NICHOLAS APPLEGATE MUTUAL FUNDS, 485APOS, 1996-06-04

NICHOLAS APPLEGATE MUTUAL FUNDS
485APOS, 1996-06-04

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As filed with the Securities and Exchange Commission

on June 3, 1996

Registration No. 33-56094
811-7428
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. __ [ ]

POST-EFFECTIVE AMENDMENT NO. 30 [X]

AND/OR

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

AMENDMENT NO. 32

(Check appropriate box or boxes)

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NICHOLAS-APPLEGATE MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)

600 WEST BROADWAY, 30TH FLOOR
SAN DIEGO, CALIFORNIA 92101
(Address of Principal Executive Offices, including Zip Code)

ARTHUR E. NICHOLAS
C/O NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
600 WEST BROADWAY, 30TH FLOOR
SAN DIEGO, CALIFORNIA 92101
(Name and Address of Agent for Service)

COPY TO: ROBERT E. CARLSON
PAUL, HASTINGS, JANOFSKY & WALKER
555 S. FLOWER STREET, TWENTIETH FLOOR
LOS ANGELES, CALIFORNIA 90071

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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE FOLLOWING EFFECTIVE DATE.

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[ ] 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 (date) pursuant to paragraph (a)(ii), of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has registered an indefinite number of shares by this Registration Statement.
Registrant filed a Notice under such Rule for its fiscal year ended March 31,
1996 on May 30, 1996. This Registration Statement has been executed by the
trustees and principal officers of the Registrant and of Nicholas-Applegate
Investment Trust.

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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)

N-1A ITEM NO. LOCATION
PART A

Item 1. Cover Page . . . . . . . . . . . . . . .Cover Page

Item 2. Synopsis . . . . . . . . . . . . . . . .Summary of Expenses;
Prospectus Summary

Item 3. Condensed Financial Information. . . . .Financial Highlights

Item 4. General Description of Registrant. . . .Cover Page; Prospectus
Summary; Investment Objectives
and Policies; Organization and
Management; Appendix

Item 5. Management of Fund . . . . . . . . . . .Organization and Management

Item 6. Capital Stock and Other Securities . . .Dividends, Distributions and
Taxes; Purchasing Shares

Item 7. Purchase of Securities Being Offered . .Purchasing Shares; Reducing
Your Sales Charge; Redeeming
Shares; Shareholder Services

Item 8. Redemption of Repurchase . . . . . . . .Redeeming Shares; Shareholder
Services

Item 9. Pending Legal Proceedings. . . . . . . .Not Applicable

PART B

Item 10. Cover Page . . . . . . . . . . . . . . .Cover Page

Item 11. Table of Contents. . . . . . . . . . . .Table of Contents

Item 12. General Information and History. . . . .General Information

Item 13. Investment Objectives and Policies . . .Investment Objectives and
Policies; Investment
Restrictions

Item 14. Management of the Fund . . . . . . . . .Trustees and Officers;
Administrator; Distributor

Item 15. Control Persons and Principal
Holders of Securities . . . . . . . . . .Principal Holders of
Securities

Item 16. Investment Advisory and Other
Services. . . . . . . . . . . . . . . . .Administrator; Investment
Adviser; Distributor;
Custodian, Transfer and
Dividend Disbursing Agent,
Independent Auditors and
Legal Counsel

Item 17. Brokerage Allocation and Other
Practices. . . . . . . . . . . . . . . .Portfolio Transactions and
Brokerage

Item 18. Capital Stock and Other Securities . . .Miscellaneous

Item 19. Purchase, Redemption and Pricing
of Securities Being Offered . . . . . . .Purchase and Redemption of
Portfolio Shares; Shareholder
Services

Item 20. Tax Status . . . . . . . . . . . . . . .Dividends, Distributions and
Taxes

Item 21. Underwriters . . . . . . . . . . . . . .Distributor

Item 22. Calculation of Performance Data. . . . .Performance Information

Item 23. Financial Statements . . . . . . . . . .Financial Statements

PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to the Registration Statement.
<PAGE>
NICHOLAS--APPLEGATE-REGISTERED TRADEMARK- MUTUAL FUNDS

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SERIES A DOMESTIC PORTFOLIOS

PROSPECTUS

Nicholas-Applegate Mutual Funds is an open-end management investment company
consisting of a number of diversified investment portfolios, including the five
Series A Portfolios and Money Market Portfolio ("Portfolios") offered hereby.
These Portfolios provide a broad range of domestic investment opportunities
which are suitable for different investors.

EACH PORTFOLIO, UNLIKE MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE
AND MANAGE THEIR OWN PORTFOLIOS OF SECURITIES, SEEKS TO ACHIEVE ITS INVESTMENT
OBJECTIVE BY INVESTING ALL OF ITS ASSETS IN A CORRESPONDING SERIES ("FUND") OF
NICHOLAS-APPLEGATE INVESTMENT TRUST, WHICH HAS THE SAME OBJECTIVE AS THE
PORTFOLIO. THE FUNDS IN TURN INVEST THEIR ASSETS, INCLUDING THOSE OF THE
PORTFOLIOS, IN PORTFOLIO SECURITIES. ACCORDINGLY, THE INVESTMENT EXPERIENCE OF
EACH PORTFOLIO WILL CORRESPOND DIRECTLY WITH THE INVESTMENT EXPERIENCE OF THE
RELATED FUND. INVESTORS SHOULD CAREFULLY CONSIDER THIS INVESTMENT APPROACH. SEE
"INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS-SPECIAL CONSIDERATIONS
REGARDING MASTER/FEEDER STRUCTURE", PAGE 10, FOR ADDITIONAL INFORMATION
REGARDING THIS UNIQUE STRUCTURE. THERE CAN BE NO ASSURANCE THAT ANY PORTFOLIO OR
FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
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CORE GROWTH PORTFOLIO A seeks to maximize long-term capital appreciation. It
invests in the Nicholas-Applegate Core Growth Fund, which in turn invests
primarily in a diversified portfolio of common stocks of U.S. companies with
middle market capitalizations and above (generally above $500 million).

EMERGING GROWTH PORTFOLIO A seeks to maximize long-term capital appreciation. It
invests in the Nicholas-Applegate Emerging Growth Fund, which in turn invests
primarily in a diversified portfolio of common stocks of U.S. corporations with
smaller market capitalizations (e.g., up to $500 million).

INCOME & GROWTH PORTFOLIO A seeks to maximize total return, consisting of
capital appreciation and current income. It invests in the Nicholas-Applegate
Income & Growth Fund, which in turn invests primarily in convertible and equity
securities of U.S. companies. Up to 50% of the assets of the Fund may be
invested in securities rated below investment grade, sometimes called "junk
bonds," which are speculative and involve greater risks, including risk of
default, than higher-rated securities.

BALANCED GROWTH PORTFOLIO A seeks to provide investors with a balance of
long-term capital appreciation and current income. It invests in the
Nicholas-Applegate Balanced Growth Fund, which in turn invests approximately 60%
of its total assets in equity and convertible securities of primarily U.S.
companies and 40% of its total assets in debt securities, money market
instruments and other short-term investments.

GOVERNMENT INCOME PORTFOLIO A seeks to maximize current income consistent with
prudent investment risk and preservation of capital. It invests in the
Nicholas-Applegate Government Income Fund, which in turn invests primarily in
intermediate-term debt securities of the U.S. Government and its agencies and
instrumentalities.

MONEY MARKET PORTFOLIO seeks to obtain a high level of current income consistent
with preservation of capital and maintenance of liquidity. It invests in the
Nicholas-Applegate Money Market Portfolio, which in turn invests in
high-quality, short-term, U.S. dollar denominated money market instruments. THE
MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT
OR ANY OTHER PERSON, AND THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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SHARES OF THE PORTFOLIOS ARE NOT BANK DEPOSITS AND ARE NOT FEDERALLY INSURED
BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY. INVESTMENT IN A PORTFOLIO INVOLVES INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

This Prospectus presents information you should know before investing in any
of the Portfolios. It should be retained for future reference. A Statement of
Additional Information for the Portfolios dated , 1996 has been
filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. The Statement may be obtained, without charge,
by writing to the Trust, 600 West Broadway, 30th Floor, San Diego, California
92101, or by calling (800) 551-8045. Inquiries regarding any of the Portfolios
can also be made by calling (800) 551-8043.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

, 1996

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NICHOLAS--APPLEGATE MUTUAL FUNDS

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SERIES A DOMESTIC PORTFOLIOS

CORE GROWTH PORTFOLIO A
EMERGING GROWTH PORTFOLIO A
INCOME & GROWTH PORTFOLIO A
BALANCED GROWTH PORTFOLIO A
GOVERNMENT INCOME PORTFOLIO A
MONEY MARKET PORTFOLIO

TABLE OF CONTENTS

Summary of Expenses......................................... 3
Prospectus Summary.......................................... 5
Financial Highlights........................................ 9
Investment Objectives, Policies and Risk
Considerations............................................ 10
Organization and Management................................. 17
Purchasing Shares........................................... 21
Shareholder Services........................................ 25
Redeeming Shares............................................ 27
Dividends, Distributions and Taxes.......................... 30
General Information......................................... 30
Appendix:
Investment Policies, Strategies
and Risks............................................... 33
Corporate Bond Ratings.................................... 47
Prior Performance......................................... 49

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NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE PORTFOLIOS OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER BY THE PORTFOLIOS OR THE DISTRIBUTOR TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.

2
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SUMMARY OF EXPENSES

This table is designed to help you understand the costs of investing in each of
the Portfolios. These are based on the expenses of each Portfolio for its fiscal
year ended March 31, 1996, and because each Portfolio invests all of its assets
in a corresponding Fund, each Portfolio's estimated expenses include its
proportionate share of the operating expenses of the corresponding Fund. Actual
expenses may be more or less than those shown.

<TABLE>
<CAPTION>
CORE EMERGING INCOME & BALANCED GOVERNMENT
GROWTH GROWTH GROWTH GROWTH INCOME MONEY
Portfolio Portfolio Portfolio Portfolio Portfolio MARKET
A A A A A Portfolio
<S> <C> <C> <C> <C> <C> <C>
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SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a percentage of
offering price)(1) 5.25% 5.25% 5.25% 5.25% 4.75% None
Sales charge on reinvested dividends None None None None None None
Deferred sales charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower)(2) None None None None None None
Redemption fee(3) None None None None None None
Exchange fee None None None None None 5.25%(4)
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ANNUAL PORTFOLIO OPERATING EXPENSES AS
A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)(5)
Management fees 0.75% 1.00% 0.75% 0.75% 0.40% 0.00%
12b-1 expenses 0.25% 0.25% 0.25% 0.25% 0.25% 0.15%
All other expenses (after expense deferral)(5)
Shareholder service expenses 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
Other expenses 0.50% 0.39% 0.50% 0.50% 0.15% 0.06%
Total other expenses 0.60% 0.49% 0.60% 0.60% 0.25% 0.16%
Total operating expenses (after expense deferral)(5) 1.60% 1.74% 1.60% 1.60% 0.90% 0.31%
</TABLE>

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(1)Sales charges are reduced for purchases of $50,000 or more of shares of the
Series A Portfolios. There is no initial sales charge on purchases of shares
of the Money Market Portfolio. The National Association of Securities
Dealers, Inc. limits total annual sales charges (including 12b-1 expenses) to
all purchasers of shares of a Portfolio to 6.25% of new sales plus an
interest factor. However, long-term shareholders may pay more than the
economic equivalent of such maximum sales charges. See "Alternative Purchase
Arrangements."

(3) A $10 charge will be imposed on redemptions requested to be paid by wire
transfer. See "Redeeming Shares-Redemption Payments."

3
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expenses (before recoupment) are less than the applicable percentage
limitation set forth above. Accordingly, until all such deferred fees or
expenses have been recouped by the Investment Adviser, the Portfolios'
expenses will be higher, and their yields will be lower, than would
otherwise be the case. See "Organization and Management-Expense Limitation."
Actual operating expenses for the Series A Portfolios for the fiscal year
ended March 31, 1996 were the following percentages of the Portfolios'
average net assets: Core Growth Portfolio A-1.56%; Emerging Growth Portfolio
A-1.74%; Income & Growth Portfolio A-1.76%; Balanced Growth Portfolio
A-3.30%; Government Income Portfolio A-9.58%; and Money Market
Portfolio-5.78%. The various operating expenses of the Portfolios are
further described under "Organization and Management."

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
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CORE GROWTH
Portfolio A(1) $68 $100 $135 $233
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EMERGING GROWTH
Portfolio A(1) $69 $104 $142 $247
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INCOME & GROWTH
Portfolio A(1) $68 $100 $135 $233
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BALANCED GROWTH
Portfolio A(1) $68 $100 $135 $233
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GOVERNMENT INCOME
Portfolio A(1) $56 $ 75 $ 95 $153
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MONEY MARKET PORTFOLIO(1) $ 3 $ 10 $ 17 $ 39
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</TABLE>

(1)Assumes redemption at the end of the time period, and deduction at the time
of purchase of the maximum applicable initial sales charge. The contingent
deferred sales charge on the Series A Portfolios is not applicable to the
hypothetical investment of $1,000; it only applies on redemptions of $1
million purchases. There is generally no initial or contingent deferred sales
charge on purchases or redemptions of shares of the Money Market Portfolio.

This Example assumes that all dividends and other distribution are reinvested
and that the percentage amounts listed under "Annual Portfolio Operating
Expenses" in the fee table on page 3 remain the same in the years shown.

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OF FUTURE
EXPENSES, AND A PORTFOLIO'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN. The hypothetical 5% annual return is used for illustrative purposes only
and should not be interpreted as an estimate of a Portfolio's annual return, as
there can be no guarantee of a Portfolio's future performance.

4
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PROSPECTUS SUMMARY

Nicholas-Applegate Mutual Funds (the "Trust") is an open-end management
investment company comprised of a number of diversified investment portfolios,
including the five Series A Portfolios and Money Market Portfolio offered
hereby. The Series A Portfolios are sold subject to a front-end sales charge and
the Money Market Portfolio has no sales charge.

INVESTMENT OBJECTIVES. The investment objectives of the Portfolios are described
on the front cover of this Prospectus. There can be no assurance that any
Portfolio will achieve its investment objective. See "Investment Objectives,
Policies and Risk Considerations" and "Appendix: Investment Policies, Strategies
and Risks."

MASTER/FEEDER STRUCTURE. The Portfolios seek to achieve their respective
investment objectives by investing all of their assets in corresponding series
("Funds") of Nicholas-Applegate Investment Trust (the "Master Trust"), a
diversified, open-end management investment company. The Funds have the same
investment objectives as the Portfolios which invest in them. The Funds in turn
hold investment securities. Although the "master/feeder" structure employed by
the Portfolios to achieve their investment objectives could provide certain
efficiencies and economies of scale, it could also have potential adverse
effects such as those resulting from large-scale redemptions by other investors
of their interests in the Funds, or from the failure by shareholders of a
Portfolio to approve a change in investment objectives and policies that has
been approved by the shareholders of the corresponding Fund. There may also be
other investment companies through which you can invest in the Funds which may
have higher or lower fees and expenses than those of the Portfolios. See
"Investment Objectives, Policies and Risk Considerations-Special Considerations
Regarding Master/Feeder Structure."

A Portfolio may cease investing in a corresponding Fund only if the Trust's
Board of Trustees determines that this is in the best interests of the Portfolio
and its shareholders, and only with the approval of the Portfolio's
shareholders. In such event the Board of Trustees would consider alternative
arrangements such as investing all of the Portfolio's assets in another
investment company with the same investment objective as the Portfolio or hiring
an investment adviser to manage the Portfolio's assets in accordance with the
Portfolio's investment policies. No assurance exists that satisfactory
alternative arrangements would be available.

INVESTMENT RISKS AND CONSIDERATIONS. INVESTMENT RISKS AND OTHER CONSIDERATIONS
RELEVANT TO THE SECURITIES IN WHICH THE PORTFOLIOS INVEST THROUGH CORRESPONDING
FUNDS ARE DESCRIBED UNDER "INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS" AND IN THE APPENDIX--INVESTMENT POLICIES, STRATEGIES AND RISKS.
They include the following:

The securities of many companies in which the Core Growth, Emerging Growth,
Income & Growth, and Balanced Growth Funds invest are subject to more volatile
market movements than securities of larger, more established companies because
the issuers are typically more subject to changes in earnings and prospects. The
net asset values of the corresponding Portfolios therefore can be expected to
experience above-average fluctuations, as above-average risk is assumed by the
Funds in investing in such growth companies in seeking higher than average
growth in capital.

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up to 35% and 50% respectively of their net assets in convertible and debt
securities rated below "Baa" by Moody's Investors Service, Inc. ("Moody's"),
"BBB" by Standard & Poor's Corporation ("S&P"), or investment grade by other
recognized rating agencies, or in unrated securities of comparable quality, if
the Investment Adviser believes that the financial condition of the issuer or
the protection afforded to the particular securities is stronger than would
otherwise be indicated by such low ratings or lack of ratings. Such securities,
commonly referred to as "junk bonds," are speculative and subject to greater
market fluctuations and risk of loss of income and principal than higher rated
bonds. Such Funds will in no event purchase debt securities rated below "C" or
equivalent by Moody's, S&P or another rating agency, or determined by the
Investment Adviser to be of comparable quality. See "Appendix: Investment
Policies, Strategies and Risks" and the Statement of Additional Information for
a description of these securities and ratings.

Investments by the Funds in securities of foreign companies and governments
involve special risks in addition to the usual risks inherent in domestic
investments, including fluctuations in foreign exchange rates, political or
economic instability in the country of issue, and the possible imposition of
exchange controls or other laws or restrictions. Settlement of transactions in
foreign markets may be delayed or less frequent than in the U.S., and foreign
governments may withhold taxes from dividends and interest paid on securities
held by the Funds. There is also likely to be less publicly available
information about certain foreign issuers than is available about U.S.
companies, and foreign companies are not generally subject to uniform financial
reporting standards comparable to those applicable to U.S. companies. Investment
in emerging markets involves greater risks than other foreign investments.

The investment approach of Nicholas Applegate Capital Management (the
"Investment Adviser") results in above-average portfolio turnover for each Fund
other than the Money Market Fund. A high rate of portfolio turnover involves
correspondingly greater brokerage commission expenses, and may also result in
the realization and distribution to shareholders of net capital gains which are
taxable to them as ordinary income for federal tax purposes.

For hedging purposes, certain Funds may purchase or write put and call options
on securities and securities indices, and effect transactions in futures
contracts and related options on stock indices. These are derivative
instruments, whose value derives from the value of an underlying security or
index. Risks associated with the use of such instruments include the possibility
that the Investment Adviser's forecasts of market values and other factors are
not correct; imperfect correlation between the Fund's hedging technique and the
asset or liability being hedged; default by the other party to the transaction;
and inability to close out a position because of the lack of a liquid market.
Investment in such derivative instruments may not be successful, and may reduce
the returns and increase the volatility of the Funds. See "Appendix: Investment
Policies, Strategies and Risks" in this Prospectus and "Investment Objectives,
Policies and Risks" in the Statement of Additional Information.

THE CORE GROWTH AND EMERGING GROWTH FUNDS MAY ENGAGE IN SHORT SALES, WHICH
THEORETICALLY INVOLVE UNLIMITED LOSS POTENTIAL AND MAY BE CONSIDERED A
SPECULATIVE TECHNIQUE. See the description of the risks of short sales under
"Short Sales" in "Appendix: Investment Policies, Strategies and Risks."

6
<PAGE>
require the Funds to sell portfolio securities to meet interest and principal
payments at an unfavorable time. See "Illiquid Securities," "Repurchase
Agreements," "Securities Lending" and "Borrowing" in "Appendix: Investment
Policies, Strategies and Risks."

INVESTMENT ADVISER. The Trust has not retained the services of an investment
adviser for the Portfolios, as the Portfolios seek to achieve their investment
objectives by investing all of their assets in corresponding Funds.
Nicholas-Applegate Capital Management (the "Investment Adviser") serves as
investment adviser to the Funds. The Investment Adviser has been in the
investment advisory business since 1984 and currently manages approximately $30
billion of discretionary assets for numerous clients, including employee benefit
plans of corporations, public retirement systems and unions, university
endowments, foundations and other institutional investors, and individuals.

The Investment Adviser is compensated for its services to the Funds in the form
of monthly fees at the following annual rates: for the Emerging Growth
Fund-1.00% of the Fund's net assets; for each of the Core Growth, Income &
Growth and Balanced Growth Funds-0.75% of the first $500 million of the Fund's
net assets, 0.675% of the next $500 million and 0.65% of net assets in excess of
$1 billion; for the Government Income Fund-0.40% of the first $500 million of
the Fund's net assets and 0.35% of net assets in excess of $500 million; and for
the Money Market Fund-0.25% of the first $500 million of the Fund's net assets
and 0.2275% of net assets in excess of $500 million. See "Organization and
Management."

DISTRIBUTOR. Nicholas-Applegate Securities (the "Distributor"), an affiliate of
the Investment Adviser, serves as distributor of shares of the Portfolios. Under
a Distribution Plan, the Distributor receives compensation for providing
distribution services for the Portfolios at the following annual rates: for the
Series A Portfolios-0.25% of each Portfolio's net assets; and for the Money
Market Portfolio-0.15% of such Portfolio's net assets. Under a Shareholder
Service Plan, the Distributor is reimbursed for shareholder services it provides
and for payments made to broker-dealers and others for related support and
recordkeeping services at an annual rate of up to 0.10% of each Series A
Portfolio's and the Money Market Portfolio's net assets. See "Organization and
Management." Under a Distribution Agreement, the Distributor will also retain a
portion of the initial sales load on purchases of shares of the Series A
Portfolios and the contingent deferred sales load on redemptions of shares of
the Series A Portfolios. See "Organization and Management" and "Alternative
Purchase Arrangements."

ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN. Investment Company Administration
Corporation (the "Administrator") is the administrator for the Trust, with
responsibility for managing the daily business operations of the Portfolios,
subject to the supervision of the Trust's Board of Trustees. It also acts as
administrator for the Master Trust. PNC Bank (the "Custodian") is the custodian
for the Trust and the Master Trusts, and State Street Bank and Trust Company
(the "Transfer Agent") is the transfer and dividend disbursing agent for the
Trust.

PURCHASE OF SHARES. Shares of the Portfolios may be purchased directly from the
Trust through its Transfer Agent or through selected dealers. Shares are
purchased at the next offering price, less a sales charge if applicable, after
an order is received in proper form by the Transfer Agent. The minimum initial
investment is $2,000 and the minimum subsequent investment is $100, but reduced
investment minimums are available in certain cases.

Shares of the Series A Portfolios are sold subject to a maximum sales charge of
5.25% (4.75% for Government Income Portfolio A). Reduced sales charges are
available for purchases of $50,000 or more of shares of a Series A Portfolio. No
initial sales charge applies on a purchase of $1 million or more of shares of a
Series A Portfolio, but a contingent deferred sales charge

7
<PAGE>
of 1.00% is imposed on redemptions made less than one year after the $1 million
purchase. The Trust offers a number of ways shareholders in a Series A Portfolio
can reduce their sales charges, including aggregation, concurrent purchases,
rights of accumulation and letters of intent. Shares of the Money Market
Portfolio are sold with no initial or contingent deferred sales charge. See
"Purchasing Shares."

SHAREHOLDER SERVICES. The following services are provided to shareholders of the
Portfolios for their convenience and flexibility: an automatic investment plan;
automatic reinvestment and cross-reinvestment of dividends and capital gains
distributions; an exchange privilege, including automatic exchanges; automatic
withdrawals; and check writing for certain shareholders of the Money Market
Portfolio. See "Shareholder Services." The Trust also offers various retirement
plans through which you can invest in the Portfolios. See "Purchasing Shares."

REDEEMING SHARES. Shares of a Portfolio may be redeemed by writing to the
Transfer Agent, directly or through a selected dealer, or by telephone if
telephone redemption privileges have been established. Redemption proceeds of
$5,000 or more may be wired; otherwise proceeds will be sent by check. The price
received for Portfolio shares redeemed is at the next determined net asset value
after the request is received in proper form by the Transfer Agent, which may be
more or less than the purchase price, except that a contingent deferred sales
charge may apply to certain redemptions. See "Redeeming Shares."

DIVIDENDS, DISTRIBUTIONS AND TAXES. The Core Growth and Emerging Growth
Portfolios declare and pay annual dividends of net investment income; the
Balanced Growth, Income & Growth, and Government Income Portfolios declare and
pay quarterly dividends; and the Money Market Portfolio declares daily dividends
and distributes accrued dividends each month. The Portfolios make distributions
at least annually of any net capital gains. All dividends and distributions will
be paid in the form of additional shares at net asset value unless cash payment
is requested.

8
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

The following financial highlights have been audited by Ernst & Young, L.L.P.
with respect to the fiscal year ended March 31, 1996 and by Coopers & Lybrand
L.L.P. with respect to the period from commencement of operations of the
Portfolios through March 31, 1995. Ernst & Young, L.L.P. and Coopers & Lybrand
L.L.P. are independent auditors whose reports thereon were unqualified. This
information should be read in conjunction with the financial statements and the
notes thereto which appear in the Trust's 1996 Annual Report to Shareholders
incorporated by reference in the Statement of Additional Information.

<TABLE>
<CAPTION>
CORE EMERGING INCOME &
GROWTH GROWTH GROWTH
Portfolio Portfolio Portfolio
A A A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
4-19-93 4-1-94 4-1-95 12-27-93 4-1-94 4-1-95 4-19-93 4-1-94 4-1-95
to to to to to to to to to
3-31-94 3-31-95 3-31-96 3-31-94 3-31-95 3-31-96 3-31-94 3-31-95 3-31-96
--------- --------- --------- --------- --------- --------- --------- --------- ---------
PER SHARE DATA:
Net asset value,
beginning of period $ 12.50 $ 13.25 $ 13.61 $ 12.50 $ 12.10 $ 13.06 $ 12.50 $ 14.16 $ 12.86
Income from
investment
operations:
Net investment
income (deficit) (0.07) (0.10) (0.18) (0.04) (0.16) (0.20) 0.32 0.49 0.48
Net realized and
unrealized gains
(losses) on
securities 0.86 0.46 4.94 (0.36) 1.12 5.09 2.15 (0.89) 2.82
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 0.79 0.36 4.76 (0.40) 0.96 4.89 2.47 (0.40) 3.30
Less distributions:
Dividends from net
investment income -- -- -- -- -- -- (0.32) (0.49) (0.48)
Distributions from
capital gains (0.04) -- -- -- -- (0.02) (0.49) (0.41) --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net asset value, end
of period $ 13.25 $ 13.61 $ 18.37 $ 12.10 $ 13.06 $ 17.93 $ 14.16 $ 12.86 $ 15.68
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN:+ 6.27% 2.72% 35.07% (3.20%) 7.93% 37.48% 19.65% (2.64%) 26.0%
RATIOS/SUPPLEMENTAL
DATA:
Net assets ($000),
end of period $ 70,512 $ 65,292 $ 77,275 $ 104,838 $ 106,725 $ 138,155 $ 30,447 $ 31,150 $ 31,712
Ratio of expenses to
average net assets,
after expense
reimbursement++ 1.57%* 1.59% 1.58% 1.73%* 1.86% 1.74% 1.59%* 1.60% 1.60%
Ratio of expenses to
average net assets,
before expense
reimbursement++ 1.71%* 1.63% 1.56% 1.80%* 1.84% 1.74% 1.83%* 1.36% 1.76%
Ratio of net
investment income
(deficit) to average
net assets, after
expense
reimbursement++ (0.68%)* (0.66%) (0.91%) (1.44%)* (1.27%) (1.20%) 2.83%* 3.71% 3.29%
Ratio of net
investment income
(deficit) to average
net assets, before
expense
reimbursement++ (0.82%)* (0.70%) (0.89%) (1.51%)* (1.25%) (1.20%) 2.59%* 3.55% 3.12%
Portfolio turnover** 84.84% 98.09% 114.48% 50.51% 100.46% 129.59% 177.52% 125.51% 142.21%
Average commission
rate paid** N/A N/A $ 0.0593 N/A N/A $ 0.0597 N/A N/A $ 0.0597

<CAPTION>
BALANCED GOVERNMENT
GROWTH INCOME MONEY
Portfolio Portfolio MARKET
A A Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------
4-19-93 4-1-94 4-1-95 4-19-93 4-1-94 4-1-95 4-19-93 4-1-94 4-1-95
to to to to to to to to to
3-31-94 3-31-95 3-31-96 3-31-94 3-31-95 3-31-96 3-31-94 3-31-95 3-31-96
-- --------- --------- --------- --------- --------- --------- --------- ---------
PER SHARE DATA:
Net asset value,
beginning of period $12.50 $ 13.52 $ 13.74 $ 12.50 $ 12.51 $ 12.29 $ 1.00 $ 1.00 $ 1.00
Income from
investment
operations:
Net investment
income (deficit) 0.15 0.21 0.34 0.29 0.63 0.75 0.01 0.05 0.05
Net realized and
unrealized gains
(losses) on
securities 1.02 0.22 2.42 0.34 (0.19) 0.45 -- -- --
-- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 1.17 0.43 2.76 0.63 0.44 1.20 0.01 0.05 0.05
Less distributions:
Dividends from net
investment income (0.15) (0.21) (0.34) (0.29) (0.63) (0.75) (0.01) (0.05) (0.05)
Distributions from
capital gains -- -- -- (0.33) (0.03) -- -- -- --
-- --------- --------- --------- --------- --------- --------- --------- ---------
Net asset value, end
of period $13.52 $ 13.74 $ 16.16 $ 12.51 $ 12.29 $ 12.74 $ 1.00 $ 1.00 $ 1.00
-- --------- --------- --------- --------- --------- --------- --------- ---------
-- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN:+ 9.35% 3.22% 20.16% 4.97% 3.68% 9.71% 1.72% 4.58% 5.47%
RATIOS/SUPPLEMENTAL
DATA:
Net assets ($000),
end of period $6,446 $ 4,980 $ 5,902 $ 820 $ 925 $ 1,297 $ 48 $ 2,996 $ 3,129
Ratio of expenses to
average net assets,
after expense
reimbursement++ 1.59%* 1.60% 1.60% 1.10%* 1.10% 0.93% 0.54%* 0.31% 0.45%
Ratio of expenses to
average net assets,
before expense
reimbursement++ 3.28%* 2.78% 3.30% 20.28%* 8.40% 9.50% 323.24%* 2.49% 5.38%
Ratio of net
investment income
(deficit) to average
net assets, after
expense
reimbursement++ 1.30%* 1.44% 2.16% 3.07%* 5.18% 5.78% 1.85%* 4.60% 5.35%
Ratio of net
investment income
(deficit) to average
net assets, before
expense
reimbursement++ (0.39%)* 0.26% 0.88% (16.11%)* (2.12%) (0.75%) (320.85%)* 2.42% 2.77%
Portfolio turnover** 85.43% 110.40% 197.19% 159.17% 258.72% 190.47% N/A N/A N/A
Average commission
rate paid** N/A N/A $ 0.0594 N/A N/A N/A N/A N/A N/A
</TABLE>

- ------------------------------
* Annualized

** For the corresponding Funds of the Master Trust

+ Computations do not reflect the Portfolios' sales charges

++ Includes expenses allocated from Master Trust Funds.

9
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of each Portfolio are discussed below and
in the "Appendix: Investment Policies, Strategies and Risks."

SPECIAL CONSIDERATIONS REGARDING MASTER/FEEDER STRUCTURE. The Portfolios seek to
achieve their investment objectives by investing all of their assets in
corresponding Funds, which have the same objectives as the Portfolios. The Funds
in turn hold investment securities. Accordingly, the investment experience of
each Portfolio will correspond directly with the investment experience of the
related Fund. For a description of the Funds' objectives, policies,
restrictions, management and expenses, see "Investment Objectives, Policies and
Risk Considerations" below, the Appendix and "Organization and Management."
There can be no assurance that any Portfolio or Fund will achieve its investment
objective. Each Portfolio's and Fund's investment objective is a fundamental
policy which may not be changed without the approval of the holders of a
majority of the outstanding shares of the Portfolio or Fund, respectively, as
defined in the Investment Company Act of 1940 (the "Investment Company Act").
Upon any such approval, each Portfolio will provide at least 30 days' written
notice to its shareholders before any change is made to its or the corresponding
Fund's investment objective.

There are certain risks to the Portfolios related to the use of the
"master/feeder" structure. Such risks include, but are not limited to, the
following: Large-scale redemptions by other investment companies of their
interests in the corresponding Funds could have adverse effects, such as lack of
portfolio diversity and decreased economics of scale, and could result in the
shareholders of a Portfolio, as the remaining investor in the Fund, bearing all
the operating costs of the Fund and thus experiencing higher pro rata operating
expenses and lower returns than would otherwise be the case. In addition, the
total withdrawal by another investment company as an investor in a Fund will
cause the Fund to terminate automatically in 120 days, unless the corresponding
Portfolio and any other investors in the Fund unanimously agree to continue the
business of the Fund. As the Portfolio is required to submit such matters to a
vote of its shareholders, it will be required to incur the expenses of
shareholder meetings in connection with such withdrawals. If unanimous agreement
is not reached to continue the Fund, the Board of Trustees of the Trust would
need to consider alternative arrangements for the Portfolio, including investing
all of the Portfolio's assets in another investment company with the same
investment objective as the Portfolio or hiring an investment adviser to manage
the Portfolio's assets in accordance with the investment policies described
below and in "Appendix: Investment Policies, Strategies and Risks." The absence
of substantial experience with the master/feeder structure could result in
accounting or other difficulties. Failure by shareholders of a Portfolio to
approve a change in the investment objective and policies of a Portfolio
parallel to a change that has been approved by the shareholders of the
corresponding Fund would require the Portfolio to redeem its shares of the Fund;
this could result in a distribution in kind to the Portfolio of the portfolio
securities of the Fund (rather than a cash distribution), causing the Portfolio
to incur brokerage fees or other transaction costs in converting such securities
to cash, reducing the diversification of the Portfolio's investments and
adversely affecting its liquidity. Other shareholders in the Funds may have a
greater ownership interest in the Funds than the Portfolios' interest, and could
thus have effective voting control over the operation of the Funds.

10
<PAGE>
invest all or substantially all of their assets in the Funds. Accordingly, there
may be other investment companies through which you can invest indirectly in the
Funds. The fees charged by such other investment companies may be higher or
lower than those charged by the Portfolios, which may reflect, among other
things, differences in the nature and level of the services and features offered
by such companies to their shareholders. Information about the availability of
other investment companies that invest in the Funds can be obtained by calling
(800) 551-8045.

A Portfolio may cease investing in a corresponding Fund only if the Board of
Trustees of the Trust determines that such action is in the best interests of
the Portfolio and its shareholders, and only with the approval of the
Portfolio's shareholders. In that event, the Board of Trustees would consider
alternative arrangements, including investing all of the Portfolio's assets in
another investment company with the same investment objective as the Portfolio
or hiring an investment adviser to manage the Portfolio's assets in accordance
with the investment policies described below and in "Appendix: Investment
Policies, Strategies and Risks."

CORE GROWTH PORTFOLIO A. Core Growth Portfolio A seeks to maximize long-term
capital appreciation. The Portfolio invests all of its assets in the
Nicholas-Applegate Core Growth Fund, which has the same investment objective as
the Core Growth Portfolio. Assets of the Core Growth Fund are invested primarily
in common stocks of U.S. companies the earnings and stock prices of which are
expected by the Fund's Investment Adviser to grow faster than the average rate
of companies in the Standard & Poor's 500 Stock Price Index. Companies in which
the Fund invests do business in a cross-section of industries and may be growth
companies, cyclical companies or companies believed to be undergoing a basic
change in operations or markets which, in the opinion of the Investment Adviser,
would result in a significant improvement in earnings. The securities of such
companies may be subject to more volatile market movements than securities of
larger, more established companies. Although the Fund is not restricted to
investments in companies of any particular size, it currently intends to invest
primarily in companies with middle market capitalizations and above (generally
above $500 million). See "Appendix: Investment Policies, Strategies and Risks"
for a discussion of the risks associated with investment in such growth
companies.

Under normal market conditions, at least 75% of the Core Growth Fund's total
assets will be invested in common stocks. The remainder of the Core Growth
Fund's assets may be invested in preferred and convertible securities issued by
similar growth companies, investment grade corporate debt securities, securities
issued or guaranteed by the U.S. Government and its agencies and
instrumentalities and various other securities and instruments described in
"Appendix: Investment Policies, Strategies and Risks." The Fund may invest up to
20% of its total assets, directly (or indirectly through American Depository
Receipts), in securities issued by foreign issuers. See "Appendix: Investment
Policies, Strategies and Risks" for a discussion of the risks associated with
investment in foreign securities. The debt securities in which the Fund may
invest will be rated "Baa" or higher by Moody's, "BBB" or higher by S&P or
equivalent ratings by other recognized rating agencies, or will be unrated if
determined by the Investment Adviser to be of comparable quality. These
securities are of investment grade, which means that their issuers are believed
to have adequate capacity to pay interest and repay principal, although certain
of such securities in the lower grades have speculative characteristics, and
changes in economic conditions or other circumstances may be more likely to lead
to a weakened capacity to pay interest and principal than would be the case with
higher rated securities. If the rating of a debt security held by the Fund is
downgraded below investment

11
<PAGE>
grade, the security will be sold as promptly as practicable. The Fund may also
make short sales, which is considered a speculative technique. See "Appendix:
Investment Policies, Strategies and Risks" for a discussion of the risks
associated with short sale transactions.

EMERGING GROWTH PORTFOLIO A. Emerging Growth Portfolio A seeks to maximize
long-term capital appreciation. The Portfolio invests all of its assets in the
Nicholas-Applegate Emerging Growth Fund, which has the same investment objective
as the Emerging Growth Portfolio. Assets of the Emerging Growth Fund are
invested in the same types of securities as the Core Growth Fund, except that
the Fund intends to invest primarily in companies with smaller market
capitalizations (e.g., up to $500 million). However, the Fund will not
necessarily sell any security held by it if the market capitalization of the
issuer increases above $500 million subsequent to purchase. See "Core Growth
Portfolio A" above.

INCOME & GROWTH PORTFOLIO A. Income & Growth Portfolio A seeks to maximize total
return, consisting of capital appreciation and current income. The Portfolio
invests all of its assets in the Nicholas-Applegate Income & Growth Fund, which
has the same investment objective as the Income & Growth Portfolio. Assets of
the Income & Growth Fund are invested primarily in convertible and equity
securities of U.S. companies. Convertible securities are bonds, debentures,
corporate notes or preferred stocks which pay interest or dividends and which
may be converted into common stock at the option of the holder. Convertible
securities provide for participation in the appreciation of the underlying
common stock but at a lower level of risk because the yield is higher and the
security is senior to the common stock upon liquidation of the issuer.

Under normal market conditions, at least 65% of the Income & Growth Fund's total
assets will be invested in convertible securities and in common stocks received
upon conversion or exchange of such securities and retained in the Fund's
portfolio to permit orderly disposition. Up to 35% of the Fund's total assets
may be invested in other securities, including
non-convertible equity (common and preferred stocks) and debt securities and
securities issued or guaranteed by the U.S. Government and its agencies and
instrumentalities. See "Appendix: Investment Policies, Strategies and Risks" for
a description of the various other securities and instruments in which the Fund
may invest. The Fund may also invest in Eurodollar convertible securities and
American Depository Receipts. See "Appendix: Investment Policies, Strategies and
Risks" for a discussion of the risks associated with investment in foreign
securities. At all times, a minimum of 25% of the Fund's total assets will be
invested in income-producing securities (including convertible securities and
debt securities), and a minimum of 25% of the Fund's total assets will be
invested in equity securities (including common and preferred stocks).

The issuers of the convertible and equity securities in which the Income &
Growth Fund invests will be the same types of growth companies as those in which
the Core Growth Fund invests. See "Core Growth Portfolio A" above and the
Appendix for a discussion of the risks associated with investment in such growth
companies. The Income & Growth Fund's convertible and other debt securities will
generally be investment grade securities rated "Baa" or higher by Moody's, "BBB"
or higher by S&P or equivalent ratings by other recognized rating agencies, or
will be unrated if determined by the Investment Adviser to be of comparable
quality, as described above under "Core Growth Portfolio A."

12
<PAGE>

ratings or the lack thereof. Debt securities with ratings below "Baa" or "BBB"
or equivalent ratings, commonly referred to as "junk bonds," are speculative and
subject to greater market fluctuations and risk of loss of income and principal
than higher rated bonds. The default rate of lower-quality debt securities is
likely to be higher when issuers have difficulty meeting projected goals or
obtaining additional financing, which could occur during economic recessions or
periods of high interest rates. They may be thinly traded, making them difficult
to sell promptly at an acceptable price. Negative publicity or investor
perceptions may make valuing such securities difficult, and could hurt the
Fund's ability to dispose of them. If the rating of an investment grade security
held by the Fund is downgraded, the Investment Adviser will determine whether it
is in the best interests of the Fund to continue to hold such security in its
investment portfolio. However, if the downgrading of a debt security causes the
Fund to retain 50% or more of its net assets in junk bonds, the Fund will sell
sufficient principal amount of junk bonds as promptly as practicable to ensure
that it does not hold 50% or more of its net assets in such securities. See
"Appendix: Investment Policies, Strategies and Risks" for a discussion of the
risks associated with investment in junk bonds.

BALANCED GROWTH PORTFOLIO A. Balanced Growth Portfolio A seeks to provide
investors with a balance of long-term capital appreciation and current income.
The Portfolio invests all of its assets in the Nicholas-Applegate Balanced
Growth Fund, which has the same investment objective as the Balanced Growth
Portfolio. Assets of the Balanced Growth Fund are invested in equity securities
(common and preferred stocks), convertible securities and warrants primarily of
U.S. companies, debt securities (bonds, debentures and notes), money market
instruments and other short-term investments and instruments described in
"Appendix: Investment Policies, Strategies and Risks." Under normal
circumstances, the Fund will allocate approximately 60% of its total assets to
equity securities, convertible securities and warrants and approximately 40% to
debt securities, money market instruments and other short-term investments and
instruments.

Temporary deviations from the Balanced Growth Fund's 60%/40% balance of
securities due to market fluctuations in the value of securities or otherwise
will be permitted so long as the percentage of equity securities, convertible
securities and warrants in the Balanced Growth Fund's investment portfolio is
not more than 70% or less than 50% of the value of the Fund's total assets. If
the value of the equity securities, convertible securities and warrants in the
Balanced Growth Fund's investment portfolio increases above 70% or decreases
below 50%, the Fund will effect sales or purchases of certain of its existing
investments as promptly as practicable, consistent with maintaining the
Portfolio's tax status as a regulated investment company, to restore the 60%/40%
ratio. Such a portfolio adjustment may cause the Fund to buy or sell securities
at different times than the Investment Adviser would otherwise have made such
purchases and sales. Such purchases and sales may also cause the Fund to incur a
higher proportion of short-term capital gains than might otherwise be the case.

The issuers of the Balanced Growth Fund's equity investments will be the same
types of growth companies as those in which the Core Growth Fund invests. See
"Core Growth Portfolio A" above and the Appendix for a discussion of the risks
associated with investment in such growth companies. The debt securities in
which the Balanced Growth Fund may invest include debt securities issued by the
U.S. Government and its agencies and instrumentalities, and corporate debt
securities. The ratings (or in the case of unrated securities, the Investment
Adviser's assessment of comparable quality) of the Fund's convertible and other
debt securities, and its policies regarding downgraded securities, will be the
same as those of the Income & Growth Fund. The Balanced Growth Fund may invest a
portion (less than 35%) of its net assets in convertible and debt securities
rated below investment grade or in unrated securities

13
<PAGE>
of comparable quality. Such securities or "junk bonds" are speculative and
subject to greater risk of loss of income and principal than higher rated bonds.
See "Income & Growth Portfolio A" above and "Appendix: Investment Policies,
Strategies and Risks" for a discussion of the risks associated with investment
in junk bonds.

GOVERNMENT INCOME PORTFOLIO A. Government Income Portfolio A seeks to maximize
current income consistent with prudent investment risk and preservation of
capital. The Portfolio invests all of its assets in the Nicholas-Applegate
Government Income Fund, which has the same investment objective as the
Government Income Portfolio. The assets of the Government Income Fund are
invested primarily in investment grade, intermediate-term debt securities of the
U.S. Government and its agencies and instrumentalities. Such securities are of
varying maturities, with a weighted average portfolio duration (expected life)
from three to six years. The Fund may invest in direct obligations of the United
States (such as Treasury bills, notes and bonds, which are supported by the full
faith and credit of the United States) and obligations (including
mortgage-related securities) issued or guaranteed by agencies and
instrumentalities of the U.S. Government that are established under an act of
Congress. These agencies and instrumentalities may include, but are not limited
to, the Government National Mortgage Association, Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation, Student Loan Marketing
Association, Federal Farm Credit Banks, Federal Home Loan Banks, and Resolution
Funding Corporation. Under normal market conditions, at least 75% of the total
assets of the Fund will be invested in securities issued or guaranteed by the
U.S. Government or its agencies and instrumentalities. The remainder of the
Fund's assets may be invested in mortgage-related securities (including
collateralized mortgage obligations), investment grade debt securities,
short-term investments and other securities and instruments described in
"Appendix: Investment Policies, Strategies and Risks."

Although the Government Income Fund invests primarily in securities issued or
guaranteed by the U.S. Government or its agencies and instrumentalities, the
value of the Fund's and Portfolio's shares and their current yields will
fluctuate and are not guaranteed by the U.S. Government. The market value of the
debt securities in which the Fund will invest is generally affected by changes
in the level of interest rates. An increase in interest rates will tend to
reduce their market value, and a decline in interest rates will tend to increase
their value. The magnitude of these changes will be greater for securities with
longer remaining maturities than those with shorter maturities. Generally, the
longer the maturity of a debt security, the higher its yield and the greater its
price volatility. Conversely, the shorter the maturity, the lower the yield but
the greater the price stability.

Duration is one of the fundamental tools used by the Investment Adviser in the
selection of securities for the Government Income Fund. Developed as a more
precise alternative to the concept of "term to maturity," duration is a measure
of the expected life of a debt security on a present value basis and is an
indicator of a security's price movement and risk associated with changes in
interest rates. Duration incorporates a bond's yield, coupon interest payments,
final maturity and call features into one measure. It takes the length of the
time intervals between the present time and the time that interest and principal
payments are scheduled and weights them by the present values of the cash to be
received at each future point in time. For any fixed income security with
interest payments occurring prior to the payment of principal, duration is
always less than maturity. In general, all other things being the same, the
lower the stated or coupon rate of interest of a fixed income security, the
longer the duration of the security; conversely, the higher the stated or coupon
rate of interest of a fixed income security, the shorter the duration of the
security. For example, the maturity of a coupon bond with a three-year duration
is approximately 3.5 years, and the maturity of a coupon bond with a six-

14
<PAGE>
year duration is approximately nine years. In some situations the standard
duration calculation does not properly reflect the interest rate exposure of a
security, such as in the case of mortgage pass-through securities. In such
instances, the Investment Adviser will use more sophisticated analytical
techniques that incorporate the economic life of a security into the
determination of its interest rate exposure.

MONEY MARKET PORTFOLIO. The Money Market Portfolio seeks to obtain a high level
of current income consistent with preservation of capital and maintenance of
liquidity. It invests all of its assets in the Nicholas-Applegate Money Market
Fund, which has the same investment objective as the Money Market Portfolio.
Assets of the Money Market Fund are invested in high quality, short-term, U.S.
dollar denominated money market instruments. Such instruments include
obligations issued or guaranteed as to principal or interest by the U.S.
Government or its agencies and instrumentalities; certificates of deposit, time
deposits and bankers' acceptances of certain domestic banks, foreign banks,
domestic branches of foreign banks, foreign branches of domestic and foreign
banks, and domestic savings and loan associations; commercial paper and other
short-term corporate obligations, including those with floating or variable
rates of interest; and repurchase agreements with respect to any of the
foregoing obligations. The Money Market Fund may also invest in firm commitment
agreements and other instruments described in "Appendix: Investment Policies,
Strategies and Risks" under certain circumstances. Neither the Money Market
Portfolio nor the Money Market Fund is insured or guaranteed by the U.S.
Government, and there can be no assurance that either the Money Market Portfolio
or the Money Market Fund will be able to maintain a stable net asset value of
$1.00 per share.

All of the Money Market Fund's investments will mature in 397 days or less from
the date of purchase, and such investments will have a dollar-weighted maturity
of 90 days or less. By limiting the maturity of its investments, the Fund seeks
to lessen changes in the value of its assets caused by fluctuations in
short-term interest rates; however, due to the short maturities of its
investments, the Fund will tend to have a lower yield (but less volatility) than
funds that invest in longer-term securities. In addition, the Fund will invest
only in securities determined by or under the supervision of its Board of
Trustees to present minimal credit risks and which at the time of purchase are
"eligible securities" as defined by Rule 2a-7 under the Investment Company Act.

Although the Money Market Fund will invest only in U.S. dollar denominated
instruments, the Fund may invest up to 20% of its total assets in securities
issued by foreign banks, foreign branches of domestic banks, domestic and
foreign branches of foreign banks, and commercial paper issued by foreign
issuers. Investment in such securities may subject the Fund to certain special
risks that are different from those incurred by a fund which invests only in
debt obligations of U.S. issuers, and the Sub-Adviser will give appropriate
consideration to such risks. See "'Appendix: Investment Policies, Strategies and
Risks" for a discussion of the risks associated with investment in foreign
securities.

The Money Market Portfolio and the Money Market Fund are subject to certain
restrictions required by Rule 2a-7 under the Investment Company Act. In order to
comply with such restrictions, the Fund will not, among other things, purchase
the securities of any issuer if it would cause (i) more than 5% of its total
assets to be invested in the securities of any one issuer (excluding U.S.
Government securities and repurchase agreements fully collateralized by U.S.
Government securities), except as permitted by the Rule for certain securities
for a period of up to three business days after purchase, (ii) more than 5% of
its total assets to be invested in "second tier securities," as defined by the
Rule, or (iii) more than the greater of $1 million or 1% of its total net assets
to be invested in the second tier securities of any one issuer. This

15
<PAGE>
limitation does not apply to investment of all the assets of the Money Market
Portfolio in the Money Market Fund. See the Statement of Additional Information
for a more detailed description of the requirements of Rule 2a-7.

INVESTMENT TECHNIQUES AND PROCESSES. The focus of the Investment Adviser's
investment program is GROWTH OVER TIME-Registered Trademark-. In making
decisions with respect to equity securities for the Funds, the Investment
Adviser uses a proprietary investment methodology which is designed to capture
positive change at an early stage. It adheres rigorously to this methodology,
and applies it to various segments of the capital markets, domestically and
internationally. This methodology consists of investment techniques and
processes designed to identify companies with attractive earnings and dividend
growth potential and to evaluate their investment prospects. These techniques
and processes include relationships with an extensive network of brokerage and
research firms located throughout the world; computer-assisted fundamental
analysis of thousands of domestic and foreign companies; established criteria
for the purchase and sale of individual securities; portfolio structuring and
rebalancing guidelines; securities trading techniques; and continual monitoring
and reevaluation of all holdings with a view to maintaining the most attractive
mix of investments. The Investment Adviser collects data on approximately 26,000
companies in 35 countries (adjusting for reporting and accounting differences).
There can be no assurance that use of this proprietary investment methodology
will be successful.

The decision to invest assets of a Fund in any particular debt security will be
based on such factors as the Investment Adviser's analysis of the effect of the
yield to maturity of the security on the average yield to maturity of the total
debt security portfolio of the Fund, the Investment Adviser's assessment of the
credit quality of the issuer and other factors the Investment Adviser deems
relevant. In managing the Funds' debt security investments, the Investment
Adviser seeks to capture major moves in interest rates and utilizes a
proprietary model to identify interest rate trends in the bond market. There can
be no assurance that use of these techniques will be successful.

INVESTMENT POLICIES, STRATEGIES AND RISKS. The Appendix and the Statement of
Additional Information describe certain investment securities and techniques of
the Funds and the associated risks. These include short-term investments in cash
and cash equivalents; investment in sovereign debt securities of the U.S.
government and its agencies and instrumentalities; floating and variable rate
demand notes and bonds; commercial paper; non-convertible corporate debt
securities; convertible securities, synthetic convertible securities and
warrants; depository receipts; over-the-counter securities; when-issued
securities and firm commitment agreements; put and call options on securities;
stock index futures contracts; repurchase agreements; illiquid securities;
securities lending; and borrowing.

INVESTMENT RESTRICTIONS. Each Portfolio and Fund is subject to certain
investment restrictions which constitute fundamental policies. Fundamental
policies may not be changed without the approval of the holders of a majority of
the outstanding shares of the affected Portfolio or Fund, respectively, as
defined in the Investment Company Act. An investment policy or restriction which
is not described as fundamental in this Prospectus or the Statement of
Additional Information may be changed or modified by the Board of Trustees of
the Trust or Master Trust, as the case may be, without shareholder approval.

16
<PAGE>
Certain of the investment restrictions which are fundamental policies are set
forth below. Additional investment restrictions are discussed in the Appendix
and Statement of Additional Information.

1. No Portfolio or Fund may invest more than 5% of its total assets in the
securities of any one issuer. However, up to 25% of a Portfolio's or
Fund's total assets can be invested without regard to this limitation, and
this limitation does not apply to investments in securities of the U.S.
Government or its agencies and instrumentalities.

2. No Portfolio or Fund may purchase more than 10% of the outstanding voting
securities of any one issuer, or purchase the securities of any issuer for
the purpose of exercising control.

3. No Portfolio or Fund may invest 25% or more of its total assets in any one
particular industry; however, this restriction does not apply to the
securities of the U.S. Government, its agencies and instrumentalities or,
with respect to the Money Market Portfolio or Fund, domestic branches of
U.S. banks and U.S. branches of foreign banks which are subject to the
same regulation as U.S. banks.

4. No Portfolio or Fund may make loans of its portfolio securities in an
aggregate amount exceeding 30% of the value of its total assets, or borrow
money (except from banks for temporary, extraordinary or emergency
purposes or for the clearance of transactions and in an aggregate amount
not exceeding 20% of the value of its total assets).

5. No Portfolio or Fund may invest more than 15% (10% in the case of the
Money Market Portfolio or Fund) of its net assets in illiquid securities.

The investment restrictions described above do not apply to an investment by a
Portfolio of all of its assets in a corresponding Fund.

PORTFOLIO TURNOVER. The Investment Adviser's investment approach results in
above-average portfolio turnover for each Fund other than the Money Market Fund
as the Investment Adviser sells portfolio securities when it believes the
reasons for their initial purchase are no longer valid or when it believes that
the sale of a security owned by a Fund and the purchase of another security of
better value can enhance principal or increase income. A security may also be
sold to avoid a prospective decline in market value or purchased in anticipation
of a market rise. Although it is not possible to predict future portfolio
turnover rates accurately, and such rates may vary greatly from year to year,
the Investment Adviser anticipates that the annual portfolio turnover rate for
each Fund other than the Money Market Fund may be up to 200%, which is
substantially greater than that of many other investment companies. A high rate
of portfolio turnover (100% or more) will result in a Fund paying greater
brokerage commissions on equity securities (other than those effected with
dealers on a principal basis) than would otherwise be the case, which will be
borne directly by the Fund and ultimately by the shareholders of the
corresponding Portfolios. High portfolio turnover should not result in a Fund
paying greater brokerage commissions on debt securities, as most transactions in
debt securities are effected with dealers on a principal basis. However, debt
securities, as well as equity securities traded on a principal basis, are
subject to mark-ups by the dealers. High portfolio turnover may also result in
the realization of substantial net capital gains, and any distributions derived
from such gains may be ordinary income for federal tax purposes.

- --------------------------------------------------------------------------------
ORGANIZATION AND MANAGEMENT

ORGANIZATION. Each Portfolio is a series of Nicholas-Applegate Mutual Funds, a
Delaware business trust. The Board of Trustees of the Trust, in addition to
reviewing the actions of the

17
<PAGE>
Trust's Administrator and Distributor, as set forth below, decides upon matters
of general policy with respect to each Portfolio. See "General Information." The
trustees and officers of the Trust and of the Master Trust are described in the
Statement of Additional Information. None of the disinterested trustees of the
Trust are same individuals as the disinterested trustees of the Master Trust.

INVESTMENT ADVISER. The Trust has not retained the services of an investment
adviser for the Portfolios, as the Portfolios seek to achieve their investment
objectives by investing all of their assets in corresponding Funds.
Nicholas-Applegate Capital Management, 600 West Broadway, 30th Floor, San Diego,
California 92101, serves as the Investment Adviser to the Funds. The Investment
Adviser currently manages approximately $30 billion of discretionary assets for
numerous clients, including employee benefit plans of corporations, public
retirement systems and unions, university endowments, foundations and other
institutional investors, and individuals. The Investment Adviser was organized
in 1984 as a California limited partnership. Its general partner is
Nicholas-Applegate Capital Management Holdings, L.P., a California limited
partnership controlled by Arthur E. Nicholas. He and 13 other partners manage a
staff of approximately 325 employees.

As compensation for the services it provides, the Investment Adviser receives a
monthly fee at the following annual rates: for the Emerging Growth Fund, 1.00%
of the Fund's net assets; for each of the Core Growth Fund, Income & Growth Fund
and Balanced Growth Fund, 0.75% of the first $500 million of the Fund's net
assets, 0.675% of the next $500 million of net assets, and 0.65% of net assets
in excess of $1 billion; for the Government Income Fund, 0.40% of the first $500
million of the Fund's net assets, and 0.35% of net assets in excess of $500
million; and for the Money Market Fund, 0.25% of the first $500 million of the
Fund's net assets, and 0.2275% of net assets in excess of $500 million. The
advisory fees paid by most of the Funds are higher than those paid by most other
investment companies.

For the fiscal year ended March 31, 1996, the Investment Adviser received (paid)
fees and expense recoupments (reimbursements) from the Funds equal to the
following percentages of the Portfolios' respective average net assets, after
the fee deferrals and expense reimbursements referred to under "Expense
Limitation": Core Growth Portfolio A, 0.77%; Emerging Growth Portfolio A, 1.00%;
Income & Growth Portfolio A, 0.58%; Balanced Growth Portfolio A, (0.95%);
Government Income Portfolio A, (8.22%); Money Market Portfolio, (5.11%).

The Funds have been managed since inception under the general supervision of Mr.
Nicholas, who has been the Chief Investment Officer of the Investment Adviser
since its organization. In addition, since December 1995, John D. Wylie, as
Chief Investment Officer-Investor Services Group, is also responsible for
general oversight of the Funds' portfolios. The following persons are primarily
responsible for the Investment Adviser's day-to-day management of the Funds'
portfolios; except as otherwise indicated, each of them has been primarily
responsible since the Funds began operation: Core Growth Fund-John C. Marshall,
Jr.; Emerging Growth Fund-Catherine Somhegyi; Income & Growth Fund-John D.
Wylie; Balanced Growth Fund-John D. Wylie and the Investment Adviser's global
management team, headed by Lawrence S. Speidell (since March 1994) and Catherine
Somhegyi (since March 1996); Government Income Fund-John D. Wylie. Mr. Wylie,
Mr. Marshall and Ms. Avery have managed similar institutional accounts for the
Investment Adviser for more than the last five years. Mr. Speidell has been a
portfolio manager with the Investment Adviser since March 1994; from 1983 until
he joined the Investment Adviser, he was an institutional portfolio manager with
Batterymarch Financial Management.

For historical performance data relating to the Portfolios, see "Appendix: Prior
Performance."

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<PAGE>
ADMINISTRATOR. Investment Company Administration Corporation, a Delaware
corporation, is the Administrator of each Portfolio. Pursuant to an
Administration Agreement with the Trust, and subject to the supervision of the
Board of Trustees of the Trust, the Administrator supervises the overall
administration of the Trust. Its responsibilities include preparing and filing
all documents required for compliance by the Trust with applicable laws and
regulations, arranging for the maintenance of books and records of the Trust and
supervision of other organizations that provide services to the Trust. Certain
officers of the Trust are also provided by the Administrator. For the services
it provides to the Trust, the Administrator receives an annual fee of between
$5,000 and $35,000 for each of the groups of portfolios of the Trust investing
in the various series of the Master Trust; the fee is allocated among the
various series of the Trust, including the Portfolios, in accordance with
relative net asset values. The Administrator provides similar services as the
administrator of the Master Trust, subject to the supervision of its Board of
Trustees, and is compensated separately for the services rendered to each Fund
at an annual rate of approximately 0.02% of the average daily net assets of the
Fund.

EXPENSE LIMITATION. To limit the expenses of each Portfolio, the Investment
Adviser has agreed to defer its fees, and to absorb the other operating expenses
of each Portfolio, to ensure that the expenses of each Portfolio (excluding
interest, taxes, brokerage commissions and other portfolio transaction expenses,
capital expenditures and extraordinary expenses, but including such Portfolio's
proportionate share of the corresponding Fund's similar operating expenses) do
not exceed the following percentage of the Portfolio's average net assets on an
annual basis through March 31, 1997 or any lower expense limitation imposed by
any state during any fiscal period: Core Growth Portfolio A-1.60%; Emerging
Growth Portfolio A-1.95%; Income & Growth Portfolio A-1.60%; Balanced Growth
Portfolio A-1.60%; Government Income Portfolio A-0.90%; and the Money Market
Portfolio-1.10%. Each Portfolio will reimburse the Investment Adviser for fees
deferred or other expenses paid by the Investment Adviser pursuant to this
agreement in later years in which operating expenses for the Portfolio are less
than the applicable percentage limitation set forth above for any such year. No
interest, carrying or finance charge will be paid by a Portfolio with respect to
any amounts representing fees deferred or other expenses paid by the Investment
Adviser. In addition, no Portfolio or Fund will be required to repay any
unreimbursed amounts to the Investment Adviser upon termination or non-renewal
of its Investment Advisory Agreement with the Master Trust.

For the fiscal year ended March 31, 1996, the Series A Portfolios' total
expenses were the following percentages of their respective average net assets
(annualized for Series B), after the fee deferrals and expense reimbursements
indicated in parentheses: Core Growth Portfolio A-1.58% (includes 0.02%
recoupment of past deferrals); Emerging Growth Portfolio A-1.74% (0.00%); Income
& Growth Portfolio A-1.60% (0.13%); Balanced Growth Portfolio A-1.60% (1.70%);
Government Income Portfolio A-0.93% (8.65%); Money Market Portfolio-0.45%
(5.33%).

DISTRIBUTOR. Nicholas-Applegate Securities, 600 West Broadway, 30th Floor, San
Diego, California 92101, a California limited partnership, serves as the
Distributor of shares of each Portfolio. The general partner of the Distributor
is Nicholas-Applegate Capital Management Holdings, L.P. and its limited partner
is the Investment Adviser.

19
<PAGE>
distribution of shares of such Portfolio. The Trust has also adopted a
Shareholder Service Plan under which each Portfolio reimburses the Distributor
for shareholder servicing expenses actually incurred with respect to shares of
such Portfolio.

Under the Distribution Plan and a related distribution agreement (the
"Distribution Agreement"), the Distributor incurs the expenses of distributing
each Portfolio's shares. These expenses include advertising and marketing
expenses, commissions and other payments to broker-dealers and others which have
entered into agreements with the Distributor, the expenses of preparing,
printing and distributing prospectuses for the Portfolios, and indirect and
overhead costs associated with the sale of Portfolio shares. The Distributor
recovers the distribution expenses it incurs through the receipt of compensation
payments from each Portfolio under the Distribution Plan at the following annual
rates: for the Series A Portfolios, 0.25% of each such Portfolio's average daily
net assets; and for the Money Market Portfolio, 0.15% of such Portfolio's
average daily net assets. Moreover, under the Distribution Agreement, the
Distributor retains a portion of an initial sales charge from purchases of
shares of the Series A Portfolios, and a contingent deferred sales charge from
certain redemptions of shares of the Series A Portfolios. The Distribution Plan
is a "compensation" plan, which means that the distribution fees paid by the
Portfolios under the Distribution Plan are intended to compensate the
Distributor for services rendered and commission fees borne even if the amounts
paid exceed the Distributor's actual expenses (in which case the Distributor
would realize a profit). If in any year the Distributor's expenses incurred in
connection with the distribution of a Portfolio's shares exceed the distribution
fees paid by the Portfolio, the Distributor will recover such excess if the
Distribution Plan with respect to such shares continues to be in effect in some
later year when the distribution fees exceed the Distributor's expenses with
respect to the Portfolio. There is no limit on the periods during which
unreimbursed expenses may be carried forward; no Portfolio pays interest,
carrying or other finance charges on any carried forward amounts; and no
Portfolio will be obligated to pay any unreimbursed expenses that may exist at
such time, if any, as the Distribution Plan terminates or is not continued.

Many of the Distributor's sales efforts involve the Trust as a whole, so that
distribution fees paid by one Portfolio may help finance sales efforts relating
to shares of other Portfolios. In reporting its expenses to the Trustees, the
Distributor separately itemizes expenses that relate to the distribution of
shares of a single Portfolio, and allocates other expenses among the Portfolios
based on their relative net assets.

Under the Shareholder Service Plan, which is a "reimbursement" plan, each Series
A Portfolio and the Money Market Portfolio pays the Distributor an annual fee of
up to 0.10% of the Portfolio's average daily net assets as reimbursement for
certain expenses actually incurred in connection with shareholder services
provided by the Distributor and payments to broker-dealers and others for the
provision of such services. Support services with respect to the beneficial
owners of Portfolio shares include establishing and maintaining accounts and
records relating to clients of the Distributor, broker-dealers and others who
invest in the Portfolio shares, preparing tax reports, assisting clients in
processing exchange and redemption requests and account designations, and
responding to client inquiries concerning their investments. If in any month the
Distributor is due more monies for shareholder services than are immediately
payable because of the expense limitations under the Shareholder Service Plan,
the unpaid amount is carried forward from month to month while the Shareholder
Service Plan is in effect until such time when it may be paid. However, no
carried forward amount will be

20
<PAGE>
payable beyond the fiscal year during which the amounts were incurred, and no
interest, carrying or other finance charge is borne by the Portfolios with
respect to any amount carried forward.

No fees or commissions will be paid by the Distributor to any broker-dealer or
others until amounts owed to such broker-dealer or others are at least $100. The
Distributor, at its expense, may provide additional promotional incentives to
brokers and dealers. In the case of dealers who institute special promotional
programs for sales of shares of the Series A Portfolios or other series of the
Trust, such incentives may be up to 0.50% of sales during the promotion period.
Dealers may obtain further information by calling (800) 551-8045.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. PNC Bank, Airport Business
Center, International Court 2, 200 Stevens Drive, Lester, Pennsylvania, 19113,
serves as Custodian for the Portfolios and the Funds. PFPC Inc., an affiliate of
the Custodian, provides accounting services to the Portfolios and the Funds.
State Street Bank and Trust Company, Mutual Funds Division, Nicholas-Applegate,
2 Heritage Drive, 7th Floor, North Quincy, Massachusetts 02171, is the Transfer
Agent and the Dividend Disbursing Agent for the Portfolios.

PORTFOLIO TRANSACTIONS AND BROKERAGE. The Investment Adviser is responsible for
the Funds' portfolio transactions and the allocation of the brokerage business.
In executing such transactions, the Investment Adviser seeks to obtain the best
price and execution for the Funds. Subject to obtaining the best price and
execution, the Investment Adviser may effect transactions through brokers who
sell shares of the Portfolios or provide research services to the Investment
Adviser, which may result in the payment of higher commissions than those
charged by other brokers. However, the selection of such brokers will be made in
accordance with Section 28(e) of the Securities Exchange Act of 1934. Section
28(e) requires the Investment Adviser to make a good faith determination that
the commissions paid are reasonable in relation to the value of the brokerage
and research services provided by such broker, viewed in terms of either that
particular transaction or the Investment Adviser's overall responsibilities with
respect to the accounts as to which it exercises investment discretion.

- --------------------------------------------------------------------------------
PURCHASING SHARES

HOW TO PURCHASE SHARES. You may purchase shares of any Portfolio directly from
the Trust through its Transfer Agent, State Street Bank and Trust Company, or
through your dealer which has entered into a selling group agreement with the
Distributor. Account applications can be obtained from the Transfer Agent or
your dealer. The minimum initial investment is generally $2,000 and the minimum
subsequent investment is $100, but reduced investment minimums are available in
certain cases. See "Investment Minimums" below.

Purchases of shares of the Portfolios can be made by check or by wiring federal
funds to the Transfer Agent. Checks should be in U.S. dollars and made payable
to Nicholas-Applegate Mutual Funds or, in the case of a retirement account, the
custodian or trustee. Third party checks will not be accepted. Checks should be
sent to the Transfer Agent, State Street Bank and Trust Company, P.O. Box 8326,
Boston, Massachusetts 02266-8326, Attention: Nicholas-Applegate Mutual Funds.
Please specify the name of the Portfolio, the account number assigned by the
Transfer Agent, and your name. See "Purchase by Wire" below for wiring
instructions.

21
<PAGE>
You may make subsequent investments in any Portfolio by completing the
subsequent investments form at the bottom of a recent account statement, making
your check payable to the Trust, writing your account number on the check and
mailing it in the envelope provided with your account statement. Subsequent
investments may also be made by mailing your check directly to your dealer's
address printed on your account statement.

Each Portfolio reserves the right to reject any purchase order or to suspend or
modify the continuous offering of its shares. Your dealer is responsible for
forwarding payment promptly to the Transfer Agent. The Trust reserves the right
to cancel any purchase order for which payment has not been received by the
third business day following the investment. Transactions in Portfolio shares
made through dealers other than the Transfer Agent may be subject to postage and
handling charges imposed by the dealer.

INVESTMENT MINIMUMS. The minimum initial investment in each Portfolio is $2,000.
For retirement plan investments and custodial accounts under the Uniform
Gifts/Transfers to Minors Act, the minimum is $250. The minimum is reduced to
$50 for purchases through the Automatic Investment Plan or to $25 for purchases
by retirement plans through payroll deductions. The minimum is $100 for
additional investments (except as noted above).

PURCHASE BY WIRE. For an initial purchase of shares of a Portfolio by wire, you
must first telephone the Transfer Agent at (800) 551-8043 between the hours of
8:00 A.M. and 4:00 P.M. (Eastern time) on a day when the New York Stock Exchange
is open for normal trading to receive an account number. The following
information will be requested: your name, address, tax identification number,
dividend distribution election, amount being wired and wiring bank. Instructions
should then be given by you to your bank to transfer funds by wire to the
Transfer Agent, State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, ABA Number 011000028, DDA Number 9904-645-0,
Attention: Nicholas-Applegate Mutual Funds, specifying on the wire the name of
the Portfolio, the account number assigned by the Transfer Agent and your name.
If you arrange for receipt by the Transfer Agent of federal funds prior to the
close of trading (currently 4:00 P.M., Eastern time) of the New York Stock
Exchange on a day the Exchange is open for normal trading, you may purchase
shares of a Portfolio as of that day. Your bank may charge a fee for wiring
money on your behalf.

In making a subsequent purchase order by wire, you should wire funds to the
Transfer Agent in the manner described above and be sure that the wire specifies
the name of the Portfolio, your name and the account number. However, it is not
necessary to call the Transfer Agent to make subsequent purchase orders
utilizing federal funds. The minimum amount which may be invested by wire is
$100, except as noted below.

SHARE PRICE. Shares of a Portfolio are purchased at the next offering price
after an order in proper form is received by the Transfer Agent. An order in
proper form must include all correct and complete information, documents and
signatures required to process your purchase. The offering price is the net
asset value plus a sales charge, if applicable. The net asset value per share is
determined as of the close of trading of the New York Stock Exchange on each day
the Exchange is open for normal trading. Orders received before 4:00 P.M.
(Eastern time) on a day when the Exchange is open for normal trading will be
processed as of the close of trading on that day. Otherwise processing will
occur on the next business day. To determine a Portfolio's net asset value per
share, the current value of the Portfolio's total assets, less all liabilities,
is divided by the total number of shares outstanding, and the result is rounded
to the nearer cent.

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<PAGE>
The sales charges you pay when purchasing shares of a Series A Portfolio are set
forth below:

<TABLE>
<CAPTION>
Dealer Commission
as Percentage of the
Sales Charges as Percentage of the: Offering Price
Amount of Purchase NET AMOUNT OFFERING
at the Offering Price INVESTED PRICE
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
CORE GROWTH, EMERGING GROWTH,
INCOME & GROWTH AND
BALANCED GROWTH PORTFOLIOS
Less than $50,000 5.54% 5.25% 4.50%
$50,000 but less than $100,000 4.71% 4.50% 3.75%
$100,000 but less than $250,000 3.63% 3.50% 2.75%
$250,000 but less than $500,000 2.56% 2.50% 2.00%
$500,000 but less than $1,000,000 2.04% 2.00% 1.60%
$1,000,000 or more None None (See below)
- -------------------------------------------------------------------------------------------------------------------------
GOVERNMENT INCOME PORTFOLIO
Less than $50,000 4.99% 4.75% 4.00%
$50,000 but less than $100,000 4.17% 4.00% 3.25%
$100,000 but less than $250,000 3.63% 3.50% 2.75%
$250,000 but less than $500,000 2.56% 2.50% 2.00%
$500,000 but less than $1,000,000 2.04% 2.00% 1.60%
$1,000,000 or more None None (See below)
</TABLE>

No initial sales charge applies on purchases of shares of the Money Market
Portfolio. In addition, although no initial sales charge applies on a purchase
of $1 million or more of any of the Series A Portfolios, a contingent deferred
sales charge of 1.00% is imposed on certain redemptions less than one year after
the $1 million purchase. See "Redeeming Shares-Contingent Deferred Sales Charge
on Redemptions of Portfolio A Shares." Commissions will be paid by the
Distributor to dealers who initiate and are responsible for purchases of $1
million or more and for purchases made at net asset value by certain retirement
plans of organizations with 50 or more eligible employees as set forth in the
Statement of Additional Information.

NET ASSET VALUE PURCHASES. The Trust may sell shares of a Series A Portfolio at
net asset value to:

(1) current or retired directors, trustees, partners, officers and employees of
the Trust, the Master 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;

(2) current or retired registered representatives or full-time employees and
their spouses and minor children of dealers having selling group agreements with
the Trust and plans for such persons;

(3) former limited partners and participants of certain investment partnerships
and pooled trusts previously managed by the Investment Adviser;

(4) shareholders and former shareholders of another mutual fund which has a
sales charge and is not a series of the Trust, so long as shares of the
Portfolio are purchased with the proceeds of a redemption, made within 60 days
of the purchase, of shares of such other mutual fund (to obtain this benefit,
the redemption check, endorsed to the Trust, or a copy of the confirmation
showing the redemption must be forwarded to the Transfer Agent);

(5) companies or other entities exchanging securities with the Trust or Master
Trust through a merger, acquisition or exchange offer;

23
<PAGE>
(6) trustees or other fiduciaries purchasing shares for certain retirement plans
of organizations with 50 or more eligible employees;

(7) participants in certain pension, profit-sharing or employee benefit plans
that are sponsored by the Distributor and its affiliates;

(8) investment advisers and financial planners who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services;

(9) clients of investment advisers and financial planners referred to in item
(8) who place trades for their own accounts if the accounts are linked to the
master account of the investment adviser or financial planner on the books and
records of a broker, agent, investment adviser or financial institution;

(10) employee-sponsored benefit plans in connection with redemptions of shares
of Series A or C Portfolios made as a result of participant-directed exchanges
between options in such a plan;

(11) "wrap accounts" for the benefit of clients of broker-dealers, financial
institutions or financial planners having sales or service agreements with the
Distributor or another broker-dealer or financial institution with respect to
sales of shares of the Series A Portfolios; and

Shares are offered at net asset value to these persons and organizations due to
anticipated economies in sales effort and expense. No sales charges are imposed
on Portfolio shares purchased upon the reinvestment of dividends and
distributions, or upon an exchange of shares from other series of the Trust
except as otherwise noted in "Shareholder Services-Exchange Privilege" below.

AGGREGATION. Sales charge discounts on purchases of shares of a Series A
Portfolio are available for certain aggregated investments. Investments which
may be aggregated include those by you, your spouse and your children under the
age of 21, if all parties are purchasing shares for their own accounts, which
may include purchases through employee benefit plans such as an IRA,
individual-type 403(b) plan or single-participant Keogh-type plan or by a
business solely controlled by these individuals (for example, the individuals
own the entire business) or by a trust (or other fiduciary arrangement) solely
for the benefit of these individuals. Individual purchases by trustees or other
fiduciaries may also be aggregated if the investments are (1) for a single trust
estate or fiduciary account, including an employee benefit plan other than those
described above, or (2) made for two or more employee benefit plans of a single
employer or of affiliated employers as defined in the Investment Company Act,
again excluding employee benefit plans described above, or (3) for a common
trust fund or other pooled account not specifically formed for the purpose of
accumulating Portfolio shares. Purchases made for nominee or street name
accounts (securities held in the name of a dealer or another nominee such as a
bank trust department instead of the customer) may not be aggregated with those
made for other accounts and may not be aggregated with other nominee or street
name accounts unless otherwise qualified as described above.

CONCURRENT PURCHASES. To qualify for a reduced sales charge, you may combine
concurrent purchases of shares of two or more Series A Portfolios. Shares of the
Money Market Portfolio purchased through an exchange, reinvestment or
cross-reinvestment from a Series A Portfolio also qualify. For example, if you
concurrently invest $25,000 in one Portfolio and $25,000 in another Portfolio,
the sales charge would be reduced to reflect a $50,000 purchase.

24
<PAGE>
RIGHT OF ACCUMULATION. The sales charge for your investment may also be reduced
by taking into account your existing holdings in the Series A Portfolios. See
the account application for further details.

LETTER OF INTENT. You may reduce sales charges on all investments by meeting the
terms of a letter of intent, a non-binding commitment to invest a certain amount
within a 13-month period. Your existing holdings in the Series A Portfolios may
also be combined with the investment commitment set forth in the letter of
intent to further reduce your sales charge. Up to 5% of the letter amount will
be held in escrow to cover additional sales charges which may be due if your
total investments over the letter period are not sufficient to qualify for a
sales charge reduction. See the account application for further details.

RETIREMENT PLANS. You may invest in each Portfolio through various retirement
plans including IRAs, Simplified Employee Plan (SEP IRAs), 403(b) plans, 457
plans, and all qualified retirement plans (including 401(k) plans). For further
information about any of the plans, agreements, applications and annual fees,
contact the Distributor or your dealer. To determine which retirement plan is
appropriate for you, please consult your tax adviser.

SHARE CERTIFICATES. Shares are credited to your account and certificates are not
issued unless specifically requested. This eliminates the costly problem of lost
or destroyed certificates. If you would like certificates issued, please request
them by writing to the Transfer Agent. There is usually no charge for issuing
certificates in reasonable denominations, but certificates will be issued only
for full shares. Certificates are not available for shares of the Money Market
Portfolio.

OTHER PORTFOLIOS. Currently, the Trust is offering eight Series A Portfolios,
eight Series B Portfolios, eight Series C Portfolios and a Money Market
Portfolio. Five domestic Series A Portfolios and the Money Market Portfolio are
offered pursuant to this Prospectus. Three global Series A Portfolios, and the
Series B and Series C Portfolios, are covered by separate prospectuses which can
be obtained by calling (800) 551-8045. The Distributor also offers shares of
other portfolios of the Trust which invest in the same Funds of the Master Trust
as the Series A Portfolios. These other portfolios have different sales charges
and other expenses than the Series A Portfolios, which may affect their
performance. Information about these other portfolios can be obtained from your
dealer or by calling (800) 551-8045.

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SHAREHOLDER SERVICES

AUTOMATIC INVESTMENT PLAN. You may make regular monthly or quarterly investments
in each Portfolio 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
(800) 551-8043.

AUTOMATIC REINVESTMENT. Dividends and capital gain distributions are reinvested
in additional shares at no sales charge unless you indicate otherwise on the
account application. You may elect to have dividends or capital gain
distributions paid in cash.

CROSS-REINVESTMENT. You may cross-reinvest dividends or dividends and capital
gain distributions paid by one Series A Portfolio into shares of another Series
A Portfolio, subject to conditions outlined in the Statement of Additional
Information. Cross-reinvestment of

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dividends and capital gain distributions may also be made from and to the Money
Market Portfolio. Generally, to use this service the value of your account in
the Portfolio which paid the dividend or capital gain distribution must equal at
least $5,000.

EXCHANGE PRIVILEGE. You may exchange shares of a Series A Portfolio into shares
of other Series A Portfolios by writing to the Transfer Agent, State Street Bank
and Trust Company, Attention: Nicholas-Applegate Mutual Funds, P.O. Box 8326,
Boston, Massachusetts 02266-8326. Shares may also be exchanged to or from the
Money Market Portfolio. Please specify the name of the applicable Portfolio, the
number of shares or dollar amount to be exchanged and your name and account
number. You may also exchange shares by contacting your dealer or - if you have
authorized telephone exchanges on the account application - by telephoning the
Transfer Agent at (800) 551-8043 or by sending the Transfer Agent a facsimile at
(617) 774-2651, between the hours of 8:00 A.M. and 4:00 P.M. (Eastern time) on a
day when the New York Stock Exchange is open for normal trading (see "Telephone
Privilege" below).

Before effecting an exchange, you should obtain the currently effective
prospectus of the series into which the exchange is to be made. Exchange
purchases are subject to the minimum investment requirements of the Portfolio
purchased. No sales charge applies except for exchanges of shares of the Money
Market Portfolio for shares of a Series A Portfolio, which are subject to
applicable sales charges on the Series A Portfolio being purchased unless the
Money Market Portfolio shares were acquired by an exchange from a Series A
Portfolio having a sales charge, or by reinvestment or cross-investment of
dividends or capital gain distributions. Additionally, a contingent deferred
sales load may apply to certain redemptions of shares of the Money Market
Portfolio acquired in an exchange for shares of a Series A Portfolio. See
"Purchasing Shares" above. An exchange will be treated as a redemption and
purchase for tax purposes. If certificates are held by you, the certificates,
signed in the name(s) shown on the face of the certificates, must be returned in
order for the shares to be exchanged.

TELEPHONE PRIVILEGE. You may exchange or redeem shares by telephone if you have
elected the telephone privilege on the account application. You should realize
that by electing the telephone privilege you may be giving up a measure of
security that you may have if you were to request an exchange or redemption of
shares in writing. Furthermore, in periods of severe market or economic
conditions, telephone exchanges or redemptions may be difficult to implement, in
which case you should mail or send by overnight delivery a written exchange or
redemption request to the Transfer Agent. Overnight deliveries should be sent to
the Transfer Agent, Attention: Nicholas-Applegate Mutual Funds, 2 Heritage
Drive, 7th Floor, North Quincy, Massachusetts 02171. All exchanges will be made
on the basis of the relative net asset values of the two Portfolios next
determined after a completed request is received. Requests for telephone
exchanges or redemptions received before 4:00 P.M. (Eastern time) on a day when
the New York Stock Exchange is open for normal trading will be processed as of
the close of trading on that day. Otherwise processing will occur on the next
business day.

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recording of telephone instructions, and providing written confirmation of
transactions. The Trust reserves the right to refuse a telephone exchange or
redemption request if it believes, for example, that the person making the
request is neither the record owner of the shares being exchanged or redeemed
nor otherwise authorized by the shareholder to request the exchange or
redemption. Shareholders will be promptly notified of any refused request for a
telephone exchange or redemption. No Portfolio or its agents will be liable for
any loss, liability or cost which results from acting upon instructions of a
person reasonably believed to be a shareholder with respect to the telephone
privilege.

AUTOMATIC EXCHANGES. You may automatically exchange shares (in increments of $50
or more) among any of the Series A Portfolios or with the Money Market Portfolio
on a monthly or quarterly basis. You must either meet the minimum initial
investment requirement for the receiving Portfolio or the originating
Portfolio's balance must be at least $5,000 and the receiving Portfolio's
minimum must be met within one year.

AUTOMATIC WITHDRAWALS. You may make automatic withdrawals from a Portfolio of
$50 or more on a monthly or quarterly basis if you have an account of $5,000 or
more in the Portfolio. Withdrawal proceeds will normally be received prior to
the end of the month or quarter. See the account application for further
information.

ACCOUNT STATEMENTS. Your account is opened in accordance with your registration
instructions. Transactions in the account, such as additional investments and
dividend reinvestments, will be reflected on regular confirmation statements
from the Transfer Agent (for qualified retirement plans, such statements will be
provided by the plan administrator or sponsor).

REPORTS TO SHAREHOLDERS. Each Portfolio will send its shareholders 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 Portfolios may provide one annual and one semi-annual
report and annual prospectus per household. In addition, quarterly unaudited
financial data are available from the Portfolios upon request.

SHAREHOLDER INQUIRIES. Shareholder inquiries should be addressed to the Trust,
c/o State Street Bank and Trust Company, Attention: Mutual Funds Division,
Nicholas-Applegate, P.O. Box 8326, Boston, Massachusetts 02266-8326. Telephone
inquiries can be made by calling (800) 551-8043 or, from outside the U.S., (617)
774-5000 (collect).

The services referred to above are available only in states where the Portfolio
to be purchased may be legally offered and 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 at the address and telephone number provided above.

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REDEEMING SHARES

HOW TO REDEEM SHARES. You may redeem shares of any Portfolio by writing to the
Transfer Agent, State Street Bank and Trust Company, Attention:
Nicholas-Applegate Mutual Funds, P.O. Box 8326, Boston, Massachusetts
02266-8326. Please specify the name of the Portfolio, the number of shares or
dollar amount to be sold and your name and account number. You should also
enclose any certificated shares you wish to redeem. Shares may also be redeemed
by contacting your dealer, who may charge you for this service. Shares held in
street name must be redeemed through your dealer.

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If redemption is requested by a corporation, partnership, trust or fiduciary,
written evidence of authority acceptable to the Transfer Agent must be submitted
before such request will be accepted. If the proceeds of the redemption exceed
$50,000, are to be paid to a person other than the record owner, are to be sent
to an address other than the address on the Transfer Agent's records, or are to
be paid to a corporation, partnership, trust or fiduciary, the signature(s) on
the redemption request and on the certificates, if any, or stock powers may be
required to be guaranteed by an "eligible guarantor," which includes a bank or
savings and loan association that is federally insured or a member firm of a
national securities exchange.

TELEPHONE REDEMPTIONS. You may establish telephone redemption privileges if you
have checked the appropriate box and supplied the necessary information on the
account application. You may then redeem shares of a Portfolio by telephoning
the Transfer Agent at (800) 551-8043 or, from outside the U.S., (617) 774-5000,
or by sending the Transfer Agent a facsimile at (617) 774-2651, between the
hours of 8:00 A.M. and 4:00 P.M. (Eastern time) on a day when the New York Stock
Exchange is open for normal trading. Redemptions by telephone must be at least
$1,000. Redemption requests received by the Transfer Agent before 4:00 P.M.
(Eastern time) on a day when the New York Stock Exchange is open for normal
trading will be processed that day. Otherwise processing will occur on the next
business day. See "Shareholder Services-Telephone Privilege" above.

REDEMPTION PAYMENTS. Redemption proceeds are generally paid to you by check.
However, at your request, redemption proceeds of $5,000 or more may be wired by
the Transfer Agent to your bank account. Requests for redemption by wire should
include the name, location and ABA or bank routing number (if known) of your
designated bank and your account number. You will be charged a $10 fee for wire
transmissions of redemption proceeds, which will be deducted from such proceeds.
Payment will be made within three days after receipt by the Transfer Agent of
the written or telephonic redemption request and any share certificates, except
as indicated below. When purchases are made by check or periodic account
investment, redemption will not be allowed until the investment being redeemed
has been in the account for 14 calendar days. 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 Portfolio of securities owned by it is not reasonably practicable or it is
not reasonably practicable for the Portfolio fairly to determine the value of
its net assets, or during any other period when the Securities and Exchange
Commission, by order, so permits. Payment for redemption of recently purchased
shares will be delayed until the Transfer Agent has been advised that the
purchase check has been honored, up to 15 calendar days from the time of receipt
of the purchase check by the Transfer Agent. Such delay may be avoided by
purchasing shares by wire or by certified or official bank checks.

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indicated on your Checking Account Signature Card contained in the account
application. You will be charged $1 for each check presented for payment. This
privilege may be modified or terminated at any time by the Trust or Transfer
Agent upon notice to shareholders.

CONTINGENT DEFERRED SALES CHARGE ON REDEMPTIONS OF PORTFOLIO A SHARES. A
contingent deferred sales charge of 1.00% applies to certain redemptions of
shares of a Series A Portfolio less than one year after investments of $1
million or more. The charge is 1.00% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares. The charge will be deducted from the redemption
proceeds and will reduce the amount paid to you. The charge is waived for:

(1) exchanges for other Portfolio A shares (except if shares acquired by
exchange are then redeemed within 12 months of the initial purchase);

(2) redemptions in connection with mergers, acquisitions and exchange offers
involving a Series A Portfolio;

(3) qualifying distributions from qualified retirement plans and other employee
benefit plans;

(4) distributions from custodial accounts under Section 403(b)(7) of the
Internal Revenue Code or from IRAs due to death, disability or attainment of age
59 1/2;

(5) tax-free returns of excess contributions to IRAs;

(6) any partial or complete redemptions following the death or disability of a
shareholder, provided the redemption is made within one year of death or initial
determination of disability;

(7) redemptions through certain automatic withdrawals; and

(8) redemptions by qualified retirement and employee benefit plans with 50 or
more eligible employees.

There is no contingent deferred sales charge on redemptions of shares of the
Money Market Portfolio unless such shares were acquired in an exchange for
shares of a Series A Portfolio and the redemption is made less than one year
after the initial $1 million purchase of such shares.

REINSTATEMENT PRIVILEGE. You may reinvest proceeds from a redemption of
Portfolio shares, or proceeds of a dividend or capital gain distribution paid to
you in cash with respect to Portfolio shares, without a sales charge in any of
the Portfolios. Upon such a reinvestment, the Distributor will credit to your
account any contingent deferred sales charge imposed on the redeemed shares.
Send a written request and a check to the Transfer Agent within 90 days after
the date of the redemption, dividend or distribution. Reinvestment will be at
the next calculated net asset value after receipt. The tax status of a gain
realized on a redemption will not be affected by exercise of the reinstatement
privilege, but a loss may be nullified if you reinvest in the same series within
30 days.

INVOLUNTARY REDEMPTION. In order to reduce expenses of a Portfolio, the Trust
may redeem all
of the shares of any shareholder whose account has a net asset value of less
than $500 due to redemptions other than a shareholder which is an IRA or other
tax-deferred retirement plan. The Trust will give such shareholders 60 days'
prior written notice in which to purchase sufficient additional shares to avoid
such redemption. No contingent deferred sales charge is imposed on such
redemptions.

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DIVIDENDS, DISTRIBUTIONS AND TAXES

The Trust intends to qualify each Portfolio as a regulated investment company
under the Internal Revenue Code. Accordingly, the Portfolios will not be subject
to federal income taxes on their net investment income and capital gains, if
any, that they distribute to their shareholders. All dividends out of net
investment income, together with distributions of short-term capital gains, will
be taxable as ordinary income to the shareholders whether or not reinvested. Any
net long-term capital gains distributed to shareholders will be taxable as such
to the shareholders, whether or not reinvested and regardless of the length of
time a shareholder has owned his shares.

The Core Growth and Emerging Growth Portfolios declare and pay annual dividends
of net investment income. The Balanced Growth, Income & Growth and Government
Income Portfolios declare and pay quarterly dividends of net investment income.
The Money Market Portfolio declares daily dividends of net investment income and
distributes the accrued dividends to shareholders each month. Each Portfolio
makes distributions at least annually of its net capital gains, if any. In
determining amounts of capital gains to be distributed by a Portfolio, any
capital loss carryovers from prior years will be offset against its capital
gains.

Under U.S. Treasury Regulations, the Portfolios are required to withhold and
remit to the U.S. Treasury 31% of the dividends, capital gain income and
redemption proceeds on the accounts of those shareholders who fail to furnish
their correct tax identification numbers on IRS Form W-9 (or IRS Form W-8, in
the case of certain foreign shareholders) with the required certifications
regarding the shareholder's status under the federal income tax law or who are
subject to backup withholding for failure to include payments of interest or
dividends on their returns. Notwithstanding the foregoing, dividends of net
income and short-term capital gains to a foreign shareholder will generally be
subject to U.S. withholding at the rate of 30% (or lower treaty rate).

The Trust may elect to "pass through" to a Portfolio's shareholders the amount
of foreign income taxes paid by the Portfolio. The Trust will make such an
election only if it is deemed to be in the best interests of the shareholders.
If this election is made, shareholders of the Portfolio will be required to
include in their gross income their pro rata share of foreign taxes paid by the
Portfolio. However, shareholders will be able to treat their pro rata share of
foreign taxes as either an itemized deduction or a foreign credit against U.S.
income taxes (but not both) on their tax return.

The Master Trust's Funds are not required to pay federal income taxes on their
net investment income and capital gains, as they are treated as partnerships for
tax purposes. Any interest, dividends and gains or losses of a Fund will be
deemed to have been "passed through" to the corresponding Portfolio and other
investors in the Fund, regardless of whether such interest, dividends or gains
have been distributed by the Fund or losses have been realized by the Portfolio
and other investors.

You should consult your own tax adviser regarding specific questions as to
federal, state or local taxes. See "Taxes" in the Statement of Additional
Information.

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GENERAL INFORMATION

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Portfolio would have increased (or decreased) over a specified period of time
(I.E., one, five or ten years or since inception of the Portfolio) assuming that
all distributions and dividends by the Trust to shareholders of the Portfolio
were reinvested on the reinvestment dates during the period. Total return takes
into account any applicable sales charges, but does not take into account any
federal or state income taxes which may be payable by the investor. Yield will
be calculated on a 30-day period (seven-day period for the Money Market
Portfolio), pursuant to a formula prescribed by the Securities and Exchange
Commission (the "Commission"). The Trust also may include comparative
performance information in advertising or marketing Portfolio shares. Such
performance information may include data from Lipper Analytical Services, Inc.,
Morningstar Inc., other industry publications, business periodicals, rating
services and market indices. See "Appendix: Prior Performance," and "Performance
Information" in the Statement of Additional Information.

Further information about the performance of the Portfolios is contained in the
Trust's 1996 Annual Report to Shareholders, which may be obtained without charge
by calling (800) 551-8043.

DESCRIPTION OF SHARES. The Portfolios are series of Nicholas-Applegate Mutual
Funds, a diversified, open-end management investment company. The Trust was
organized in December 1992 as a Delaware business trust. The Trust is authorized
to issue an unlimited number of shares of each Portfolio. Shares of a Portfolio,
when issued, are fully paid, nonassessable, fully transferable and redeemable at
the option of the holder. Shares of a Portfolio are also redeemable at the
option of the Trust under certain circumstances. There are no conversion,
preemptive or other subscription rights. In the event of liquidation, each share
of a Portfolio is entitled to its portion of all of the Portfolio's assets after
all debts and expenses of the Portfolio have been paid. Pursuant to the Trust's
Declaration of Trust, the Board of Trustees of the Trust may authorize the
creation of additional series, and classes within series, with such preferences,
privileges, limitations and voting and dividend rights as the Board may
determine.

Shareholders of the Portfolios are entitled to one vote for each full share held
and fractional votes for fractional shares held, and will vote by series except
as otherwise required by law or when the Board of Trustees of the Trust
determines that a matter to be voted upon affects only the interests of
shareholders of a particular series. Shares of the Trust do not have cumulative
voting rights for the election of Trustees. The Trust does not intend to hold
annual meetings of its shareholders unless otherwise required by law. The Trust
will not be required to hold meetings of shareholders unless the election of
Trustees or any other matter is required to be acted on by shareholders under
the Investment Company Act. Shareholders have certain rights, including the
right to call a meeting upon the request of 10% of the outstanding shares of a
Portfolio, for the purpose of voting on the removal of one or more Trustees.

As of March 31, 1996, the following persons held more than 25% of the
outstanding shares of the following Portfolios, and may be deemed to control
such Portfolios: Money Market Portfolio: Citicorp USA Inc., Custodian for
Marlboro Equity Partners L.P. (26.71%).

MASTER TRUST. The Funds are series of Nicholas-Applegate Investment Trust an
open-end management investment company organized as a Delaware business trust in
December 1992. The trustees and officers of the Master Trust are described in
the Statement of Additional Information. Whenever a Portfolio is requested to
vote on matters pertaining to the corresponding Fund or the Master Trust in its
capacity as a shareholder of such Fund, the Trust will hold a meeting of its
shareholders and will cast its vote as instructed by such shareholders or, in
the case of a matter pertaining exclusively to the corresponding Fund, as

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instructed particularly by shareholders of the Portfolio and other series of the
Trust which invest in the Fund. The Trust will vote shares for which it has
received no voting instructions in the same proportion as the shares for which
it does receive voting instructions.

ADDITIONAL INFORMATION. This Prospectus, including the Statement of Additional
Information which has been incorporated by reference herein, does not contain
all the information set forth in the Registration Statement filed by the Trust
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended. The Master Trust has also filed a Registration Statement with the
Commission. Copies of the Trust's and Master Trust's Registration Statement may
be obtained at a reasonable charge from the Commission or may be examined,
without charge, at the office of the Commission in Washington, D.C.

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APPENDIX

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INVESTMENT POLICIES, STRATEGIES AND RISKS

The investment policies and strategies of the Portfolios (as implemented through
their investment in corresponding Funds) encompass the following securities,
techniques and risk considerations.

SHORT-TERM INVESTMENTS (ALL FUNDS). Each of the Funds may invest in short-term
investments to maintain liquidity for redemptions or during periods when, in the
opinion of the Investment Adviser, attractive investments are temporarily
unavailable. Under normal circumstances, no more than 10% of a Fund's total
assets will be retained in cash and cash equivalents. The Money Market Fund,
however, is under no such restriction, as it invests all of its assets in
short-term investments. In addition, each Fund may invest without restriction in
short-term investments for temporary defensive purposes, such as when the
securities markets or economic conditions are expected to enter a period of
decline. Short-term investments in which the Funds may invest include U.S.
Treasury bills or other U.S. Government or Government agency or instrumentality
obligations; certificates of deposit; bankers' acceptances; time deposits; high
quality commercial paper and other short-term high grade corporate obligations;
shares of money market mutual funds; or repurchase agreements with respect to
such securities. These instruments are described below. The Funds will only
invest in short-term investments which, in the opinion of the Investment
Adviser, present minimal credit and interest rate risk.

GOVERNMENT OBLIGATIONS (ALL FUNDS). Securities issued or guaranteed by the U.S.
Government or its agencies and instrumentalities in which each of the Funds may
invest include U.S. Treasury securities, which differ only in their interest
rates, maturities and times of issuance. Treasury bills have initial maturities
of one year or less; Treasury notes have initial maturities of one to ten years;
and Treasury bonds generally have initial maturities of more than ten years.

Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, for example, Government National Mortgage Association
("GNMA") pass-through certificates, are supported by the full faith and credit
of the U.S. Treasury; others, such as those of the Federal Home Loan Banks, by
the right of the issuer to borrow money from the Treasury; others, such as those
issued by the Federal National Mortgage Association, by the discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
While the U.S. Government provides financial support to U.S.
Government-sponsored agencies and instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law. The Funds will
invest in securities issued or guaranteed by U.S. Government agencies and
instrumentalities only when the Investment Adviser is satisfied that the credit
risk with respect to the issuer is minimal.

ZERO COUPON SECURITIES (INCOME & GROWTH, BALANCED GROWTH, GOVERNMENT INCOME AND
MONEY MARKET FUNDS). The Income & Growth, Balanced Growth and Government Income
Funds may each invest up to 35% of its net assets in "zero coupon" securities
issued or guaranteed by the U.S. Government and its agencies and
instrumentalities. Zero coupon securities may be issued by the U.S. Treasury or
by a U.S. Government agency, authority or instrumentality (such as the Student
Loan Marketing Association or the Resolution Funding Corporation). In addition,
the Money Market Fund may invest up to 5% of its net assets in separately traded
interest and principal component parts of U.S. Treasury securities that are sold
as zero coupon securities

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and are transferable through the Federal book-entry system known as Separately
Traded Registered Interest and Principal Securities ("STRIPS") and Coupons Under
Book Entry Safekeeping ("CUBES"). Zero coupon securities are sold at a
substantial discount from face value and redeemed at face value at their
maturity date without interim cash payments of interest and principal. This
discount is amortized over the life of the security and such amortization will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, such securities may be subject to greater
volatility as a result of changes in prevailing interest rates than interest
paying investments in which the Funds may invest. Because income on such
securities is accrued on a current basis, even though the Funds do not receive
the income currently in cash, the Funds may have to sell other portfolio
investments to obtain cash needed by the related Portfolios to make income
distributions.

CERTIFICATES OF DEPOSIT, TIME DEPOSITS AND BANKERS' ACCEPTANCES (ALL
FUNDS). Each of the Funds may invest in certificates of deposit, time deposits
and bankers' acceptances issued by domestic banks, foreign banks, foreign
branches of domestic banks, domestic and foreign branches of foreign banks, and
domestic savings and loan associations, all of which at the date of investment
have capital, surplus and undivided profits as of the date of their most recent
published financial statements in excess of $100 million, or less than $100
million if the principal amount of such bank obligations is insured by the
Federal Deposit Insurance Corporation. Certificates of deposit are certificates
evidencing the obligation of a bank to repay funds deposited with it for a
specified period of time. Time deposits are non-negotiable deposits maintained
in a banking institution for a specified period of time at a stated interest
rate. Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer; these instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity.

COMMERCIAL PAPER (ALL FUNDS). The Funds may invest in commercial paper of
domestic and foreign entities which is rated (or guaranteed by a corporation the
commercial paper of which is rated) in the two highest rating categories by at
least two nationally recognized statistical rating organizations ("NRSROs"),
including "P-1" or "P-2" by Moody's or "A-1" or "A-2" by S&P, or, if rated by
only one NRSRO, in such NRSRO's two highest grades, or, if not rated, is issued
by an entity which the Investment Adviser, acting pursuant to guidelines
established by the Master Trust's Board of Trustees, has determined to be of
minimal credit risk and comparable quality. Commercial paper consists of
short-term, unsecured promissory notes issued to finance short-term credit
needs.

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frequently are not rated by credit rating agencies and a Fund may invest in
obligations which are not so rated only if the Investment Adviser determines
that at the time of investment the obligations are of comparable quality to the
other obligations in which the Fund may invest. The Investment Adviser will
monitor the creditworthiness of the issuers of such obligations and their
earning power and cash flow, and will also consider situations in which all
holders of such notes would redeem at the same time. Investment by a Fund in
floating or variable rate demand obligations as to which it cannot exercise the
demand feature on not more than seven days' notice will be subject to the Fund's
limit on illiquid securities of 15% (10% in the case of the Money Market Fund)
of net assets if there is no secondary market available for these obligations.

CORPORATE DEBT SECURITIES (ALL FUNDS). The non-convertible corporate debt
securities in which the Funds may invest include obligations of varying
maturities (such as debentures, bonds and notes) over a cross-section of
industries. The value of a debt security changes as interest rates fluctuate,
with longer-term securities fluctuating more widely in response to changes in
interest rates than those of shorter-term securities. A decline in interest
rates usually produces an increase in the value of debt securities, while an
increase in interest rates generally reduces their value. Certain of the Funds
may invest some of their assets in debt securities rated below investment grade.
See "Junk Bond Considerations" below. For short-term purposes, all Funds may
invest in corporate obligations issued by domestic and foreign issuers which
mature in one year or less and which are rated "Aa" or higher by Moody's, "AA"
or higher by S&P, rated in the two highest rating categories by any other NRSRO,
or which are unrated but determined by the Investment Adviser to be of minimal
credit risk and comparable quality.

CONVERTIBLE SECURITIES AND WARRANTS (CORE GROWTH, EMERGING GROWTH, INCOME &
GROWTH, BALANCED GROWTH, AND GOVERNMENT INCOME FUNDS). The Core Growth, Emerging
Growth, Income & Growth, Balanced Growth, and Government Income Funds may invest
in securities which may be exchanged for, converted into, or exercised to
acquire a predetermined number of shares of the issuer's common stock at the
option of the holder during a specified time period (such as convertible
preferred stocks, convertible debentures and warrants). Convertible securities
generally pay interest or dividends and provide for participation in the
appreciation of the underlying common stock but at a lower level of risk because
the yield is higher and the security is senior to common stock. Convertible
securities may also include warrants which give the holder the right to purchase
at any time during a specified period a predetermined number of shares of common
stock at a fixed price but which do not pay a fixed dividend. Investments in
warrants involve certain risks, including the possible lack of a liquid market
for resale, potential price fluctuations as a result of speculation or other
factors, and the failure of the price of the underlying security to reach or
have reasonable prospects of reaching a level at which the warrant can be
prudently exercised, in which event the warrant may expire without being
exercised, resulting in a loss of a Fund's entire investment therein. As a
matter of operating policy, no Fund will invest more than 5% of its net assets
in warrants.

The value of a convertible security is a function of its "investment value"
(determined by its yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The credit standing of the issuer and other factors
may also affect the investment value of a convertible security. The conversion
value of a convertible security is determined by the market price of the
underlying common stock. If the conversion value is low relative to the
investment value, the price of the

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convertible security is governed principally by its investment value. To the
extent the market price of the underlying common stock approaches or exceeds the
conversion price, the price of the convertible security will be increasingly
influenced by its conversion value.

Like other debt securities, the market value of convertible securities tends to
vary inversely with the level of interest rates. The value of the security
declines as interest rates increase and increases as interest rates decline.
Although under normal market conditions longer term securities have greater
yields than do shorter term securities of similar quality, they are subject to
greater price fluctuations. Fluctuations in the value of a Fund's investments
will be reflected in its and the corresponding Portfolio's net asset value per
share. A convertible security may be subject to redemption at the option of the
issuer at a price established in the instrument governing the convertible
security. If a convertible security held by a Fund is called for redemption, the
Fund will be required to permit the issuer to redeem the security, convert it
into the underlying common stock or sell it to a third party.

Convertible debt securities purchased by the Income & Growth and Balanced Growth
Funds are subject to certain minimum rating requirements (see "Junk Bond
Considerations" below). Convertible debt securities purchased by the other
Funds, which are acquired in whole or substantial part for their equity
characteristics, are not subject to such rating requirements.

JUNK BOND CONSIDERATIONS (INCOME & GROWTH AND BALANCED GROWTH FUNDS). The Income
& Growth and Balanced Growth Funds may invest a portion (less than 50% and 35%,
respectively) of their respective net assets in convertible and other debt
securities rated below "Baa" by Moody's, "BBB" by S&P or below investment grade
by other recognized rating agencies, or in unrated securities determined by the
Investment Adviser to be of comparable quality, if the Investment Adviser
believes that the financial condition of the issuer or the protection afforded
to the particular securities is stronger than would otherwise be indicated by
such low ratings or the lack thereof. Securities rated below "Baa" or "BBB" or
equivalent ratings, commonly referred to as "junk bonds," are subject to greater
risk of loss of income and principal than higher rated bonds and are considered
to be predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal, which may in any case decline during sustained
periods of deteriorating economic conditions or rising interest rates. Junk
bonds are also generally considered to be subject to greater market risk in
times of deteriorating economic conditions and to wider market and yield
fluctuations than higher-rated securities. Junk bonds may also be more
susceptible to real or perceived adverse economic and competitive industry
conditions than investment grade securities. The market for such securities may
be thinner and less active than that for higher-rated securities, which can
adversely affect the prices at which these securities can be sold. To the extent
that there is no established secondary market for lower-rated securities, a Fund
may experience difficulty in valuing such securities and, in turn, its assets.
In addition, adverse publicity and investor perceptions about junk bonds,
whether or not based on fundamental analysis, may tend to decrease the market
value and liquidity of such securities.

Legislation has been and could be adopted limiting the use, or tax and other
advantages, of junk bonds which could adversely affect their value. Under the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989, for
example, federally insured savings and loan associations were required to divest
their investments in non-investment grade corporate debt securities by July 1,
1994. Such legislation could have a material adverse effect on the market for,
and prices of, such securities.

The Investment Adviser will try to reduce the risk inherent in the Funds'
investment in such securities through credit analysis, diversification and
attention to current developments and

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trends in interest rates and economic conditions. However, there can be no
assurance that losses will not occur. Since the risk of default is higher for
lower-rated bonds, the Investment Adviser's research and credit analysis are a
correspondingly more important aspect of its program for managing the Funds'
investments in such debt securities. The Investment Adviser will attempt to
identify those issuers of high- yielding securities whose financial condition is
adequate to meet future obligations, or has improved or is expected to improve
in the future.

The Income & Growth and Balanced Growth Funds will in no event purchase
securities rated below "C" or equivalent by Moody's, S&P or another rating
agency, or determined by the Investment Adviser to be of comparable quality.
Debt securities with such ratings are predominantly speculative with respect to
the capacity of the issuer to pay interest and repay principal. Non-rated
securities will also be considered for investment when the Investment Adviser
believes that the financial condition of the issuers of such securities, or the
protection afforded by the terms of the securities themselves, limit the risk to
a Fund to a degree comparable to that of rated securities which are consistent
with the Fund's investment objective and policies. See "Appendix: Corporate Bond
Ratings" for a description of credit ratings.

Credit ratings evaluate the safety of principal and interest payments of
securities, not their market value. The rating of an issuer is also heavily
weighted by past developments and does not necessarily reflect probable future
conditions. There is frequently a lag between the time a rating is assigned and
the time it is updated. As credit rating agencies may fail to timely change
credit ratings of securities to reflect subsequent events, the Investment
Adviser will also monitor issuers of such securities to determine if such
issuers will have sufficient cash flow and profits to meet required principal
and interest payments and to assure their liquidity. If the rating of a debt
security held by the Income & Growth or Balanced Growth Fund is downgraded below
"C" or an equivalent rating, or if the Investment Adviser determines that an
unrated security is of comparable quality, the Investment Adviser will determine
whether it is in the best interests of the Fund to continue to hold such
security in its investment portfolio. However, if the downgrading of an
investment grade security causes the Income & Growth Fund or Balanced Growth
Fund to hold 50% or more, or 35% or more, respectively, of its net assets in
securities rated below investment grade or determined by the Investment Adviser
to be of comparable quality, the Fund will sell sufficient principal amount of
such securities as promptly as practicable to make sure that it holds less than
35% of its net assets in such securities.

The average percentages of assets invested by the Income & Growth and Balanced
Growth Funds in bonds of each permissible rating, on a monthly dollar-weighted
basis, were as follows for the year ended March 31, 1996: AA-3.86% and 0%;
A-10.76% and 1.93%; BBB-14.14% and 0%; BB-7.50% and 0%; B-20.20% and 31.98%;
CCC-0.10% and 0%; nonrated-3.28% and 14.98%.

SYNTHETIC CONVERTIBLE SECURITIES (INCOME & GROWTH FUND). The Income & Growth
Fund may invest in "synthetic" convertible securities, which are derivative
positions composed of two or more different securities whose investment
characteristics, taken together, resemble those of convertible securities. For
example, the Income & Growth Fund may purchase a non-convertible debt security
and a warrant or option, which enables the Fund to have a convertible-like
position with respect to a company, group of companies or stock index. Synthetic
convertible securities are typically offered by financial institutions and
investment banks in private placement transactions. Upon conversion, the Fund
generally receives an amount in cash equal to the difference between the
conversion price and the then current

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value of the underlying security. Unlike a true convertible security, a
synthetic convertible comprises two or more separate securities, each with its
own market value. Therefore, the market value of a synthetic convertible is the
sum of the values of its fixed-income component and its convertible component.
For this reason, the values of a synthetic convertible and a true convertible
security may respond differently to market fluctuations. The Income & Growth
Fund 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
S&P, and will not invest more than 15% of its net assets in such synthetic
securities and other illiquid securities. See "Illiquid Securities" below.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES (ALL FUNDS). Each of the
Funds may invest in certificates issued by the Government National Mortgage
Association ("GNMA") as a short-term investment. GNMA certificates are
mortgage-backed securities representing part ownership of a pool of mortgage
loans, which are issued by lenders such as mortgage bankers, commercial banks
and savings associations, and are either insured by the Federal Housing
Administration or the Veterans Administration. A pool of these mortgages is
assembled and, after being approved by GNMA, is offered to investors through
securities dealers. The timely payment of interest and principal on each
mortgage is guaranteed by GNMA and backed by the full faith and credit of the
U.S. Government. Principal is paid back monthly by the borrower over the term of
the loan rather than returned in a lump sum at maturity. Due to the prepayment
feature and the need to reinvest prepayments of principal at current market
rates, GNMA certificates can be less effective than typical bonds of similar
maturities at "locking in" yields during periods of declining interest rates.

CMOS (GOVERNMENT INCOME FUND). The Government Income Fund may invest in
mortgage-related securities and collateralized mortgage obligations ("CMOs"). A
CMO is a debt security issued by a U.S. Government agency or instrumentality
that is collateralized by a portfolio or pool of mortgages or mortgage-backed
securities. The issuer's obligation to make interest and principal payments is
secured by the underlying pool or portfolio of mortgages or securities. The
market value of mortgage-related derivative securities, even those in which the
underlying pool or mortgage loans is guaranteed as to the payment of principal
and interest by the U.S. Government, is not insured. When interest rates
increase, the market value of mortgage-related securities may decrease in the
same manner as other debt, but when interest rates decline, such securities may
not increase as much as other debt instruments because of their prepayment
feature. If such securities are purchased at a premium, the Government Income
Fund will suffer a loss if the obligation is prepaid. Prepayments will be
reinvested at prevailing rates, which may be less than the rate paid by such
obligation.

EQUITY SECURITIES (CORE GROWTH, EMERGING GROWTH, INCOME & GROWTH AND BALANCED
GROWTH FUNDS). Each of the Core Growth, Emerging Growth, Income & Growth and
Balanced Growth Funds may invest in equity securities, including common stocks,
convertible securities and warrants. Common stocks, the most familiar type of
equity securities, represent an equity (ownership) interest in a corporation.
See "Convertible Securities and Warrants" for a description of convertible
securities and warrants. The Core Growth, Income & Growth and Balanced Growth
Funds each may invest in equity securities of growth companies, cyclical
companies, companies with smaller market capitalizations (I.E., $500 million or
less) or companies believed to be undergoing a basic change in operations or
markets which could result in a significant improvement in earnings, and the
Emerging Growth Fund will invest primarily in such securities. Although equity
securities have a history of long term growth in value, their prices fluctuate
based on changes in the issuer's financial condition and prospects and on
overall market and economic conditions. Small companies and new companies often

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have limited product lines, markets or financial resources, and may be dependent
upon one or few key persons for management. The securities of such companies may
be subject to more volatile market movements than securities of larger, more
established companies, both because the securities typically are traded in lower
volume and because the issuers typically are more subject to changes in earnings
and prospects. The corresponding Portfolios' net asset values can be expected to
experience above-average fluctuations, as above-average risk is assumed by the
Funds in investing in such growth companies in seeking higher than average
growth in capital.

DEPOSITORY RECEIPTS (CORE GROWTH, EMERGING GROWTH, INCOME & GROWTH AND BALANCED
GROWTH FUNDS). The Core Growth, Emerging Growth, Income & Growth and Balanced
Growth Funds may invest in American Depository Receipts ("ADRs"), which are
receipts issued by an American bank or trust company evidencing ownership of
underlying securities issued by a foreign issuer. ADRs, in registered form, are
designed for use in U.S. securities markets. Such depository receipts may be
sponsored by the foreign issuer or may be unsponsored. Unsponsored depository
receipts are organized independently and without the cooperation of the foreign
issuer of the underlying securities; as a result, available information
regarding the issuer may not be as current as for sponsored depository receipts,
and the prices of unsponsored depository receipts may be more volatile than if
they were sponsored by the issuers of the underlying securities.

EURODOLLAR CONVERTIBLE SECURITIES (INCOME & GROWTH FUND). The Income & Growth
Fund may invest in Eurodollar convertible securities, which are fixed-income
securities of a U.S. issuer or a foreign issuer that are issued outside the
United States and are convertible into or exchangeable for equity securities of
the same or a different issuer. Interest and dividends on Eurodollar securities
are payable in U.S. dollars outside of the United States. The Fund may invest
without limitation in Eurodollar convertible securities that are convertible
into or exchangeable for foreign equity securities listed, or represented by
ADRs listed, on the New York Stock Exchange or the American Stock Exchange or
convertible into or exchangeable for publicly traded common stock of U.S.
companies. The Income & Growth Fund may also invest up to 15% of its total
assets invested in convertible securities, taken at market value, in Eurodollar
convertible securities that are convertible into or exchangeable for foreign
equity securities which are not listed, or represented by ADRs listed, on such
exchanges.

FOREIGN INVESTMENT CONSIDERATIONS (ALL FUNDS). There are special risks
associated with the Funds' investments in securities of foreign companies and
governments, which add to the usual risks inherent in domestic investments. Such
special risks include fluctuations in foreign exchange rates, political or
economic instability in the country of issue, and the possible imposition of
exchange controls or other laws or restrictions. In addition, securities prices
in foreign markets are generally subject to different economic, financial,
political and social factors than are the prices of securities in United States
markets. With respect to some foreign countries there may be the possibility of
expropriation or confiscatory taxation, limitations on liquidity of securities
or political or economic developments which could affect the foreign investments
of a Fund. Moreover, securities of foreign issuers generally will not be
registered with the Securities and Exchange Commission and such issuers
generally will not be subject to the Commission's reporting requirements.
Accordingly, there is likely to be less publicly available information
concerning certain of the foreign issuers of securities held by a Fund than is
available concerning U.S. companies. Foreign companies are also generally not
subject to uniform accounting, auditing and financial reporting standards or to
practices and requirements comparable to those applicable to U.S. companies.
There may also be less government supervision and regulation of foreign
broker-dealers, financial institutions and listed companies

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<PAGE>

than exists in the United States. The Funds will not invest in securities
denominated in a foreign currency unless, at the time of investment, such
currency is considered by the Investment Adviser to be fully exchangeable into
United States dollars without significant legal restriction. See "Investment
Objectives, Policies and Risks-Foreign Investments" in the Statement of
Additional Information.

SPECIAL CONSIDERATIONS REGARDING EMERGING MARKETS INVESTMENTS (ALL
FUNDS). Investments by the Funds in securities issued by the governments of
emerging or developing countries, and of companies within those countries,
involve greater risks than other foreign investments. Investments in emerging or
developing markets involve exposure to economic and legal structures that are
generally less diverse and mature (and in some cases the absence of developed
legal structures governing private and foreign investments and private
property), and to political systems which can be expected to have less
stability, than those of more developed countries. The risks of investment in
such countries may include matters such as relatively unstable governments,
higher degrees of government involvement in the economy, the absence until
recently of capital market structures or market-oriented economies, economies
based on only a few industries, securities markets which trade only a small
number of securities, restrictions on foreign investment in stocks, and
significant foreign currency devaluations and fluctuations.

Emerging markets can be substantially more volatile than both U.S. and more
developed foreign markets. Such volatility may be exacerbated by illiquidity.
The average daily trading volume in all of the emerging markets combined is a
small fraction of the average daily volume of the U.S. market. Small trading
volumes may result in a Fund being forced to purchase securities at
substantially higher prices than the current market, or to sell securities at
much lower prices than the current market.

OVER-THE-COUNTER SECURITIES (CORE GROWTH, EMERGING GROWTH, INCOME & GROWTH AND
BALANCED GROWTH FUNDS). Securities owned by the Core Growth, Emerging Growth,
Income & Growth and Balanced Growth Funds may be traded in the over-the-counter
market or on a regional securities exchange and may not be traded every day or
in the volume typical of securities trading on a national securities exchange.
As a result, disposition by such Funds of portfolio securities to meet
redemptions by shareholders or otherwise may require the Funds to sell these
securities at a discount from market prices, to sell during periods when such
disposition is not desirable, or to make many small sales over a lengthy period
of time.

WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS (ALL FUNDS). The Funds may
purchase securities on a delayed delivery or "when-issued" basis and enter into
firm commitment agreements (transactions in which the payment obligation and
interest rate are fixed at the time of the transaction but the settlement is
delayed). Delivery and payment for these securities typically occur 15 to 45
days after the commitment to purchase. No interest accrues to the purchaser
during the period before delivery. There is a risk in these transactions that
the value of the securities at settlement may be more or less than the agreed
upon price, or that the party with which a Fund enters into such a transaction
may not perform its commitment. The Funds will normally enter into these
transactions with the intention of actually receiving or delivering the
securities. The Funds may sell the securities before the settlement date.

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sufficient to meet their payment obligations with respect to these transactions.
A Fund may not purchase when-issued securities or enter into firm commitments
if, as a result, more than 15% of the Fund's net assets would be segregated to
cover such contracts.

"ROLL" TRANSACTIONS (GOVERNMENT INCOME FUND). The Government Income 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, the Fund forgoes principal and interest paid on the securities. The Fund
is compensated by the difference between the current sales price and the forward
price for the future purchase, as well as by the interest earned on the cash
proceeds of the initial sale. Like when-issued securities or firm commitment
agreements, roll transactions involve the risk that the market value of the
securities sold by the Fund may decline below the price at which the Fund is
committed to purchase similar securities. Additionally, in the event the buyer
of securities under a roll transaction files for bankruptcy or becomes
insolvent, the Fund's use of the proceeds of the transaction may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Fund's obligation to repurchase the securities.

The 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 borrowings by the Fund for purposes of
the percentage limitations applicable to borrowings. See "Borrowings" below. The
Fund will establish a segregated account with its Custodian in which it will
maintain cash, U.S. Government securities and other liquid, high-grade debt
obligations in an amount sufficient to meet its payment obligations with respect
to these transactions. The Fund will not enter into roll transactions if, as a
result, more than 15% of the Fund's net assets would be segregated to cover such
contracts.

SHORT SALES (CORE GROWTH AND EMERGING GROWTH FUNDS). The Investment Adviser
believes that its growth equity management approach, in addition to identifying
equity securities the earnings and prices of which it expects to grow at a rate
above that of the S&P 500, also identifies securities the prices of which can be
expected to decline. Therefore, each of the Core Growth and Emerging Growth
Funds is authorized to make short sales of securities it owns or has the right
to acquire at no added cost through conversion or exchange of other securities
it owns (referred to as short sales "against the box") and to make short sales
of securities which it does not own or have the right to acquire. A short sale
that is not made "against the box" is a transaction in which a Fund sells a
security it does not own in anticipation of a decline in market price. When a
Fund makes a short sale, the proceeds it receives are retained by the broker
until the Fund replaces the borrowed security. In order to deliver the security
to the buyer, the Fund must arrange through a broker to borrow the security and,
in so doing, the Fund becomes obligated to replace the security borrowed at its
market price at the time of replacement, whatever that price may be.

Short sales by the Core Growth or Emerging Growth Fund that are not made
"against the box" create opportunities to increase the Fund's return but, at the
same time, involve special risk considerations and may be considered a
speculative technique. Since 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, and that of the corresponding Portfolios, will tend to increase
more when the securities it has sold short decrease in value, and to decrease
more when the securities it has sold short increase in value, than would
otherwise be the case if it had not engaged in such short sales.

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Short sales theoretically involve unlimited loss potential, as the market price
of securities sold short may continuously increase, although a Fund may mitigate
such losses by replacing the securities sold short before the market price has
increased significantly. Under adverse market conditions a Fund might have
difficulty purchasing securities to meet its short sale delivery obligations,
and might have to sell portfolio securities to raise the capital necessary to
meet its short sale obligations at a time when fundamental investment
considerations would not favor such sales. The value of securities of any issuer
in which a Fund maintains a short position which is "not against the box" may
not exceed the lesser of 2% of the value of the Fund's net assets or 2% of the
securities of such class of the issuer.

If the Core Growth or Emerging Growth Fund makes a short sale "against the box,"
the Fund would not immediately deliver the securities sold and would not receive
the proceeds from the sale. The seller is said to have a short position in the
securities sold until it delivers the securities sold, at which time it receives
the proceeds of the sale. A Fund's decision to make a short sale "against the
box" may be a technique to hedge against market risks when the Investment
Adviser believes that the price of a security may decline, causing a decline in
the value of a security owned by the Fund or a security convertible into or
exchangeable for such security. In such case, any future losses in the Fund's
long position would be reduced by a gain in the short position.

In the view of the Commission, a short sale involves the creation of a "senior
security" as such term is defined in the Investment Company Act, unless the sale
is "against the box" and the securities sold are placed in a segregated account
(not with the broker), or unless the Fund's obligation to deliver the securities
sold short is "covered" by placing in a segregated account (not with the broker)
cash or U.S. Government securities in an amount equal to the difference between
the market value of the securities sold short at the time of the short sale and
any cash or U.S. Government securities required to be deposited as collateral
with a broker in connection with the sale (not including the proceeds from the
short sale), which difference is adjusted daily for changes in the value of the
securities sold short. The total value of the cash and U.S. Government
securities deposited with the broker and otherwise segregated may not at any
time be less than the market value of the securities sold short at the time of
the short sale. As a matter of policy, the Master Trust's Board of Trustees has
determined that no Fund will make short sales of securities or maintain a short
position if to do so could create liabilities or require collateral deposits and
segregation of assets aggregating more than 25% of the Fund's total assets,
taken at market value.

A Fund's ability to enter into short sales transactions is limited by the
requirements of the Internal Revenue Code with respect to the corresponding
Portfolio's qualification as a regulated investment company. See "Dividends,
Distributions and Taxes" in the Statement of Additional Information.

OPTIONS (CORE GROWTH, EMERGING GROWTH, INCOME & GROWTH AND BALANCED GROWTH
FUNDS). Each of the Core Growth, Emerging Growth, Income & Growth and Balanced
Growth Funds may purchase listed covered "put" and "call" options with respect
to securities which are otherwise eligible for purchase by such Fund and with
respect to various stock indices, for hedging purposes, subject to the following
restrictions: the aggregate premiums on call options purchased by a Fund may not
exceed 5% of the market value of net assets of the Fund as of the date the call
options are purchased, and the aggregate premiums on put options may not exceed
5% of the market value of the net assets of the Fund as of the date such options
are purchased. In addition, a Fund will not purchase or sell options if,
immediately thereafter, more than 25% of its net assets would be hedged. A "put"
gives a holder the right, in return

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for the premium paid, to require the writer of the put to purchase from the
holder a security at a specified price. A "call" gives a holder the right, in
return for the premium paid, to require the writer of the call to sell a
security to the holder at a specified price. An option on a securities index
(such as a stock index) gives the holder the right, in return for the premium
paid, to require the writer to pay cash equal to the difference between the
closing price of the index and the exercise price of the option, expressed in
dollars, times a specified multiplier.

Put and call options are derivative securities traded on United States and
foreign exchanges, including the American Stock Exchange, Chicago Board Options
Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange and New York Stock
Exchange. Additionally, the Core Growth, Worldwide Growth, International Growth
and Emerging Countries Funds may purchase options not traded on a securities
exchange, which may bear a greater risk of nonperformance than options traded on
a securities exchange. Options not traded on an exchange are considered dealer
options and generally lack the liquidity of an exchange traded option.
Accordingly, dealer options may be subject to the Funds' restriction on
investment in illiquid securities, as described below. Dealer options may also
involve the risk that the securities dealers participating in such transactions
will fail to meet their obligations under the terms of the option.

The Core Growth, Emerging Growth, and Income & Growth Funds may also write
listed covered options on up to 25% of the value of their respective net assets.
Call options written by a Fund give the holder the right to buy the underlying
securities from the Fund at a stated exercise price; put options written by a
Fund give the holder the right to sell the underlying security to the Fund. A
call option is covered if the Fund owns the security underlying the call or has
an absolute and immediate right to acquire that security without additional cash
consideration upon conversion or exchange of securities currently held by the
Fund. A put option is covered if the Fund maintains cash or cash equivalents
equal to the exercise price in a segregated amount with its Custodian. If an
option written by a Fund expires unexercised, the Fund realizes a gain equal to
the premium received at the time the option was written. If an option purchased
by a Fund expires unexercised, the Fund realizes a capital loss equal to the
premium paid.

Prior to the earlier of exercise or expiration, an option written by a Fund may
be closed out by an offsetting purchase or sale of an option of the same series.
A Fund will realize a gain from a closing purchase transaction if the cost of
the closing transaction is less than the premium received from writing the
option; if it is more, the Fund will realize a capital loss. If the premium
received from a closing sale transaction is more than the premium paid to
purchase the option, the Fund will realize a gain; if it is less, the Fund will
realize a loss.

FUTURES CONTRACTS (CORE GROWTH, EMERGING GROWTH, INCOME & GROWTH, AND GOVERNMENT
INCOME FUNDS). The Core Growth, Emerging Growth, and Income & Growth Funds may
purchase and sell stock index futures contracts as a hedge against changes in
market conditions. A stock index futures contract is a bilateral agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. No physical delivery of the
underlying stocks in the index is made.

The Income & Growth and Government Income Funds may also purchase and sell
financial futures contracts as a hedge against changes in interest rates.
Additionally, the Income & Growth, Balanced Growth, and Government Income Funds
may purchase and sell related options on futures contracts. A financial futures
contract obligates the seller of the contract to

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deliver and the purchaser of the contract to take delivery of the type of
financial instrument called for in the contract at a specified future time (the
settlement date) for a specified price. Although the terms of a contract call
for actual delivery or acceptance of the financial instrument, the contracts
will be closed out before the delivery date without delivery or acceptance
taking place. Futures options possess many of the same characteristics as
options on securities and indices. A futures option gives the holder, in return
for the premium paid, the right to buy (call) from or sell (put) to the writer
of the option a futures contract at a specified price at any time during the
period of the option. Upon exercise of a call option, the holder acquires a long
position in the futures contract and the writer is assigned the opposite short
position. In the case of a put option, the opposite is true. A futures option
may be closed out before exercise or expiration by an offsetting purchase or
sale of a futures option of the same series.

Financial and stock index futures contracts are derivative instruments traded on
United States commodities and futures exchanges, including the Chicago
Mercantile Exchange, the New York Futures Exchange, the Kansas City Board of
Trade, the Chicago Board of Trade and the International Monetary Market, as well
as commodity and securities exchanges located outside the United States,
including the London International Financial Futures Exchange, the Singapore
International Monetary Exchange, the Sydney Futures Exchange Limited and the
Tokyo Stock Exchange.

The Funds will not engage in transactions in futures contracts for speculation,
but only as a hedge against the risk of unexpected changes in the values of
securities held or intended to be held by the Funds. As a general rule, no Fund
will purchase or sell futures if, immediately thereafter, more than 25% of its
net assets would be hedged. In addition, no Fund may purchase or sell futures or
related options if, immediately thereafter, the sum of the amount of margin
deposits on the Fund's existing futures positions and premiums paid for such
options would exceed 5% of the market value of the fund's net assets. In
instances involving the purchase of futures contracts by a Fund, an amount of
cash and cash equivalents equal to the market value of the futures contracts
will be deposited in a segregated account with the Fund's Custodian or with a
broker to collateralize the position and thereby insure that the use of such
futures is unleveraged.

SPECIAL HEDGING CONSIDERATIONS (CORE GROWTH, EMERGING GROWTH, INCOME & GROWTH,
BALANCED GROWTH, AND GOVERNMENT INCOME FUNDS). Special risks are associated with
the use of options and futures contracts as hedging techniques. There can be no
guaranty of a correlation between price movements in the hedging vehicle and in
the portfolio securities being hedged. A lack of correlation could result in a
loss on both the hedged securities in a Fund and the hedging vehicle, so that
the Fund's return might have been better had hedging not been attempted. In
addition, a decision as to whether, when and how to use options or futures
involves the exercise of skill and judgment which are different from those
needed to select portfolio securities, and even a well-conceived transaction may
be unsuccessful to some degree because of market behavior, currency fluctuations
or interest rate trends. If the Investment Adviser is incorrect in its forecasts
regarding market values, interest rate trends or other relevant factors, a Fund
may be in a worse position than if the Fund had not engaged in options or
futures transactions. The potential loss incurred by a Fund in writing options
on futures and engaging in futures transactions is unlimited. The Investment
Adviser is experienced in the use of options and futures contracts as an
investment technique.

There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out an option position or futures contract. Most futures
exchanges and boards of trade limit

44
<PAGE>
the amount of fluctuation in futures contract prices during a single day; once
the daily limit has been reached on a particular contract, no trades may be made
that day at a price beyond that limit. In addition, certain of these instruments
are relatively new and without a significant trading history. As a result, there
is no assurance that an active secondary market will develop or continue to
exist. Lack of a liquid market for any reason may prevent a Fund from
liquidating an unfavorable position and a Fund would remain obligated to meet
margin requirements until the position is closed.

A Fund's ability to enter into options and futures contracts is limited by the
requirements of the Internal Revenue Code with respect to the corresponding
Portfolio's qualification as a regulated investment company. See "Dividends,
Distributions and Taxes" in the Statement of Additional Information.

REPURCHASE AGREEMENTS (ALL FUNDS). Each Fund may on occasion enter into
repurchase agreements, in which the Fund purchases securities and the seller
agrees to repurchase them from the Fund at a mutually agreed-upon time and
price. The period of maturity is usually overnight or a few days, although it
may extend over a number of months. The resale price is in excess of the
purchase price, reflecting an agreed-upon rate of return effective for the
period of time the Fund's money is invested in the security. Each Fund's
repurchase agreements will at all times be fully collateralized in an amount at
least equal to 102% of the purchase price, including accrued interest earned on
the underlying securities. The instruments held as collateral are valued daily
and, if the value of the instruments declines, the Fund will require additional
collateral. If the seller defaults and the value of the collateral securing the
repurchase agreement declines, the Fund may incur a loss. If bankruptcy
proceedings are commenced with respect to the seller, realization upon the
collateral by a Fund may be delayed or limited. A Fund will only enter into
repurchase agreements involving securities in which it could otherwise invest
and with selected financial institutions and brokers and dealers which meet
certain creditworthiness and other criteria.

ILLIQUID SECURITIES (ALL FUNDS). Each Fund may invest up to 15% (10% in the case
of the Money Market Fund) of its net assets in securities that at the time of
purchase have legal or contractual restrictions on resale or are otherwise
illiquid. Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933 ("restricted securities"),
securities which are otherwise not readily marketable such as over-the-counter,
or dealer traded, options, and repurchase agreements having a maturity of more
than seven days. Mutual funds do not typically hold a significant amount of
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and the Fund might not be
able to dispose of restricted or other securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions. The Fund
might also have to register such restricted securities in order to dispose of
them, resulting in additional expense and delay.

45
<PAGE>
Securities and Exchange Commission under the Securities Act of 1933, the Master
Trust's Board of Trustees may determine that such securities are not illiquid
securities notwithstanding their legal or contractual restrictions on resale,
based on factors such as the frequency of trades and quotes for the securities,
the number of dealers and others wishing to purchase and sell the securities,
and the nature of the security and the marketplace trades. In all other cases,
however, securities subject to restrictions on resale will be deemed illiquid.
Investing in restricted securities eligible for resale under Rule 144A could
have the effect of increasing the level of illiquidity in the Funds to the
extent that qualified institutional buyers become uninterested in purchasing
such securities.

SECURITIES LENDING (ALL FUNDS). To increase its income, each Fund may lend its
portfolio securities to financial institutions such as banks and brokers if the
loan is collateralized in accordance with applicable regulatory requirements.
The Master Trust's Board of Trustees has adopted an operating policy that limits
the amount of loans made by a Fund to not more than 30% of the value of the
total assets of the Fund. During the time portfolio securities are on loan, the
borrower pays the Fund an amount equivalent to any dividends or interest paid on
such securities, and the Fund may invest the cash collateral and earn additional
income, or it may receive an agreed-upon amount of interest income from the
borrower who has delivered equivalent collateral or secured a letter of credit.
Such loans involve risks of delay in receiving additional collateral or in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially. However, such securities
lending will be made only when, in the Investment Adviser's judgment, the income
to be earned from the loans justifies the attendant risks. Loans are subject to
termination at the option of the Fund or the borrower.

BORROWING (ALL FUNDS). Each Fund may borrow money from banks in amounts up to
20% of its total assets (calculated when the loan is made) only for temporary,
extraordinary or emergency purposes or for the clearance of transactions.
Borrowing involves special risk considerations. Interest costs on borrowings may
fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds (or on the assets that were retained
rather than sold to meet the needs for which funds were borrowed). Under adverse
market conditions, a Fund might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales. All borrowings by a Fund will be made
only to the extent that the value of the Fund's total assets, less its
liabilities other than borrowings, is equal to at least 300% of all borrowings.
If such asset coverage of 300% is not maintained, the Fund will take prompt
action to reduce its borrowings as required by applicable law. Short sales "not
against the box" and roll transactions are considered borrowings for purposes of
the percentage limitations applicable to borrowings.

46
<PAGE>
- --------------------------------------------------------------------------------
CORPORATE BOND RATINGS

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS

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

A -- Bonds 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 as 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 as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

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
regarded as having extremely poor prospects of ever attaining any real
investment standing.

Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 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.

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.

47
<PAGE>
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.

48
<PAGE>
- --------------------------------------------------------------------------------
PRIOR PERFORMANCE

The following table sets forth historical performance information for the
Portfolios and certain predecessor investment partnerships and a predecessor
pooled trust which were operated by the Investment Adviser prior to the
organization of the Core Growth, Emerging Growth and Income & Growth Portfolios.

The Investment Adviser has advised the Trust that its net performance results in
the table are calculated as set forth above under "General
Information-Performance Information." All information set forth in the table
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, such information has not been verified and is unaudited. See
"Performance Information" in the Statement of Additional Information for further
information about calculation of total return.

The Investment Adviser has advised the Trust that such partnerships and pooled
trust were operated in substantially the same manner as such Portfolios, and
their assets were transferred to the Portfolios prior to the effective date of
the Portfolios' registration statement. It has indicated that such results for
the prior partnerships and pooled trust have been adjusted to reflect the
deduction of the fees and expenses of the Portfolios, and their proportionate
shares of the operating expenses of the corresponding Funds, as stated under
"Summary of Expenses," and give effect to transaction costs as well as
reinvestment of income and gains. However, the prior investment partnerships and
pooled trust were not registered under the 1940 Act and were not subject to
certain investment restrictions imposed by such Act; if they had been so
registered, their performance might have been adversely affected.

The results presented on the following pages may not necessarily equate with the
return experienced by any particular shareholder, partner or trust beneficiary
as a result of the timing of investments and redemptions. In addition, the
effect of taxes on any shareholder, partner or trust beneficiary 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.

<TABLE>
<CAPTION>
EMERGING GROWTH
PERFORMANCE
-------------------- INCOME & GROWTH PERFORMANCE
CORE GROWTH RUSSELL
PERFORMANCE 2000 -----------------------------
---------------------- EMERGING GROWTH INCOME & CS FIRST BOSTON
CORE GROWTH S&P 500 GROWTH STOCK GROWTH CONVERTIBLE
YEAR PORTFOLIO A INDEX(4) PORTFOLIO A INDEX(2) PORTFOLIO A INDEX(3)
- -------------------------------------------------- ----------- -------- ----------- ------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1985(4)...........................................
1986(4)...........................................
1987..............................................
1988..............................................
1989..............................................
1990..............................................
1991..............................................
1992..............................................
1993(4)...........................................
1994..............................................
1995..............................................
1996(5)...........................................
Last year(5)......................................
Last 5 years(5)...................................
Last 10 years(5)..................................
Since inception(5)................................
</TABLE>

49
<PAGE>

<TABLE>
<CAPTION>
BALANCED GROWTH PERFORMANCE
------------------------------------ GOVERNMENT INCOME
LEHMAN PERFORMANCE
BROTHERS -------------------------
GOVERNMENT/ GOVERNMENT
BALANCED CORPORATE INCOME LEHMAN BROS.
GROWTH S&P 500 BOND PORTFOLIO GOV'T BOND
YEAR PORTFOLIO A INDEX(1) INDEX(6) A INDEX(7)
- ------------------------------------------------------------ ----------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
1993(4).....................................................
1994........................................................
1995........................................................
1996(5).....................................................
Last year(5)................................................
Since inception(5)..........................................
</TABLE>

- ------------------------------
(1)The S&P 500 Index is an unmanaged index containing 500 industrial,
transportation, utility and financial companies, regarded as generally
representative of the U.S. stock market. The Index reflects the reinvestment
of income dividends and capital gain distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.

(2) The Russell 2000 Growth Stock Index contains those securities in the Russell
2000 Index with a greater-than-average growth orientation. Companies in the
Growth Stock Index generally have higher price-to-book and price-earnings
ratios than the average for all companies in the 2000 Index. 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.

(3) 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.

(4) Inception dates are as follows: Core Growth Portfolio A-September 30, 1985
(registration statement effective April 19, 1993); Emerging Growth Portfolio
A-July 31, 1985 (registration statement effective December 27, 1993); Income
& Growth Portfolio A-December 31, 1986 (registration statement effective
April 19, 1993); Balanced Growth Portfolio A-April 19, 1993; Government
Income Portfolio A-April 19, 1993.

(5) Through March 31, 1996.

(6) The Lehman Brothers Government/Corporate Bond Index is an unmanaged
market-weighted index consisting of all public obligations of the U.S.
Government, its agencies and instrumentalities, and all corporate issuers of
fixed rate, non-convertible, investment grade U.S. dollar denominated bonds
having maturities of greater than one year. It is generally regarded as
representative of the market for domestic bonds. 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.

(7) The Lehman brothers Government Bond Index includes all public obligations of
the U.S. Treasury (excluding flower bonds and foreign-targeted issues), its
agencies and quasi-federal corporations, and corporate debt guaranteed by
the U.S. Government. The Index includes income and distributions but does
not reflect fees, brokerage commissions or other expenses of investing.

50
<PAGE>
NICHOLAS--APPLEGATE-REGISTERED TRADEMARK- MUTUAL FUNDS

- -------------------------------------------------
SERIES A & B DOMESTIC PORTFOLIOS

PROSPECTUS

Nicholas-Applegate Mutual Funds is an open-end management investment company
consisting of a number of diversified investment portfolios, including the five
Series A Portfolios, five Series B Portfolios and Money Market Portfolio
("Portfolios") offered hereby. These Portfolios provide a broad range of
domestic investment opportunities which are suitable for different investors.
The Series A Portfolios and Series B Portfolios have identical investment
objectives and policies. However, the Series A Portfolios are sold subject to an
initial sales charge and lower operating expenses, and the Series B Portfolios
are sold subject to a contingent deferred sales charge and higher operating
expenses. The Money Market Portfolio has no front-end or contingent deferred
sales charge.

EACH PORTFOLIO, UNLIKE MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE
AND MANAGE THEIR OWN PORTFOLIOS OF SECURITIES, SEEKS TO ACHIEVE ITS INVESTMENT
OBJECTIVE BY INVESTING ALL OF ITS ASSETS IN A CORRESPONDING SERIES ("FUND") OF
NICHOLAS-APPLEGATE INVESTMENT TRUST, WHICH HAS THE SAME OBJECTIVE AS THE
PORTFOLIO. THE FUNDS IN TURN INVEST THEIR ASSETS, INCLUDING THOSE OF THE
PORTFOLIOS, IN PORTFOLIO SECURITIES. ACCORDINGLY, THE INVESTMENT EXPERIENCE OF
EACH PORTFOLIO WILL CORRESPOND DIRECTLY WITH THE INVESTMENT EXPERIENCE OF THE
RELATED FUND. INVESTORS SHOULD CAREFULLY CONSIDER THIS INVESTMENT APPROACH. SEE
"INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS-SPECIAL CONSIDERATIONS
REGARDING MASTER/FEEDER STRUCTURE", PAGE 11, FOR ADDITIONAL INFORMATION
REGARDING THIS UNIQUE STRUCTURE. THERE CAN BE NO ASSURANCE THAT ANY PORTFOLIO OR
FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
- --------------------------------------------------------------------------------

CORE GROWTH PORTFOLIO A AND PORTFOLIO B seek to maximize long-term capital
appreciation. They invest in the Nicholas-Applegate Core Growth Fund, which in
turn invests primarily in a diversified portfolio of common stocks of U.S.
companies with middle market capitalizations and above (generally above $500
million).

EMERGING GROWTH PORTFOLIO A AND PORTFOLIO B seek to maximize long-term capital
appreciation. They invest in the Nicholas-Applegate Emerging Growth Fund, which
in turn invests primarily in a diversified portfolio of common stocks of U.S.
corporations with smaller market capitalizations (e.g., up to $500 million).

INCOME & GROWTH PORTFOLIO A AND PORTFOLIO B seek to maximize total return,
consisting of capital appreciation and current income. They invest in the
Nicholas-Applegate Income & Growth Fund, which in turn invests primarily in
convertible and equity securities of U.S. companies. Up to 50% of the assets of
the Fund may be invested in securities rated below investment grade, sometimes
called "junk bonds," which are speculative and involve greater risks, including
risk of default, than higher-rated securities.

BALANCED GROWTH PORTFOLIO A AND PORTFOLIO B seek to provide investors with a
balance of long-term capital appreciation and current income. They invest in the
Nicholas-Applegate Balanced Growth Fund, which in turn invests approximately 60%
of its total assets in equity and convertible securities of primarily U.S.
companies and 40% of its total assets in debt securities, money market
instruments and other short-term investments.

GOVERNMENT INCOME PORTFOLIO A AND PORTFOLIO B seek to maximize current income
consistent with prudent investment risk and preservation of capital. They invest
in the Nicholas-Applegate Government Income Fund, which in turn invests
primarily in intermediate-term debt securities of the U.S. Government and its
agencies and instrumentalities.

, 1996

<PAGE>
NICHOLAS--APPLEGATE MUTUAL FUNDS

- -------------------------------------------------
SERIES A & B DOMESTIC PORTFOLIOS

CORE GROWTH PORTFOLIO A AND B
EMERGING GROWTH PORTFOLIO A AND B
INCOME & GROWTH PORTFOLIO A AND B
BALANCED GROWTH PORTFOLIO A AND B
GOVERNMENT INCOME PORTFOLIO A AND B
MONEY MARKET PORTFOLIO

TABLE OF CONTENTS

Summary of Expenses......................................... 3
Prospectus Summary.......................................... 6
Financial Highlights........................................ 10
Investment Objectives, Policies and Risk
Considerations............................................ 12
Organization and Management................................. 19
Purchasing Shares........................................... 23
Alternative Purchase Arrangements........................... 25
Shareholder Services........................................ 29
Redeeming Shares............................................ 32
Dividends, Distributions and Taxes.......................... 36
General Information......................................... 37
Appendix:
Investment Policies, Strategies
and Risks............................................... 39
Corporate Bond Ratings.................................... 53
Prior Performance......................................... 55

2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES

<TABLE>
<CAPTION>
CORE EMERGING INCOME &
GROWTH GROWTH GROWTH
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
A B A B A B
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a
percentage of offering price)(1) 5.25% None 5.25% None 5.25% None
Sales charge on reinvested dividends None None None None None None
Deferred sales charge (as a percentage
of original purchase price or
redemption proceeds, whichever is
lower)(2) None 5.00% None 5.00% None 5.00%
Redemption fee(3) None None None None None None
Exchange fee None None None None None None
- ---------------------------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS
A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)(5)
Management fees 0.75% 0.75% 1.00% 1.00% 0.75% 0.75%
12b-1 expenses(6) 0.25% 0.75% 0.25% 0.75% 0.25% 0.75%
All other expenses (after expense
deferral)(5)
Shareholder service expenses 0.10% 0.25% 0.10% 0.25% 0.10% 0.25%
Other expenses 0.50% 0.50% 0.39% 0.58% 0.50% 0.50%
Total other expenses 0.60% 0.75% 0.49% 0.83% 0.60% 0.75%
Total operating expenses (after expense
deferral)(5) 1.60% 2.25% 1.74% 2.58% 1.60% 2.25%

<CAPTION>
BALANCED GOVERNMENT
GROWTH INCOME MONEY
Portfolio Portfolio Portfolio Portfolio MARKET
A B A B Portfolio
<S> <C> <C> <C> <C> <C>
- ----------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a
percentage of offering price)(1) 5.25% None 4.75% None None
Sales charge on reinvested dividends None None None None None
Deferred sales charge (as a percentage
of original purchase price or
redemption proceeds, whichever is
lower)(2) None 5.00% None 5.00% None
Redemption fee(3) None None None None None
Exchange fee None None None None 5.25%(4)
- ----------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS
A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)(5)
Management fees 0.75% 0.75% 0.40% 0.40% 0.00%
12b-1 expenses(6) 0.25% 0.75% 0.25% 0.50% 0.15%
All other expenses (after expense
deferral)(5)
Shareholder service expenses 0.10% 0.25% 0.10% 0.25% 0.10%
Other expenses 0.50% 0.50% 0.15% 0.15% 0.06%
Total other expenses 0.60% 0.75% 0.25% 0.40% 0.16%
Total operating expenses (after expense
deferral)(5) 1.60% 2.25% 0.90% 1.30% 0.31%
</TABLE>

- ---------------------------
(1) Sales charges are reduced for purchases of $50,000 or more of shares of the
Series A Portfolios. There is no initial sales charge on purchases of shares
of the Series B Portfolios or the Money Market Portfolio. The National
Association of Securities Dealers, Inc. limits total annual sales charges
(including 12b-1 expenses) to all purchasers of shares of a Portfolio to
6.25% of new sales plus an interest factor. However, long-term shareholders
may pay more than the economic equivalent of such maximum sales charges. See
"Alternative Purchase Arrangements."

(2) Although purchases of $1 million or more of shares of a Series A Portfolios
are not subject to an initial sales charge, a contingent deferred sales
charge of 1.00% applies on certain redemptions made less than one year
following such purchases. A contingent deferred sales charge also applies on
certain redemptions of shares of a Series B Portfolio, ranging from 5.00% of
redemptions made within 12 months after purchase to zero for redemptions
made more than six years after purchase. See "Redeeming Shares."

(3) A $10 charge will be imposed on redemptions requested to be paid by wire
transfer. See "Redeeming Shares-Redemption Payments."

(4) An exchange of shares of the Money Market Portfolio for shares of a Series A
Portfolio is subject to the 5.25% (4.75% in the case of Government Income
Portfolio A) initial sales charge imposed on the dollar amount of shares
received in such exchange, unless the Money Market Portfolio shares were
acquired by an exchange from a Series A Portfolio or by reinvestment or
cross-reinvestment of dividends or capital gain distributions. An exchange
of shares of the Money Market Portfolio for shares of a Series B Portfolio
is not subject to an initial sales charge; however, the Series B shares
received in the exchange are subject to a contingent deferred sales charge,
unless the Money Market Portfolio shares were acquired by reinvestment or
cross-reinvestment of dividends or capital gain distributions. See
"Shareholder Services-Exchange Privilege."

3
<PAGE>

following respective percentage of such Portfolio's average net assets on an
annual basis through March 31, 1997: Core Growth Portfolio A and B-1.60% and
2.25%; Emerging Growth Portfolio A and B, 1.80% and 2.25%; Income & Growth
Portfolio A and B-1.60% and 2.25%; Balanced Growth Portfolio A and B-1.60%
and 2.25%; Government Income Portfolio A and B-0.90% and 1.30%; and Money
Market Portfolio-1.10%. In subsequent years, overall operating expenses for
each Portfolio will not fall below the applicable percentage limitation
until the Investment Adviser has fully recouped fees deferred or expenses
paid by the Investment Adviser under this agreement, as each Portfolio will
reimburse the Investment Adviser in subsequent years when operating expenses
(before recoupment) are less than the applicable percentage limitation set
forth above. Accordingly, until all such deferred fees or expenses have been
recouped by the Investment Adviser, the Portfolios' expenses will be higher,
and their yields will be lower, than would otherwise be the case. See
"Organization and Management-Expense Limitation." Actual operating expenses
for the Series A, B (annualized) Portfolios for the fiscal year ended March
31, 1996 were, the following respective percentages of the Portfolios'
average net assets: Core Growth Portfolio A and B-1.56% and 3.39%; Emerging
Growth Portfolio A and B-1.74% and 3.26%; Income & Growth Portfolio A and
B-1.76% and 7.08%; Balanced Growth Portfolio A and B-3.30% and 13.05%;
Government Income Portfolio A and B-9.58% and 86.12%; and Money Market
Portfolio-5.78%. The various operating expenses of the Portfolios are
further described under "Organization and Management."

(6) After a substantial period, these expenses with respect to the Series B
Portfolios may total more than the maximum sales expenses that would have
been permissible if imposed entirely as an initial sales charge. See
"Organization and Management-Distributor."

4
<PAGE>
EXAMPLE OF PORTFOLIO EXPENSES. The following table illustrates the expenses that
a shareholder would pay on a hypothetical $1,000 investment in each of the
Portfolios over various time periods, assuming a 5% annual return. The
Portfolios charge no redemption fees. However, a contingent deferred sales
charge of 1.00% applies on redemptions of shares of a Series A Portfolio made
less than one year after a $1 million purchase of such shares, and a contingent
deferred sales charge applies on redemptions of shares of a Series B Portfolio
ranging from 5.0% of redemptions made within 12 months of purchase to zero for
redemptions made more than six years after purchase.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORE GROWTH
Portfolio A(1) $68 $100 $135 $233
Portfolio B(2):
Assuming redemption at end of time period $74 $103 $143 $258
Assuming no redemption $23 $ 70 $120 $258
- -------------------------------------------------------------------------------------
EMERGING GROWTH
Portfolio A(1) $69 $104 $142 $247
Portfolio B(2):
Assuming redemption at end of time period $77 $112 $160 $291
Assuming no redemption $26 $ 80 $137 $291
- -------------------------------------------------------------------------------------
INCOME & GROWTH
Portfolio A(1) $68 $100 $135 $233
Portfolio B(2):
Assuming redemption at end of time period $74 $103 $143 $258
Assuming no redemption $23 $ 70 $120 $258
- -------------------------------------------------------------------------------------
BALANCED GROWTH
Portfolio A(1) $68 $100 $135 $233
Portfolio B(2):
Assuming redemption at end of time period $74 $103 $143 $258
Assuming no redemption $23 $ 70 $120 $258
- -------------------------------------------------------------------------------------
GOVERNMENT INCOME
Portfolio A(1) $56 $ 75 $ 95 $153
Portfolio B(2):
Assuming redemption at end of time period $65 $ 75 $ 95 $157
Assuming no redemption $13 $ 41 $ 71 $157
- -------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO(1) $ 3 $ 10 $ 17 $ 39
- -------------------------------------------------------------------------------------
</TABLE>

(2)Assumes deduction at the time of redemption of a contingent deferred sales
charge, if applicable, and no exchange of Portfolio B shares for Portfolio A
shares seven or more years after purchase.

5
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY

Nicholas-Applegate Mutual Funds (the "Trust") is an open-end management
investment company comprised of a number of diversified investment portfolios,
including the five Series A Portfolios, five Series B Portfolios and Money
Market Portfolio ("Portfolios") offered hereby. The Series A Portfolios and
Series B Portfolios have identical investment objectives and policies. However,
the Series A Portfolios are sold subject to a front end sales charge and the
Series B Portfolios are sold subject to a contingent deferred sales charge. The
Money Market Portfolio has no front-end or contingent deferred sales charge.

6
<PAGE>

The Income & Growth, Balanced Growth and Government Income Funds are each
permitted to invest up to 35% of its net assets in zero coupon securities, which
may be subject to greater volatility as a result of changes in prevailing
interest rates than other debt securities. In addition, the Balanced Growth and
Income & Growth Funds are permitted to invest up to 35% and 50%, respectively,
of their net assets in convertible and debt securities rated below "Baa" by
Moody's Investors Service, Inc. ("Moody's"), "BBB" by Standard & Poor's
Corporation ("S&P"), or investment grade by other recognized rating agencies, or
in unrated securities of comparable quality, if the Investment Adviser believes
that the financial condition of the issuer or the protection afforded to the
particular securities is stronger than would otherwise be indicated by such low
ratings or lack of ratings. Such securities, commonly referred to as "junk
bonds," are speculative and subject to greater market fluctuations and risk of
loss of income and principal than higher rated bonds. Such Funds will in no
event purchase debt securities rated below "C" or equivalent by Moody's, S&P or
another rating agency, or determined by the Investment Adviser to be of
comparable quality. See "Appendix: Investment Policies, Strategies and Risks"
and the Statement of Additional Information for a description of these
securities and ratings.

The investment approach of Nicholas-Applegate Capital Management (the
"Investment Adviser") results in above-average portfolio turnover for each Fund
other than the Money Market Fund. A high rate of portfolio turnover involves
correspondingly greater brokerage commission expenses, and may also result in
the realization and distribution to shareholders of net capital gains which are
taxable to them as ordinary income for federal tax purposes.

7
<PAGE>

Each Fund may invest up to 15% (10% in the case of the Money Market Fund) of its
net assets in illiquid securities. Each Fund may enter into repurchase
agreements and lend its portfolio securities, which involve the risk of loss
upon the default of the seller or borrower. The Funds may also borrow money from
banks for temporary purposes which, among other risks, may require the Funds to
sell portfolio securities to meet interest and principal payments at an
unfavorable time. See "Illiquid Securities," "Repurchase Agreements,"
"Securities Lending" and "Borrowing" in "Appendix: Investment Policies,
Strategies and Risks."

DISTRIBUTOR. Nicholas-Applegate Securities (the "Distributor"), an affiliate of
the Investment Adviser, serves as distributor of shares of the Portfolios. Under
a Distribution Plan, the Distributor receives compensation for providing
distribution services for the Portfolios at the following annual rates: for the
Series A Portfolios-0.25% of each Portfolio's net assets; for the Series B
Portfolios-0.75% (0.50% in the case of Government Income Portfolio B) of each
Portfolio's net assets; and for the Money Market Portfolio-0.15% of such
Portfolio's net assets. Under a Shareholder Service Plan, the Distributor is
reimbursed for shareholder services it provides and for payments made to
broker-dealers and others for related support and recordkeeping services at an
annual rate of up to 0.10% of each Series A Portfolio's and the Money Market
Portfolio's net assets, and 0.25% of each Series B Portfolio's net assets. See
"Organization and Management." Under a Distribution Agreement, the Distributor
will also retain a portion of the initial sales load on purchases of shares of
the Series A Portfolios and the contingent deferred sales load on redemptions of
shares of the Series A and B Portfolios. See "Organization and Management" and
"Alternative Purchase Arrangements."

PURCHASE OF SHARES. Shares of the Portfolios may be purchased directly from the
Trust through its Transfer Agent or through selected dealers. Shares are
purchased at the next offering price,

8
<PAGE>
less a sales charge if applicable, after an order is received in proper form by
the Transfer Agent. The minimum initial investment is $2,000 and the minimum
subsequent investment is $100, but reduced investment minimums are available in
certain cases.

ALTERNATIVE PURCHASE ARRANGEMENTS. Shares of the Series A Portfolios are sold
subject to a maximum sales charge of 5.25% (4.75% for Government Income
Portfolio A). Reduced sales charges are available for purchases of $50,000 or
more of shares of a Series A Portfolio. No initial sales charge applies on a
purchase of $1 million or more of shares of a Series A Portfolio, but a
contingent deferred sales charge of 1.00% is imposed on redemptions made less
than one year after the $1 million purchase. The Trust offers a number of ways
shareholders in a Series A Portfolio can reduce their sales charges, including
aggregation, concurrent purchases, rights of accumulation and letters of intent.
See "Alternative Purchase Arrangements-Series A Portfolios."

Although shares of the Series B Portfolios are sold without an initial sales
charge, a contingent deferred sales charge is imposed on redemptions, ranging
from 5.00% of redemptions made within 12 months after purchase to zero for
redemptions made more than six years after purchase. Shares of the Series B
Portfolios may be exchanged for shares of the corresponding Series A Portfolios
seven years after purchase. See "Alternative Purchase Arrangements-Series B
Portfolios." Shares of the Money Market Portfolio are sold with no initial or
contingent deferred sales charge.

9
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

The following financial highlights have been audited by Ernst & Young, L.L.P.
with respect to the fiscal year ended March 31, 1996, and by Coopers & Lybrand
L.L.P. with respect to the period from commencement of operations of the
Portfolios through March 31, 1995. Ernst & Young, L.L.P. and Coopers & Lybrand
L.L.P. are independent auditors whose reports thereon were unqualified. This
information should be read in conjunction with the financial statements and the
notes thereto which appear in the Trust's 1996 Annual Report to Shareholders
incorporated by reference in the Statement of Additional Information.

<TABLE>
<CAPTION>
CORE EMERGING INCOME &
GROWTH GROWTH GROWTH
Portfolio Portfolio Portfolio
A A A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
4-19-93 4-1-94 4-1-95 12-27-93 4-1-94 4-1-95 4-19-93 4-1-94 4-1-95
to to to to to to to to to
3-31-94 3-31-95 3-31-96 3-31-94 3-31-95 3-31-96 3-31-94 3-31-95 3-31-96
--------- --------- --------- --------- --------- --------- --------- --------- ---------
PER SHARE DATA:
Net asset value,
beginning of period $ 12.50 $ 13.25 $ 13.61 $ 12.50 $ 12.10 $ 13.06 $ 12.50 $ 14.16 $ 12.86
Income from
investment
operations:
Net investment
income (deficit) (0.07) (0.10) (0.18) (0.04) (0.16) (0.20) 0.32 0.49 0.48
Net realized and
unrealized gains
(losses) on
securities 0.86 0.46 4.94 (0.36) 1.12 5.09 2.15 (0.89) 2.82
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 0.79 0.36 4.76 (0.40) 0.96 4.89 2.47 (0.40) 3.30
Less distributions:
Dividends from net
investment income -- -- -- -- -- -- (0.32) (0.49) (0.48)
Distributions from
capital gains (0.04) -- -- -- -- (0.02) (0.49) (0.41) --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net asset value, end
of period $ 13.25 $ 13.61 $ 18.37 $ 12.10 $ 13.06 $ 17.93 $ 14.16 $ 12.86 $ 15.68
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN:+ 6.27% 2.72% 35.07 (3.20%) 7.93% 37.48% 19.65% (2.64%) 26.00%
RATIOS/SUPPLEMENTAL
DATA:
Net assets ($000),
end of period $ 70,512 $ 65,292 $ 77,275 $ 104,838 $ 106,725 $ 188,155 $ 30,447 $ 31,150 $ 31,712
Ratio of expenses to
average net assets,
after expense
reimbursement++ 1.57%* 1.59% 1.58% 1.73%* 1.86% 1.74% 1.59%* 1.60% 1.60%
Ratio of expenses to
average net assets,
before expense
reimbursement++ 1.71%* 1.63% 1.56% 1.80%* 1.84% 1.77% 1.83%* 1.76% 1.76%
Ratio of net
investment income to
average net assets,
after expense
reimbursement++ (0.68%)* (0.66%) (0.91%) (1.44%)* (1.27%) (1.20%) 2.83%* 3.71% 3.29%
Ratio of net
investment income
(deficit) to average
net assets, before
expense
reimbursement++ (0.82%)* (0.70%) (0.84%) (1.51%)* (1.25%) (1.20%) 2.59%* 3.55% 3.12%
Portfolio turnover** 84.84% 98.09% 114.48% 50.51% 100.46% 129.59% 177.52% 125.51% 144.97%
Average commission
rate paid** N/A N/A $ 0.0597 N/A N/A $ 0.0523 N/A N/A $ 0.0597

<CAPTION>
BALANCED GOVERNMENT
GROWTH INCOME MONEY
Portfolio Portfolio MARKET
A A Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------
4-19-93 4-1-94 4-1-95 4-19-93 4-1-94 4-1-95 4-19-93 4-1-94 4-1-95
to to to to to to to to to
3-31-94 3-31-95 3-31-96 3-31-94 3-31-95 3-31-96 3-31-94 3-31-95 3-31-96
-- --------- --------- --------- --------- --------- ---------- --------- ---------
PER SHARE DATA:
Net asset value,
beginning of period $12.50 $ 13.52 $ 13.74 $ 12.50 $ 12.51 $ 12.29 $ 1.00 $ 1.00 $ 1.00
Income from
investment
operations:
Net investment
income (deficit) 0.15 0.21 0.34 0.29 0.63 0.75 0.01 0.05 0.05
Net realized and
unrealized gains
(losses) on
securities 1.02 0.22 2.42 0.34 (0.19) 0.45 -- -- --
-- --------- --------- --------- --------- --------- ---------- --------- ---------
Total from investment
operations 1.17 0.43 2.76 0.63 0.44 1.20 0.01 0.05 0.05
Less distributions:
Dividends from net
investment income (0.15) (0.21) (0.34) (0.29) (0.63) (0.75) (0.01) (0.05) (0.05)
Distributions from
capital gains -- -- -- (0.33) (0.03) -- -- -- --
-- --------- --------- --------- --------- --------- ---------- --------- ---------
Net asset value, end
of period $13.52 $ 13.74 $ 16.16 $ 12.51 $ 12.29 $ 12.74 $ 1.00 $ 1.00 $ 1.00
-- --------- --------- --------- --------- --------- ---------- --------- ---------
-- --------- --------- --------- --------- --------- ---------- --------- ---------
TOTAL RETURN:+ 9.35% 3.22% 20.16% 4.97% 3.68% 9.71% 1.72% 4.58% 5.47%
RATIOS/SUPPLEMENTAL
DATA:
Net assets ($000),
end of period $6,446 $ 4,980 $ 5,902 $ 820 $ 925 $ 1,297 $ 48 $ 2,996 $ 3,129
Ratio of expenses to
average net assets,
after expense
reimbursement++ 1.59%* 1.60% 1.60% 1.10%* 1.10% 0.93% 0.54%* 0.31% 0.45%
Ratio of expenses to
average net assets,
before expense
reimbursement++ 3.28%* 2.78% 3.30% 20.28%* 8.40% 9.58% 323.24%* 2.49% 5.78%
Ratio of net
investment income to
average net assets,
after expense
reimbursement++ 1.30%* 1.44% 2.16% 3.07%* 5.18% 5.78% 1.85%* 4.60% 5.35%
Ratio of net
investment income
(deficit) to average
net assets, before
expense
reimbursement++ (0.39%)* 0.26% 0.88% (16.11%)* 2.12% 0.75% (320.85%)* 2.42% 2.77%
Portfolio turnover** 85.43% 110.40% 197.19% 159.17% 258.72% 190.47% N/A N/A N/A
Average commission
rate paid** N/A N/A $ 0.0594 N/A N/A N/A N/A N/A
</TABLE>

10
<PAGE>

<TABLE>
<CAPTION>
CORE EMERGING INCOME & BALANCED GOVERNMENT
GROWTH GROWTH GROWTH GROWTH INCOME
Portfolio Portfolio Portfolio Portfolio Portfolio
B B B B B
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
5-31-95 5-31-95 5-31-95 5-31-95 5-31-95
to to to to to
3-31-96 3-31-96 3-31-96 3-31-96 3-31-96
--------- ----------- ----------- ---------- -----------
PER SHARE DATA:
Net asset value, beginning of period $ 12.50 $ 12.50 $ 12.50 $ 12.50 $ 12.50
Income from investment operations:
Net investment income (deficit) (0.09) (0.14) 0.24 0.12 0.48
Net realized and unrealized gains
(losses) on securities 3.84 4.33 2.46 1.68 0.04
--------- ----------- ----------- ---------- -----------
Total from investment operations 3.75 4.19 2.70 1.80 0.52
Less distributions:
Dividends from net investment income -- -- (0.24) (0.12) (0.48)
Distributions from capital gains -- -- -- -- (0.01)
--------- ----------- ----------- ---------- -----------
Net asset value, end of period $ 16.25 $ 16.69 $ 14.96 $ 14.18 $ 12.53
--------- ----------- ----------- ---------- -----------
--------- ----------- ----------- ---------- -----------
TOTAL RETURN:+ 30.00% 33.52% 21.72% 14.45% 4.16%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 11,186 $ 13,626 $ 2,125 $ 673 $ 128
Ratio of expenses to average net assets,
after expense reimbursement++ 2.22%* 2.58%* 2.25%* 2.25%* 1.33%*
Ratio of expenses to average net assets,
before expense reimbursement++ 3.39%* 3.26% 7.08%* 13.05% 86.12%*
Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement++ (1.61%)* (2.09%)* 2.59%* 1.38%* 5.14%*
Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement++ (2.79%) (2.76%)* 2.22%* (18.86%)* (67.73%)*
Portfolio turnover** 114.48% 129.59% 144.97% 177.19% 190.47%
Average commission rate paid** $ 0.0593 $ 0.0523 $ 0.0597 $ 0.0594 N/A
</TABLE>

- ----------------------------------------
* Annualized

** For the corresponding Funds of the Master Trust

+ Computations do not reflect the Portfolios' sales charges

++ Includes expenses allocated from Master Trust Funds

11
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of each Portfolio are discussed below and
in the "Appendix: Investment Policies, Strategies, and Risks"

12
<PAGE>
invest all or substantially all of their assets in the Funds. Accordingly, there
may be other investment companies through which you can invest indirectly in the
Funds. The fees charged by such other investment companies may be higher or
lower than those charged by the Portfolios, which may reflect, among other
things, differences in the nature and level of the services and features offered
by such companies to their shareholders. Information about the availability of
other investment companies that invest in the Funds can be obtained by calling
(800) 551-8045.

CORE GROWTH PORTFOLIO A AND PORTFOLIO B. Each Core Growth Portfolio seeks to
maximize long-term capital appreciation. Each Portfolio invests all of its
assets in the Nicholas-Applegate Core Growth Fund, which has the same investment
objective as the Core Growth Portfolios. Assets of the Core Growth Fund are
invested primarily in common stocks of U.S. companies the earnings and stock
prices of which are expected by the Fund's Investment Adviser to grow faster
than the average rate of companies in the Standard & Poor's 500 Stock Price
Index. Companies in which the Fund invests do business in a cross-section of
industries and may be growth companies, cyclical companies or companies believed
to be undergoing a basic change in operations or markets which, in the opinion
of the Investment Adviser, would result in a significant improvement in
earnings. The securities of such companies may be subject to more volatile
market movements than securities of larger, more established companies. Although
the Fund is not restricted to investments in companies of any particular size,
it currently intends to invest primarily in companies with middle market
capitalizations and above (generally above $500 million). See "Appendix:
Investment Policies, Strategies and Risks" for a discussion of the risks
associated with investment in such growth companies.

13
<PAGE>
grade, the security will be sold as promptly as practicable. The Fund may also
make short sales, which is considered a speculative technique. See "Appendix:
Investment Policies, Strategies and Risks" for a discussion of the risks
associated with short sale transactions.

EMERGING GROWTH PORTFOLIO A AND PORTFOLIO B. Each Emerging Growth Portfolio
seeks to maximize long-term capital appreciation. Each Portfolio invests all of
its assets in the Nicholas-Applegate Emerging Growth Fund, which has the same
investment objective as the Emerging Growth Portfolios. Assets of the Emerging
Growth Fund are invested in the same types of securities as the Core Growth
Fund, except that the Fund intends to invest primarily in companies with smaller
market capitalizations (e.g., up to $500 million). However, the Fund will not
necessarily sell any security held by it if the market capitalization of the
issuer increases above $500 million subsequent to purchase. See "Core Growth
Portfolio A and Portfolio B" above.

INCOME & GROWTH PORTFOLIO A AND PORTFOLIO B. Each Income & Growth Portfolio
seeks to maximize total return, consisting of capital appreciation and current
income. Each Portfolio invests all of its assets in the Nicholas-Applegate
Income & Growth Fund, which has the same investment objective as the Income &
Growth Portfolios. Assets of the Income & Growth Fund are invested primarily in
convertible and equity securities of U.S. companies. Convertible securities are
bonds, debentures, corporate notes or preferred stocks which pay interest or
dividends and which may be converted into common stock at the option of the
holder. Convertible securities provide for participation in the appreciation of
the underlying common stock but at a lower level of risk because the yield is
higher and the security is senior to the common stock upon liquidation of the
issuer.

The issuers of the convertible and equity securities in which the Income &
Growth Fund invests will be the same types of growth companies as those in which
the Core Growth Fund invests. See "Core Growth Portfolio A and Portfolio B"
above and the Appendix for a discussion of the risks associated with investment
in such growth companies. The Income & Growth Fund's convertible and other debt
securities will generally be investment grade securities rated "Baa" or higher
by Moody's, "BBB" or higher by S&P or equivalent ratings by other recognized
rating agencies, or will be unrated if determined by the Investment Adviser to
be of comparable quality, as described above under "Core Growth Portfolio A and
Portfolio B."

However, a portion (up to 50%) of the Income & Growth Fund's net assets may be
invested in debt securities rated below investment grade or in unrated
securities of comparable quality

14
<PAGE>

if the Investment Adviser believes that the financial condition of the issuer or
the protection afforded to the particular securities is stronger than would
otherwise be indicated by such low ratings or the lack thereof. Debt securities
with ratings below "Baa" or "BBB" or equivalent ratings, commonly referred to as
"junk bonds," are speculative and subject to greater market fluctuations and
risk of loss of income and principal than higher rated bonds. The default rate
of lower-quality debt securities is likely to be higher when issuers have
difficulty meeting projected goals or obtaining additional financing, which
could occur during economic recessions or periods of high interest rates. They
may be thinly traded, making them difficult to sell promptly at an acceptable
price. Negative publicity or investor perceptions may make valuing such
securities difficult, and could hurt the Fund's ability to dispose of them. If
the rating of an investment grade security held by the Fund is downgraded, the
Investment Adviser will determine whether it is in the best interests of the
Fund to continue to hold such security in its investment portfolio. However, if
the downgrading of a debt security causes the Fund to retain 50% or more of its
net assets in junk bonds, the Fund will sell sufficient principal amount of junk
bonds as promptly as practicable to ensure that it does not hold 50% or more of
its net assets in such securities. See "Appendix: Investment Policies,
Strategies and Risks" for a discussion of the risks associated with investment
in junk bonds.

BALANCED GROWTH PORTFOLIO A AND PORTFOLIO B. Each Balanced Growth Portfolio
seeks to provide investors with a balance of long-term capital appreciation and
current income. Each Portfolio invests all of its assets in the
Nicholas-Applegate Balanced Growth Fund, which has the same investment objective
as the Balanced Growth Portfolios. Assets of the Balanced Growth Fund are
invested in equity securities (common and preferred stocks), convertible
securities and warrants primarily of U.S. companies, debt securities (bonds,
debentures and notes), money market instruments and other short-term investments
and instruments described in "Appendix: Investment Policies, Strategies and
Risks." Under normal circumstances, the Fund will allocate approximately 60% of
its total assets to equity securities, convertible securities and warrants and
approximately 40% to debt securities, money market instruments and other
short-term investments and instruments.

Temporary deviations from the Balanced Growth Fund's 60%/40% balance of
securities due to market fluctuations in the value of securities or otherwise
will be permitted so long as the percentage of equity securities, convertible
securities and warrants in the Balanced Growth Fund's investment portfolio is
not more than 70% or less than 50% of the value of the Fund's total assets. If
the value of the equity securities, convertible securities and warrants in the
Balanced Growth Fund's investment portfolio increases above 70% or decreases
below 50%, the Fund will effect sales or purchases of certain of its existing
investments as promptly as practicable, consistent with maintaining each
corresponding Portfolio's tax status as a regulated investment company, to
restore the 60%/40% ratio. Such a portfolio adjustment may cause the Fund to buy
or sell securities at different times than the Investment Adviser would
otherwise have made such purchases and sales. Such purchases and sales may also
cause the Fund to incur a higher proportion of short-term capital gains than
might otherwise be the case.

The issuers of the Balanced Growth Fund's equity investments will be the same
types of growth companies as those in which the Core Growth Fund invests. See
"Core Growth Portfolio A and Portfolio B" above and the Appendix for a
discussion of the risks associated with investment in such growth companies. The
debt securities in which the Balanced Growth Fund may invest include debt
securities issued by the U.S. Government and its agencies and instrumentalities,
and corporate debt securities. The ratings (or in the case of unrated
securities, the Investment Adviser's assessment of comparable quality) of the
Fund's convertible and other debt securities, and its policies regarding
downgraded securities, will be

15
<PAGE>
the same as those of the Income & Growth Fund. The Balanced Growth Fund may
invest a portion (less than 35%) of its net assets in convertible and debt
securities rated below investment grade or in unrated securities of comparable
quality. Such securities or "junk bonds" are speculative and subject to greater
risk of loss of income and principal than higher rated bonds. See "Income &
Growth Portfolio A and Portfolio B" above and "Appendix: Investment Policies,
Strategies and Risks" for a discussion of the risks associated with investment
in junk bonds.

GOVERNMENT INCOME PORTFOLIO A AND PORTFOLIO B. Each Government Income Portfolio
seeks to maximize current income consistent with prudent investment risk and
preservation of capital. Each Portfolio invests all of its assets in the
Nicholas-Applegate Government Income Fund, which has the same investment
objective as the Government Income Portfolios. The assets of the Government
Income Fund are invested primarily in investment grade, intermediate-term debt
securities of the U.S. Government and its agencies and instrumentalities. Such
securities are of varying maturities, with a weighted average portfolio duration
(expected life) from three to six years. The Fund may invest in direct
obligations of the United States (such as Treasury bills, notes and bonds, which
are supported by the full faith and credit of the United States) and obligations
(including mortgage-related securities) issued or guaranteed by agencies and
instrumentalities of the U.S. Government that are established under an act of
Congress. These agencies and instrumentalities may include, but are not limited
to, the Government National Mortgage Association, Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation, Student Loan Marketing
Association, Federal Farm Credit Banks, Federal Home Loan Banks, and Resolution
Funding Corporation. Under normal market conditions, at least 75% of the total
assets of the Fund will be invested in securities issued or guaranteed by the
U.S. Government or its agencies and instrumentalities. The remainder of the
Fund's assets may be invested in mortgage-related securities (including
collateralized mortgage obligations), investment grade debt securities,
short-term investments and other securities and instruments described in
"Appendix: Investment Policies, Strategies and Risks."

Although the Government Income Fund invests primarily in securities issued or
guaranteed by the U.S. Government or its agencies and instrumentalities, the
value of the Fund's and Portfolios' shares and their current yields will
fluctuate and are not guaranteed by the U.S. Government. The market value of the
debt securities in which the Fund will invest is generally affected by changes
in the level of interest rates. An increase in interest rates will tend to
reduce their market value, and a decline in interest rates will tend to increase
their value. The magnitude of these changes will be greater for securities with
longer remaining maturities than those with shorter maturities. Generally, the
longer the maturity of a debt security, the higher its yield and the greater its
price volatility. Conversely, the shorter the maturity, the lower the yield but
the greater the price stability.

16
<PAGE>
security; conversely, the higher the stated or coupon rate of interest of a
fixed income security, the shorter the duration of the security. For example,
the maturity of a coupon bond with a three-year duration is approximately 3.5
years, and the maturity of a coupon bond with a six-year duration is
approximately nine years. In some situations the standard duration calculation
does not properly reflect the interest rate exposure of a security, such as in
the case of mortgage pass-through securities. In such instances, the Investment
Adviser will use more sophisticated analytical techniques that incorporate the
economic life of a security into the determination of its interest rate
exposure.

17
<PAGE>
of up to three business days after purchase, (ii) more than 5% of its total
assets to be invested in "second tier securities," as defined by the Rule, or
(iii) more than the greater of $1 million or 1% of its total net assets to be
invested in the second tier securities of any one issuer. This limitation does
not apply to investment of all the assets of the Money Market Portfolio in the
Money Market Fund. See the Statement of Additional Information for a more
detailed description of the requirements of Rule 2a-7.

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<PAGE>
Certain of the investment restrictions which are fundamental policies are set
forth below. Additional investment restrictions are discussed in the Appendix
and Statement of Additional Information.

2. No Portfolio or Fund may purchase more than 10% of the outstanding voting
securities of any one issuer, or purchase the securities of any issuer for
the purpose of exercising control.

5. No Portfolio or Fund may invest more than 15% (10% in the case of the
Money Market Portfolio or Fund) of its net assets in illiquid securities.

The investment restrictions described above do not apply to an investment by a
Portfolio of all of its assets in a corresponding Fund.

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ORGANIZATION AND MANAGEMENT

19
<PAGE>
policy with respect to each Portfolio. See "General Information." The trustees
and officers of the Trust and of the Master Trust are described in the Statement
of Additional Information. None of the disinterested trustees of the Trust are
same individuals as the disinterested trustees of the Master Trust.

INVESTMENT ADVISER. The Trust has not retained the services of an investment
adviser for the Portfolios, as the Portfolios seek to achieve their investment
objectives by investing all of their assets in corresponding Funds.
Nicholas-Applegate Capital Management, 600 West Broadway, 30th Floor, San Diego,
California 92101, serves as the Investment Adviser to the Funds. The Investment
Adviser currently manages approximately $30 billion of discretionary assets for
numerous clients, including employee benefit plans of corporations, public
retirement systems and unions, university endowments, foundations and other
institutional investors, and individuals. The Investment Adviser was organized
in 1984 as a California limited partnership. Its general partner is
Nicholas-Applegate Capital Management Holdings, L.P., a California limited
partnership controlled by Arthur E. Nicholas. He and 13 other partners manage a
staff of approximately 325 employees.

For the fiscal year ended March 31, 1996, the Investment Adviser received (paid)
fees and expense recoupments (reimbursements) from the Funds equal to the
following percentages of the Portfolios' respective average net assets, after
the fee deferrals and expense reimbursements referred to under "Expense
Limitation": Core Growth Portfolio A and B, 0.77% and (0.23%); Emerging Growth
Portfolio A and B, 1.00% and 0.44%; Income & Growth Portfolio A and B, 0.58% and
(3.27%); Balanced Growth Portfolio A and B, (0.95%) and (8.28%); Government
Income Portfolio A and B, (8.22%) and (67.13%); Money Market Portfolio, (5.11%).

The Funds have been managed since inception under the general supervision of Mr.
Nicholas, who has been the Chief Investment Officer of the Investment Adviser
since its organization. In addition, since December 1995, John D. Wylie, as
Chief Investment Officer-Investor Services Group, is also responsible for
general oversight of the Funds' portfolios. The following persons are primarily
responsible for the Investment Adviser's day-to-day management of the Funds'
portfolios; except as otherwise indicated, each of them has been primarily
responsible since the Funds began operation: Core Growth Fund--John C. Marshall,
Jr.; Income & Growth Fund--John D. Wylie; Balanced Growth Fund--John D. Wylie
and the Investment Adviser's global management team, headed by Lawrence S.
Speidell (since March 1994) and Catherine Somhegyi (since March 1996);
Government Income Fund--John D. Wylie. Mr. Marshall, Ms. Somhegyi and Mr. Wylie
have managed similar institutional accounts for the Investment Adviser for more
than the last five years. Mr. Speidell has been a portfolio manager with the
Investment Adviser since March 1994; from 1983 until he joined the Investment
Adviser, he was an institutional portfolio manager with Batterymarch Financial
Management.

For historical performance data relating to the Portfolios, see "Appendix: Prior
Performance."

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<PAGE>
ADMINISTRATOR. Investment Company Administration Corporation, a Delaware
corporation, is the Administrator of each Portfolio. Pursuant to an
Administration Agreement with the Trust, and subject to the supervision of the
Board of Trustees of the Trust, the Administrator supervises the overall
administration of the Trust. Its responsibilities include preparing and filing
all documents required for compliance by the Trust with applicable laws and
regulations, arranging for the maintenance of books and records of the Trust and
supervision of other organizations that provide services to the Trust. Certain
officers of the Trust are also provided by the Administrator. For the services
it provides to the Trust, the Administrator receives an annual fee of between
$5,000 and $30,000 for each of the groups of portfolios of the Trust investing
in the various series of the Master Trust; the fee is allocated among the
various series of the Trust, including the Portfolios, in accordance with
relative net asset values. The Administrator provides similar services as the
administrator of the Master Trust, subject to the supervision of its Board of
Trustees, and is compensated separately for the services rendered to each Fund
at an annual rate of approximately 0.02% of the average daily net assets of the
Fund.

EXPENSE LIMITATION. To limit the expenses of each Portfolio, the Investment
Adviser has agreed to defer its fees, and to absorb the other operating expenses
of each Portfolio, to ensure that the expenses of each Portfolio (excluding
interest, taxes, brokerage commissions and other portfolio transaction expenses,
capital expenditures and extraordinary expenses, but including such Portfolio's
proportionate share of the corresponding Fund's similar operating expenses) do
not exceed the following respective percentage of such Portfolio's average net
assets on an annual basis through March 31, 1997 or any lower expense limitation
imposed by any state during any fiscal period: Core Growth Portfolio A and
Portfolio B-1.60% and 2.25%; Emerging Growth Portfolio A and Portfolio B-1.95%
and 2.60%; Income & Growth Portfolio A and Portfolio B-1.60% and 2.25%; Balanced
Growth Portfolio A and Portfolio B-1.60% and 2.25%; Government Income Portfolio
A and Portfolio B-0.90% and 1.30%; and the Money Market Portfolio-1.10%. Each
Portfolio will reimburse the Investment Adviser for fees deferred or other
expenses paid by the Investment Adviser pursuant to this agreement in later
years in which operating expenses for the Portfolio are less than the applicable
percentage limitation set forth above for any such year. No interest, carrying
or finance charge will be paid by a Portfolio with respect to any amounts
representing fees deferred or other expenses paid by the Investment Adviser. In
addition, no Portfolio or Fund will be required to repay any unreimbursed
amounts to the Investment Adviser upon termination or non-renewal of its
Investment Advisory Agreement with the Master Trust.

For the fiscal year ended March 31, 1996, the Series A and B Portfolios' total
expenses were the following percentages of their respective average net assets
(annualized for Series B), after the fee deferrals and expense reimbursements
indicated in parentheses: Core Growth Portfolio A and B-1.58% (includes 0.02%
recoupment of past deferrals) and 2.22% (1.17%); Emerging Growth Portfolio A and
B-1.74% (0.00%) and 2.58% (0.68%); Income & Growth Portfolio A and B-1.60%
(0.17%) and 2.25% (4.83%); Balanced Growth Portfolio A and B-1.60% (1.70%) and
2.25% (10.80%); Government Income Portfolio A and B-0.93% (8.65%) and 1.33%;
Money Market Portfolio-0.45% (5.33%).

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<PAGE>
The Trust has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act with respect to the Portfolios. Under the Distribution
Plan, each Portfolio compensates the Distributor for services rendered and costs
incurred in connection with distribution of shares of such Portfolio. The Trust
has also adopted a Shareholder Service Plan under which each Portfolio
reimburses the Distributor for shareholder servicing expenses actually incurred
with respect to shares of such Portfolio.

Under the Distribution Plan and a related distribution agreement (the
"Distribution Agreement"), the Distributor incurs the expenses of distributing
each Portfolio's shares. These expenses include advertising and marketing
expenses, commissions and other payments to broker-dealers and others which have
entered into agreements with the Distributor, the expenses of preparing,
printing and distributing prospectuses for the Portfolios, and indirect and
overhead costs associated with the sale of Portfolio shares. The Distributor
recovers the distribution expenses it incurs through the receipt of compensation
payments from each Portfolio under the Distribution Plan at the following annual
rates: for the Series A Portfolios, 0.25% of each such Portfolio's average daily
net assets; for the Series B Portfolios, 0.75% (0.50% for Government Income
Portfolio B) of each such Portfolio's average daily net assets; and for the
Money Market Portfolio, 0.15% of such Portfolio's average daily net assets.
Moreover, under the Distribution Agreement, the Distributor retains a portion of
an initial sales charge from purchases of shares of the Series A Portfolios, and
a contingent deferred sales charge from redemptions of shares of the Series A
Portfolios and Series B Portfolios. The Distribution Plan is a "compensation"
plan, which means that the distribution fees paid by the Portfolios under the
Distribution Plan are intended to compensate the Distributor for services
rendered and commission fees borne even if the amounts paid exceed the
Distributor's actual expenses (in which case the Distributor would realize a
profit). If in any year the Distributor's expenses incurred in connection with
the distribution of a Portfolio's shares exceed the distribution fees paid by
the Portfolio, the Distributor will recover such excess if the Distribution Plan
with respect to such shares continues to be in effect in some later year when
the distribution fees exceed the Distributor's expenses with respect to the
Portfolio. There is no limit on the periods during which unreimbursed expenses
may be carried forward; no Portfolio pays interest, carrying or other finance
charges on any carried forward amounts; and no Portfolio will be obligated to
pay any unreimbursed expenses that may exist at such time, if any, as the
Distribution Plan terminates or is not continued.

Under the Shareholder Service Plan, which is a "reimbursement" plan, each Series
A Portfolio and the Money Market Portfolio, and each Series B Portfolio, pays
the Distributor an annual fee of up to 0.10% and 0.25%, respectively, of the
Portfolio's average daily net assets as reimbursement for certain expenses
actually incurred in connection with shareholder services provided by the
Distributor and payments to broker-dealers and others for the provision of such
services. Support services with respect to the beneficial owners of Portfolio
shares include establishing and maintaining accounts and records relating to
clients of the Distributor, broker-dealers and others who invest in the
Portfolio shares, preparing tax reports, assisting clients in processing
exchange and redemption requests and account designations, and responding to
client inquiries concerning their investments. If in any month the Distributor
is due more monies for shareholder services than are immediately payable because
of the expense

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<PAGE>
limitations under the Shareholder Service Plan, the unpaid amount is carried
forward from month to month while the Shareholder Service Plan is in effect
until such time when it may be paid. However, no carried forward amount will be
payable beyond the fiscal year during which the amounts were incurred, and no
interest, carrying or other finance charge is borne by the Portfolios with
respect to any amount carried forward.

No fees or commissions will be paid by the Distributor to any broker-dealer or
others until amounts owed to such broker-dealer or others are at least $100. The
Distributor, at its expense, may provide additional promotional incentives to
brokers and dealers. In the case of dealers who institute special promotional
programs for sales of shares of the Series A or Series B Portfolios or other
series of the Trust, such incentives may be up to 0.50% of sales during the
promotion period. Dealers may obtain further information by calling (800)
551-8045.

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PURCHASING SHARES

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<PAGE>

Applegate Mutual Funds. Please specify the name of the Portfolio, the account
number assigned by the Transfer Agent, and your name. See "Purchase by Wire"
below for wiring instructions.

You may make subsequent investments in any Portfolio by completing the
subsequent investments form at the bottom of a recent account statement, making
your check payable to the Trust, writing your account number on the check and
mailing it in the envelope provided with your account statement. Subsequent
investments may also be made by mailing your check directly to your dealer's
address printed on your account statement.

SHARE CERTIFICATES. Shares are credited to your account and certificates are not
issued unless specifically requested. This eliminates the costly problem of lost
or destroyed certificates. If

24
<PAGE>
you would like certificates issued, please request them by writing to the
Transfer Agent. There is usually no charge for issuing certificates in
reasonable denominations, but certificates will be issued only for full shares.
Certificates are not available for shares of the Money Market Portfolio.

RETIREMENT PLANS. You may invest in each Portfolio through various retirement
plans including IRAs, Simplified Employee Plan (SEP) IRAs, 403(b) plans, 457
plans, and all qualified retirement plans (including 401(k) plans). For further
information about any of the plans, agreements, applications and annual fees,
contact the Distributor or your dealer. To determine which retirement plan is
appropriate for you, please consult your tax adviser.

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ALTERNATIVE PURCHASE ARRANGEMENTS

Purchases of shares of a Series A Portfolio are generally subject to a maximum
initial sales charge of 5.25% (4.75% for Government Income Portfolio A), and
lower distribution and shareholder service fees than shares of a Series B
Portfolio. Purchases of shares of a Series B Portfolio are subject to a
contingent deferred sales charge, ranging from 5.00% on redemptions made within
12 months after the shares were purchased to zero for redemptions made more than
six years after purchase, and higher distribution and shareholder service fees
than shares of a Series A Portfolio. Shares of the Series B Portfolios may be
exchanged for shares of the corresponding Series A Portfolios seven years after
purchase; an exchange will be treated as a redemption and purchase for tax
purposes.

You may choose the method of purchasing Portfolio shares that is most beneficial
given the amount of your intended purchase, the length of time you expect to
hold the shares and other relevant circumstances. You should consider which
method of purchase best suits your individual circumstances, I.E., whether it is
more advantageous to incur an initial sales charge and lower annual fees, or to
have the entire purchase price invested in Portfolio shares with the investment
thereafter being subject to a contingent deferred sales charge for a period of
six years from date of purchase and higher annual fees.

As an illustration, you might prefer the initial sales charge alternative
(Series A Portfolios) because you may intend to purchase shares of sufficient
value to qualify for a sales charge reduction, and such reductions are not
available for purchases under the contingent deferred sales charge alternative
(Series B Portfolios). Moreover, all shares acquired under the initial sales
charge alternative are subject to lower distribution and shareholder service
fees and, accordingly, such shares are expected to pay correspondingly higher
dividends on a per share basis. Even if your purchase will not qualify for
reduced initial sales charges you may nonetheless want to consider purchasing
shares of the Series A Portfolios if you expect to hold the shares for an
extended period of time because, depending on the number of years you hold the
investment, the accumulated continuing distribution and shareholder service
charges on shares of the Series B Portfolios would eventually exceed the initial
sales charge plus the lower continuing distribution and shareholder service
charges on shares of the Series A

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<PAGE>
Portfolios during the life of your investment. However, because initial sales
charges are deducted at the time of purchase, you would not have all of the
purchase payment for shares of the Series A Portfolios invested initially.

On the other hand, you might determine that it would be more advantageous to
have all of your funds invested initially by purchasing shares of the Series B
Portfolios, although remaining subject to higher continuing distribution and
shareholder service charges and, for a six-year period, being subject to a
contingent deferred sales charge. For example, based on estimated fees and
expenses, if you were to buy shares of Core Growth Portfolio A with a 5.25%
initial sales charge and elected to reinvest dividends in additional shares, you
would have to hold the investment in such shares approximately eight years
before the accumulated distribution and shareholder service fees on shares of
Core Growth Portfolio B would exceed the initial sales charge plus the
accumulated distribution and shareholder service fees on shares of Core Growth
Portfolio A. In this example, if you intend to maintain your investment for
eight or more years, you may consider purchasing shares of the Series A
Portfolios. This example does not take into account the time value of money
which further reduces the impact of the Series B Portfolios' distribution and
shareholder service fees on the investment, fluctuations in net asset value, the
effect of the return on the investment over this period or redemptions while the
contingent deferred sales charge is applicable.

Financial advisers and other sales agents who sell shares of the Trust will
receive different compensation for selling shares of the Series A and B
Portfolios, and will generally receive more compensation initially for selling
shares of the Series A Portfolios than for selling shares of the Series B
Portfolios.

SERIES A PORTFOLIOS

The sales charges you pay when purchasing shares of a Series A Portfolio are set
forth below:

<TABLE>
<CAPTION>
Dealer Commission
as Percentage of the
Sales Charges as Percentage of the: Offering Price
Amount of Purchase NET AMOUNT
at the Offering Price INVESTED OFFERING PRICE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
CORE GROWTH, EMERGING GROWTH,
INCOME & GROWTH AND
BALANCED GROWTH PORTFOLIOS
Less than $50,000 5.54% 5.25% 4.50%
$50,000 but less than $100,000 4.71% 4.50% 3.75%
$100,000 but less than $250,000 3.63% 3.50% 2.75%
$250,000 but less than $500,000 2.56% 2.50% 2.00%
$500,000 but less than $1,000,000 2.04% 2.00% 1.60%
$1,000,000 or more None None (See below)
- -----------------------------------------------------------------------------------------------------------------------
GOVERNMENT INCOME PORTFOLIO
Less than $50,000 4.99% 4.75% 4.00%
$50,000 but less than $100,000 4.17% 4.00% 3.25%
$100,000 but less than $250,000 3.63% 3.50% 2.75%
$250,000 but less than $500,000 2.56% 2.50% 2.00%
$500,000 but less than $1,000,000 2.04% 2.00% 1.60%
$1,000,000 or more None None (See below)
</TABLE>

No initial sales charge applies on purchases of shares of the Money Market
Portfolio. In addition, although no initial sales charge applies on a purchase
of $1 million or more of any of

26
<PAGE>
the Series A Portfolios, a contingent deferred sales charge of 1.00% is imposed
on certain redemptions less than one year after the $1 million purchase. See
"Redeeming Shares-Contingent Deferred Sales Charge on Redemptions of Portfolio A
Shares." Commissions will be paid by the Distributor to dealers who initiate and
are responsible for purchases of $1 million or more and for purchases made at
net asset value by certain retirement plans of organizations with 50 or more
eligible employees as set forth in the Statement of Additional Information.

NET ASSET VALUE PURCHASES. The Trust may sell shares of a Series A Portfolio at
net asset value to:

(1) current or retired directors, trustees, partners, officers and employees
of the Trust, the Master 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;

(2) current or retired registered representatives or full-time employees and
their spouses and minor children of dealers having selling group agreements with
the Trust and plans for such persons;

(3) former limited partners and participants of certain investment
partnerships and pooled trusts previously managed by the Investment Adviser;

(5) companies or other entities exchanging securities with the Trust or
Master Trust through a merger, acquisition or exchange offer;

(6) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with 50 or more eligible employees;

(7) participants in certain pension, profit-sharing or employee benefit
plans that are sponsored by the Distributor and its affiliates;

(8) investment advisers and financial planners who place trades for their
own accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services;

(9) clients of investment advisers and financial planners referred to in
item (8) who place trades for their own accounts if the accounts are linked to
the master account of the investment adviser or financial planner on the books
and records of a broker, agent, investment adviser or financial institution;

(10) employee-sponsored benefit plans in connection with redemptions of
shares of Series A or C Portfolios made as a result of participant-directed
exchanges between options in such a plan;

27
<PAGE>
Shares are offered at net asset value to these persons and organizations due to
anticipated economies in sales effort and expense. No sales charges are imposed
on Portfolio shares purchased upon the reinvestment of dividends and
distributions, or upon an exchange of shares from other series of the Trust
except as otherwise noted in "Shareholder Services- Exchange Privilege" below.

RIGHT OF ACCUMULATION. The sales charge for your investment may also be reduced
by taking into account your existing holdings in the Series A Portfolios. See
the account application for further details.

SERIES B PORTFOLIOS

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<PAGE>
contingent deferred sales charge is paid to the Distributor. The Distributor
pays sales commissions of up to 4.00% (up to 3.00% for Government Income
Portfolio B) of the purchase price to participating broker-dealers and others at
the end of the month during which purchases of shares of the Series B Portfolios
are made by their customers. See "Redeeming Shares-Contingent Deferred Sales
Charge on Redemption of Portfolio B Shares."

Portfolio B shares may be exchanged for the corresponding Portfolio A shares
seven years after purchase. Exchanges will be effected at relative net asset
value without the imposition of any additional sales charge, and will be treated
as a redemption and purchase for tax purposes. Since annual distribution-related
fees are lower for Portfolio A shares than Portfolio B shares, the per share net
asset value of the Portfolio A shares may be higher than that of the Portfolio B
shares at the time of conversion. Thus, although the aggregate dollar value will
be the same, you may receive fewer Portfolio A shares than Portfolio B shares
converted.

For Portfolio B shares previously exchanged for shares of the Money Market
Portfolio, the time period during which such shares were held in the Money
Market Portfolio will be excluded in calculating the applicable holding period.
For example, Portfolio B shares held in the Money Market Portfolio for one year
will not be exchangeable for Portfolio A shares until eight years from purchase.
Portfolio B shares acquired through exchange may be exchanged for Portfolio A
shares after expiration of the exchange period applicable to the original
purchase of such shares.

The Trust currently intends to establish, prior to 2002, an additional class of
the Series B Portfolios with the same distribution and shareholder service fees
as the Series A Portfolios, and to provide for the automatic conversion of the
shares of the current class of Series B Portfolios into the new class seven
years after purchase without any sales charge, if in the opinion of counsel such
conversion would not constitute a taxable event for U.S. income tax purposes. No
assurance exists that the Trust will be able to establish such a class of the
Series B Portfolios in a manner that will provide such benefit.

OTHER PORTFOLIOS

Currently, the Trust is offering eight Series A Portfolios, eight Series B
Portfolios, eight Series C Portfolios, and a Money Market Portfolio. Five
domestic Series A and Series B Portfolios and the Money Market Portfolio are
offered pursuant to this Prospectus. Three global Series A and B Portfolios, and
the Series C Portfolios, are covered by separate prospectuses which can be
obtained by calling (800) 551-8045. The Distributor also offers shares of other
portfolios of the Trust which invest in the same Funds of the Master Trust as
the Series A and B Portfolios. These other portfolios have different sales
charges and other expenses than the Series A and B Portfolios, which may affect
their performance. Information about these other portfolios can be obtained from
your dealer or by calling (800) 551-8045.

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SHAREHOLDER SERVICES

AUTOMATIC INVESTMENT PLAN. You may make regular monthly or quarterly investments
in each Portfolio 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
(800) 551-8043.

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<PAGE>
AUTOMATIC REINVESTMENT. Dividends and capital gain distributions are reinvested
in additional shares at no sales charge unless you indicate otherwise on the
account application. You may elect to have dividends or capital gain
distributions paid in cash.

CROSS-REINVESTMENT. You may cross-reinvest dividends or dividends and capital
gain distributions paid by one Portfolio into shares of another Portfolio within
the same series (A or B), subject to conditions outlined in the Statement of
Additional Information. Cross-reinvestment of dividends and capital gain
distributions may also be made from and to the Money Market Portfolio.
Generally, to use this service the value of your account in the Portfolio which
paid the dividend or capital gain distribution must equal at least $5,000.

EXCHANGE PRIVILEGE. You may exchange shares of any Portfolio into shares of
other Portfolios within the same series (A or B) by writing to the Transfer
Agent, State Street Bank and Trust Company, Attention: Nicholas-Applegate Mutual
Funds, P.O. Box 8326, Boston, Massachusetts 02266-8326. Shares may also be
exchanged to or from the Money Market Portfolio. Please specify the name of the
applicable Portfolio, the number of shares or dollar amount to be exchanged and
your name and account number. You may also exchange shares by contacting your
dealer or - if you have authorized telephone exchanges on the account
application - by telephoning the Transfer Agent at (800) 551-8043 or by sending
the Transfer Agent a facsimile at (617) 774-2651, between the hours of 8:00 A.M.
and 4:00 P.M. (Eastern time) on a day when the New York Stock Exchange is open
for normal trading (see "Telephone Privilege" below).

Before effecting an exchange, you should obtain the currently effective
prospectus of the series into which the exchange is to be made. Exchange
purchases are subject to the minimum investment requirements of the Portfolio
purchased. No sales charge applies except for exchanges of shares of the Money
Market Portfolio for shares of a Series A Portfolio, which are subject to
applicable sales charges on the Series A Portfolio being purchased unless the
Money Market Portfolio shares were acquired by an exchange from a Series A
Portfolio having a sales charge, or by reinvestment or cross-investment of
dividends or capital gain distributions. Additionally, a contingent deferred
sales load may apply to certain redemptions of shares of the Money Market
Portfolio acquired in an exchange for shares of a Series A or B Portfolio. See
"Alternative Purchase Arrangements" above. An exchange will be treated as a
redemption and purchase for tax purposes. If certificates are held by you, the
certificates, signed in the name(s) shown on the face of the certificates, must
be returned in order for the shares to be exchanged.

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<PAGE>
for telephone exchanges or redemptions received before 4:00 P.M. (Eastern time)
on a day when the New York Stock Exchange is open for normal trading will be
processed as of the close of trading on that day. Otherwise processing will
occur on the next business day.

The Trust will employ procedures designed to provide reasonable assurance that
instructions communicated by telephone are genuine and, if it does not do so, it
may be liable for any losses due to unauthorized or fraudulent instructions. The
procedures employed by the Trust include requiring personal identification by
account number and social security number, tape recording of telephone
instructions, and providing written confirmation of transactions. The Trust
reserves the right to refuse a telephone exchange or redemption request if it
believes, for example, that the person making the request is neither the record
owner of the shares being exchanged or redeemed nor otherwise authorized by the
shareholder to request the exchange or redemption. Shareholders will be promptly
notified of any refused request for a telephone exchange or redemption. No
Portfolio or its agents will be liable for any loss, liability or cost which
results from acting upon instructions of a person reasonably believed to be a
shareholder with respect to the telephone privilege.

AUTOMATIC EXCHANGES. You may automatically exchange shares (in increments of $50
or more) among any of the Portfolios within the same series (A or B) or with the
Money Market Portfolio on a monthly or quarterly basis. You must either meet the
minimum initial investment requirement for the receiving Portfolio or the
originating Portfolio's balance must be at least $5,000 and the receiving
Portfolio's minimum must be met within one year.

REPORTS TO SHAREHOLDERS. Each Portfolio will send its shareholders 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 Portfolios may provide one annual and semi-annual report
and annual prospectus per household. In addition, quarterly unaudited financial
data are available from the Portfolios upon request.

31
<PAGE>
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REDEEMING SHARES

If redemption is requested by a corporation, partnership, trust or fiduciary,
written evidence of authority acceptable to the Transfer Agent must be submitted
before such request will be accepted. If the proceeds of the redemption exceed
$50,000, are to be paid to a person other than the record owner, are to be sent
to an address other than the address on the Transfer Agent's records, or are to
be paid to a corporation, partnership, trust or fiduciary, the signature(s) on
the redemption request and on the certificates, if any, or stock powers may be
required to be guaranteed by an "eligible guarantor", which includes a bank or
savings and loan association that is federally insured or a member firm of a
national securities exchange.

32
<PAGE>
has been advised that the purchase check has been honored, up to 15 calendar
days from the time of receipt of the purchase check by the Transfer Agent. Such
delay may be avoided by purchasing shares by wire or by certified or official
bank checks.

CHECK WRITING. Upon investing in the Money Market Portfolio, directly or by
exchange for shares of a Series A Portfolio, a holder of shares of the Money
Market Portfolio may establish check writing privileges by completing the
necessary information on the account application and paying an initial $5 fee.
You will be provided with checks that you may use to draw against your account.
Checks may be payable to anyone you designate in the amount of $250 or more and
must be signed by the authorized number of registered shareholders exactly as
indicated on your Checking Account Signature Card contained in the account
application. You will be charged $1 for each check presented for payment. This
privilege may be modified or terminated at any time by the Trust or Transfer
Agent upon notice to shareholders.

(1) exchanges for other Portfolio A shares (except if shares acquired by
exchange are then redeemed within 12 months of the initial purchase);

(2) redemptions in connection with mergers, acquisitions and exchange offers
involving a Series A Portfolio;

(3) qualifying distributions from qualified retirement plans and other
employee benefit plans;

(4) distributions from custodial accounts under Section 403(b)(7) of the
Internal Revenue Code or from IRAs due to death, disability or attainment of age
59 1/2;

(5) tax-free returns of excess contributions to IRAs;

(6) any partial or complete redemptions following the death or disability of
a shareholder, provided the redemption is made within one year of death or
initial determination of disability;

(7) redemptions through certain automatic withdrawals; and

(8) redemptions by qualified retirement and employee benefit plans with 50
or more eligible employees.

33
<PAGE>
you. A CDSC will be applied to the lesser of the original purchase price or the
current value of the shares being redeemed. Increases in the value of your
shares or shares acquired through reinvestment of dividends or distributions are
not subject to a CDSC.

The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Portfolio B shares until the time the
shares are redeemed. Solely for purposes of determining the number of years from
the time of any payment for the purchase of shares, all payments during a month
will be aggregated and deemed to have been made on the last day of the month
preceding the purchase, and the time shares were held in the Money Market
Portfolio will be excluded.

The following table sets forth the rates of the CDSC applicable to redemptions
of shares of a Portfolio B series:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
DOLLARS INVESTED OR REDEMPTION
YEAR SINCE PURCHASE PAYMENT MADE PROCEEDS
- ----------------------------------------------------------------------- ------------------------------
<S> <C>
First.................................................................. 5.00%
Second................................................................. 4.00%
Third.................................................................. 3.00%
Fourth................................................................. 3.00%
Fifth.................................................................. 2.00%
Sixth.................................................................. 1.00%
Seventh and thereafter................................................. None
</TABLE>

In determining whether a CDSC is applicable to a redemption of shares of a
Series B Portfolio, the calculation will be made in a manner that results in the
lowest possible rate. It will be assumed that the redemption is made first of
amounts representing shares of the Series B Portfolio acquired pursuant to the
reinvestment of dividends and distributions; then of amounts representing the
increase in net asset value of your holdings of the Series B Portfolio above the
total amount of payments for the purchase of the shares of the Series during the
preceding six years; then of amounts representing the cost of shares of the
Series B Portfolio held beyond the applicable CDSC period; and finally, of
amounts representing the cost of shares of the Series B Portfolio held for the
longest period of time.

For example, assume you purchased 100 shares of Core Growth Portfolio B at $10
per share for a cost of $1,000. Subsequently, you acquired 5 additional shares
of Core Growth Portfolio B through dividend reinvestment. During the second year
after the purchase, you decided to redeem $500 of your investment. Assuming at
the time of the redemption the net asset value had appreciated to $12 per share,
the value of your Core Growth Portfolio B shares would be $1,260 (105 shares at
$12 per share). The CDSC would not be applied to the value of the reinvestment
dividend shares and the amount which represents appreciation ($260). Therefore,
$240 of the $500 redemption proceeds ($500 minus $260) would be charged a CDSC
at a rate of 4% (the applicable rate in the second year after purchase) for a
total CDSC of $9.60.

For Federal income tax purposes, the amount of the CDSC will reduce the gain or
increase the loss, as the case may be, on the amount recognized on the
redemption of shares.

The CDSC is waived for redemptions of shares of a Series B Portfolio by: (1)
current or retired directors, trustees, partners, officers and employees of the
Trust, the Master Trust, the

34
<PAGE>
Distributor, the Investment Adviser and its general partner, certain family
members of the above persons, and trusts or plans primarily for such persons;
(2) former limited partners and participants of certain investment partnerships
and pooled trusts previously managed by the Investment Adviser; and (3)
participants in certain pension, profit-sharing or employee benefit plans that
are sponsored by the Distributor and its affiliates.

The CDSC is also waived for:

(1) exchanges of shares of the Series B Portfolios (however, the shares
acquired by exchange will continue to be subject to a CDSC on the same basis as
the shares exchanged);

(2) redemptions in connection with mergers, acquisitions and exchange offers
involving a Series B Portfolio;

(3) qualifying distributions from qualified retirement plans and other
employee benefit plans;

(4) distributions from custodial accounts under Section 403(b)(7) of the
Internal Revenue Code or IRAs due to death, disability or attainment of age
59 1/2;

(5) tax-free returns of excess contributions to IRAs; and

(6) any partial or complete redemptions following the death or disability of
a shareholder, provided the redemption is made within one year of death or
initial determination of disability.

There is no CDSC on redemptions of shares of the Money Market Portfolio unless
such shares were acquired in an exchange for shares of a Series B Portfolio and
the redemption is made within six years after the initial purchase.

INVOLUNTARY REDEMPTION. In order to reduce expenses of a Portfolio, the Trust
may redeem all of the shares of any shareholder whose account has a net asset
value of less than $500 due to redemptions other than a shareholder which is an
IRA or other tax-deferred retirement plan. The Trust will give such shareholders
60 days' prior written notice in which to purchase sufficient additional shares
to avoid such redemption. No contingent deferred sales charge is imposed on such
redemptions.

35
<PAGE>
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES

You should consult your own tax adviser regarding specific questions as to
federal, state or local taxes. See "Taxes" in the Statement of Additional
Information.

36
<PAGE>
- --------------------------------------------------------------------------------
GENERAL INFORMATION

PERFORMANCE INFORMATION. From time to time the Trust may advertise each
Portfolio's total return and, if applicable, its yield. These figures are based
on historical earnings and are not intended to indicate future performance.
Total return shows how much an investment in the Portfolio would have increased
(or decreased) over a specified period of time (I.E., one, five or ten years or
since inception of the Portfolio) assuming that all distributions and dividends
by the Trust to shareholders of the Portfolio were reinvested on the
reinvestment dates during the period. Total return takes into account any
applicable sales charges, but does not take into account any federal or state
income taxes which may be payable by the investor. Yield will be calculated on a
30-day period (seven-day period for the Money Market Portfolio), pursuant to a
formula prescribed by the Securities and Exchange Commission (the "Commission").
The Trust also may include comparative performance information in advertising or
marketing Portfolio shares. Such performance information may include data from
Lipper Analytical Services, Inc., Morningstar, Inc., other industry
publications, business periodicals, rating services and market indices. See
"Appendix: Prior Performance," and "Performance Information" in the Statement of
Additional Information.

Further information about the performance of the Portfolios is contained in the
Trust's 1994 Annual Report to Shareholders, which may be obtained without charge
by calling (800) 551-8043.

DESCRIPTION OF SHARES. The Portfolios are series of Nicholas-Applegate Mutual
Funds, an
open-end management investment company. The Trust was organized in December 1992
as a Delaware business trust. The Trust is authorized to issue an unlimited
number of shares of each Portfolio. Shares of a Portfolio, when issued, are
fully paid, nonassessable, fully transferable and redeemable at the option of
the holder. Shares of a Portfolio are also redeemable at the option of the Trust
under certain circumstances. There are no conversion, preemptive or other
subscription rights. In the event of liquidation, each share of a Portfolio is
entitled to its portion of all of the Portfolio's assets after all debts and
expenses of the Portfolio have been paid. Pursuant to the Trust's Declaration of
Trust, the Board of Trustees of the Trust may authorize the creation of
additional series, and classes within series, with such preferences, privileges,
limitations and voting and dividend rights as the Board may determine.

37
<PAGE>
Additional Information. Whenever a Portfolio is requested to vote on matters
pertaining to the corresponding Fund or the Master Trust in its capacity as a
shareholder of such Fund, the Trust will hold a meeting of its shareholders and
will cast its vote as instructed by such shareholders or, in the case of a
matter pertaining exclusively to the corresponding Fund, as instructed
particularly by shareholders of the Portfolio and other series of the Trust
which invest in the Fund. The Trust will vote shares for which it has received
no voting instructions in the same proportion as the shares for which it does
receive voting instructions.

38
<PAGE>
APPENDIX

- --------------------------------------------------------------------------------
INVESTMENT POLICIES, STRATEGIES AND RISKS

The investment policies and strategies of the Portfolios (as implemented through
their investment in corresponding Funds) encompass the following securities,
techniques and risk considerations.

39
<PAGE>
and are transferable through the Federal book-entry system known as Separately
Traded Registered Interest and Principal Securities ("STRIPS") and Coupons Under
Book Entry Safekeeping ("CUBES"). Zero coupon securities are sold at a
substantial discount from face value and redeemed at face value at their
maturity date without interim cash payments of interest and principal. This
discount is amortized over the life of the security and such amortization will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, such securities may be subject to greater
volatility as a result of changes in prevailing interest rates than interest
paying investments in which the Funds may invest. Because income on such
securities is accrued on a current basis, even though the Funds do not receive
the income currently in cash, the Funds may have to sell other portfolio
investments to obtain cash needed by the related Portfolios to make income
distributions.

40
<PAGE>
frequently are not rated by credit rating agencies and a Fund may invest in
obligations which are not so rated only if the Investment Adviser determines
that at the time of investment the obligations are of comparable quality to the
other obligations in which the Fund may invest. The Investment Adviser will
monitor the creditworthiness of the issuers of such obligations and their
earning power and cash flow, and will also consider situations in which all
holders of such notes would redeem at the same time. Investment by a Fund in
floating or variable rate demand obligations as to which it cannot exercise the
demand feature on not more than seven days' notice will be subject to the Fund's
limit on illiquid securities of 15% (10% in the case of the Money Market Fund)
of net assets if there is no secondary market available for these obligations.

41
<PAGE>
convertible security is governed principally by its investment value. To the
extent the market price of the underlying common stock approaches or exceeds the
conversion price, the price of the convertible security will be increasingly
influenced by its conversion value.

Convertible debt securities purchased by the Income & Growth and Balanced Growth
Funds are subject to certain minimum rating requirements (see "Junk Bond
Considerations" below). Convertible debt securities purchased by the Core Growth
and Emerging Growth Funds, which are acquired in whole or substantial part for
their equity characteristics, are not subject to such rating requirements.

42
<PAGE>
The Investment Adviser will try to reduce the risk inherent in the Funds'
investment in such securities through credit analysis, diversification and
attention to current developments and trends in interest rates and economic
conditions. However, there can be no assurance that losses will not occur. Since
the risk of default is higher for lower-rated bonds, the Investment Adviser's
research and credit analysis are a correspondingly more important aspect of its
program for managing the Funds' investments in such debt securities. The
Investment Adviser will attempt to identify those issuers of high-yielding
securities whose financial condition is adequate to meet future obligations, or
has improved or is expected to improve in the future.

Credit ratings evaluate the safety of principal and interest payments of
securities, not their market value. The rating of an issuer is also heavily
weighted by past developments and does not necessarily reflect probable future
conditions. There is frequently a lag between the time a rating is assigned and
the time it is updated. As credit rating agencies may fail to timely change
credit ratings of securities to reflect subsequent events, the Investment
Adviser will also monitor issuers of such securities to determine if such
issuers will have sufficient cash flow and profits to meet required principal
and interest payments and to assure their liquidity. If the rating of a debt
security held by the Income & Growth or Balanced Growth Fund is downgraded below
"C" or an equivalent rating, or if the Investment Adviser determines that an
unrated security is of comparable quality, the Investment Adviser will determine
whether it is in the best interests of the Fund to continue to hold such
security in its investment portfolio. However, if the downgrading of an
investment grade security causes the Income & Growth Fund or Balanced Growth
Fund to hold 50% or more, or 35% or more, respectively of its net assets in
securities rated below investment grade or determined by the Investment Adviser
to be of comparable quality, the Fund will sell sufficient principal amount of
such securities as promptly as practicable to make sure that it holds less than
35% of its net assets in such securities.

43
<PAGE>
banks in private placement transactions. Upon conversion, the Fund generally
receives an amount in cash equal to the difference between the conversion price
and the then current value of the underlying security. Unlike a true convertible
security, a synthetic convertible comprises two or more separate securities,
each with its own market value. Therefore, the market value of a synthetic
convertible is the sum of the values of its fixed-income component and its
convertible component. For this reason, the values of a synthetic convertible
and a true convertible security may respond differently to market fluctuations.
The Income & Growth Fund 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 S&P, and will not invest more than 15% of its net assets in
such synthetic securities and other illiquid securities. See "Illiquid
Securities" below.

44
<PAGE>

value, their prices fluctuate based on changes in the issuer's financial
condition and prospects and on overall market and economic conditions. Small
companies and new companies often have limited product lines, markets or
financial resources, and may be dependent upon one or few key persons for
management. The securities of such companies may be subject to more volatile
market movements than securities of larger, more established companies, both
because the securities typically are traded in lower volume and because the
issuers typically are more subject to changes in earnings and prospects. The
corresponding Portfolios' net asset values can be expected to experience
above-average fluctuations, as above-average risk is assumed by the Funds in
investing in such growth companies in seeking higher than average growth in
capital.

45
<PAGE>

comparable to those applicable to U.S. companies. There may also be less
government supervision and regulation of foreign broker-dealers, financial
institutions and listed companies than exists in the United States. The Funds
will not invest in securities denominated in a foreign currency unless, at the
time of investment, such currency is considered by the Investment Adviser to be
fully exchangeable into United States dollars without significant legal
restriction. See "Investment Objectives, Policies and Risks-Foreign Investments"
in the Statement of Additional Information.

46
<PAGE>
cash, U.S. Government securities and other liquid, high quality debt securities
in an amount sufficient to meet their payment obligations with respect to these
transactions. A Fund may not purchase when-issued securities or enter into firm
commitments if, as a result, more than 15% of the Fund's net assets would be
segregated to cover such contracts.

47
<PAGE>
increase in value, than would otherwise be the case if it had not engaged in
such short sales. Short sales theoretically involve unlimited loss potential, as
the market price of securities sold short may continuously increase, although a
Fund may mitigate such losses by replacing the securities sold short before the
market price has increased significantly. Under adverse market conditions a Fund
might have difficulty purchasing securities to meet its short sale delivery
obligations, and might have to sell portfolio securities to raise the capital
necessary to meet its short sale obligations at a time when fundamental
investment considerations would not favor such sales. The value of securities of
any issuer in which a Fund maintains a short position which is "not against the
box" may not exceed the lesser of 2% of the value of the Fund's net assets or 2%
of the securities of such class of the issuer.

If the Core Growth or Emerging Growth Fund makes a short sale "against the box",
the Fund would not immediately deliver the securities sold and would not receive
the proceeds from the sale. The seller is said to have a short position in the
securities sold until it delivers the securities sold, at which time it receives
the proceeds of the sale. A Fund's decision to make a short sale "against the
box" may be a technique to hedge against market risks when the Investment
Adviser believes that the price of a security may decline, causing a decline in
the value of a security owned by the Fund or a security convertible into or
exchangeable for such security. In such case, any future losses in the Fund's
long position would be reduced by a gain in the short position.

48
<PAGE>
more than 25% of its net assets would be hedged. A "put" gives a holder the
right, in return for the premium paid, to require the writer of the put to
purchase from the holder a security at a specified price. A "call" gives a
holder the right, in return for the premium paid, to require the writer of the
call to sell a security to the holder at a specified price. An option on a
securities index (such as a stock index) gives the holder the right, in return
for the premium paid, to require the writer to pay cash equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars, times a specified multiplier.

49
<PAGE>
options on futures contracts. A financial futures contract obligates the seller
of the contract to deliver and the purchaser of the contract to take delivery of
the type of financial instrument called for in the contract at a specified
future time (the settlement date) for a specified price. Although the terms of a
contract call for actual delivery or acceptance of the financial instrument, the
contracts will be closed out before the delivery date without delivery or
acceptance taking place. Futures options possess many of the same
characteristics as options on securities and indices. A futures option gives the
holder, in return for the premium paid, the right to buy (call) from or sell
(put) to the writer of the option a futures contract at a specified price at any
time during the period of the option. Upon exercise of a call option, the holder
acquires a long position in the futures contract and the writer is assigned the
opposite short position. In the case of a put option, the opposite is true. A
futures option may be closed out before exercise or expiration by an offsetting
purchase or sale of a futures option of the same series.

SPECIAL HEDGING CONSIDERATIONS (CORE GROWTH, EMERGING GROWTH, INCOME & GROWTH,
BALANCED GROWTH, AND GOVERNMENT INCOME FUNDS). Special risks are associated with
the use of options and futures contracts as hedging techniques. There can be no
guaranty of a correlation between price movements in the hedging vehicle and in
the portfolio securities being hedged. A lack of correlation could result in a
loss on both the hedged securities in a Fund and the hedging vehicle, so that
the Fund's return might have been better had hedging not been attempted. In
addition, a decision as to whether, when and how to use options or futures
involves the exercise of skill and judgment which are different from those
needed to select portfolio securities, and even a well- conceived transaction
may be unsuccessful to some degree because of market behavior, currency
fluctuations or interest rate trends. If the Investment Adviser is incorrect in
its forecasts regarding market values, interest rate trends or other relevant
factors, a Fund may be in a worse position than if the Fund had not engaged in
options or futures transactions. The Investment Adviser is experienced in the
use of options and futures contracts as an investment technique.

There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out an option position or futures contract. Most futures
exchanges and boards of trade limit

50
<PAGE>
the amount of fluctuation in futures contract prices during a single day; once
the daily limit has been reached on a particular contract, no trades may be made
that day at a price beyond that limit. In addition, certain of these instruments
are relatively new and without a significant trading history. As a result, there
is no assurance that an active secondary market will develop or continue to
exist. Lack of a liquid market for any reason may prevent a Fund from
liquidating an unfavorable position and a Fund would remain obligated to meet
margin requirements until the position is closed.

REPURCHASE AGREEMENTS (ALL FUNDS). Each Fund may on occasion enter into
repurchase agreements, in which the Fund purchases securities and the seller
agrees to repurchase them from the Fund at a mutually agreed- upon time and
price. The period of maturity is usually overnight or a few days, although it
may extend over a number of months. The resale price is in excess of the
purchase price, reflecting an agreed- upon rate of return effective for the
period of time the Fund's money is invested in the security. Each Fund's
repurchase agreements will at all times be fully collateralized in an amount at
least equal to 102% of the purchase price, including accrued interest earned on
the underlying securities. The instruments held as collateral are valued daily
and, if the value of the instruments declines, the Fund will require additional
collateral. If the seller defaults and the value of the collateral securing the
repurchase agreement declines, the Fund may incur a loss. If bankruptcy
proceedings are commenced with respect to the seller, realization upon the
collateral by a Fund may be delayed or limited. A Fund will only enter into
repurchase agreements involving securities in which it could otherwise invest
and with selected financial institutions and brokers and dealers which meet
certain creditworthiness and other criteria.

51
<PAGE>
Securities and Exchange Commission under the Securities Act of 1933, the Master
Trust's Board of Trustees may determine that such securities are not illiquid
securities notwithstanding their legal or contractual restrictions on resale,
based on factors such as the frequency of trades and quotes for the securities,
the number of dealers and others wishing to purchase and sell the securities,
and the nature of the security and the marketplace trades. In all other cases,
however, securities subject to restrictions on resale will be deemed illiquid.

52
<PAGE>
- --------------------------------------------------------------------------------
CORPORATE BOND RATINGS

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
regarded 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.

53
<PAGE>
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.

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.

54
<PAGE>
- --------------------------------------------------------------------------------
PRIOR PERFORMANCE

55
<PAGE>

<TABLE>
<CAPTION>
EMERGING GROWTH
PERFORMANCE INCOME & GROWTH PERFORMANCE
CORE GROWTH PERFORMANCE ---------------------- ---------------------------
------------------------
EMERGING INCOME &
CORE GROWTH GROWTH RUSSELL GROWTH CS FIRST
PORTFOLIO PORTFOLIO 2000 PORTFOLIO BOSTON
-------------- S&P 500 -------------- GROWTH -------------- CONVERTIBLE
YEAR A B INDEX(4) A B STOCK(2) A B INDEX(3)
- ------------------------------------------------ ------ ------ -------- ------ ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1985(4).........................................
1986(4).........................................
1987............................................
1988............................................
1989............................................
1990............................................
1991............................................
1992............................................
1993(4).........................................
1994............................................
1995(4).........................................
1996(5).........................................
Last year(5)....................................
Last 5 years(5).................................
Last 10 years(5)................................
Since inception(5)..............................
</TABLE>

<TABLE>
<CAPTION>
GOVERNMENT INCOME
BALANCED GROWTH PERFORMANCE PERFORMANCE
------------------------------------------------ --------------------
BALANCED GROWTH GOVERNMENT INCOME
LEHMAN BROTHERS
PORTFOLIO CORPORATE/ PORTFOLIO
-------------------- S&P 500 GOVERNMENT --------------------
YEAR A B INDEX(1) INDEX(6) A B
- ------------------------------------------------------------ --------- --------- --------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1993(3).....................................................
1994........................................................
1995........................................................
1996(4).....................................................
Last year(4)................................................
Since inception(4)..........................................

<CAPTION>
LEHMAN BROTHERS
GOV'T BOND
YEAR INDEX(7)
- ------------------------------------------------------------ ---------------
<S> <C>
1993(3).....................................................
1994........................................................
1995........................................................
1996(4).....................................................
Last year(4)................................................
Since inception(4)..........................................
</TABLE>

- ----------------------------------
(1) The S&P 500 Index is an unmanaged index containing 500 industrial,
transportation, utility and financial companies, regarded as generally
representative of the U.S. stock market. The Index reflects the reinvestment
of income dividends and capital gain distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.

(4) Inception dates are as follows: Core Growth Portfolio A-September 30, 1985
(registration statement effective April 19, 1993); Core Growth Portfolio
B-September 30, 1995; Emerging Growth Portfolio A-July 31, 1985
(registration statement effective December 27, 1993); Emerging Growth
Portfolio B-July 31, 1995; Income & Growth Portfolio A-December 31, 1986
(registration statement effective April 19, 1993); Income & Growth Portfolio
B-May 31, 1995; Balanced Growth Portfolio A-April 19, 1993; Balanced Growth
Portfolio B-May 31, 1995; Government Income Portfolios A-April 19, 1993;
Government Income Portfolio B-May 31, 1995.

(5) Through March 31, 1996.

(7) The Lehman Brothers Government Bond Index includes all public obligations of
the U.S. Treasury (excluding flower bonds and foreign-targeted issues), its
agencies and quasi-federal corporations, and corporate debt guaranteed by
the U.S. Government. The Index includes income and distributions but does
not reflect fees, brokerage commissions or other expenses of investing.

56
<PAGE>
NICHOLAS--APPLEGATE-REGISTERED TRADEMARK-MUTUAL FUNDS

- -------------------------------------------------
SERIES A, B & C DOMESTIC PORTFOLIOS

PROSPECTUS

Nicholas-Applegate Mutual Funds is an open-end management investment company
consisting of a number of diversified investment portfolios, including the five
Series A Portfolios, five Series B Portfolios, five Series C Portfolios and
Money Market Portfolio ("Portfolios") offered hereby. These Portfolios provide a
broad range of domestic investment opportunities which are suitable for
different investors. The Series A, B and C Portfolios have identical investment
objectives and policies. However, the Series A Portfolios are sold subject to an
initial sales charge and lower operating expenses, and the Series B and C
Portfolios are sold subject to a contingent deferred sales charge and higher
operating expenses. The Money Market Portfolio has no front-end or contingent
deferred sales charge.

EACH PORTFOLIO, UNLIKE MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE
AND MANAGE THEIR OWN PORTFOLIOS OF SECURITIES, SEEKS TO ACHIEVE ITS INVESTMENT
OBJECTIVE BY INVESTING ALL OF ITS ASSETS IN A CORRESPONDING SERIES ("FUND") OF
NICHOLAS-APPLEGATE INVESTMENT TRUST, WHICH HAS THE SAME OBJECTIVE AS THE
PORTFOLIO. THE FUNDS IN TURN INVEST THEIR ASSETS, INCLUDING THOSE OF THE
PORTFOLIOS, IN PORTFOLIO SECURITIES. ACCORDINGLY, THE INVESTMENT EXPERIENCE OF
EACH PORTFOLIO WILL CORRESPOND DIRECTLY WITH THE INVESTMENT EXPERIENCE OF THE
RELATED FUND. INVESTORS SHOULD CAREFULLY CONSIDER THIS INVESTMENT APPROACH. SEE
"INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS-SPECIAL CONSIDERATIONS
REGARDING MASTER/FEEDER STRUCTURE", PAGE 11, FOR ADDITIONAL INFORMATION
REGARDING THIS UNIQUE STRUCTURE. THERE CAN BE NO ASSURANCE THAT ANY PORTFOLIO OR
FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
- --------------------------------------------------------------------------------

CORE GROWTH PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C seek to maximize long-term
capital appreciation. They invest in the Nicholas-Applegate Core Growth Fund,
which in turn invests primarily in a diversified portfolio of common stocks of
U.S. companies with middle market capitalizations and above (generally above
$500 million).

EMERGING GROWTH PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C seek to maximize
long-term capital appreciation. They invest in the Nicholas-Applegate Emerging
Growth Fund, which in turn invests primarily in a diversified portfolio of
common stocks of U.S. corporations with smaller market capitalizations (e.g., up
to $500 million).

INCOME & GROWTH PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C seek to maximize total
return, consisting of capital appreciation and current income. They invest in
the Nicholas-Applegate Income & Growth Fund, which in turn invests primarily in
convertible and equity securities of U.S. companies. Up to 50% of the assets of
the Fund may be invested in securities rated below investment grade, sometimes
called "junk bonds", which are speculative and involve greater risks, including
risk of default, than higher-rated securities.

BALANCED GROWTH PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C seek to provide
investors with a balance of long-term capital appreciation and current income.
They invest in the Nicholas-Applegate Balanced Growth Fund, which in turn
invests approximately 60% of its total assets in equity and convertible
securities of primarily U.S. companies and 40% of its total assets in debt
securities, money market instruments and other short-term investments.

GOVERNMENT INCOME PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C seek to maximize
current income consistent with prudent investment risk and preservation of
capital. They invest in the Nicholas-Applegate Government Income Fund, which in
turn invests primarily in intermediate-term debt securities of the U.S.
Government and its agencies and instrumentalities.

This Prospectus presents information you should know before investing in any
of the Portfolios. It should be retained for future reference. A Statement of
Additional Information for the Portfolios dated , 1996 has been filed with
the Securities and Exchange Commission and is incorporated by reference into
this Prospectus. The Statement may be obtained, without charge, by writing to
the Trust, 600 West Broadway, 30th Floor, San Diego, California 92101, or by
calling (800) 551-8045. Inquiries regarding any of the Portfolios can also be
made by calling (800) 551-8043.

, 1996

<PAGE>
NICHOLAS--APPLEGATE MUTUAL FUNDS

- -------------------------------------------------
SERIES A, B & C DOMESTICPORTFOLIOS

CORE GROWTH PORTFOLIO A, B AND C
EMERGING GROWTH PORTFOLIO A, B AND C
INCOME & GROWTH PORTFOLIO A, B AND C
BALANCED GROWTH PORTFOLIO A, B AND C
GOVERNMENT INCOME PORTFOLIO A, B AND C
MONEY MARKET PORTFOLIO

TABLE OF CONTENTS

<TABLE>
<S> <C>
Summary of Expenses......................................... 3
Prospectus Summary.......................................... 6
Financial Highlights........................................ 10
Investment Objectives, Policies and Risk
Considerations............................................ 12
Organization and Management................................. 20
Purchasing Shares........................................... 24
Alternative Purchase Arrangements........................... 25
Shareholder Services........................................ 30
Redeeming Shares............................................ 32
Dividends, Distributions and Taxes.......................... 37
General Information......................................... 37
Appendix:
Investment Policies, Strategies
and Risks............................................... 40
Corporate Bond Ratings.................................... 53
Prior Performance......................................... 55
</TABLE>

2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES

<TABLE>
<CAPTION>
CORE EMERGING INCOME &
GROWTH GROWTH GROWTH
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
A B C A B C A B C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on
purchases (as a
percentage of offering
price)(1) 5.25% None None 5.25% None None 5.25% None None
Sales charge on
reinvested dividends None None None None None None None None None
Deferred sales charge
(as a percentage of
original purchase
price or redemption
proceeds,
whichever is lower)(2) None 5.00% 1.00% None 5.00% 1.00% None 5.00% 1.00%
Redemption fee(3) None None None None None None None None None
Exchange fee None None None None None None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
AS
A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense
deferral)(5)
Management fees 0.75% 0.75% 0.75% 1.00% 1.00% 1.00% 0.75% 0.75% 0.75%
12b-1 expenses 0.25% 0.75% 0.75% 0.25% 0.75% 0.75% 0.25% 0.75% 0.75%
All other expenses
(after expense
deferral)(5)
Shareholder service
expenses 0.10% 0.25% 0.25% 0.10% 0.25% 0.25% 0.10% 0.25% 0.25%
Other expenses 0.50% 0.50% 0.39% 0.39% 0.56% 0.35% 0.50% 0.50% 0.50%
Total other expenses 0.60% 0.75% 0.64% 0.49% 0.83% 0.60% 0.60% 0.75% 0.75%
Total operating expenses
(after expense
deferral)(5) 1.60% 2.25% 2.14% 1.74% 2.58% 2.35% 1.60% 2.25% 2.25%
</TABLE>

<TABLE>
<CAPTION>
BALANCED GOVERNMENT
GROWTH INCOME
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
A B C A B C
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a percentage of
offering price)(1) 5.25% None None 4.75% None None
Sales charge on reinvested dividends None None None None None None
Deferred sales charge (as a percentage of original purchase
price or
redemption proceeds, whichever is lower)(2) None 5.00% 1.00% None 5.00% 1.00%
Redemption fee(3) None None None None None None
Exchange fee None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS
A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)(5)
Management fees 0.75% 0.75% 0.75% 0.40% 0.40% 0.40%
12b-1 expenses(6) 0.25% 0.75% 0.75% 0.25% 0.50% 0.50%
All other expenses (after expense deferral)(5)
Shareholder service expenses 0.10% 0.25% 0.25% 0.10% 0.25% 0.25%
Other expenses 0.50% 0.50% 0.50% 0.15% 0.15% 0.15%
Total other expenses 0.60% 0.75% 0.75% 0.25% 0.40% 0.40%
Total operating expenses (after expense deferral)(5) 1.60% 2.25% 2.25% 0.90% 1.30% 1.30%

<CAPTION>
MONEY
MARKET
Portfolio
<S> <C>
- ------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a percentage of
offering price)(1) None
Sales charge on reinvested dividends None
Deferred sales charge (as a percentage of original purchase
price or
redemption proceeds, whichever is lower)(2) None
Redemption fee(3) None
Exchange fee 5.25%(4)
- ------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS
A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)(5)
Management fees 0.00%
12b-1 expenses(6) 0.15%
All other expenses (after expense deferral)(5)
Shareholder service expenses 0.10%
Other expenses 0.06%
Total other expenses 0.16%
Total operating expenses (after expense deferral)(5) 0.31%
</TABLE>

- ---------------------------
(1)
Sales charges are reduced for purchases of $50,000 or more of shares of the
Series A Portfolios. There is no initial sales charge on purchases of shares of
the Series B or C Portfolios or the Money Market Portfolio. The National
Association of Securities Dealers, Inc. limits total annual sales charges
(including 12b-1 expenses) to all purchasers of shares of a Portfolio to 6.25%
of new sales plus an interest factor. However, long-term shareholders may pay
more than the economic equivalent of such maximum sales charges. See
"Alternative Purchase Arrangements."

3
<PAGE>
(2)
Although purchases of $1 million or more of shares of a Series A Portfolios are
not subject to an initial sales charge, a contingent deferred sales charge of
1.00% applies on certain redemptions made less than one year following such
purchases. A contingent deferred sales charge applies on certain redemptions of
shares of a Series B Portfolio, ranging from 5.00% of redemptions made within
12 months of purchase to zero for redemptions made more than six years after
purchase. A contingent deferred sales charge of 1.00% also applies on certain
redemptions of shares of a Series C Portfolio made within 12 months following
their purchase, but without regard to the size of the purchase. See "Redeeming
Shares."

(3)
A $10 charge will be imposed on redemptions requested to be paid by wire
transfer. See "Redeeming Shares-Redemption Payments."

(4)
An exchange of shares of the Money Market Portfolio for shares of a Series A
Portfolio is subject to the 5.25% (4.75% in the case of Government Income
Portfolio A) initial sales charge imposed on the dollar amount of shares
received in such exchange, unless the Money Market Portfolio shares were
acquired by an exchange from a Series A Portfolio or by reinvestment or
cross-reinvestment of dividends or capital gain distributions. An exchange of
shares of the Money Market Portfolio for shares of a Series B or C Portfolio is
not subject to an initial sales charge; however, the Series B or C shares
received in the exchange are subject to a contingent deferred sales charge,
unless the Money Market Portfolio shares were acquired by reinvestment or
cross-reinvestment of dividends or capital gain distributions. See "Shareholder
Services-Exchange Privilege."

(5)
The Investment Adviser of the Master Trust has agreed to waive or defer its
fees, and to absorb other operating expenses, to ensure that the expenses
(other than interest, taxes, brokerage commissions and other portfolio
transaction expenses, capital expenditures and extraordinary expenses) for each
Portfolio will not exceed the following respective percentage of such
Portfolio's average net assets on an annual basis through March 31, 1997: Core
Growth Portfolio A, B and C-1.60%, 2.25% and 2.25%; Emerging Growth Portfolio
A, B and C-1.95%, 2.60% and 2.60%; Income & Growth Portfolio A, B and C-1.60%,
2.25% and 2.25%; Balanced Growth Portfolio A, B and C-1.60%, 2.25% and 2.25%;
Government Income Portfolio A, B and C-0.90%, 1.30% and 1.30%; and Money Market
Portfolio-1.10%. In subsequent years, overall operating expenses for each
Portfolio will not fall below the applicable percentage limitation until the
Investment Adviser has fully recouped fees deferred or expenses paid by the
Investment Adviser under this agreement, as each Portfolio will reimburse the
Investment Adviser in subsequent years when operating expenses (before
recoupment) are less than the applicable percentage limitation set forth above.
Accordingly, until all such deferred fees or expenses have been recouped by the
Investment Adviser, the Portfolios' expenses will be higher, and their yields
will be lower, than would otherwise be the case. See "Organization and
Management-Expense Limitation." Actual operating expenses for the Series A, B
(annualized), and C Portfolios for the fiscal year ended March 31, 1996 were,
the following respective percentages of such Portfolios' average net assets:
Core Growth Portfolio A, B and C-1.56%, 3.39% and 2.14%; Emerging Growth
Portfolio A, B and C-1.74%, 3.26% and 2.35%; Income & Growth Portfolio A, B and
C-1.76%, 7.08% and 2.28%; Balanced Growth Portfolio A, B and C-3.30%, 13.05%
and 3.01%; Government Income Portfolio A, B and C-9.58%, 86.12% and 5.77%; and
Money Market Portfolio-5.78%. The various operating expenses of the Portfolios
are further described under "Organization and Management."

(6)
After a substantial period, these expenses with respect to the Series B and C
Portfolios may total more than the maximum sales expenses that would have been
permissible if imposed entirely as an initial sales charge. See "Organization
and Management-Distributor."

EXAMPLE OF PORTFOLIO EXPENSES. The following table illustrates the expenses that
a shareholder would pay on a hypothetical $1,000 investment in each of the
Portfolios over various time periods, assuming a 5% annual return. The
Portfolios charge no redemption fees. However, a contingent deferred sales
charge of 1.00% applies on redemptions of shares of a Series A Portfolio made
less than one year after a $1 million purchase of such shares, a contingent
deferred sales charge applies on redemptions of shares of a Series B Portfolio
(ranging from 5.00% of redemptions made within 12 months of purchase to zero for
redemptions made more than six years after purchase), and a contingent deferred
sales charge of 1.00% applies on redemptions of shares of a Series C Portfolio
made less than one year after any purchase of such shares.

4
<PAGE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
CORE GROWTH
Portfolio A(1) $ 68 $ 100 $ 135 $ 233
Portfolio B(2):
Assuming redemption at end of time period $ 74 $ 103 $ 143 $ 258
Assuming no redemption $ 23 $ 70 $ 120 $ 258
Portfolio C(2):
Assuming redemption at end of time period $ 33 $ 70 $ 120 $ 258
Assuming no redemption $ 23 $ 70 $ 120 $ 258
- ------------------------------------------------------------------------------------------------
EMERGING GROWTH
Portfolio A(1) $ 59 $ 104 $ 142 $ 247
Portfolio B(2):
Assuming redemption at end of time period $ 77 $ 112 $ 160 $ 291
Assuming no redemption $ 26 $ 60 $ 137 $ 291
Portfolio C(2):
Assuming redemption at end of time period $ 36 $ 79 $ 136 $ 289
Assuming no redemption $ 26 $ 79 $ 136 $ 289
- ------------------------------------------------------------------------------------------------
INCOME & GROWTH
Portfolio A(1) $ 68 $ 100 $ 135 $ 233
Portfolio B(2):
Assuming redemption at end of time period $ 74 $ 103 $ 143 $ 258
Assuming no redemption $ 23 $ 70 $ 120 $ 258
Portfolio C(2):
Assuming redemption at end of time period $ 33 $ 70 $ 120 $ 258
Assuming no redemption $ 23 $ 70 $ 120 $ 258
- ------------------------------------------------------------------------------------------------
BALANCED GROWTH
Portfolio A(1) $ 68 $ 100 $ 135 $ 233
Portfolio B(2):
Assuming redemption at end of time period $ 74 $ 103 $ 143 $ 258
Assuming no redemption $ 23 $ 70 $ 120 $ 258
Portfolio C(2):
Assuming redemption at end of time period $ 33 $ 70 $ 120 $ 258
Assuming no redemption $ 23 $ 70 $ 120 $ 258
- ------------------------------------------------------------------------------------------------
GOVERNMENT INCOME
Portfolio A(1) $ 56 $ 75 $ 95 $ 153
Portfolio B(2):
Assuming redemption at end of time period $ 65 $ 75 $ 95 $ 157
Assuming no redemption $ 13 $ 41 $ 71 $ 157
Portfolio C(2):
Assuming redemption at end of time period $ 24 $ 41 $ 71 $ 157
Assuming no redemption $ 13 $ 41 $ 71 $ 157
- ------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO(1) $ 3 $ 10 $ 17 $ 39
- ------------------------------------------------------------------------------------------------
</TABLE>

(2)Assumes deduction at the time of redemption of a contingent deferred sales
charges, if applicable, and no exchange of Portfolio B shares for Portfolio A
shares seven or more years after purchase.

5
<PAGE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OF FUTURE
EXPENSES, AND A PORTFOLIO'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN. The hypothetical 5% annual return is used for illustrative purposes only
and should not be interpreted as an estimate of a Portfolio's annual return, as
there can be no guarantee of a Portfolio's future performance.

- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY

Nicholas-Applegate Mutual Funds (the "Trust") is an open-end management
investment company comprised of a number of diversified investment portfolios,
including the five Series A Portfolios, five Series B Portfolios, five Series C
Portfolios and Money Market Portfolio ("Portfolios") offered hereby. The Series
A Portfolios, Series B Portfolios and Series C Portfolios have identical
investment objectives and policies. However, the Series A Portfolios are sold
subject to a front end sales charge and the Series B Portfolios and Series C
Portfolios are sold subject to a contingent deferred sales charge. The Money
Market Portfolio has no front-end or contingent deferred sales charge.

6
<PAGE>
INVESTMENT RISKS AND CONSIDERATIONS. INVESTMENT RISKS AND OTHER CONSIDERATIONS
RELEVANT TO THE SECURITIES IN WHICH THE PORTFOLIOS INVEST THROUGH CORRESPONDING
FUNDS ARE DESCRIBED UNDER "INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS" AND IN THE APPENDIX--INVESTMENT POLICIES, STRATEGIES AND RISKS.
They include the following:

7
<PAGE>
correlation between the Fund's hedging technique and the asset or liability
being hedged; default by the other party to the transaction; and inability to
close out a position because of the lack of a liquid market. Investment in such
derivative instruments may not be successful, and may reduce the returns and
increase the volatility of the Funds. See "Appendix: Investment Policies,
Strategies and Risks" in this Prospectus and "Investment Objectives, Policies
and Risks" in the Statement of Additional Information.

DISTRIBUTOR. Nicholas-Applegate Securities (the "Distributor"), an affiliate of
the Investment Adviser, serves as distributor of shares of the Portfolios. Under
a Distribution Plan, the Distributor receives compensation for providing
distribution services for the Portfolios at the following annual rates: for the
Series A Portfolios-0.25% of each Portfolio's net assets; for the Series B
Portfolios-0.75% (0.50% in the case of Government Income Portfolio B) of each
Portfolio's net assets;for the Series C Portfolios-0.75% (0.50% in the case of
Government Income Portfolio C) of each Portfolio's net assets; and for the Money
Market Portfolio-0.15% of such Portfolio's net assets. Under a Shareholder
Service Plan, the Distributor is reimbursed for shareholder services it provides
and for payments made to broker-dealers and others for related support and
recordkeeping services at an annual rate of up to 0.10% of each Series A
Portfolio's and the Money Market Portfolio's net assets, 0.25% of each Series B
Portfolio's net assets and 0.25% of each Series C Portfolio's net assets. See
"Organization and Management." Under a Distribution Agreement, the Distributor
will also retain a portion of the initial sales

8
<PAGE>
load on purchases of shares of the Series A Portfolios and the contingent
deferred sales load on redemptions of shares of the Series A, B and C
Portfolios. See "Organization and Management" and "Alternative Purchase
Arrangements."

ALTERNATIVE PURCHASE ARRANGEMENTS. Shares of the Series A Portfolios are sold
subject to a maximum sales charge of 5.25% (4.75% for Government Income
Portfolio A). Reduced sales charges are available for purchases of $50,000 or
more of shares of a Series A Portfolio. No initial sales charge applies on a
purchase of $1 million or more of shares of a Series A Portfolio, but a
contingent deferred sales charge of 1.00% is imposed on redemptions made within
12 months after the $1 million purchase. The Trust offers a number of ways
shareholders in a Series A Portfolio can reduce their sales charges, including
aggregation, concurrent purchases, rights of accumulation and letters of intent.
See "Alternative Purchase Arrangements-Series A Portfolios."

Although shares of the Series B Portfolios and Series C Portfolios may be
purchased without an initial sales charge, a contingent deferred sales charge is
imposed on redemptions of Series B Portfolios (ranging from 5.00% of redemptions
made within 12 months after purchase to zero for redemptions made more than six
years after purchase) and a contingent deferred sales charge of 1.00% is imposed
on redemptions of Series C Portfolios made less than one year after purchase.
Shares of the Series B Portfolios may be exchanged for shares of the
corresponding Series A Portfolios seven years after purchase. See "Alternative
Purchase Arrangements-Series B Portfolios" and "-Series C Portfolios."Shares of
the Money Market Portfolio may be purchased with no initial or contingent
deferred sales charge.

SHAREHOLDER SERVICES. The following services are provided to shareholders of the
Portfolios for their convenience and flexibility: an automatic investment plan;
automatic reinvestment and cross-reinvestment of dividends and capital gains
distributions; an exchange privilege, including automatic exchanges; automatic
withdrawals; and check writing for certain shareholders of the Money Portfolio.
See "Shareholder Services." The Trust also offers various retirement plans
through which you can invest in the Portfolios. See "Purchasing Shares."

9
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES. The Core Growth and Emerging Growth
Portfolios declare and pay annual dividends of net investment income; the
Balanced Growth, Income & Growth, and Government Income Portfolios declare and
pay quarterly dividends; and the Money Market Portfolio declares daily dividends
and distributes accrued dividends each month. The Portfolios make distributions
at least annually of any net capital gains. All dividends and distributions will
be paid in the form of additional shares at net asset value unless cash payment
is requested.

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

The following financial highlights have been audited by Ernst & Young, L.L.P.
with respect to the year ended March 31, 1996, and by Coopers & Lybrand L.L.P.
with respect to the period from commencement of operations of the Portfolios
through March 31, 1995. Ernst & Young, L.L.P. and Coopers & Lybrand L.L.P. are
independent auditors whose reports thereon were unqualified. This information
should be read in conjunction with the financial statements and the notes
thereto which appear in the Trust's 1996 Annual Report to Shareholders
incorporated by reference in the Statement of Additional Information.

<TABLE>
<CAPTION>
CORE EMERGING
GROWTH GROWTH
Portfolio Portfolio
A A
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
4-19-93 4-1-94 4-1-95 12-27-93 4-1-94 4-1-95
to to to to to to
3-31-94 3-31-95 3-31-96 3-31-94 3-31-95 3-31-96
----------- ----------- ----------- ----------- ----------- -----------
PER SHARE DATA:
Net asset value, beginning of period $ 12.50 $ 13.25 $ 13.61 $ 12.50 $ 12.10 $ 13.06
Income from investment operations:
Net investment income (deficit) (0.07 ) (0.10 ) (0.18 ) (0.04 ) (0.16 ) (0.20)
Net realized and unrealized gains (losses)
on securities 0.86 0.46 4.94 (0.36 ) 1.12 5.09
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 0.79 0.36 4.76 (0.40 ) 0.96 4.89
Less distributions:
Dividends from net investment income -- -- -- -- -- --
Distributions from capital gains (0.04 ) -- -- -- -- (0.02)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 13.25 $ 13.61 $ 18.37 $ 12.10 $ 13.06 $ 17.93
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL RETURN:+ 6.27% 2.72% 35.07% (3.20% ) 7.93% 37.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 70,512 $ 65,292 $ 77,275 $ 104,838 $ 106,725 $ 138,155
Ratio of expenses to average net assets, after
expense reimbursement++ 1.57%* 1.59% 1.58% 1.73%* 1.86% 1.74%
Ratio of expenses to average net assets,
before expense reimbursement++ 1.71% 1.63% 1.56% 1.80% 1.84% 1.74%
Ratio of net investment income (deficit) to
average net assets, after expense
reimbursement++ (0.68%)* (0.66%) (0.91%) (1.44%)* (1.27%) (1.20%)
Ratio of net investment income (deficit) to
average net assets, before expense
reimbursement++ 0.92%* 0.89% 0.89% 1.12%* 1.12% 1.11%
Portfolio turnover** 84.84% 98.09% 114.48% 50.51% 100.46% 129.59%
Average commission rate paid** N/A N/A $0.0593 N/A N/A $0.0523

<CAPTION>
INCOME &
GROWTH
Portfolio
A
<S> <C> <C> <C>
- ----------------------------------------------
4-19-93 4-1-94 4-1-95
to to to
3-31-94 3-31-95 3-31-96
---------- ----------- -----------
PER SHARE DATA:
Net asset value, beginning of period $ 12.50 $ 14.16 $ 12.86
Income from investment operations:
Net investment income (deficit) 0.32 0.49 0.48
Net realized and unrealized gains (losses)
on securities 2.15 (0.89 ) 2.82
---------- ----------- -----------
Total from investment operations 2.47 (0.40 ) 3.30
Less distributions:
Dividends from net investment income (0.32) (0.49 ) (0.48 )
Distributions from capital gains (0.49) (0.41 ) --
---------- ----------- -----------
Net asset value, end of period $ 14.16 $ 12.86 $ 15.68
---------- ----------- -----------
---------- ----------- -----------
TOTAL RETURN:+ 19.65% (2.64% ) 26.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 30,447 $ 31,150 $ 31,712
Ratio of expenses to average net assets, after
expense reimbursement++ 1.59%* 1.60% 1.60%
Ratio of expenses to average net assets,
before expense reimbursement++ 1.83% 1.76% 1.77%
Ratio of net investment income (deficit) to
average net assets, after expense
reimbursement++ 2.83%* 3.71% 3.29%
Ratio of net investment income (deficit) to
average net assets, before expense
reimbursement++ 0.94%* 0.93% 0.95%
Portfolio turnover** 177.52% 125.51% 144.97%
Average commission rate paid** N/A N/A $0.0597
</TABLE>

<TABLE>
<CAPTION>
BALANCED GOVERNMENT
GROWTH INCOME
Portfolio Portfolio
A A
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
4-19-93 4-1-94 4-1-95 12-27-93 4-1-94 4-1-95
to to to to to to
3-31-94 3-31-95 3-31-96 3-31-94 3-31-95 3-31-96
----------- ----------- ----------- ----------- ----------- -----------
PER SHARE DATA:
Net asset value, beginning of period $ 12.50 $ 13.52 $ 13.74 $ 12.50 $ 12.51 $ 12.29
Income from investment operations:
Net investment income (deficit) 0.15 0.21 0.34 0.29 0.63 0.75
Net realized and unrealized gains (losses)
on
securities 1.02 0.22 2.42 0.34 (0.19 ) 0.45
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 1.17 0.43 2.76 0.63 0.44 1.20
Less distributions:
Dividends from net investment income (0.15 ) (0.21 ) (0.34 ) (0.29 ) (0.63 ) (0.75)
Distributions from capital gains -- -- -- (0.33 ) (0.03 ) --
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 13.52 $ 13.74 $ 16.16 $ 12.51 $ 12.29 $ 12.74
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL RETURN:+ 9.35% 3.22% 20.16% 4.97% 3.68% 9.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 6,446 $ 4,980 $ 5,902 820 $ 925 $ 1,297
Ratio of expenses to average net assets, after
expense reimbursement++ 1.59%* 1.60% 1.60% 1.10%* 1.10% 0.93%
Ratio of expenses to average net assets,
before expense reimbursement++ 3.28%* 2.78% 3.30% 20.28%* 8.40% 9.58%
Ratio of net investment income (deficit) to
average net assets, after expense
reimbursement++ 1.30%* 1.44% 2.16% 3.07%* 5.18% 5.78%
Ratio of net investment income (deficit) to
average net assets, before expense
reimbursement++ (0.39%)* 0.26% 0.88% (16.11%)* (2.12%) (0.75%)
Portfolio turnover** 85.43% 110.40% 197.19% 159.17% 258.72% 190.47%
Average commission rate paid** N/A N/A $0.0514 N/A N/A N/A

<CAPTION>
MONEY
MARKET
Portfolio
<S> <C> <C> <C>
- ----------------------------------------------
4-19-93 4-1-94 4-1-95
to to to
3-31-94 3-31-95 3-31-96
---------- ----------- -----------
PER SHARE DATA:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income (deficit) 0.01 0.05 0.05
Net realized and unrealized gains (losses)
on
securities -- -- --
---------- ----------- -----------
Total from investment operations 0.01 0.05 0.05
Less distributions:
Dividends from net investment income (0.01) (0.05 ) (0.05 )
Distributions from capital gains -- -- --
---------- ----------- -----------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
---------- ----------- -----------
---------- ----------- -----------
TOTAL RETURN:+ 1.72% 4.58% 5.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 48 $ 2,996 $ 3,129
Ratio of expenses to average net assets, after
expense reimbursement++ 0.54%* 0.31% 0.45%
Ratio of expenses to average net assets,
before expense reimbursement++ 323.24%* 2.49% 5.78%
Ratio of net investment income (deficit) to
average net assets, after expense
reimbursement++ 1.85%* 4.60% 5.35%
Ratio of net investment income (deficit) to
average net assets, before expense
reimbursement++ (320.85%)* 2.42% 2.77%
Portfolio turnover** N/A N/A N/A
Average commission rate paid** N/A N/A N/A
</TABLE>

10
<PAGE>

<TABLE>
<CAPTION>
CORE EMERGING INCOME & BALANCED GOVERNMENT
GROWTH GROWTH GROWTH GROWTH INCOME
Portfolio Portfolio Portfolio Portfolio Portfolio
B B B B B
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
5-31-95 5-31-95 5-31-95 5-31-95 5-31-95
to to to to to
3-31-96 3-31-96 3-31-96 3-31-96 3-31-96
------------- ------------- ------------- ------------- -------------
PER SHARE DATA:
Net asset value, beginning of period $ 12.50 $ 12.50 $ 12.50 $ 12.50 $ 12.50
Income from investment operations:
Net investment income (deficit) (0.09) (0.14) 0.24 0.12 0.48
Net realized and unrealized gains on securities 3.84 4.33 2.46 1.68 0.04
------------- ------------- ------------- ------------- -------------
Total from investment operations 3.75 4.19 2.70 1.80 0.52
Less distributions:
Dividends from net investment income -- (0.24) (0.12) (0.48)
Distributions from capital gains -- -- -- -- (0.01)
------------- ------------- ------------- ------------- -------------
Net asset value, end of period $ 16.25 $ 16.69 $ 14.96 $ 14.18 $ 12.53
------------- ------------- ------------- ------------- -------------
TOTAL RETURN:+ 30.00% 33.52% 21.72% 14.45% 4.16%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 11,186 $ 13,626 $ 2,125 $ 673 $ 128
Ratio of expenses to average net assets, after
expense reimbursement++ 2.22%* 2.58%* 2.25%* 2.25%* 1.33%*
Ratio of expenses to average net assets, before
expense reimbursement++ 3.39%* 3.26%* 7.08%* 13.05%* 86.12%*
Ratio of net investment income (deficit) to average
net assets, after expense reimbursement++ (1.61%)* (2.09%)* 2.59%* 1.38%* 5.14%
Ratio of net investment income (deficit) to average
net assets, before expense reimbursement++ (2.77%)* (2.76%)* (2.22%)* (8.86%)* (67.73%)*
Portfolio turnover** 114.48% 129.59% 144.97% 197.19% 190.47%
Average commission rate paid** $0.0597 $0.0523 $0.0597 $0.0594 N/A
</TABLE>

<TABLE>
<CAPTION>
INCOME &
CORE GROWTH EMERGING GROWTH GROWTH
Portfolio C Portfolio C Portfolio C
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
4-19-93 4-1-94 4-1-95 12-27-93 4-1-94 4-1-95 4-19-93
to to to to to to to
3-31-94 3-31-95 3-31-96 3-31-94 3-31-95 3-31-96 3-31-94
--------- ----------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $ 12.50 $ 13.18 $ 13.45 $ 12.50 $ 12.07 $ 12.96 $ 12.50
Income from investment operations:
Net investment income (deficit) (0.11) (0.17) (0.27) (0.06) (0.22) (0.29) 0.24
Net realized and unrealized gains
(losses) on securities 0.80 0.44 4.88 (0.37) 1.11 5.03 2.11
--------- ----------- ----------- --------- ----------- ----------- -----------
Total from investment operations 0.69 0.27 4.61 (0.43) 0.89 4.74 2.35
Less distributions:
Dividends from net investment income -- -- -- -- -- -- (0.24)
Distributions from capital gains (0.01) -- -- -- -- (0.08) (0.33)
--------- ----------- ----------- --------- ----------- ----------- -----------
Net asset value, end of period $ 13.18 $ 13.45 $ 18.06 $ 12.07 $ 12.96 $ 17.62 $ 14.28
--------- ----------- ----------- --------- ----------- ----------- -----------
--------- ----------- ----------- --------- ----------- ----------- -----------
TOTAL RETURN:+ 5.54% 2.05% 34.28% (3.44%) 7.37% 37.18% 18.76%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 141,489 $ 143,390 $ 177,461 $ 142,874 $ 157,292 $ 207,332 $ 69,265
Ratio of expenses to average net
assets, after expense reimbursement++ 2.17%* 2.24% 2.14% 2.34%* 2.44% 2.35% 2.22%*
Ratio of expenses to average net
assets, before expense reimbursement++ 2.17%* 2.24% 2.14% 2.34%* 2.44% 2.35% 2.23%*
Ratio of net investment income
(deficit) to average net assets, after
expense reimbursement++ (1.30%)* (1.30%) (1.47%) (2.04%)* (1.85%) (1.81%) 2.28%*
Ratio of net investment income
(deficit) to average net assets,
before expense reimbursement++ (1.30%)* (1.30%) (1.47%) (2.04%)* (1.85%) (1.81%) (2.27%)*
Portfolio turnover** 84.84% 98.09% 114.48% 50.51% 100.46% 129.59% 177.52%
Average commission rate paid** N/A N/A $ 0.0597 N/A N/A $ 0.0523 N/A

<CAPTION>
<S> <C> <C>
- ---------------------------------------
4-1-94 4-1-95
to to
3-31-95 3-31-96
----------- -----------
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $ 14.28 $ 13.03
Income from investment operations:
Net investment income (deficit) 0.41 0.40
Net realized and unrealized gains
(losses) on securities (0.89) 2.86
----------- -----------
Total from investment operations (0.48) 3.26
Less distributions:
Dividends from net investment income (0.41) (0.40)
Distributions from capital gains (0.36) --
----------- -----------
Net asset value, end of period $ 13.03 $ 15.89
----------- -----------
----------- -----------
TOTAL RETURN:+ (3.26%) 25.24%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 61,792 $ 58,997
Ratio of expenses to average net
assets, after expense reimbursement++ 2.25% 2.25%
Ratio of expenses to average net
assets, before expense reimbursement++ 2.29% 2.28%
Ratio of net investment income
(deficit) to average net assets, after
expense reimbursement++ 3.05% 2.64%
Ratio of net investment income
(deficit) to average net assets,
before expense reimbursement++ (3.01%) (2.61%)
Portfolio turnover** 125.51% 144.97
Average commission rate paid** N/A $ 0.0597
</TABLE>

<TABLE>
<CAPTION>
BALANCED GROWTH GOVERNMENT INCOME
Portfolio C Portfolio C
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
4-19-93 4-1-94 4-1-95 4-19-93 4-1-94
to to to to to
3-31-94 3-31-95 3-31-96 3-31-94 3-31-95
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $ 12.50 $ 13.54 $ 13.76 $ 12.50 $ 12.56
Income from investment operations:
Net investment income 0.08 0.11 0.24 0.25 0.63
Net realized and unrealized gains (losses) on securities 1.04 0.22 2.44 0.29 (0.28)
--------- ----------- ----------- ----------- -----------
Total from investment operations 1.12 0.33 2.68 0.54 0.35
Less distributions:
Dividends from net investment income (0.08) (0.11) (0.24) (0.25) (0.63)
Distributions from capital gains -- -- -- (0.23) (0.01)
--------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 13.54 $ 13.76 $ 16.20 $ 12.56 $ 12.27
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
TOTAL RETURN:+ 8.91% 2.47% 19.58% 4.28% 2.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 16,248 $ 16,470 $ 16,586 $ 7,345 $ 4,278
Ratio of expenses to average net assets, after expense
reimbursement++ 2.24%* 2.25% 2.25% 1.50%* 1.50%
Ratio of expenses to average net assets, before expense
reimbursement++ 2.73%* 2.60% 3.01% 3.86%* 2.67%
Ratio of net investment income to average net assets, after expense
reimbursement++ 0.61%* 0.83% 1.53% 2.70%* 4.58%
Ratio of net investment income to average net assets, before expense
reimbursement++ 0.12%* 0.48% 1.19% 0.34%* 3.41%
Portfolio turnover** 85.43% 110.40% 197.19% 159.17% 258.72%
Average commission rate paid** N/A N/A $ 0.0594 N/A N/A

<CAPTION>
<S> <C>
- --------------------------------------------------------------------
4-1-95
to
3-31-96
-----------
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period $ 12.27
Income from investment operations:
Net investment income 0.77
Net realized and unrealized gains (losses) on securities 0.36
-----------
Total from investment operations 1.13
Less distributions:
Dividends from net investment income (0.77)
Distributions from capital gains --
-----------
Net asset value, end of period $ 12.63
-----------
-----------
TOTAL RETURN:+ 9.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 2,986
Ratio of expenses to average net assets, after expense
reimbursement++ 1.33%
Ratio of expenses to average net assets, before expense
reimbursement++ 5.77%
Ratio of net investment income to average net assets, after expense
reimbursement++ 5.46%
Ratio of net investment income to average net assets, before expense
reimbursement++ 3.13%
Portfolio turnover** 190.47%
Average commission rate paid** N/A
</TABLE>

- ------------------------------
* Annualized

** For the corresponding Funds of the Master Trust

+ Computations do not reflect the Portfolios' sales charges

++ Includes expenses allocated from Master Trust Funds

11
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of each Portfolio are discussed below and
in the "Appendix: Investment Policies, Strategies and Risks."

CORE GROWTH PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C. Each Core Growth Portfolio
seeks to maximize long-term capital appreciation. Each Portfolio invests all of
its assets in the Nicholas-Applegate Core Growth Fund, which has the same
investment objective as the Core Growth Portfolios. Assets of the Core Growth
Fund are invested primarily in common stocks of U.S. companies the earnings and
stock prices of which are expected by the Fund's Investment Adviser to grow
faster than the average rate of companies in the Standard & Poor's 500 Stock
Price Index. Companies in which the Fund invests do business in a cross-section
of industries and may be growth companies, cyclical companies or companies
believed to be undergoing a basic change in operations or markets which, in the
opinion of the Investment Adviser, would result in a significant improvement in
earnings. The securities of such companies may be subject to more volatile
market movements than securities of larger, more established companies. Although
the Fund is not restricted to investments in companies of any particular size,
it currently intends to invest primarily in companies with middle market
capitalizations and above (generally above $500 million). See "Appendix:
Investment Policies, Strategies and Risks" for a discussion of the risks
associated with investment in such growth companies.

EMERGING GROWTH PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C. Each Emerging Growth
Portfolio seeks to maximize long-term capital appreciation. Each Portfolio
invests all of its assets in the Nicholas-Applegate Emerging Growth Fund, which
has the same investment objective as the Emerging Growth Portfolios. Assets of
the Emerging Growth Fund are invested in the same types of securities as the
Core Growth Fund, except that the Fund intends to invest primarily in companies
with smaller market capitalizations (e.g., up to $500 million). However, the
Fund will not necessarily sell any security held by it if the market
capitalization of the issuer increases above $500 million subsequent to
purchase. See "Core Growth Portfolio A, Portfolio B and Portfolio C" above.

INCOME & GROWTH PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C. Each Income & Growth
Portfolio seeks to maximize total return, consisting of capital appreciation and
current income. Each Portfolio invests all of its assets in the
Nicholas-Applegate Income & Growth Fund, which has the same investment objective
as the Income & Growth Portfolios. Assets of the Income & Growth Fund are
invested primarily in convertible and equity securities of U.S. companies.
Convertible securities are bonds, debentures, corporate notes or preferred
stocks which pay interest or dividends and which may be converted into common
stock at the option of the holder. Convertible securities provide for
participation in the appreciation of the underlying common stock but at a lower
level of risk because the yield is higher and the security is senior to the
common stock upon liquidation of the issuer.

The issuers of the convertible and equity securities in which the Income &
Growth Fund invests will be the same types of growth companies as those in which
the Core Growth Fund invests. See "Core Growth Portfolio A, Portfolio B and
Portfolio C" above and the Appendix for a discussion of the risks associated
with investment in such growth companies. The Income & Growth Fund's convertible
and other debt securities will generally be investment grade securities rated
"Baa" or higher by Moody's, "BBB" or higher by S&P or equivalent ratings by
other recognized rating agencies, or will be unrated if determined by the
Investment Adviser to be of comparable quality, as described above under "Core
Growth Portfolio A, Portfolio B and Portfolio C."

However, a portion (up to 50%) of the Income & Growth Fund's net assets may be
invested in debt securities rated below investment grade or in unrated
securities of comparable quality

14
<PAGE>

if the Investment Adviser believes that the financial condition of the issuer or
the protection afforded to the particular securities is stronger than would
otherwise be indicated by such low ratings or the lack thereof. Debt securities
with ratings below "Baa" or "BBB" or equivalent ratings,commonly referred to as
"junk bonds," are speculative and subject to greater market fluctuations and
risk of loss of income and principal than higher rated bonds. The default rate
of lower-quality debt securities is likely to be higher when issuers have
difficulty meeting projected goals or obtaining additional financing, which
could occur during economic recessions or periods of high interest rates. They
may be thinly traded, making them difficult to sell promptly at an acceptable
price. Negative publicity or investor perceptions may make valuing such
securities difficult, and could hurt the Fund's ability to dispose of them. If
the rating of an investment grade security held by the Fund is downgraded, the
Investment Adviser will determine whether it is in the best interests of the
Fund to continue to hold such security in its investment portfolio. However, if
the downgrading of a debt security causes the Fund to retain 50% or more of its
net assets in junk bonds, the Fund will sell sufficient principal amount of junk
bonds as promptly as practicable to ensure that it does not hold 50% or more of
its net assets in such securities. See "Appendix: Investment Policies,
Strategies and Risks" for a discussion of the risks associated with investment
in junk bonds.

BALANCED GROWTH PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C. Each Balanced Growth
Portfolio seeks to provide investors with a balance of long-term capital
appreciation and current income. Each Portfolio invests all of its assets in the
Nicholas-Applegate Balanced Growth Fund, which has the same investment objective
as the Balanced Growth Portfolios. Assets of the Balanced Growth Fund are
invested in equity securities (common and preferred stocks), convertible
securities and warrants primarily of U.S. companies, debt securities (bonds,
debentures and notes), money market instruments and other short-term investments
and instruments described in "Appendix: Investment Policies, Strategies and
Risks." Under normal circumstances, the Fund will allocate approximately 60% of
its total assets to equity securities, convertible securities and warrants and
approximately 40% to debt securities, money market instruments and other
short-term investments and instruments.

Temporary deviations from the Balanced Growth Fund's 60%/40% balance of
securities due to market fluctuations in the value of securities or otherwise
will be permitted so long as the percentage of equity securities, convertible
securities and warrants in the Balanced Growth Fund's investment portfolio is
not more than 70% or less than 50% of the value of the Fund's total assets. If
the value of the equity securities, convertible securities and warrants in the
Balanced Growth Fund's investment portfolio increases above 70% or decreases
below 50%, the Fund will effect sales or purchases of certain of its existing
investments as promptly as practicable, consistent with maintaining each
corresponding Portfolio's tax status as a regulated investment company, to
restore the 60%/40% ratio. Such a portfolio adjustment may cause the Fund to buy
or sell securities at different times than the Investment Adviser would
otherwise have made such purchases and sales. Such purchases and sales may also
cause the Fund to incur a higher proportion of short-term capital gains than
might otherwise be the case.

The issuers of the Balanced Growth Fund's equity investments will be the same
types of growth companies as those in which the Core Growth Fund invests. See
"Core Growth Portfolio A, Portfolio B and Portfolio C" above and "Appendix:
Investment Policies, Strategies and Risks" for a discussion of the risks
associated with investment in such growth companies. The debt securities in
which the Balanced Growth Fund may invest include debt securities issued by the
U.S. Government and its agencies and instrumentalities, and corporate debt
securities. The ratings (or in the case of unrated securities, the Investment
Adviser's assessment of comparable quality) of the Fund's convertible and other
debt securities, and its

15
<PAGE>
policies regarding downgraded securities, will be the same as those of the
Income & Growth Fund. The Balanced Growth Fund may invest a portion (less than
35%) of its net assets in convertible and debt securities rated below investment
grade or in unrated securities of comparable quality. Such securities or "junk
bonds" are speculative and subject to greater risk of loss of income and
principal than higher rated bonds. See "Income & Growth Portfolio A, Portfolio B
and Portfolio C" above and "Appendix: Investment Policies, Strategies and Risks"
for a discussion of the risks associated with investment in junk bonds.

GOVERNMENT INCOME PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C. Each Government
Income Portfolio seeks to maximize current income consistent with prudent
investment risk and preservation of capital. Each Portfolio invests all of its
assets in the Nicholas-Applegate Government Income Fund, which has the same
investment objective as the Government Income Portfolios. The assets of the
Government Income Fund are invested primarily in investment grade,
intermediate-term debt securities of the U.S. Government and its agencies and
instrumentalities. Such securities are of varying maturities, with a weighted
average portfolio duration (expected life) from three to six years. The Fund may
invest in direct obligations of the United States (such as Treasury bills, notes
and bonds, which are supported by the full faith and credit of the United
States) and obligations (including mortgage-related securities) issued or
guaranteed by agencies and instrumentalities of the U.S. Government that are
established under an act of Congress. These agencies and instrumentalities may
include, but are not limited to, the Government National Mortgage Association,
Federal National Mortgage Association, Federal Home Loan Mortgage Corporation,
Student Loan Marketing Association, Federal Farm Credit Banks, Federal Home Loan
Banks, and Resolution Funding Corporation. Under normal market conditions, at
least 75% of the total assets of the Fund will be invested in securities issued
or guaranteed by the U.S. Government or its agencies and instrumentalities. The
remainder of the Fund's assets may be invested in mortgage-related securities
(including collateralized mortgage obligations), investment grade debt
securities, short-term investments and other securities and instruments
described in "Appendix: Investment Policies, Strategies and Risks."

Although the Government Income Fund invests primarily in securities issued or
guaranteed by the U.S. Government or its agencies and instrumentalities, the
value of the Fund's and Portfolios' shares and their current yields will
fluctuate and are not guaranteed by the U.S. Government. The market value of the
debt securities in which the Fund will invest is generally affected by changes
in the level of interest rates. An increase in interest rates will tend to
reduce their market value, and a decline in interest rates will tend to increase
their value. The magnitude of these changes will be greater for securities with
longer remaining maturities than those with shorter maturities. Generally, the
longer the maturity of a debt security, the higher its yield and the greater its
price volatility. Conversely, the shorter the maturity, the lower the yield but
the greater the price stability.

16
<PAGE>
stated or coupon rate of interest of a fixed income security, the longer the
duration of the security; conversely, the higher the stated or coupon rate of
interest of a fixed income security, the shorter the duration of the security.
For example, the maturity of a coupon bond with a three-year duration is
approximately 3.5 years, and the maturity of a coupon bond with a six-year
duration is approximately nine years. In some situations the standard duration
calculation does not properly reflect the interest rate exposure of a security,
such as in the case of mortgage pass-through securities. In such instances, the
Investment Adviser will use more sophisticated analytical techniques that
incorporate the economic life of a security into the determination of its
interest rate exposure.

17
<PAGE>
U.S. Government securities), except as permitted by the Rule for certain
securities for a period of up to three business days after purchase, (ii) more
than 5% of its total assets to be invested in "second tier securities," as
defined by the Rule, or (iii) more than the greater of $1 million or 1% of its
total net assets to be invested in the second tier securities of any one issuer.
This limitation does not apply to investment of all the assets of the Money
Market Portfolio in the Money Market Fund. See the Statement of Additional
Information for a more detailed description of the requirements of Rule 2a-7.

INVESTMENT TECHNIQUES AND PROCESSES. The focus of the Investment Adviser's
investment program is GROWTH OVER TIME-REGISTERED TRADEMARK-. In making
decisions with respect to equity securities for the Funds, the Investment
Adviser uses a proprietary investment methodology which is designed to capture
positive change at an early stage. It adheres rigorously to this methodology,
and applies it to various segments of the capital markets, domestically and
internationally. This methodology consists of investment techniques and
processes designed to identify companies with attractive earnings and dividend
growth potential and to evaluate their investment prospects. These techniques
and processes include relationships with an extensive network of brokerage and
research firms located throughout the world; computer-assisted fundamental
analysis of thousands of domestic and foreign companies; established criteria
for the purchase and sale of individual securities; portfolio structuring and
rebalancing guidelines; securities trading techniques; and continual monitoring
and reevaluation of all holdings with a view to maintaining the most attractive
mix of investments. The Investment Adviser collects data on approximately 26,000
companies in 35 countries (adjusting for reporting and accounting differences).
There can be no assurance that use of this proprietary investment methodology
will be successful.

1. No Portfolio or Fund may invest more than 5% of its total assets in the
securities of any one issuer. However, up to 25% of a Portfolio's or
Fund's total assets can be invested without regard to this limitation,
and this limitation does not apply to investments in securities of the
U.S. Government or its agencies and instrumentalities.

2. No Portfolio or Fund may purchase more than 10% of the outstanding
voting securities of any one issuer, or purchase the securities of any
issuer for the purpose of exercising control.

3. No Portfolio or Fund may invest 25% or more of its total assets in any
one particular industry; however, this restriction does not apply to the
securities of the U.S. Government, its agencies and instrumentalities
or, with respect to the Money Market Portfolio or Fund, domestic
branches of U.S. banks and U.S. branches of foreign banks which are
subject to the same regulation as U.S. banks.

4. No Portfolio or Fund may make loans of its portfolio securities in an
aggregate amount exceeding 30% of the value of its total assets, or
borrow money (except from banks for temporary, extraordinary or
emergency purposes or for the clearance of transactions and in an
aggregate amount not exceeding 20% of the value of its total assets).

5. No Portfolio or Fund may invest more than 15% (10% in the case of the
Money Market Portfolio or Fund) of its net assets in illiquid
securities.

The investment restrictions described above do not apply to an investment by a
Portfolio of all of its assets in a corresponding Fund.

19
<PAGE>
- --------------------------------------------------------------------------------
ORGANIZATION AND MANAGEMENT

ORGANIZATION. Each Portfolio is a series of Nicholas-Applegate Mutual Funds, a
Delaware business trust. The Board of Trustees of the Trust, in addition to
reviewing the actions of the Trust's Administrator and Distributor, as set forth
below, decides upon matters of general policy with respect to each Portfolio.
See "General Information." The trustees and officers of the Trust and of the
Master Trust are described in the Statement of Additional Information. None of
the disinterested trustees of the Trust are same individuals as the
disinterested trustees of the Master Trust.

INVESTMENT ADVISER. The Trust has not retained the services of an investment
adviser for the Portfolios, as the Portfolios seek to achieve their investment
objectives by investing all of their assets in corresponding Funds.
Nicholas-Applegate Capital Management, 600 West Broadway, 30th Floor, San Diego,
California 92101, serves as the Investment Adviser to the Funds. The Investment
Adviser currently manages approximately $30 billion of discretionary assets for
numerous clients, including employee benefit plans of corporations, public
retirement systems and unions, university endowments, foundations and other
institutional investors, and individuals. The Investment Adviser was organized
in 1984 as a California limited partnership. Its general partner is
Nicholas-Applegate Capital Management Holdings, L.P., a California limited
partnership controlled by Arthur E. Nicholas. He and 13 other partners manage a
staff of approximately 325 employees.

As compensation for the services it provides, the Investment Adviser receives a
monthly fee at the following annual rates: for the Emerging Growth Fund, 1.00%
of the Fund's net assets;for each of the Core Growth Fund, Income & Growth Fund
and Balanced Growth Fund, 0.75% of the first $500 million of the Fund's net
assets, 0.675% of the next $500 million of net assets, and 0.65% of net assets
in excess of $1 billion; for the Government Income Fund, 0.40% of the first $500
million of the Fund's net assets, and 0.35% of net assets in excess of $500
million; and for the Money Market Fund, 0.25% of the first $500 million of the
Fund's net assets, and 0.2275% of net assets in excess of $500 million. The
advisory fees paid by most of the Funds are higher than those paid by most other
investment companies.

For the fiscal year ended March 31, 1996, the Investment Adviser received (paid)
fees and expense recoupments (reimbursements) from the Funds equal to the
following percentages of the Portfolios' respective average net assets, after
the fee deferrals and expense reimbursements referred to under "Expense
Limitation": Core Growth Portfolio A, B and C, 0.77%, 0.23% and 0.75%; Emerging
Growth Portfolio A, B and C, 1.00%, 0.44% and 1.00%; Income & Growth Portfolio
A, B and C, 0.58%, (3.27%) and 0.72%; Balanced Growth Portfolio A, B and C,
(0.95%), (8.28%) and (0.01%); Government Income Portfolio A, B and C, (8.22%),
(67.13%) and (4.02%); Money Market Portfolio, (5.11%).

The Funds have been managed since inception under the general supervision of Mr.
Nicholas, who has been the Chief Investment Officer of the Investment Adviser
since its organization. In addition, since December 1995, John D. Wylie, as
Chief Investment Officer-Investor Services Group, is also responsible for
general oversight of the Funds' portfolios. The following persons are primarily
responsible for the Investment Adviser's day-to-day management of the Funds'
portfolios; except as otherwise indicated, each of them has been primarily
responsible since the Funds began operation: Core Growth Fund-John C. Marshall,
Jr.; Emerging Growth Fund-Catherine Somhegyi; Income & Growth Fund-John D.
Wylie; Balanced Growth Fund-John D. Wylie and the Investment Adviser's global
management team, headed by Lawrence S. Speidell (since March 1994) and Catherine
Somhegyi (since March 1996); and Government Income Fund-John D. Wylie. Mr.
Wylie, Mr. Marshall and

20
<PAGE>

Ms. Somhegyi have managed similar institutional accounts for the Investment
Adviser for more than the last five years. Mr. Speidell has been a portfolio
manager with the Investment Adviser since March 1994; from 1983 until he joined
the Investment Adviser, he was an institutional portfolio manager with
Batterymarch Financial Management.

For historical performance data relating to the Portfolios, see "Appendix: Prior
Performance."

ADMINISTRATOR. Investment Company Administration Corporation, a Delaware
corporation, is the Administrator of each Portfolio. Pursuant to an
Administration Agreement with the Trust, and subject to the supervision of the
Board of Trustees of the Trust, the Administrator supervises the overall
administration of the Trust. Its responsibilities include preparing and filing
all documents required for compliance by the Trust with applicable laws and
regulations, arranging for the maintenance of books and records of the Trust and
supervision of other organizations that provide services to the Trust. Certain
officers of the Trust are also provided by the Administrator. For the services
it provides to the Trust, the Administrator receives an annual fee of between
$5,000 and $30,000 for each of the groups of portfolios of the Trust investing
in the various series of the Master Trust; the fee is allocated among the
various series of the Trust, including the Portfolios, in accordance with
relative net asset values. The Administrator provides similar services as the
administrator of the Master Trust, subject to the supervision of its Board of
Trustees, and is compensated separately for the services rendered to each Fund
at an annual rate of approximately 0.02% of the average daily net assets of the
Fund.

EXPENSE LIMITATION. To limit the expenses of each Portfolio, the Investment
Adviser has agreed to defer its fees, and to absorb the other operating expenses
of each Portfolio, to ensure that the expenses of each Portfolio (excluding
interest, taxes, brokerage commissions and other portfolio transaction expenses,
capital expenditures and extraordinary expenses, but including such Portfolio's
proportionate share of the corresponding Fund's similar operating expenses) do
not exceed the following respective percentage of such Portfolio's average net
assets on an annual basis through March 31, 1997, or any lower expense
limitation imposed by any state during any fiscal period: Core Growth Portfolio
A, B and C-1.60%, 2.25% and 2.25%; Emerging Growth Portfolio A, B and C-1.95%,
2.60% and 2.60%; Income & Growth Portfolio A, B and C-1.60%, 2.25% and 2.25%;
Balanced Growth Portfolio A, B and C-1.60%, 2.25% and 2.25%; Government Income
Portfolio A, B and C-0.90%, 1.30% and 1.30%; and the Money Market
Portfolio-1.10%. Each Portfolio will reimburse the Investment Adviser for fees
deferred or other expenses paid by the Investment Adviser pursuant to this
agreement in later years in which operating expenses for the Portfolio are less
than the applicable percentage limitation set forth above for any such year. No
interest, carrying or finance charge will be paid by a Portfolio with respect to
any amounts representing fees deferred or other expenses paid by the Investment
Adviser. In addition, no Portfolio or Fund will be required to repay any
unreimbursed amounts to the Investment Adviser upon termination or non-renewal
of its Investment Advisory Agreement with the Master Trust.

For the fiscal year ended March 31, 1996, the Series A, B and C Portfolios'
total expenses were the following percentages of their respective average net
assets (annualized for Series B), after the fee deferrals and expense
reimbursements indicated in parentheses: Core Growth Portfolio A, B and C-1.58%
(includes 0.02% recoupment of past deferrals), 2.22% (1.17%) and 2.14% (0.00%);
Emerging Growth Portfolio A, B and C-1.74% (0.00%), 2.58% (0.68%) and 2.35%
(0.00%); Income & Growth Portfolio A, B and C-1,60% (0.17%), 2.25% (4.83%) and
2.25% (0.03%); Balanced Growth Portfolio A, B and C-1.60% (1.70%), 2.25%
(10.80%) and 2.25% (0.76%); Government Income Portfolio A, B and C-0.93%
(8.65%), 1.33% (84.79%) and 1.33% (4.44%); Money Market Portfolio-0.45% (5.33%).

21
<PAGE>
DISTRIBUTOR. Nicholas-Applegate Securities, 600 West Broadway, 30th Floor, San
Diego, California 92101, a California limited partnership, serves as the
Distributor of shares of each Portfolio. The general partner of the Distributor
is Nicholas-Applegate Capital Management Holdings, L.P. and its limited partner
is the Investment Adviser.

The Trust has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act with respect to the Portfolios. Under the Distribution
Plan, each Portfolio compensates the Distributor for services rendered and costs
incurred in connection with distribution of shares of such Portfolio. The Trust
has also adopted a Shareholder Service Plan under which each Portfolio
reimburses the Distributor for shareholder servicing expenses actually incurred
with respect to shares of such Portfolio.

Under the Distribution Plan and a related distribution agreement (the
"Distribution Agreement"), the Distributor incurs the expenses of distributing
each Portfolio's shares. These expenses include advertising and marketing
expenses, commissions and other payments to broker-dealers and others which have
entered into agreements with the Distributor, the expenses of preparing,
printing and distributing prospectuses for the Portfolios, and indirect and
overhead costs associated with the sale of Portfolio shares. The Distributor
recovers the distribution expenses it incurs through the receipt of compensation
payments from each Portfolio under the Distribution Plan at the following annual
rates: for the Series A Portfolios, 0.25% of each such Portfolio's average daily
net assets; for the Series B Portfolios, 0.75% (0.50% for Government Income
Portfolio B) of each such Portfolio's average daily net assets; for the Series C
Portfolios, 0.75% (0.50% for Government Income Portfolio C) of each such
Portfolio's average daily net assets; and for the Money Market Portfolio, 0.15%
of such Portfolio's average daily net assets. Moreover, under the Distribution
Agreement, the Distributor retains a portion of an initial sales charge from
purchases of shares of the Series A Portfolios, and a contingent deferred sales
charge from redemptions of shares of the Series A, B and C Portfolios. The
Distribution Plan is a "compensation" plan, which means that the distribution
fees paid by the Portfolios under the Distribution Plan are intended to
compensate the Distributor for services rendered and commission fees borne even
if the amounts paid exceed the Distributor's actual expenses (in which case the
Distributor would realize a profit). If in any year the Distributor's expenses
incurred in connection with the distribution of a Portfolio's shares exceed the
distribution fees paid by the Portfolio, the Distributor will recover such
excess if the Distribution Plan with respect to such shares continues to be in
effect in some later year when the distribution fees exceed the Distributor's
expenses with respect to the Portfolio. There is no limit on the periods during
which unreimbursed expenses may be carried forward; no Portfolio pays interest,
carrying or other finance charges on any carried forward amounts; and no
Portfolio will be obligated to pay any unreimbursed expenses that may exist at
such time, if any, as the Distribution Plan terminates or is not continued.

Under the Shareholder Service Plan, which is a "reimbursement" plan, each Series
A Portfolio and the Money Market Portfolio, and each Series B and C Portfolio,
pays the Distributor an annual fee of up to 0.10%, 0.25% and 0.25%,
respectively, of the Portfolio's average daily net assets as reimbursement for
certain expenses actually incurred in connection with shareholder services
provided by the Distributor and payments to broker-dealers and others for the

22
<PAGE>
provision of such services. Support services with respect to the beneficial
owners of Portfolio shares include establishing and maintaining accounts and
records relating to clients of the Distributor, broker-dealers and others who
invest in the Portfolio shares, preparing tax reports, assisting clients in
processing exchange and redemption requests and account designations, and
responding to client inquiries concerning their investments. If in any month the
Distributor is due more monies for shareholder services than are immediately
payable because of the expense limitations under the Shareholder Service Plan,
the unpaid amount is carried forward from month to month while the Shareholder
Service Plan is in effect until such time when it may be paid. However, no
carried forward amount will be payable beyond the fiscal year during which the
amounts were incurred, and no interest, carrying or other finance charge is
borne by the Portfolios with respect to any amount carried forward.

No fees or commissions will be paid by the Distributor to any broker-dealer or
others until amounts owed to such broker-dealer or others are at least $100. The
Distributor, at its expense, may provide additional promotional incentives to
brokers and dealers. In the case of dealers who institute special promotional
programs for sales of shares of the Portfolios or other series of the Trust,
such incentives may be up to 0.50% of sales during the promotion period. Dealers
may obtain further information by calling (800) 551-8045.

PORTFOLIO TRANSACTIONS AND BROKERAGE. The Investment Adviser is responsible for
the Funds' portfolio transactions and the allocation of the brokerage business.
In executing such transactions, the Investment Adviser seeks to obtain the best
price and execution for the Funds. Subject to obtaining the best price and
execution, the Investment Adviser (or Sub-Adviser) may effect transactions
through brokers who sell shares of the Portfolios or provide research services
to the Investment Adviser, which may result in the payment of higher commissions
than those charged by other brokers. However, the selection of such brokers will
be made in accordance with Section 28(e) of the Securities Exchange Act of 1934.
Section 28(e) requires the Investment Adviser to make a good faith determination
that the commissions paid are reasonable in relation to the value of the
brokerage and research services provided by such broker, viewed in terms of
either that particular transaction or the Investment Adviser's overall
responsibilities with respect to the accounts as to which it exercises
investment discretion.

23
<PAGE>
- --------------------------------------------------------------------------------
PURCHASING SHARES

24
<PAGE>
SHARE PRICE. Shares of a Portfolio are purchased at the next offering price
after an order in proper form is received by the Transfer Agent. An order in
proper form must include all correct and complete information, documents and
signatures required to process your purchase. The offering price is the net
asset value plus a sales charge, if applicable. The net asset value per share is
determined as of the close of trading of the New York Stock Exchange on each day
the Exchange is open for normal trading. Orders received before 4:00 P.M.
(Eastern time) on a day when the Exchange is open for normal trading will be
processed as of the close of trading on that day. Otherwise processing will
occur on the next business day. To determine a Portfolio's net asset value per
share, the current value of the Portfolio's total assets, less all liabilities,
is divided by the total number of shares outstanding, and the result is rounded
to the nearer cent.

- --------------------------------------------------------------------------------
ALTERNATIVE PURCHASE ARRANGEMENTS

Purchases of shares of a Series A Portfolio are generally subject to a maximum
initial sales charge of 5.25% (4.75% for Government Income Portfolio A), and
lower distribution and shareholder service fees than shares of a Series B or C
Portfolio. Purchases of a Series B Portfolio are subject to a contingent
deferred sales charge, ranging from 5.00% on redemptions made within 12 months
after the shares were purchased to zero for redemptions made more than six years
after purchase, and higher distribution and shareholder service fees than shares
of a Series A Portfolio. Shares of the Series B Portfolios may be exchanged for
shares of the corresponding Series A Portfolios seven years after purchase; an
exchange will be treated as a redemption and purchase for tax purposes.
Purchases of shares of a Series C Portfolio are subject to a contingent deferred
sales charge of 1.00% imposed on redemptions made within 12 months after the
shares were purchased, and higher distribution and shareholder service fees than
shares of a Series A Portfolio.

25
<PAGE>
circumstances, I.E., whether it is more advantageous to incur an initial sales
charge and lower annual fees (Series A Portfolios), to have the entire purchase
price invested in Portfolio shares with the investment thereafter being subject
to a contingent deferred sales charge for a period of six years and higher
annual fees for a period of seven years from date of purchase (Series B
Portfolios), or to have the entire purchase price invested in Portfolio shares
with the investment thereafter being subject to a contingent deferred sales
charge for a period of one year from date of purchase and higher annual fees
(Series C Portfolios).

The following illustrations are provided to assist you in determining which
method of purchase best suits your individual circumstances, and are based on
current fees and expenses being charged to the Portfolios:

If you intend to hold your investment in a Portfolio for less than seven years
and do not qualify for a reduced sales charge on Series A Portfolio shares, you
should consider purchasing Series C Portfolio shares rather than Series A or B
Portfolio shares, since Series A Portfolio shares are subject to a maximum
initial sales charge of 5.25% and Series B Portfolio shares are subject to a
contingent deferred sales charge of 5% which declines to zero over a six-year
period.

If you intend to hold your investment in a Portfolio for seven years or more and
do not qualify for a reduced sales charge on Series A Portfolio shares, you
should consider purchasing Series B Portfolio shares rather than Series A or C
Portfolio shares, since Series B Portfolio shares may be exchanged for Series A
Portfolio shares in a taxable transaction seven years after purchase and all of
your money would be invested initially in the case of Series B Portfolio shares.

If you qualify for a reduced sales charge on Series A Portfolio shares, it may
be more advantageous for you to purchase Series A Portfolio shares than Series B
or C Portfolio shares regardless of how long you intend to hold your investment.
However, unlike Series B and C Portfolio shares, you would not have all of your
money invested initially because the sales charge on Series A Portfolio shares
is deducted at the time of purchase.

If you do not qualify for a reduced sales charge on Series A Portfolio shares
and you purchase Series B or C Portfolio shares, you would have to hold your
investment for approximately eight years in the case of Series B or C Portfolio
shares for the higher cumulative distribution and shareholder service fees on
those shares to exceed the initial sales charge plus cumulative distribution and
shareholder service fees on Series A Portfolio shares. This does not take into
account the time value of money, which further reduces the impact of the higher
Series B or C Portfolio distribution and shareholder service fees on the
investment, fluctuations in net asset value, the effect of the return on the
investment over this period of time or redemptions at a time when the contingent
deferred sales charge is applicable.

Financial advisers and other sales agents who sell shares of the Trust will
receive different compensation for selling shares of the Series A, B and C
Portfolios, and will generally receive more compensation initially for selling
shares of the Series A Portfolios than for selling shares of the Series B or C
Portfolios.

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<PAGE>
SERIES A PORTFOLIOS

The sales charges you pay when purchasing shares of a Series A Portfolio are set
forth below:

<TABLE>
<CAPTION>
Dealer Commission
as Percentage of the
Sales Charges as Percentage of the: Offering Price
Amount of Purchase NET AMOUNT OFFERING
at the Offering Price INVESTED PRICE
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
CORE GROWTH, EMERGING GROWTH, INCOME &
GROWTH, AND BALANCED GROWTH PORTFOLIOS
Less than $50,000 5.54% 5.25% 4.50%
$50,000 but less than $100,000 4.71% 4.50% 3.75%
$100,000 but less than $250,000 3.63% 3.50% 2.75%
$250,000 but less than $500,000 2.56% 2.50% 2.00%
$500,000 but less than $1,000,000 2.04% 2.00% 1.60%
$1,000,000 or more None None (See below)
- -------------------------------------------------------------------------------------------
GOVERNMENT INCOME PORTFOLIO
Less than $50,000 4.99% 4.75% 4.00%
$50,000 but less than $100,000 4.17% 4.00% 3.25%
$100,000 but less than $250,000 3.63% 3.50% 2.75%
$250,000 but less than $500,000 2.56% 2.50% 2.00%
$500,000 but less than $1,000,000 2.04% 2.00% 1.60%
$1,000,000 or more None None (See below)
</TABLE>

No initial sales charge applies on purchases of shares of the Money Market
Portfolio. In addition, although no initial sales charge applies on a purchase
of $1 million or more of any of the Series A Portfolios, a contingent deferred
sales charge of 1.00% is imposed on certain redemptions less than one year after
the $1 million purchase. See "Redeeming Shares- Contingent Deferred Sales Charge
on Redemptions of Portfolio A Shares." Commissions will be paid by the
Distributor to dealers who initiate and are responsible for purchases of $1
million or more and for purchases made at net asset value by certain retirement
plans of organizations with 50 or more eligible employees as set forth in the
Statement of Additional Information.

NET ASSET VALUE PURCHASES. The Trust may sell shares of a Series A Portfolio at
net asset value to:

(1) current or retired directors, trustees, partners, officers and employees
of the Trust, the Master 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;

(2) current or retired registered representatives or full-time employees and
their spouses and minor children of dealers having selling group agreements
with the Trust and plans for such persons;

(3) former limited partners and participants of certain investment
partnerships and pooled trusts previously managed by the Investment Adviser;

(4) shareholders and former shareholders of another mutual fund which has a
sales charge and is not a series of the Trust, so long as shares of the
Portfolio are purchased with the proceeds of a redemption, made within 60
days of the purchase, of shares of such other mutual fund (to obtain this
benefit, the redemption check, endorsed to the Trust, or a copy of the
confirmation showing the redemption must be forwarded to the Transfer
Agent);

27
<PAGE>
(5) companies or other entities exchanging securities with the Trust or
Master Trust through a merger, acquisition or exchange offer;

(6) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with 50 or more eligible employees;

(7) participants in certain pension, profit-sharing or employee benefit
plans that are sponsored by the Distributor and its affiliates;

(8) investment advisers and financial planners who place trades for their
own accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services;

(9) clients of investement advisers and financial planners referred to in
item (8) who place trades for their own accounts if the accounts are linked
to the master account of the investment adviser or financial planner on the
books and records of a broker, agent, investment adviser or financial
institution;

(10) employee-sponsored benefit plans in connection with redemptions of
shares of Series A or C Portfolios made as a result of participant-directed
exchanges between options in such a plan;

(11) "wrap accounts" for the benefit of clients of broker-dealers, financial
institutions or financial planners having sales or service agreements with
the Distributor or another broker-dealer or financial institution with
respect to sales of shares of the Series A Portfolios; and

28
<PAGE>
CONCURRENT PURCHASES. To qualify for a reduced sales charge, you may combine
concurrent purchases of shares of two or more Series A Portfolios. Shares of the
Money Market Portfolio purchased through an exchange, reinvestment or
cross-reinvestment from a Series A Portfolio also qualify. For example, if you
concurrently invest $25,000 in one Portfolio and $25,000 in another Portfolio,
the sales charge would be reduced to reflect a $50,000 purchase.

SERIES B PORTFOLIOS

You may purchase shares of any Series B Portfolio without an initial sales
charge. However, you will bear your proportionate share of payments pursuant to
the Distribution and Shareholder Service Plans, as described above, which
affects the net asset value of your shares in the Series B Portfolios. In
addition, a contingent deferred sales charge applies to redemptions of shares of
a Series B Portfolio made within six years from date of their purchase. No such
charge is imposed if the shares redeemed have been acquired through the
reinvestment of dividends or capital gains distributions or if the amount
redeemed is derived from increases in the value of the account above the amount
of purchase payments. The contingent deferred sales charge is paid to the
Distributor. The Distributor pays sales commissions of up to 4.00% (up to3.00%,
for Government Income Portfolio B) of the purchase price to participating
broker-dealers and others at the end of the month during which purchases of
shares of the Series B Portfolios are made by their customers. See "Redeeming
Shares-Contingent Deferred Sales Charge on Redemption of Portfolio B Shares."

For Portfolio B shares previously exchanged for shares of the Trust's Money
Market Portfolio, the time period during which such shares were held in the
Money Market Portfolio will be excluded in calculating the applicable holding
period. For example, Portfolio B shares held in the Money Market Portfolio for
one year will not be exchangeable for Portfolio A shares until eight years from
purchase. Portfolio B shares acquired through exchange may be exchanged for
Portfolio A shares after expiration of the exchange period applicable to the
original purchase of such shares.

The Trust currently intends to establish, prior to 2002, an additional class of
the Series B Portfolios with the same distribution and shareholder service fees
as the Series A Portfolios,

29
<PAGE>
and to provide for the automatic conversion of the shares of the current class
of Series B Portfolios into the new class seven years after purchase without any
sales charge, if in the opinion of counsel such conversion would not constitute
a taxable event for U.S. income tax purposes. No assurance exists that the Trust
will be able to establish such a class of the Series B Portfolios in a manner
that will provide such benefit.

SERIES C PORTFOLIOS

You may purchase shares of any Series C Portfolio without an initial sales
charge. However, you will bear your proportionate share of payments pursuant to
the Distribution and Shareholder Service Plans, as described above, which
affects the net asset value of your shares in the Series C Portfolios. In
addition, a contingent deferred sales charge of 1.00% applies to redemptions of
shares of a Series C Portfolio made within one year from date of their purchase.
Shares of the Portfolio C Series may not be exchanged forshares of the Portfolio
A Series, which may affect their performance for long-term investors. The
Distributor pays sales commissions of up to 1.00% (up to 0.75% for Government
Income Portfolio C) of the purchase price to participating broker-dealers and
others at the end of the month during which purchases of shares of the Series C
Portfolios are made by their customers.

OTHER PORTFOLIOS

Currently, the Trust is offering eight Series A Portfolios, eight Series B
Portfolios, eight Series C Portfolios and a Money Market Portfolio. Five
domestic Series A, B and C Portfolios and the Money Market Portfolio are offered
pursuant to this Prospectus. Three global Series A, B and C Portfolios are
covered by a separate prospectus which can be obtained by calling (800)
551-8045. The Distributor also offers shares of other portfolios of the Trust
which invest in the same Funds of the Master Trust as the Series A, B and C
Portfolios. These other portfolios have different sales charges and other
expenses than the Series A, B and C Portfolios, which may affect their
performance. Information about these other portfolios can be obtained from your
dealer or by calling (800) 551-8045.

- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES

AUTOMATIC INVESTMENT PLAN. You may make regular monthly or quarterly investments
in each Portfolio 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
(800) 551-8043.

CROSS-REINVESTMENT. You may cross-reinvest dividends or dividends and capital
gain distributions paid by one Portfolio into shares of another Portfolio within
the same series (A, B or C), subject to conditions outlined in the Statement of
Additional Information. Cross-reinvestment of dividends and capital gain
distributions may also be made from and to the Money Market Portfolio.
Generally, to use this service the value of your account in the Portfolio which
paid the dividend or capital gain distribution must equal at least $5,000.

EXCHANGE PRIVILEGE. You may exchange shares of any Portfolio into shares of
other Portfolios within the same series (A, B or C) by writing to the Transfer
Agent, State Street Bank and

30
<PAGE>

Trust Company, Attention: Nicholas-Applegate Mutual Funds, P.O. Box 8326,
Boston, Massachusetts 02266-8326. Shares may also be exchanged to or from the
Money Market Portfolio. Please specify the name of the applicable Portfolio, the
number of shares or dollar amount to be exchanged and your name and account
number. You may also exchange shares by contacting your dealer or-if you have
authorized telephone exchanges on the account application-by telephoning the
Transfer Agent at (800) 551-8043 or by sending the Transfer Agent a facsimile at
(617) 774-2651, between the hours of 8:00 A.M. and 4:00 P.M. (Eastern time) on a
day when the New York Stock Exchange is open for normal trading (see "Telephone
Privilege" below).

Before effecting an exchange, you should obtain the currently effective
prospectus of the series into which the exchange is to be made. Exchange
purchases are subject to the minimum investment requirements of the Portfolio
purchased. No sales charge applies except for exchanges of shares of the Money
Market Portfolio for shares of a Series A Portfolio, which are subject to
applicable sales charges on the Series A Portfolio being purchased unless the
Money Market Portfolio shares were acquired by an exchange from a Series A
Portfolio having a sales charge, or by reinvestment or cross-investment of
dividends or capital gain distributions. Additionally, a contingent deferred
sales load may apply to certain redemptions of shares of the Money Market
Portfolio acquired in an exchange for shares of a Series A, B or C Portfolio.
See "Alternative Purchase Arrangements" above. An exchange will be treated as a
redemption and purchase for tax purposes. If certificates are held by you, the
certificates, signed in the name(s) shown on the face of the certificates, must
be returned in order for the shares to be exchanged.

31
<PAGE>
exchange or redemption. No Portfolio or its agents will be liable for any loss,
liability or cost which results from acting upon instructions of a person
reasonably believed to be a shareholder with respect to the telephone privilege.

AUTOMATIC EXCHANGES. You may automatically exchange shares (in increments of $50
or more) among any of the Portfolios within the same series (A, B or C) or with
the Money Market Portfolio on a monthly or quarterly basis. You must either meet
the minimum initial investment requirement for the receiving Portfolio or the
originating Portfolio's balance must be at least $5,000 and the receiving
Portfolio's minimum must be met within one year.

REPORTS TO SHAREHOLDERS. Each Portfolio will send its shareholders 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 Portfolios may provide one annual and semi-annual report
and annual prospectus per household. In addition, quarterly unaudited financial
data are available from the Portfolios upon request.

- --------------------------------------------------------------------------------
REDEEMING SHARES

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<PAGE>
signature(s) on the redemption request and on the certificates, if any, or stock
powers may be required to be guaranteed by an "eligible guarantor", which
includes a bank or savings and loan association that is federally insured or a
member firm of a national securities exchange.

(1) exchanges for other Portfolio A shares (except if shares acquired by
exchange are then redeemed within 12 months of the initial purchase);

(2) redemptions in connection with mergers, acquisitions and exchange offers
involving a Series A Portfolio;

33
<PAGE>
(3) qualifying distributions from qualified retirement plans and other
employee benefit plans;

(4) distributions from custodial accounts under Section 403(b)(7) of the
Internal Revenue Code or from IRAs due to death, disability or attainment of
age 59 1/2;

(5) tax-free returns of excess contributions to IRAs;

(6) any partial or complete redemptions following the death or disability of
a shareholder, provided the redemption is made within one year of death or
initial determination of disability;

(7) redemptions through certain automatic withdrawals; and

(8) redemptions by qualified retirement and employee benefit plans with 50
or more eligible employees.

CONTINGENT DEFERRED SALES CHARGE ON REDEMPTION OF PORTFOLIO B SHARES. A
contingent deferred sales charge ("CDSC") applies to redemptions of shares of a
Series B Portfolio within six years of investment. The charge declines from
5.00% to zero over a six-year period. The CDSC will be deducted from the
redemption proceeds and will reduce the amount paid to you. A CDSC will be
applied to the lesser of the original purchase price or the current value of the
shares being redeemed. Increases in the value of your shares or shares acquired
through reinvestment of dividends or distributions are not subject to a CDSC.

The following table sets forth the rates of the CDSC applicable to redemptions
of shares of a Portfolio B series:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLARS INVESTED OR
PAYMENT MADE REDEMPTION PROCEEDS
- --------------------------------------------------------------------- ----------------------------
<S> <C>
First.............................................................. 5.00%
Second............................................................. 4.00%
Third.............................................................. 3.00%
Fourth............................................................. 3.00%
Fifth.............................................................. 2.00%
Sixth.............................................................. 1.00%
Seventh and thereafter............................................. None
</TABLE>

34
<PAGE>
Series B Portfolio acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the increase in net asset value of
your holdings of the Series B Portfolio above the total amount of payments for
the purchase of the shares of the Series during the preceding six years; then of
amounts representing the cost of shares of the Series B Portfolio held beyond
the applicable CDSC period; and finally, of amounts representing the cost of
shares of the Series B Portfolio held for the longest period of time.

For example, assume you purchased 100 shares of Core Growth Portfolio B at $10
per share for a cost of $1,000. Subsequently, you acquired 5 additional shares
of Core Growth Portfolio B through dividend reinvestment. During the second year
after the purchase, you decided to redeem $500 of your investment. Assuming at
the time of the redemption the net asset value had appreciated to $12 per share,
the value of your Core Growth Portfolio B shares would be $1,260 (105 shares at
$12 per share). The CDSC would not be applied to the value of the reinvested
dividend shares and the amount which represents appreciation ($260). Therefore,
$240 of the $500 redemption proceeds ($500 minus $260) would be charged a CDSC
at a rate of 4% (the applicable rate in the second year after purchase) for a
total CDSC of $9.60.

For Federal income tax purposes, the amount of the CDSC will reduce the gain or
increase the loss, as the case may be, on the amount recognized on the
redemption of shares.

The CDSC is waived for redemptions of shares of a Series B Portfolio by: (1)
current or retired directors, trustees, partners, officers and employees of the
Trust, the Master 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; (2) former limited partners and participants of
certain investment partnerships and pooled trusts previously managed by the
Investment Adviser; and (3) participants in certain pension, profit-sharing or
employee benefit plans that are sponsored by the Distributor and its affiliates.

The CDSC is also waived for:

(1) exchanges of shares of the Series B Portfolios (however, the shares
acquired by exchange will continue to be subject to a CDSC on the same basis
as the shares exchanged);

(2) redemptions in connection with mergers, acquisitions and exchange offers
involving a Series B Portfolio;

(3) qualifying distributions from qualified retirement plans and other
employee benefit plans;

(4) distributions from custodial accounts under Section 403(b)(7) of the
Internal Revenue Code or IRAs due to death, disability or attainment of age
59 1/2;

(5) tax-free returns of excess contributions to IRAs; and

(6) any partial or complete redemptions following the death or disability of
a shareholder, provided the redemption is made within one year of death or
initial determination of disability.

35
<PAGE>
CONTINGENT DEFERRED SALES CHARGE ON REDEMPTION OF PORTFOLIO C SHARES. A
contingent deferred sales charge of 1.00% applies to redemptions of shares of a
Series C Portfolio made less than one year after the date of their purchase. No
such charge is imposed if the shares redeemed have been acquired through the
reinvestment of dividends or capital gains distributions or if the amount
redeemed is derived from increases in the value of the account above the amount
of purchase payments. In determining whether a contingent deferred sales charge
is payable, the same procedures are followed as described above with respect to
redemptions of shares of Series B Portfolios. The contingent deferred sales
charge is paid to the Distributor. The contingent deferred sales charge is
waived for redemptions of shares of a Series C Portfolio, on the same basis as
for redemptions of shares of a Series B Portfolio. See "Contingent Deferred
Sales Charge onRedemption of Portfolio B Shares."

REINSTATEMENT PRIVILEGE. You may reinvest proceeds from a redemption of
Portfolio shares, or proceeds of a dividend or capital gain distribution paid to
you with respect to Portfolio shares, without a sales charge in any of the
Portfolios. Upon such a reinvestment, the Distributor will credit to your
account any contingent deferred sales charge imposed on the redeemed shares.Send
a written request and a check to the Transfer Agent within 90 days after the
date of the redemption, dividend or distribution. Reinvestment will be at the
next calculated net asset value after receipt. The tax status of a gain realized
on a redemption will not be affected by exercise of the reinstatement privilege,
but a loss may be nullified if you reinvest in the same series within 30 days.

INVOLUNTARY REDEMPTION. In order to reduce expenses of a Portfolio, the Trust
may redeem all of the shares of any shareholder whose account has a net asset
value of less than $500 due to redemptions other than a shareholder which is an
IRA or other tax-deferred retirement plan. The Trust will give such shareholders
60 days' prior written notice in which to purchase sufficient additional shares
to avoid such redemption. No contingent deferred sales charge is imposed on such
redemptions.

36
<PAGE>
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES

You should consult your own tax adviser regarding specific questions as to
federal, state or local taxes. See "Taxes" in the Statement of Additional
Information.

- --------------------------------------------------------------------------------
GENERAL INFORMATION

37
<PAGE>

Further information about the performance of the Portfolios is contained in the
Trust's 1996 Annual Report to Shareholders, which may be obtained without charge
by calling (800) 551-8043.

DESCRIPTION OF SHARES. The Portfolios are series of Nicholas-Applegate Mutual
Funds, an open-end management investment company. The Trust was organized in
December 1992 as a Delaware business trust. The Trust is authorized to issue an
unlimited number of shares of each Portfolio. Shares of a Portfolio, when
issued, are fully paid, nonassessable, fully transferable and redeemable at the
option of the holder. Shares of a Portfolio are also redeemable at the option of
the Trust under certain circumstances. There are no conversion, preemptive or
other subscription rights. In the event of liquidation, each share of a
Portfolio is entitled to its portion of all of the Portfolio's assets after all
debts and expenses of the Portfolio have been paid. Pursuant to the Trust's
Declaration of Trust, the Board of Trustees of the Trust may authorize the
creation of additional series, and classes within series, with such preferences,
privileges, limitations and voting and dividend rights as the Board may
determine.

38
<PAGE>
instructed particularly by shareholders of the Portfolio and other series of the
Trust which invest in the Fund. The Trust will vote shares for which it has
received no voting instructions in the same proportion as the shares for which
it does receive voting instructions.

39
<PAGE>
ABCDOMPRO595
<PAGE>
APPENDIX

- --------------------------------------------------------------------------------
INVESTMENT POLICIES, STRATEGIES AND RISKS

The investment policies and strategies of the Portfolios (as implemented through
their investment in corresponding Funds) encompass the following securities,
techniques and risk considerations.

SHORT-TERM INVESTMENTS (ALL FUNDS). Each of the Funds may invest in short-term
investments to maintain liquidity for redemptions or during periods when, in the
opinion of the Investment Adviser, attractive investments are temporarily
unavailable. Under normal circumstances, no more than 10% of a Fund's total
assets will be retained in cash (U.S. dollars) the Worldwide Growth,
International Growth and Emerging Countries Funds, foreign and cash equivalents.
The Money Market Fund, however, is under no such restriction, as it invests all
of its assets in short-term investments. In addition, each Fund may invest
without restriction in short-term investments for temporary defensive purposes,
such as when the securities markets or economic conditions are expected to enter
a period of decline. Short-term investments in which the Funds may invest
include U.S. Treasury bills or other U.S. Government or Government agency or
instrumentality obligations; certificates of deposit; bankers' acceptances; time
deposits; high quality commercial paper and other short-term high grade
corporate obligations; shares of money market mutual funds; or repurchase
agreements with respect to such securities. These instruments are described
below. The Funds will only invest in short-term investments which, in the
opinion of the Investment Adviser, present minimal credit and interest rate
risk.

40
<PAGE>
the Money Market Fund may invest up to 5% of its net assets in separately traded
interest and principal component parts of U.S. Treasury securities that are sold
as zero coupon securities and are transferable through the Federal book-entry
system known as Separately Traded Registered Interest and Principal Securities
("STRIPS") and Coupons Under Book Entry Safekeeping ("CUBES"). Zero coupon
securities are sold at a substantial discount from face value and redeemed at
face value at their maturity date without interim cash payments of interest and
principal. This discount is amortized over the life of the security and such
amortization will constitute the income earned on the security for both
accounting and tax purposes. Because of these features, such securities may be
subject to greater volatility as a result of changes in prevailing interest
rates than interest paying investments in which the Funds may invest. Because
income on such securities is accrued on a current basis, even though the Funds
do not receive the income currently in cash, the Funds may have to sell other
portfolio investments to obtain cash needed by the related Portfolios to make
income distributions.

41
<PAGE>
such instruments generally will be traded, and there generally is no established
secondary market for these obligations, although they are redeemable at face
value. Such obligations frequently are not rated by credit rating agencies and a
Fund may invest in obligations which are not so rated only if the Investment
Adviser determines that at the time of investment the obligations are of
comparable quality to the other obligations in which the Fund may invest. The
Investment Adviser will monitor the creditworthiness of the issuers of such
obligations and their earning power and cash flow, and will also consider
situations in which all holders of such notes would redeem at the same time.
Investment by a Fund in floating or variable rate demand obligations as to which
it cannot exercise the demand feature on not more than seven days' notice will
be subject to the Fund's limit on illiquid securities of 15% (10% in the case of
the Money Market Fund) of net assets if there is no secondary market available
for these obligations.

CONVERTIBLE SECURITIES AND WARRANTS (CORE GROWTH, EMERGING GROWTH, INCOME &
GROWTH, BALANCED GROWTH AND GOVERNMENT INCOME FUNDS). The Core Growth, Emerging
Growth, Income & Growth, Balanced Growth and Government Income Funds may invest
in securities which may be exchanged for, converted into, or exercised to
acquire a predetermined number of shares of the issuer's common stock at the
option of the holder during a specified time period (such as convertible
preferred stocks, convertible debentures and warrants). Convertible securities
generally pay interest or dividends and provide for participation in the
appreciation of the underlying common stock but at a lower level of risk because
the yield is higher and the security is senior to common stock. Convertible
securities may also include warrants which give the holder the right to purchase
at any time during a specified period a predetermined number of shares of common
stock at a fixed price but which do not pay a fixed dividend. Investments in
warrants involve certain risks, including the possible lack of a liquid market
for resale, potential price fluctuations as a result of speculation or other
factors, and the failure of the price of the underlying security to reach or
have reasonable prospects of reaching a level at which the warrant can be
prudently exercised, in which event the warrant may expire without being
exercised, resulting in a loss of a Fund's entire investment therein. As a
matter of operating policy, no Fund will invest more than 5% of its net assets
in warrants.

42
<PAGE>
convertible security is governed principally by its investment value. To the
extent the market price of the underlying common stock approaches or exceeds the
conversion price, the price of the convertible security will be increasingly
influenced by its conversion value.

JUNK BOND CONSIDERATIONS (INCOME & GROWTH AND BALANCED GROWTH FUNDS). The Income
& Growth and Balanced Growth Funds may invest a portion (less than 50% and 35%,
respectively) of their respective net assets in debt securities rated below
"Baa" by Moody's, "BBB" by S&P or below investment grade by other recognized
rating agencies, or in unrated securities determined by the Investment Adviser
to be of comparable quality if the Investment Adviser believes that the
financial condition of the issuer or the protection afforded to the particular
securities is stronger than would otherwise be indicated by such low ratings or
the lack thereof. Securities rated below "Baa" or "BBB" or equivalent
ratings,commonly referred to as "junk bonds," are subject to greater risk of
loss of income and principal than higher rated bonds and are considered to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal, which may in any case decline during sustained periods of
deteriorating economic conditions or rising interest rates. Junk bonds are also
generally considered to be subject to greater market risk in times of
deteriorating economic conditions and to wider market and yield fluctuations
than higher-rated securities. Junk bonds may also be more susceptible to real or
perceived adverse economic and competitive industry conditions than investment
grade securities. The market for such securities may be thinner and less active
than that for higher-rated securities, which can adversely affect the prices at
which these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, its assets. In addition, adverse publicity
and investor perceptions about junk bonds, whether or not based on fundamental
analysis, may tend to decrease the market value and liquidity of such
securities.

43
<PAGE>

The Investment Adviser will try to reduce the risk inherent in the Funds'
investment in such securities through credit analysis, diversification and
attention to current developments and trends in interest rates and economic
conditions. However, there can be no assurance that losses will not occur. Since
the risk of default is higher for lower-rated bonds, the Investment Adviser's
research and credit analysis are a correspondingly more important aspect of its
program for managing the Funds' investments in such debt securities. The
Investment Adviser will attempt to identify those issuers of high-yielding
securities whose financial condition is adequate to meet future obligations, or
has improved or is expected to improve in the future.

Credit ratings evaluate the safety of principal and interest payments of
securities, not their market value. The rating of an issuer is also heavily
weighted by past developments and does not necessarily reflect probable future
conditions. There is frequently a lag between the time a rating is assigned and
the time it is updated. As credit rating agencies may fail to timely change
credit ratings of securities to reflect subsequent events, the Investment
Adviser will also monitor issuers of such securities to determine if such
issuers will have sufficient cash flow and profits to meet required principal
and interest payments and to assure their liquidity. If the rating of a debt
security held by the Income & Growth or Balanced GrowthFund is downgraded below
"C" or an equivalent rating, or determined by the Investment Adviser to be of
comparable quality, the Investment Adviser will determine whether it is in the
best interests of the Fund to continue to hold such security in its investment
portfolio. However, if the downgrading of an investment grade security causes
the Income & Growth Fund or Balanced Growth Fund to hold 50% or more, or 35% or
more, respectively, of its net assets in securities rated below investment grade
or determined by the Investment Adviser to be of comparable quality, the Fund
will sell sufficient principal amount of such securities as promptly as
practicable to make sure that it holds less than 35% of its net assets in such
securities.

44
<PAGE>
banks in private placement transactions. Upon conversion, the Fund generally
receives an amount in cash equal to the difference between the conversion price
and the then current value of the underlying security. Unlike a true convertible
security, a synthetic convertible comprises two or more separate securities,
each with its own market value. Therefore, the market value of a synthetic
convertible is the sum of the values of its fixed-income component and its
convertible component. For this reason, the values of a synthetic convertible
and a true convertible security may respond differently to market fluctuations.
The Income & Growth Fund 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 S&P, and will not invest more than 15% of its net assets in
such synthetic securities and other illiquid securities. See "Illiquid
Securities" below.

EQUITY SECURITIES (CORE GROWTH, EMERGING GROWTH, INCOME & GROWTH AND BALANCED
GROWTH FUNDS). Each of the Core Growth, Emerging Growth, Income & Growth and
Balanced Growth Funds may invest in equity securities, including common stocks,
convertible securities and warrants. Common stocks, the most familiar type of
equity securities, represent an equity (ownership) interest in a corporation.
See "Convertible Securities and Warrants" for a description of convertible
securities and warrants. The Core Growth, Income & Growth, and Balanced Growth
Funds each may invest in equity securities of growth companies, cyclical
companies, companies with smaller market capitalizations (I.E., $500 million or
less) or companies believed to be undergoing a basic change in operations or
markets which could result in a significant improvement in earnings, and the
Emerging Growth Fund will invest primarily in such securities. Although equity
securities have a history of long term growth in

45
<PAGE>

DEPOSITORY RECEIPTS (CORE GROWTH, EMERGING GROWTH, INCOME & GROWTH AND BALANCED
GROWTH FUNDS). The Core Growth, Emerging Growth, Income & Growth, andBalanced
Growth Funds may invest in American Depository Receipts ("ADRs"), which are
receipts issued by an American bank or trust company evidencing ownership of
underlying securities issued by a foreign issuer. ADRs, in registered form, are
designed for use in U.S. securities markets. Such depository receipts may be
sponsored by the foreign issuer or may be unsponsored. Unsponsored depository
receipts are organized independently and without the cooperation of the foreign
issuer of the underlying securities; as a result, available information
regarding the issuer may not be as current as for sponsored depository receipts,
and the prices of unsponsored depository receipts may be more volatile than if
they were sponsored by the issuers of the underlying securities.

46
<PAGE>

OVER-THE-COUNTER SECURITIES (CORE GROWTH, EMERGING GROWTH, INCOME & GROWTH, AND
BALANCED GROWTH FUNDS). Securities owned by the Core Growth, Emerging Growth,
Income & Growth, and Balanced Growth Funds may be traded in the over-the-counter
market or on a regional securities exchange and may not be traded every day or
in the volume typical of securities trading on a national securities exchange.
As a result, disposition by such Funds of portfolio securities to meet
redemptions by shareholders or otherwise may require the Funds to sell these
securities at a discount from market prices, to sell during periods when such
disposition is not desirable, or to make many small sales over a lengthy period
of time.

47
<PAGE>
cash, U.S. Government securities and other liquid, high quality debt securities
in an amount sufficient to meet their payment obligations with respect to these
transactions. A Fund may not purchase when-issued securities or enter into firm
commitments if, as a result, more than 15% of the Fund's net assets would be
segregated to cover such contracts.

48
<PAGE>
increase in value, than would otherwise be the case if it had not engaged in
such short sales. Short sales theoretically involve unlimited loss potential, as
the market price of securities sold short may continuously increase, although a
Fund may mitigate such losses by replacing the securities sold short before the
market price has increased significantly. Under adverse market conditions a Fund
might have difficulty purchasing securities to meet its short sale delivery
obligations, and might have to sell portfolio securities to raise the capital
necessary to meet its short sale obligations at a time when fundamental
investment considerations would not favor such sales. The value of securities of
any issuer in which a Fund maintains a short position which is "not against the
box" may not exceed the lesser of 2% of the value of the Fund's net assets or 2%
of the securities of such class of the issuer.

OPTIONS (CORE GROWTH, EMERGING GROWTH, INCOME & GROWTH, AND BALANCED GROWTH
FUNDS). Each of the Core Growth, Emerging Growth, Income & Growth, and Balanced
Growth Funds may purchase listed covered "put" and "call" options with respect
to securities which are otherwise eligible for purchase by such Fund and with
respect to various stock indices, for hedging purposes, subject to the following
restrictions: the aggregate premiums on call options purchased by a Fund may not
exceed 5% of the market value of net assets of the Fund as of the date the call
options are purchased, and the aggregate premiums on put options may not exceed
5% of the market value of the net assets of the Fund as of the date such options
are purchased. In addition, a Fund will not purchase or sell options if,
immediately thereafter,

49
<PAGE>
more than 25% of its net assets would be hedged. A "put" gives a holder the
right, in return for the premium paid, to require the writer of the put to
purchase from the holder a security at a specified price. A "call" gives a
holder the right, in return for the premium paid, to require the writer of the
call to sell a security to the holder at a specified price. An option on a
securities index (such as a stock index) gives the holder the right, in return
for the premium paid, to require the writer to pay cash equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars, times a specified multiplier.

The Core Growth, Emerging Growth and Income & GrowthFunds may also write listed
covered options on up to 25% of the value of their respective net assets. Call
options written by a Fund give the holder the right to buy the underlying
securities from the Fund at a stated exercise price; put options written by a
Fund give the holder the right to sell the underlying security to the Fund. A
call option is covered if the Fund owns the security underlying the call or has
an absolute and immediate right to acquire that security without additional cash
consideration upon conversion or exchange of securities currently held by the
Fund. A put option is covered if the Fund maintains cash or cash equivalents
equal to the exercise price in a segregated amount with its Custodian. If an
option written by a Fund expires unexercised, the Fund realizes a gain equal to
the premium received at the time the option was written. If an option purchased
by a Fund expires unexercised, the Fund realizes a capital loss equal to the
premium paid.

FUTURES CONTRACTS (CORE GROWTH, EMERGING GROWTH, INCOME & GROWTH, AND GOVERNMENT
INCOME FUNDS). The Core Growth, Emerging Growth and Income & Growth Funds may
purchase and sell stock index futures contracts as a hedge against changes in
market conditions. A stock index futures contract is a bilateral agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. No physical delivery of the
underlying stocks in the index is made.

50
<PAGE>
options on futures contracts. A financial futures contract obligates the seller
of the contract to deliver and the purchaser of the contract to take delivery of
the type of financial instrument called for in the contract at a specified
future time (the settlement date) for a specified price. Although the terms of a
contract call for actual delivery or acceptance of the financial instrument, the
contracts will be closed out before the delivery date without delivery or
acceptance taking place. Futures options possess many of the same
characteristics as options on securities and indices. A futures option gives the
holder, in return for the premium paid, the right to buy (call) from or sell
(put) to the writer of the option a futures contract at a specified price at any
time during the period of the option. Upon exercise of a call option, the holder
acquires a long position in the futures contract and the writer is assigned the
opposite short position. In the case of a put option, the opposite is true. A
futures option may be closed out before exercise or expiration by an offsetting
purchase or sale of a futures option of the same series.

51
<PAGE>
There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out an option position or futures contract. Most futures
exchanges and boards of trade limit the amount of fluctuation in futures
contract prices during a single day; once the daily limit has been reached on a
particular contract, no trades may be made that day at a price beyond that
limit. In addition, certain of these instruments are relatively new and without
a significant trading history. As a result, there is no assurance that an active
secondary market will develop or continue to exist. Lack of a liquid market for
any reason may prevent a Fund from liquidating an unfavorable position and a
Fund would remain obligated to meet margin requirements until the position is
closed.

52
<PAGE>
institutions may not be indicative of the liquidity of such investments. If such
securities are subject to purchase by institutional buyers in accordance with
Rule 144A promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, the Master Trust's Board of Trustees may determine that
such securities are not illiquid securities notwithstanding their legal or
contractual restrictions on resale, based on factors such as the frequency of
trades and quotes for the securities, the number of dealers and others wishing
to purchase and sell the securities, and the nature of the security and the
marketplace trades. In all other cases, however, securities subject to
restrictions on resale will be deemed illiquid. Investing in restricted
securities eligible for resale under Rule 144A could have the effect of
increasing the level of illiquidity in the Funds to the extent that qualified
institutional buyers become uninterested in purchasing such securities.

- --------------------------------------------------------------------------------
CORPORATE BOND RATINGS

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

53
<PAGE>
a large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.

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
regarded 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.

54
<PAGE>
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.

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.

- --------------------------------------------------------------------------------
PRIOR PERFORMANCE

55
<PAGE>

However, such information has not been verified and is unaudited. See
"Performance Information" in the Statement of Additional Information for further
information about calculation of total return.

56
<PAGE>

<TABLE>
<CAPTION>
EMERGING GROWTH PERFORMANCE
CORE GROWTH PERFORMANCE -------------------------------
----------------------------------------------
EMERGING GROWTH PORTFOLIO
CORE GROWTH PORTFOLIO
---------------- S&P 500 ----------------
YEAR A B C INDEX(1) A B C
- -------------------------------------------- --- --- --- ------------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1985(4).....................................
1986(4).....................................
1987........................................
1988........................................
1989........................................
1990........................................
1991........................................
1992........................................
1993(4).....................................
1994........................................
1995(4).....................................
1996(5).....................................
Last year(5)................................
Last 5 years(5).............................
Last 10 years(5)............................
Since inception(5)..........................

<CAPTION>
INCOME & GROWTH PERFORMANCE
----------------------------------------------------
INCOME &
GROWTH PORTFOLIO
RUSSELL 2000 CS FIRST BOSTON
GROWTH ---------------- CONVERTIBLE
YEAR INDEX(2) A B C INDEX(3)
- -------------------------------------------- ------------- --- --- --- -------------------
<S> <C> <C> <C> <C> <C>
1985(4).....................................
1986(4).....................................
1987........................................
1988........................................
1989........................................
1990........................................
1991........................................
1992........................................
1993(4).....................................
1994........................................
1995(4).....................................
1996(5).....................................
Last year(5)................................
Last 5 years(5).............................
Last 10 years(5)............................
Since inception(5)..........................
</TABLE>

<TABLE>
<CAPTION>
BALANCED GROWTH PERFORMANCE
---------------------------------------------------------------
BALANCED GROWTH PORTFOLIO
LEHMAN BROS.
---------------- S&P 500 CORP./GOVT.
YEAR A B C INDEX(1) INDEX(6)
- -------------------------------------------------- --- --- --- ------------- ---------------
<S> <C> <C> <C> <C> <C>
1993(3)...........................................
1994..............................................
1995..............................................
1996(5)...........................................
Last year(5)......................................
Since inception(5)................................

<CAPTION>
GOVERNMENT INCOME PERFORMANCE
---------------------------------------------------------
GOVERNMENT INCOME PORTFOLIO
---------------- LEHMAN BROTHERS
YEAR A B C GOV'T BOND INDEX(7)
- -------------------------------------------------- --- --- --- ---------------------
<S> <C> <C> <C> <C>
1993(3)...........................................
1994..............................................
1995..............................................
1996(5)...........................................
Last year(5)......................................
Since inception(5)................................
</TABLE>

- ------------------------------
(1)
The S&P 500 Index is an unmanaged index containing 500 industrial,
transportation, utility and financial companies, regarded as generally
representative of the U.S. stock market. The Index reflects the reinvestment of
income dividends and capital gain distributions, if any, but does not reflect
fees, brokerage commissions, or other expenses of investing.

(2)
The Russell 2000 Growth Stock Index contains those securities in the Russell
2000 Index with a greater-than-average growth orientation. Companies in the
Growth Stock Index generally have higher price-to-book and price-earnings
ratios than the average for all companies in the 2000 Index. 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.

(3)
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.

(4)
Inception dates are as follows: Core Growth Portfolios A and C-September 30,
1985 (registration statement effective April 19, 1993); Core Growth Portfolio
B-September 30, 1995; Emerging Growth Portfolios A and C- September 30, 1985
(registration statement effective December 27, 1993); Emerging Growth Portfolio
B-May 31, 1995; Income & Growth Portfolios A and C-December 31, 1986,
(registration statement effective April 19, 1993); Income & Growth Portfolio
B-May 31, 1995; Balanced Growth Portfolios A and C-April 19, 1993; Balanced
Growth Portfolio B-May 31, 1995; Government Income Portfolios A and C-April 17,
1993; Government Income Portfolio B-May 31, 1995.

(5)

Through March 31, 1996.

57
<PAGE>
It is generally regarded as representative of the market for domestic 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.

(7)
The Lehman Brothers Government Bond Index includes all public obligations of
the U.S. Treasury (excluding flower bonds and foreign-targeted issues), its
agencies and quasi-federal corporations, and corporate debt guaranteed by the
U.S. Government. The Index includes income and distributions but does not
reflect fees, brokerage commissions or other expenses of investing.

58
<PAGE>
NICHOLAS--APPLEGATE-REGISTERED TRADEMARK- MUTUAL FUNDS

- -------------------------------------------------
SERIES A GLOBAL PORTFOLIOS

PROSPECTUS

Nicholas-Applegate Mutual Funds is an open-end management investment company
consisting of a number of diversified investment portfolios, including the three
Series A Portfolios ("Portfolios") offered hereby. These Portfolios provide a
broad range of global investment opportunities which are suitable for different
investors.

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

WORLDWIDE GROWTH PORTFOLIO A seeks to maximize long-term capital appreciation.
It invests in the Nicholas- Applegate Worldwide Growth Fund, which in turn
invests in a global portfolio of equity securities of U.S. and foreign
companies.

INTERNATIONAL GROWTH PORTFOLIO A seeks to maximize long-term capital
appreciation. It invests in the Nicholas Applegate International Growth Fund,
which in turn invests in an international portfolio of equity securities of
foreign companies only.

EMERGING COUNTRIES PORTFOLIO A seeks to maximize long-term capital appreciation.
It invests in the Nicholas Applegate Emerging Countries Fund, which in turn
invests primarily in a diversified portfolio of equity securities of issuers
located in emerging markets. INVESTMENTS IN THIS PORTFOLIO SHOULD BE CONSIDERED
SPECULATIVE, SINCE THE PORTFOLIO WILL INVEST IN EMERGING MARKET COUNTRIES. SEE
"INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS," PAGE 10.

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

, 1996

<PAGE>
NICHOLAS--APPLEGATE MUTUAL FUNDS

- -------------------------------------------------
SERIES A GLOBAL PORTFOLIOS

WORLDWIDE GROWTH PORTFOLIO A
INTERNATIONAL GROWTH PORTFOLIO A
EMERGING COUNTRIES PORTFOLIO A

TABLE OF CONTENTS

Summary of Expenses......................................... 3
Prospectus Summary.......................................... 4
Financial Highlights........................................ 8
Investment Objectives, Policies and Risk
Considerations............................................ 8
Organization and Management................................. 14
Purchasing Shares........................................... 17
Shareholder Services........................................ 21
Redeeming Shares............................................ 23
Dividends, Distributions and Taxes.......................... 25
General Information......................................... 26
Appendix:
Investment Policies, Strategies
and Risks............................................... 28
Prior Performance......................................... 40

2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES

<TABLE>
<CAPTION>
WORLDWIDE INTERNATIONAL EMERGING
GROWTH GROWTH COUNTRIES
Portfolio Portfolio Portfolio
A A A
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a percentage of offering
price)(1) 5.25% 5.25% 5.25%
Sales charge on reinvested dividends None None None
Deferred sales charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower)(2) None None None
Redemption fee(3) None None None
Exchange fee None None None
- -------------------------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET
ASSETS:
(after expense deferral)(5)
Management fees 1.00% 1.00% 1.25%
12b-1 expenses 0.25% 0.25% 0.25%
All other expenses (after expense deferral)(4)
Shareholder service expenses 0.10% 0.10% 0.10%
Other expenses 0.50% 0.60% 0.65%
Total other expenses 0.60% 0.70% 0.75%
Total operating expenses (after expense deferral)(4) 1.85% 1.95% 2.25%
</TABLE>

The Board of Trustees of the Trust believes that the aggregate per share
expenses of each Portfolio are no greater than the expenses that the Portfolio
would incur if it retained the services of an investment adviser and the assets
of the Portfolio were invested directly in the types of securities held by the
corresponding Fund. For a detailed description of the expenses of the Portfolios
and the Funds in which they invest, see "Organization and Management."
- ---------------------------
(1) Sales charges are reduced for purchases of $50,000 or more of shares of the
Series A Portfolios. There is no initial sales charge on purchases of shares
of the Money Market Portfolio. The National Association of Securities
Dealers, Inc. limits total annual sales charges (including 12b-1 expenses)
to all purchasers of shares of a Portfolio to 6.25% of new sales plus an
interest factor. However, long-term shareholders may pay more than the
economic equivalent of such maximum sales charges. See "Alternative Purchase
Arrangements."

(3) A $10 charge will be imposed on redemptions requested to be paid by wire
transfer. See "Redeeming Shares-Redemption Payments."

(4) The Investment Adviser of the Master Trust has agreed to waive or defer its
fees, and to absorb other operating expenses, to ensure that the expenses
(other than interest, taxes, brokerage commissions and other portfolio
transaction expenses, capital expenditures and extraordinary expenses) for
each Portfolio will not exceed the following percentage of such Portfolio's
average net assets on an annual basis through March 31, 1997: Worldwide
Growth Portfolio A, 1.85%; International Growth Portfolio, 1.95%; and
Emerging Countries Portfolio A, 2.25%. In subsequent years, overall
operating expenses for each Portfolio will not fall below the applicable
percentage limitation until the Investment Adviser has fully recouped fees
deferred or expenses paid by the Investment Adviser under this agreement, as
each Portfolio will reimburse the Investment Adviser in subsequent years
when operating expenses (before recoupment) are less than the applicable
percentage limitation set forth above. Accordingly, until all such deferred
fees or expenses have been recouped by the Investment Adviser, the
Portfolios' expenses will be higher, and their yields will be lower, than
would otherwise be the case. See "Organization and Management-Expense
Limitation." Actual operating expenses for the Series A Portfolios for the
fiscal year ended March 31, 1996 were the following annualized percentages
of such Portfolios' average net assets: Worldwide Growth Portfolio A, 2.17%;
International Growth Portfolio A, 10.06%; and Emerging Countries Portfolio
A, 6.72%. The various operating expenses of the Portfolios are further
described under "Organization and Management."

3
<PAGE>
EXAMPLE OF PORTFOLIO EXPENSES. The following table illustrates the expenses that
a shareholder would pay on a hypothetical $1,000 investment in each of the
Portfolios over various time periods, assuming a 5% annual return. The
Portfolios charge no redemption fees. However, a contingent deferred sales
charge of 1.00% applies on redemptions of shares of a Series A Portfolio made
less than one year after a $1 million purchase of such shares.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
WORLDWIDE GROWTH
Portfolio A(1) $70 $108 $147 $258
- -------------------------------------------------------------------------------------
INTERNATIONAL GROWTH
Portfolio A(1) $71 $111 $152 $268
- -------------------------------------------------------------------------------------
EMERGING COUNTRIES
Portfolio A(1) $74 $119 $167 $297
- -------------------------------------------------------------------------------------
</TABLE>

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND A PORTFOLIO'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN. The hypothetical 5% annual return is used for illustrative purposes only
and should not be interpreted as an estimate of a Portfolio's annual return, as
there can be no guarantee of a Portfolio's future performance.

- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY

4
<PAGE>
consider alternative arrangements such as investing all of the Portfolio's
assets in another investment company with the same investment objective as the
Portfolio or hiring an investment adviser to manage the Portfolio's assets in
accordance with the Portfolio's investment policies. No assurance exists that
satisfactory alternative arrangements would be available.

INVESTMENT RISKS AND CONSIDERATIONS. INVESTMENT RISKS AND OTHER CONSIDERATIONS
RELEVANT TO THE SECURITIES IN WHICH THE PORTFOLIOS INVEST THROUGH CORRESPONDING
FUNDS ARE DESCRIBED UNDER "INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS" AND IN THE APPENDIX-INVESTMENT POLICIES, STRATEGIES AND RISKS.
They include the following:

The securities of many companies in which the Worldwide Growth, International
Growth and Emerging Countries Funds invest are subject to more volatile market
movements than securities of larger, more established companies because the
issuers are typically more subject to changes in earnings and prospects. The net
asset values of the corresponding Portfolios therefore can be expected to
experience above-average fluctuations, as above-average risk is assumed by the
Funds in investing in such growth companies in seeking higher than average
growth in capital.

In addition, investment by the Emerging Countries Fund in emerging markets
involves greater risks than other foreign investments, including less-developed
economic and legal structures; less stable political systems; illiquid
securities markets; possible expropriations, nationalization or confiscatory
taxation; and possible foreign currency devaluations and fluctuations. As a
result of these and other factors, the share prices of the Emerging Countries
Portfolio are expected to be volatile, and investment in the Portfolio should be
considered speculative and appropriate only as a long-term investment vehicle.
The Worldwide Growth and International Growth Funds may also invest a portion of
their assets in emerging market countries.

The investment approach of Nicholas-Applegate Capital Management (the
"Investment Adviser") results in above-average portfolio turnover for each Fund.
A high rate of portfolio turnover involves correspondingly greater brokerage
commission expenses, and may also result in the realization and distribution to
shareholders of net capital gains which are taxable to them as ordinary income
for federal tax purposes.

5
<PAGE>
close out a position because of the lack of a liquid market. Investment in such
derivative instruments may not be successful, and may reduce the returns and
increase the volatility of the Funds. See "Appendix: Investment Policies,
Strategies and Risks" in this Prospectus and "Investment Objectives, Policies
and Risks" in the Statement of Additional Information.

THE WORLDWIDE GROWTH AND INTERNATIONAL GROWTH FUNDS MAY ENGAGE IN SHORT SALES,
WHICH THEORETICALLY INVOLVE UNLIMITED LOSS POTENTIAL AND MAY BE CONSIDERED A
SPECULATIVE TECHNIQUE. See the description of the risks of short sales under
"Short Sales" in "Appendix: Investment Policies, Strategies and Risks."

Each Fund may invest up to 15% of its net assets in illiquid securities. Each
Fund may enter into repurchase agreements and lend its their portfolio
securities, which involve the risk of loss upon the default of the seller or
borrower. The Funds may also borrow money from banks for temporary purposes
which, among other risks, may require the Funds to sell portfolio securities to
meet interest and principal payments at an unfavorable time. See "Illiquid
Securities," "Repurchase Agreements," "Securities Lending" and "Borrowing" in
"Appendix: Investment Policies, Strategies and Risks."

The Investment Adviser is compensated for its services to the Funds in the form
of monthly fees at the following annual rates: for the Emerging Countries
Fund-1.25% of the Fund's net assets; for each of the Worldwide Growth and
International Growth Funds-1.00% of the first $500 million of the Fund's net
assets, 0.90% of the next $500 million and 0.85% of net assets in excess of $1
billion. See "Organization and Management."

DISTRIBUTOR. Nicholas-Applegate Securities (the "Distributor"), an affiliate of
the Investment Adviser, serves as distributor of shares of the Portfolios. Under
a Distribution Plan, the Distributor receives compensation for providing
distribution services for the Series A Portfolios at the annual rate of 0.25% of
net assets. Under a Shareholder Service Plan, the Distributor is reimbursed for
shareholder services it provides and for payments made to broker-dealers and
others for related support and recordkeeping services at an annual rate of up to
0.10% of each Series A Portfolio's net assets. See "Organization and
Management." Under a Distribution Agreement, the Distributor will also retain a
portion of the initial sales load on purchases of shares of the Series A
Portfolios and the contingent deferred sales load on redemptions of shares of
the Series A Portfolios. See "Organization and Management" and "Alternative
Purchase Arrangements."

6
<PAGE>
PURCHASE OF SHARES. Shares of the Portfolios may be purchased directly from the
Trust through its Transfer Agent or through selected dealers. Shares are
purchased at the next offering price, less a sales charge if applicable, after
an order is received in proper form by the Transfer Agent. The minimum initial
investment is $2,000 and the minimum subsequent investment is $100, but reduced
investment minimums are available in certain cases.

Shares of the Series A Portfolios are sold subject to a maximum sales charge of
5.25%. Reduced sales charges are available for purchases of $50,000 or more of
shares of a Series A Portfolio. No initial sales charge applies on a purchase of
$1 million or more of shares of a Series A Portfolio, but a contingent deferred
sales charge of 1.00% is imposed on redemptions made less than one year after
the $1 million purchase. The Trust offers a number of ways shareholders in a
Series A Portfolio can reduce their sales charges, including aggregation,
concurrent purchases, rights of accumulation and letters of intent. See
"Purchasing Shares."

SHAREHOLDER SERVICES. The following services are provided to shareholders of the
Portfolios for their convenience and flexibility: an automatic investment plan;
automatic reinvestment and cross-reinvestment of dividends and capital gains
distributions; an exchange privilege, including automatic exchanges; and
automatic withdrawals. See "Shareholder Services." The Trust also offers various
retirement plans through which you can invest in the Portfolios. See "Purchasing
Shares."

DIVIDENDS, DISTRIBUTIONS AND TAXES. The Worldwide Growth, International Growth
and Emerging Countries Portfolios declare and pay annual dividends of net
investment income. The Portfolios make distributions at least annually of any
net capital gains. All dividends and distributions will be paid in the form of
additional shares at net asset value unless cash payment is requested.

7
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
WORLDWIDE GROWTH INTERNATIONAL GROWTH EMERGING COUNTRIES
Portfolio A Portfolio A Portfolio A
4-19-93 4-1-94 4-1-95 8-31-94 4-1-95 11-28-94 4-1-95
to to to to to to to
3-31-94 3-31-95 3-31-96 3-31-95 3-31-96 3-31-95 3-31-96
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $ 12.50 $ 14.94 $ 14.29 $ 12.50 $ 11.51 $ 12.50 $ 11.00
Income from investment operations:
Net investment income (deficit) (0.07) (0.05) (0.07) -- (0.02) 0.04 (0.04)
Net realized and unrealized gains (losses)
on securities and foreign currency 2.51 (0.09) 2.86 (0.98) 1.79 (1.54) 3.15
--------- --------- --------- --------- --------- --------- ---------
Total from investment operations 2.44 (0.14) 2.79 (0.98) 1.77 (1.50) 3.11
Less distributions:
Dividends from net investment income -- (0.02) (0.12) (0.01) (0.13) -- (0.02)
Distributions from capital gains -- (0.49) (0.39) -- -- -- (0.06)
--------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period $ 14.94 $ 14.29 $ 16.57 $ 11.51 $ 13.15 $ 11.00 $ 14.03
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN:+ 19.52% (0.90%) 19.79% (7.85%) 15.46% (11.98%) 28.43%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 20,194 $ 22,208 $ 23,481 $ 610 $ 1,056 $ 1,197 $ 4,718
Ratio of expenses to average net assets,
after expense reimbursement++ 1.85%* 1.85% 1.85% 1.95%* 1.95% 2.25%* 2.25%
Ratio of expenses to average net costs,
before expense reimbursement++ 2.23%* 2.18% 2.17% 9.77%* 10.06% 6.15%* 6.72%
Ratio of net investment deficit to average
net assets, after expense reimbursement++ (0.69%)* (0.42%) (0.35%) (0.07%)* (0.27%) (1.09%)* (0.35%)
Ratio of net investment deficit to average
net assets, before expense reimbursement++ (1.07%)* (0.75%) (0.61%) (7.89%)* (7.75%) (4.99%)* (3.61%)
Portfolio turnover** 95.09% 98.54% 132.20% 74.85% 141.02% 60.79% 118.21%
Average commission rate paid** N/A N/A $ 0.0187 N/A $ 0.0128 N/A $ 0.0022
</TABLE>

- ------------------------
* Annualized

** For the corresponding Funds of the Master Trust

+ Computations do not reflect the Portfolio's sales charges

++ Includes expenses allocated from Master Trust Funds

- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of each Portfolio are discussed below and
in the "Appendix: Investment Policies, Strategies, and Risk."

8
<PAGE>
defined in the Investment Company Act of 1940 (the "Investment Company Act").
Upon any such approval, each Portfolio will provide at least 30 days' written
notice to its shareholders before any change is made to its or the corresponding
Fund's investment objective.

The Trust's Board of Trustees believes that the Portfolios will achieve certain
efficiencies and economies of scale through the "master/feeder" structure, and
that the aggregate expenses of the Portfolios will be less than if the
Portfolios invested directly in the securities held by the Funds. However, other
investment companies that offer their shares to the public also may invest all
or substantially all of their assets in the Funds. Accordingly, there may be
other investment companies through which you can invest indirectly in the Funds.
The fees charged by such other investment companies may be higher or lower than
those charged by the Portfolios, which may reflect, among other things,
differences in the nature and level of the services and features offered by such
companies to their shareholders. Information about the availability of other
investment companies that invest in the Funds can be obtained by calling (800)
551-8045.

9
<PAGE>

WORLDWIDE GROWTH PORTFOLIO A. Worldwide Growth Portfolio A seeks to maximize
long-term capital appreciation. The Portfolio invests all of its assets in the
Nicholas-Applegate Worldwide Growth Fund, which has the same investment
objective as the Worldwide Growth Portfolio. Assets of the Worldwide Growth Fund
are invested primarily in equity securities of U.S. and foreign companies. Such
companies may be in the earlier stages of development, growth companies,
cyclical companies or companies believed to be undergoing a basic change in
operations or markets which, in the opinion of the Investment Adviser, would
result in a significant improvement in earnings. The securities of such
companies may be subject to more volatile market movements than securities of
larger, more established companies. Although the Fund is not restricted to
investments in companies of any particular size, it currently intends to invest
principally in companies with smaller market capitalizations and above
(generally above $100 million). See "Appendix: Investment Policies, Strategies
and Risks" for a discussion of the risks associated with investment in such
companies.

The Worldwide Growth Fund may invest in securities issued by companies based or
operating in any country, including the United States. Under normal market
conditions, as a fundamental policy which cannot be changed without shareholder
approval, at least 65% of the Fund's total assets will be invested in securities
of issuers located in at least three countries, one of which may be the United
States. Under normal market conditions, the Fund may invest up to 50% of its
total assets in securities of U.S. issuers. With these exceptions, the Fund is
not driven by allocation considerations with respect to any particular
countries, geographic regions or economic sectors. Countries in which investment
opportunities will be sought include Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, the
United Kingdom and the United States. However, the Fund may also invest in
securities issued by companies based in other countries such as the countries of
Eastern Europe and South America, Indonesia, Korea, Mexico, the Philippines,
Portugal and Thailand. The Worldwide Growth Fund may also invest up to 10% of
its total assets in closed-end or open-end country funds. An investment in such
funds may result in duplication of fees. See "Appendix: Investment Policies,
Strategies and Risks" for a discussion of the risks associated with investment
in foreign securities.

Under normal market conditions, at least 75% of the Worldwide Growth Fund's
total assets will be invested in equity securities (common and preferred
stocks), and warrants and securities convertible into equity securities. The
remainder of the Worldwide Growth Fund's assets will be invested in debt
securities of foreign companies and foreign governments and their agencies and
instrumentalities which the Investment Adviser believes present attractive
opportunities for capital growth, as well as in various other securities and
instruments described in "Appendix: Investment Policies, Strategies and Risks."
The debt securities in which the Fund may invest will be rated "Baa" or higher
by Moody's, "BBB" or higher by S&P or equivalent ratings by other recognized
rating agencies, or will be unrated if determined by the Investment Adviser to
be of comparable quality. These securities are of investment grade, which means
that their issuers are believed to have adequate capacity to pay interest and
repay principal, although certain of such securities in the lower grades have
speculative characteristics, and changes in economic conditions or other
circumstances may be more likely to lead to a weakened capacity to pay interest
and principal than would be the case with higher rated securities. If the rating
of a debt security held by the Fund is downgraded below investment grade, the
security will be sold as promptly as practicable. The Fund may also

10
<PAGE>
make short sales, which is considered a speculative technique. See "Appendix:
Investment Policies, Strategies and Risks" for a discussion of the risks
associated with short sale transactions.

INTERNATIONAL GROWTH PORTFOLIO A. International Growth Portfolio A seeks to
maximize long-term capital appreciation. The Portfolio invests all of its assets
in the Nicholas-Applegate International Growth Fund, which has the same
investment objective as the International Growth Portfolio. Assets of the
International Growth Fund are invested in the same types of securities as the
Worldwide Growth Fund, except that the International Growth Fund may invest up
to 35% of its total assets in securities of U.S. companies. Under normal market
conditions, as a fundamental policy which cannot be changed without shareholder
approval, at least 65% of the Fund's total assets will be invested in securities
of issuers located in at least three countries. See "Worldwide Growth Portfolio
A and Portfolio B" above.

EMERGING COUNTRIES PORTFOLIO A. Emerging Countries Portfolio A seeks to maximize
long-term capital appreciation. The Portfolio invests all of its assets in the
Nicholas-Applegate Emerging Countries Fund, which has the same investment
objective as the Portfolio. Assets of the Fund are invested primarily in equity
securities of issuers located in countries with emerging securities markets-that
is, countries with securities markets which are, in the opinion of the
Investment Adviser, emerging as investment markets but have yet to reach a level
of maturity associated with developed foreign stock markets, especially in terms
of participation by foreign investors. The Fund currently expects to invest in
issuers located in some or all of the following emerging market countries:
Argentina, Brazil, Chile, China, Colombia, the Czech Republic, Greece, Hungary,
India, Indonesia, Israel, Jordan, Malaysia, Mexico, Morocco, Pakistan, Peru, the
Philippines, Poland, Portugal, Singapore, Sri Lanka, South Africa, South Korea,
Taiwan, Thailand, Turkey and Venezuela. At the discretion of the Investment
Adviser, the Fund may also invest in other countries with emerging securities
markets. See "Appendix: Investment Policies, Strategies and Risks" for a
discussion of the risks associated with investment in emerging markets
countries.

Under normal market conditions, as a fundamental policy which cannot be changed
without shareholder approval, at least 65% of the Emerging Countries Fund's
total assets will be invested in securities of issuers located in at least three
different countries. With this exception, the Fund is not driven by allocation
considerations with respect to any particular countries, geographic regions or
economic sectors. Although the Fund is authorized to invest more than 25% of its
total assets in the securities of issuers located in any one country, it does
not currently intend to do so. The Investment Adviser currently selects
portfolio securities for the Fund from an investment universe of approximately
6,000 foreign issuers in 20 emerging markets.

The Fund may invest up to 10% of its total assets in closed-end or open-end
country funds. Under normal market conditions, the Fund may invest up to 35% of
its total assets in securities of U.S. companies. In addition, the Fund may also
invest up to 20% of its total assets in securities of issuers that are not
domiciled or do not have their principal places of business in developing
countries, but that have or will have substantial assets in developing
countries, or derive or expect to derive a substantial portion of their total
revenues from either goods and services produced in, or sales made in,
developing countries.

11
<PAGE>
and instrumentalities which the Investment Adviser believes present attractive
opportunities for capital growth, as well as in various other securities and
instruments described in "Appendix: Investment Policies, Strategies and Risks."

The debt securities in which the Emerging Countries Fund may invest will be
rated "Baa" or higher by Moody's, "BBB-" or higher by S&P or equivalent ratings
by other recognized rating agencies, or will be unrated if determined by the
Investment Adviser to be of comparable quality. At least 75% of the Fund's total
assets invested in such securities will be invested in securities rated A or
better by Moody's or S&P or, if unrated, determined to be of comparable quality
by the Investment Adviser. See "Worldwide Growth Portfolio A and Portfolio B"
for a description of these investment grade securities. If the rating of a debt
security held by the Fund is downgraded below investment grade, the security
will be sold as promptly as practicable.

12
<PAGE>
country funds; depository receipts; over-the-counter securities; when-issued
securities and firm commitment agreements; foreign exchange contracts; put and
call options on securities; stock index futures contracts; repurchase
agreements; illiquid securities; securities lending; and borrowing.

Certain of the investment restrictions which are fundamental policies are set
forth below. Additional investment restrictions are discussed in the Appendix
and Statement of Additional Information.

2. No Portfolio or Fund may purchase more than 10% of the outstanding voting
securities of any one issuer, or purchase the securities of any issuer for
the purpose of exercising control.

5. No Portfolio or Fund may invest more than 15% of its net assets in
illiquid securities.

The investment restrictions described above do not apply to an investment by a
Portfolio of all of its assets in a corresponding Fund.

PORTFOLIO TURNOVER. The Investment Adviser's investment approach results in
above-average portfolio turnover for each Fund as the Investment Adviser sells
portfolio securities when it believes the reasons for their initial purchase are
no longer valid or when it believes that the sale of a security owned by a Fund
and the purchase of another security of better value can enhance principal or
increase income. A security may also be sold to avoid a prospective decline in
market value or purchased in anticipation of a market rise. Although it is not
possible to predict future portfolio turnover rates accurately, and such rates
may vary greatly from year to year, the Investment Adviser anticipates that the
annual portfolio turnover rate for each Fund may be up to 200%, which is
substantially greater than that of many other investment companies. A high rate
of portfolio turnover (100% or more) will result in a Fund paying greater
brokerage commissions on equity securities (other than those effected with
dealers on a principal basis) than would otherwise be the case, which will be
borne directly by the Fund and ultimately by the shareholders of the
corresponding Portfolios. High portfolio turnover should not result in a Fund
paying greater brokerage commissions on debt securities, as most transactions in
debt securities are effected with dealers on a principal basis. However,

13
<PAGE>

debt securities, as well as equity securities traded on a principal basis, are
subject to mark-ups by the dealers. High portfolio turnover may also result in
the realization of substantial net capital gains, and any distributions derived
from such gains may be ordinary income for federal tax purposes.

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ORGANIZATION AND MANAGEMENT

INVESTMENT ADVISER. The Trust has not retained the services of an investment
adviser for the Portfolios, as the Portfolios seek to achieve their investment
objectives by investing all of their assets in corresponding Funds.
Nicholas-Applegate Capital Management, 600 West Broadway, 30th Floor, San Diego,
California 92101, serves as the Investment Adviser to the Funds. The Investment
Adviser currently manages approximately $30 billion of discretionary assets for
numerous clients, including employee benefit plans of corporations, public
retirement systems and unions, university endowments, foundations and other
institutional investors, and individuals. The Investment Adviser was organized
in 1984 as a California limited partnership. Its general partner is
Nicholas-Applegate Capital Management Holdings, L.P., a California limited
partnership controlled by Arthur E. Nicholas. He and 13 other partners manage a
staff of approximately 325 employees.

As compensation for the services it provides, the Investment Adviser receives a
monthly fee at the following annual rates: for the Emerging Countries Fund,
1.25% of the Fund's net assets; for each of the Worldwide Growth and
International Funds Growth, 1.00% on the first $500 million of the Fund's net
assets, 0.90% on the next $500 million of net assets, and 0.85% on net assets in
excess of $1 billion. The advisory fees paid by the Funds are higher than those
paid by most other investment companies.

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Advisers for more than the last five years. Mr. Speidell has been a portfolio
manager with the Investment Adviser since March 1994; from 1983 until he joined
the Investment Adviser, he was an institutional portfolio manager with
Batterymarch Financial Management.

ADMINISTRATOR. Investment Company Administration Corporation, a Delaware
corporation, is the Administrator of each Portfolio. Pursuant to an
Administration Agreement with the Trust, and subject to the supervision of the
Board of Trustees of the Trust, the Administrator supervises the overall
administration of the Trust. Its responsibilities include preparing and filing
all documents required for compliance by the Trust with applicable laws and
regulations, arranging for the maintenance of books and records of the Trust and
supervision of other organizations that provide services to the Trust. Certain
officers of the Trust are also provided by the Administrator. For the services
it provides to the Trust, the Administrator receives an annual fee of between
$5,000 and $35,000 for each of the groups of portfolios of the Trust investing
in the various series of the Master Trust; the fee is allocated among the
various series of the Trust, including the Portfolios, in accordance with
relative net asset values. The Administrator provides similar services as the
administrator of the Master Trust, subject to the supervision of its Board of
Trustees, and is compensated separately for the services rendered to each Fund
at an annual rate of approximately 0.02% of the average daily net assets of the
Fund.

EXPENSE LIMITATION. To limit the expenses of each Portfolio, the Investment
Adviser has agreed to defer its fees, and to absorb the other operating expenses
of each Portfolio, to ensure that the expenses of each Portfolio (excluding
interest, taxes, brokerage commissions and other portfolio transaction expenses,
capital expenditures and extraordinary expenses, but including such Portfolio's
proportionate share of the corresponding Fund's similar operating expenses) do
not exceed the following percentage of the Portfolio's average net assets on an
annual basis through March 31, 1997: Worldwide Growth Portfolio A-1.85%;
International Growth Portfolio A-1.95%; and Emerging Countries Portfolio
A-2.25%. Each Portfolio will reimburse the Investment Adviser for fees deferred
or other expenses paid by the Investment Adviser pursuant to this agreement in
later years in which operating expenses for the Portfolio are less than the
applicable percentage limitation set forth above for any such year. No interest,
carrying or finance charge will be paid by a Portfolio with respect to any
amounts representing fees deferred or other expenses paid by the Investment
Adviser. In addition, no Portfolio or Fund will be required to repay any
unreimbursed amounts to the Investment Adviser upon termination or non-renewal
of its Investment Advisory Agreement with the Master Trust.

For the fiscal year ended March 31, 1996, the Series A Portfolios' total
expenses were the following percentages of their respective average net assets,
after the fee deferrals and expense reimbursements indicated in parentheses:
Worldwide Growth Portfolio A-1.85% (0.32%); International Growth Portfolio
A-1.95% (8.11%); and Emerging Countries Portfolio A, 2.25% (4.47%).

For historical performance data relating to the Portfolios, see "Appendix: Prior
Performance."

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<PAGE>
distribution of shares of such Portfolio. The Trust has also adopted a
Shareholder Service Plan under which each Portfolio reimburses the Distributor
for shareholder servicing expenses actually incurred with respect to shares of
such Portfolio.

Under the Distribution Plan and a related distribution agreement (the
"Distribution Agreement"), the Distributor incurs the expenses of distributing
each Portfolio's shares. These expenses include advertising and marketing
expenses, commissions and other payments to broker-dealers and others which have
entered into agreements with the Distributor, the expenses of preparing,
printing and distributing prospectuses for the Portfolios, and indirect and
overhead costs associated with the sale of Portfolio shares. The Distributor
recovers the distribution expenses it incurs through the receipt of compensation
payments from each Portfolio under the Distribution Plan at the annual rate of
0.25% of the Portfolio's average daily net assets. Moreover, under the
Distribution Agreement, the Distributor retains a portion of an initial sales
charge from purchases of shares of the Series A Portfolios, and a contingent
deferred sales charge from certain redemptions of shares of the Series A
Portfolios. The Distribution Plan is a "compensation" plan, which means that the
distribution fees paid by the Portfolios under the Distribution Plan are
intended to compensate the Distributor for services rendered and commission fees
borne even if the amounts paid exceed the Distributor's actual expenses (in
which case the Distributor would realize a profit). If in any year the
Distributor's expenses incurred in connection with the distribution of a
Portfolio's shares exceed the distribution fees paid by the Portfolio, the
Distributor will recover such excess if the Distribution Plan with respect to
such shares continues to be in effect in some later year when the distribution
fees exceed the Distributor's expenses with respect to the Portfolio. There is
no limit on the periods during which unreimbursed expenses may be carried
forward; no Portfolio pays interest, carrying or other finance charges on any
carried forward amounts; and no Portfolio will be obligated to pay any
unreimbursed expenses that may exist at such time, if any, as the Distribution
Plan terminates or is not continued.

Under the Shareholder Service Plan, which is a "reimbursement" plan, each Series
A Portfolio pays the Distributor an annual fee of up to 0.10% of the Portfolio's
average daily net assets as reimbursement for certain expenses actually incurred
in connection with shareholder services provided by the Distributor and payments
to broker-dealers and others for the provision of such services. Support
services with respect to the beneficial owners of Portfolio shares include
establishing and maintaining accounts and records relating to clients of the
Distributor, broker-dealers and others who invest in the Portfolio shares,
preparing tax reports, assisting clients in processing exchange and redemption
requests and account designations, and responding to client inquiries concerning
their investments. If in any month the Distributor is due more monies for
shareholder services than are immediately payable because of the expense
limitations under the Shareholder Service Plan, the unpaid amount is carried
forward from month to month while the Shareholder Service Plan is in effect
until such time when it may be paid. However, no carried forward amount will be
payable beyond the fiscal year during which the amounts were incurred, and no
interest, carrying or other finance charge is borne by the Portfolios with
respect to any amount carried forward.

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No fees or commissions will be paid by the Distributor to any broker-dealer or
others until amounts owed to such broker-dealer or others are at least $100. The
Distributor, at its expense, may provide additional promotional incentives to
brokers and dealers. In the case of dealers who institute special promotional
programs for sales of shares of the Series A Portfolios or other series of the
Trust, such incentives may be up to 0.50% of sales during the promotion period.
Dealers may obtain further information by calling (800) 551-8045.

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PURCHASING SHARES

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Each Portfolio reserves the right to reject any purchase order or to suspend or
modify the continuous offering of its shares. Your dealer is responsible for
forwarding payment promptly to the Transfer Agent. The Trust reserves the right
to cancel any purchase order for which payment has not been received by the
third business day following the investment. Transactions in Portfolio shares
made through dealers other than the Transfer Agent may be subject to postage and
handling charges imposed by the dealer.

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<PAGE>
The sales charges you pay when purchasing shares of a Series A Portfolio are set
forth below:

In addition, although no initial sales charge applies on a purchase of $1
million or more of any of the Series A Portfolios, a contingent deferred sales
charge of 1.00% is imposed on certain redemptions less than one year after the
$1 million purchase. See "Redeeming Shares-Contingent Deferred Sales Charge on
Redemptions of Portfolio A Shares." Commissions will be paid by the Distributor
to dealers who initiate and are responsible for purchases of $1 million or more
and for purchases made at net asset value by certain retirement plans of
organizations with 50 or more eligible employees as set forth in the Statement
of Additional Information.

NET ASSET VALUE PURCHASES. The Trust may sell shares of a Series A Portfolio at
net asset value to:

(1) current or retired directors, trustees, partners, officers and employees
of the Trust, the Master 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;

(2) current or retired registered representatives or full-time employees and
their spouses and minor children of dealers having selling group
agreements with the Trust and plans for such persons;

(3) former limited partners and participants of certain investment
partnerships and pooled trusts previously managed by the Investment
Adviser;

(4) shareholders and former shareholders of another mutual fund which has a
sales charge and is not a series of the Trust, so long as shares of the
Portfolio are purchased with the proceeds of a redemption, made within 60
days of the purchase, of shares of such other mutual fund (to obtain this
benefit, the redemption check, endorsed to the Trust, or a copy of the
confirmation showing the redemption must be forwarded to the Transfer
Agent);

(5) companies or other entities exchanging securities with the Trust or
Master Trust through a merger, acquisition or exchange offer;

(6) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with 50 or more eligible employees;

(7) participants in certain pension, profit-sharing or employee benefit
plans that are sponsored by the Distributor and its affiliates;

(8) investment advisers and financial planners who place trades for their
own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services;

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<PAGE>

(9) clients of investment advisers and financial planners referred to in
item (8) who place trades for their own accounts if the accounts are
linked to the master account of the investment adviser or financial
planner on the books and records of a broker, agent, investment adviser
or financial institution;

(10) employee-sponsored benefit plans in connection with redemptions of
shares of Series A or C Portfolios made as a result of
participant-directed exchanges between options in such a plan;

(11) "wrap accounts" for the benefit of the clients of broker-dealers,
financial institutions or financial planners having sales or service
agreements with the Distributor or another broker-dealer or financial
institution with respect to sales of shares of the Series A Portfolios;
and

CONCURRENT PURCHASES. To qualify for a reduced sales charge, you may combine
concurrent purchases of shares of two or more Series A Portfolios. Shares of the
Trust's Money Market Portfolio purchased through an exchange, reinvestment or
cross-investment from a Series A Portfolio also qualify. For example, if you
concurrently invest $25,000 in one Portfolio and $25,000 in another Portfolio,
the sales charge would be reduced to reflect a $50,000 purchase.

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<PAGE>
LETTER OF INTENT. You may reduce sales charges on all investments by meeting the
terms of a letter of intent, a non-binding commitment to invest a certain amount
within a 13-month period. Your existing holdings in the Series A Portfolios may
also be combined with the investment commitment set forth in the letter of
intent to further reduce your sales charge. Up to 5% of the letter amount will
be held in escrow to cover additional sales charges which may be due if your
total investments over the letter period are not sufficient to qualify for a
sales charge reduction. See the account application for further details.

OTHER PORTFOLIOS. Currently, the Trust offers eight Series A Portfolios, eight
Series B Portfolios, eight Series C Portfolios and a Money Market Portfolio.
Three global Series A Portfolios are offered pursuant to this Prospectus. Five
domestic Series A, B and C Portfolios, the Money Market Portfolio, and the
global Series B and Series C Portfolios, are covered by separate prospectuses
which can be obtained by calling (800) 551-8045.

The Distributor also offers shares of other portfolios of the Trust which invest
in the same Funds of the Master Trust as the Series A Portfolios. These other
portfolios have different sales charges and other expenses than the Series A
Portfolios, which may affect their performance. Information about these other
portfolios can be obtained from your dealer or by calling (800) 551-8045.

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SHAREHOLDER SERVICES

AUTOMATIC INVESTMENT PLAN. You may make regular monthly or quarterly investments
in each Portfolio 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
(800) 551-8043.

CROSS-REINVESTMENT. You may cross-reinvest dividends or dividends and capital
gain distributions paid by one Series A Portfolio into shares of another Series
A Portfolio subject to conditions outlined in the Statement of Additional
Information. Cross-reinvestment of dividends and capital gain distributions may
also be made from and to the Trust's Money Market Portfolio. Generally, to use
this service the value of your account in the Portfolio which paid the dividend
or capital gain distribution must equal at least $5,000.

EXCHANGE PRIVILEGE. You may exchange shares of a Series A Portfolio into shares
of other Series A Portfolios by writing to the Transfer Agent, State Street Bank
and Trust Company,

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Attention: Nicholas-Applegate Mutual Funds, P.O. Box 8326, Boston, Massachusetts
02266-8326. Shares may also be exchanged to or from the Trust's Money Market
Portfolio. Please specify the name of the applicable Portfolio, the number of
shares or dollar amount to be exchanged and your name and account number. You
may also exchange shares by contacting your dealer or-if you have authorized
telephone exchanges on the account application-by telephoning the Transfer Agent
at (800) 551-8043 or by sending the Transfer Agent a facsimile at (617)
774-2651, between the hours of 8:00 A.M. and 4:00 P.M. (Eastern time) on a day
when the New York Stock Exchange is open for normal trading (see "Telephone
Privilege" below).

The Trust's exchange privilege is not intended to afford shareholders a way to
speculate on short-term market movements. Accordingly, the Trust reserves the
right to limit the number of exchanges a shareholder may make in any year, to
avoid excessive Portfolio expenses. In order to prevent excessive use of the
exchange privilege that may potentially disrupt the management of the Emerging
Countries Portfolios and increase transaction costs, the Portfolios have
established a policy of limiting excessive exchange activity. Exchange activity
generally will not be deemed excessive if limited to two substantive exchange
redemptions, at least 30 days apart, from either Portfolio during any twelve
month period. In addition, the Portfolios reserve the right to reject any
exchange request that is deemed to be disruptive to efficient portfolio
management. Any such restriction will be made by the Emerging Countries
Portfolio on a prospective basis only, upon notice to the shareholder not later
than ten days following such shareholder's most recent exchange.

Before effecting an exchange, you should obtain the currently effective
prospectus of the series into which the exchange is to be made. Exchange
purchases are subject to the minimum investment requirements of the Portfolio
purchased. No sales charge applies except for exchanges of shares of the Trust's
Money Market Portfolio for shares of a Series A Portfolio, which are subject to
applicable sales charges on the Series A Portfolio being purchased unless the
Money Market Portfolio shares were acquired by an exchange from a Series A
Portfolio having a sales charge, or by reinvestment or cross-investment of
dividends or capital gain distributions. Additionally, a contingent deferred
sales load may apply to certain redemptions of shares of the Trust's Money
Market Portfolio acquired in an exchange for shares of a Series A Portfolio. See
"Purchasing Shares" above. An exchange will be treated as a redemption and
purchase for tax purposes. If certificates are held by you, the certificates,
signed in the name(s) shown on the face of the certificates, must be returned in
order for the shares to be exchanged.

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The Trust will employ procedures designed to provide reasonable assurance that
instructions communicated by telephone are genuine and, if it does not do so, it
may be liable for any losses due to unauthorized or fraudulent instructions. The
procedures employed by the Trust include requiring personal identification by
account number and social security number, tape recording of telephone
instructions, and providing written confirmation of transactions. The Trust
reserves the right to refuse a telephone exchange or redemption request if it
believes, for example, that the person making the request is neither the record
owner of the shares being exchanged or redeemed nor otherwise authorized by the
shareholder to request the exchange or redemption. Shareholders will be promptly
notified of any refused request for a telephone exchange or redemption. No
Portfolio or its agents will be liable for any loss, liability or cost which
results from acting upon instructions of a person reasonably believed to be a
shareholder with respect to the telephone privilege.

AUTOMATIC EXCHANGES. You may automatically exchange shares (in increments of $50
or more) among any of the Series A Portfolios or with the Trust's Money Market
Portfolio on a monthly or quarterly basis. You must either meet the minimum
initial investment requirement for the receiving Portfolio or the originating
Portfolio's balance must be at least $5,000 and the receiving Portfolio's
minimum must be met within one year.

REPORTS TO SHAREHOLDERS. Each Portfolio will send its shareholders 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 Portfolios may provide one annual and semi-annual report
and annual prospectus per household. In addition, quarterly unaudited financial
data are available from the Portfolios upon request.

SHAREHOLDER INQUIRIES. Shareholder inquiries should be addressed to the Trust,
c/o State Street Bank and Trust Company, Attention: Nicholas-Applegate Mutual
Funds, P.O. Box 8326, Boston, Massachusetts 02266-8326. Telephone inquiries can
be made by calling (800) 551-8043 or, from outside the U.S., (617) 774-5000
(collect).

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REDEEMING SHARES

HOW TO REDEEM SHARES. You may redeem shares of any Portfolio by writing to the
Transfer Agent, State Street Bank and Trust Company, Attention:
Nicholas-Applegate Mutual Funds, P.O. Box 8326, Boston, Massachusetts
02266-8326. Please specify the name of the Portfolio, the number of shares or
dollar amount to be sold and your name and account number. You

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<PAGE>
should also enclose any certificated shares you wish to redeem. Shares may also
be redeemed by contacting your dealer, who may charge you for this service.
Shares held in street name must be redeemed through your dealer.

If redemption is requested by a corporation, partnership, trust or fiduciary,
written evidence of authority acceptable to the Transfer Agent must be submitted
before such request will be accepted. If the proceeds of the redemption exceed
$50,000, are to be paid to a person other than the record owner, are to be sent
to an address other than the address on the Transfer Agent's records, or are to
be paid to a corporation, partnership, trust or fiduciary, the signature(s) on
the redemption request and on the certificates, if any, or stock powers may be
required to be guaranteed by an "eligible guarantor," which includes a bank or
savings and loan association that is federally insured or a member firm of a
national securities exchange.

Except as noted in the discussions of contingent deferred sales charges below
the price you receive for the Portfolio shares redeemed is at the next
determined net asset value for the shares after a completed redemption request
is received by the Transfer Agent.

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<PAGE>

value of the shares redeemed (exclusive of reinvested dividends and capital gain
distributions) or the total cost of such shares. The charge will be deducted
from the redemption proceeds and will reduce the amount paid to you. The charge
is waived for:

(1) exchanges for other Portfolio A Shares (except if shares acquired by
exchange are then redeemed within 12 months of the initial purchase);

(2) redemptions in connection with mergers, acquisitions and exchange offers
involving a Series A Portfolio;

(3) qualifying distributions from qualified retirement plans and other
employee benefit plans;

(4) distributions from custodial accounts under Section 403(b)(7) of the
Internal Revenue Code or from IRAs due to death, disability or attainment
of age 59 1/2;

(5) tax-free returns of excess contributions to IRAs;

(6) any partial or complete redemptions following the death or disability of
a shareholder, provided the redemption is made within one year of death
or initial determination of disability;

(7) redemptions through certain automatic withdrawals; and

(8) redemptions by qualified retirement and employee benefit plans with 50
or more eligible employees. There is no contingent deferred sales charge
on redemptions of shares of the Money Market Portfolio unless such shares
were acquired in an exchange for shares of a Series A Portfolio and the
redemption is made less than one year after the initial $1 million
purchase of such shares.

REINSTATEMENT PRIVILEGE. You may reinvest proceeds from a redemption of
Portfolio shares, or proceeds of a dividend or capital gain distribution paid to
you with respect to Portfolio shares, without a sales charge in any of the
Portfolios. Upon such a reinvestment, the Distributor will credit to your
account any contingent deferred sales charge imposed on the redeemed shares.
Send a written request and a check to the Transfer Agent within 90 days after
the date of the redemption, dividend or distribution. Reinvestment will be at
the next calculated net asset value after receipt. The tax status of a gain
realized on a redemption will not be affected by exercise of the reinstatement
privilege, but a loss may be nullified if you reinvest in the same series within
30 days.

INVOLUNTARY REDEMPTION. In order to reduce expenses of a Portfolio, the Trust
may redeem all of the shares of any shareholder whose account has a net asset
value of less than $500 due to redemptions other than a shareholder which is an
IRA or other tax-deferred retirement plan. The Trust will give such shareholders
60 days' prior written notice in which to purchase sufficient additional shares
to avoid such redemption. No contingent deferred sales charge is imposed on such
redemptions.

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DIVIDENDS, DISTRIBUTIONS AND TAXES

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reinvested. Any net long-term capital gains distributed to shareholders will be
taxable as such to the shareholders, whether or not reinvested and regardless of
the length of time a shareholder has owned his shares.

The Worldwide Growth, International Growth and Emerging Countries Portfolios
declare and pay annual dividends of net investment income. Each Portfolio makes
distributions at least annually of its net capital gains, if any. In determining
amounts of capital gains to be distributed by a Portfolio, any capital loss
carryovers from prior years will be offset against its capital gains.

You should consult your own tax adviser regarding specific questions as to
federal, state or local taxes. See "Taxes" in the Statement of Additional
Information.

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GENERAL INFORMATION

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Morningstar Inc., other industry publications, business periodicals, rating
services and market indices. See "Appendix: Prior Performance," and "Performance
Information" in the Statement of Additional Information.

Further information about the performance of the Portfolios is contained in the
Trust's 1996 Annual Report to Shareholders, which may be obtained without charge
by calling (800) 551-8043.

DESCRIPTION OF SHARES. The Portfolios are series of Nicholas-Applegate Mutual
Funds on open-end management investment company. The Trust was organized in
December 1992 as a Delaware business trust. The Trust is authorized to issue an
unlimited number of shares of each Portfolio. Shares of a Portfolio, when
issued, are fully paid, nonassessable, fully transferable and redeemable at the
option of the holder. Shares of a Portfolio are also redeemable at the option of
the Trust under certain circumstances. There are no conversion, preemptive or
other subscription rights. In the event of liquidation, each share of a
Portfolio is entitled to its portion of all of the Portfolio's assets after all
debts and expenses of the Portfolio have been paid. Pursuant to the Trust's
Declaration of Trust, the Board of Trustees of the Trust may authorize the
creation of additional series, and classes within series, with such preferences,
privileges, limitations and voting and dividend rights as the Board may
determine.

MASTER TRUST. The Funds are series of Nicholas-Applegate Investment Trust, a
diversified, open-end management investment company organized as a Delaware
business trust in December 1992. The trustees and officers of the Master Trust
are described in the Statement of Additional Information. Whenever a Portfolio
is requested to vote on matters pertaining to the corresponding Fund or the
Master Trust in its capacity as a shareholder of such Fund, the Trust will hold
a meeting of its shareholders and will cast its vote as instructed by such
shareholders or, in the case of a matter pertaining exclusively to the
corresponding Fund, as instructed particularly by shareholders of the Portfolio
and other series of the Trust which invest in the Fund. The Trust will vote
shares for which it has received no voting instructions in the same proportion
as the shares for which it does receive voting instructions.

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APPENDIX

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INVESTMENT POLICIES, STRATEGIES AND RISKS

The investment policies and strategies of the Portfolios (as implemented through
their investment in corresponding Funds) encompass the following securities,
techniques and risk considerations.

SHORT-TERM INVESTMENTS (ALL FUNDS). Each of the Funds may invest in short-term
investments to maintain liquidity for redemptions or during periods when, in the
opinion of the Investment Adviser, attractive investments are temporarily
unavailable. Under normal circumstances, no more than 10% of a Fund's total
assets will be retained in cash (U.S. dollars, foreign currencies or
multinational currency units) and cash equivalents. In addition, each Fund may
invest without restriction in short-term investments for temporary defensive
purposes, such as when the securities markets or economic conditions are
expected to enter a period of decline. Short-term investments in which the Funds
may invest include U.S. Treasury bills or other U.S. Government or Government
agency or instrumentality obligations; certificates of deposit; bankers'
acceptances; time deposits; high quality commercial paper and other short-term
high grade corporate obligations; shares of money market mutual funds; or
repurchase agreements with respect to such securities. These instruments are
described below. The Funds will only invest in short-term investments which, in
the opinion of the Investment Adviser present minimal credit and interest rate
risk.

Each of the Funds may invest in sovereign debt securities of emerging market
governments and their agencies and instrumentalities. Investments in such
securities involve special risks. The issuer of the debt or the governmental
authorities that control the repayment of the debt may be unable or unwilling to
pay principal or interest when due in accordance with the terms of the debt.
Periods of economic uncertainty may result in the volatility of market prices of
sovereign debt, and in turn the Fund's net asset value, to a greater extent than
the volatility inherent in domestic fixed income securities.

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CERTIFICATES OF DEPOSIT, TIME DEPOSITS AND BANKERS' ACCEPTANCES (ALL
FUNDS). Each of the Funds may invest in certificates of deposit, time deposits
and bankers' acceptances issued by domestic banks, foreign banks, foreign
branches of domestic banks, domestic and foreign branches of foreign banks, and
domestic savings and loan associations, all of which at the date of investment
have capital, surplus and undivided profits as of the date of their most recent
published financial statements in excess of $100 million, or less than $100
million if the principal amount of such bank obligations is insured by the
Federal Deposit Insurance Corporation. Certificates of deposit are certificates
evidencing the obligation of a bank to repay funds deposited with it for a
specified period of time. Time deposits are non-negotiable deposits maintained
in a banking institution for a specified period of time at a stated interest
rate. Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer; these instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity.

VARIABLE RATE DEMAND SECURITIES (ALL FUNDS). Each of the Funds may purchase
floating and variable rate demand notes and bonds, which are obligations
ordinarily having stated maturities in excess of one year, but which permit the
holder to demand payment of principal at any time, or at specified intervals not
exceeding one year, in each case upon not more than 30 days' notice. Variable
rate demand notes include master demand notes, which are obligations that permit
a Fund to invest fluctuating amounts, which may change daily without penalty.
The interest rates on these notes are adjusted at designated intervals or
whenever there are changes in the market rates of interest on which the interest
rates are based. The issuer of such obligations normally has a corresponding
right, after a given period, to prepay in its discretion the outstanding
principal amount of the obligations plus accrued interest upon a specified
number of days' notice to the holders of such obligations. Because these
obligations are direct lending arrangements between the lender and borrower, it
is not contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value. Such obligations frequently are not rated by
credit rating agencies and a Fund may invest in obligations which are not so
rated only if the Investment Adviser determines that at the time of investment
the obligations are of comparable quality to the other obligations in which the
Fund may invest. The Investment Adviser will monitor the creditworthiness of the
issuers of such obligations and their earning power and cash flow, and will also
consider situations in which all holders of such notes would redeem at the same
time. Investment by a Fund in floating or variable rate demand obligations as to
which it cannot exercise the demand feature on not more than seven days' notice
will be subject to the Fund's limit on illiquid securities of 15% (10% in the
case of the Money Market Fund) of net assets if there is no secondary market
available for these obligations.

CORPORATE DEBT SECURITIES (ALL FUNDS). The non-convertible corporate debt
securities in which the Funds may invest include obligations of varying
maturities (such as debentures, bonds and

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notes) over a cross-section of industries. The value of a debt security changes
as interest rates fluctuate, with longer-term securities fluctuating more widely
in response to changes in interest rates than those of shorter-term securities.
A decline in interest rates usually produces an increase in the value of debt
securities, while an increase in interest rates generally reduces their value.
For short-term purposes, all Funds may invest in corporate obligations issued by
domestic and foreign issuers which mature in one year or less and which are
rated "Aa" or higher by Moody's, "AA" or higher by S&P, rated in the two highest
rating categories by any other NRSRO, or which are unrated but determined by the
Investment Adviser to be of minimal credit risk and comparable quality.

CONVERTIBLE SECURITIES AND WARRANTS (ALL FUNDS). Each of the Funds may invest in
securities which may be exchanged for, converted into, or exercised to acquire a
predetermined number of shares of the issuer's common stock at the option of the
holder during a specified time period (such as convertible preferred stocks,
convertible debentures and warrants). Convertible securities generally pay
interest or dividends and provide for participation in the appreciation of the
underlying common stock but at a lower level of risk because the yield is higher
and the security is senior to common stock. Convertible securities may also
include warrants which give the holder the right to purchase at any time during
a specified period a predetermined number of shares of common stock at a fixed
price but which do not pay a fixed dividend. Investments in warrants involve
certain risks, including the possible lack of a liquid market for resale,
potential price fluctuations as a result of speculation or other factors, and
the failure of the price of the underlying security to reach or have reasonable
prospects of reaching a level at which the warrant can be prudently exercised,
in which event the warrant may expire without being exercised, resulting in a
loss of a Fund's entire investment therein. As a matter of operating policy, no
Fund will invest more than 5% of its net assets in warrants.

Convertible debt securities purchased by the Funds, which are acquired in
substantial part for their equity characteristics, are not subject to minimum
rating requirements.

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<PAGE>

EURODOLLAR CONVERTIBLE SECURITIES (ALL FUNDS). Each of the Funds may invest in
Eurodollar convertible securities, which are fixed income securities of a U.S.
issuer or a foreign issuer that are issued outside the United States and are
convertible into or exchangeable for equity securities of the same or a
different issuer. Interest and dividends on Eurodollar securities are payable in
U.S. dollars outside of the United States. The Funds may invest without
limitation in Eurodollar convertible securities that are convertible into or
exchangeable for foreign equity securities listed, or represented by ADRs
listed, on the New York Stock Exchange or the American Stock Exchange or
convertible into or exchangeable for publicly traded common stock of U.S.
companies. Each Fund may also invest up to 15% of its total assets invested in
convertible securities, taken at market value, in Eurodollar convertible
securities that are convertible into or exchangeable for foreign equity
securities which are not listed, or represented by ADRs listed, on such
exchanges.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES (WORLDWIDE GROWTH
FUND). The Worldwide Growth Fund may invest in certificates issued by the
Government National Mortgage Association as a short-term investment. GNMA
certificates are mortgage-backed securities representing part ownership of a
pool of mortgage loans, which are issued by lenders such as mortgage bankers,
commercial banks and savings associations, and are either insured by the Federal
Housing Administration or the Veterans Administration. A pool of these mortgages
is assembled and, after being approved by GNMA, is offered to investors through
securities dealers. The timely payment of interest and principal on each
mortgage is guaranteed by GNMA and backed by the full faith and credit of the
U.S. Government. Principal is paid back monthly by the borrower over the term of
the loan rather than returned in a lump sum at maturity. Due to the prepayment
feature and the need to reinvest prepayments of principal at current market
rates, GNMA certificates can be less effective than typical bonds of similar
maturities at "locking in" yields during periods of declining interest rates.

EQUITY SECURITIES (WORLDWIDE GROWTH, INTERNATIONAL GROWTH AND EMERGING COUNTRIES
FUNDS). Each of the Funds may invest in equity securities, including common
stocks, convertible securities and warrants. Common stocks, the most familiar
type of equity securities, represent an equity (ownership) interest in a
corporation. See "Convertible Securities and Warrants" for a description of
convertible securities and warrants.

The Worldwide Growth, International Growth and Emerging Countries Funds each may
invest in equity securities of growth companies, cyclical companies, companies
with smaller market capitalizations (I.E., $500 million or less) or companies
believed to be undergoing a basic change in operations or markets which could
result in a significant improvement in earnings. Although equity securities have
a history of long term growth in value, their prices fluctuate based on changes
in the issuer's financial condition and prospects and on overall market and
economic conditions. Small companies and new companies often have limited
product lines, markets or financial resources, and may be dependent upon one or
few key persons for management. The securities of such companies may be subject
to more volatile market movements than securities of larger, more established
companies, both because the securities typically are traded in lower volume and
because the issuers typically are more subject to changes in earnings and
prospects. The corresponding Portfolios' net asset values can be expected to
experience above-average fluctuations, as above-average risk is assumed by the
Funds in investing in such growth companies in seeking higher than average
growth in capital.

COUNTRY FUNDS (ALL FUNDS). Closed-end and open-end country funds in which the
Funds may invest are registered investment companies which hold portfolio
securities of issuers operated or located in a single country or geographical
region. The extent to which a Fund may invest

31
<PAGE>

in closed-end and open-end country funds is limited by the Investment Company
Act and various state securities or "blue sky" laws. Accordingly, as a
fundamental policy, none of such Funds will own more than 3% of the outstanding
voting stock of any closed-end or open-end investment company, will not invest
more than 10% of its total assets in securities issued by closed-end and
open-end investment companies nor, together with other investment companies
managed by the Investment Adviser, will own more than 10% of any closed-end or
open-end investment company. Assets of the Funds invested in closed-end and
open-end country funds are subject to advisory and other fees imposed by the
closed-end and open-end country funds, as well as to fees imposed by the Funds.

DEPOSITORY RECEIPTS (ALL FUNDS). Each of the Funds may invest in American
Depository Receipts ("ADRs"), which are receipts issued by an American bank or
trust company evidencing ownership of underlying securities issued by a foreign
issuer. ADRs, in registered form, are designed for use in U.S. securities
markets. The Funds may also invest in European and Global Depository Receipts
("EDRs" and "GDRs"), which, in bearer form, are designed for use in European and
other foreign securities markets, and in other instruments representing
securities of foreign companies. Such depository receipts may be sponsored by
the foreign issuer or may be unsponsored. Unsponsored depository receipts are
organized independently and without the cooperation of the foreign issuer of the
underlying securities; as a result, available information regarding the issuer
may not be as current as for sponsored depository receipts, and the prices of
unsponsored depository receipts may be more volatile than if they were sponsored
by the issuers of the underlying securities.

32
<PAGE>
developed legal structures governing private and foreign investments and private
property), and to political systems which can be expected to have less
stability, than those of more developed countries. The risks of investment in
such countries may include matters such as relatively unstable governments,
higher degrees of government involvement in the economy, the absence until
recently of capital market structures or market-oriented economies, economies
based on only a few industries, securities markets which trade only a small
number of securities, restrictions on foreign investment in stocks, and
significant foreign currency devaluations and fluctuations.

The Emerging Countries Fund is not restricted to investments in companies of any
particular size or market capitalization. The issuers of the equity securities
acquired by the Fund may be in the earlier stages of development, growth
companies, cyclical companies, or companies believed to be undergoing a basic
change in markets or operations which, in the opinion of the Investment Adviser,
would result in a significant improvement in earnings. Smaller companies and new
companies often have limited production lines, markets or financial resources,
and may be dependent upon a few key persons for management. The securities of
such companies may be subject to more volatile market movements than securities
of larger or more established companies.

As a result of the factors described above, the share price of the Emerging
Countries Portfolio is expected to be volatile, investment in this Portfolio
should be considered speculative, and investors should be able to tolerate
sudden, sometimes substantial, fluctuations in the value of their investments.
Because of the risks associated with international equity investments and
emerging markets in particular, the Emerging Countries Portfolio is intended to
be a long-term investment vehicle and is not designed to provide investors with
a means of speculating on short-term market movements.

OVER-THE-COUNTER SECURITIES (ALL FUNDS). Securities owned by the Funds may be
traded in the over-the-counter market or on a regional securities exchange and
may not be traded every day or in the volume typical of securities trading on a
national securities exchange. As a result, disposition by such Funds of
portfolio securities to meet redemptions by shareholders or otherwise may
require the Funds to sell these securities at a discount from market prices, to
sell during periods when such disposition is not desirable, or to make many
small sales over a lengthy period of time.

33
<PAGE>
To the extent a Fund engages in any of these transactions it will do so for the
purpose of acquiring securities for its portfolio consistent with its investment
objective and policies and not for the purpose of investment leverage. The Funds
will segregate liquid assets such as cash, U.S. Government securities and other
liquid, high quality debt securities in an amount sufficient to meet their
payment obligations with respect to these transactions. A Fund may not purchase
when-issued securities or enter into firm commitments if, as a result, more than
15% of the Fund's net assets would be segregated to cover such contracts.

SHORT SALES (WORLDWIDE GROWTH AND INTERNATIONAL GROWTH FUNDS). The Investment
Adviser believes that its growth equity management approach, in addition to
identifying equity securities the earnings and prices of which it expects to
grow at a rate above that of the S&P 500, also identifies securities the prices
of which can be expected to decline. Therefore, each of the Worldwide Growth and
International Growth Funds is authorized to make short sales of securities it
owns or has the right to acquire at no added cost through conversion or exchange
of other securities it owns (referred to as short sales "against the box") and
to make short sales of securities which it does not own or have the right to
acquire. A short sale that is not made "against the box" is a transaction in
which a Fund sells a security it does not own in anticipation of a decline in
market price. When the Fund makes a short sale, the proceeds it receives are
retained by the broker until the Fund replaces the borrowed security. In order
to deliver the security to the buyer, the Fund must arrange through a broker to
borrow the security and, in so doing, the Fund becomes obligated to replace the
security borrowed at its market price at the time of replacement, whatever that
price may be.

Short sales by the Worldwide Growth or International Growth Fund that are not
made "against the box" create opportunities to increase the Fund's return but,
at the same time, involve special risk considerations and may be considered a
speculative technique. Since the Fund in effect profits from a decline in the
price of the securities sold short without the need to invest the full purchase
price of the securities on the date of the short sale, the Fund's net asset
value per share, and that of the corresponding Portfolios, will tend to increase
more when the securities it has sold short decrease in value, and to decrease
more when the securities it has sold short increase in value, than would
otherwise be the case if it had not engaged in such short sales. Short sales
theoretically involve unlimited loss potential, as the market price of
securities sold short may continuously increase, although a Fund may mitigate
such losses by replacing the securities sold short before the market price has
increased significantly. Under adverse market conditions a Fund might have
difficulty purchasing securities to meet its short sale delivery obligations,
and might have to sell portfolio securities to raise the capital necessary to
meet its short sale obligations at a time when fundamental investment
considerations would not favor such sales. The value of securities of any issuer
in which a Fund maintains a short position which is "not against the box" may
not exceed the lesser of 2% of the value of the Fund's net assets or 2% of the
securities of such class of the issuer.

If the Worldwide Growth or International Growth Fund makes a short sale "against
the box," the Fund would not immediately deliver the securities sold and would
not receive the proceeds from the sale. The seller is said to have a short
position in the securities sold until it delivers the securities sold, at which
time it receives the proceeds of the sale. A Fund's decision to make a short
sale "against the box" may be a technique to hedge against market risks when the
Investment Adviser believes that the price of a security may decline, causing a
decline in the value of a security owned by the Fund or a security convertible
into or exchangeable for such security. In such case, any future losses in the
Fund's long position would be reduced by a gain in the short position.

34
<PAGE>
In the view of the Commission, a short sale involves the creation of a "senior
security" as such term is defined in the Investment Company Act, unless the sale
is "against the box" and the securities sold are placed in a segregated account
(not with the broker), or unless the Fund's obligation to deliver the securities
sold short is "covered" by placing in a segregated account (not with the broker)
cash or U.S. Government securities in an amount equal to the difference between
the market value of the securities sold short at the time of the short sale and
any cash or U.S. Government securities required to be deposited as collateral
with a broker in connection with the sale (not including the proceeds from the
short sale), which difference is adjusted daily for changes in the value of the
securities sold short. The total value of the cash and U.S. Government
securities deposited with the broker and otherwise segregated may not at any
time be less than the market value of the securities sold short at the time of
the short sale. As a matter of policy, the Master Trust's Board of Trustees has
determined that no Fund will make short sales of securities or maintain a short
position if to do so could create liabilities or require collateral deposits and
segregation of assets aggregating more than 25% of the Fund's total assets,
taken at market value.

FOREIGN EXCHANGE CONTRACTS (ALL FUNDS). Since each Fund may invest primarily in
securities denominated in currencies other than the U.S. dollar, changes in
foreign currency exchange rates will affect the values of its portfolio
securities and the unrealized appreciation or depreciation of its investments.
The rate of exchange between the U.S. dollar and other currencies is determined
by forces of supply and demand in the foreign exchange markets. These forces are
affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation and other factors.

Each Fund may enter into derivative positions such as foreign exchange forward
contracts or currency futures or options contracts for the purchase or sale of
foreign currency to "lock in" the U.S. dollar price of the securities
denominated in a foreign currency or the U.S. dollar equivalent of interest and
dividends to be paid on such securities, or to hedge against the possibility
that the currency of a foreign country in which the Fund has investments may
suffer a decline against the U.S. dollar. A forward currency contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. For example, a Fund may
purchase a particular currency or enter into a forward currency contract to
preserve the U.S. dollar price of securities it intends to or has contracted to
purchase. Alternatively, a Fund might sell a particular currency on either a
spot (cash) basis at the rate then prevailing in the currency exchange market or
on a forward basis by entering into a forward contract to purchase or sell
currency, to hedge against an anticipated decline in the U.S. dollar value of
securities it intends or has contracted to sell. This method of attempting to
hedge the value of a Fund's portfolio securities against a decline in the value
of a currency does not eliminate fluctuations in the underlying prices of the
securities. No such Fund is obligated to engage in any such currency hedging
operations, and there can be no assurance as to the success of any hedging
operations which a Fund may implement. Although the strategy of engaging in
foreign currency transactions could reduce the risk of loss due to a decline in
the value of the hedged currency, it could also limit the potential gain from an
increase in the value of the currency. No such Fund intends to maintain a net
exposure to

35
<PAGE>
such contracts where the fulfillment of the Fund's obligations under such
contracts would obligate the Fund to deliver an amount of foreign currency in
excess of the value of the Fund's portfolio securities or other assets
denominated in that currency.

OPTIONS (ALL FUNDS). Each of the Funds may purchase listed covered "put" and
"call" options with respect to securities which are otherwise eligible for
purchase by such Fund and with respect to various stock indices, for hedging
purposes, subject to the following restrictions: the aggregate premiums on call
options purchased by a Fund may not exceed 5% of the market value of net assets
of the Fund as of the date the call options are purchased, and the aggregate
premiums on put options may not exceed 5% of the market value of the net assets
of the Fund as of the date such options are purchased. In addition, a Fund will
not purchase or sell options if, immediately thereafter, more than 25% of its
net assets would be hedged. A "put" gives a holder the right, in return for the
premium paid, to require the writer of the put to purchase from the holder a
security at a specified price. A "call" gives a holder the right, in return for
the premium paid, to require the writer of the call to sell a security to the
holder at a specified price. An option on a securities index (such as a stock
index) gives the holder the right, in return for the premium paid, to require
the writer to pay cash equal to the difference between the closing price of the
index and the exercise price of the option, expressed in dollars, times a
specified multiplier.

Put and call options are derivative securities traded on United States and
foreign exchanges, including the American Stock Exchange, Chicago Board Options
Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange and New York Stock
Exchange. Additionally, the Funds may purchase options not traded on a
securities exchange, which may bear a greater risk of nonperformance than
options traded on a securities exchange. Options not traded on an exchange are
considered dealer options and generally lack the liquidity of an exchange traded
option. Accordingly, dealer options may be subject to the Funds' restriction on
investment in illiquid securities, as described below. Dealer options may also
involve the risk that the securities dealers participating in such transactions
will fail to meet their obligations under the terms of the option.

Each Fund may also write listed covered options on up to 25% of the value of
their respective net assets. Call options written by a Fund give the holder the
right to buy the underlying securities from the Fund at a stated exercise price;
put options written by a Fund give the holder the right to sell the underlying
security to the Fund. A call option is covered if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration upon conversion or exchange of
securities currently held by the Fund. A put option is covered if the Fund
maintains cash or cash equivalents equal to the exercise price in a segregated
amount with its Custodian. If an option written by a Fund expires unexercised,
the Fund realizes a gain equal to the premium received at the time the option
was written. If an option purchased by a Fund expires unexercised, the Fund
realizes a capital loss equal to the premium paid.

FUTURES CONTRACTS (ALL FUNDS). Each Fund may purchase and sell stock index
futures contracts as a hedge against changes in market conditions. A stock index
futures contract is a bilateral

36
<PAGE>
agreement pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the stock index value at the close of the last trading day of the contract and
the price at which the futures contract is originally struck. No physical
delivery of the underlying stocks in the index is made.

The Funds may also purchase and sell financial futures contracts as a hedge
against changes in interest rates. Additionally, the Funds may purchase and sell
currency futures contracts to hedge against foreign currency fluctuations, and
may purchase and sell related options on futures contracts. A financial or
currency futures contract obligates the seller of the contract to deliver and
the purchaser of the contract to take delivery of the type of financial
instrument or currency called for in the contract at a specified future time
(the settlement date) for a specified price. Although the terms of a contract
call for actual delivery or acceptance of the financial instrument or currency,
the contracts will be closed out before the delivery date without delivery or
acceptance taking place. Futures options possess many of the same
characteristics as options on securities and indices. A futures option gives the
holder, in return for the premium paid, the right to buy (call) from or sell
(put) to the writer of the option a futures contract at a specified price at any
time during the period of the option. Upon exercise of a call option, the holder
acquires a long position in the futures contract and the writer is assigned the
opposite short position. In the case of a put option, the opposite is true. A
futures option may be closed out before exercise or expiration by an offsetting
purchase or sale of a futures option of the same series.

Financial, currency and stock index futures contracts are derivative instruments
traded on United States commodities and futures exchanges, including the Chicago
Mercantile Exchange, the New York Futures Exchange, the Kansas City Board of
Trade, the Chicago Board of Trade and the International Monetary Market, as well
as commodity and securities exchanges located outside the United States,
including the London International Financial Futures Exchange, the Singapore
International Monetary Exchange, the Sydney Futures Exchange Limited and the
Tokyo Stock Exchange.

37
<PAGE>
Adviser is incorrect in its forecasts regarding market values, currency
fluctuations, interest rate trends or other relevant factors, a Fund may be in a
worse position than if the Fund had not engaged in options or futures
transactions. The potential loss incurred by a Fund in writing options on
futures and engaging in futures transactions is unlimited. The Investment
Adviser is experienced in the use of options and futures contracts as an
investment technique.

There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out an option position or futures contract. Most futures
exchanges and boards of trade limit the amount of fluctuation in futures
contract prices during a single day; once the daily limit has been reached on a
particular contract, no trades may be made that day at a price beyond that
limit. In addition, certain of these instruments are relatively new and without
a significant trading history. As a result, there is no assurance that an active
secondary market will develop or continue to exist. Lack of a liquid market for
any reason may prevent a Fund from liquidating an unfavorable position and a
Fund would remain obligated to meet margin requirements until the position is
closed.

ILLIQUID SECURITIES (ALL FUNDS). Each Fund may invest up to 15% of its net
assets in securities that at the time of purchase have legal or contractual
restrictions on resale or are otherwise illiquid. Historically, illiquid
securities have included securities subject to contractual or legal restrictions
on resale because they have not been registered under the Securities Act of 1933
("restricted securities"), securities which are otherwise not readily marketable
such as over-the-counter, or dealer traded, options, and repurchase agreements
having a maturity of more than seven days. Mutual funds do not typically hold a
significant amount of restricted or other illiquid securities because of the
potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and the Fund might not be able to dispose of restricted or other securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions. The Fund might also have to register such restricted
securities in order to dispose of them, resulting in additional expense and
delay.

38
<PAGE>
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the Securities Act of 1933, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, the Master Trust's Board of
Trustees may determine that such securities are not illiquid securities
notwithstanding their legal or contractual restrictions on resale, based on
factors such as the frequency of trades and quotes for the securities, the
number of dealers and others wishing to purchase and sell the securities, and
the nature of the security and the marketplace trades. In all other cases,
however, securities subject to restrictions on resale will be deemed illiquid.
Investing in restricted securities eligible for resale under Rule 144A could
have the effect of increasing the level of illiquidity in the Funds to the
extent that qualified institutional buyers become uninterested in purchasing
such securities.

39
<PAGE>
- --------------------------------------------------------------------------------

PRIOR PERFORMANCE

The following table sets forth historical performance information for the
Portfolios and a predecessor investment partnership which was operated by the
Investment Adviser prior to the organization of the International Growth
Portfolio.

The Investment Adviser has advised the Trust that such partnership was operated
in substantially the same manner as such Portfolio, and its assets were
transferred to the Portfolio prior to the effective date of the Portfolio's
registration statement. It has indicated that such results for the prior
partnership have been adjusted to reflect the deduction of the fees and expenses
of the International Growth Portfolio, and its proportionate shares of the
operating expenses of the corresponding Fund, as stated under "Summary of
Expenses," and give effect to transaction costs as well as reinvestment of
income and gains. However, the prior investment partnership was not registered
under the 1940 Act and was not subject to certain investment restrictions
imposed by such Act; if it had been so registered, its performance might have
been adversely affected.

The results presented on the following pages may not necessarily equate with the
return experienced by any particular shareholder or partner as a result of the
timing of investments and redemptions. In addition, the effect of taxes on any
shareholder or partner 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.

40
<PAGE>

<TABLE>
<CAPTION>
WORLDWIDE GROWTH INTERNATIONAL GROWTH EMERGING COUNTRIES
PERFORMANCE PERFORMANCE PERFORMANCE
------------------------- --------------------------- -------------------------
WORLDWIDE INTERNATIONAL EMERGING IFTC
GROWTH MSCI WORLD GROWTH MSCI EAFE COUNTRIES INVESTABLE
YEAR PORTFOLIO A INDEX(1) PORTFOLIO A INDEX(2) PORTFOLIO A INDEX(3)
- ------------------------------------------ ------------ ----------- -------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
1990(4)...................................
1991......................................
1992......................................
1993(4)...................................
1994(4)...................................
1995......................................
1996(5)...................................
Last year(5)..............................
Last 5 years(5)...........................
Since inception(5)........................
</TABLE>

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

(1) The Morgan Stanley Capital International World Index consists of more than
1,400 securities listed on exchanges in the U.S., Europe, Canada, Australia,
New Zealand and the Far East. The Index is a market-value weighted
combination of countries and is unmanaged. The Index reflects the
reinvestment of income dividends and capital gains distributions, if any,
but does not reflect fees, brokerage commissions or other expenses of
investing.

(2) The Morgan Stanley Capital International EAFE Index consists of the
securities within the MSCI World Index listed on exchanges in Europe,
Australia and the Far East excluding the United States. The Index is
unmanaged, and reflects the reinvestment of income dividends and capital
gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.

(3) The IFTC Investable Index measures the performance of more than 1,100 stocks
that are legally and practically available to outside investors in 25
emerging market countries of the world. 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.

(4) Inception dates are as follows: Worldwide Growth Portfolio A-April 19, 1993;
International Growth Portfolio A-June 7, 1990 (registration statement
effective August 31, 1994); Emerging Countries Portfolio A-November 28,
1994.

(5) Through March 31, 1996.

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<PAGE>
NICHOLAS--APPLEGATE-REGISTERED TRADEMARK- MUTUAL FUNDS

- -------------------------------------------------
SERIES A & B GLOBAL PORTFOLIOS

PROSPECTUS

Nicholas-Applegate Mutual Funds is an open-end management investment company
consisting of a number of diversified investment portfolios, including the three
Series A Portfolios and three Series B Portfolios ("Portfolios") offered hereby.
These Portfolios provide a broad range of global investment opportunities which
are suitable for different investors. The Series A Portfolios and Series B
Portfolios have identical investment objectives and policies. However, the
Series A Portfolios are sold subject to an initial sales charge and lower
operating expenses, and the Series B Portfolios are sold subject to a contingent
deferred sales charge and higher operating expenses.

WORLDWIDE GROWTH PORTFOLIO A AND PORTFOLIO B seek to maximize long-term capital
appreciation. They invest in the Nicholas- Applegate Worldwide Growth Fund,
which in turn invests in a global portfolio of equity securities of U.S. and
foreign companies.

INTERNATIONAL GROWTH PORTFOLIO A AND PORTFOLIO B seek to maximize long-term
capital appreciation. They invest in the Nicholas Applegate International Growth
Fund, which in turn invests in an international portfolio of equity securities
of foreign companies only.

EMERGING COUNTRIES PORTFOLIO A AND PORTFOLIO B seek to maximize long-term
capital appreciation. They invest in the Nicholas Applegate Emerging Countries
Fund, which in turn invests primarily in a diversified portfolio of equity
securities of issuers located in emerging markets. INVESTMENTS IN THE PORTFOLIOS
SHOULD BE CONSIDERED SPECULATIVE, SINCE THE PORTFOLIOS WILL INVEST IN EMERGING
MARKET COUNTRIES. SEE "INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS,"
PAGE 10.
- --------------------------------------------------------------------------------

, 1996

<PAGE>
NICHOLAS--APPLEGATE MUTUAL FUNDS

- -------------------------------------------------
SERIES A & B GLOBAL PORTFOLIOS

WORLDWIDE GROWTH PORTFOLIO A AND B
INTERNATIONAL GROWTH PORTFOLIO A AND B
EMERGING COUNTRIES PORTFOLIO A AND B

TABLE OF CONTENTS

Summary of Expenses......................................... 3
Prospectus Summary.......................................... 4
Financial Highlights........................................ 9
Investment Objectives, Policies and Risk
Considerations............................................ 10
Organization and Management................................. 15
Purchasing Shares........................................... 19
Alternative Purchase Arrangements........................... 20
Shareholder Services........................................ 24
Redeeming Shares............................................ 27
Dividends, Distributions and Taxes.......................... 30
General Information......................................... 31
Appendix:
Investment Policies, Strategies
and Risks............................................... 33
Prior Performance........................................... 45

2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES

<TABLE>
<CAPTION>
WORLDWIDE INTERNATIONAL
GROWTH GROWTH
Portfolio Portfolio Portfolio Portfolio
A B A B
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a percentage of
offering price)(1) 5.25% None 5.25% None
Sales charge on reinvested dividends None None None None
Deferred sales charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower)(2) None 5.00% None 5.00%
Redemption fee(3) None None None None
Exchange fee None None None None
- -----------------------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS
A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)(5)
Management fees 1.00% 1.00% 1.00% 1.00%
12b-1 expenses 0.25% 0.75% 0.25% 0.75%
All other expenses (after expense deferral)(4)
Shareholder service expenses 0.10% 0.25% 0.10% 0.25%
Other expenses 0.50% 0.50% 0.60% 0.60%
Total other expenses 0.60% 0.75% 0.70% 0.85%
Total operating expenses (after expense deferral)(4) 1.85% 2.50% 1.95% 2.60%

<CAPTION>
EMERGING
COUNTRIES
Portfolio Portfolio
A B
<S> <C> <C>
- ------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a percentage of
offering price)(1) 5.25% None
Sales charge on reinvested dividends None None
Deferred sales charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower)(2) None 5.00%
Redemption fee(3) None None
Exchange fee None None
- ------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS
A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)(5)
Management fees 1.25% 1.25%
12b-1 expenses 0.25% 0.75%
All other expenses (after expense deferral)(4)
Shareholder service expenses 0.10% 0.25%
Other expenses 0.65% 0.65%
Total other expenses 0.75% 0.90%
Total operating expenses (after expense deferral)(4) 2.25% 2.90%
</TABLE>

The Board of Trustees of the Trust believes that the aggregate per share
expenses of each Portfolio are no greater than the expenses that the Portfolio
would incur if it retained the services of an investment adviser and the assets
of the Portfolio were invested directly in the types of securities held by the
corresponding Fund. For a detailed description of the expenses of the Portfolios
and the Funds in which they invest, see "Organization and Management."
- ---------------------------
(1) Sales charges are reduced for purchases of $50,000 or more of shares of the
Series A Portfolios. There is no initial sales charge on purchases of shares
of the Series B Portfolios or the Money Market Portfolio. The National
Association of Securities Dealers, Inc. limits total annual sales charges
(including 12b-1 expenses) to all purchasers of shares of a Portfolio to
6.25% of new sales plus an interest factor. However, long-term shareholders
may pay more than the economic equivalent of such maximum sales charges. See
"Alternative Purchase Arrangements."

(2) Although purchases of $1 million or more of shares of a Series A Portfolios
are not subject to an initial sales charge, a contingent deferred sales
charge of 1.00% applies on certain redemptions made less than one year
following such purchases. A contingent deferred sales charge also applies on
certain redemptions of shares of a Series B Portfolio, ranging from 5.00% of
redemptions made within 12 months of purchase to zero for redemptions made
more than six years after purchase. See "Redeeming Shares."

(3) A $10 charge will be imposed on redemptions requested to be paid by wire
transfer. See "Redeeming Shares-Redemption Payments."

(4) The Investment Adviser of the Master Trust has agreed to waive or defer its
fees, and to absorb other operating expenses, to ensure that the expenses
(other than interest, taxes, brokerage commissions and other portfolio
transaction expenses, capital expenditures and extraordinary expenses) for
each Portfolio will not exceed the following respective percentage of such
Portfolio's average net assets on an annual basis through March 31, 1997:
Worldwide Growth Portfolio A and B, 1.85% and 2.50%; International Growth
Portfolio A and B, 1.95% and 2.60%; Emerging Countries Portfolio A and B,
2.25% and 2.90%. In subsequent years, overall operating expenses for each
Portfolio will not fall below the applicable percentage limitation until the
Investment Adviser has fully recouped fees deferred or expenses paid by the
Investment Adviser under this agreement, as each Portfolio will reimburse
the Investment Adviser in subsequent years when operating expenses (before
recoupment) are less than the applicable percentage limitation set forth
above. Accordingly, until all such deferred fees or expenses have been
recouped by the Investment Adviser, the Portfolios' expenses will be higher,
and their yields will be lower, than would otherwise be the case. See
"Organization and Management-Expense Limitation." Actual operating expenses
for the Series A Portfolios for the fiscal year ended March 31, 1996 were,
the following annualized respective percentages of such Portfolios' average
net assets: Worldwide Growth Portfolio A and B, 2.17% and 9.50%;

3
<PAGE>

International Growth Portfolio A and B, 10.06% and 16.15%; Emerging
Countries Portfolio A and B, 6.72% and 7.58%. The various operating expenses
of the Portfolios are further described under "Organization and Management."

EXAMPLE OF PORTFOLIO EXPENSES. The following table illustrates the expenses that
a shareholder would pay on a hypothetical $1,000 investment in each of the
Portfolios over various time periods, assuming a 5% annual return. The
Portfolios charge no redemption fees. However, a contingent deferred sales
charge of 1.00% applies on redemptions of shares of a Series A Portfolio made
less than one year after a $1 million purchase of such shares, and a contingent
deferred sales charge applies on redemptions of shares of a Series B Portfolio,
ranging from 5.0% of redemptions made within 12 months of purchase to zero for
redemptions made more than six years after purchase.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
WORLDWIDE GROWTH
Portfolio A(1) $70 $108 $147 $258
Portfolio B(2):
Assuming redemption at end of time period $77 $110 $156 $284
Assuming no redemption $25 $ 78 $133 $284
- -------------------------------------------------------------------------------------
INTERNATIONAL GROWTH
Portfolio A(1) $71 $111 $152 $268
Portfolio B(2):
Assuming redemption at end of time period $78 $113 $161 $293
Assuming no redemption $26 $ 81 $138 $293
- -------------------------------------------------------------------------------------
EMERGING COUNTRIES
Portfolio A(1) $74 $119 $167 $297
Portfolio B(2):
Assuming redemption at end of time period $80 $122 $175 $322
Assuming no redemption $29 $ 90 $153 $322
- -------------------------------------------------------------------------------------
</TABLE>

(2)Assumes deduction at the time of redemption of a contingent deferred sales
charge, if applicable, and no exchange of Portfolio B shares for Portfolio A
shares seven or more years after purchase.

- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY

Nicholas-Applegate Mutual Funds (the "Trust") is an open-end management
investment company comprised of a number of diversified investment portfolios,
including the three Series A Portfolios and three Series B Portfolios
("Portfolios") offered hereby. The Series A Portfolios and Series B Portfolios
have identical investment objectives and policies. However, the Series A
Portfolios are sold subject to a front end sales charge and the Series B
Portfolios are sold subject to a contingent deferred sales charge.

4
<PAGE>
INVESTMENT OBJECTIVES. The investment objectives of the Portfolios are described
on the front cover of this Prospectus. There can be no assurance that any
Portfolio will achieve its investment objective. See "Investment Objectives,
Policies and Risk Considerations" and "Appendix: Investment Policies, Strategies
and Risks."

5
<PAGE>
In addition, investment by the Emerging Countries Fund in emerging markets
involves greater risks than other foreign investments, including less-developed
economic and legal structures; less stable political systems; illiquid
securities markets; possible expropriations, nationalization or confiscatory
taxation; and possible foreign currency devaluations and fluctuations. As a
result of these and other factors, the share prices of the Emerging Countries
Portfolios are expected to be volatile, and investment in the Portfolios should
be considered speculative and appropriate only as a long-term investment
vehicle. The Worldwide Growth and International Growth Funds may also invest a
portion of their assets in emerging market countries.

For hedging purposes, certain Funds may purchase or write put and call options
on securities and securities indices, effect transactions in futures contracts
and related options on stock indices, and enter into foreign exchange forward
contracts, currency futures or related options. These are derivative
instruments, whose value derives from the value of an underlying security, index
or currency. Risks associated with the use of such instruments include the
possibility that the Investment Adviser's forecasts of market values and
currency rates of exchange and other factors are not correct; imperfect
correlation between the Fund's hedging technique and the asset or liability
being hedged; default by the other party to the transaction; and inability to
close out a position because of the lack of a liquid market. Investment in such
derivative instruments may not be successful, and may reduce the returns and
increase the volatility of the Funds. See "Appendix: Investment Policies,
Strategies and Risks" in this Prospectus and "Investment Objectives, Policies
and Risks" in the Statement of Additional Information.

Each Fund may invest up to 15% of its net assets in illiquid securities. Each
Fund may enter into repurchase agreements and lend its portfolio securities,
which involve the risk of loss upon the default of the seller or borrower. The
Funds may also borrow money from banks for temporary purposes which, among other
risks, may require the Funds to sell portfolio securities to meet interest and
principal payments at an unfavorable time. See "Illiquid Securities,"
"Repurchase Agreements," "Securities Lending" and "Borrowing" in "Appendix:
Investment Policies, Strategies and Risks."

The Investment Adviser is compensated for its services to the Funds in the form
of monthly fees at the following annual rates: for the Emerging Countries
Fund-1.25% of the Fund's net

6
<PAGE>

assets; for each of the Worldwide Growth and International Growth Funds-1.00% of
the first $500 million of the Fund's net assets, 0.90% of the next $500 million
and 0.85% of net assets in excess of $1 billion. See "Organization and
Management."

DISTRIBUTOR. Nicholas-Applegate Securities (the "Distributor"), an affiliate of
the Investment Adviser, serves as distributor of shares of the Portfolios. Under
a Distribution Plan, the Distributor receives compensation for providing
distribution services for the Portfolios at the following annual rates: for the
Series A Portfolios-0.25% of each Portfolio's net assets; and for the Series B
Portfolios-0.75% of each Portfolio's net assets. Under a Shareholder Service
Plan, the Distributor is reimbursed for shareholder services it provides and for
payments made to broker-dealers and others for related support and recordkeeping
services at an annual rate of up to 0.10% of each Series A Portfolio's and the
Money Market Portfolio's net assets, and 0.25% of each Series B Portfolio's net
assets. See "Organization and Management." Under a Distribution Agreement, the
Distributor will also retain a portion of the initial sales load on purchases of
shares of the Series A Portfolios and the contingent deferred sales load on
redemptions of shares of the Series A and B Portfolios. See "Organization and
Management" and "Alternative Purchase Arrangements."

ALTERNATIVE PURCHASE ARRANGEMENTS. Shares of the Series A Portfolios are sold
subject to a maximum sales charge of 5.25%. Reduced sales charges are available
for purchases of $50,000 or more of shares of a Series A Portfolio. No initial
sales charge applies on a purchase of $1 million or more of shares of a Series A
Portfolio, but a contingent deferred sales charge of 1.00% is imposed on
redemptions made within 12 months after the $1 million purchase. The Trust
offers a number of ways shareholders in a Series A Portfolio can reduce their
sales charges, including aggregation, concurrent purchases, rights of
accumulation and letters of intent. See "Purchasing Shares."

Although shares of the Series B Portfolios are sold without an initial sales
charge, a contingent deferred sales charge of 1.00% is imposed on redemptions,
ranging from 5.00% of redemptions made less than one year after purchase to zero
for redemptions made more than six years after purchase. Shares of the Series B
Portfolios may be exchanged for shares of the corresponding Series A Portfolios
seven years after purchase. See "Alternative Purchase Arrangements- Series B
Portfolios."

SHAREHOLDER SERVICES. The following services are provided to shareholders of the
Portfolios for their convenience and flexibility: an automatic investment plan;
automatic reinvestment and cross-reinvestment of dividends and capital gains
distributions; an exchange privilege, including automatic exchanges; and
automatic withdrawals. See "Shareholder Services." The Trust also offers various
retirement plans through which you can invest in the Portfolios. See "Purchasing
Shares."

7
<PAGE>
REDEEMING SHARES. Shares of a Portfolio may be redeemed by writing to the
Transfer Agent, directly or through a selected dealer, or by telephone if
telephone redemption privileges have been established. Redemption proceeds of
$5,000 or more may be wired; otherwise proceeds will be sent by check. The price
received for Portfolio shares redeemed is at the next determined net asset value
after the request is received in proper form by the Transfer Agent, which may be
more or less than the purchase price, except that a contingent deferred sales
charge may apply to certain redemptions. See "Redeeming Shares."

8
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

The following financial highlights have been audited by Ernst & Young, L.L.P.
with respect to the fiscal year ending March 31, 1996, and by Coopers & Lybrand
L.L.P. with respect to the period from commencement of operations of the
Portfolios through March 31, 1995. Ernst & Young, L.L.P. and Coopers & Lybrand
L.L.P. are independent auditors whose reports thereon were unqualified. This
information should be read in conjunction with the financial statements and the
notes thereto which appear in the Trust's 1996 Annual Report to Shareholders
incorporated by reference in the Statement of Additional Information.

<TABLE>
<CAPTION>
WORLDWIDE GROWTH INTERNATIONAL GROWTH
Portfolio A Portfolio B Portfolio A Portfolio B
------------------------------------- ----------- ------------------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
4-19-93 4-1-94 4-1-95 5-31-95 8-31-94 4-1-95 5-31-95
to to to to to to to
3-31-94 3-31-95 3-31-96 3-31-96 3-31-95 3-31-96 3-31-96
- -------------------------------------------------------------------------------------------------------------------
PER SHARE DATA:
Net asset value,
beginning of period $ 12.50 $ 14.94 $ 14.29 $ 12.50 $ 12.50 $ 11.51 $ 12.50
Income from investment
operations:
Net investment income
(deficit) (0.07) (0.05) (0.07) (0.05) -- (0.02) (0.02)
Net realized and
unrealized gains
(losses) on
securities and
foreign currency 2.51 (0.09) 2.86 1.89 (0.98) 1.79 1.48
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations 2.44 (0.14) 2.79 1.84 (0.98) 1.77 1.46
Less distributions:
Dividends from net
investment income -- (0.02) (0.12) -- (0.01) (0.13) --
Distributions from
capital gains -- (0.49) (0.39) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of
period $ 14.94 $ 14.29 $ 16.57 $ 14.34 $ 11.51 $ 13.15 $ 13.96
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL RETURN:+ 19.52% (0.90%) 19.79% 14.72% (7.85%) 15.46% 11.68%
RATIOS/SUPPLEMENTAL
DATA:
Net assets ($000), end
of period $ 20,194 $ 22,208 $ 23,481 $ 1,972 $ 610 $ 1,056 $ 1,487
Ratio of expenses to
average net assets,
after expense
reimbursement++ 1.85%* 1.85% 1.85% 2.50%* 1.95%* 1.95% 2.60%*
Ratio of expenses to
average net assets,
before expense
reimbursement++ 2.23%* 2.18% 2.17% 9.50%* 9.77%* 10.06% 16.15%*
Ratio of net investment
income to average net
assets, after expense
reimbursement++ (0.69%)* (0.42%) (0.35%) (1.28%)* (0.07%)* (0.27%) (0.64%)*
Ratio of net investment
deficit to average net
assets, before expense
reimbursement++ (1.07%)* (0.75%) (0.61%) (8.12%)* (7.89%)* (7.75%) (13.26%)
Portfolio turnover** 95.09% 98.54% 132.20% 132.20% 74.85% 141.02% 141.02%
Average commission rate
paid** N/A N/A $ 0.0187 $ 0.0187 N/A $ 0.0128 $ 0.0128

<CAPTION>
EMERGING COUNTRIES
Portfolio A Portfolio B
--------------- -----------
<S> <C> <C>
11-28-94 4-1-95 5-31-95
to to to
3-31-95 3-31-96 3-31-96
- ------------------------
PER SHARE DATA:
Net asset value,
beginning of period $12.50 $ 11.00 $ 12.50
Income from investment
operations:
Net investment income
(deficit) 0.04 (0.04) (0.04)
Net realized and
unrealized gains
(losses) on
securities and
foreign currency (1.54) 3.15 1.56
-- ----------- -----------
Total from investment
operations (1.50) 3.11 1.52
Less distributions:
Dividends from net
investment income -- (0.02) --
Distributions from
capital gains -- (0.06) --
-- ----------- -----------
Net asset value, end of
period $11.00 $ 14.03 $ 14.02
-- ----------- -----------
-- ----------- -----------
TOTAL RETURN:+ (11.98%) 28.43% 12.16%
RATIOS/SUPPLEMENTAL
DATA:
Net assets ($000), end
of period $1,197 $ 4,718 $ 3,557
Ratio of expenses to
average net assets,
after expense
reimbursement++ 2.25%* 2.25% 2.90%*
Ratio of expenses to
average net assets,
before expense
reimbursement++ 6.15%* 6.72% 7.58%*
Ratio of net investment
income to average net
assets, after expense
reimbursement++ (1.09%)* (0.35%) (1.05%)*
Ratio of net investment
deficit to average net
assets, before expense
reimbursement++ (4.99%)* (3.61%) (5.44%)*
Portfolio turnover** 60.79% 118.21% 118.21%
Average commission rate
paid** N/A $ 0.0022 $ 0.0022
</TABLE>

- ------------------------
* Annualized

** For the corresponding Funds of the Master Trust

+ Computations do not reflect the Portfolio's sales charges

++ Includes expenses allocated from Master Trust Funds

9
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of each Portfolio are discussed below and
in the "Appendix: Investment Policies, Strategies and Risks."

WORLDWIDE GROWTH PORTFOLIO A AND PORTFOLIO B. Each Worldwide Growth Portfolio
seeks to maximize long-term capital appreciation. Each Portfolio invests all of
its assets in the Nicholas-Applegate Worldwide Growth Fund, which has the same
investment objective as the Worldwide Growth Portfolios. Assets of the Worldwide
Growth Fund are invested primarily in equity securities of U.S. and foreign
companies. Such companies may be in the earlier stages of development, growth
companies, cyclical companies or companies believed to be undergoing a basic
change in operations or markets which, in the opinion of the Investment Adviser,
would result in a significant improvement in earnings. The securities of such
companies may be subject to more volatile market movements than securities of
larger, more established companies. Although the Fund is not restricted to
investments in companies of any particular size, it currently intends to invest
principally in companies with smaller market capitalizations and above
(generally above $100 million). See "Appendix: Investment Policies, Strategies
and Risks" for a discussion of the risks associated with investment in such
companies.

The Worldwide Growth Fund may invest in securities issued by companies based or
operating in any country, including the United States. Under normal market
conditions, as a fundamental policy which cannot be changed without shareholder
approval, at least 65% of the Fund's total assets will be invested in securities
of issuers located in at least three countries, one of which may be the United
States. Under normal market conditions the Fund may invest up to 50% of its
total assets in securities of U.S. issuers. With these exceptions, the Fund is
not driven by allocation considerations with respect to any particular
countries, geographic regions or economic sectors. Countries in which investment
opportunities will be sought include Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, the
United Kingdom and the United States. However, the Fund may also invest in
securities issued by companies based in other countries such as the countries of
Eastern Europe and South America, Indonesia, Korea, Mexico, the Philippines,
Portugal and Thailand. The Worldwide Growth Fund may also invest up to 10% of
its total assets in closed-end or open-end country funds. An investment in such
funds may result in duplication of fees. See "Appendix: Investment Policies,
Strategies and Risks" for a discussion of the risks associated with investment
in foreign securities.

Under normal market conditions, at least 75% of the Worldwide Growth Fund's
total assets will be invested in equity securities (common and preferred
stocks), and warrants and

11
<PAGE>

securities convertible into equity securities. The remainder of the Worldwide
Growth Fund's assets will be invested in debt securities of foreign companies
and foreign governments and their agencies and instrumentalities which the
Investment Adviser believes present attractive opportunities for capital growth,
as well as in various other securities and instruments described in "Appendix:
Investment Policies, Strategies and Risks." The debt securities in which the
Fund may invest will be rated "Baa" or higher by Moody's, "BBB" or higher by S&P
or equivalent ratings by other recognized rating agencies, or will be unrated if
determined by the Investment Adviser to be of comparable quality. These
securities are of investment grade, which means that their issuers are believed
to have adequate capacity to pay interest and repay principal, although certain
of such securities in the lower grades have speculative characteristics, and
changes in economic conditions or other circumstances may be more likely to lead
to a weakened capacity to pay interest and principal than would be the case with
higher rated securities. If the rating of a debt security held by the Fund is
downgraded below investment grade, the security will be sold as promptly as
practicable. The Fund may also make short sales, which is considered a
speculative technique. See "Appendix: Investment Policies, Strategies and Risks"
for a discussion of the risks associated with short sale transactions.

INTERNATIONAL GROWTH PORTFOLIO A AND PORTFOLIO B. Each International Growth
Portfolio seeks to maximize long-term capital appreciation. Each Portfolio
invests all of its assets in the Nicholas-Applegate International Growth Fund,
which has the same investment objective as the International Growth Portfolios.
Assets of the International Growth Fund are invested in the same types of
securities as the Worldwide Growth Fund, except that the International Growth
Fund may invest up to 35% of its total assets in securities of U.S. companies.
Under normal market conditions, as a fundamental policy which cannot be changed
without shareholder approval, at least 65% of the Fund's total assets will be
invested in securities of issuers located in at least three countries. See
"Worldwide Growth Portfolio A and Portfolio B" above.

EMERGING COUNTRIES PORTFOLIO A AND PORTFOLIO B. The Emerging Countries
Portfolios seek to maximize long-term capital appreciation. Each Portfolio
invests all of its assets in the Nicholas-Applegate Emerging Countries Fund,
which has the same investment objective as the Portfolio. Assets of the Fund are
invested primarily in equity securities of issuers located in countries with
emerging securities markets -- that is, countries with securities markets which
are, in the opinion of the Investment Adviser, emerging as investment markets
but have yet to reach a level of maturity associated with developed foreign
stock markets, especially in terms of participation by foreign investors. The
Fund currently expects to invest in issuers located in some or all of the
following emerging market countries: Argentina, Brazil, Chile, China, Colombia,
the Czech Republic, Greece, Hungary, India, Indonesia, Israel, Jordan, Malaysia,
Mexico, Morocco, Pakistan, Peru, the Philippines, Poland, Portugal, Singapore,
Sri Lanka, South Africa, South Korea, Taiwan, Thailand, Turkey and Venezuela. At
the discretion of the Investment Adviser, the Fund may also invest in other
countries with emerging securities markets. See "Appendix: Investment Policies,
Strategies and Risks" for a discussion of the risks associated with investment
in emerging markets countries.

12
<PAGE>
currently intend to do so. The Investment Adviser currently selects portfolio
securities for the Fund from an investment universe of approximately 6,000
foreign issuers in 20 emerging markets.

Under normal market conditions, at least 75% of the Emerging Countries Fund's
total assets will be invested in equity securities (common and preferred
stocks), and warrants and securities convertible into equity securities. The
remainder of the Fund's assets will be invested in debt securities of foreign
companies and foreign governments and their agencies and instrumentalities which
the Investment Adviser believes present attractive opportunities for capital
growth, as well as in various other securities and instruments described in
"Appendix: Investment Policies, Strategies and Risks."

The debt securities in which the Emerging Countries Fund may invest will be
rated "Baa" or higher by Moody's, "BBB" or higher by S&P or equivalent ratings
by other recognized rating agencies, or will be unrated if determined by the
Investment Adviser to be of comparable quality. At least 75% of the Fund's total
assets invested in such securities will be invested in securities rated A or
better by Moody's or S&P or, if unrated, determined to be of comparable quality
by the Investment Adviser. See "Worldwide Growth Portfolio A and Portfolio B"
for a description of these investment grade securities. If the rating of a debt
security held by the Fund is downgraded below investment grade, the security
will be sold as promptly as practicable.

13
<PAGE>
The decision to invest assets of a Fund in any particular debt security will be
based on such factors as the Investment Adviser's analysis of the effect of the
yield to maturity of the security on the average yield to maturity of the total
debt security portfolio of the Fund, the Investment Adviser's assessment of the
credit quality of the issuer and other factors the Investment Adviser deems
relevant. In managing the Funds' debt security investments, the Investment
Adviser seeks to capture major moves in interest rates and utilizes a
proprietary model to identify interest rate trends in the bond market. There can
be no assurance that use of these techniques will be successful.

INVESTMENT POLICIES, STRATEGIES AND RISKS. The Appendix and the Statement of
Additional Information describe certain investment securities and techniques of
the Funds and the associated risks. These include short-term investments in cash
and cash equivalents; investment in sovereign debt securities of U.S. and
foreign governments and their agencies and instrumentalities; floating and
variable rate demand notes and bonds; commercial paper; non-convertible
corporate debt securities; convertible securities, synthetic convertible
securities and warrants; closed-end country funds; depository receipts;
over-the-counter securities; when-issued securities and firm commitment
agreements; foreign exchange contracts; put and call options on securities;
stock index futures contracts; repurchase agreements; illiquid securities;
securities lending; and borrowing.

Certain of the investment restrictions which are fundamental policies are set
forth below. Additional investment restrictions are discussed in the Appendix
and Statement of Additional Information.

2. No Portfolio or Fund may purchase more than 10% of the outstanding voting
securities of any one issuer, or purchase the securities of any issuer for
the purpose of exercising control.

5. No Portfolio or Fund may invest more than 15% of its net assets in
illiquid securities.

The investment restrictions described above do not apply to an investment by a
Portfolio of all of its assets in a corresponding Fund.

14
<PAGE>

- --------------------------------------------------------------------------------
ORGANIZATION AND MANAGEMENT

INVESTMENT ADVISER. The Trust has not retained the services of an investment
adviser for the Portfolios, as the Portfolios seek to achieve their investment
objectives by investing all of their assets in corresponding Funds.
Nicholas-Applegate Capital Management, 600 West Broadway, 30th Floor, San Diego,
California 92101, serves as the Investment Adviser to the Funds. The Investment
Adviser currently manages approximately $30 billion of discretionary assets for
numerous clients, including employee benefit plans of corporations, public
retirement systems and unions, university endowments, foundations and other
institutional investors, and individuals. The Investment Adviser was organized
in 1984 as a California limited partnership. Its general partner is
Nicholas-Applegate Capital Management Holdings, L.P., a California limited
partnership controlled by Arthur E. Nicholas. He and 13 other partners manage a
staff of approximately 325 employees.

15
<PAGE>

For the fiscal year ended March 31, 1996, the Investment Adviser received (paid)
fees and expense recoupments (reimbursements) from the Funds equal to the
following percentages of the Portfolios' respective average net assets, after
the fee deferrals and expense reimbursements referred to under "Expense
Limitation": Worldwide Growth Portfolio A and B, 0.68% and (4.82%);
International Growth Portfolio A and B, 9.11% and (10.31%); Emerging Countries
Portfolio A and B, (2.76%)% and (3.65%).

The Funds have been managed since inception under the general supervision of Mr.
Nicholas, who has been the Chief Investment Officer of the Investment Adviser
since its organization. In addition, since December 1995, John D. Wylie, as
Chief Investment Officer-Investor Services Group, is also responsible for
general oversight of the Funds' portfolios. The following persons are primarily
responsible for the Investment Adviser's day-to-day management of the Funds'
portfolios; except as otherwise indicated, each of them has been primarily
responsible since the Funds began operation: Worldwide Growth, International
Growth and Emerging Countries Funds--the Investment Adviser's global management
team, headed by Lawrence S. Speidell (since March 1994) and Catherine Somhegyi
(since March 1996). Mr. Wylie and Ms. Somhegyi have managed institutional
investments for the Investments Adviser for more than the last five years. Mr.
Speidell has been a portfolio manager with the Investment Adviser since March
1994; from 1983 until he joined the Investment Adviser, he was an institutional
portfolio manager with Batterymarch Financial Management.

EXPENSE LIMITATION. To limit the expenses of each Portfolio, the Investment
Adviser has agreed to defer its fees, and to absorb the other operating expenses
of each Portfolio, to ensure that the expenses of each Portfolio (excluding
interest, taxes, brokerage commissions and other portfolio transaction expenses,
capital expenditures and extraordinary expenses, but including such Portfolio's
proportionate share of the corresponding Fund's similar operating expenses) do
not exceed the following respective percentage of such Portfolio's average net
assets on an annual basis through March 31, 1997: Worldwide Growth Portfolio A
and Portfolio B-1.85% and 2.50%; International Growth Portfolio A and Portfolio
B-1.95% and 2.60%; Emerging Countries Portfolio A and Portfolio B, 2.25% and
2.90%. Each Portfolio will reimburse the Investment Adviser for fees deferred or
other expenses paid by the Investment Adviser pursuant to this agreement in
later years in which operating expenses for the Portfolio are less than the
applicable percentage limitation set forth above for any such year. No interest,
carrying or finance charge will be paid by a Portfolio with respect to any
amounts representing

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<PAGE>

fees deferred or other expenses paid by the Investment Adviser. In addition, no
Portfolio or Fund will be required to repay any unreimbursed amounts to the
Investment Adviser upon termination or non-renewal of its Investment Advisory
Agreement with the Master Trust.

For the fiscal year ended March 31, 1996, the Series A and B Portfolios' total
expenses were the following percentages of their respective average net assets
(annualized for Series B), after the fee deferrals and expense reimbursements
indicated in parentheses: Worldwide Growth Portfolio A and B-1.85% (0.32%) and
2.50% (7.00%); International Growth Portfolio A and B-1.95% (8.11%) and 2.60%
(13.55%); and Emerging Countries Portfolio A and B-2.25% (4.47%) and 2.90%
(4.68%).

For historical performance data relating to the Portfolios, see "Appendix: Prior
Performance."

Under the Distribution Plan and a related distribution agreement (the
"Distribution Agreement"), the Distributor incurs the expenses of distributing
each Portfolio's shares. These expenses include advertising and marketing
expenses, commissions and other payments to broker-dealers and others which have
entered into agreements with the Distributor, the expenses of preparing,
printing and distributing prospectuses for the Portfolios, and indirect and
overhead costs associated with the sale of Portfolio shares. The Distributor
recovers the distribution expenses it incurs through the receipt of compensation
payments from each Portfolio under the Distribution Plan at the following annual
rates: for the Series A Portfolios, 0.25% of each such Portfolio's average daily
net assets; and for the Series B Portfolios, 0.75% of each such Portfolio's
average daily net assets. Moreover, under the Distribution Agreement, the
Distributor retains a portion of an initial sales charge from purchases of
shares of the Series A Portfolios, and a contingent deferred sales charge from
redemptions of shares of the Series A Portfolios and Series B Portfolios. The
Distribution Plan is a "compensation" plan, which means that the distribution
fees paid by the Portfolios under the Distribution Plan are intended to
compensate the Distributor for services rendered and commission fees borne even
if the amounts paid exceed the Distributor's actual expenses (in which case the
Distributor would realize a profit). If in any year the Distributor's expenses
incurred in connection with the distribution of a Portfolio's shares exceed the
distribution fees paid by the Portfolio, the Distributor will recover such
excess if the Distribution Plan with respect to such shares continues to be in
effect in some later year when the distribution fees exceed the Distributor's
expenses with respect to the Portfolio. There is no limit on the periods during
which unreimbursed expenses may be carried forward; no Portfolio pays interest,
carrying or other finance charges on any carried forward amounts; and no
Portfolio will be obligated to pay any unreimbursed expenses that may exist at
such time, if any, as the Distribution Plan terminates or is not continued.

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<PAGE>
Many of the Distributor's sales efforts involve the Trust as a whole, so that
distribution fees paid by one Portfolio may help finance sales efforts relating
to shares of other Portfolios. In reporting its expenses to the Trustees, the
Distributor separately itemizes expenses that relate to the distribution of
shares of a single Portfolio, and allocates other expenses among the Portfolios
based on their relative net assets.

No fees or commissions will be paid by the Distributor to any broker-dealer or
others until amounts owed to such broker-dealer or others are at least $100. The
Distributor, at its expense, may provide additional promotional incentives to
brokers and dealers. In the case of dealers who institute special promotional
programs for sales of shares of the Series A or Series B Portfolios or other
series of the Trust, such incentives may be up to 0.50% of sales during the
promotion period. Dealers may obtain further information by calling (800)
551-8045.

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<PAGE>
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PURCHASING SHARES

SHARE PRICE. Shares of a Portfolio are purchased at the next offering price
after an order in proper form is received by the Transfer Agent. An order in
proper form must include all

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<PAGE>
correct and complete information, documents and signatures required to process
your purchase. The offering price is the net asset value plus a sales charge, if
applicable. The net asset value per share is determined as of the close of
trading of the New York Stock Exchange on each day the Exchange is open for
normal trading. Orders received before 4:00 P.M. (Eastern time) on a day when
the Exchange is open for normal trading will be processed as of the close of
trading on that day. Otherwise processing will occur on the next business day.
To determine a Portfolio's net asset value per share, the current value of the
Portfolio's total assets, less all liabilities, is divided by the total number
of shares outstanding, and the result is rounded to the nearer cent.

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ALTERNATIVE PURCHASE ARRANGEMENTS

Purchases of shares of a Series A Portfolio are generally subject to a maximum
initial sales charge of 5.25% (4.75% for Government Income Portfolio A), and
lower distribution and shareholder service fees than shares of a Series B
Portfolio. Purchases of shares of a Series B Portfolio are subject to a
contingent deferred sales charge, ranging from 5.00% on redemptions made within
12 months after the shares were purchased to zero for redemptions made more than
six years after purchase, and higher distribution and shareholder service fees
than shares of a Series A Portfolio. Shares of the Series B Portfolios may be
exchanged for shares of the corresponding Series A Portfolios seven years after
purchases; an exchange will be treated as a redemption and purchase for tax
purposes.

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<PAGE>
sales charge alternative (Series B Portfolios). Moreover, all shares acquired
under the initial sales charge alternative are subject to lower distribution and
shareholder service fees and, accordingly, such shares are expected to pay
correspondingly higher dividends on a per share basis. Even if your purchase
will not qualify for reduced initial sales charges you may nonetheless want to
consider purchasing shares of the Series A Portfolios if you expect to hold the
shares for an extended period of time because, depending on the number of years
you hold the investment, the accumulated continuing distribution and shareholder
service charges on shares of the Series B Portfolios would eventually exceed the
initial sales charge plus the lower continuing distribution and shareholder
service charges on shares of the Series A Portfolios during the life of your
investment. However, because initial sales charges are deducted at the time of
purchase, you would not have all of the purchase payment for shares of the
Series A Portfolios invested initially.

SERIES A PORTFOLIOS

The sales charges you pay when purchasing shares of a Series A Portfolio are set
forth below:

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<PAGE>
Shares-Contingent Deferred Sales Charge on Redemptions of Portfolio A Shares."
Commissions will be paid by the Distributor to dealers who initiate and are
responsible for purchases of $1 million or more and for purchases made at net
asset value by certain retirement plans of organizations with 50 or more
eligible employees as set forth in the Statement of Additional Information.

NET ASSET VALUE PURCHASES. The Trust may sell shares of a Series A Portfolio at
net asset value to:

(2) current or retired registered representatives or full-time employees and
their spouses and minor children of dealers having selling group agreements with
the Trust and plans for such persons;

(3) former limited partners and participants of certain investment partnerships
and pooled trusts previously managed by the Investment Adviser;

(5) companies or other entities exchanging securities with the Trust or Master
Trust through a merger, acquisition or exchange offer;

(6) trustees or other fiduciaries purchasing shares for certain retirement plans
of organizations with 50 or more eligible employees;

(7) participants in certain pension, profit-sharing or employee benefit plans
that are sponsored by the Distributor and its affiliates;

(8) investment advisers and financial planners who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services;

(10) employee-sponsored benefit plans in connection with redemptions of shares
of Series A or C Portfolios made as a result of participant-directed exchanges
between options in such a plan;

(12) such other persons as are determined by the Board of Trustees (or by the
Distributor pursuant to guidelines established by the Board) to have acquired
shares under circumstances not involving any sales expense to the Trust or the
Distributor. Shares are offered at net asset value to these persons and
organizations due to anticipated economies in sales effort and

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<PAGE>
expense. No sales charges are imposed on Portfolio shares purchased upon the
reinvestment of dividends and distributions, or upon an exchange of shares from
other series of the Trust except as otherwise noted in "Shareholder
Services-Exchange Privilege" below.

SERIES B PORTFOLIOS

You may purchase shares of any Series B Portfolio without an initial sales
charge. However, you will bear your proportionate share of payments pursuant to
the Distribution and Shareholder Service Plans, as described above, which
affects the net asset value of your shares in the Series B Portfolios. In
addition, a contingent deferred sales charge applies to redemptions of shares of
a Series B Portfolio made within six years from date of their purchase. No such
charge is imposed if the shares redeemed have been acquired through the
reinvestment of dividends or capital gains distributions or if the amount
redeemed is derived from increases in the value of the account above the amount
of purchase payments. The contingent deferred sales charge is paid to the
Distributor. The Distributor pays sales commissions of up to 4.00% of the
purchase price to participating broker-dealers and others at

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<PAGE>
the end of the month during which purchases of shares of the Series B Portfolios
are made by their customers. See "Redeeming Shares-Contingent Deferred Sales
Charge on Redemption of Portfolio B Shares."

OTHER PORTFOLIOS

Currently, the Trust offers eight Series A Portfolios, eight Series B
Portfolios, eight Series C Portfolios and a Money Market Portfolio. Three global
Series A and Series B Portfolios are offered pursuant to this Prospectus. Five
domestic Series A and B Portfolios, the Money Market Portfolio, and the Series C
Portfolios, are covered by separate prospectuses which can be obtained by
calling (800) 551-8045. The Distributor also offers shares of other portfolios
of the Trust which invest in the same Funds of the Master Trust as the Series A
and B Portfolios. These other portfolios have different sales charges and other
expenses than the Series A and B Portfolios, which may affect their performance.
Information about these other portfolios can be obtained from your dealer or by
calling (800) 551-8045.

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SHAREHOLDER SERVICES

AUTOMATIC INVESTMENT PLAN. You may make regular monthly or quarterly investments
in each Portfolio 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
(800) 551-8043.

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<PAGE>
CROSS-REINVESTMENT. You may cross-reinvest dividends or dividends and capital
gain distributions paid by one Portfolio into shares of another Portfolio within
the same series (A or B), subject to conditions outlined in the Statement of
Additional Information. Cross-reinvestment of dividends and capital gain
distributions may also be made from and to the Trust's Money Market Portfolio.
Generally, to use this service the value of your account in the Portfolio which
paid the dividend or capital gain distribution must equal at least $5,000.

EXCHANGE PRIVILEGE. You may exchange shares of any Portfolio into shares of
other Portfolios within the same series (A or B) by writing to the Transfer
Agent, State Street Bank and Trust Company, Attention: Nicholas-Applegate Mutual
Funds, P.O. Box 8326, Boston, Massachusetts 02266-8326. Shares may also be
exchanged to or from the Trust's Money Market Portfolio. Please specify the name
of the applicable Portfolio, the number of shares or dollar amount to be
exchanged and your name and account number. You may also exchange shares by
contacting your dealer or - if you have authorized telephone exchanges on the
account application - by telephoning the Transfer Agent at (800) 551-8043 or by
sending the Transfer Agent a facsimile at (617) 774-2651, between the hours of
8:00 A.M. and 4:00 P.M. (Eastern time) on a day when the New York Stock Exchange
is open for normal trading (see "Telephone Privilege" below).

Before effecting an exchange, you should obtain the currently effective
prospectus of the series into which the exchange is to be made. Exchange
purchases are subject to the minimum investment requirements of the Portfolio
purchased. No sales charge applies except for exchanges of shares of the Trust's
Money Market Portfolio for shares of a Series A Portfolio, which are subject to
applicable sales charges on the Series A Portfolio being purchased unless the
Money Market Portfolio shares were acquired by an exchange from a Series A
Portfolio having a sales charge, or by reinvestment or cross-investment of
dividends or capital gain distributions. Additionally, a contingent deferred
sales load may apply to certain redemptions of shares of the Trust's Money
Market Portfolio acquired in an exchange for shares of a Series A or B
Portfolio. See "Alternative Purchase Arrangements" above. An exchange will be
treated as a redemption and purchase for tax purposes. If certificates are held
by you, the certificates, signed in the name(s) shown on the face of the
certificates, must be returned in order for the shares to be exchanged.

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<PAGE>

implement, in which case you should mail or send by overnight delivery a written
exchange or redemption request to the Transfer Agent. Overnight deliveries
should be sent to the Transfer Agent, Attention: Nicholas-Applegate Mutual
Funds, 2 Heritage Drive, 7th Floor, North Quincy, Massachusetts 02171. All
exchanges will be made on the basis of the relative net asset values of the two
Portfolios next determined after a completed request is received. Requests for
telephone exchanges or redemptions received before 4:00 P.M. (Eastern time) on a
day when the New York Stock Exchange is open for normal trading will be
processed as of the close of trading on that day. Otherwise processing will
occur on the next business day.

AUTOMATIC EXCHANGES. You may automatically exchange shares (in increments of $50
or more) among any of the Portfolios within the same series (A or B) or with the
Trust's Money Market Portfolio on a monthly or quarterly basis. You must either
meet the minimum initial investment requirement for the receiving Portfolio or
the originating Portfolio's balance must be at least $5,000 and the receiving
Portfolio's minimum must be met within one year.

REPORTS TO SHAREHOLDERS. Each Portfolio will send its shareholders 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 Portfolios may provide one annual and semi-annual report
and annual prospectus per household. In addition, quarterly unaudited financial
data are available from the Portfolios upon request.

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REDEEMING SHARES

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<PAGE>

(1) exchanges for other Portfolio A shares (except if shares acquired by
exchange are then redeemed within 12 months of the initial purchase);

(2) redemptions in connection with mergers, acquisitions and exchange offers
involving a Series A Portfolio;

(3) qualifying distributions from qualified retirement plans and other employee
benefit plans;

(4) distributions from custodial accounts under Section 403(b)(7) of the
Internal Revenue Code or from IRAs due to death, disability or attainment of age
59 1/2;

(5) tax-free returns of excess contributions to IRAs;

(6) any partial or complete redemptions following the death or disability of a
shareholder, provided the redemption is made within one year of death or initial
determination of disability;

(7) redemptions through certain automatic withdrawals; and

(8) redemptions by qualified retirement and employee benefit plans with 50 or
more eligible employees. There is no contingent deferred sales charge on
redemptions of shares of the Money Market Portfolio unless such shares were
acquired in an exchange for shares of a Series A Portfolio and the redemption is
made less than one year after the initial $1 million purchase of such shares.

CONTINGENT DEFERRED SALES CHARGE ON REDEMPTION OF PORTFOLIO B SHARES. A
contingent deferred sales charge ("CDSC") applies to redemptions of Shares of a
Series B Portfolio within six years of investment. The charge declines from
5.00% to zero over a six-year period. The CDSC will be deducted from the
redemption proceeds and will reduce the amount paid to you. A CDSC will be
applied to the lesser of the original purchase price or the current value of the
shares being redeemed. Increases in the value of your shares or shares acquired
through reinvestment of dividends or distributions are not subject to a CDSC.

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The following table sets forth the rates of the CDSC applicable to redemptions
of shares of a Portfolio B series:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES
CHARGE AS A PERCENTAGE
OF DOLLARS INVESTED OR
YEAR SINCE PURCHASE PAYMENT MADE REDEMPTION PROCEEDS
- --------------------------------------------------------------------------- -----------------------
<S> <C>
First...................................................................... 5.00%
Second..................................................................... 4.00%
Third...................................................................... 3.00%
Fourth..................................................................... 3.00%
Fifth...................................................................... 2.00%
Sixth...................................................................... 1.00%
Seventh and thereafter..................................................... None
</TABLE>

For example, assume you purchased 100 shares of Worldwide Growth Portfolio B at
$10 per share for a cost of $1,000. Subsequently, you acquired 5 additional
shares of Worldwide Growth Portfolio B through dividend reinvestment. During the
second year after the purchase, you decided to redeem $500 of your investment.
Assuming at the time of the redemption the net asset value had appreciated to
$12 per share, the value of your Worldwide Growth Portfolio B shares would be
$1,260 (105 shares at $12 per share). The CDSC would not be applied to the value
of the reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would
be charged a CDSC at a rate of 4% (the applicable rate in the second year after
purchase) for a total CDSC of $9.60.

For Federal income tax purposes, the amount of the CDSC will reduce the gain or
increase the loss, as the case may be, on the amount recognized on the
redemption of shares.

The CDSC is waived for redemptions of shares of a Series B Portfolio by: (1)
current or retired directors, trustees, partners, officers and employees of the
Trust, the Master 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; (2) former limited partners and participants of
certain investment partnerships and pooled trusts previously managed by the
Investment Adviser; (3) participants in certain pension, profit-sharing or
employee benefit plans that are sponsored by the Distributor and its affiliates.

The CDSC is also waived for:

(1) exchanges of shares of the Series B Portfolios (however, the shares acquired
by exchange will continue to be subject to a contingent deferred sales charge on
the same basis as the shares exchanged);

(2) redemptions in connection with mergers, acquisitions and exchange offers
involving a Series B Portfolio;

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<PAGE>
(3) qualifying distributions from qualified retirement plans and other employee
benefit plans;

(4) distributions from custodial accounts under Section 403(b)(7) of the
Internal Revenue Code or IRAs due to death, disability or attainment of age
59 1/2;

(5) tax-free returns of excess contributions to IRAs; and

(6) any partial or complete redemptions following the death or disability of a
shareholder, provided the redemption is made within one year of death or initial
determination of disability. There is no CDSC on redemptions of shares of the
Money Market Portfolio unless such shares were acquired in an exchange for
shares of a Series B Portfolio and the redemption is made within six years after
the initial purchase.

REINSTATEMENT PRIVILEGE. You may reinvest proceeds from a redemption of
Portfolio shares, or proceeds of a dividend or capital gain distribution paid to
you with respect to Portfolio shares, without a sales charge in any of the
Portfolios. Upon such a reinvestment, the Distributor will credit to your
account any contingent deferred sales charge imposed on the redeemed shares.
Send a written request and a check to the Transfer Agent within 90 days after
the date of the redemption, dividend or distribution. Reinvestment will be at
the next calculated net asset value after receipt. The tax status of a gain
realized on a redemption will not be affected by exercise of the reinstatement
privilege, but a loss may be nullified if you reinvest in the same series within
30 days.

INVOLUNTARY REDEMPTION. In order to reduce expenses of a Portfolio, the Trust
may redeem all of the shares of any shareholder whose account has a net asset
value of less than $500 due to redemptions other than a shareholder which is an
IRA or other tax-deferred retirement plan. The Trust will give such shareholders
60 days' prior written notice in which to purchase sufficient additional shares
to avoid such redemption. No contingent deferred sales charge is imposed on such
redemptions.

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DIVIDENDS, DISTRIBUTIONS AND TAXES

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<PAGE>
on their returns. Notwithstanding the foregoing, dividends of net income and
short-term capital gains to a foreign shareholder will generally be subject to
U.S. withholding at the rate of 30% (or lower treaty rate).

You should consult your own tax adviser regarding specific questions as to
federal, state or local taxes. See "Taxes" in the Statement of Additional
Information.

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GENERAL INFORMATION

PERFORMANCE INFORMATION. From time to time the Trust may advertise each
Portfolio's total return and, if applicable, its yield. These figures are based
on historical earnings and are not intended to indicate future performance.
Total return shows how much an investment in the Portfolio would have increased
(or decreased) over a specified period of time (I.E., one, five or ten years or
since inception of the Portfolio) assuming that all distributions and dividends
by the Trust to shareholders of the Portfolio were reinvested on the
reinvestment dates during the period. Total return takes into account any
applicable sales charges, but does not take into account any federal or state
income taxes which may be payable by the investor. The Trust also may include
comparative performance information in advertising or marketing Portfolio
shares. Such performance information may include data from Lipper Analytical
Services, Inc., Morningstar Inc., other industry publications, business
periodicals, rating services and market indices. "Appendix: Prior Performance"
and "Performance Information" in the Statement of Additional Information.

Further information about the performance of the Portfolios is contained in the
Trust's 1996 Annual Report to Shareholders, which may be obtained without charge
by calling (800) 551-8043.

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<PAGE>
have been paid. Pursuant to the Trust's Declaration of Trust, the Board of
Trustees of the Trust may authorize the creation of additional series, and
classes within series, with such preferences, privileges, limitations and voting
and dividend rights as the Board may determine.

MASTER TRUST. The Funds are series of Nicholas-Applegate Investment Trust, an
open-end management investment company organized as a Delaware business trust in
December 1992. The trustees and officers of the Master Trust are described in
the Statement of Additional Information. Whenever a Portfolio is requested to
vote on matters pertaining to the corresponding Fund or the Master Trust in its
capacity as a shareholder of such Fund, the Trust will hold a meeting of its
shareholders and will cast its vote as instructed by such shareholders or, in
the case of a matter pertaining exclusively to the corresponding Fund, as
instructed particularly by shareholders of the Portfolio and other series of the
Trust which invest in the Fund. The Trust will vote shares for which it has
received no voting instructions in the same proportion as the shares for which
it does receive voting instructions.

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APPENDIX

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INVESTMENT POLICIES, STRATEGIES AND RISKS

The investment policies and strategies of the Portfolios (as implemented through
their investment in corresponding Funds) encompass the following securities,
techniques and risk considerations.

SHORT-TERM INVESTMENTS (ALL FUNDS). Each of the Funds may invest in short-term
investments to maintain liquidity for redemptions or during periods when, in the
opinion of the Investment Adviser, attractive investments are temporarily
unavailable. Under normal circumstances, no more than 10% of a Fund's total
assets will be retained in cash (U.S. dollars, foreign currencies or
multinational currency units) and cash equivalents. In addition, each Fund may
invest without restriction in short-term investments for temporary defensive
purposes, such as when the securities markets or economic conditions are
expected to enter a period of decline. Short-term investments in which the Funds
may invest include U.S. Treasury bills or other U.S. Government or Government
agency or instrumentality obligations; certificates of deposit; bankers'
acceptances; time deposits; high quality commercial paper and other short-term
high grade corporate obligations; shares of money market mutual funds; or
repurchase agreements with respect to such securities. These instruments are
described below. The Funds will only invest in short-term investments which, in
the opinion of the Investment Adviser present minimal credit and interest rate
risk.

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<PAGE>
CERTIFICATES OF DEPOSIT, TIME DEPOSITS AND BANKERS' ACCEPTANCES (ALL
FUNDS). Each of the Funds may invest in certificates of deposit, time deposits
and bankers' acceptances issued by domestic banks, foreign banks, foreign
branches of domestic banks, domestic and foreign branches of foreign banks, and
domestic savings and loan associations, all of which at the date of investment
have capital, surplus and undivided profits as of the date of their most recent
published financial statements in excess of $100 million, or less than $100
million if the principal amount of such bank obligations is insured by the
Federal Deposit Insurance Corporation. Certificates of deposit are certificates
evidencing the obligation of a bank to repay funds deposited with it for a
specified period of time. Time deposits are non-negotiable deposits maintained
in a banking institution for a specified period of time at a stated interest
rate. Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer; these instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity.

CORPORATE DEBT SECURITIES (ALL FUNDS). The non-convertible corporate debt
securities in which the Funds may invest include obligations of varying
maturities (such as debentures, bonds and

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<PAGE>

Convertible debt securities purchased by the Funds, which are acquired in
substantial part for their equity characteristics, are not subject to minimum
rating requirements.

35
<PAGE>

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES (WORLDWIDE GROWTH
FUND). The Worldwide Growth Fund may invest in certificates issued by the
Government National Mortgage Association ("GNMA") as a short-term investment.
GNMA certificates are mortgage-backed securities representing part ownership of
a pool of mortgage loans, which are issued by lenders such as mortgage bankers,
commercial banks and savings associations, and are either insured by the Federal
Housing Administration or the Veterans Administration. A pool of these mortgages
is assembled and, after being approved by GNMA, is offered to investors through
securities dealers. The timely payment of interest and principal on each
mortgage is guaranteed by GNMA and backed by the full faith and credit of the
U.S. Government. Principal is paid back monthly by the borrower over the term of
the loan rather than returned in a lump sum at maturity. Due to the prepayment
feature and the need to reinvest prepayments of principal at current market
rates, GNMA certificates can be less effective than typical bonds of similar
maturities at "locking in" yields during periods of declining interest rates.

COUNTRY FUNDS (ALL FUNDS). Closed-end and open-end country funds in which the
Funds may invest are registered investment companies which hold portfolio
securities of issuers operated

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<PAGE>

or located in a single country or geographical region. The extent to which a
Fund may invest in closed-end and open-end country funds is limited by the
Investment Company Act and various state securities or "blue sky" laws.
Accordingly, as a fundamental policy, none of such Funds will own more than 3%
of the outstanding voting stock of any closed-end or open-end investment
company, will not invest more than 10% of its total assets in securities issued
by closed-end and open-end investment companies nor, together with other
investment companies managed by the Investment Adviser, will own more than 10%
of any closed-end or open-end investment company. Assets of the Funds invested
in closed-end and open-end country funds are subject to advisory and other fees
imposed by the closed-end and open-end country funds, as well as to fees imposed
by the Funds.

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<PAGE>
structures that are generally less diverse and mature (and in some cases the
absence of developed legal structures governing private and foreign investments
and private property), and to political systems which can be expected to have
less stability, than those of more developed countries. The risks of investment
in such countries may include matters such as relatively unstable governments,
higher degrees of government involvement in the economy, the absence until
recently of capital market structures or market-oriented economies, economies
based on only a few industries, securities markets which trade only a small
number of securities, restrictions on foreign investment in stocks, and
significant foreign currency devaluations and fluctuations.

As a result of the factors described above, the share price of the Emerging
Countries Portfolios is expected to be volatile, investment in these Portfolios
should be considered speculative, and investors should be able to tolerate
sudden, sometimes substantial, fluctuations in the value of their investments.
Because of the risks associated with international equity investments and
emerging markets in particular, the Emerging Countries Portfolios are intended
to be a long-term investment vehicle and are not designed to provide investors
with a means of speculating on short-term market movements.

38
<PAGE>
the party with which a Fund enters into such a transaction may not perform its
commitment. The Funds will normally enter into these transactions with the
intention of actually receiving or delivering the securities. The Funds may sell
the securities before the settlement date.

To the extent a Fund engages in any of these transactions it will do so for the
purpose of acquiring securities for its portfolio consistent with its investment
objective and policies and not for the purpose of investment leverage. The Funds
will segregate liquid assets such as cash, U.S. Government securities and other
liquid, high quality debt securities in an amount sufficient to meet their
payment obligations with respect to these transactions. A Fund may not purchase
when-issued securities or enter into firm commitments if, as a result, more than
15% of the Fund's net assets would be segregated to cover such contracts.

39
<PAGE>
risks when the Investment Adviser believes that the price of a security may
decline, causing a decline in the value of a security owned by the Fund or a
security convertible into or exchangeable for such security. In such case, any
future losses in the Fund's long position would be reduced by a gain in the
short position.

40
<PAGE>

assurance as to the success of any hedging operations which a Fund may
implement. Although the strategy of engaging in foreign currency transactions
could reduce the risk of loss due to a decline in the value of the hedged
currency, it could also limit the potential gain from an increase in the value
of the currency. No such Fund intends to maintain a net exposure to such
contracts where the fulfillment of the Fund's obligations under such contracts
would obligate the Fund to deliver an amount of foreign currency in excess of
the value of the Fund's portfolio securities or other assets denominated in that
currency.

Put and call options are derivative securities traded on United States and
foreign exchanges, including the American Stock Exchange, Chicago Board Options
Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange and New York Stock
Exchange. Additionally, the Funds may purchase options not traded on a
securities exchange, which may bear a greater risk of nonperformance than
options traded on a securities exchange. Options not traded on an exchange are
considered dealer options and generally lack the liquidity of an exchange traded
option. Accordingly, dealer options may be subject to the Funds' restriction on
investment in illiquid securities, as described below. Dealer options may also
involve the risk that the securities dealers participating in such transactions
will fail to meet their obligations under the terms of the option.

41
<PAGE>
received from writing the option; if it is more, the Fund will realize a capital
loss. If the premium received from a closing sale transaction is more than the
premium paid to purchase the option, the Fund will realize a gain; if it is
less, the Fund will realize a loss.

FUTURES CONTRACTS (ALL FUNDS). Each Fund may purchase and sell stock index
futures contracts as a hedge against changes in market conditions. A stock index
futures contract is a bilateral agreement pursuant to which two parties agree to
take or make delivery of an amount of cash equal to a specified dollar amount
times the difference between the stock index value at the close of the last
trading day of the contract and the price at which the futures contract is
originally struck. No physical delivery of the underlying stocks in the index is
made.

42
<PAGE>
hedging vehicle, so that the Fund's return might have been better had hedging
not been attempted. In addition, a decision as to whether, when and how to use
options or futures involves the exercise of skill and judgment which are
different from those needed to select portfolio securities, and even a
well-conceived transaction may be unsuccessful to some degree because of market
behavior, currency fluctuations or interest rate trends. If the Investment
Adviser is incorrect in its forecasts regarding market values, currency
fluctuations, interest rate trends or other relevant factors, a Fund may be in a
worse position than if the Fund had not engaged in options or futures
transactions. The Investment Adviser is experienced in the use of options and
futures contracts as an investment technique.

43
<PAGE>
reasonable prices and might thereby experience difficulty satisfying
redemptions. The Fund might also have to register such restricted securities in
order to dispose of them, resulting in additional expense and delay.

In recent years, however, a large institutional market has developed for certain
securities that are not registered under the Securities Act of 1933, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, the Master Trust's Board of
Trustees may determine that such securities are not illiquid securities
notwithstanding their legal or contractual restrictions on resale, based on
factors such as the frequency of trades and quotes for the securities, the
number of dealers and others wishing to purchase and sell the securities, and
the nature of the security and the marketplace trades. In all other cases,
however, securities subject to restrictions on resale will be deemed illiquid.

44
<PAGE>
- --------------------------------------------------------------------------------

PRIOR PERFORMANCE

45
<PAGE>

<TABLE>
<CAPTION>
WORLDWIDE GROWTH INTERNATIONAL GROWTH EMERGING COUNTRIES
PERFORMANCE PERFORMANCE PERFORMANCE
------------------------ ------------------------ --------------------------
WORLDWIDE INTERNATIONAL EMERGING
GROWTH GROWTH COUNTRIES
PORTFOLIO MSCI PORTFOLIO MSCI PORTFOLIO IFTC
-------------- WORLD -------------- EAFE -------------- INVESTABLE
YEAR A B INDEX(1) A B INDEX(2) A B INDEX(3)
- ------------------------------------------------ ------ ------ -------- ------ ------ -------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1990(4).........................................
1991............................................
1992............................................
1993(4).........................................
1994(4).........................................
1995(4).........................................
1996(5).........................................
Last year(5)....................................
Last 5 years(5).................................
Since inception(5)..............................
</TABLE>

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

(4) Inception dates are as follows: Worldwide Growth Portfolio A-April 19, 1993;
Worldwide Growth Portfolio B-May 31, 1995; International Growth Portfolio
A-June 7, 1990 (registration statement effective August 31, 1994);
International Growth Portfolio B-May 31, 1995; Emerging Countries Portfolio
A-November 28, 1994; Emerging Countries Portfolio B-May 31, 1995.

(5) Through March 31, 1996.

46
<PAGE>
NICHOLAS--APPLEGATE-REGISTERED TRADEMARK- MUTUAL FUNDS

- -------------------------------------------------
SERIES A, B & C GLOBAL PORTFOLIOS

PROSPECTUS

Nicholas-Applegate Mutual Funds is an open-end management investment company
consisting of a number of diversified investment portfolios, including the three
Series A Portfolios, three Series B Portfolios and three Series C Portfolios
("Portfolios") offered hereby. These Portfolios provide a broad range of global
investment opportunities which are suitable for different investors. The Series
A, B and C Portfolios have identical investment objectives and policies.
However, the Series A Portfolios are sold subject to an initial sales charge and
lower operating expenses, and the Series B and C Portfolios are sold subject to
a contingent deferred sales charge and higher operating expenses.

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

WORLDWIDE GROWTH PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C seek to maximize
long-term capital appreciation. They invest in the Nicholas-Applegate Worldwide
Growth Fund, which in turn invests in a global portfolio of equity securities of
U.S. and foreign companies.

INTERNATIONAL GROWTH PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C seek to maximize
long-term capital appreciation. They invest in the Nicholas-Applegate
International Growth Fund, which in turn invests in an international portfolio
of equity securities of foreign companies only.

EMERGING COUNTRIES PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C seek to maximize
long-term capital appreciation. They invest in the Nicholas-Applegate Emerging
Countries Fund, which in turn invests primarily in a diversified portfolio of
equity securities of issuers located in emerging markets. INVESTMENTS IN THE
PORTFOLIOS SHOULD BE CONSIDERED SPECULATIVE, SINCE THE PORTFOLIOS WILL INVEST IN
EMERGING MARKET COUNTRIES. SEE "INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS," PAGE 10.

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

This Prospectus presents information you should know before investing in any
of the Portfolios. It should be retained for future reference. A Statement of
Additional Information for the Portfolios dated , 1996 has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this Prospectus. The Statement may be obtained, without charge, by writing
to the Trust, 600 West Broadway, 30th Floor, San Diego, California 92101, or by
calling (800) 551-8045. Inquiries regarding any of the Portfolios can also be
made by calling (800) 551-8043.

, 1996

<PAGE>
NICHOLAS--APPLEGATE MUTUAL FUNDS

- -------------------------------------------------
SERIES A, B & C GLOBAL PORTFOLIOS

WORLDWIDE GROWTH PORTFOLIO A, B AND C
INTERNATIONAL GROWTH PORTFOLIO A, B AND C
EMERGING COUNTRIES PORTFOLIO A, B AND C

TABLE OF CONTENTS

Summary of Expenses......................................... 3
Prospectus Summary.......................................... 6
Financial Highlights........................................ 10
Investment Objectives, Policies and Risk
Considerations............................................ 10
Organization and Management................................. 16
Purchasing Shares........................................... 20
Alternative Purchase Arrangements........................... 21
Shareholder Services........................................ 26
Redeeming Shares............................................ 28
Dividends, Distributions and Taxes.......................... 32
General Information......................................... 33
Appendix:
Investment Policies, Strategies
and Risks............................................... 35
Prior Performance......................................... 47

2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES

<TABLE>
<CAPTION>
WORLDWIDE INTERNATIONAL
GROWTH GROWTH
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
A B C A B C
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum sales charge on purchases (as a
percentage of offering price)(1) 5.25% None None 5.25% None None
Sales charge on reinvested dividends None None None None None None
Deferred sales charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower)(2) None 5.00% 1.00% None 5.00% 1.00%
Redemption fee(3) None None None None None None
Exchange fee None None None None None None
- ---------------------------------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERCENTAGE OF
AVERAGE NET ASSETS:
(after expense deferral)(5)
Management fees 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
12b-1 expenses 0.25% 0.75% 0.75% 0.25% 0.75% 0.75%
All other expenses (after expense
deferral)(5)
Shareholder service expenses 0.10% 0.25% 0.25% 0.10% 0.25% 0.25%
Other expenses 0.50% 0.50% 0.50% 0.60% 0.60% 0.60%
Total other expenses 0.60% 0.75% 0.75% 0.70% 0.85% 0.85%
Total operating expenses (after expense
deferral)(5) 1.85% 2.50% 2.50% 1.95% 2.60% 2.60%

<CAPTION>
EMERGING
COUNTRIES
Portfolio Portfolio Portfolio
A B C
<S> <C> <C>
- ---------------------------------------------
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum sales charge on purchases (as a
percentage of offering price)(1) 5.25% None None
Sales charge on reinvested dividends None None None
Deferred sales charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower)(2) None 5.00% 1.00%
Redemption fee(3) None None None
Exchange fee None None None
- ---------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERC
AVERAGE NET ASSETS:
(after expense deferral)(5)
Management fees 1.25% 1.25% 1.25%
12b-1 expenses 0.25% 0.75% 0.75%
All other expenses (after expense
deferral)(5)
Shareholder service expenses 0.10% 0.25% 0.25%
Other expenses 0.65% 0.65% 0.65%
Total other expenses 0.75% 0.90% 0.90%
Total operating expenses (after expense
deferral)(5) 2.25% 2.90% 2.90%
</TABLE>

The Board of Trustees of the Trust believes that the aggregate per share
expenses of each Portfolio are no greater than the expenses that the Portfolio
would incur if it retained the services of an investment adviser and the assets
of the Portfolio were invested directly in the types of securities held by the
corresponding Fund. For a detailed description of the expenses of the Portfolios
and the Funds in which they invest, see "Organization and Management."
- ---------------------------
(1)
Sales charges are reduced for purchases of $50,000 or more of shares of the
Series A Portfolios. There is no initial sales charge on purchases of shares
of the Series B or C Portfolios. The National Association of Securities
Dealers, Inc. limits total annual sales charges (including 12b-1 expenses) to
all purchasers of shares of a Portfolio to 6.25% of new sales plus an interest
factor. However, long-term shareholders may pay more than the economic
equivalent of such maximum sales charges. See "Alternative Purchase
Arrangements."

(2) Although purchases of $1 million or more of shares of a Series A Portfolios
are not subject to an initial sales charge, a contingent deferred sales
charge of 1.00% applies on certain redemptions made less than one year
following such purchases. A contingent deferred sales charge applies on
certain redemptions of shares of a Series B Portfolio, ranging from 5.00% of
redemptions made within 12 months of purchase to zero for redemptions made
more than six years after purchase. A contingent deferred sales charge of
1.00% also applies on certain redemptions of shares of a Series C Portfolio
made within 12 months following their purchase, but without regard to the
size of the purchase. See "Redeeming Shares."

(3) A $10 charge will be imposed on redemptions requested to be paid by wire
transfer. See "Redeeming Shares-Redemption Payments."

3
<PAGE>

(before recoupment) are less than the applicable percentage limitation set
forth above. Accordingly, until all such deferred fees or expenses have been
recouped by the Investment Adviser, the Portfolios' expenses will be higher,
and their yields will be lower, than would otherwise be the case. See
"Organization and Management-Expense Limitation." Actual operating expenses
for the Series A, B (annualized) and C Portfolios for the fiscal year ended
March 31, 1996 were the following respective annualized percentages of such
Portfolios' average net assets: Worldwide Growth Portfolio A, B and C-2.17%,
9.50% and 2.57%; International Growth Portfolios A, B and C-10.06%, 16.15%
and 16.15%; Emerging Countries Portfolio A, B and C-6.72%, 7.58% and 6.23%.
The various operating expenses of the Portfolios are further described under
"Organization and Management."

(5) After a substantial period, these expenses with respect to the Series B and
C Portfolios may total more than the maximum sales expenses that would have
been permissible if imposed entirely as an initial sales charge. See
"Organization and Management-Distributor."

4
<PAGE>
EXAMPLE OF PORTFOLIO EXPENSES. The following table illustrates the expenses that
a shareholder would pay on a hypothetical $1,000 investment in each of the
Portfolios over various time periods, assuming a 5% annual return. The
Portfolios charge no redemption fees. However, a contingent deferred sales
charge of 1.00% applies on redemptions of shares of a Series A Portfolio made
less than one year after a $1 million purchase of such shares, a contingent
deferred sales charge applies on redemptions of shares of a Series B Portfolio
(ranging from 5.00% of redemptions made within 12 months of purchase to zero for
redemptions made more than six years after purchase), and a contingent deferred
sales charge of 1.00% applies on redemptions of shares of a Series C Portfolio
made less than one year after any purchase of such shares.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
WORLDWIDE GROWTH
Portfolio A(1) $70 $108 $147 $258
Portfolio B:(2)
Assuming redemption at end of time period $77 $110 $156 $284
Assuming no redemption $25 $ 78 $133 $284
Portfolio C:(2)
Assuming redemption at end of time period $36 $ 78 $133 $284
Assuming no redemption $25 $ 78 $133 $284
- -------------------------------------------------------------------------------------
INTERNATIONAL GROWTH
Portfolio A(1) $71 $111 $152 $268
Portfolio B:(2)
Assuming redemption at end of time period $78 $113 $161 $293
Assuming no redemption $26 $ 81 $138 $293
Portfolio C:(2)
Assuming redemption at end of time period $37 $ 81 $138 $293
Assuming no redemption $26 $ 81 $138 $293
- -------------------------------------------------------------------------------------
EMERGING COUNTRIES
Portfolio A(1) $74 $119 $167 $297
Portfolio B:(2)
Assuming redemption at end of time period $80 $122 $175 $322
Assuming no redemption $29 $ 90 $153 $322
Portfolio C:(2)
Assuming redemption at end of time period $40 $ 90 $153 $322
Assuming no redemption $29 $ 90 $153 $322
- -------------------------------------------------------------------------------------
</TABLE>

(2)Assumes deduction at the time of redemption of a contingent deferred sales
charge, if applicable and no exchange of Portfolio B shares for Portfolio A
shares seven or more years after purchase.

5
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY

Nicholas-Applegate Mutual Funds (the "Trust") is an open-end management
investment company comprised of a number of diversified investment portfolios,
including the three Series A Portfolios, three Series B Portfolios and three
Series C Portfolios ("Portfolios") offered hereby. The Series A Portfolios,
Series B Portfolios and Series C Portfolios have identical investment objectives
and policies. However, the Series A Portfolios are sold subject to a front end
sales charge and the Series B Portfolios are sold subject to a contingent
deferred sales charge.

6
<PAGE>
Investments by the Funds in securities of foreign companies and governments
involve special risks in addition to the usual risks inherent in domestic
investments, including fluctuations in foreign exchange rates, political or
economic instability in the country of issue, and the possible imposition of
exchange controls or other laws or restrictions. Settlement of transactions in
foreign markets may be delayed or less frequent than in the U.S., and foreign
governments may withhold taxes from dividends and interest paid on securities
held by the Funds. There is also likely to be less publicly available
information about certain foreign issuers than is available about U.S.
companies, and foreign companies are not generally subject to uniform financial
reporting standards comparable to those applicable to U.S. companies.

In addition, investment by the Emerging Countries Fund in emerging markets
involves greater risks than other foreign investments, including less-developed
economic and legal structures; less stable political systems; illiquid
securities markets; possible expropriations, nationalization or confiscatory
taxation; and possible foreign currency devaluations and fluctuations. As a
result of these and other factors, the share prices of the Emerging Countries
Portfolios are expected to be volatile, and investment in the Portfolios should
be considered speculative and appropriate only as a long-term investment
vehicle. The Worldwide Growth and International Growth Funds may also invest a
portion of their assets in emerging market countries.

7
<PAGE>

DISTRIBUTOR. Nicholas-Applegate Securities (the "Distributor"), an affiliate of
the Investment Adviser, serves as distributor of shares of the Portfolios. Under
a Distribution Plan, the Distributor receives compensation for providing
distribution services for the Portfolios at the following annual rates: for the
Series A Portfolios-0.25% of each Portfolio's net assets; for the Series B
Portfolios-0.75% of each Portfolio's net assets; and for the Series C
Portfolios-0.75% of each Portfolio's net assets. Under a Shareholder Service
Plan, the Distributor is reimbursed for shareholder services it provides and for
payments made to broker-dealers and others for related support and recordkeeping
services at an annual rate of up to 0.10% of each Series A Portfolio's net
assets, 0.25% of each Series B Portfolio's net assets, and 0.25% of each Series
C Portfolio's net assets. See "Organization and Management." Under a
Distribution Agreement, the Distributor will also retain a portion of the
initial sales load on purchases of shares of the Series A Portfolios and the
contingent deferred sales load on redemptions of shares of the Portfolios. See
"Organization and Management" and "Alternative Purchase Arrangements."

Although shares of the Series B Portfolios and Series C Portfolios may be
purchased without an initial sales charge, a contingent deferred sales charge is
imposed on redemptions of

8
<PAGE>
Series B Portfolios (ranging from 5.00% of redemptions made within 12 months of
the purchase to zero for redemptions made more than six years after purchase)
and a contingent deferred sales charge of 1.00% is imposed on redemptions of
Series C Portfolios made less than one year after purchase. Shares of Series B
Portfolios may be exchanged for shares of the corresponding Series A Portfolios
seven years after purchase. See "Alternative Purchase Arrangements-Series B
Portfolios" and "-- Series C Portfolios."

SHAREHOLDER SERVICES. The following services are provided to shareholders of the
Portfolios for their convenience and flexibility: an automatic investment plan;
automatic reinvestment and cross-reinvestment of dividends and capital gains
distributions; an exchange privilege, including automatic exchanges; and
automatic withdrawals. See "Shareholder Services." The Trust also offers various
retirement plans through which you can invest in the Portfolios. See "Purchasing
Shares."

9
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

The following financial highlights have been audited by Ernst & Young L.L.P.
with respect to the fiscal year ended March 31, 1996, and by Coopers & Lybrand
L.L.P. with respect to the period from commencement of operations of the
Portfolios through March 31, 1995. Ernst & Young L.L.P. and Coopers & Lybrand
L.L.P. are independent auditors whose reports thereon were unqualified. This
information should be read in conjunction with the financial statements and the
notes thereto which appear in the Trust's 1996 Annual Report to Shareholders
incorporated by reference in the Statement of Additional Information.

<TABLE>
<CAPTION>
WORLDWIDE INTERNATIONAL
GROWTH GROWTH
Portfolio Portfolio Portfolio Portfolio Portfolio
A B C A B
------------------------------- --------- ------------------------------- -------------------- ---------
4-19-93 4-1-94 4-1-95 5-31-95 4-19-93 4-1-94 4-1-95 8-31-94 4-1-95 5-31-95
to to to to to to to to to to
3-31-94 3-31-95 3-31-96 3-31-96 3-31-94 3-31-95 3-31-96 3-31-95 3-31-96 3-31-96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA: $ 12.50 $ 14.94 $ 14.29 $ 12.50 $ 12.50 $ 14.86 $ 14.44 $ 12.50 $ 11.51 $ 12.50
Net asset value,
beginning of
period
Income from
investment
operations:
Net investment
income
(deficit) (0.07) (0.05) (0.07) (0.05) (0.09) (0.15) (0.21) -- (0.02) (0.02)
Net realized
and unrealized
gains (losses)
on securities
and foreign
currency 2.51 (0.09) 2.86 1.89 2.45 (0.08) 2.92 (0.98) 1.79 1.48
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from
investment
operations 2.44 (0.14) 2.79 1.84 2.36 (0.23) 2.71 (0.98) 1.77 1.46
Less
distributions:
Dividends from
net investment
income -- (0.02) (0.12) -- -- -- (0.01) (0.01) (0.13) --
Distributions
from capital
gains -- (0.49) (0.39) -- -- (0.19) (0.38) -- -- --
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net asset value,
end of period $ 14.94 $ 14.29 $ 16.57 $ 14.34 $ 14.86 $ 14.44 $ 16.76 $ 11.51 $ 13.15 $ 13.96
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN:+ 19.52% (0.90%) 19.79% 14.72% 18.88% (1.49%) 18.95% (7.85%) 15.46% 11.68%
RATIOS/SUPPLEMENTAL
DATA:
Net assets
($000), end of
period $ 20,194 $ 22,208 $ 23,481 $ 1,972 $ 66,577 $ 71,201 $ 71,155 $ 610 $ 1,056 $ 1,487
Ratio of expenses
to average net
assets, after
expense
reimbursement++ 1.85%* 1.85% 1.85% 2.50%* 2.44%* 2.50% 2.50% 1.95%* 1.95% 2.60%*
Ratio of expenses
to average net
assets, before
expense
reimbursement++ 2.23%* 2.18% 2.17% 9.50%* 2.44%* 2.57% 2.73% 9.77%* 10.06% 16.15%*
Ratio of net
investment
deficit to
average net
assets, after
expense
reimbursement++ (0.69%)* (0.42%) (0.35%) (1.28%)* (1.24%)* (1.06%) (0.99%) (0.07%)* (0.27%) (0.64%)*
Ratio of net
investment
deficit to
average net
assets, before
expense
reimbursement++ (1.07%)* (0.75%) (0.61%) (8.12%)* (1.24%)* (1.13%) (1.00%) (7.89%)* (7.75%) (13.26%)*
Portfolio
turnover** 95.09% 98.54% 132.20% 132.20% 95.09% 98.54% 132.20% 74.85% 141.02% 141.02%
Average
commission rate
paid** N/A N/A $ 0.0187 $ 0.0187 N/A N/A $ 0.0187 N/A $ 0.0128 $ 0.0128

<CAPTION>
EMERGING
COUNTRIES
Portfolio Portfolio Portfolio Portfolio
C A B C
-------------------- -------------------- --------- ---------------------
8-31-94 4-1-95 11-28-94 4-1-95 5-31-95 11-28-94 4-1-95
to to to to to to to
3-31-95 3-31-96 3-31-95 3-31-96 3-31-96 3-31-95 3-31-96
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------
PER SHARE DATA: $ 12.50 $ 11.32 $ 12.50 $ 11.00 $ 12.50 $ 12.50 $ 10.79
Net asset value,
beginning of
period
Income from
investment
operations:
Net investment
income
(deficit) (0.04) 0.01 0.04 (0.04) (0.04) -- (0.05)
Net realized
and unrealized
gains (losses)
on securities
and foreign
currency (1.12) 1.72 (1.54) 3.15 1.56 (1.70) 2.97
--------- --------- --------- --------- --------- ---------- ---------
Total from
investment
operations (1.16) 1.73 (1.50) 3.11 1.52 (1.70) 2.92
Less
distributions:
Dividends from
net investment
income (0.02) -- -- (0.02) -- (0.01) --
Distributions
from capital
gains -- -- -- (0.06) -- -- --
--------- --------- --------- --------- --------- ---------- ---------
Net asset value,
end of period $ 11.32 $ 13.05 $ 11.00 $ 14.03 $ 14.02 $ 10.79 $ 13.71
--------- --------- --------- --------- --------- ---------- ---------
--------- --------- --------- --------- --------- ---------- ---------
TOTAL RETURN:+ (9.25%) 15.30% (11.98%) 28.43% 12.16% (13.64%) 27.30%
RATIOS/SUPPLEMENT
DATA:
Net assets
($000), end of
period $ 24 $ 933 $ 1,197 $ 4,718 $ 3,557 $ 59 $ 4,345
Ratio of expenses
to average net
assets, after
expense
reimbursement++ 2.61%* 2.60% 2.25%* 2.25% 2.90%* 2.90%* 2.90%
Ratio of expenses
to average net
assets, before
expense
reimbursement++ 75.37%* 16.15% 6.15%* 6.72% 7.58%* 242.59%* 6.23%
Ratio of net
investment
deficit to
average net
assets, after
expense
reimbursement++ (0.76%)* (1.02%) (1.09%)* (0.35%) (1.05%)* (0.04%)* (1.06%)
Ratio of net
investment
deficit to
average net
assets, before
expense
reimbursement++ (73.52%)* (13.95%) (4.99%)* (3.61%) (5.44%)* (239.73%)* (4.15%)
Portfolio
turnover** 74.85% 141.02% 60.79% 118.21% 118.21% 60.79% 118.21%
Average
commission rate
paid** N/A $ 0.0128 N/A $ 0.0022 $ 0.0022 N/A $ 0.0022
</TABLE>

- ------------------------------
* Annualized

** For the corresponding Funds of the Master Trust

+ Computations do not reflect the Portfolio's sales charges

++ Includes expenses allocated from Master Trust Funds

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INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of each Portfolio are discussed below and
in the "Appendix: Investment Policies, Strategies and Risks."

10
<PAGE>
SPECIAL CONSIDERATIONS REGARDING MASTER/FEEDER STRUCTURE. The Portfolios seek to
achieve their investment objectives by investing all of their assets in
corresponding Funds, which have the same objectives as the Portfolios. The Funds
in turn hold investment securities. Accordingly, the investment experience of
each Portfolio will correspond directly with the investment experience of the
related Fund. For a description of the Funds' objectives, policies,
restrictions, management and expenses, see "Investment Objectives, Policies and
Risk Considerations" below, the Appendix and "Organization and Management."
There can be no assurance that any Portfolio or Fund will achieve its investment
objective. Each Portfolio's and Fund's investment objective is a fundamental
policy which may not be changed without the approval of the holders of a
majority of the outstanding shares of the Portfolio or Fund, respectively, as
defined in the Investment Company Act of 1940 (the "Investment Company Act").
Upon any such approval, each Portfolio will provide at least 30 days' written
notice to its shareholders before any change is made to its or the corresponding
Fund's investment objective.

11
<PAGE>
services and features offered by such companies to their shareholders.
Information about the availability of other investment companies that invest in
the Funds can be obtained by calling (800) 551-8045.

WORLDWIDE GROWTH PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C. Each Worldwide
Growth Portfolio seeks to maximize long-term capital appreciation. Each
Portfolio invests all of its assets in the Nicholas-Applegate Worldwide Growth
Fund, which has the same investment objective as the Worldwide Growth
Portfolios. Assets of the Worldwide Growth Fund are invested primarily in equity
securities of U.S. and foreign companies. Such companies may be in the earlier
stages of development, growth companies, cyclical companies or companies
believed to be undergoing a basic change in operations or markets which, in the
opinion of the Investment Adviser, would result in a significant improvement in
earnings. The securities of such companies may be subject to more volatile
market movements than securities of larger, more established companies. Although
the Fund is not restricted to investments in companies of any particular size,
it currently intends to invest principally in companies with smaller market
capitalizations and above (generally above $100 million). See "Appendix:
Investment Policies, Strategies and Risks" for a discussion of the risks
associated with investment in such companies.

12
<PAGE>

described in "Appendix: Investment Policies, Strategies and Risks." The debt
securities in which the Fund may invest will be rated "Baa" or higher by
Moody's, "BBB" or higher by S&P or equivalent ratings by other recognized rating
agencies, or will be unrated if determined by the Investment Adviser to be of
comparable quality. These securities are of investment grade, which means that
their issuers are believed to have adequate capacity to pay interest and repay
principal, although certain of such securities in the lower grades have
speculative characteristics, and changes in economic conditions or other
circumstances may be more likely to lead to a weakened capacity to pay interest
and principal than would be the case with higher rated securities. If the rating
of a debt security held by the Fund is downgraded below investment grade, the
security will be sold as promptly as practicable. The Fund may also make short
sales, which is considered a speculative technique. See "Appendix: Investment
Policies, Strategies and Risks" for a discussion of the risks associated with
short sale transactions.

INTERNATIONAL GROWTH PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C. Each
International Growth Portfolio seeks to maximize long-term capital appreciation.
Each Portfolio invests all of its assets in the Nicholas-Applegate International
Growth Fund, which has the same investment objective as the International Growth
Portfolios. Assets of the International Growth Fund are invested in the same
types of securities as the Worldwide Growth Fund, except that the International
Growth Fund may invest up to 35% of its total assets in securities of U.S.
companies. Under normal market conditions, as a fundamental policy which cannot
be changed without shareholder approval, at least 65% of the Fund's total assets
will be invested in securities of issuers located in at least three countries.
See "Worldwide Growth Portfolio A and Portfolio B" above.

EMERGING COUNTRIES PORTFOLIO A, PORTFOLIO B AND PORTFOLIO C. The Emerging
Countries Portfolios seek to maximize long-term capital appreciation. Each
Portfolio invests all of its assets in the Nicholas-Applegate Emerging Countries
Fund, which has the same investment objective as the Portfolio. Assets of the
Fund are invested primarily in equity securities of issuers located in countries
with emerging securities markets -- that is, countries with securities markets
which are, in the opinion of the Investment Adviser, emerging as investment
markets but have yet to reach a level of maturity associated with developed
foreign stock markets, especially in terms of participation by foreign
investors. The Fund currently expects to invest in issuers located in some or
all of the following emerging market countries: Argentina, Brazil, Chile, China,
Colombia, the Czech Republic, Greece, Hungary, India, Indonesia, Israel, Jordan,
Malaysia, Mexico, Morocco, Pakistan, Peru, the Philippines, Poland, Portugal,
Singapore, Sri Lanka, South Africa, South Korea, Taiwan, Thailand, Turkey and
Venezuela. At the discretion of the Investment Adviser, the Fund may also invest
in other countries with emerging securities markets. See "Appendix: Investment
Policies, Strategies and Risks" for a discussion of the risks associated with
investment in emerging markets countries.

13
<PAGE>

The debt securities in which the Emerging Countries Fund may invest will be
rated "Baa" or higher by Moody's, "BBB" or higher by S&P or investment grade by
other recognized rating agencies, or will be unrated if determined by the
Investment Adviser to be of comparable quality. At least 75% of the Fund's total
assets invested in such securities will be invested in securities rated A or
better by Moody's or S&P or, if unrated, determined to be of comparable quality
by the Investment Adviser. See "Worldwide Growth Portfolio A, Portfolio B and
Portfolio C" for a description of these investment grade securities. If the
rating of a debt security held by the Fund is downgraded below investment grade,
the security will be sold as promptly as practicable.

14
<PAGE>
Investment Adviser's assessment of the credit quality of the issuer and other
factors the Investment Adviser deems relevant. In managing the Funds' debt
security investments, the Investment Adviser seeks to capture major moves in
interest rates and utilizes a proprietary model to identify interest rate trends
in the bond market. There can be no assurance that use of these techniques will
be successful.

INVESTMENT POLICIES, STRATEGIES AND RISKS. The Appendix and the Statement of
Additional Information describe certain investment securities and techniques of
the Funds and the associated risks. These include short-term investments in cash
and cash equivalents; investment in sovereign debt securities of U.S. and
foreign governments and their agencies and instrumentalities; floating and
variable rate demand notes and bonds; commercial paper; non-convertible
corporate debt securities; convertible securities and warrants; closed-end
country funds; depository receipts; over-the-counter securities; when-issued
securities and firm commitment agreements; foreign exchange contracts; put and
call options on securities; stock index futures contracts; repurchase
agreements; illiquid securities; securities lending; and borrowing.

Certain of the investment restrictions which are fundamental policies are set
forth below. Additional investment restrictions are discussed in the Appendix
and Statement of Additional Information.

2. No Portfolio or Fund may purchase more than 10% of the outstanding voting
securities of any one issuer, or purchase the securities of any issuer for
the purpose of exercising control.

5. No Portfolio or Fund may invest more than 15% of its net assets in
illiquid securities.

The investment restrictions described above do not apply to an investment by a
Portfolio of all of its assets in a corresponding Fund.

15
<PAGE>

sale of a security owned by a Fund and the purchase of another security of
better value can enhance principal or increase income. A security may also be
sold to avoid a prospective decline in market value or purchased in anticipation
of a market rise. Although it is not possible to predict future portfolio
turnover rates accurately, and such rates may vary greatly from year to year,
the Investment Adviser anticipates that the annual portfolio turnover rate for
each Fund may be up to 200%, which is substantially greater than that of many
other investment companies. A high rate of portfolio turnover (100% or more)
will result in a Fund paying greater brokerage commissions on equity securities
(other than those affected with dealers on a principal basis) than would
otherwise be the case, which will be borne directly by the Fund and ultimately
by the shareholders of the corresponding Portfolios. High portfolio turnover
should not result in a Fund paying greater brokerage commissions on debt
securities, as most transactions in debt securities are affected with dealers on
a principal basis. However, debt securities, as well as equity securities traded
on a principal basis, are subject to mark-ups by the dealers. High portfolio
turnover may also result in the realization of substantial net capital gains,
and any distributions derived from such gains may be ordinary income for federal
tax purposes.

- --------------------------------------------------------------------------------
ORGANIZATION AND MANAGEMENT

INVESTMENT ADVISER. The Trust has not retained the services of an investment
adviser for the Portfolios, as the Portfolios seek to achieve their investment
objectives by investing all of their assets in corresponding Funds.
Nicholas-Applegate Capital Management, 600 West Broadway, 30th Floor, San Diego,
California 92101, serves as the Investment Adviser to the Funds. The Investment
Adviser currently manages approximately $30 billion of discretionary assets for
numerous clients, including employee benefit plans of corporations, public
retirement systems and unions, university endowments, foundations and other
institutional investors, and individuals. The Investment Adviser was organized
in 1984 as a California limited partnership. Its general partner is
Nicholas-Applegate Capital Management Holdings, L.P., a California limited
partnership controlled by Arthur E. Nicholas. He and 13 other partners manage a
staff of approximately 325 employees.

As compensation for the services it provides, the Investment Adviser receives a
monthly fee at the following annual rates: for the Emerging Countries Fund,
1.25% of the Fund's net assets; for each of the Worldwide Growth and
International Funds Growth, 1.00% on the first $500 million of the Fund's net
assets, 0.90% on the next $500 million of net assets, and 0.85% on net assets in
excess of $1 billion. The advisory fees paid by most of the Funds are higher
than those paid by most other investment companies.

16
<PAGE>

referred to under "Expense Limitation": Worldwide Growth Portfolio A, B and C,
0.68%, (4.82%) and 0.93%; International Growth A, B and C, (7.11%), (10.31%) and
(12.55%); and Emerging Countries A, B and C, (2.76%), (3.65%) and (3.04%).

The Funds have been managed since inception under the general supervision of Mr.
Nicholas, who has been the Chief Investment Officer of the Investment Adviser
since its organization. In addition, since December, 1995, John D. Wylie, as
Chief Investment Officer -- Investor Services Group, is also responsible for
general oversight of the Funds' portfolios. The following persons are primarily
responsible for the Investment Adviser's day-to-day management of the Funds'
portfolios; except as otherwise indicated, each of them has been primarily
responsible since the Funds began operation: Worldwide Growth, International
Growth and Emerging Countries Funds--the Investment Adviser's global management
team, headed by Lawrence S. Speidell (since March 1994) and Catherine Somhegyi
(since March 1996). Mr. Wylie and Ms. Somhegyi have managed institutional
investments for the Investment Adviser for more than the last five years. Mr.
Speidell has been a portfolio manager with the Investment Adviser since March
1994; from 1983 until he joined the Investment Adviser, he was an institutional
portfolio manager with Batterymarch Financial Management.

EXPENSE LIMITATION. To limit the expenses of each Portfolio, the Investment
Adviser has agreed to defer its fees, and to absorb the other operating expenses
of each Portfolio, to ensure that the expenses of each Portfolio (excluding
interest, taxes, brokerage commissions and other portfolio transaction expenses,
capital expenditures and extraordinary expenses, but including such Portfolio's
proportionate share of the corresponding Fund's similar operating expenses) do
not exceed the following respective percentage of such Portfolio's average net
assets on an annual basis through March 31, 1997: Worldwide Growth Portfolio A,
B and C-1.85%, 2.50% and 2.50%; International Growth Portfolio A, B and C-1.95%,
2.60% and 2.60%; Emerging Countries Portfolio A, B and C-2.25%, 2.90% and 2.90%.
Each Portfolio will reimburse the Investment Adviser for fees deferred or other
expenses paid by the Investment Adviser pursuant to this agreement in later
years in which operating expenses for the Portfolio are less than the applicable
percentage limitation set forth above for any such year. No interest, carrying
or finance charge will be paid by a Portfolio with respect to any amounts
representing fees deferred or other expenses paid by the Investment Adviser. In
addition, no Portfolio or Fund will be required to repay any unreimbursed
amounts to the Investment Adviser upon termination or non-renewal of its
Investment Advisory Agreement with the Master Trust.

17
<PAGE>

For historical performance data relating to the Portfolios, see "Appendix: Prior
Performance."

Under the Distribution Plan and a related distribution agreement (the
"Distribution Agreement"), the Distributor incurs the expenses of distributing
each Portfolio's shares. These expenses include advertising and marketing
expenses, commissions and other payments to broker-dealers and others which have
entered into agreements with the Distributor, the expenses of preparing,
printing and distributing prospectuses for the Portfolios, and indirect and
overhead costs associated with the sale of Portfolio shares. The Distributor
recovers the distribution expenses it incurs through the receipt of compensation
payments from each Portfolio under the Distribution Plan at the following annual
rates: for the Series A Portfolios, 0.25% of each such Portfolio's average daily
net assets; for the Series B Portfolios, 0.75% of each of such Portfolio's
average daily net costs; for the Series C Portfolios, 0.75% of each such
Portfolio's average daily net assets. Moreover, under the Distribution
Agreement, the Distributor retains a portion of an initial sales charge from
purchases of shares of the Series A Portfolios, and a contingent deferred sales
charge from redemptions of shares of the Series A, B and C Portfolios. The
Distribution Plan is a "compensation" plan, which means that the distribution
fees paid by the Portfolios under the Distribution Plan are intended to
compensate the Distributor for services rendered and commission fees borne even
if the amounts paid exceed the Distributor's actual expenses (in which case the
Distributor would realize a profit). If in any year the Distributor's expenses
incurred in connection with the distribution of a Portfolio's shares exceed the
distribution fees paid by the Portfolio, the Distributor will recover such
excess if the Distribution Plan with respect to such shares continues to be in
effect in some later year when the distribution fees exceed the Distributor's
expenses with respect to the Portfolio. There is no limit on the periods during
which unreimbursed expenses may be carried forward; no Portfolio pays interest,
carrying or other finance charges on any carried forward amounts; and no
Portfolio will be obligated to pay any unreimbursed expenses that may exist at
such time, if any, as the Distribution Plan terminates or is not continued.

18
<PAGE>
Under the Shareholder Service Plan, which is a "reimbursement" plan, each Series
A Portfolio, Series B Portfolio and Series C Portfolio, pays the Distributor an
annual fee of up to 0.10%, 0.25% and 0.25%, respectively, of the Portfolio's
average daily net assets as reimbursement for certain expenses actually incurred
in connection with shareholder services provided by the Distributor and payments
to broker-dealers and others for the provision of such services. Support
services with respect to the beneficial owners of Portfolio shares include
establishing and maintaining accounts and records relating to clients of the
Distributor, broker-dealers and others who invest in the Portfolio shares,
preparing tax reports, assisting clients in processing exchange and redemption
requests and account designations, and responding to client inquiries concerning
their investments. If in any month the Distributor is due more monies for
shareholder services than are immediately payable because of the expense
limitations under the Shareholder Service Plan, the unpaid amount is carried
forward from month to month while the Shareholder Service Plan is in effect
until such time when it may be paid. However, no carried forward amount will be
payable beyond the fiscal year during which the amounts were incurred, and no
interest, carrying or other finance charge is borne by the Portfolios with
respect to any amount carried forward.

No fees or commissions will be paid by the Distributor to any broker-dealer or
others until amounts owed to such broker-dealer or others are at least $100. The
Distributor, at its expense, may provide additional promotional incentives to
brokers and dealers. In the case of dealers who institute special promotional
programs for sales of shares of the Portfolios or other series of the Trust,
such incentives may be up to 0.50% of sales during the promotion period. Dealers
may obtain further information by calling (800) 551-8045.

19
<PAGE>
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PURCHASING SHARES

20
<PAGE>
SHARE PRICE. Shares of a Portfolio are purchased at the next offering price
after an order in proper form is received by the Transfer Agent. An order in
proper form must include all correct and complete information, documents and
signatures required to process your purchase. The offering price is the net
asset value plus a sales charge, if applicable. The net asset value per share is
determined as of the close of trading of the New York Stock Exchange on each day
the Exchange is open for normal trading. Orders received before 4:00 P.M.
(Eastern time) on a day when the Exchange is open for normal trading will be
processed as of the close of trading on that day. Otherwise processing will
occur on the next business day. To determine a Portfolio's net asset value per
share, the current value of the Portfolio's total assets, less all liabilities,
is divided by the total number of shares outstanding, and the result is rounded
to the nearer cent.

- --------------------------------------------------------------------------------
ALTERNATIVE PURCHASE ARRANGEMENTS

Purchases of shares of a Series A Portfolio are generally subject to a maximum
initial sales charge of 5.25% and lower distribution and shareholder service
fees than shares of a Series B or C Portfolio. Purchases of a Series B Portfolio
are subject to a contingent deferred sales charge, ranging from 5.00% on
redemptions made within 12 months after the shares were purchased to zero for
redemptions made more than six years after purchase, and higher distribution and
shareholder service fees than shares of a Series A Portfolio. Purchases of
shares of a Series C Portfolio are subject to a contingent deferred sales charge
of 1.00% imposed on redemptions made within 12 months after the shares were
purchased, and higher distribution and shareholder service fees than shares of a
Series A Portfolio. Shares of the Series B Portfolios may be exchanged for
shares of the corresponding Series A Portfolios seven years after purchase; an
exchange will be treated as a redemption and purchase for tax purposes.

21
<PAGE>
annual fees (Series A Portfolios), to have the entire purchase price invested in
Portfolio shares with the investment thereafter being subject to a contingent
deferred sales charge for a period of six years and higher annual fees for a
period of seven years from date of purchase (Series B Portfolios), or to have
the entire purchase price invested in Portfolio shares with the investment
thereafter being subject to a contingent deferred sales charge for a period of
one year from date of purchase and higher annual fees (Series C Portfolios).

22
<PAGE>
SERIES A PORTFOLIOS

The sales charges you pay when purchasing shares of a Series A Portfolio are set
forth below:

In addition, although no initial sales charge applies on a purchase of $1
million or more of any of the Series A Portfolios, a contingent deferred sales
charge of 1.00% is imposed on certain redemptions within one year of the $1
million purchase. See "Redeeming Shares--Contingent Deferred Sales Charge on
Redemptions of Portfolio A Shares." Commissions will be paid by the Distributor
to dealers who initiate and are responsible for purchases of $1 million or more
and for purchases made at net asset value by certain retirement plans of
organizations with 50 or more eligible employees as set forth in the Statement
of Additional Information.

NET ASSET VALUE PURCHASES. The Trust may sell shares of a Series A Portfolio at
net asset value to:

(1) current or retired directors, trustees, partners, officers and
employees of the Trust, the Master 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;

(2) current or retired registered representatives or full-time employees
and their spouses and minor children of dealers having selling group
agreements with the Trust and plans for such persons;

(3) former limited partners and participants of certain investment
partnerships and pooled trusts previously managed by the Investment Adviser;

(4) shareholders and former shareholders of another mutual fund which
has a sales charge and is not a series of the Trust, so long as shares of
the Portfolio are purchased with the proceeds of a redemption, made within
60 days of the purchase, of shares of such other mutual fund (to obtain this
benefit, the redemption check, endorsed to the Trust, or a copy of the
confirmation showing the redemption must be forwarded to the Transfer
Agent);

(5) companies or other entities exchanging securities with the Trust or
Master Trust through a merger, acquisition or exchange offer;

(6) trustees or other fiduciaries purchasing shares for certain
retirement plans of organizations with 50 or more eligible employees;

(7) participants in certain pension, profit-sharing or employee benefit
plans that are sponsored by the Distributor and its affiliates;

23
<PAGE>

(8) investment advisers and financial planners who place trades for
their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services;

(9) clients of investment advisers and financial planners referred to in
item (8) who place trades for their own accounts if the accounts are linked
to the master account of the investment adviser or financial planner on the
books and records of a broker, agent, investment adviser or financial
institution;

(10) employee-sponsored benefit plans in connection with redemptions of
shares of Series A or C Portfolios made as a result of participant-directed
exchanges between options in such a plan;

(11) "wrap accounts" for the benefit of clients of broker-dealers,
financial institutions or financial planners having sales or service
agreements with the Distributor or another broker-dealer or financial
institution with respect to sales of shares of the Series A Portfolios; and

CONCURRENT PURCHASES. To qualify for a reduced sales charge, you may combine
concurrent purchases of shares of two or more Series A Portfolios. For example,
if you concurrently invest $25,000 in one Portfolio and $25,000 in another
Portfolio, the sales charge would be reduced to reflect a $50,000 purchase.

24
<PAGE>
LETTER OF INTENT. You may reduce sales charges on all investments by meeting the
terms of a letter of intent, a non-binding commitment to invest a certain amount
within a 13-month period. Your existing holdings in the Series A Portfolios may
also be combined with the investment commitment set forth in the letter of
intent to further reduce your sales charge. Up to 5% of the letter amount will
be held in escrow to cover additional sales charges which may be due if your
total investments over the letter period are not sufficient to qualify for a
sales charge reduction. See the account application for further details.

SERIES B PORTFOLIOS

You may purchase shares of any Series B Portfolio without an initial sales
charge. However, you will bear your proportionate share of payments pursuant to
the Distribution and Shareholder Service Plans, as described above, which
affects the net asset value of your shares in the Series B Portfolios. In
addition, a contingent deferred sales charge applies to redemptions of shares of
a Series B Portfolio made within six years from date of their purchase. No such
charge is imposed if the shares redeemed have been acquired through the
reinvestment of dividends or capital gains distributions or if the amount
redeemed is derived from increases in the value of the account above the amount
of purchase payments. The contingent deferred sales charge is paid to the
Distributor. The Distributor pays sales commissions of up to 4.00% of the
purchase price to participating broker-dealers and others at the end of the
month during which purchases of shares of the Series B Portfolios are made by
their customers. See "Redeeming Shares--Contingent Deferred Sales Charge or
Redemption of Portfolio B Shares"

For Portfolio B shares previously exchanged for shares of the Trust's Money
Market Portfolio, the time period during which such shares were held in the
Money Market Portfolio will be excluded in calculating the applicable holding
period. For example, Portfolio B shares held in the Trust's Money Market
Portfolio for one year will not be exchangeable for Portfolio A shares until
eight years from purchase. Portfolio B shares acquired through exchange may be
exchanged for Portfolio A shares after expiration of the exchange period
applicable to the original purchase of such shares.

25
<PAGE>
SERIES C PORTFOLIOS

You may purchase shares of any Series C Portfolio without an initial sales
charge. However, you will bear your proportionate share of payments pursuant to
the Distribution and Shareholder Service Plans, as described above, which
affects the net asset value of your shares in the Series C Portfolios. In
addition, a contingent deferred sales charge of 1.00% applies to redemptions of
shares of a Series C Portfolio made within one year from date of their purchase.
Shares of the Series C Portfolios may not be exchanged for shares of the Series
A Portfolios, which may affect their performance for long-term investors. The
Distributor pays sales commissions of up to 1.00% of the purchase price to
participating broker-dealers and others at the end of the month during which
purchases of shares of the Series C Portfolios are made by their customers.

OTHER PORTFOLIOS

Currently, the Trust offers eight Series A Portfolios, eight Series B
Portfolios, eight Series C Portfolios and a Money Market Portfolio. Three global
Series A, B and C Portfolios are offered pursuant to this Prospectus. Five
domestic Series A, B and C Portfolios, and the Money Market Portfolio, are
covered by separate prospectuses which can be obtained by calling (800)
551-8045. The Distributor also offers shares of other portfolios of the Trust
which invest in the same Funds of the Master Trust as the Series A, B and C
Portfolios. These other portfolios have different sales charges and other
expenses than the Series A, B and C Portfolios, which may affect their
performance. Information about these other portfolios can be obtained from your
dealer or by calling (800) 551-8045.

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SHAREHOLDER SERVICES

AUTOMATIC INVESTMENT PLAN. You may make regular monthly or quarterly investments
in each Portfolio 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
(800) 551-8043.

CROSS-REINVESTMENT. You may cross-reinvest dividends or dividends and capital
gain distributions paid by one Portfolio into shares of another Portfolio within
the same series (A, B or C), subject to conditions outlined in the Statement of
Additional Information. Generally, to use this service the value of your account
in the Portfolio which paid the dividend or capital gain distribution must equal
at least $5,000.

EXCHANGE PRIVILEGE. You may exchange shares of any Portfolio into shares of
other Portfolios within the same series (A, B or C) by writing to the Transfer
Agent, State Street Bank and Trust Company, Attention: Nicholas-Applegate Mutual
Funds, P.O. Box 8326, Boston, Massachusetts 02266-8326. Please specify the name
of the applicable Portfolio, the number of shares or dollar amount to be
exchanged and your name and account number. You may also exchange shares by
contacting your dealer or - if you have authorized telephone exchanges on the
account application - by telephoning the Transfer Agent at (800) 551-8043 or by
sending

26
<PAGE>
the Transfer Agent a facsimile at (617) 774-2651, between the hours of 8:00 A.M.
and 4:00 P.M. (Eastern time) on a day when the New York Stock Exchange is open
for normal trading (see "Telephone Privilege" below).

27
<PAGE>
AUTOMATIC EXCHANGES. You may automatically exchange shares (in increments of $50
or more) among any of the Portfolios within the same series (A, B or C) on a
monthly or quarterly basis. You must either meet the minimum initial investment
requirement for the receiving Portfolio or the originating Portfolio's balance
must be at least $5,000 and the receiving Portfolio's minimum must be met within
one year.

REPORTS TO SHAREHOLDERS. Each Portfolio will send its shareholders 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 Portfolios may provide one annual and semi-annual report
and annual prospectus per household. In addition, quarterly unaudited financial
data are available from the Portfolios upon request.

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REDEEMING SHARES

28
<PAGE>
Except as noted in the discussions of contingent deferred sales charges below,
the price you receive for the Portfolio shares redeemed is at the next
determined net asset value for the shares after a completed redemption request
is received by the Transfer Agent.

(1) exchanges for other Portfolio A Shares (except if shares acquired by
exchange are then redeemed within 12 months of the initial purchase);

(2) redemptions in connection with mergers, acquisitions and exchange
offers involving a Series A Portfolio;

(3) qualifying distributions from qualified retirement plans and other
employee benefit plans;

(4) distributions from custodial accounts under Section 403(b)(7) of the
Internal Revenue Code or from IRAs due to death, disability or attainment of
age 59 1/2;

29
<PAGE>
(5) tax-free returns of excess contributions to IRAs;

(6) any partial or complete redemptions following the death or
disability of a shareholder, provided the redemption is made within one year
of death or initial determination of disability;

(7) redemptions through certain automatic withdrawals; and

(8) redemptions by qualified retirement and employee benefit plans with
50 or more eligible employees.

The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Portfolio B shares until the time the
shares are redeemed. Solely for purposes of determining the number of years from
the time of any payment for the purchase of shares, all payments during a month
will be aggregated and deemed to have been made on the last day of the month
preceding the purchase and the time shares were held in the Trust's Money Market
Portfolio will be excluded.

The following table sets forth the rates of the CDSC applicable to redemptions
of shares of a Portfolio B series:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEARS SINCE PURCHASE OF DOLLARS INVESTED OR
PAYMENT MADE REDEMPTION PROCEEDS
- ----------------------------------------------------------------------- ----------------------------
<S> <C>
First.................................................................. 5.00%
Second................................................................. 4.00%
Third.................................................................. 3.00%
Fourth................................................................. 3.00%
Fifth.................................................................. 2.00%
Sixth.................................................................. 1.00%
Seventh and thereafter................................................. None
</TABLE>

30
<PAGE>
For example, assume you purchased 100 shares of Worldwide Growth Portfolio B at
$10 per share for a cost of $1,000. Subsequently, you acquired 5 additional
shares of Worldwide Growth Portfolio B through dividend reinvestment. During the
second year after the purchase, you decided to redeem $500 of your investment.
Assuming at the time of the redemption the net asset value had appreciated to
$12 per share, the value of your Worldwide Growth Portfolio B shares would be
$1,260 (105 shares at $12 per share). The CDSC would not be applied to the value
of the reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would
be charged a CDSC at a rate of 4% (the applicable rate in the second year after
purchase) for a total CDSC of $9.60.

For Federal income tax purposes, the amount of the CDSC will reduce the gain or
increase the loss, as the case may be, on the amount recognized on the
redemption of shares.

The CDSC is also waived for:

(1) exchanges of shares of the Series B Portfolios (however, the shares
acquired by exchange will continue to be subject to a contingent deferred
sales charge on the same basis as the shares exchanged);

(2) redemptions in connection with mergers, acquisitions and exchange
offers involving a Series B Portfolio;

(3) qualifying distributions from qualified retirement plans and other
employee benefit plans;

(4) distributions from custodial accounts under Section 403(b)(7) of the
Internal Revenue Code or IRAs due to death, disability or attainment of age
59 1/2;

(5) tax-free returns of excess contributions to IRAs; and

(6) any partial or complete redemptions following the death or
disability of a shareholder, provided the redemption is made within one year
of death or initial determination of disability.

CONTINGENT DEFERRED SALES CHARGE ON REDEMPTION OF PORTFOLIO C SHARES. A
contingent deferred sales charge of 1.00% applies to redemptions of shares of a
Series C Portfolio made less than one year after the date of their purchase. No
such charge is imposed if the shares redeemed have been acquired through the
reinvestment of dividends or capital gains distributions or if the amount
redeemed is derived from increases in the value of the account above the amount
of purchase payments. In determining whether a contingent deferred sales charge
is payable, the same procedures are followed as described above with respect to
redemptions of shares of Series B Portfolios. The contingent deferred sales
charge is paid to the Distributor. The

31
<PAGE>
contingent deferred sales charge is waived for redemptions of shares of a Series
C Portfolio, on the same basis as for redemptions of shares of a Series B
Portfolio. See "Contingent Deferred Sales Charge on Redemption of Portfolio B
Shares."

REINSTATEMENT PRIVILEGE. You may reinvest proceeds from a redemption of
Portfolio shares, or proceeds of a dividend or capital gain distribution paid to
you with respect to Portfolio shares, without a sales charge in any of the
Portfolios. Upon such a reinvestment, the Distributor will credit to your
account any contingent deferred sales charge imposed on the redeemed shares.
Send a written request and a check to the Transfer Agent within 90 days after
the date of the redemption, dividend or distribution. Reinvestment will be at
the next calculated net asset value after receipt. The tax status of a gain
realized on a redemption will not be affected by exercise of the reinstatement
privilege, but a loss may be nullified if you reinvest in the same series within
30 days.

INVOLUNTARY REDEMPTION. In order to reduce expenses of a Portfolio, the Trust
may redeem all of the shares of any shareholder whose account has a net asset
value of less than $500 due to redemptions other than a shareholder which is an
IRA or other tax-deferred retirement plan. The Trust will give such shareholders
60 days' prior written notice in which to purchase sufficient additional shares
to avoid such redemption. No contingent deferred sales charge is imposed on such
redemptions.

- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES

32
<PAGE>
Portfolio will be required to include in their gross income their pro rata share
of foreign taxes paid by the Portfolio. However, shareholders will be able to
treat their pro rata share of foreign taxes as either an itemized deduction or a
foreign credit against U.S. income taxes (but not both) on their tax return.

You should consult your own tax adviser regarding specific questions as to
federal, state or local taxes. See "Taxes" in the Statement of Additional
Information.

- --------------------------------------------------------------------------------
GENERAL INFORMATION

PERFORMANCE INFORMATION. From time to time the Trust may advertise each
Portfolio's total return and, if applicable, its yield. These figures are based
on historical earnings and are not intended to indicate future performance.
Total return shows how much an investment in the Portfolio would have increased
(or decreased) over a specified period of time (I.E., one, five or ten years or
since inception of the Portfolio) assuming that all distributions and dividends
by the Trust to shareholders of the Portfolio were reinvested on the
reinvestment dates during the period. Total return takes into account any
applicable sales charges, but does not take into account any federal or state
income taxes which may be payable by the investor. The Trust also may include
comparative performance information in advertising or marketing Portfolio
shares. Such performance information may include data from Lipper Analytical
Services, Inc., Morningstar Inc., other industry publications, business
periodicals, rating services and market indices. See "Appendix: Prior
Performance," and "Performance Information" in the Statement of Additional
Information.

Further information about the performance of the Portfolios is contained in the
Trust's 1996 Annual Report to Shareholders, which may be obtained without charge
by calling (800) 551-8043.

33
<PAGE>
not have cumulative voting rights for the election of Trustees. The Trust does
not intend to hold annual meetings of its shareholders unless otherwise required
by law. The Trust will not be required to hold meetings of shareholders unless
the election of Trustees or any other matter is required to be acted on by
shareholders under the Investment Company Act. Shareholders have certain rights,
including the right to call a meeting upon the request of 10% of the outstanding
shares of a Portfolio, for the purpose of voting on the removal of one or more
Trustees.

34
<PAGE>
APPENDIX

- --------------------------------------------------------------------------------
INVESTMENT POLICIES, STRATEGIES AND RISKS

The investment policies and strategies of the Portfolios (as implemented through
their investment in corresponding Funds) encompass the following securities,
techniques and risk considerations.

SHORT-TERM INVESTMENTS (ALL FUNDS). Each of the Funds may invest in short-term
investments to maintain liquidity for redemptions or during periods when, in the
opinion of the Investment Adviser, attractive investments are temporarily
unavailable. Under normal circumstances, no more than 10% of a Fund's total
assets will be retained in cash (U.S. dollars, foreign currencies or
multinational currency units) and cash equivalents. In addition, each Fund may
invest without restriction in short-term investments for temporary defensive
purposes, such as when the securities markets or economic conditions are
expected to enter a period of decline. Short-term investments in which the Funds
may invest include U.S. Treasury bills or other U.S. Government or Government
agency or instrumentality obligations; certificates of deposit; bankers'
acceptances; time deposits; high quality commercial paper and other short-term
high grade corporate obligations; shares of money market mutual funds; or
repurchase agreements with respect to such securities. These instruments are
described below. The Funds will only invest in short-term investments which, in
the opinion of the Investment Adviser present minimal credit and interest rate
risk.

35
<PAGE>
CERTIFICATES OF DEPOSIT, TIME DEPOSITS AND BANKERS' ACCEPTANCES (ALL
FUNDS). Each of the Funds may invest in certificates of deposit, time deposits
and bankers' acceptances issued by domestic banks, foreign banks, foreign
branches of domestic banks, domestic and foreign branches of foreign banks, and
domestic savings and loan associations, all of which at the date of investment
have capital, surplus and undivided profits as of the date of their most recent
published financial statements in excess of $100 million, or less than $100
million if the principal amount of such bank obligations is insured by the
Federal Deposit Insurance Corporation. Certificates of deposit are certificates
evidencing the obligation of a bank to repay funds deposited with it for a
specified period of time. Time deposits are non-negotiable deposits maintained
in a banking institution for a specified period of time at a stated interest
rate. Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer; these instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity.

CORPORATE DEBT SECURITIES (ALL FUNDS). The non-convertible corporate debt
securities in which the Funds may invest include obligations of varying
maturities (such as debentures, bonds and

36
<PAGE>

Convertible debt securities purchased by the Funds, which are acquired in
substantial part for their equity characteristics, are not subject to minimum
rating requirements.

37
<PAGE>

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES (WORLDWIDE GROWTH
FUND). The Worldwide Growth Fund may invest in certificates issued by the
Government National Mortgage Association ("GNMA") as a short-term investment.
GNMA certificates are mortgage-backed securities representing part ownership of
a pool of mortgage loans, which are issued by lenders such as mortgage bankers,
commercial banks and savings associations, and are either insured by the Federal
Housing Administration or the Veterans Administration. A pool of these mortgages
is assembled and, after being approved by GNMA, is offered to investors through
securities dealers. The timely payment of interest and principal on each
mortgage is guaranteed by GNMA and backed by the full faith and credit of the
U.S. Government. Principal is paid back monthly by the borrower over the term of
the loan rather than returned in a lump sum at maturity. Due to the prepayment
feature and the need to reinvest prepayments of principal at current market
rates, GNMA certificates can be less effective than typical bonds of similar
maturities at "locking in" yields during periods of declining interest rates.

The Worldwide Growth, International Growth and Emerging Countries Funds each may
invest in equity securities of growth companies, cyclical companies, companies
with smaller market capitalizations (I.E., $500 million or less) or companies
believed to be undergoing a basic change in operations or markets which could
result in a significant improvement in earnings. Although equity securities have
a history of long-term growth in value, their prices fluctuate based on changes
in the issuer's financial condition and prospects and on overall market and
economic conditions. Small companies and new companies often have limited
product lines, markets or financial resources, and may be dependent upon one or
few key persons for management. The securities of such companies may be subject
to more volatile market movements than securities of larger, more established
companies, both because the securities typically are traded in lower volume and
because the issuers typically are more subject to changes in earnings and
prospects. The corresponding Portfolios' net asset values can be expected to
experience above-average fluctuations, as above-average risk is assumed by the
Funds in investing in such growth companies in seeking higher than average
growth in capital.

COUNTRY FUNDS (ALL FUNDS). Closed-end and open-end country funds in which the
Funds may invest are registered investment companies which hold portfolio
securities of issuers operated

38
<PAGE>

or located in a single country or geographical region. The extent to which a
Fund may invest in closed-end and open-end country funds is limited by the
Investment Company Act and various state securities or "blue sky" laws.
Accordingly, as a fundamental policy, none of such Funds will own more than 3%
of the outstanding voting stock of any closed-end or open-end investment
company, will not invest more than 10% of its total assets in securities issued
by closed-end and open-end investment companies nor, together with other
investment companies managed by the Investment Adviser, will own more than 10%
of any closed-end and open-end investment company. Assets of the Funds invested
in closed-end and open-end country funds are subject to advisory and other fees
imposed by the closed-end and open-end country funds, as well as to fees imposed
by the Funds.

DEPOSITORY RECEIPTS (ALL FUNDS). The Funds may invest in American Depository
Receipts ("ADRs"), which are receipts issued by an American bank or trust
company evidencing ownership of underlying securities issued by a foreign
issuer. ADRs, in registered form, are designed for use in U.S. securities
markets. The Funds may also invest in European and Global Depository Receipts
("EDRs" and "GDRs"), which, in bearer form, are designed for use in European and
other foreign securities markets, and in other instruments representing
securities of foreign companies. Such depository receipts may be sponsored by
the foreign issuer or may be unsponsored. Unsponsored depository receipts are
organized independently and without the cooperation of the foreign issuer of the
underlying securities; as a result, available information regarding the issuer
may not be as current as for sponsored depository receipts, and the prices of
unsponsored depository receipts may be more volatile than if they were sponsored
by the issuers of the underlying securities.

39
<PAGE>
structures that are generally less diverse and mature (and in some cases the
absence of developed legal structures governing private and foreign investments
and private property), and to political systems which can be expected to have
less stability, than those of more developed countries. The risks of investment
in such countries may include matters such as relatively unstable governments,
higher degrees of government involvement in the economy, the absence until
recently of capital market structures or market-oriented economies, economies
based on only a few industries, securities markets which trade only a small
number of securities, restrictions on foreign investment in stocks, and
significant foreign currency devaluations and fluctuations.

40
<PAGE>
the party with which a Fund enters into such a transaction may not perform its
commitment. The Funds will normally enter into these transactions with the
intention of actually receiving or delivering the securities. The Funds may sell
the securities before the settlement date.

41
<PAGE>
risks when the Investment Adviser believes that the price of a security may
decline, causing a decline in the value of a security owned by the Fund or a
security convertible into or exchangeable for such security. In such case, any
future losses in the Fund's long position would be reduced by a gain in the
short position.

A Fund may enter into derivative positions such as foreign exchange forward
contracts or currency futures or options contracts for the purchase or sale of
foreign currency to "lock in" the U.S. dollar price of the securities
denominated in a foreign currency or the U.S. dollar equivalent of interest and
dividends to be paid on such securities, or to hedge against the possibility
that the currency of a foreign country in which the Fund has investments may
suffer a decline against the U.S. dollar. A forward currency contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. For example, a Fund may
purchase a particular currency or enter into a forward currency contract to
preserve the U.S. dollar price of securities it intends to or has contracted to
purchase. Alternatively, a Fund might sell a particular currency on either a
spot (cash) basis at the rate then prevailing in the currency exchange market or
on a forward basis by entering into a forward contract to purchase or sell
currency, to hedge against an anticipated decline in the U.S. dollar value of
securities it intends or has contracted to sell. This method of attempting to
hedge the value of a Fund's portfolio securities against a decline in the value
of a currency does not eliminate fluctuations in the underlying prices of the
securities. No such Fund is obligated to engage in any such currency hedging
operations, and there can be no

42
<PAGE>

OPTIONS (ALL FUNDS). Each of the Funds may purchase listed covered "put" and
"call" options with respect to securities which are otherwise eligible for
purchase by such Fund and with respect to various stock indices, for hedging
purposes, subject to the following restrictions: the aggregate premiums on call
options purchased by a Fund may not exceed 5% of the market value of net assets
of the Fund as of the date the call options are purchased, and the aggregate
premiums on put options may not exceed 5% of the market value of the net assets
of the Fund as of the date such options are purchased. In addition a Fund will
not purchase or sell options if, immediately thereafter, more than 25% of its
net assets would be hedged. A "put" gives a holder the right, in return for the
premium paid, to require the writer of the put to purchase from the holder a
security at a specified price. A "call" gives a holder the right, in return for
the premium paid, to require the writer of the call to sell a security to the
holder at a specified price. An option on a securities index (such as a stock
index) gives the holder the right, in return for the premium paid, to require
the writer to pay cash equal to the difference between the closing price of the
index and the exercise price of the option, expressed in dollars, times a
specified multiplier.

Put and call options are derivative securities traded on United States and
foreign exchanges, including the American Stock Exchange, Chicago Board Options
Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange and New York Stock
Exchange. Additionally, the Funds may purchase options not traded on a
securities exchange, which may bear a greater risk of nonperformance than
options traded on a securities exchange. Options not traded on an exchange are
considered dealer options and generally lack the liquidity of an exchange traded
option. Accordingly, dealer options may be subject to the Funds' restriction on
investment in illiquid securities, as described below. Dealer options may also
involve the risk that the securities dealers participating in such transactions
will fail to meet their obligations under the terms of the option.

43
<PAGE>
received from writing the option; if it is more, the Fund will realize a capital
loss. If the premium received from a closing sale transaction is more than the
premium paid to purchase the option, the Fund will realize a gain; if it is
less, the Fund will realize a loss.

The Funds may also purchase and sell financial futures contracts as a hedge
against changes in interest rates. Additionally, the Funds may purchase and sell
currency futures contracts to hedge against foreign currency fluctuations, and
the Funds may purchase and sell related options on futures contracts. A
financial or currency futures contract obligates the seller of the contract to
deliver and the purchaser of the contract to take delivery of the type of
financial instrument or currency called for in the contract at a specified
future time (the settlement date) for a specified price. Although the terms of a
contract call for actual delivery or acceptance of the financial instrument or
currency, the contracts will be closed out before the delivery date without
delivery or acceptance taking place. Futures options possess many of the same
characteristics as options on securities and indices. A futures option gives the
holder, in return for the premium paid, the right to buy (call) from or sell
(put) to the writer of the option a futures contract at a specified price at any
time during the period of the option. Upon exercise of a call option, the holder
acquires a long position in the futures contract and the writer is assigned the
opposite short position. In the case of a put option, the opposite is true. A
futures option may be closed out before exercise or expiration by an offsetting
purchase or sale of a futures option of the same series.

44
<PAGE>
hedging vehicle, so that the Fund's return might have been better had hedging
not been attempted. In addition, a decision as to whether, when and how to use
options or futures involves the exercise of skill and judgment which are
different from those needed to select portfolio securities, and even a
well-conceived transaction may be unsuccessful to some degree because of market
behavior, currency fluctuations or interest rate trends. If the Investment
Adviser is incorrect in its forecasts regarding market values, currency
fluctuations, interest rate trends or other relevant factors, a Fund may be in a
worse position than if the Fund had not engaged in options or futures
transactions. The potential loss incurred by a Fund in writing options on
futures and engaging in futures transactions is unlimited. The Investment
Adviser is experienced in the use of options and futures contracts as an
investment technique.

45
<PAGE>
and the Fund might not be able to dispose of restricted or other securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions. The Fund might also have to register such restricted
securities in order to dispose of them, resulting in additional expense and
delay.

46
<PAGE>
borrowings as required by applicable law. Short sales "not against the box" and
roll transactions are considered borrowings for purposes of the percentage
limitations applicable to borrowings.

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

PRIOR PERFORMANCE

The Investment Advisor has advised the Trust that its net performance results in
the table are calculated as set forth above under "General Information --
Performance Information." All information set forth in the table 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, such
information has not been verified and is unaudited. See "Performance
Information" in the Statement of Additional Information for further information
about calculation of total return.

47
<PAGE>

<TABLE>
<CAPTION>
WORLDWIDE GROWTH PERFORMANCE INTERNATIONAL GROWTH PERFORMANCE
---------------------------------------------- ----------------------------------------------
WORLDWIDE GROWTH INTERNATIONAL GROWTH PORTFOLIO
PORTFOLIO MSCI
---------------------------------- MSCI WORLD ---------------------------------- EAFE
YEAR A B C INDEX(1) A B C INDEX(2)
- ------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
1990(4)
1991
1992
1993(4)
1994(4)
1995(4)
1996(5)
Last year(5)
Last 5 years(5)
Since inception(5)

<CAPTION>
EMERGING COUNTRIES PERFORMANCE
----------------------------------------------
EMERGING COUNTRIES PORTFOLIO
IFTC
---------------------------------- INVESTABLE
YEAR A B C INDEX(3)
- ------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
- ------------------------------
1990(4)
1991
1992
1993(4)
1994(4)
1995(4)
1996(5)
Last year(5)
Last 5 years(5)
Since inception(5)
</TABLE>

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

(4) Inception dates are as follows: Worldwide Growth Portfolios A and C -- April
19, 1993; Worldwide Growth Portfolio B -- May 31, 1995; International Growth
Portfolios A and C -- June 7, 1990 (registration statement effective August
31, 1994); International Growth Portfolio B -- May 31, 1995; Emerging
Countries Portfolios A and C -- November 28, 1994; Emerging Countries
Portfolio B -- May 31, 1995.

(5) Through March 31, 1996.

48
<PAGE>
NICHOLAS--APPLEGATE-REGISTERED TRADEMARK- MUTUAL FUNDS

- -------------------------------------------------
DOMESTIC INSTITUTIONAL PORTFOLIOS
PROSPECTUS

Nicholas-Applegate Mutual Funds is a diversified, open-end management investment
company comprised of a number of investment portfolios, including the five
portfolios ("Portfolios") offered hereby. The Portfolios provide a broad range
of domestic investment opportunities which are suitable for different investors.
They are generally offered to institutional investors, high net worth
individuals, and participants in certain mutual fund asset allocation programs.

EACH PORTFOLIO, UNLIKE MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE
AND MANAGE THEIR OWN PORTFOLIOS OF SECURITIES, SEEKS TO ACHIEVE ITS INVESTMENT
OBJECTIVE BY INVESTING ALL OF ITS ASSETS IN A CORRESPONDING SERIES ("FUND") OF
NICHOLAS-APPLEGATE INVESTMENT TRUST, WHICH HAS THE SAME OBJECTIVE AS THE
PORTFOLIO. THE FUNDS IN TURN INVEST THEIR ASSETS, INCLUDING THOSE OF THE
PORTFOLIOS, IN PORTFOLIO SECURITIES. ACCORDINGLY, THE INVESTMENT EXPERIENCE OF
EACH PORTFOLIO WILL CORRESPOND DIRECTLY WITH THE INVESTMENT EXPERIENCE OF THE
RELATED FUND. INVESTORS SHOULD CAREFULLY CONSIDER THIS INVESTMENT APPROACH. SEE
"INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS-SPECIAL CONSIDERATIONS
REGARDING MASTER/FEEDER STRUCTURE," PAGE 9, FOR ADDITIONAL INFORMATION REGARDING
THIS UNIQUE STRUCTURE. THERE CAN BE NO ASSURANCE THAT ANY PORTFOLIO OR FUND WILL
ACHIEVE ITS INVESTMENT OBJECTIVE.
- --------------------------------------------------------------------------------

CORE GROWTH INSTITUTIONAL PORTFOLIO seeks to maximize long-term capital
appreciation. It invests in the Nicholas-Applegate Core Growth Fund, which in
turn invests primarily in a diversified portfolio of common stocks of U.S.
companies with middle market capitalizations and above (generally above $500
million).

EMERGING GROWTH INSTITUTIONAL PORTFOLIO seeks to maximize long-term capital
appreciation. It invests in the Nicholas-Applegate Emerging Growth Fund, which
in turn invests primarily in a diversified portfolio of common stocks of U.S.
corporations with smaller market capitalizations (e.g., up to $500 million).

VALUE INSTITUTIONAL PORTFOLIO seeks to provide a total return consisting of
capital appreciation plus dividend and interest income that exceeds the total
return on the Standard & Poor's 500 Stock Price Index. It invests in the
Nicholas-Applegate Value Fund, which in turn invests primarily in a diversified
portfolio of equity securities of issuers with larger market capitalizations.

INCOME & GROWTH INSTITUTIONAL PORTFOLIO seeks to maximize total return,
consisting of capital appreciation and current income. It invests in the
Nicholas-Applegate Income & Growth Fund, which in turn invests primarily in
convertible and equity securities of U.S. companies. Up to 50% of the assets of
the Fund may be invested in securities rated below investment grade, sometimes
called "junk bonds," which are speculative and involve greater risks, including
risk of default, than higher-rated securities.

BALANCED GROWTH INSTITUTIONAL PORTFOLIO seeks to provide investors with a
balance of long-term capital appreciation and current income. It invests in the
Nicholas-Applegate Balanced Growth Fund, which in turn invests approximately 60%
of its total assets in equity and convertible securities of primarily U.S.
companies and 40% of its total assets in debt securities, money market
instruments and other short-term investments.
- --------------------------------------------------------------------------------

This Prospectus presents information you should know before investing in any
of the Portfolios. It should be retained for future reference. A Statement of
Additional Information for the Portfolios dated , 1996 has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this Prospectus. The Statement may be obtained, without charge, by writing
to the Trust, P.O. Box 82169, San Diego, California 92138-2169, or by calling
(800) 551-8643. Inquiries regarding any of the Portfolios can also be made by
calling (800) 551-8643.

, 1996

<PAGE>
NICHOLAS--APPLEGATE MUTUAL FUNDS

- -------------------------------------------------
DOMESTIC INSTITUTIONAL PORTFOLIOS

CORE GROWTH INSTITUTIONAL PORTFOLIO
EMERGING GROWTH INSTITUTIONAL PORTFOLIO
VALUE INSTITUTIONAL PORTFOLIO
INCOME & GROWTH INSTITUTIONAL PORTFOLIO
BALANCED GROWTH INSTITUTIONAL PORTFOLIO

TABLE OF CONTENTS

Summary of Expenses......................................... 3
Prospectus Summary.......................................... 4
Financial Highlights........................................ 8
Investment Objectives, Policies and Risk Considerations..... 9
Organization and Management................................. 15
Purchasing Shares........................................... 17
Investor Services........................................... 19
Redeeming Shares............................................ 21
Dividends, Distributions and Taxes.......................... 22
General Information......................................... 23
Appendix:
Investment Policies, Strategies
and Risks............................................... 25
Corporate Bond Ratings.................................... 37
Prior Performance......................................... 40

- --------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE PORTFOLIOS OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER BY THE PORTFOLIOS OR THE DISTRIBUTOR TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.

2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES

This table is designed to help you understand the costs of investing in each of
the Portfolios. These are based on the expenses of the Core Growth, Emerging
Growth, Income & Growth and Balanced Growth Portfolios for the fiscal year ended
March 31, 1996, and the expected expenses of the Value Portfolio for its first
year of operations. Because each Portfolio invests all of its assets in a
corresponding Fund, each Portfolio's expenses include its proportionate share of
the operating expenses of the corresponding Fund. Actual expenses may be more or
less than those shown.

<TABLE>
<CAPTION>
EMERGING INCOME & BALANCED
CORE GROWTH GROWTH VALUE GROWTH GROWTH
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a percentage
of offering price) None None None None None
Sales charge on reinvested dividends None None None None None
Deferred sales charge (as a percentage of original
purchase price or redemption proceeds, whichever
is lower) None None None None None
Redemption fee None None None None None
Exchange fee None None None None None
- ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A
PERCENTAGE OF AVERAGE NET ASSETS:
(after expense reduction)(1)
Management fees 0.75% 1.00% 0.75% 0.75% 0.75%
12b-1 expenses None None None None None
All Other expenses (after expense reduction)(1) 0.25% 0.17% 0.25% 0.25% 0.25%
Total operating expenses (after expense
reduction)(1) 1.00% 1.17% 1.00% 1.00% 1.00%
</TABLE>

(1) The Investment Adviser of the Master Trust has agreed to waive or defer its
fees, and to absorb other operating expenses, to ensure that the expenses
for each Portfolio (other than interest, taxes, brokerage commissions and
other portfolio transaction expenses, capital expenditures and extraordinary
expenses) will not exceed the following respective percentage of such
Portfolio's average net assets on an annual basis through March 31, 1997:
Core Growth-1.00%; Emerging Growth- 1.17%; Value-1.00%; Income &
Growth-1.00%; Balanced Growth-1.00%. In subsequent years, overall operating
expenses for each Portfolio will not fall below the applicable percentage
limitation until the Investment Adviser has fully recouped fees deferred or
expenses paid by the Investment Adviser under this agreement, as each
Portfolio will reimburse the Investment Adviser when operating expenses
(before recoupment) for the Portfolio are less than the applicable
percentage limitation set forth above. Accordingly, until all such deferred
fees or expenses have been recouped by the Investment Adviser, the
Portfolio's expenses will be higher, and their yields will be lower, than
would otherwise be the case. See "Organization and Management-Expense
Limitation." Actual operating expenses for the Portfolios for the fiscal
year ended March 31, 1996 were the following respective percentages of such
Portfolios' average net assets: Core Growth-1.06%; Emerging Growth-1.20%;
Income & Growth-1.53%; Balanced Growth-9.90%. Actual operating expenses for
the Value Portfolio for the fiscal year ended March 31, 1997 are estimated
to be 2.07% of the Portfolio's average net assets (annualized). The various
operating expenses of the Portfolios are further described under
"Organization and Management."

3
<PAGE>
EXAMPLE OF PORTFOLIO EXPENSES. The following table illustrates the expenses that
an investor would pay on a hypothetical $1,000 investment in each of the
Portfolios over various time periods, assuming (1) a 5% annual return and (2)
redemption at the end of each time period. The Portfolios charge no redemption
fees.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
Core Growth Institutional Portfolio $10 $32 $55 $122
Emerging Growth Institutional Portfolio $12 $37 $64 $142
Value Institutional Portfolio $10 $32 $55 $122
Income & Growth Institutional Portfolio $10 $32 $55 $122
Balanced Growth Institutional Portfolio $10 $32 $55 $122
</TABLE>

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

This Example assumes that all dividends and other distributions are reinvested
and that the percentage amounts listed under the heading "Annual Portfolio
Operating Expenses" in the fee table above remain the same in the years shown.

- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY

Nicholas-Applegate Mutual Funds (the "Trust") is an open-end management
investment company currently comprised of 45 diversified investment portfolios,
including the five Institutional Portfolios ("Portfolios") offered hereby. The
Portfolios are generally offered to institutional investors, high net worth
individuals, and participants in certain mutual fund asset allocation programs.

MASTER/FEEDER STRUCTURE. The Portfolios seek to achieve their respective
investment objectives by investing all of their assets in corresponding series
("Funds") of Nicholas-Applegate Investment Trust (the "Master Trust"), a
diversified, open-end management investment company. The Funds have the same
investment objectives as the Portfolios which invest in them. The Funds, in
turn, hold investment securities. Although the "master/feeder" structure
employed by the Portfolios to achieve their investment objectives could provide
certain efficiencies and economies of scale, it could also have potential
adverse effects such as those resulting from large-scale redemptions by other
investors of their interests in the Funds, or from the failure by investors of a
Portfolio to approve a change in investment objectives and policies that has
been approved by the investors of the corresponding Fund. There may also be
other investment companies through which you can invest in the Funds which may
have higher or lower fees and expenses than those of the Portfolios. See
"Investment Objectives, Policies and Risk Considerations-Special Considerations
Regarding Master/Feeder Structure."

A Portfolio may cease investing in a corresponding Fund only if the Trust's
Board of Trustees determines that this is in the best interests of the Portfolio
and its investors, and only with the approval of the Portfolio's investors. In
such event the Board of Trustees would consider

4
<PAGE>
alternative arrangements such as investing all of the Portfolio's assets in
another investment company with the same investment objective as the Portfolio
or hiring an investment adviser to manage the Portfolio's assets in accordance
with the Portfolio's investment policies. No assurance exists that satisfactory
alternative arrangements would be available.

INVESTMENT RISKS AND CONSIDERATIONS. INVESTMENT RISKS AND OTHER CONSIDERATIONS
RELEVANT TO THE SECURITIES IN WHICH THE PORTFOLIOS INVEST THROUGH CORRESPONDING
FUNDS ARE DESCRIBED UNDER "INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS" AND IN THE APPENDIX-INVESTMENT POLICIES, STRATEGIES AND RISKS.
They include the following:

The securities of many companies in which the Core Growth, Emerging Growth,
Income & Growth and Balanced Growth Funds invest are subject to more volatile
market movements than securities of larger, more established companies because
the issuers are typically more subject to changes in earnings and prospects. The
net asset values of the corresponding Portfolios therefore can be expected to
experience above-average fluctuations.

The Income & Growth and Balanced Growth Funds are each permitted to invest up to
35% of its net assets in zero coupon securities, which may be subject to greater
volatility as a result of changes in prevailing interest rates than other debt
securities. In addition, the Balanced Growth and Income & Growth Funds are
permitted to invest up to 35% and 50%, respectively, of their net assets in
convertible and debt securities rated below "Baa" by Moody's Investors Service,
Inc. ("Moody's"), "BBB" by Standard & Poor's Corporation ("S&P"), or investment
grade by other recognized rating agencies, or in unrated securities of
comparable quality, if Nicholas-Applegate Capital Management (the "Investment
Adviser") believes that the financial condition of the issuer or the protection
afforded to the particular securities is stronger than would otherwise be
indicated by such low ratings or lack of ratings. Such securities, commonly
referred to as "junk bonds," are speculative and subject to greater market
fluctuations and risk of loss of income and principal than higher rated bonds.
Such Funds will in no event purchase debt securities rated below "C" or
equivalent by Moody's, S&P or another rating agency, or determined by the
Investment Adviser to be of comparable quality. See "Appendix: Investment
Policies, Strategies and Risks" and the Statement of Additional Information for
a description of these securities and ratings.

5
<PAGE>
security or index. Risks associated with the use of such instruments include the
possibility that the Investment Adviser's forecasts of market values and
currency rates of exchange and other factors are not correct; imperfect
correlation between the Fund's hedging technique and the asset or liability
being hedged; default by the other party to the transaction; and inability to
close out a position because of the lack of a liquid market. Investment in such
derivative instruments may not be successful, and may reduce the returns and
increase the volatility of the Funds. See "Appendix: Investment Policies,
Strategies and Risks" in this Prospectus and "Investment Objectives, Policies
and Risks" in the Statement of Additional Information.

Each Fund may invest up to 15% of its net assets in illiquid securities. Each
Fund may enter into repurchase agreements and lend their portfolio securities,
which involve the risk of loss upon the default of the seller or borrower. The
Funds may also borrow money from banks for temporary purposes which, among other
things, may require the Funds to sell portfolio securities to meet interest and
principal payments at an unfavorable time. See "Illiquid Securities,"
"Repurchase Agreements," "Securities Lending," and "Borrowing" in "Appendix:
Investment Policies, Strategies and Risks."

The Value Fund commenced operation on April 17, 1996 and has a limited operating
history.

The Investment Adviser is compensated for its services to the Funds in the form
of monthly fees at the following annual rates: for the Emerging Growth
Fund-1.00% of the Fund's net assets; for the Value Fund-0.75% of the Fund's net
assets; for each of the Core Growth, Income & Growth and Balanced Growth
Funds-0.75% of the first $500 million of the Fund's net assets, 0.675% of the
next $500 million and 0.65% of net assets in excess of $1 billion. See
"Organization and Management."

DISTRIBUTOR. Nicholas-Applegate Securities (the "Distributor"), an affiliate of
the Investment Adviser, serves as distributor of shares of the Portfolios. The
Portfolios pay no distribution or other fees to the Distributor in connection
with services it provides.

ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN. Investment Company Administration
Corporation (the "Administrator") is the administrator for the Trust, with
responsibility for managing the daily business operations of the Portfolios,
subject to the supervision of the Trust's Board of Trustees. It also acts as
administrator for the Master Trust. PNC Bank (the "Custodian") is the custodian
for the Trust and the Master Trust, and State Street Bank and Trust Company (the
"Transfer Agent") is the transfer and dividend disbursing agent for the Trust.

6
<PAGE>

purchased at the next offering price without any sales charge, after an order is
received in proper form by the Transfer Agent or a sub-transfer agent. The
minimum initial investment is $250,000 and the minimum subsequent investment is
$10,000. The minimum initial and subsequent investments are waived for
individual participants of qualified retirement plans and for certain others,
and may be waived from time to time by the Distributor for other investors.
Shares of a Portfolio may also be purchased with securities which are otherwise
appropriate for investment by the Portfolio. See "Purchasing Shares."

INVESTOR SERVICES. The following services are provided to investors of a
Portfolio for their convenience and flexibility: an automatic investment plan;
automatic reinvestment and cross-reinvestment of dividends and capital gains
distributions; an exchange privilege; and automatic withdrawals. See "Investor
Services." Individual participants of qualified retirement plans should direct
inquiries to their plan sponsor or administrator.

REDEEMING SHARES. Shares of the Portfolios may be redeemed by writing to the
Transfer Agent or by telephone if telephone redemption privileges have been
established. Redemption proceeds will be wired to your bank. Participants of
qualified retirement plans must make redemption requests to the plan sponsor or
administrator. The price received for Portfolio shares redeemed is at the next
determined net asset value after the request is received by the Transfer Agent
or a sub-transfer agent, which may be more or less than the purchase price. No
contingent deferred sales charge or other fee is imposed on redemptions. See
"Redeeming Shares."

DIVIDENDS, DISTRIBUTIONS AND TAXES. The Core Growth, Emerging Growth and Value
Portfolios declare and pay annual dividends of net investment income; the
Balanced Growth and Income & Growth Portfolios declare and pay quarterly
dividends. The Portfolios make distributions at least annually of any net
capital gains. All dividends and distributions will be paid in the form of
additional shares at net asset value unless cash payment is requested.

7
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

The following financial highlights have been audited by Ernst & Young, L.L.P.
with respect to the fiscal year ended March 31, 1996, and by Coopers & Lybrand
L.L.P. with respect to the period from commencement of operations of the
Portfolios on the dates indicated below through March 31, 1995. Ernst & Young,
L.L.P. and Coopers & Lybrand L.L.P. are independent auditors whose reports
thereon were unqualified. This information should be read in conjunction with
the financial statements and the notes thereto, which appear in the Trust's 1996
Annual Report to Shareholders incorporated by reference in the Statement of
Additional Information.

<TABLE>
<CAPTION>
CORE GROWTH EMERGING GROWTH
Institutional Portfolio Institutional Portfolio
4-19-93 4-1-94 4-1-95 10-1-93 4-1-94 4-1-95
to to to to to to
3-31-94 3-31-95 3-31-96 3-31-94 3-31-95 3-31-96
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period $12.50 $12.68 $12.62 $12.50 $11.38 $11.58
Income from investment
operations:
Net investment income
(deficit) (0.01 ) (0.01 ) (0.03 ) (0.04 ) (0.05 ) (0.11 )
Net realized and unrealized
gains (losses) securities 0.92 0.38 4.47 (0.69 ) 0.95 4.45
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations 0.91 0.37 4.44 (0.73 ) 0.90 4.34
Less distributions:
Dividends from net investment
income -- -- -- -- -- --
Distributions from capital
gains (0.73 )* (0.43 ) (0.80 ) (0.39 ) (0.70 ) (0.82 )
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $12.68 $12.62 $16.26 $11.38 $11.58 $15.10
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN: 6.84 % 3.30 % 35.81 % (6.06 %) 8.69 % 38.27 %
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of
period $ 77,947 $ 72,826 $ 149,969 $ 165,940 $ 206,696 $ 224,077
Ratio of expenses to average
net assets, after expense
reimbursement**+ 0.97% 0.99 % 0.98 % 1.17 % 1.18 % 1.16 %
Ratio of expenses to average
net assets, before expense
reimbursement+ 1.14% 1.07 % 1.06 % 1.18 % 1.24 % 1.20 %
Ratio of net investment income
(deficit) to average net
assets, after expense
reimbursement**+ (0.07%)* (0.06 %) (0.32 %) (0.83 %)* (0.58 %) (0.62 %)
Ratio of net investment income
(deficit) to average net
assets, before expense
reimbursement+ (0.24%)* (0.14 %) (0.40 %) (0.84 %)* (0.64 %) (0.66 %)
Portfolio turnover++ 84.84% 98.09 % 114.48 % 50.51 % 100.46 % 129.59 %
Average commission rate paid++ N/A N/A $0.0593 N/A N/A $0.0523

<CAPTION>
INCOME & GROWTH BALANCED GROWTH
Institutional Portfolio Institutional Portfolio
4-19-93 4-1-94 4-1-95 10-1-93 to 4-1-94 4-1-95
to to to 3-31-94 to to
3-31-94 3-31-95 3-31-96 3-31-95 3-31-96
- -------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period $12.50 $13.39 $11.86 $12.50 $11.71 $12.01
Income from investment
operations:
Net investment income
(deficit) 0.42 0.54 0.53 0.08 0.22 0.37
Net realized and unrealized
gains (losses) securities 2.12 (0.85 ) 2.59 (0.79 ) 0.30 2.19
-- ----------- ----------- ----------- ----------- -----------
Total from investment
operations 2.54 (0.31 ) 3.12 (0.71 ) 0.52 2.56
Less distributions:
Dividends from net investment
income (0.42) (0.54 ) (0.53 ) (0.08 ) (0.22 ) (0.37 )
Distributions from capital
gains (1.23)* (0.68 ) -- -- -- --
-- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $13.39 $11.86 $14.45 $11.71 $12.01 $14.20
-- ----------- ----------- ----------- ----------- -----------
-- ----------- ----------- ----------- ----------- -----------
- -------------------------------
TOTAL RETURN: 20.18% (2.02 %) 26.69 % (5.66 %) 4.56 % 21.45 %
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of
period $18,332 $12,506 $ 17,239 $ 143 $ 284 $ 625
Ratio of expenses to average
net assets, after expense
reimbursement**+ 0.99% 1.00 % 1.00 % 0.99 % 1.00 % 1.00 %
Ratio of expenses to average
net assets, before expense
reimbursement+ 1.50% 1.48 % 1.53 % 43.16 % 20.66 % 9.90 %
Ratio of net investment income
(deficit) to average net
assets, after expense
reimbursement**+ 3.36%* 4.28 % 3.88 % 1.59 %* 2.06 % 2.74 %
Ratio of net investment income
(deficit) to average net
assets, before expense
reimbursement+ 2.85%* 3.80 % 3.34 % (40.58 %)* (17.60 %) (5.74 %)
Portfolio turnover++ 177.52% 125.51 % 144.97 % 85.43 % 110.40 % 197.19 %
Average commission rate paid++ N/A N/A $0.0597 N/A N/A $0.0594
</TABLE>

- ----------------------------------------------
*The initial investors in the Portfolio, who were former investors in a limited
partnership of which the Investment Adviser was the general partner,
transferred assets to the Portfolio at their historical tax basis.
Accordingly, capital gains include $0.10 in respect of the excess of the book
basis of the Portfolio's assets over their tax basis.

**Ratios for periods ended March 31, 1994 are annualized

+Includes expenses allocated from Master Trust Funds

++For the corresponding Funds of the Master Trust

8
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of each Portfolio are discussed below and
in the "Appendix: Investment Policies, Strategies, and Risks."

SPECIAL CONSIDERATIONS REGARDING MASTER/FEEDER STRUCTURE. The Portfolios seek to
achieve their investment objectives by investing all of their assets in
corresponding Funds, which have the same objectives as the Portfolios. The
Funds, in turn, hold investment securities. Accordingly, the investment
experience of each Portfolio will correspond directly with the investment
experience of the related Fund. For a description of the Funds' objectives,
policies, restrictions, management and expenses, see "Investment Objectives,
Policies and Risk Considerations" below, the Appendix and "Organization and
Management." There can be no assurance that any Portfolio or Fund will achieve
its investment objective. Each Portfolio's and Fund's investment objective is a
fundamental policy which may not be changed without the approval of the holders
of a majority of the outstanding shares of the Portfolio or Fund, respectively,
as defined in the Investment Company Act of 1940 (the "Investment Company Act").
Upon any such approval, each Portfolio will provide at least 30 days' written
notice to its investors before any change is made to its or the corresponding
Fund's investment objective.

There are certain risks to the Portfolios related to the use of the
"master/feeder" structure. Such risks include, but are not limited to, the
following: Large-scale redemptions by other investment companies of their
interests in the corresponding Funds, could have adverse effects, such as lack
of portfolio diversity and decreased economies of scale, and could result in the
shareholders of a Portfolio, as the remaining investor in the Fund, bearing all
the operating costs of the Fund and thus experiencing higher pro rata operating
expenses and lower returns than would otherwise be the case. In addition, the
total withdrawal by another investment company as an investor in a Fund will
cause the Fund to terminate automatically in 120 days, unless the corresponding
Portfolio and any other investors in the Fund unanimously agree to continue the
business of the Fund. As the Portfolio is required to submit such matters to a
vote of its shareholders, it will be required to incur the expenses of
shareholder meetings in connection with such withdrawals. If unanimous agreement
is not reached to continue the Fund, the Board of Trustees of the Trust would
need to consider alternative arrangements for the Portfolio, including investing
all of the Portfolio's assets in another investment company with the same
investment objective as the Portfolio or hiring an investment adviser to manage
the Portfolio's assets in accordance with the investment policies described
below and in "Appendix: Investment Policies, Strategies and Risks." The absence
of substantial experience with the master/feeder structure could result in
accounting or other difficulties. Failure by investors of a Portfolio to approve
a change in the investment objective and policies of a Portfolio parallel to a
change that has been approved by the investors of the corresponding Fund would
require the Portfolio to redeem its shares of the Fund; this could result in a
distribution in kind to the Portfolio of the portfolio securities of the Fund
(rather than a cash distribution), causing the Portfolio to incur brokerage fees
or other transaction costs in converting such securities to cash, reducing the
diversification of the Portfolio's investments and adversely affecting its
liquidity. Other shareholders in the Funds may have a greater ownership interest
in the Funds than the Portfolios' interest, and could thus have effective voting
control over the operation of the Funds.

9
<PAGE>
invest all or substantially all of their assets in the Funds. Accordingly, there
may be other investment companies through which investors can invest indirectly
in the Funds. The fees charged by such other investment companies may be higher
or lower than those charged by the Portfolios, which may reflect, among other
things, differences in the nature and level of the services and features offered
by such companies to their investors. Information about the availability of
other investment companies that invest in the Funds can be obtained by calling
(800) 551-8643.

A Portfolio may cease investing in a corresponding Fund only if the Board of
Trustees of the Trust determines that such action is in the best interests of
the Portfolio and its investors, and only with the approval of the Portfolio's
investors. In that event, the Board of Trustees would consider alternative
arrangements, including investing all of the Portfolio's assets in another
investment company with the same investment objective as the Portfolio or hiring
an investment adviser to manage the Portfolio's assets in accordance with the
investment policies described below and in "Appendix: Investment Policies,
Strategies and Risks."

CORE GROWTH INSTITUTIONAL PORTFOLIO. The Core Growth Portfolio seeks to maximize
long-term capital appreciation. It invests all of its assets in the
Nicholas-Applegate Core Growth Fund, which has the same investment objective as
the Core Growth Portfolio. Assets of the Core Growth Fund are invested primarily
in common stocks of U.S. companies the earnings and stock prices of which are
expected by the Fund's Investment Adviser to grow faster than the average rate
of companies in the Standard & Poor's 500 Stock Price Index (the "S&P 500
Index"). Companies in which the Fund invests are diversified over a
cross-section of industries and may be growth companies, cyclical companies or
companies believed to be undergoing a basic change in operations or markets
which, in the opinion of the Investment Adviser, would result in a significant
improvement in earnings. The securities of such companies may be subject to more
volatile market movements than securities of larger, more established companies.
Although the Fund is not restricted to investments in companies of any
particular size, it currently intends to invest primarily in companies with
middle market capitalizations and above (generally above $500 million). See
"Appendix: Investment Policies, Strategies and Risks." for a discussion of the
risks associated with investment in such growth companies.

Under normal market conditions, at least 75% of the Core Growth Fund's total
assets will be invested in common stocks. The remainder of the Fund's assets may
be invested in preferred and convertible securities issued by similar growth
companies, investment grade corporate debt securities, securities issued or
guaranteed by the U.S. Government and its agencies or instrumentalities and
various other securities and instruments described in "Appendix: Investment
Policies, Strategies and Risks." The Fund may invest up to 20% of its total
assets, directly (or indirectly through American Depository Receipts), in
securities issued by foreign issuers. See "Appendix: Investment Policies,
Strategies and Risks" for a discussion of the risks associated with investment
in foreign securities. The debt securities in which the Fund may invest will be
rated "Baa" or higher by Moody's, "BBB" or higher by S&P or equivalent ratings
by other recognized rating agencies, or will be unrated if determined by the
Investment Adviser to be of comparable quality. These securities are of
investment grade, which means that their issuers are believed to have adequate
capacity to pay interest and repay principal, although certain of such
securities in the lower grades have speculative characteristics, and changes in
economic conditions or other circumstances may be more likely to lead to a
weakened capacity to pay interest and principal than would be the case with
higher rated securities. If the rating of a debt security held by the Fund is
downgraded below investment

10
<PAGE>
grade, the security will be sold as promptly as practicable. The Fund may also
make short sales, which is considered a speculative technique. See "Appendix:
Investment Policies, Strategies and Risks" for a discussion of the risks
associated with short sale transactions.

EMERGING GROWTH INSTITUTIONAL PORTFOLIO. The Emerging Growth Institutional
Portfolio seeks to maximize long-term capital appreciation. The Portfolio
invests all of its assets in the Nicholas-Applegate Emerging Growth Fund, which
has the same investment objective as the Emerging Growth Portfolio. Assets of
the Emerging Growth Fund are invested in the same types of securities as the
Core Growth Fund, except that the Fund intends to invest primarily in companies
with smaller market capitalizations (e.g., up to $500 million). However, the
Fund will not necessarily sell any security held by it if the market
capitalization of the issuer increases above $500 million subsequent to
purchase. See "Core Growth Institutional Portfolio" above.

VALUE INSTITUTIONAL PORTFOLIO. The Value Institutional Portfolio seeks to
provide a total return consisting of capital appreciation plus dividend and
interest income that exceeds the total return realized on the S&P 500 Index. It
invests all of its assets in the Nicholas-Applegate Value Fund, which has the
same investment objective as the Portfolio. Under normal circumstances, the Fund
will invest at least 80% of its total assets in a diversified portfolio of
equity securities, primarily of companies with larger market capitalizations
(e.g., over $5 billion). Such equity securities will include common stocks,
preferred stocks, convertible securities and warrants. The Fund may invest in
equity securities of domestic issuers and in equity securities of foreign
issuers that are traded in the United States and comply with U.S. accounting
standards. The Fund's portfolio is designed to have risk, capitalization and
industry characteristics similar to those of the S&P 500 Index. The remainder of
the Fund's assets will be invested in debt securities of such domestic and
foreign issuers that are considered by the Investment Adviser to be cash
equivalents, as well as in various other securities and instruments described in
"Appendix: Investment Policies, Strategies and Risks".

INCOME & GROWTH INSTITUTIONAL PORTFOLIO. The Income & Growth Portfolio seeks to
maximize total return, consisting of capital appreciation and current income. It
invests all of its assets in the Nicholas-Applegate Income & Growth Fund, which
has the same investment objective as the Income & Growth Portfolio. Assets of
the Income & Growth Fund are invested primarily in convertible and equity
securities of U.S. companies. Convertible securities are bonds, debentures,
corporate notes or preferred stocks which pay interest or dividends and which
may be converted into common stock at the option of the holder. Convertible
securities provide for participation in the appreciation of the underlying
common stock but at a lower level of risk because the yield is higher and the
security is senior to the common stock upon liquidation of the issuer.

Under normal market conditions, at least 65% of the Income & Growth Fund's total
assets will be invested in convertible securities and in common stocks received
upon conversion or exchange of such securities and retained in the Fund's
portfolio to permit orderly disposition. Up to 35% of the Fund's total assets
may be invested in other securities, including non-convertible equity (common
and preferred stocks) and debt securities and securities issued or guaranteed by
the U.S. Government and its agencies and instrumentalities. See "Appendix:
Investment Policies, Strategies and Risks" for a description of the various
other securities and instruments in which the Fund may invest. The Fund may also
invest in Eurodollar convertible securities and American Depository Receipts.
See "Appendix: Investment Policies, Strategies and Risks" for a discussion of
the risks associated with investment in foreign securities. At all times, a
minimum of 25% of the Fund's total assets will be invested in

11
<PAGE>
income-producing securities (including convertible securities and debt
securities), and a minimum of 25% of the Fund's total assets will be invested in
equity securities (including common and preferred stocks).

The issuers of the convertible and equity securities in which the Income &
Growth Fund invests will be the same types of growth companies as those in which
the Core Growth Fund invests. See "Core Growth Institutional Portfolio" above
and the Appendix for a discussion of the risks associated with investment in
such growth companies. The Income & Growth Fund's convertible and other debt
securities will generally be investment grade securities rated "Baa" or higher
by Moody's, "BBB" or higher by S&P or equivalent ratings by other recognized
rating agencies, or will be unrated if determined by the Investment Adviser to
be of comparable quality, as described above under "Core Growth Institutional
Portfolio."

However, a portion (up to 50%) of the Income & Growth Fund's net assets may be
invested in debt securities rated below investment grade or in unrated
securities of comparable quality if the Investment Adviser believes that the
financial condition of the issuer or the protection afforded to the particular
securities is stronger than would otherwise be indicated by such low ratings or
the lack thereof. Debt securities with ratings below "Baa" or "BBB" or
equivalent ratings, commonly referred to as "junk bonds," are speculative and
subject to greater market fluctuations and risk of loss of income and principal
than higher rated bonds. The default rate of lower-quality debt securities is
likely to be higher when issuers have difficulty meeting projected goals or
obtaining additional financing, which could occur during economic recessions or
periods of high interest rates. They may be thinly traded, making them difficult
to sell promptly at an acceptable price. Negative publicity or investor
perceptions may make valuing such securities difficult, and could hurt the
Fund's ability to dispose of them. If the rating of an investment grade security
held by the Fund is downgraded, the Investment Adviser will determine whether it
is in the best interests of the Fund to continue to hold such security in the
investment portfolio. However, if the downgrading of a debt security causes the
Fund to retain 50% or more of its net assets in junk bonds, the Fund will sell
sufficient principal amount of junk bonds as promptly as practicable to ensure
that it does not hold 50% or more of its net assets in such securities. See
"Appendix: Investment Policies, Strategies and Risks" for a discussion of the
risks associated with investment in junk bonds.

BALANCED GROWTH INSTITUTIONAL PORTFOLIO. The Balanced Growth Portfolio seeks to
provide investors with a balance of long-term capital appreciation and current
income. It invests all of its assets in the Nicholas-Applegate Balanced Growth
Fund, which has the same investment objective as the Balanced Growth Portfolio.
Assets of the Balanced Growth Fund are invested in equity securities (common and
preferred stocks), convertible securities and warrants primarily of U.S.
companies, debt securities (bonds, debentures and notes), money market
instruments and other short-term investments and instruments described in
"Appendix: Investment Policies, Strategies and Risks." Under normal
circumstances, the Fund will allocate approximately 60% of its total assets to
equity securities, convertible securities and warrants and approximately 40% to
debt securities, money market instruments and other short-term investments and
instruments.

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the Fund will effect sales or purchases of certain of its existing investments
as promptly as practicable, consistent with maintaining the Portfolio's tax
status as a regulated investment company, to restore the 60%/40% ratio. Such a
portfolio adjustment may cause the Fund to buy or sell securities at different
times than the Investment Adviser would otherwise have made such purchases and
sales. Such purchases and sales may also cause the Fund to incur a higher
proportion of short-term capital gains than might otherwise be the case.

The issuers of the Balanced Growth Fund's equity investments will be the same
types of growth companies as those in which the Core Growth Fund invests. See
"Core Growth Institutional Portfolio" above and the Appendix for a discussion of
the risks of investment in such growth companies. The debt securities in which
the Balanced Growth Fund may invest include debt securities issued by the U.S.
Government and its agencies and instrumentalities, and corporate debt
securities. The ratings (or in the case of unrated securities, the Investment
Adviser's assessment of comparable quality) of the Fund's convertible and other
debt securities, and its policies regarding downgraded securities, will be the
same as those of the Income & Growth Fund. The Balanced Growth Fund may invest a
portion (less than 35%) of its net assets in convertible and debt securities
rated below investment grade or in unrated securities of comparable quality.
Such securities or "junk bonds" are speculative and subject to greater risk of
loss of income and principal than higher rated bonds. See "Income & Growth
Institutional Portfolio" above and "Appendix: Investment Policies, Strategies
and Risks" for a discussion of the risks associated with investment in junk
bonds.

INVESTMENT TECHNIQUES AND PROCESSES. The focus of the Investment Adviser's
investment program is GROWTH OVER TIME-REGISTERED TRADEMARK-. In making
decisions with respect to equity securities for the Funds, the Investment
Adviser uses a proprietary investment methodology which is designed to capture
positive change at an early stage. It adheres rigorously to this methodology,
and applies it to various segments of the capital markets, domestically and
internationally. This methodology consists of investment techniques and
processes designed to identify companies with attractive earnings and dividend
growth potential and to evaluate their investment prospects. These techniques
and processes include relationships with an extensive network of brokerage and
research firms located throughout the world; computer-assisted fundamental
analysis of thousands of domestic and foreign companies; established criteria
for the purchase and sale of individual securities; portfolio structuring and
rebalancing guidelines; securities trading techniques; and continual monitoring
and reevaluation of all holdings with a view to maintaining the most attractive
mix of investments. The Investment Adviser generally collects data on
approximately 26,000 companies in 35 countries (adjusting for reporting and
accounting differences). There can be no assurance that use of the proprietary
investment methodology will be successful.

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investment in sovereign debt securities of U.S. and foreign governments and
their agencies and instrumentalities; floating and variable rate demand notes
and bonds; commercial paper; non-convertible corporate debt securities;
convertible securities, synthetic convertible securities and warrants;
closed-end country funds; depository receipts; over-the-counter securities,
when-issued securities and firm commitment agreements; futures contracts;
foreign exchange contracts; put and call options on securities; stock index
futures contracts; repurchase agreements; illiquid securities; securities
lending; and borrowing.

Certain of the investment restrictions which are fundamental policies are set
forth below. Additional investment restrictions are discussed in the Appendix
and Statement of Additional Information.

1. No Portfolio or Fund may invest more than 5% of its total assets in the
securities of any one issuer. However, up to 25% of a Portfolio's or
Fund's total assets may be invested without regard to this limitation,
and this limitation does not apply to investments in securities of the
U.S. Government or its agencies and instrumentalities.

2. No Portfolio or Fund may purchase more than 10% of the outstanding voting
securities of any one issuer, or purchase the securities of any issuer
for the purpose of exercising control.

4. No Portfolio or Fund may make loans of its portfolio securities in an
aggregate amount exceeding 30% of the value of its total assets, or
borrow money (except from banks for temporary, extraordinary or emergency
purposes or for the clearance of transactions and in an aggregate amount
not exceeding 20% of the value of its total assets).

5. No Portfolio or Fund may invest more than 15% of its net assets in
illiquid securities.

The investment restrictions described above do not apply to an investment by a
Portfolio of all of its assets in a corresponding Fund.

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<PAGE>

dealers on a principal basis) than would otherwise be the case, which will be
borne directly by the Fund and ultimately by the investors of the corresponding
Portfolios. High portfolio turnover should not result in a Fund paying greater
brokerage commissions on debt securities, as most transactions in debt
securities are effected with dealers on a principal basis. However, debt
securities, as well as equity securities treated on a principal basis, are
subject to mark-up by the dealers. High portfolio turnover may also result in
the realization of substantial net capital gains, and any distributions derived
from such gains may be ordinary income for federal tax purposes.

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ORGANIZATION AND MANAGEMENT

ORGANIZATION. Each Portfolio is a series of Nicholas-Applegate Mutual Funds, a
Delaware business trust. The Board of Trustees of the Trust, in addition to
reviewing the actions of the Trust's Administrator and Distributor, as set forth
below, decides upon matters of general policy with respect to each Portfolio.
See "General Information." The trustees and officers of the Trust and of the
Master Trust are described in the Statement of Additional Information. None of
the disinterested trustees of the Trust are the same individuals as the
disinterested trustees of the Master Trust.

INVESTMENT ADVISER. The Trust has not retained the services of an investment
adviser for the Portfolios, as the Portfolios seek to achieve their investment
objectives by investing all of their assets in corresponding Funds.
Nicholas-Applegate Capital Management, 600 West Broadway, 30th Floor, San Diego,
California 92101, serves as the Investment Adviser to the Funds. The Investment
Adviser currently manages approximately $30 billion of discretionary assets for
numerous clients, including employee benefit plans of corporations, public
retirement systems and unions, university endowments, foundations and other
institutional investors, and individuals. The Investment Adviser was organized
in 1984 as a California limited partnership. Its general partner is
Nicholas-Applegate Capital Management Holdings, L.P., a California limited
partnership controlled by Arthur E. Nicholas. He and 13 other partners manage a
staff of approximately 325 employees.

As compensation for the services it provides, the Investment Adviser receives a
monthly fee at the following annual rates: for the Emerging Growth Fund, 1.00%
of the Fund's net assets; for the Value Fund, 0.75% of the Fund's net assets;
for each of the Core Growth Fund, Income & Growth Fund and Balanced Growth Fund,
0.75% of the first $500 million of the Fund's net assets, 0.675% of the next
$500 million of net assets, and 0.65% of net assets in excess of $1 billion. The
advisory fees paid by the Funds are higher than those paid by most other
investment companies.

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<PAGE>

following persons are primarily responsible for the Investment Adviser's
day-to-day management of the Funds' portfolios; except as otherwise indicated,
each of them has been primarily responsible since the Funds began operation:
Core Growth Fund-John C. Marshall, Jr.; Emerging Growth Fund-Cathrine Somhegyi;
Value Fund and Income & Growth Fund-John D. Wylie; Balanced Growth Fund-John D.
Wylie and the Investment Adviser's global management team headed by Lawrence S.
Speidell (since March 1994) and Catherine Somhegyi (since March 1996). Mr.
Wylie, Mr. Marshall and Ms. Avery have has managed similar institutional
accounts for the Investment Adviser for more than the last five years. Mr.
Speidell has been a portfolio manager with the Investment Adviser since March
1994; from 1983 until he joined the Investment Adviser, he was an institutional
portfolio manager with Batterymarch Financial Management.

For historical performance data relating to the Portfolios, see "Appendix: Prior
Performance."

ADMINISTRATOR. Investment Company Administration Corporation, a Delaware
corporation, is the Administrator of each Portfolio. Pursuant to an
Administration Agreement with the Trust, and subject to the supervision of the
Board of Trustees of the Trust, the Administrator supervises the overall
administration of the Trust. Its responsibilities include preparing and filing
all documents required for compliance by the Trust with applicable laws and
regulations, arranging for the maintenance of books and records of the Trust and
supervision of other organizations that provide services to the Trust. Certain
officers of the Trust are also provided by the Administrator. For the services
it provides to the Trust, the Administrator receives an annual fee of between
$5,000 and $35,000 for each of the groups of portfolios of the Trust investing
in the various series of the Master Trust; the fee is allocated among various
series of the Trust, including the Portfolios, in accordance with relative net
asset values. The Administrator provides similar services as the administrator
of the Master Trust, subject to the supervision of its Board of Trustees, and is
compensated separately for the services rendered to each Fund at an annual rate
of approximately 0.02% of the average daily net assets of the Fund.

EXPENSE LIMITATION. To limit the expenses of each Portfolio, the Investment
Adviser has agreed to defer its fees, and to absorb the other operating expenses
of each Portfolio, to ensure that the expenses of each Portfolio (excluding
interest, taxes, brokerage commissions and other portfolio transaction expenses,
capital expenditures and extraordinary expenses, but including such Portfolio's
proportionate share of the corresponding Fund's similar operating expenses) do
not exceed the following respective percentage of such Portfolio's average net
assets on an annual basis through March 31, 1997 or any lower expense limitation
imposed by any state during any fiscal period: Core Growth-1.00%; Emerging
Growth-1.17%; Value-1.00%; Income & Growth-1.00%; Balanced Growth-1.00%. Each
Portfolio will reimburse the Investment Adviser for fees deferred or other
expenses paid by the Investment Adviser pursuant to this agreement in later
years in which operating expenses for the Portfolio are less than the applicable
percentage limitation set forth above for any such year. No interest, carrying
or finance charge will be paid by a Portfolio with respect to any amounts
representing fees deferred or other expenses paid by the Investment Adviser. In
addition, no Portfolio or Fund will be required to repay any unreimbursed
amounts to the Investment Adviser upon termination or non-renewal of its
Investment Advisory Agreement with the Master Trust.

For the fiscal year ended March 31, 1996, the Portfolios' total expenses were
the following percentages of their respective average net assets, after the fee
deferrals and expense reimbursements indicated in parentheses: Core Growth-0.98%
(0.08%); Emerging Growth-1.16% (0.04%); Income & Growth-1.00% (0.53%); Balanced
Growth-1.00% (8.90%).

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DISTRIBUTOR. Nicholas-Applegate Securities, 600 West Broadway, 30th Floor, San
Diego, California 92101, a California limited partnership, serves as the
Distributor of shares of each Portfolio. The general partner of the Distributor
is Nicholas-Applegate Capital Management Holdings, L.P. and its limited partner
is the Investment Adviser.

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PURCHASING SHARES

HOW TO PURCHASE SHARES. Shares of the Portfolios are offered to institutional
investors, high net worth individuals, and participants in mutual fund asset
allocation programs sponsored by certain broker-dealers. Shares of the
Portfolios are also offered to former limited partners and participants of
certain investment partnerships and pooled trusts previously managed by the
Investment Adviser (the "former partners"); to partners, officers and employees
of the Investment Adviser and Distributor and their immediate family members;
and to certain other persons determined from time to time by the Distributor.

Investments by individual participants of qualified retirement plans are made
through their plan sponsor or administrator, who is responsible for transmitting
all orders for the purchase, redemption and exchange of Portfolio shares. The
availability of an investment by a plan participant in the Portfolios, and the
procedures for investing, depend upon the provisions of the qualified retirement
plan and whether the plan sponsor or administrator has contracted with the Trust
or the Transfer Agent for special processing services, including subaccounting.
Other institutional investors and eligible purchasers must arrange for services
through the Transfer Agent or Distributor by calling (800) 551-8043.

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<PAGE>
by the Portfolio. Shares will be purchased for a participant of a qualified
retirement plan only upon receipt by the plan's recordkeeper of the
participant's funds accompanied by the information necessary to determine the
proper share allocation for the participant.

An account may be opened by completing and signing an account application and
sending it to the address indicated on the application. Account applications can
be obtained from the Distributor or Transfer Agent. Individual participants of
qualified retirement plans can obtain an account application from their plan
sponsor or administrator. Plan sponsors and administrators will be responsible
for forwarding to the Transfer Agent all relevant information and account
applications for plan participants.

PURCHASE BY WIRE. Purchases of shares of the Portfolios can be made by wiring
federal funds to the Transfer Agent. Before wiring federal funds, you must first
telephone the Transfer Agent at (800) 551-8043 (toll-free) between the hours of
8:00 A.M. and 4:00 P.M. (Eastern Time) on a day when the New York Stock Exchange
is open for normal trading to receive an account number. The following
information will be requested: your name, address, tax identification number,
dividend distribution election, amount being wired and wiring bank. Instructions
should then be given by you to your bank to transfer funds by wire to the
Portfolio's Transfer Agent, State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts, 02110, ABA No. 011000028, DDA No. 9904-645-0
Attention: Nicholas-Applegate Mutual Funds, specifying on the wire the name of
the Portfolio, the account number assigned by the Transfer Agent and your name.
If you arrange for receipt by the Transfer Agent of federal funds prior to close
of trading (currently 4:00 P.M., Eastern time) of the New York Stock Exchange on
a day when the Exchange is open for normal trading, you may purchase shares of
the Portfolio as of that day. Your bank is likely to charge you a fee for wire
transfers.

Subsequent purchases by wire may be made at any time by calling the Transfer
Agent and wiring federal funds as outlined above.

Individual participants of qualified retirement plans should purchase Portfolio
shares through their plan sponsor or administrator who is responsible for
forwarding payment to the Transfer Agent.

SHARE PRICE. Shares are purchased at the next offering price after the order is
received in proper form by the Transfer Agent or a sub-transfer agent. An order
in proper form must include all correct and complete information, documents and
signatures required to process your purchase, as well as a check or bank wire
payment properly drawn and collectable. For purchases by a qualified retirement
plan, an order in proper form is defined as receipt of funds and the information
necessary to determine the proper share allocation for each participant. The
price per share is its net asset value, which is determined as of the close of
trading of the New York Stock Exchange on each day the Exchange is open for
normal trading. Orders received before 4:00 P.M. (Eastern time) on a day when
the Exchange is open for normal trading will be processed as of the close of
trading on that day. Otherwise, processing will

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<PAGE>
occur on the next business day. To determine a Portfolio's net asset value per
share, the current value of the Portfolio's total assets, less all liabilities,
is divided by the total number of shares outstanding, and the result is rounded
to the nearer cent.

OTHER PORTFOLIOS. Currently, the Trust has nine Institutional Portfolios. Five
domestic Institutional Portfolios are offered pursuant to this Prospectus; three
global Institutional Portfolios and a Mini-Cap Institutional Portfolio are
offered pursuant to separate prospectuses which can be obtained by calling (800)
551-8643. The Distributor also offers shares of other portfolios of the Trust
which invest in the same Funds of the Master Trust as the Institutional
Portfolios. These other portfolios have different sales charges and other
expenses than the Institutional Portfolios, which may affect their performance.
Information about these other portfolios can be obtained from your dealer or by
calling (800) 551-8045.

OTHER PURCHASE INFORMATION. The Portfolio reserves the right to reject any
purchase order or to suspend or modify the continuous offering of its shares.
Purchases of Portfolio shares will be made in full and fractional shares. In the
interest of economy and convenience, certificates for shares will generally not
be issued.

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INVESTOR SERVICES

AUTOMATIC INVESTMENT PLAN. Investors may make regular monthly or quarterly
investments in the Portfolio through automatic withdrawals of specified amounts
from their bank account once an automatic investment plan is established.
Individual participants of qualified retirement plans may make regular
investments in the Portfolio through payroll deductions in accordance with
procedures adopted by the plan sponsor or administrator. Further details about
this service and an application form are available from the Transfer Agent or
from your plan sponsor or administrator.

CROSS-REINVESTMENT. You may cross-reinvest dividends or dividends and capital
gain distributions paid by one Portfolio into shares of any other Institutional
Portfolio, subject to conditions outlined in the Statement of Additional
Information and the applicable provisions of the qualified retirement plan.

EXCHANGE PRIVILEGE. Shares of a Portfolio may be exchanged into shares of any
other Institutional Portfolio by writing to the Transfer Agent, State Street
Bank and Trust Company, Attention: Nicholas-Applegate Mutual Funds, P.O. Box
8326, Boston, Massachusetts 02266-8326. Please specify the name of the
applicable series, the number of shares or dollar amount to be exchanged and
your name and account number. Shares may also be exchanged by telephoning the
Transfer Agent at (800) 551-8043 or by sending the Transfer Agent a

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<PAGE>
facsimile at (617) 774-2651, between the hours of 8:00 A.M. and 4:00 P.M.
(Eastern time) on a day when the New York Stock Exchange is open for normal
trading (see "Telephone Privilege" below).

Individual participants of qualified retirement plans may exchange shares
(depending upon the provisions of the plan) by written or telephone request
through the plan sponsor or administrator. Such participants may exchange shares
only for shares of other Institutional Portfolios that are included in their
plan. In addition, the exchange privilege may not be available to investors who
are eligible to purchase shares of a Portfolio as a result of agreements between
the Distributor and certain broker-dealers, financial planners and similar
institutions.

Before effecting an exchange, you should obtain the currently effective
prospectus of the series into which the exchange is to be made. All exchanges
will be made on the basis of the relative net asset values of the two series
next determined after a completed request is received. Exchange purchases are
subject to the minimum investment requirements of the series being purchased. An
exchange will be treated as a redemption and purchase for tax purposes.

TELEPHONE PRIVILEGE. Investors may exchange or redeem shares by telephone if
they have elected the telephone privilege on their account applications.
Participants in qualified retirement plans may make telephone requests only
through their plan sponsor or administrator and only if such service is offered
under the plan. Investors should realize that by electing the telephone
privilege, they may be giving up a measure of security that they may have if
they were to exchange or redeem their shares in writing. Furthermore, in periods
of severe market or economic conditions, telephone exchanges or redemptions may
be difficult to implement, in which case investors should mail or send by
overnight delivery a written exchange or redemption request to the Transfer
Agent. Overnight deliveries should be sent to the Transfer Agent, Attention:
Nicholas-Applegate Mutual Funds, 2 Heritage Drive, 7th Floor, North Quincy,
Massachusetts 02171. Requests for telephone exchanges or redemptions received
before 4:00 P.M. (Eastern time) on a day when the New York Stock Exchange is
open for normal trading will be processed as of the close of trading on that
day. Otherwise, processing will occur on the next business day. All exchanges or
redemptions will be made on the basis of the relative net asset values of the
two series next determined after a completed request is received.

The Trust will employ procedures designed to provide reasonable assurance that
instructions communicated by telephone are genuine and, if it does not do so, it
may be liable for any losses due to unauthorized or fraudulent instructions. The
procedures employed by the Trust include requiring personal identification by
account number and social security number, tape recording of telephone
instructions, and providing written confirmation of transactions. The Trust
reserves the right to refuse a telephone exchange or redemption request if it
believes, for example, that the person making the request is neither the record
owner of the shares being exchanged or redeemed nor otherwise authorized by the
investor to request the exchange or redemption. Investors will be promptly
notified of any refused request for a telephone exchange or redemption. No
Portfolio or its agents will be liable for any loss, liability or cost which
results from acting upon instructions of a person reasonably believed to be an
investor with respect to the telephone privilege.

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<PAGE>
AUTOMATIC WITHDRAWAL PLAN. An automatic withdrawal plan may be established by an
investor or by a qualified retirement plan sponsor or administrator for its
participants subject to the requirements of the plan and applicable Federal law.
Individual participants of qualified retirement plans must establish automatic
withdrawal plans with the plan sponsor or administrator rather than the Trust.
Automatic withdrawals of $250 or more may be made on a monthly, quarterly,
semi-annual or annual basis if you have an account of at least $15,000 when the
automatic withdrawal plan begins. Withdrawal proceeds will normally be received
prior to the end of the period designated. All income dividends and capital gain
distributions on shares under the Automatic Withdrawal Plan must be reinvested
in additional shares of the Portfolio. For the protection of investors and the
Trust, wiring instructions must be on file prior to executing any request for
the wire transfer of automatic withdrawal proceeds.

ACCOUNT STATEMENTS. An account is opened in accordance with applicable
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from the Transfer Agent (for qualified retirement plans,
such statements will be provided by the plan sponsor or administrator).

REPORTS TO INVESTORS. Each Portfolio 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 Portfolios may provide one annual and semi-annual report
and annual prospectus per household. In addition, quarterly unaudited financial
data are available from the Portfolios upon request.

INVESTOR INQUIRIES. Investor inquiries should be addressed to the Trust, P.O.
Box 82169, San Diego, California 92138-2169, or by telephone, at (800) 551-8643
(toll free). Individual participants of qualified retirement plans should direct
inquiries to their plan sponsor or administrator.

The services referred to above are available only in states where the Portfolio
to be purchased may be legally offered and may be terminated or modified at any
time upon 60 days' written notice. Investors seeking to add to, change or cancel
their selection of available services should contact the Transfer Agent of the
address and telephone number provided above.

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REDEEMING SHARES

HOW TO REDEEM SHARES. Shares of a Portfolio may be redeemed by writing to the
Transfer Agent, State Street Bank and Trust Company, Attention:
Nicholas-Applegate Mutual Funds, P.O. Box 8326, Boston, Massachusetts
02266-8326. Redemptions by participants in qualified retirement plans must be
made in writing to the plan sponsor or administrator rather than the Trust.
Please specify the name of the Portfolio, the number of shares or dollar amount
to be sold and your name and account number. The price received for the shares
redeemed is at the next determined net asset value for the Portfolio shares
after the redemption request is received by the Transfer Agent or a sub-transfer
agent. No charge will be imposed by the Trust or the Transfer Agent for
redemptions.

The signature on a redemption request must be exactly as names appear on the
Portfolio's account records, and the request must be signed by the minimum
number of persons designated on the account application that are required to
effect a redemption. Requests by participants of qualified retirement plans must
include all other signatures required by the plan and applicable Federal law.

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<PAGE>
If redemption is requested by a corporation, partnership, trust or fiduciary,
written evidence of authority acceptable to the Transfer Agent must be submitted
before such request will be accepted. If the proceeds of the redemption exceed
$50,000, are to be paid to a person other than the record owner, are to be sent
to an address other than the address on the Transfer Agent's records, or are to
be paid to a corporation, partnership, trust or fiduciary, the signature(s) on
the redemption request may be required to be guaranteed by an "eligible
guarantor", which includes a bank or savings and loan association that is
federally insured or a member firm of a national securities exchange.

REDEMPTIONS BY TELEPHONE. If an election is made on the account application (or
subsequently in writing), redemptions of shares may be requested by contacting
the Transfer Agent by telephone at (800) 551-8043 or by facsimile at (617)
774-2651 between the hours of 8:00 A.M. and 4:00 P.M. (Eastern time) on a day
when the New York Stock Exchange is open for normal trading. Investors should
state the name of the Portfolio, the number of shares or dollar amount to be
sold and their name and account number. Participants of qualified retirement
plans may make telephonic or facsimile redemption requests through their plan
sponsor or administrator, provided that such service is offered under the plan
and satisfactory arrangements have been made with the Transfer Agent. Redemption
requests received by the Transfer Agent before 4:00 P.M. (Eastern time) on a day
when the New York Stock Exchange is open for normal trading will be processed
that day. Otherwise, processing will occur on the next business day. See
"Shareholder Services-Telephone Privilege" above.

REDEMPTION PAYMENTS. Payment for shares presented for redemption will ordinarily
be wired to your bank one business day after redemption is requested, but may
take up to three days after receipt by the Transfer Agent of a written or
telephonic redemption request except as indicated below. When purchases are made
by check or periodic account investment, redemption will not be allowed until
the investment being redeemed has been in the account for 14 calendar days. 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 Portfolio of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Portfolio
fairly to determine the value of its net assets, or during any other period when
the Securities and Exchange Commission, by order, so permits.

INVOLUNTARY REDEMPTION. In order to reduce expenses of a Portfolio, the Trust
may redeem all of the shares of any investor whose account has a net asset value
of less than $10,000 due to redemptions other than a shareholder who is a
participant in a qualified retirement plan. The Trust will give such investors
60 days' prior written notice in which to purchase sufficient additional shares
to avoid such redemption.

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DIVIDENDS, DISTRIBUTIONS AND TAXES

The Trust intends to qualify each Portfolio as a regulated investment company
under the Internal Revenue Code. Accordingly, the Portfolios will not be subject
to federal income taxes on its net investment income and capital gains, if any,
that they distributes to their investors. All dividends out of net investment
income, together with distributions of short-term capital gains, will be taxable
as ordinary income to the investors whether or not reinvested. Any net long-term
capital gains distributed to investors will be taxable as such to the investors,
whether or not reinvested and regardless of the length of time an investor has
owned his shares.

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The Core Growth, Emerging Growth and Value Portfolios declare and pay annual
dividends of net investment income. The Balanced Growth and Income & Growth
Portfolios declare and pay quarterly dividends of net investment income. The
Portfolios make distributions at least annually of their net capital gains, if
any. In determining amounts of capital gains to be distributed by a Portfolio,
any capital loss carryovers from prior years will be offset against its capital
gains. Under U.S. Treasury Regulations, the Portfolios are required to withhold
and remit to the U.S. Treasury 31% of the dividends, capital gains and
redemption proceeds on the accounts of those investors who fail to furnish their
correct tax identification numbers on IRS Form W-9 (or IRS Form W-8, in the case
of certain foreign investors) with the required certifications regarding the
investor's status under the federal income tax law or who are subject to backup
withholding for failure to include payments of interest or dividends on their
returns. Notwithstanding the foregoing, dividends of net income and short-term
capital gains to a foreign investor will generally be subject to U.S.
withholding at the rate of 30% (or lower treaty rate).

The corresponding Funds are not required to pay federal income taxes on their
net investment income and capital gains, as they are treated as partnerships for
tax purposes. Any interest, dividends and gains or losses of a Fund will be
deemed to have been "passed through" to the corresponding Portfolio and other
investors in the Fund, regardless of whether such interest, dividends or gains
have been distributed by the Fund or losses have been realized by the Portfolio
and such other investors.

Investors should consult their own tax advisers regarding specific questions as
to federal, state or local taxes. See "Taxes" in the Statement of Additional
Information.

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GENERAL INFORMATION

PERFORMANCE INFORMATION. From time to time the Trust may advertise each
Portfolio's total return and, if applicable, its yield. These figures are based
on historical earnings and are not intended to indicate future performance.
Total return shows how much an investment in the Portfolio would have increased
(or decreased) over a specified period of time (I.E., one, five or ten years or
since inception of the Portfolio) assuming that all distributions and dividends
by the Trust to investors of the Portfolio were reinvested on the reinvestment
dates during the period. Total return does not take into account any federal or
state income taxes which may be payable by the investor. Yield will be
calculated on a 30-day period pursuant to a formula prescribed by the Securities
and Exchange Commission (the "Commission"). The Trust also may include
comparative performance information in advertising or marketing Portfolio
shares. Such performance information may include data from Lipper Analytical
Services, Inc., Morningstar Inc., other industry publications, business
periodicals, rating services and market indices. See "Appendix: Prior
Performance," and "Performance Information" in the Statement of Additional
Information.

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Further information about the performance of the Portfolios is contained in the
Trust's 1996 Annual Report to Shareholders, which may be obtained without charge
by calling (800) 551-8643.

Investors of the Portfolios are entitled to one vote for each full share held
and fractional votes for fractional shares held, and will vote by series except
as otherwise required by law or when the Board of Trustees of the Trust
determines that a matter to be voted upon affects only the interests of
investors of a particular series. Shares of the Trust do not have cumulative
voting rights for the election of Trustees. The Trust does not intend to hold
annual meetings of its investors unless otherwise required by law. The Trust
will not be required to hold meetings of investors unless the election of
Trustees or any other matter is required to be acted on by investors under the
Investment Company Act. Investors have certain rights, including the right to
call a meeting upon the request of 10% of the outstanding shares of a Portfolio,
for the purpose of voting on the removal of one or more Trustees.

MASTER TRUST. The Funds are series of Nicholas-Applegate Investment Trust, an
open-end management investment company organized as a Delaware business trust in
December 1992. The trustees and officers of the Master Trust are described in
the Statement of Additional Information. Whenever a Portfolio is requested to
vote on matters pertaining to the corresponding Fund or the Master Trust in its
capacity as a shareholder of such Fund, the Trust will hold a meeting of its
investors and will cast its vote as instructed by such investors or, in the case
of a matter pertaining exclusively to the corresponding Fund, as instructed
particularly by investors of the Portfolio and other series of the Trust which
invest in the Fund. The Trust will vote shares for which it has received no
voting instructions in the same proportion as the shares for which it does
receive voting instructions.

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APPENDIX

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INVESTMENT POLICIES, STRATEGIES AND RISKS

The investment policies and strategies of the Portfolios (as implemented through
their investment in corresponding Funds) encompass the following securities,
techniques and risk considerations.

SHORT-TERM INVESTMENTS (ALL FUNDS). Each of the Funds may invest in short-term
investments to maintain liquidity for redemptions or during periods when, in the
opinion of the Investment Adviser, attractive investments are temporarily
unavailable. Under normal circumstances, no more than 10% of a Fund's total
assets will be retained in cash and cash equivalents. However, each Fund may
invest without restriction in short-term investments for temporary defensive
purposes, such as when the securities markets or economic conditions are
expected to enter a period of decline. Short-term investments in which the Funds
may invest include U.S. Treasury bills or other U.S. Government or Government
agency or instrumentality obligations; certificates of deposit; bankers'
acceptances; time deposits; high quality commercial paper and other short-term
high grade corporate obligations; shares of money market mutual funds; or
repurchase agreements with respect to such securities. These instruments are
described below. The Funds will only invest in short-term investments which, in
the opinion of the Investment Adviser present minimal credit and interest rate
risk.

U.S. GOVERNMENT OBLIGATIONS (ALL FUNDS). Securities issued or guaranteed by the
U.S. Government or its agencies and instrumentalities in which each of the Funds
may invest include U.S. Treasury securities, which differ only in their interest
rates, maturities and times of issuance. Treasury bills have initial maturities
of one year or less; Treasury notes have initial maturities of one to ten years;
and Treasury bonds generally have initial maturities of more than ten years.

ZERO COUPON SECURITIES (INCOME & GROWTH AND BALANCED GROWTH FUNDS). The Income &
Growth and Balanced Growth Funds may each invest up to 35% of its net assets in
"zero coupon" securities issued or guaranteed by the U.S. Government and its
agencies and instrumentalities. Zero coupon securities may be issued by the U.S.
Treasury or by a U.S. Government agency, authority or instrumentality (such as
the Student Loan Marketing Association or the Resolution Funding Corporation).
Zero coupon securities are sold at a substantial discount from face value and
redeemed at face value at their maturity date without interim cash payments of
interest and principal. This discount is amortized over the life of the security
and such amortization will constitute the income earned on the security for both
accounting and

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tax purposes. Because of these features, such securities may be subject to
greater volatility as a result of changes in prevailing interest rates than
interest paying investments in which the Fund may invest. Because income on such
securities is accrued on a current basis, even though the Funds do not receive
the income currently in cash, the Funds may have to sell other portfolio
investments to obtain cash needed by the related Portfolios to make income
distributions.

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demand obligations as to which it cannot exercise the demand feature on not more
than seven days' notice will be subject to the Fund's limit on illiquid
securities of 15% of net assets if there is no secondary market available for
these obligations.

CORPORATE DEBT SECURITIES (ALL FUNDS). The non-convertible corporate debt
securities in which the Funds may invest include obligations of varying
maturities (such as debentures, bonds and notes) over a cross-section of
industries. The value of a debt security changes as interest rates fluctuate,
with longer-term securities fluctuating more widely in response to changes in
interest rates than those of shorter-term securities. A decline in interest
rates usually produces an increase in the value of debt securities, while an
increase in interest rates generally reduces their value. Certain of the Funds
may invest some of their assets in debt securities rated below investment grade.
See "Junk Bond Considerations" below. For short-term purposes, all Funds may
also invest in corporate obligations issued by domestic and foreign issuers
which mature in one year or less and which are rated "Aa" or higher by Moody's,
"AA" or higher by S&P, rated in the two highest rating categories by any other
NRSRO, or which are unrated but determined by the Investment Adviser to be of
minimal credit risk and comparable quality.

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<PAGE>
governing the convertible security. If a convertible security held by a Fund is
called for redemption, the Fund will be required to permit the issuer to redeem
the security, convert it into the underlying common stock or sell it to a third
party.

JUNK BOND CONSIDERATIONS (INCOME & GROWTH AND BALANCED GROWTH FUNDS). The Income
& Growth and Balanced Growth Funds may invest a portion (less than 35%) of their
respective net assets in convertible and other debt securities rated below "Baa"
by Moody's, "BBB" by S&P or below investment grade by other recognized rating
agencies, or in unrated securities determined by the Investment Adviser to be of
comparable quality, if the Investment Adviser believes that the financial
condition of the issuer or the protection afforded to the particular securities
is stronger than would otherwise be indicated by such low ratings or the lack
thereof. Securities rated below "Baa" or "BBB" or equivalent ratings, commonly
referred to as "junk bonds," are subject to greater risk of loss of income and
principal than higher-rated bonds and are considered to be predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal, which may in any case decline during sustained periods of
deteriorating economic conditions or rising interest rates. Junk bonds are also
generally considered to be subject to greater market risk in times of
deteriorating economic conditions, and to wider market and yield fluctuations,
than higher-rated securities. Junk bonds may also be more susceptible to real or
perceived adverse economic and competitive industry conditions than investment
grade securities. The market for such securities may be thinner and less active
than that for higher-rated securities, which can adversely affect the prices at
which these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, the Fund may experience difficulty
in valuing such securities and, in turn, its assets. In addition, adverse
publicity and investor perceptions about junk bonds, whether or not based on
fundamental analysis, may tend to decrease the market value and liquidity of
such securities.

The Investment Adviser will try to reduce the risk inherent in the Funds'
investment in such securities through credit analysis, diversification and
attention to current developments and trends in interest rates and economic
conditions. However, there can be no assurance that losses will not occur. Since
the risk of default is higher for lower-rated bonds, the Investment Adviser's
research and credit analysis are a correspondingly important aspect of its
program for managing the Fund's investments in such debt securities. The
Investment Adviser will attempt to identify those issuers of high-yielding
securities whose financial condition is adequate to meet future obligations, or
has improved or is expected to improve in the future.

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<PAGE>

principal. Unrated securities will also be considered for investment when the
Investment Adviser believes that the financial condition of the issuers of such
securities, or the protection afforded by the terms of the securities
themselves, limit the risk to a Fund to a degree comparable to that of rated
securities which are consistent with the Fund's investment objective and
policies. See "Appendix: Corporate Bond Ratings" for a description of credit
ratings.

The average percentages of assets invested by the Income & Growth and Balanced
Growth Funds in bonds of each permissible rating, on a monthly dollar-weighted
basis, were as follows for the year ended March 31, 1996: AA-3.86% and 0%;
A-10.78% and 1.93%; BBB-14.14% and 0%; BBB-7.50% and 0%; B-20.20% and 31.98%;
CCC-0.10% and 0%; nonrated-3.28% and 14.98%.

SYNTHETIC CONVERTIBLE SECURITIES (INCOME & GROWTH AND VALUE FUNDS). The Income &
Growth and Value Funds may invest in "synthetic" convertible securities, which
are derivative positions composed of two or more different securities whose
investment characteristics, taken together, resemble those of convertible
securities. For example, 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, the Fund
generally receives an amount in cash equal to the difference between the
conversion price and the then current value of the underlying security. Unlike a
true convertible security, a synthetic convertible comprises two or more
separate securities, each with its own market value. Therefore, the market value
of a synthetic convertible is the sum of the values of its fixed-income
component and its convertible component. For this reason, the values of a
synthetic convertible and a true convertible security may respond differently to
market fluctuations. 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 S&P, and will not invest more than 15% of its net assets in
such synthetic securities and other illiquid securities. See "Illiquid
Securities" below.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES (ALL FUNDS EXCEPT VALUE
FUND). Each of the Funds except the Value Fund may invest in certificates issued
by the Government National

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<PAGE>
Mortgage Association as a short-term investment. GNMA certificates are
mortgage-backed securities representing part ownership of a pool of mortgage
loans, which are issued by lenders such as mortgage bankers, commercial banks
and savings associations, and are either insured by the Federal Housing
Administration or the Veterans Administration. A pool of these mortgages is
assembled and, after being approved by GNMA, is offered to investors through
securities dealers. The timely payment of interest and principal on each
mortgage is guaranteed by GNMA and backed by the full faith and credit of the
U.S. Government. Principal is paid back monthly by the borrower over the term of
the loan rather than returned in a lump sum at maturity. Due to the prepayment
feature and the need to reinvest prepayments of principal at current market
rates, GNMA certificates can be less effective than typical bonds of similar
maturities at "locking in" yields during periods of declining interest rates.

EQUITY SECURITIES (ALL FUNDS). Each of the Funds may invest in equity
securities, including common stocks, convertible securities and warrants. Common
stocks, the most familar type of equity securities, represent an equity
(ownership) interest in a corporation. See "Convertible Securities and Warrants"
for a description of convertible securities and warrants. Each of the Funds may
invest in equity securities of growth companies, cyclical companies, companies
with smaller market capitalizations or companies believed to be undergoing a
basic change in operations or markets which could result in a significant
improvement in earnings. Although equity securities have a history of long term
growth in value, their prices fluctuate based on changes in the issuer's
financial condition and prospects and on overall market and economic conditions.
Small companies and new companies often have limited product lines, markets or
financial resources, and may be dependent upon one or few key persons for
management. The securities of such companies may be subject to more volatile
market movements than securities of larger, more established companies, both
because the securities typically are traded in lower volume and because the
issuers typically are more subject to changes in earnings and prospects. The
corresponding Portfolios' net asset values can be expected to experience above-
average fluctuations, as above-average risk is assumed by the Funds in investing
in such growth companies in seeking higher than average growth in capital.

DEPOSITORY RECEIPTS (ALL FUNDS). Each of the Funds may invest in American
Depository Receipts ("ADRs"), which are receipts issued by an American bank or
trust company evidencing ownership of underlying securities issued by a foreign
issuer. ADRs, in registered form, are designed for use in U.S. securities
markets. Such depository receipts may be sponsored by the foreign issuer or may
be unsponsored. The Value Fund 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 issuers of the underlying securities.

EURODOLLAR CONVERTIBLE SECURITIES (INCOME & GROWTH FUND). The Income & Growth
Fund may invest in Eurodollar convertible securities, which are fixed income
securities of a U.S. issuer or a foreign issuer that are issued outside the
United States and are convertible into or exchangeable for equity securities of
the same or a different issuer. Interest and dividends on Eurodollar securities
are payable in U.S. dollars outside of the United States. The Fund may invest
without limitation in Eurodollar convertible securities that are convertible
into or exchangeable for foreign equity securities listed, or represented by
ADRs listed, on the New

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York Stock Exchange or the American Stock Exchange or convertible into or
exchangeable for publicly traded common stock of U.S. companies. The Fund may
also invest up to 15% of its total assets invested in convertible securities,
taken at market value, in Eurodollar convertible securities that are convertible
into or exchangeable for foreign equity securities which are not listed, or
represented by ADRs listed, on such exchanges.

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<PAGE>
OVER-THE-COUNTER SECURITIES (ALL FUNDS). Securities owned by each of the Funds
may be traded in the over-the-counter market or on a regional securities
exchange and may not be traded every day or in the volume typical of securities
trading on a national securities exchange. As a result, disposition by such
Funds of portfolio securities to meet redemptions by investors or otherwise may
require the Funds to sell these securities at a discount from market prices, to
sell during periods when such disposition is not desirable, or to make many
small sales over a lengthy period of time.

To the extent a Fund engages in any of these transactions it will do so for the
purpose of acquiring securities for its portfolio consistent with its investment
objective and policies and not for the purpose of investment leverage. The Funds
will segregate liquid assets such as cash, U.S. Government securities and other
liquid high quality debt securities in an amount sufficient to meet their
payment obligations with respect to these transactions. A Fund may not purchase
when-issued securities or enter into firm commitments if, as a result, more than
15% of the Fund's net assets would be segregated to cover such contracts.

SHORT SALES (CORE GROWTH AND EMERGING GROWTH FUNDS). The Investment Adviser
believes that its growth equity management approach, in addition to identifying
equity securities the earnings and prices of which it expects to grow at a rate
above that of the S&P 500, also identifies securities the prices of which can be
expected to decline. Therefore, each of the Core Growth, and Emerging Growth
Funds is authorized to make short sales of securities it owns or has the right
to acquire at no added cost through conversion or exchange of other securities
it owns (referred to as short sales "against the box") and to make short sales
of securities which it does not own or have the right to acquire. A short sale
that is not made "against the box" is a transaction in which the Fund sells a
security it does not own in anticipation of a decline in market price. When the
Fund makes a short sale, the proceeds it receives are retained by the broker
until the Fund replaces the borrowed security. In order to deliver the security
to the buyer, the Fund must arrange through a broker to borrow the security and,
in so doing, the Fund becomes obligated to replace the security borrowed at its
market price at the time of replacement, whatever that price may be.

Short sales by the Core Growth or Emerging Growth Fund that are not made
"against the box" create opportunities to increase the Fund's return but, at the
same time, involve special risk considerations and may be considered a
speculative technique. Since the Fund in effect profits from a decline in the
price of the securities sold short without the need to invest the full purchase
price of the securities on the date of the short sale, the Fund's net asset
value per share, and that of the corresponding Portfolio, will tend to increase
more when the securities it has sold short decrease in value, and to decrease
more when the securities it has sold short increase in value, than would
otherwise be the case if it had not engaged in such short sales. Short sales
theoretically involve unlimited loss potential, as the market price of
securities sold short may continuously increase, although the Fund may mitigate
such losses by replacing the

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securities sold short before the market price has increased significantly. Under
adverse market conditions a Fund might have difficulty purchasing securities to
meet its short sale delivery obligations, and might have to sell portfolio
securities to raise the capital necessary to meet its short sale obligations at
a time when fundamental investment considerations would not favor such sales.
The value of securities of any issuer in which a Fund maintains a short position
which is "not against the box" may not exceed the lesser of 2% of the value of
the Fund's net assets or 2% of the securities of such class of the issuer.

In the view of the Securities and Exchange Commission, a short sale involves the
creation of a "senior security" as such term is defined in the Investment
Company Act, unless the sale is "against the box" and the securities sold are
placed in a segregated account (not with the broker), or unless the Fund's
obligation to deliver the securities sold short is "covered" by placing in a
segregated account (not with the broker) cash or U.S. Government securities in
an amount equal to the difference between the market value of the securities
sold short at the time of the short sale and any cash or U.S. Government
securities required to be deposited as collateral with a broker in connection
with the sale (not including the proceeds from the short sale), which difference
is adjusted daily for changes in the value of the securities sold short. The
total value of the cash and U.S. Government securities deposited with the broker
and otherwise segregated may not at any time be less than the market value of
the securities sold short at the time of the short sale. As a matter of policy,
the Master Trust's Board of Trustees has determined that no Fund will make short
sales of securities or maintain a short position if to do so could create
liabilities or require collateral deposits and segregation of assets aggregating
more than 25% of the Fund's total assets, taken at market value.

OPTIONS (ALL FUNDS EXCEPT VALUE FUND). Each of the Funds except the Value Fund
may purchase listed covered "put" and "call" options with respect to securities
which are otherwise eligible for purchase by such Fund and with respect to
various stock indices, for hedging purposes, subject to the following
restrictions: the aggregate premiums on call options purchased by a Fund may not
exceed 5% of the market value of net assets of the Fund as of the date the call
options are purchased, and the aggregate premiums on put options may not exceed
5% of the market value of the net assets of the Fund as of the date such options
are purchased. In addition, a Fund will not purchase or sell options if,
immediately thereafter, more than 25% of its net assets would be hedged. A "put"
gives a holder the right, in return for the premium paid, to require the writer
of the put to purchase from the holder a security at a specified price. A "call"
gives a holder the right, in return for the premium paid, to require the writer
of the call to sell a security to the holder at a specified price. An option on
a securities index

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(such as a stock index) gives the holder the right, in return for the premium
paid, to require the writer to pay cash equal to the difference between the
closing price of the index and the exercise price of the option, expressed in
dollars, times a specified multiplier.

Put and call options are derivative securities traded on United States and
Foreign exchanges, including the American Stock Exchange, Chicago Board Options
Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange and New York Stock
Exchange. Additionally, the Core Growth and Emerging Growth Funds may purchase
options not traded on a securities exchange, which may bear a greater risk of
nonperformance than options traded on a securities exchange. Options not traded
on an exchange are considered dealer options and generally lack the liquidity of
an exchange traded option. Accordingly, dealer options may be subject to the
Funds' restriction on investment in illiquid securities, as described below.
Dealer options may also involve the risk that the securities dealers
participating in such transactions will fail to meet their obligations under the
terms of the option.

The Core Growth, Emerging Growth and Income & Growth Funds may also write listed
covered options on up to 25% of the value of their respective net assets. Call
options written by a Fund give the holder the right to buy the underlying
securities from the Fund at a stated exercise price; put options written by a
Fund give the holder the right to sell the underlying security to the Fund. A
call option is covered if the Fund owns the security underlying the call or has
an absolute and immediate right to acquire that security without additional cash
consideration upon conversion or exchange of securities currently held by the
Fund. A put option is covered if the Fund maintains cash or cash equivalents
equal to the exercise price in a segregated amount with its Custodian. If an
option written by a Fund expires unexercised, the Fund realizes a gain equal to
the premium received at the time the option was written. If an option purchased
by a Fund expires unexercised, the Fund realizes a capital loss equal to the
premium paid.

FUTURES CONTRACTS (CORE GROWTH, EMERGING GROWTH,VALUE AND INCOME & GROWTH
FUNDS). The Core Growth, Emerging Growth, Value and Income & Growth Funds may
purchase and sell stock index futures contracts as a hedge against changes in
market conditions. A stock index futures contract is a bilateral agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. No physical delivery of the
underlying stocks in the index is made.

The Income & Growth and Value Funds may purchase and sell financial and currency
futures contracts as a hedge against changes in interest rates, and the Income &
Growth Fund may also purchase and sell related options on futures contracts. A
financial or currency futures contract obligates the seller of the contract to
deliver and the purchaser of the contract to take delivery of the type of
financial instrument or currency called for in the contract at a specified
future time (the settlement date) for a specified price. Although the terms of a
contract call for actual delivery or acceptance of the financial instrument or
currency, the contracts will be closed out before the delivery date without
delivery or acceptance taking place. Futures options

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<PAGE>
possess many of the same characteristics as options on securities and indices. A
futures option gives the holder, in return for the premium paid, the right to
buy (call) from or sell (put) to the writer of the option a futures contract at
a specified price at any time during the period of the option. Upon exercise of
a call option, the holder acquires a long position in the futures contract and
the writer is assigned the opposite short position. In the case of a put option,
the opposite is true. A futures option may be closed out before exercise or
expiration by an offsetting purchase or sale of a futures option of the same
series.

SPECIAL HEDGING CONSIDERATIONS (ALL FUNDS). Special risks are associated with
the use of options and futures contracts as hedging techniques. There can be no
guaranty of a correlation between price movements in the hedging vehicle and in
the portfolio securities being hedged. A lack of correlation could result in a
loss on both the hedged securities in a Fund and the hedging vehicle, so that
the Fund's return might have been better had hedging not been attempted. In
addition, a decision as to whether, when and how to use options or futures
involves the exercise of skill and judgment which are different from those
needed to select portfolio securities, and even a well-conceived transaction may
be unsuccessful to some degree because of market behavior, currency fluctuations
or interest rate trends. If the Investment Adviser is incorrect in its forecasts
regarding market values, currency fluctuations, interest rate trends or other
relevant factors, a Fund may be in a worse position than if the Fund had not
engaged in options or futures transactions. The potential loss incurred by a
Fund in writing options on futures and engaging in futures transactions is
unlimited. The Investment Adviser is experienced in the use of options and
futures contracts as an investment technique.

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<PAGE>

requirements until the position is closed. See "Investment Objectives, Policies
and Risks-Options on Securities and Securities Indices" and "-Futures Contracts
and Related Options" in the Statement of Additional Information.

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<PAGE>
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.

BORROWING (ALL FUNDS). Each Fund may borrow money from banks in amounts up to
20% of its total assets (calculated when the loan is made) only for temporary,
extraordinary or emergency purposes or for the clearance of transactions.
Borrowing involves special risk considerations. Interest costs on borrowings may
fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds (or on the assets that were retained
rather than sold to meet the needs for which funds were borrowed). Under adverse
market conditions, a Fund might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales. All borrowings by a Fund will be made
only to the extent that the value of the Fund's total assets, less its
liabilities other than borrowings, is equal to at least 300% of all borrowings.
If such asset coverage of 300% is not maintained, the Fund will take prompt
action to reduce its borrowings as required by applicable law. Short sales "not
against the box" are considered borrowings for purposes of the percentage
limitations applicable to borrowings.

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CORPORATE BOND RATINGS

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 as can be visualized 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 there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.

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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.

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
regarded as having extremely poor prospects of ever attaining any real
investment standing.

Moody's applies numerical modifiers, 1, 2, and 3, in each generic 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.

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.

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<PAGE>
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.

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

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.

39
<PAGE>
- --------------------------------------------------------------------------------

PRIOR PERFORMANCE

<TABLE>
<CAPTION>
EMERGING GROWTH PERFORMANCE INCOME & GROWTH PERFORMANCE
CORE GROWTH PERFORMANCE ---------------------------- ----------------------------
------------------------ EMERGING RUSSELL CS FIRST
CORE GROWTH GROWTH 2000 INCOME GROWTH BOSTON
INSTITUTIONAL S&P 500 INSTITUTIONAL GROWTH INSTITUTIONAL CONVERTIBLE
YEAR PORTFOLIO INDEX(1) PORTFOLIO STOCK(2) PORTFOLIO INDEX(3)
- --------------------------------------------- ------------- -------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1985(4)......................................
1986(4)......................................
1987.........................................
1988.........................................
1989.........................................
1990.........................................
1991.........................................
1992.........................................
1993(4)......................................
1994.........................................
1995.........................................
1996(5)......................................
Last year(5).................................
Last 5 years(5)..............................
Last 10 years(5).............................
Since inception(5)...........................
</TABLE>

40
<PAGE>

<TABLE>
<CAPTION>
BALANCED GROWTH PERFORMANCE
--------------------------------------------------
BALANCED LEHMAN
GROWTH BROTHERS
INSTITUTIONAL S&P 500 GOVERNMENT/
YEAR PORTFOLIO INDEX(1) CORPORATE INDEX(6)
- ------------------------------------------------------------------------------- -------------- ------------ --------------------
<S> <C> <C> <C>
1993(4)........................................................................
1994...........................................................................
1995...........................................................................
1996(5)........................................................................
Last year(5)...................................................................
Since Inception(5).............................................................
</TABLE>

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

(1)The S&P 500 Index is an unmanaged index containing 500 industrial,
transportation, utility and financial companies, regarded as generally
representative of the U.S. stock market. The Index reflects the reinvestment
of income dividends and capital gains distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.

(2)The Russell 2000 Growth Stock Index contains those securities in the Russell
2000 Index with a greater-than-average growth orientation. Companies in the
Growth Stock Index generally have higher price-to-book and price-earnings
ratios than the average for all companies in the 2000 Index. 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.

(3)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.

(4)Inception dates are as follows: Core Growth Institutional Portfolio-September
30, 1985 (registration statement effective April 19, 1993); Emerging Growth
Institutional Portfolio-July 31, 1985 (registration statement effective
December 27, 1993); Income & Growth Institutional Portfolio-December 31, 1986
(registration statement effective April 19, 1993); Balanced Growth
Institutional Portfolio-April 19, 1993.

(5)Through March 31, 1996.

(6)The Lehman Brothers Government/Corporate Bond Index is an unmanaged
market-weighted index consisting of all public obligations of the U.S.
Government, its agencies and instrumentalities, and all corporate issuers of
fixed rate, non-convertible, investment grade U.S. dollar denominated bonds
having maturities of greater than one year. It is generally regarded as
representative of the market for domestic bonds. 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.

41
<PAGE>
NICHOLAS--APPLEGATE-REGISTERED TRADEMARK- MUTUAL FUNDS

- -------------------------------------------------
GLOBAL INSTITUTIONAL PORTFOLIOS

PROSPECTUS

Nicholas-Applegate Mutual Funds is a diversified, open-end management investment
company comprised of a number of investment portfolios, including the three
portfolios ("Portfolios") offered hereby. The Portfolios provide a broad range
of global investment opportunities which are suitable for different investors.
They are generally offered to institutional investors, high net worth
individuals, and participants in certain mutual fund asset allocation programs.

EACH PORTFOLIO, UNLIKE MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE
AND MANAGE THEIR OWN PORTFOLIOS OF SECURITIES, SEEKS TO ACHIEVE ITS INVESTMENT
OBJECTIVE BY INVESTING ALL OF ITS ASSETS IN A CORRESPONDING SERIES ("FUND") OF
NICHOLAS-APPLEGATE INVESTMENT TRUST, WHICH HAS THE SAME OBJECTIVE AS THE
PORTFOLIO. THE FUNDS IN TURN INVEST THEIR ASSETS, INCLUDING THOSE OF THE
PORTFOLIOS, IN PORTFOLIO SECURITIES. ACCORDINGLY, THE INVESTMENT EXPERIENCE OF
EACH PORTFOLIO WILL CORRESPOND DIRECTLY WITH THE INVESTMENT EXPERIENCE OF THE
RELATED FUND. INVESTORS SHOULD CAREFULLY CONSIDER THIS INVESTMENT APPROACH. SEE
"INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS-- SPECIAL
CONSIDERATIONS REGARDING MASTER/FEEDER STRUCTURE," PAGE 9, FOR ADDITIONAL
INFORMATION REGARDING THIS UNIQUE STRUCTURE. THERE CAN BE NO ASSURANCE THAT ANY
PORTFOLIO OR FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
- --------------------------------------------------------------------------------

WORLDWIDE GROWTH INSTITUTIONAL PORTFOLIO seeks to maximize long-term capital
appreciation. It invests in the Worldwide Growth Fund, which in turn invests in
a global portfolio of equity securities of U.S. and foreign companies.

INTERNATIONAL GROWTH INSTITUTIONAL PORTFOLIO seeks to maximize long-term capital
appreciation. It invests in the International Growth Fund, which in turn invests
in an international portfolio of equity securities of foreign companies only.

EMERGING COUNTRIES INSTITUTIONAL PORTFOLIO seeks to maximize long-term capital
appreciation. It invests in the Emerging Countries Fund, which in turn invests
primarily in a diversified portfolio of equity securities of issuers located in
emerging markets. INVESTMENT IN THE PORTFOLIO SHOULD BE CONSIDERED SPECULATIVE,
SINCE THE PORTFOLIO WILL INVEST IN EMERGING MARKET COUNTRIES. SEE "INVESTMENT
OBJECTIVES, POLICIES AND RISK CONSIDERATIONS," PAGE 9.
- --------------------------------------------------------------------------------

SHARES OF THE PORTFOLIOS ARE NOT BANK DEPOSITS AND ARE NOT FEDERALLY INSURED
BY, QUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY. INVESTMENT IN A PORTFOLIO INVOLVES INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

This Prospectus presents information you should know before investing in any
of the Portfolios. It should be retained for future reference. A Statement of
Additional Information for the Portfolios dated , 1996 has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this Prospectus. The Statement may be obtained, without charge, by writing
to the Trust, P.O. Box 82169, San Diego, California 92138-2169, or by calling
(800) 551-8643. Inquiries regarding any of the Portfolios can also be made by
calling (800) 551-8643.

, 1996

<PAGE>
NICHOLAS--APPLEGATE MUTUAL FUNDS

- -------------------------------------------------
GLOBAL INSTITUTIONAL PORTFOLIOS

WORLDWIDE GROWTH INSTITUTIONAL PORTFOLIO
INTERNATIONAL GROWTH INSTITUTIONAL PORTFOLIO
EMERGING COUNTRIES INSTITUTIONAL PORTFOLIO

TABLE OF CONTENTS

Summary of Expenses.......................................3
Prospectus Summary........................................4
Financial Highlights......................................8
Investment Objectives, Policies and Risk Considerations...9
Organization and Management..............................14
Purchasing Shares........................................16
Investor Services........................................18
Redeeming Shares.........................................21
Dividends, Distributions and Taxes.......................22
General Information......................................23
Appendix:
Investment Policies, Strategies
and Risks.............................................25
Prior Performance........................................37

- --------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE PORTFOLIOS OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER BY THE PORTFOLIOS OR THE DISTRIBUTOR TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.

2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES

This table is designed to help you understand the costs of investing in each of
the Portfolios. These are based on the expenses of each Portfolio for its fiscal
year ended March 31, 1996, and because each Portfolio invests all of its assets
in a corresponding Fund, each Portfolio's expenses include its proportionate
share of the operating expenses of the corresponding Fund. Actual expenses may
be more or less than those shown.

WORLDWIDE INTERNATIONAL EMERGING
GROWTH GROWTH COUNTRIES
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a percentage of offering price) None None None
Sales charge on reinvested dividends None None None
Deferred sales charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower) None None None
Redemption fee None None None
Exchange fee None None None
- ---------------------------------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET
ASSETS:
(after expense reduction)(1)
Management fees 1.00% 1.00% 1.25%
12b-1 expenses None None None
All Other expenses (after expense reduction)(1) 0.35% 0.40% 0.40%
Total operating expenses (after expense reduction)(1) 1.35% 1.40% 1.65%
</TABLE>

(1) The Investment Adviser of the Master Trust has agreed to waive or defer its
fees, and to absorb other operating expenses, to ensure that the expenses
for each Portfolio (other than interest, taxes, brokerage commissions and
other portfolio transaction expenses, capital expenditures and extraordinary
expenses) will not exceed the following respective percentage of such
Portfolio's average net assets on an annual basis through March 31, 1997:
Worldwide Growth-1.35%; International Growth-1.40%; Emerging
Countries-1.65%. In subsequent years, overall operating expenses for each
Portfolio will not fall below the applicable percentage limitation until the
Investment Adviser has fully recouped fees deferred or expenses paid by the
Investment Adviser under this agreement, as each Portfolio will reimburse
the Investment Adviser when operating expenses (before recoupment) for the
Portfolio are less than the applicable percentage limitation set forth
above. Accordingly, until all such deferred fees or expenses have been
recouped by the Investment Adviser, the Portfolio's expenses will be higher,
and their yields will be lower, than would otherwise be the case. See
"Organization and Management-Expense Limitation." Actual operating expenses
for the Portfolios for the fiscal year ended March 31, 1996 were the
following respective percentages of such Portfolios' average net assets:
Worldwide Growth-2.80%; International Growth-2.44%; Emerging
Countries-3.95%. The various operating expenses of the Portfolios are
further described under "Organization and Management."

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
Worldwide Growth Institutional Portfolio $14 $43 $74 $162
International Growth Institutional Portfolio $14 $44 $77 $168
Emerging Countries Institutional Portfolio $17 $52 $90 $195
</TABLE>

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

- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY

Nicholas-Applegate Mutual Funds (the "Trust") is an open-end management
investment company comprised of 45 diversified investment portfolios, including
the three Institutional Portfolios ("Portfolios") offered hereby. The Portfolios
are generally offered to institutional investors, high net worth individuals and
participants in certain mutual fund asset allocation programs.

MASTER/FEEDER STRUCTURE. The Portfolios seek to achieve their respective
investment objectives by investing all of their assets in corresponding series
("Funds") of Nicholas-Applegate Investment Trust (the "Master Trust"), a
diversified, open-end management investment company. The Funds have the same
investment objectives as the Portfolios which invest in them. The Funds, in
turn, hold investment securities. Although the "master/feeder" structure
employed by the Portfolios to achieve their investment objectives could provide
certain efficiencies and economies of scale, it could also have potential
adverse effects such as those resulting from large-scale redemptions by other
investors of their interests in the Funds, or from the failure by investors of a
Portfolio to approve a change in investment objectives and policies that has
been approved by the investors of the corresponding Fund. There may also be
other investment companies through which you can invest in the Funds which may
have higher or lower fees and expenses than those of the Portfolios. See
"Investment Objectives, Policies and Risk Considerations-Special Considerations
Regarding Master/Feeder Structure."

4
<PAGE>
company with the same investment objective as the Portfolio or hiring an
investment adviser to manage the Portfolio's assets in accordance with the
Portfolio's investment policies. No assurance exists that satisfactory
alternative arrangements would be available.

INVESTMENT RISKS AND CONSIDERATIONS. INVESTMENT RISKS AND OTHER CONSIDERATIONS
RELEVANT TO THE SECURITIES IN WHICH THE PORTFOLIOS INVEST THROUGH CORRESPONDING
FUNDS ARE DESCRIBED UNDER "INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS" AND IN THE APPENDIX-INVESTMENT POLICIES, STRATEGIES AND RISKS.
They include the following:

In addition, investment by the Emerging Countries Fund in emerging markets
involves greater risks than other foreign investments, including less-developed
economic and legal structures; less stable political systems; illiquid
securities markets; possible expropriations, nationalization or confiscatory
taxation; and possible foreign currency devaluations and fluctuations. As a
result of these and other factors, the share price of the Emerging Countries
Portfolio is expected to be volatile, and investment in the Portfolio should be
considered speculative and appropriate only as a long-term investment vehicle.
The Worldwide Growth and International Growth Funds may also invest a portion of
their assets in emerging market countries.

5
<PAGE>

Each Fund may invest up to 15% of its net assets in illiquid securities. Each
Fund may enter into repurchase agreements and lend its portfolio securities,
which involve the risk of loss upon the default of the seller or borrower. The
Funds may also borrow money from banks for temporary purposes which, among other
things, may require the Funds to sell portfolio securities to meet interest and
principal payments at an unfavorable time. See "Illiquid Securities,"
"Repurchase Agreements," "Securities Lending," and "Borrowing" in "Appendix:
Investment Policies, Strategies and Risks."

ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN. Investment Company Administration
Corporation (the "Administrator") is the administrator for the Trust, with
responsibility for managing the daily business operations of the Portfolios,
subject to the supervision of the Trust's Board of Trustees. It also acts as
administrator for the Master Trust. PNC Bank (the "Custodian") is the custodian
for the Trust and the Master Trust, and State Street Bank and Trust Company (the
"Transfer Agent") is the transfer and dividend disbursing agent for the Trust.

PURCHASE OF SHARES. Shares of the Portfolios are generally offered to
institutional investors, high net worth individuals, and participants in certain
mutual fund asset allocation programs. Purchases may be made by check or by
wiring federal funds to the Transfer Agent. Shares are purchased at the next
offering price without any sales charge, after an order is received in proper
form by the Transfer Agent or a sub-transfer agent. The minimum initial
investment is $250,000 and the minimum subsequent investment is $10,000. The
minimum initial and subsequent investments are waived for individual
participants of qualified retirement plans and for the former limited partners
described above, and may be waived from time to time by the Distributor for
other investors. Shares of a Portfolio may also be purchased with securities
which are otherwise appropriate for investment by the Portfolio. See "Purchasing
Shares."

INVESTOR SERVICES. The following services are provided to investors of a
Portfolio for their convenience and flexibility: an automatic investment plan;
automatic reinvestment and cross-

6
<PAGE>
reinvestment of dividends and capital gains distributions; an exchange
privilege; and automatic withdrawals. See "Investor Services." Individual
participants of qualified retirement plans should direct inquiries to their plan
sponsor or administrator.

7
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

The following financial highlights have been audited by Ernst & Young L.L.P.
with respect to the fiscal year ended March 31, 1996, and by Coopers & Lybrand
L.L.P. with respect to the period from commencement of operations of the
Worldwide Growth, International Growth and Emerging Countries Portfolios on the
dates indicated below through March 31, 1995. Ernst & Young L.L.P. and Coopers &
Lybrand L.L.P. are independent auditors whose reports thereon were unqualified.
This information should be read in conjunction with the financial statements and
the notes thereto which appear in the Trust's 1996 Annual Report to Shareholders
incorporated by reference in the Statement of Additional Information.

<TABLE>
<CAPTION>
WORLDWIDE INTERNATIONAL EMERGING
GROWTH GROWTH COUNTRIES
Institutional Institutional Institutional
Portfolio Portfolio Portfolio
10-1-93 4-1-94 4-1-95 1-3-94 4-1-94 4-1-95 11-28-94 4-1-95
to to to to to to to to
3-31-94 3-31-95 3-31-96 3-31-94 3-31-95 3-31-96 3-31-95 3-31-96
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period $12.50 $13.15 $13.06 $12.50 $13.47 $13.09 $12.50 $10.91
Income from investment
operations:
Net investment income
(deficit) -- (0.01) 0.06 0.01 0.02 0.06 0.08 --
Net realized and unrealized
gains (losses) securities
and foreign currency 0.65 (0.04) 2.58 0.96 (0.22) 2.02 (1.66) 3.16
-------- -------- -------- -------- -------- -------- ----------- --------
Total from investment
operations 0.65 (0.05) 2.64 0.97 (0.20) 2.08 (1.58) 3.16
Less distributions:
Dividends from net
investment income -- (0.04) (0.28) -- (0.06) (0.12) (0.01) (0.05)
Distributions from capital
gains -- -- -- -- (0.12) -- -- --
-------- -------- -------- -------- -------- -------- ----------- --------
Net asset value, end of period $13.15 $13.06 $15.42 $13.47 $13.09 $15.05 $10.91 $14.02
-------- -------- -------- -------- -------- -------- ----------- --------
-------- -------- -------- -------- -------- -------- ----------- --------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:+ 5.20% (0.34%) 20.37% 7.60% (1.54%) 15.99% (12.64%) 29.06%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of
period $ 2,982 $ 4,087 $ 3,613 $ 3,668 $ 16,924 $ 20,245 $ 2,021 $ 6,878
Ratio of expenses to average
net assets, after expense
reimbursement+ 1.34%* 1.35% 1.35% 1.40%* 1.40% 1.40% 1.65%* 1.65%
Ratio of expenses to average
net assets, before expense
reimburesment+ 3.58%* 2.50% 2.60% 2.35%* 1.92% 2.44% 2.14%* 3.59%
Ratio of net income to average
net assets, after expense
reimbursement+ 0.05%* 0.05% 0.20% 0.36%* 0.19% 0.34% 1.73%* 0.29%
Ratio of net investment income
(deficit) to average net
assets, before expense
reimbursement+ (2.19%)* (1.10%) (0.99%) (0.59%)* (0.33%) (0.07%) 1.24%* (1.41%)
Portfolio turnover++ 95.09% 98.54% 132.20% 23.71% 74.85% 141.02% 60.79% 118.21%
Average commission rate paid++ N/A N/A $0.0187 N/A N/A $ 0.0128 N/A $0.0022
</TABLE>

- ----------------------------------------------
*Annualized

+Includes expenses allocated from Master Trust Funds

++For the corresponding Funds of the Master Trust

8
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of each Portfolio are discussed below and
in the "Appendix: Investment Policies, Strategies and Risks."

SPECIAL CONSIDERATIONS REGARDING MASTER/FEEDER STRUCTURE. The Portfolios seek to
achieve their investment objectives by investing all of their assets in
corresponding Funds, which have the same objectives as the Portfolios. The
Funds, in turn, hold investment securities. Accordingly, the investment
experience of each Portfolio will correspond directly with the investment
experience of the related Fund. For a description of the Funds' objectives,
policies, restrictions, management and expenses, see "Investment Objectives,
Policies and Risk Considerations" below, the Appendix and "Organization and
Management." There can be no assurance that any Portfolio or Fund will achieve
its investment objective. Each Portfolio's and Fund's investment objective is a
fundamental policy which may not be changed without the approval of the holders
of a majority of the outstanding shares of the Portfolio or Fund, respectively,
as defined in the Investment Company Act of 1940 (the "Investment Company Act").
Upon any such approval, each Portfolio will provide at least 30 days' written
notice to its investors before any change is made to its or the corresponding
Fund's investment objective.

There are certain risks to the Portfolios related to the use of the
"master/feeder" structure. Such risks include, but are not limited to, the
following: Large-scale redemptions by other investment companies of their
interests in the corresponding Funds, could have adverse effects, such as lack
of portfolio diversity and decreased economies of scale, and could result in the
shareholders of a Portfolio, as the remaining investor in the Fund, bearing all
the operating costs of the Fund and thus experiencing higher pro rata operating
expenses and lower returns than would otherwise be the case. In addition, the
total withdrawal by another investment company as an investor in a Fund will
cause the Fund to terminate automatically in 120 days, unless the corresponding
Portfolio and any other investors in the Fund unanimously agree to continue the
business of the Fund. As the Portfolio is required to submit such matters to a
vote of its shareholders, it will be required to incur the expenses of
shareholder meetings in connection with such withdrawals. If unanimous agreement
is not reached to continue the Fund, the Board of Trustees of the Trust would
need to consider alternative arrangements for the Portfolio, including investing
all of the Portfolio's assets in another investment company with the same
investment objective as the Portfolio or hiring an investment adviser to manage
the Portfolio's assets in accordance with the investment policies described
below and in "Appendix: Investment Policies, Strategies and Risks." The absence
of substantial experience with the master/feeder structure could result in
accounting or other difficulties. Failure by investors of a Portfolio to approve
a change in the investment objective and policies of a Portfolio parallel to a
change that has been approved by the investors of the corresponding Fund would
require the Portfolio to redeem its shares of the Fund; this could result in a
distribution in kind to the Portfolio of the portfolio securities of the Fund
(rather than a cash distribution), causing the Portfolio to incur brokerage fees
or other transaction costs in converting such securities to cash, reducing the
diversification of the Portfolio's investments and adversely affecting its
liquidity. Other shareholders in the Funds may have a greater ownership interest
in the Funds than the Portfolios' interest, and could thus have effective voting
control over the operation of the Funds.

WORLDWIDE GROWTH INSTITUTIONAL PORTFOLIO. The Worldwide Growth Portfolio seeks
to maximize long-term capital appreciation. It invests all of its assets in the
Nicholas-Applegate Worldwide Growth Fund, which has the same investment
objective as the Worldwide Growth Portfolio. Assets of the Worldwide Growth Fund
are invested primarily in equity securities of U.S. and foreign companies. Such
companies may be in the earlier stages of development, growth companies,
cyclical companies or companies believed to be undergoing a basic change in
operations or markets which, in the opinion of the Investment Adviser, would
result in a significant improvement in earnings. The securities of such
companies may be subject to more volatile market movements than securities of
larger, more established companies. Although the Fund is not restricted to
investments in companies of any particular size, it currently intends to invest
principally in companies with smaller to middle market capitalizations and above
(generally above $100 million). See "Appendix: Investment Policies, Strategies
and Risks" for a discussion of the risks associated with investment in such
companies.

10
<PAGE>

assets will be invested in debt securities of foreign companies and foreign
governments and their agencies and instrumentalities which the Investment
Adviser believes present attractive opportunities for capital growth, as well as
in various other securities and instruments described in "Appendix: Investment
Policies, Strategies and Risks." The debt securities in which the Fund may
invest will be rated "Baa" or higher by Moody's, "BBB" or higher by S&P or
equivalent ratings by other recognized rating agencies, or will be unrated if
determined by the Investment Adviser to be of comparable quality. These
securities are of investment grade, which means that their issuers are believed
to have adequate capacity to pay interest and repay principal, although certain
of such securities in the lower grades have speculative characteristics, and
changes in economic conditions or other circumstances may be more likely to lead
to a weakened capacity to pay interest and principal than would be the case with
higher rated securities. If the rating of a debt security held by the Fund is
downgraded below investment grade, the security will be sold as promptly as
practicable. The Fund may also make short sales, which is considered a
speculative technique. See "Appendix: Investment Policies, Strategies and Risks"
for a discussion of the risks associated with short sale transactions.

INTERNATIONAL GROWTH INSTITUTIONAL PORTFOLIO. The International Growth Portfolio
seeks to maximize long-term capital appreciation. It invests all of its assets
in the Nicholas-Applegate International Growth Fund, which has the same
investment objective as the International Growth Portfolio. Assets of the
International Growth Fund are invested in the same types of securities as the
Worldwide Growth Fund, except that the International Growth Fund may invest up
to 35% of its total assets in securities of U.S. companies. Under normal market
conditions, as a fundamental policy which cannot be changed without shareholder
approval, at least 65% of the Fund's total assets will be invested in securities
of issuers located in at least three countries. See "Worldwide Growth
Institutional Portfolio" above.

EMERGING COUNTRIES INSTITUTIONAL PORTFOLIO. The Emerging Countries Portfolio
seeks to maximize long-term capital appreciation. It invests all of its assets
in the Nicholas-Applegate Emerging Countries Fund, which has the same investment
objective as the Portfolio. Assets of the Fund are invested primarily in equity
securities of issuers located in countries with emerging securities markets --
that is, countries with securities markets which are, in the opinion of the
Investment Adviser, emerging as investment markets but have yet to reach a level
of maturity associated with developed foreign stock markets, especially in terms
of participation by foreign investors. The Fund currently expects to invest in
issuers located in some or all of the following emerging market countries:
Argentina, Brazil, Chile, China, Colombia, the Czech Republic, Greece, Hungary,
India, Indonesia, Israel, Jordan, Malaysia, Mexico, Morocco, Pakistan, Peru, the
Philippines, Poland, Portugal, Singapore, Sri Lanka, South Africa, South Korea,
Taiwan, Thailand, Turkey and Venezuela. At the discretion of the Investment
Adviser, the Fund may also invest in other countries with emerging securities
markets. See "Appendix: Investment Policies, Strategies and Risks" for a
discussion of the risks associated with investment in emerging markets
countries.

11
<PAGE>
currently intend to do so. The Investment Adviser currently selects portfolio
securities for the Fund from an investment universe of approximately 6,000
foreign issuers in 20 emerging markets.

The debt securities in which the Emerging Countries Fund may invest will be
rated "Baa" or higher by Moody's, "BBB" or higher by S&P or investment grade by
other recognized rating agencies, or will be unrated if determined by the
Investment Adviser to be of comparable quality. At least 75% of the Fund's total
assets invested in such securities will be invested in securities rated A or
better by Moody's or S&P or, if unrated, determined to be of comparable quality
by the Investment Adviser. See "Worldwide Growth Institutional Portfolio" for a
description of these investment grade securities. If the rating of a debt
security held by the Fund is downgraded below investment grade, the security
will be sold as promptly as practicable.

The Emerging Countries Fund intends to invest principally in securities that are
listed on a bona fide securities exchange or are actively traded in an
over-the-counter market (either within or outside the issuer's domicile
country). The Fund will not invest in securities denominated in a foreign
currency unless, at the time of investment, such currency is considered by the
Investment Adviser to be fully exchangeable into United States dollars without
significant legal restriction. The Fund may purchase securities issued by the
government of, or a company located in, one nation but denominated in the
currency of another nation (or in a multinational currency unit).

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data on approximately 26,000 companies in 35 countries (adjusting for reporting
and accounting differences). There can be no assurance that use of the
proprietary investment methodology will be successful.

INVESTMENT POLICIES, STRATEGIES AND RISKS. The Appendix and the Statement of
Additional Information describe certain investment securities and techniques of
the Funds, and the associated risks. These include short-term investments in
cash and cash equivalents; investment in sovereign debt securities of U.S. and
foreign governments and their agencies and instrumentalities; floating and
variable rate demand notes and bonds; commercial paper; non-convertible
corporate debt securities; convertible securities and warrants; closed-end
country funds; depository receipts; over-the-counter securities; when-issued
securities and firm commitment agreements; foreign exchange contracts; put and
call options on securities; stock index futures contracts; repurchase
agreements; illiquid securities; securities lending; and borrowing.

Certain of the investment restrictions which are fundamental policies are set
forth below. Additional investment restrictions are discussed in the Appendix
and Statement of Additional Information.

1. No Portfolio or Fund may invest more than 5% of its total assets in the
securities of any one issuer. However, up to 25% of a Portfolio's or
Fund's total assets may be invested without regard to this limitation, and
this limitation does not apply to investments in securities of the U.S.
Government or its agencies and instrumentalities.

2. No Portfolio or Fund may purchase more than 10% of the outstanding voting
securities of any one issuer, or purchase the securities of any issuer for
the purpose of exercising control.

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5. No Portfolio or Fund may invest more than 15% of its net assets in
illiquid securities.

The investment restrictions described above do not apply to an investment by a
Portfolio of all of its assets in a corresponding Fund.

PORTFOLIO TURNOVER. The Investment Adviser's investment approach results in
above-average portfolio turnover for each Fund as the Investment Adviser sells
portfolio securities when it believes the reasons for their initial purchase are
no longer valid or when it believes that the sale of a security owned by a Fund
and the purchase of another security of better value can enhance principal or
increase income. A security may also be sold to avoid a prospective decline in
market value or purchased in anticipation of a market rise. Although it is not
possible to predict future portfolio turnover rates accurately, and such rates
may vary greatly from year to year, the Investment Adviser anticipates that the
annual portfolio turnover rate for each Fund may be up to 200%, which is
substantially greater than that of many other investment companies. A high rate
of portfolio turnover (100% or more) will result in a Fund paying greater
brokerage commissions on equity securities (other than those effected with
dealers on a principal basis) than would otherwise be the case, which will be
borne directly by the Funds and ultimately by the investors of the corresponding
Portfolios. High portfolio turnover should not result in a Fund paying greater
brokerage commissions on debt securities, as most transactions in debt
securities are effected with dealers on a principal basis. However, debt
securities, as well as equity securities traded on a principal basis, are
subject to mark-up by the dealers. High portfolio turnover may also result in
the realization of substantial net capital gains, and any distributions derived
from such gains may be ordinary income for federal tax purposes.

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ORGANIZATION AND MANAGEMENT

ORGANIZATION. Each Portfolio is a series of Nicholas-Applegate Mutual Funds, a
Delaware business trust. The Board of Trustees of the Trust, in addition to
reviewing the actions of the Trust's Administrator and Distributor, as set forth
below, decides upon matters of general policy with respect to each Portfolio.
See "General Information." The trustees and officers of the Trust and of the
Master Trust are described in the Statement of Additional Information. None of
the disinterested trustees of the Trust are the same individuals as the
disinterested trustees of the Master Trust.

INVESTMENT ADVISER. The Trust has not retained the services of an investment
adviser for the Portfolios, as the Portfolios seek to achieve their investment
objectives by investing all of their assets in corresponding Funds.
Nicholas-Applegate Capital Management, 600 West Broadway, 30th Floor, San Diego,
California 92101, serves as the Investment Adviser to the Funds. The Investment
Adviser currently manages approximately $30 billion of discretionary assets for
numerous clients, including employee benefit plans of corporations, public
retirement systems and unions, university endowments, foundations and other
institutional investors, and individuals. The Investment Adviser was organized
in 1984 as a California limited partnership. Its general partner is
Nicholas-Applegate Capital Management Holdings, L.P., a California limited
partnership controlled by Arthur E. Nicholas. He and 13 other partners manage a
staff of approximately 325 employees.

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$500 million of the Fund's net assets, 0.90% on the next $500 million of net
assets, and 0.85% on net assets in excess of $1 billion. The advisory fees paid
by the Funds are higher than those paid by most other investment companies.

For the fiscal year ended March 31, 1996, the Investment Adviser received (paid)
fees and expense reimbursements (recoupments) from the Funds equal to the
following percentages of the Portfolios' respective average net assets, after
the fee deferrals and expense reimbursements referred to under "Expense
Limitation": Worldwide Growth Portfolio, (0.25%); International Growth
Portfolio, (0.04%); Emerging Countries Portfolio, (1.65%).

The Funds have been managed since inception under the general supervision of Mr.
Nicholas, who has been the Chief Investment Officer of the Investment Adviser
since its organization. In addition, since December 1995, John D. Wylie, as
Chief Investment Officer-Investor Services Group, is also responsible for
general oversight of the Funds' portfolios. The following persons are primarily
responsible for the Investment Adviser's day-to-day management of the Funds'
portfolios; except as otherwise indicated, each of them has been primarily
responsible since the Funds began operation: Worldwide Growth, International
Growth and Emerging Countries Funds-the Investment Adviser's global management
team headed by Lawrence S. Speidell (since March 1994) and Catherine Somhegyi
(since March 1996). Mr. Wylie and Ms. Somhegyi have managed institutional
investments for the Investment Adviser for more than the last five years. Mr.
Speidell has been a portfolio manager with the Investment Adviser since March
1994; from 1983 until he joined the Investment Adviser, he was an institutional
portfolio manager with Batterymarch Financial Management.

For historical peformance data relating to the Portfolios, see "Appendix: Prior
Performance."

ADMINISTRATOR. Investment Company Administration Corporation, a Delaware
corporation, is the Administrator of each Portfolio. Pursuant to an
Administration Agreement with the Trust, and subject to the supervision of the
Board of Trustees of the Trust, the Administrator supervises the overall
administration of the Trust. Its responsibilities include preparing and filing
all documents required for compliance by the Trust with applicable laws and
regulations, arranging for the maintenance of books and records of the Trust and
supervision of other organizations that provide services to the Trust. Certain
officers of the Trust are also provided by the Administrator. For the services
it provides to the Trust, the Administrator receives an annual fee of between
$5,000 and $30,000 for each of the groups of portfolios of the Trust investing
in the various series of the Master Trust; the fee is allocated among various
series of the Trust, including the Portfolios, in accordance with relative net
asset values. The Administrator provides similar services as the administrator
of the Master Trust, subject to the supervision of its Board of Trustees, and is
compensated separately for the services rendered to each Fund at an annual rate
of approximately 0.02% of the average daily net assets of the Fund.

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which operating expenses for the Portfolio are less than the applicable
percentage limitation set forth above for any such year. No interest, carrying
or finance charge will be paid by a Portfolio with respect to any amounts
representing fees deferred or other expenses paid by the Investment Adviser. In
addition, no Portfolio or Fund will be required to repay any unreimbursed
amounts to the Investment Adviser upon termination or non-renewal of its
Investment Advisory Agreement with the Master Trust.

For the fiscal year ended March 31, 1996, the Portfolios' total expenses were
the following percentages of their respective average net assets, after the fee
deferrals and expense reimbursements indicated in parentheses: Worldwide
Growth-1.35% (1.25%); International Growth-1.40% (1.04%); Emerging
Countries-1.65% (1.94%).

For historical performance data relating to the Portfolios, see "Appendix: Prior
Performance."

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PURCHASING SHARES

HOW TO PURCHASE SHARES. Shares of the Portfolios are offered to institutional
investors, high net worth individuals, and participants in certain mutual fund
asset allocation programs sponsored by certain broker-dealers. Shares of the
Portfolios are also offered to former limited partners and participants of
certain investment partnerships and pooled trusts previously managed by the
Investment Adviser (the "former partners"); to partners, officers and employees
of the Investment Adviser and Distributor and their immediate family members;
and to certain other persons determined from time to time by the Distributor.

Investments by individual participants of qualified retirement plans are made
through their plan sponsor or administrator, who is responsible for transmitting
all orders for the purchase,

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redemption and exchange of Portfolio shares. The availability of an investment
by a plan participant in the Portfolios, and the procedures for investing,
depend upon the provisions of the qualified retirement plan and whether the plan
sponsor or administrator has contracted with the Trust or the Transfer Agent for
special processing services, including subaccounting. Other institutional
investors and eligible purchasers must arrange for services through the Transfer
Agent or Distributor by calling (800) 551-8043.

Shares of the Portfolios may be purchased at net asset value without a sales
charge. The minimum initial investment is $250,000 and the minimum subsequent
investment is $10,000. The minimum initial and subsequent investments are waived
for individual participants of qualified retirement plans and for the former
partners and trust participants described above, and may be waived from time to
time by the Distributor for other investors. Shares of a Portfolio may also be
purchased with securities which are otherwise appropriate for investment by the
Portfolio. Shares will be purchased for a participant of a qualified retirement
plan only upon receipt by the plan's recordkeeper of the participant's funds
accompanied by the information necessary to determine the proper share
allocation for the participant.

Subsequent purchases by wire may be made at any time by calling the Transfer
Agent and wiring federal funds as outlined above.

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Individual participants of qualified retirement plans should purchase Portfolio
shares through their plan sponsor or administrator who is responsible for
forwarding payment to the Transfer Agent.

OTHER PORTFOLIOS. Currently, the Trust offers nine Institutional Portfolios.
Three global Institutional Portfolios are offered pursuant to this Prospectus.
Six domestic Institutional Portfolios are offered pursuant to separate
prospectuses which can be obtained by calling (800) 551-8643. The Distributor
also offers shares of other portfolios of the Trust which invest in the same
Funds of the Master Trust as the Institutional Portfolios. These other
portfolios have different sales charges and other expenses than the
Institutional Portfolios, which may affect their performance. Information about
these other portfolios can be obtained from your dealer or by calling (800)
551-8045.

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INVESTOR SERVICES

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CROSS-REINVESTMENT. You may cross-reinvest dividends or dividends and capital
gain distributions paid by one Portfolio into shares of any other Institutional
Portfolio, subject to conditions outlined in the Statement of Additional
Information and the applicable provisions of the qualified retirement plan.

The Trust's exchange privilege is not intended to afford shareholders a way to
speculate on short-term market movements. Accordingly the Trust reserves the
right to limit the number of exchanges an investor or participant may make in
any year, to avoid excessive Portfolio expenses. In order to prevent excessive
use of the exchange privilege that may potentially disrupt the management of the
Emerging Countries Portfolio and increase transaction costs, the Portfolio has
established a policy of limiting excessive exchange activity. Exchange activity
generally will not be deemed excessive if limited to two substantive exchange
redemptions, at least 30 days apart, from the Portfolio during any twelve month
period. In addition, the Portfolio reserves the right to reject any exchange
request that is deemed to be disruptive to efficient portfolio management. Any
such restriction will be made by the Emerging Countries Portfolio on a
prospective basis only, upon notice to the shareholder not later than ten days
following such shareholder's most recent exchange.

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Quincy, Massachusetts 02171. Requests for telephone exchanges or redemptions
received before 4:00 P.M. (Eastern time) on a day when the New York Stock
Exchange is open for normal trading will be processed as of the close of trading
on that day. Otherwise, processing will occur on the next business day. All
exchanges or redemptions will be made on the basis of the relative net asset
values of the two series next determined after a completed request is received.

The Trust will employ procedures designed to provide reasonable assurance that
instructions communicated by telephone are genuine and, if it does not do so, it
may be liable for any losses due to unauthorized or fraudulent instructions. The
procedures employed by the Trust include requiring personal identification by
account number and social security number, tape recording of telephone
instructions, and providing written confirmation of transactions. The Trust
reserves the right to refuse a telephone exchange or redemption request if it
believes, for example, that the person making the request is neither the record
owner of the shares being exchanged or redeemed nor otherwise authorized by the
investor to request the exchange or redemption. Investors will be promptly
notified of any refused request for a telephone exchange or redemption. No
Portfolio or its agents will be liable for any loss, liability or cost which
results from acting upon instructions of a person reasonably believed to be an
investor with respect to the telephone privilege.

AUTOMATIC WITHDRAWAL PLAN. An automatic withdrawal plan may be established by an
investor or by a qualified retirement plan sponsor or administrator for its
participants subject to the requirements of the plan and applicable Federal law.
Individual participants of qualified retirement plans must establish automatic
withdrawal plans with the plan sponsor or administrator rather than the Trust.
Automatic withdrawals of $250 or more may be made on a monthly, quarterly,
semi-annual or annual basis if you have an account of at least $15,000 when the
automatic withdrawal plan begins. Withdrawal proceeds will normally be received
prior to the end of the period designated. All income dividends and capital gain
distributions on shares under the Automatic Withdrawal Plan must be reinvested
in additional shares of the Portfolio. For the protection of investors and the
Trust, wiring instructions must be on file prior to executing any request for
the wire transfer of automatic withdrawal proceeds.

The services referred to above are available only in states where the Portfolio
to be purchased may be legally offered and may be terminated or modified at any
time upon 60 days' written notice. Investors seeking to add to, change or cancel
their selection of available services should contact the Transfer Agent of the
address and telephone number provided above.

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REDEEMING SHARES

If redemption is requested by a corporation, partnership, trust or fiduciary,
written evidence of authority acceptable to the Transfer Agent must be submitted
before such request will be accepted. If the proceeds of the redemption exceed
$50,000, are to be paid to a person other than the record owner, are to be sent
to an address other than the address on the Transfer Agent's records, or are to
be paid to a corporation, partnership, trust or fiduciary, the signature(s) on
the redemption request may be required to be guaranteed by an "eligible
guarantor", which includes a bank or savings and loan association that is
federally insured or a member firm of a national securities exchange.

REDEMPTIONS BY TELEPHONE. If an election is made on the account application (or
subsequently in writing), redemptions of shares may be requested by contacting
the Transfer Agent by telephone at (800) 551-8043 or by facsimile at (617)
774-2651 between the hours of 8:00 A.M. and 4:00 P.M. (Eastern time) on a day
when the New York Stock Exchange is open for normal trading. Investors should
state the name of the Portfolio, the number of shares or dollar amount to be
sold and their name and account number. Participants of qualified retirement
plans may make telephonic or facsimile redemption requests through their plan
sponsor or administrator, provided that such service is offered under the plan
and satisfactory arrangements have been made with the Transfer Agent. Redemption
requests received by the Transfer Agent before 4:00 P.M. (Eastern time) on a day
when the New York Stock Exchange is open for normal trading and be processed
that day. Otherwise, processing will occur on the next business day. See
"Shareholder Services-Telephone Privilege" above.

Payment for shares presented for redemption will ordinarily be wired to your
bank one business day after redemption is requested, but may take up to three
days after receipt by the Transfer Agent of a written or telephonic redemption
request except as indicated below. When purchases are made by check or periodic
account investment, redemption will not be allowed until the investment being
redeemed has been in the account for 14 calendar days. 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 Portfolio of securities owned by it is not reasonably practicable
or it is not reasonably practicable for the Portfolio fairly to determine the
value of its net assets, or during any other period when the Securities and
Exchange Commission, by order, so permits.

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INVOLUNTARY REDEMPTION. In order to reduce expenses of a Portfolio, the Trust
may redeem all of the shares of any investor whose account has a net asset value
of less than $10,000 due to redemptions other than a shareholder who is a
participant in a qualified retirement plan. The Trust will give such investors
60 days' prior written notice in which to purchase sufficient additional shares
to avoid such redemption.

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DIVIDENDS, DISTRIBUTIONS AND TAXES

The Trust intends to qualify each Portfolio as a regulated investment company
under the Internal Revenue Code. Accordingly, the Portfolios will not be subject
to federal income taxes on its net investment income and capital gains, if any,
that they distributes to their investors. All dividends out of net investment
income, together with distributions of short-term capital gains, will be taxable
as ordinary income to the investors whether or not reinvested. Any net long-term
capital gains distributed to investors will be taxable as such to the investors,
whether or not reinvested and regardless of the length of time an investor has
owned his shares.

The Worldwide Growth, International Growth and Emerging Countries Portfolios
declare and pay annual dividends of net investment income. The Portfolios make
distributions at least annually of their net capital gains, if any. In
determining amounts of capital gains to be distributed by a Portfolio, any
capital loss carryovers from prior years will be offset against its capital
gains. Under U.S. Treasury Regulations, the Portfolios are required to withhold
and remit to the U.S. Treasury 31% of the dividends, capital gains and
redemption proceeds on the accounts of those investors who fail to furnish their
correct tax identification numbers on IRS Form W-9 (or IRS Form W-8, in the case
of certain foreign investors) with the required certifications regarding the
investor's status under the federal income tax law or who are subject to backup
withholding for failure to include payments of interest or dividends on their
returns. Notwithstanding the foregoing, dividends of net income and short-term
capital gains to a foreign investor will generally be subject to U.S.
withholding at the rate of 30% (or lower treaty rate).

Investors should consult their own tax advisers regarding specific questions as
to federal, state or local taxes. See "Dividends, Distributions and Taxes" in
the Statement of Additional Information.

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GENERAL INFORMATION

PERFORMANCE INFORMATION. From time to time the Trust may advertise each
Portfolio's total return and, if applicable, its yield. These figures are based
on historical earnings and are not intended to indicate future performance.
Total return shows how much an investment in the Portfolio would have increased
(or decreased) over a specified period of time (I.E., one, five or ten years or
since inception of the Portfolio) assuming that all distributions and dividends
by the Trust to investors of the Portfolio were reinvested on the reinvestment
dates during the period. Total return does not take into account any federal or
state income taxes which may be payable by the investor. Yield will be
calculated on a 30-day period pursuant to a formula prescribed by the Securities
and Exchange Commission ("Commission"). The Trust also may include comparative
performance information in advertising or marketing Portfolio shares. Such
performance information may include data from Lipper Analytical Services, Inc.,
Morningstar Inc., other industry publications, business periodicals, rating
services and market indices. See "Appendix: Prior Performance," and "Performance
Information" in the Statement of Additional Information.

Further information about the performance of the Portfolios is contained in the
Trust's 1996 Annual Report to Shareholders, which may be obtained without charge
by calling (800) 551-8643.

Shareholders of the Portfolios are entitled to one vote for each full share held
and fractional votes for fractional shares held, and will vote by series except
as otherwise required by law or when the Board of Trustees of the Trust
determines that a matter to be voted upon affects only the interests of
investors of a particular series. Shares of the Trust do not have cumulative
voting rights for the election of Trustees. The Trust does not intend to hold
annual meetings of its investors unless otherwise required by law. The Trust
will not be required to hold meetings of investors unless the election of
Trustees or any other matter is required to be acted on by investors under the
Investment Company Act. Investors have certain rights, including the right to
call a meeting upon the request of 10% of the outstanding shares of a Portfolio,
for the purpose of voting on the removal of one or more Trustees.

As of March 31, 1996, the following persons held the following percentages of
the outstanding shares of certain of the Portfolios, and may be deemed to
control such Portfolios: Emerging Countries Portfolio-Arthur E. Nicholas,
33.70%, Sherryl A. Nicholas, 25.16%; International Growth Portfolio-Austin
Firefighters Relief & Retirement Fund, 43.86%; Worldwide Growth Portfolio-Edyth
Bush Charitable Foundation Inc., 29.16%.

MASTER TRUST. The Funds are series of Nicholas-Applegate Investment Trust, an
open-end management investment company organized as a Delaware business trust in
December 1992.

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The trustees and officers of the Master Trust are described in the Statement of
Additional Information. Whenever a Portfolio is requested to vote on matters
pertaining to the corresponding Fund or the Master Trust in its capacity as a
shareholder of such Fund, the Trust will hold a meeting of its investors and
will cast its vote as instructed by such investors or, in the case of a matter
pertaining exclusively to the corresponding Fund, as instructed particularly by
investors of the Portfolio and other series of the Trust which invest in the
Fund. The Trust will vote shares for which it has received no voting
instructions in the same proportion as the shares for which it does receive
voting instructions.

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APPENDIX

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INVESTMENT POLICIES, STRATEGIES AND RISKS

The investment policies and strategies of the Portfolios (as implemented through
their investment in corresponding Funds) encompass the following securities,
techniques and risk considerations.

SHORT-TERM INVESTMENTS (ALL FUNDS). Each of the Funds may invest in short-term
investments to maintain liquidity for redemptions or during periods when, in the
opinion of the Investment Adviser, attractive investments are temporarily
unavailable. Under normal circumstances, no more than 10% of a Fund's total
assets will be retained in cash (U.S. dollars, foreign currencies or
multinational currency units) and cash equivalents. However, each Fund may
invest without restriction in short-term investments for temporary defensive
purposes, such as when the securities markets or economic conditions are
expected to enter a period of decline. Short-term investments in which the Funds
may invest include U.S. Treasury bills or other U.S. Government or Government
agency or instrumentality obligations; certificates of deposit; bankers'
acceptances; time deposits; high quality commercial paper and other short-term
high grade corporate obligations; shares of money market mutual funds; or
repurchase agreements with respect to such securities. These instruments are
described below. The Funds will only invest in short-term investments which, in
the opinion of the Investment Adviser present minimal credit and interest rate
risk.

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CERTIFICATES OF DEPOSIT, TIME DEPOSITS AND BANKERS' ACCEPTANCES (ALL
FUNDS). Each of the Funds may invest in certificates of deposit, time deposits
and bankers' acceptances issued by domestic banks, foreign banks, foreign
branches of domestic banks, domestic and foreign branches of foreign banks, and
domestic savings and loan associations, all of which at the date of investment
have capital, surplus and undivided profits as of the date of their most recent
published financial statements in excess of $100 million, or less than $100
million if the principal amount of such bank obligations is insured by the
Federal Deposit Insurance Corporation. Certificates of deposit are certificates
evidencing the obligation of a bank to repay funds deposited with it for a
specified period of time. Time deposits are non-negotiable deposits maintained
in a banking institution for a specified period of time at a stated interest
rate. Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer; these instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity.

VARIABLE RATE DEMAND SECURITIES (ALL FUNDS). Each of the Funds may purchase
floating and variable rate demand notes and bonds, which are obligations
ordinarily having stated maturities in excess of one year, but which permit the
holder to demand payment of principal at any time, or at specified intervals not
exceeding one year, in each case upon not more than 30 days' notice. Variable
rate demand notes include master demand notes, which are obligations that permit
a Fund to invest fluctuating amounts, which may change daily without penalty.
The interest rates on these notes are adjusted at designated intervals or
whenever there are changes in the market rates of interest on which the interest
rates are based. The issuer of such obligations normally has a corresponding
right, after a given period, to prepay in its discretion the outstanding
principal amount of the obligations plus accrued interest upon a specified
number of days' notice to the holders of such obligations. Because these
obligations are direct lending arrangements between the lender and borrower, it
is not contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value. Such obligations frequently are not rated by
credit rating agencies and a Fund may invest in obligations which are not so
rated only if the Investment Adviser determines that at the time of investment
the obligations are of comparable quality to the other obligations in which the
Fund may invest. The Investment Adviser will monitor the creditworthiness of the
issuers of such obligations and their earning power and cash flow, and will also
consider situations in which all holders of such notes would redeem at the same
time. Investment by a Fund in floating or variable rate demand obligations as to
which it cannot exercise the demand feature on not more than seven days' notice
will be subject to the Fund's limit on illiquid securities of 15% of net assets
if there is no secondary market available for these obligations.

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<PAGE>

fluctuate, with longer-term securities fluctuating more widely in response to
changes in interest rates than those of shorter-term securities. A decline in
interest rates usually produces an increase in the value of debt securities,
while an increase in interest rates generally reduces their value. For
short-term purposes, all Funds may also invest in corporate obligations issued
by domestic and foreign issuers which mature in one year or less and which are
rated "Aa" or higher by Moody's, "AA" or higher by S&P, rated in the two highest
rating categories by any other NRSRO, or which are unrated but determined by the
Investment Adviser to be of minimal credit risk and comparable quality.

Convertible debt securities purchased by the Funds, which are acquired in
substantial part for their equity characteristics, are not subject to minimum
rating requirements.

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Each of the Worldwide Growth, International Growth and Emerging Countries Funds
may invest in equity securities of growth companies, cyclical companies,
companies with smaller market capitalizations or companies believed to be
undergoing a basic change in operations or markets which could result in a
significant improvement in earnings. Small companies and new companies often
have limited product lines, markets or financial resources, and may be dependent
upon one or few key persons for management. The securities of such companies may
be subject to more volatile market movements than securities of larger, more
established companies, both because the securities typically are traded in lower
volume and because the issuers typically are more subject to changes in earnings
and prospects. The corresponding Portfolios' net asset values can be expected to
experience above-average fluctuations, as above-average risk is assumed by the
Funds in investing in such growth companies in seeking higher than average
growth in capital.

COUNTRY FUNDS (ALL FUNDS). Closed-end and open-end country funds in which the
Funds may invest are registered closed-end investment companies which hold
portfolio securities of issuers operated or located in a single country or
geographical region. The extent to which a Fund may invest in closed-end and
open-end country funds is limited by the Investment Company Act and various
state securities or "blue sky" laws. Accordingly, as a fundamental

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policy, none of such Funds will own more than 3% of the outstanding voting stock
of any closed-end or open-end investment company, will invest more than 10% of
its total assets in securities issued by closed-end and open-end investment
companies nor, together with other investment companies managed by the
Investment Adviser, will own more than 10% of any closed-end or open-end
investment company. Assets of the Funds invested in closed-end and open-end
country funds are subject to advisory and other fees imposed by the closed-end
and open-end country funds, as well as to fees imposed by the Funds.

DEPOSITORY RECEIPTS (ALL FUNDS). Each of the Funds may invest in American
Depository Receipts ("ADRs"), which are receipts issued by an American bank or
trust company evidencing ownership of underlying securities issued by a foreign
issuer. ADRs, in registered form, are designed for use in U.S. securities
markets. The Funds may also invest in European and Global Depository Receipts
("EDRs" and "GDRs"), which, in bearer form, are designed for use in European and
foreign securities markets, and in other instruments representing securities of
foreign companies. Such depository receipts may be sponsored by the foreign
issuer or may be unsponsored. Unsponsored depository receipts are organized
independently and without the cooperation of the foreign issuer of the
underlying securities; as a result, available information regarding the issuer
may not be as current as for sponsored depository receipts, and the prices of
unsponsored depository receipts may be more volatile than if they were sponsored
by the issuers of the underlying securities.

SPECIAL CONSIDERATIONS REGARDING EMERGING MARKETS INVESTMENTS. (ALL FUNDS.)
Investments by the Funds in securities issued by the governments of emerging or
developing countries, and of companies within those countries, involves greater
risks than other foreign investments. Investments in emerging or developing
markets involve exposure to economic and legal structures that are generally
less diverse and mature (and in some cases the absence of developed legal
structures governing private and foreign investments and private property), and
to political systems which can be expected to have less stability, than those of
more developed

29
<PAGE>
countries. The risks of investment in such countries may include matters such as
relatively unstable governments, higher degrees of government involvement in the
economy, the absence until recently of capital market structures or
market-oriented economies, economies based on only a few industries, securities
markets which trade only a small number of securities, restrictions on foreign
investment in stocks, and significant foreign currency devaluations and
fluctuations.

As a result of the factors described above, the share price of the Emerging
Countries Portfolio is expected to be volatile, investment in the Portfolio
should be considered speculative, and investors should be able to tolerate
sudden, sometimes substantial, fluctuations in the value of their investments.
Because of the risks associated with international equity investments and
emerging markets in particular, the Emerging Countries Portfolio is intended to
be a long-term investment vehicle and is not designed to provide investors with
a means of speculating on short-term market movements.

OVER-THE-COUNTER SECURITIES (ALL FUNDS). Securities owned by each of the Funds
may be traded in the over-the-counter market or on a regional securities
exchange and may not be traded every day or in the volume typical of securities
trading on a national securities exchange. As a result, disposition by such
Funds of portfolio securities to meet redemptions by investors or otherwise may
require the Funds to sell these securities at a discount from market prices, to
sell during periods when such disposition is not desirable, or to make many
small sales over a lengthy period of time.

30
<PAGE>
To the extent a Fund engages in any of these transactions it will do so for the
purpose of acquiring securities for its portfolio consistent with its investment
objective and policies and not for the purpose of investment leverage. The Funds
will segregate liquid assets such as cash, U.S. Government securities and other
liquid high quality debt securities in an amount sufficient to meet their
payment obligations with respect to these transactions. A Fund may not purchase
when-issued securities or enter into firm commitments if, as a result, more than
15% of the Fund's net assets would be segregated to cover such contracts.

SHORT SALES (WORLDWIDE GROWTH AND INTERNATIONAL GROWTH FUNDS). The Investment
Adviser believes that its growth equity management approach, in addition to
identifying equity securities the earnings and prices of which it expects to
grow at a rate above that of the S&P 500, also identifies securities the prices
of which can be expected to decline. Therefore, each of the Worldwide Growth and
International Growth Funds is authorized to make short sales of securities it
owns or has the right to acquire at no added cost through conversion or exchange
of other securities it owns (referred to as short sales "against the box") and
to make short sales of securities which it does not own or have the right to
acquire. A short sale that is not made "against the box" is a transaction in
which the Fund sells a security it does not own in anticipation of a decline in
market price. When the Fund makes a short sale, the proceeds it receives are
retained by the broker until the Fund replaces the borrowed security. In order
to deliver the security to the buyer, the Fund must arrange through a broker to
borrow the security and, in so doing, the Fund becomes obligated to replace the
security borrowed at its market price at the time of replacement, whatever that
price may be.

Short sales by the Worldwide Growth or International Growth Fund that are not
made "against the box" create opportunities to increase the Fund's return but,
at the same time, involve special risk considerations and may be considered a
speculative technique. Since the Fund in effect profits from a decline in the
price of the securities sold short without the need to invest the full purchase
price of the securities on the date of the short sale, the Fund's net asset
value per share, and that of the corresponding Portfolio, will tend to increase
more when the securities it has sold short decrease in value, and to decrease
more when the securities it has sold short increase in value, than would
otherwise be the case if it had not engaged in such short sales. Short sales
theoretically involve unlimited loss potential, as the market price of
securities sold short may continuously increase, although the Fund may mitigate
such losses by replacing the securities sold short before the market price has
increased significantly. Under adverse market conditions a Fund might have
difficulty purchasing securities to meet its short sale delivery obligations,
and might have to sell portfolio securities to raise the capital necessary to
meet its short sale obligations at a time when fundamental investment
considerations would not favor such sales. The value of securities of any issuer
in which a Fund maintains a short position which is "not against the box" may
not exceed the lesser of 2% of the value of the Fund's net assets or 2% of the
securities of such class of the issuer.

If the Worldwide Growth or International Growth Fund makes a short sale "against
the box", the Fund would not immediately deliver the securities sold and would
not receive the proceeds from the sale. The seller is said to have a short
position in the securities sold until it delivers the securities sold, at which
time it receives the proceeds of the sale. A Fund's decision to make a short
sale "against the box" may be a technique to hedge against market risks when the
Investment Adviser believes that the price of a security may decline, causing a
decline in the value of a security owned by the Fund or a security convertible
into or exchangeable for such security. In such case, any future losses in the
Fund's long position would be reduced by a gain in the short position.

31
<PAGE>
In the view of the Securities and Exchange Commission, a short sale involves the
creation of a "senior security" as such term is defined in the Investment
Company Act, unless the sale is "against the box" and the securities sold are
placed in a segregated account (not with the broker), or unless the Fund's
obligation to deliver the securities sold short is "covered" by placing in a
segregated account (not with the broker) cash or U.S. Government securities in
an amount equal to the difference between the market value of the securities
sold short at the time of the short sale and any cash or U.S. Government
securities required to be deposited as collateral with a broker in connection
with the sale (not including the proceeds from the short sale), which difference
is adjusted daily for changes in the value of the securities sold short. The
total value of the cash and U.S. Government securities deposited with the broker
and otherwise segregated may not at any time be less than the market value of
the securities sold short at the time of the short sale. As a matter of policy,
the Master Trust's Board of Trustees has determined that no Fund will make short
sales of securities or maintain a short position if to do so could create
liabilities or require collateral deposits and segregation of assets aggregating
more than 25% of the Fund's total assets, taken at market value.

32
<PAGE>
such contracts where the fulfillment of the Fund's obligations under such
contracts would obligate the Fund to deliver an amount of foreign currency in
excess of the value of the Fund's portfolio securities or other assets
denominated in that currency.

Put and call options are derivative securities traded on United States and
Foreign exchanges, including the American Stock Exchange, Chicago Board Options
Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange and New York Stock
Exchange. Additionally, the Funds may purchase options not traded on a
securities exchange, which may bear a greater risk of nonperformance than
options traded on a securities exchange. Options not traded on an exchange are
considered dealer options and generally lack the liquidity of an exchange traded
option. Accordingly, dealer options may be subject to the Funds' restriction on
investment in illiquid securities, as described below. Dealer options may also
involve the risk that the securities dealers participating in such transactions
will fail to meet their obligations under the terms of the option.

FUTURES CONTRACTS (ALL FUNDS). Each Fund may purchase and sell stock index
futures contracts as a hedge against changes in market conditions. A stock index
futures contract is a bilateral

33
<PAGE>
agreement pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the stock index value at the close of the last trading day of the contract and
the price at which the futures contract is originally struck. No physical
delivery of the underlying stocks in the index is made.

34
<PAGE>
because of market behavior, currency fluctuations or interest rate trends. If
the Investment Adviser is incorrect in its forecasts regarding market values,
currency fluctuations, interest rate trends or other relevant factors, a Fund
may be in a worse position than if the Fund had not engaged in options or
futures transactions. The potential loss incurred by a Fund in writing options
on futures and engaging investment transactions is unlimited. The Investment
Adviser is experienced in the use of options and futures contracts as an
investment technique.

35
<PAGE>
reasonable prices and might thereby experience difficulty satisfying
redemptions. The Fund might also have to register such restricted securities in
order to dispose of them, resulting in additional expense and delay.

BORROWING (ALL FUNDS). Each Fund may borrow money from banks in amounts up to
20% of its total assets (calculated when the loan is made) only for temporary,
extraordinary or emergency purposes or for the clearance of transactions.
Borrowing involves special risk considerations. Interest costs on borrowings may
fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds (or on the assets that were retained
rather than sold to meet the needs for which funds were borrowed). Under adverse
market conditions, a Fund might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales. All borrowings by a Fund will be made
only to the extent that the value of the Fund's total assets, less its
liabilities other than borrowings, is equal to at least 300% of all borrowings.
If such asset coverage of 300% is not maintained, the Fund will take prompt
action to reduce its borrowings as required by applicable law. Short sales "not
against the box" are considered borrowings for purposes of the percentage
limitations applicable to borrowings.

36
<PAGE>
- --------------------------------------------------------------------------------

PRIOR PERFORMANCE

The investment Adviser has advised the Trust that its net performance results in
the table are calculated as set forth above under "General
Information-Performance Information." All information set forth in the table
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, such information has not been verified and is unaudited. See
"Performance Information" in the Statement of Additional Information for further
information about calculation of total return.

37
<PAGE>

<TABLE>
<CAPTION>
WORLDWIDE GROWTH INTERNATIONAL GROWTH EMERGING COUNTRIES
PERFORMANCE PERFORMANCE PERFORMANCE
------------------------- ------------------------- --------------------------
WORLDWIDE INTERNATIONAL EMERGING
GROWTH MSCI GROWTH COUNTRIES IFTC
INSTITUTIONAL WORLD INSTITUTIONAL MSCI EAFE INSTITUTIONAL INVESTABLE
YEAR PORTFOLIO INDEX(1) PORTFOLIO INDEX(2) PORTFOLIO INDEX
- ---------------------------------------- ------------- --------- ------------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1990(4).................................
1991....................................
1992....................................
1993(4).................................
1994(4).................................
1995....................................
1996(5).................................
Last year(5)............................
Last 5 years(5).........................
Since inception(5)......................
</TABLE>

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

(1)The Morgan Stanley Capital International World Index consists of more than
1,400 securities listed on exchanges in the U.S., Europe, Canada, Australia,
New Zealand and the Far East. The Index is a market-value weighted
combination of countries and is unmanaged. The Index reflects the
reinvestment of income dividends and capital gains distributions, if any, but
does not reflect fees, brokerage commissions or other expenses of investing.

(4) Inception dates are as follows: Worldwide Growth Institutional Portfolio -
April 19, 1993; International Growth Institutional Portfolio - June 7, 1990
(registration statement effective August 31, 1994); Emerging Countries
Institutional Portfolio - November 28, 1994.

(5) Through March 31, 1996.

38
<PAGE>
NICHOLAS--APPLEGATE-REGISTERED TRADEMARK- MUTUAL FUNDS

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

GLOBAL GROWTH & INCOME PORTFOLIOS

PROSPECTUS

Nicholas-Applegate Mutual Funds is an open-end management investment company
consisting of a number of diversified investment portfolios, including the
Global Growth & Income A, B, C and Institutional Portfolios ("Portfolios")
offered hereby. The Series A, B and C Portfolios have identical investment
objectives and policies. However, the Series A Portfolio is sold subject to an
initial sales charge and lower operating expenses, and the Series B and C
Portfolios are sold subject to a contingent deferred sales charge and higher
operating expenses. The Institutional Portfolio is generally offered to
institutional investors, high net worth individuals and participants in certain
mutual fund allocation programs.

EACH PORTFOLIO, UNLIKE MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE
AND MANAGE THEIR OWN PORTFOLIOS OF SECURITIES, SEEKS TO ACHIEVE ITS INVESTMENT
OBJECTIVE BY INVESTING ALL OF ITS ASSETS IN A CORRESPONDING SERIES OF THE GLOBAL
GROWTH & INCOME FUND ("FUND") OF NICHOLAS-APPLEGATE INVESTMENT TRUST, WHICH HAS
THE SAME OBJECTIVE AS THE PORTFOLIOS. THE FUND IN TURN INVESTS ITS ASSETS,
INCLUDING THOSE OF THE PORTFOLIOS, IN PORTFOLIO SECURITIES. ACCORDINGLY, THE
INVESTMENT EXPERIENCE OF EACH PORTFOLIO WILL CORRESPOND DIRECTLY WITH THE
INVESTMENT EXPERIENCE OF THE FUND. INVESTORS SHOULD CAREFULLY CONSIDER THIS
INVESTMENT APPROACH. SEE "INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS-SPECIAL CONSIDERATIONS REGARDING MASTER/FEEDER STRUCTURE", PAGE
, FOR ADDITIONAL INFORMATION REGARDING THIS UNIQUE STRUCTURE. THERE CAN BE NO
ASSURANCE THAT THE FUND OR ANY PORTFOLIO WILL ACHIEVE ITS INVESTMENT OBJECTIVE.

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

GLOBAL GROWTH & INCOME PORTFOLIOS seek long-term capital appreciation while
providing current income. They invest in the Nicholas-Applegate Global Growth &
Income Fund, which in turn invests primarily in a diversified portfolio of
equity securities, bonds and money market instruments of U.S. and foreign
issuers.

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

This Prospectus presents information you should know before investing in any
of the Portfolios. It should be retained for future reference. A Statement of
Additional Information for the Portfolios dated , 1996 has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this Prospectus. The Statement may be obtained, without charge, by writing
to the Trust, 600 West Broadway, 30th Floor, San Diego, California 92101, or by
calling (800) 551-8045. Inquiries regarding any of the Portfolios can also be
made by calling (800) 551-8043.

, 1996

<PAGE>
NICHOLAS--APPLEGATE MUTUAL FUNDS

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

GLOBAL GROWTH & INCOME PORTFOLIOS

GLOBAL GROWTH & INCOME PORTFOLIO A
GLOBAL GROWTH & INCOME PORTFOLIO B
GLOBAL GROWTH & INCOME PORTFOLIO C
GLOBAL GROWTH & INCOME INSTITUTIONAL PORTFOLIO

TABLE OF CONTENTS

Summary of Expenses......................................... 3
Prospectus Summary.......................................... 5
Investment Objectives, Policies and Risk
Considerations............................................ 9
Organization and Management................................. 13
Purchasing Shares........................................... 16
Alternative Purchase Arrangements........................... 19
Shareholder Services........................................ 23
Redeeming Shares............................................ 26
Dividends, Distributions and Taxes.......................... 30
General Information......................................... 31
Appendix:
Investment Policies, Strategies
and Risks............................................... 33

2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES

This table is designed to help you understand the costs of investing in each of
the Portfolios. These are based on the estimated expenses of each Portfolio for
its first year of operations, and because each Portfolio invests all of its
assets in the Fund, each Portfolio's estimated expenses include its
proportionate share of the operating expenses of the Fund. Actual expenses may
be more or less than those shown.

<TABLE>
<CAPTION>
Global Growth & Income
Portfolio Portfolio Portfolio Institutional
A B C Portfolio
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum sales charge on purchases (as a percentage
of offering price)(1) 5.25% None None None
Sales charge on reinvested dividends None None None None
Deferred sales charge (as a percentage of original
purchase price or redemption proceeds, whichever
is lower)(2) None 5.00% 1.00% None
Redemption fee(3) None None None None
Exchange fee None None None None
- -----------------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERCENTAGE OF
AVERAGE NET ASSETS:
(after expense deferral)(5)
Management fees 0.85% 0.85% 0.85% 0.85%
12b-1 expenses 0.25% 0.75% 0.75% --
All other expenses (after expense deferral)(4)
Shareholder service expenses 0.10% 0.25% 0.25% --
Other expenses 0.65% 0.65% 0.65% 0.50%
Total other expenses 0.75% 0.90% 0.90% 0.50%
Total operating expenses (after expense
deferral)(4) 1.85% 2.50% 2.50% 1.35%
</TABLE>

- ---------------------------
(1)Sales charges are reduced for purchases of $50,000 or more of shares of the
Series A Portfolios. There is no initial sales charge on purchases of shares
of the Series B or C Portfolios. The National Association of Securities
Dealers, Inc. limits total annual sales charges (including 12b-1 expenses) to
all purchasers of shares of a Portfolio to 6.25% of new sales plus an
interest factor. However, long-term shareholders may pay more than the
economic equivalent of such maximum sales charges. See "Alternative Purchase
Arrangements."

(2) Although purchases of $1 million or more of shares of a Series A Portfolios
are not subject to an initial sales charge, a contingent deferred sales
charge of 1.00% applies on certain redemptions made less than one year
following such purchases. A contingent deferred sales charge applies on
certain redemptions of shares of the Series B Portfolio, ranging from 5.00%
of redemptions made within 12 months of purchase to zero for redemptions
made more than six years after purchase. A contingent deferred sales charge
of 1.00% also applies on certain redemptions of shares of the Series C
Portfolio made within 12 months following their purchase, but without regard
to the size of the purchase. See "Redeeming Shares."

(3) A $10 charge will be imposed on redemptions requested to be paid by wire
transfer. See "Redeeming Shares-Redemption Payments."

(4) The Investment Adviser of the Master Trust has agreed to waive or defer its
fees, and to absorb other operating expenses, to ensure that the expenses
(other than interest, taxes, brokerage commissions and other portfolio
transaction expenses, capital expenditures and extraordinary expenses) for
each Portfolio will not exceed the following respective percentage of such
Portfolio's average net assets on an annual basis through March 31, 1997:
A-1.85%; B-2.50%; C-2.50%; Institutional-1.35%. In subsequent years, overall
operating expenses for each Portfolio will not fall below the applicable
percentage limitation until the Investment Adviser has fully recouped fees
deferred or expenses paid by the Investment Adviser under this agreement, as
each Portfolio will reimburse the Investment Adviser in subsequent years
when operating expenses (before recoupment) are less than the applicable
percentage limitation set forth above. Accordingly, until all such deferred
fees or expenses have been recouped by the Investment Adviser, the
Portfolios' expenses will be higher, and their yields will be lower, than
would otherwise be the case. See "Organization and Management-Expense
Limitation." Actual operating expenses for the Series A, B, C and
Institutional Portfolios for the first year of operations are estimated to
be the following

3
<PAGE>

respective annualized percentages of such Portfolios' average net assets:
A- %; B- %; C- %; Institutional- %. The various operating expenses of
the Portfolios are further described under "Organization and Management."

<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
- ------------------------------------------------------------------------------
GLOBAL GROWTH & INCOME PORTFOLIOS
Portfolio A(1) $70 $108
Portfolio B:(2)
Assuming redemption at end of time period $77 $110
Assuming no redemption $25 $ 78
Portfolio C:(2)
Assuming redemption at end of time period $36 $ 78
Assuming no redemption $25 $ 78
Institutional Portfolio
- ------------------------------------------------------------------------------
</TABLE>

(2)Assumes deduction at the time of redemption of a contingent deferred sales
charge, if applicable and no exchange of Portfolio B shares for Portfolio A
shares seven or more years after purchase.

4
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY

Nicholas-Applegate Mutual Funds (the "Trust") is an open-end management
investment company comprised of a number of diversified investment portfolios,
including the Global Growth & Income A, B, C and Institutional Portfolios
offered hereby.

MASTER/FEEDER STRUCTURE. The Portfolios seek to achieve their respective
investment objectives by investing all of their assets in corresponding series
("Fund") of Nicholas-Applegate Investment Trust (the "Master Trust"), a
diversified, open-end management investment company. The Fund has the same
investment objectives as the Portfolios which invest in it. The Fund in turn
holds investment securities. Although the "master/feeder" structure employed by
the Portfolios to achieve their investment objectives could provide certain
efficiencies and economies of scale, it could also have potential adverse
effects such as those resulting from large-scale redemptions by other investors
of their interests in the Fund, or from the failure by shareholders of a
Portfolio to approve a change in investment objectives and policies that has
been approved by the shareholders of the Fund. There may also be other
investment companies through which you can invest in the Fund which may have
higher or lower fees and expenses than those of the Portfolios. See "Investment
Objectives, Policies and Risk Considerations-Special Considerations Regarding
Master/Feeder Structure."

A Portfolio may cease investing in the Fund only if the Trust's Board of
Trustees determines that this is in the best interests of the Portfolio and its
shareholders, and only with the approval of the Portfolio's shareholders. In
such event the Board of Trustees would consider alternative arrangements such as
investing all of the Portfolio's assets in another investment company with the
same investment objective as the Portfolio or hiring an investment adviser to
manage the Portfolio's assets in accordance with the Portfolio's investment
policies. No assurance exists that satisfactory alternative arrangements would
be available.

INVESTMENT RISKS AND CONSIDERATIONS. INVESTMENT RISKS AND OTHER CONSIDERATIONS
RELEVANT TO THE SECURITIES IN WHICH THE PORTFOLIOS INVEST THROUGH CORRESPONDING
FUNDS ARE DESCRIBED UNDER "INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS" AND IN THE APPENDIX-INVESTMENT POLICIES, STRATEGIES AND RISKS.
They include the following:

The Fund is permitted to invest up to 35% of its net assets in zero coupon
securities, which may be subject to greater volatility as a result of changes in
prevailing interest rates than other debt securities. In addition, the Fund is
permitted to invest a portion (less than 35%) of its net assets in convertible
and debt securities rated below "Baa" by Moody's Investors Service, Inc.
("Moody's"), "BBB" by Standard & Poor's Corporation ("S&P"), or investment grade
by other recognized rating agencies, or in unrated securities of comparable
quality, if Nicholas-Applegate Capital Management (the "Investment Adviser")
believes that the financial condition of the issuer or the protection afforded
to the particular securities is stronger than would otherwise be indicated by
such low ratings or lack of ratings. Such securities, commonly referred to as
"junk bonds," are speculative and subject to greater market fluctuations and
risk of loss of income and principal than higher rated bonds. The Fund will in
no event purchase debt securities rated below "C" or equivalent by Moody's, S&P
or another rating agency, or

5
<PAGE>

determined by the Investment Adviser to be of comparable quality. See "Appendix:
Investment Policies, Strategies and Risks" and the Statement of Additional
Information for a description of these securities and ratings.

Investments by the Fund in securities of foreign companies and governments
involve special risks in addition to the usual risks inherent in domestic
investments, including fluctuations in foreign exchange rates, political or
economic instability in the country of issue, and the possible imposition of
exchange controls or other laws or restrictions. Settlement of transactions in
foreign markets may be delayed or less frequent than in the U.S., and foreign
governments may withhold taxes from dividends and interest paid on securities
held by the Fund. There is also likely to be less publicly available information
about certain foreign issuers than is available about U.S. companies, and
foreign companies are not generally subject to uniform financial reporting
standards comparable to those applicable to U.S. companies. Investments in
emerging markets involve greater risks than other foreign investments.

The investment approach of the Investment Adviser results in above-average
portfolio turnover for the Fund. A high rate of portfolio turnover involves
correspondingly greater brokerage commission expenses, and may also result in
the realization and distribution to shareholders of net capital gains which are
taxable to them as ordinary income for federal tax purposes.

For hedging purposes, the Fund may purchase or write put and call options on
securities and securities indices, effect transactions in futures contracts and
related options on stock indices, and enter into foreign exchange forward
contracts, currency futures or related options. These are derivative
instruments, whose value derives from the value of an underlying security, index
or currency. Risks associated with the use of such instruments include the
possibility that the Investment Adviser's forecasts of market values and
currency rates of exchange and other factors are not correct; imperfect
correlation between the Fund's hedging technique and the asset or liability
being hedged; default by the other party to the transaction; and inability to
close out a position because of the lack of a liquid market. Investment in such
derivative instruments may not be successful, and may reduce the returns and
increase the volatility of the Fund. See "Appendix: Investment Policies,
Strategies and Risks" in this Prospectus and "Investment Objectives, Policies
and Risks" in the Statement of Additional Information."

The Fund may invest up to 15% of its net assets in illiquid securities. The Fund
may enter into repurchase agreements and lend its portfolio securities, which
involve the risk of loss upon the default of the seller or borrower. The Fund
may also borrow money from banks for temporary purposes which, among other
risks, may require the Fund to sell portfolio securities to meet interest and
principal payments at an unfavorable time. See "Illiquid Securities,"
"Repurchase Agreements," "Securities Lending" and "Borrowing" in "Appendix:
Investment Policies, Strategies and Risks."

The Fund had not commenced operation as of the date of this Prospectus.

INVESTMENT ADVISER. The Trust has not retained the services of an investment
adviser for the Portfolios, as the Portfolios seek to achieve their investment
objectives by investing all of their assets in the Fund. Nicholas-Applegate
Capital Management serves as Investment Adviser to the Fund. The Investment
Adviser has been in the investment advisory business since 1984 and currently
manages approximately $30 billion of discretionary assets for numerous clients,
including employee benefit plans of corporations, public retirement systems and
unions, university endowments, foundations and other institutional investors,
and individuals.

The Investment Adviser is compensated for its services to the Fund in the form
of monthly fees at the annual rate of 0.85% of the Fund's net assets. See
"Organization and Management."

6
<PAGE>

DISTRIBUTOR. Nicholas-Applegate Securities (the "Distributor"), an affiliate of
the Investment Adviser, serves as distributor of shares of the Portfolios. Under
a Distribution Plan, the Distributor receives compensation for providing
distribution services for the Portfolios at the following annual rates: for the
Series A Portfolio-0.25% of the Portfolio's net assets; for the Series B
Portfolio-0.75% of the Portfolio's net assets; and for the Series C
Portfolio-0.75% of the Portfolio's net assets. Under a Shareholder Service Plan,
the Distributor is reimbursed for shareholder services it provides and for
payments made to broker-dealers and others for related support and recordkeeping
services at an annual rate of up to 0.10% of the Series A Portfolio's net
assets, 0.25% of the Series B Portfolio's net assets, and 0.25% of the Series C
Portfolio's net assets. See "Organization and Management." Under a Distribution
Agreement, the Distributor will also retain a portion of the initial sales load
on purchases of shares of the Series A Portfolio and the contingent deferred
sales load on redemptions of shares of the Portfolios. The Institutional
Portfolio pays no distribution or other fees to the Distributor in connection
with services it provides. See "Organization and Management" and "Alternative
Purchase Arrangements."

PURCHASE OF SHARES. Shares of the Portfolios may be purchased directly from the
Trust through its Transfer Agent or through selected dealers. Shares are
purchased at the next offering price, less a sales charge if applicable, after
an order is received in proper form by the Transfer Agent. For Series A, B and C
Portfolios, the minimum initial investment is $2,000 and the minimum subsequent
investment is $100, but reduced investment minimums are available in certain
cases.

Shares of the Institutional Portfolio are offered to Institutional investors,
high net worth individuals and participants in other mutual fund asset
allocation programs. The minimum initial investment is $250,000 and the minimum
subsequent investment is $10,000. The minimum initial and subsequent investments
are waived for individual participants of qualified retirement plans and for the
former limited partners described above, and may be waived from time to time by
the Distributor for other investors. Shares of the Institutional Portfolio may
also be purchased with securities which are otherwise appropriate for investment
by the Institutional Portfolio. See "Purchasing Shares."

ALTERNATIVE PURCHASE ARRANGEMENTS. Shares of the Series A Portfolio are sold
subject to a maximum sales charge of 5.25%. Reduced sales charges are available
for purchases of $50,000 or more of shares of the Series A Portfolio. No initial
sales charge applies on a purchase of $1 million or more of shares of the Series
A Portfolio, but a contingent deferred sales charge of 1.00% is imposed on
redemptions made within 12 months after the $1 million purchase. The Trust
offers a number of ways shareholders in the Series A Portfolio can reduce their
sales charges, including aggregation, concurrent purchases, rights of
accumulation and letters of intent. See "Purchasing Shares."

Although shares of the Series B Portfolio and Series C Portfolio may be
purchased without an initial sales charge, a contingent deferred sales charge is
imposed on redemptions of the Series B Portfolio (ranging from 5.00% of
redemptions made within 12 months of the purchase to zero for redemptions made
more than six years after purchase) and a contingent

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deferred sales charge of 1.00% is imposed on redemptions of the Series C
Portfolio made less than one year after purchase. Shares of the Series B
Portfolio may be exchanged for shares of the Series A Portfolio seven years
after purchase. See "Alternative Purchase Arrangements- Series B Portfolio" and
"-Series C Portfolio."

SHAREHOLDER SERVICES. The following services are provided to shareholders of the
Portfolios for their convenience and flexibility: an automatic investment plan;
automatic reinvestment and cross-reinvestment of dividends and capital gains
distributions; an exchange privilege, including automatic exchanges; and
automatic withdrawals. See "Shareholder Services." The Trust also offers various
retirement plans through which you can invest in the Portfolios. See "Purchasing
Shares."

REDEEMING SHARES. Shares of the Series A, B and C Portfolios may be redeemed by
writing to the Transfer Agent, directly or through a selected dealer, or by
telephone if telephone redemption privileges have been established. Proceeds
from the redemption of shares of the Series A, B and C Portfolios of $5,000 or
more may be wired; otherwise proceeds will be sent by check. Proceeds from the
redemption of shares of the Institutional Portfolio will be wired to the bank of
the shareholder; participants of qualified retirement plans must make redemption
requests to the plan sponsor or administrator. The price received for shares
redeemed is at the next determined net asset value after the request is received
in proper form by the Transfer Agent or a sub-transfer agent, which may be more
or less than the purchase price, except that a contingent deferred sales charge
may apply to certain redemptions. See "Redeeming Shares."

DIVIDENDS, DISTRIBUTIONS AND TAXES. The Portfolios declare and pay quarterly
dividends of net investment income. The Portfolios make distributions at least
annually of any net capital gains. All dividends and distributions will be paid
in the form of additional shares at net asset value unless cash payment is
requested.

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INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

The investment objective and policies of each Portfolio are discussed below and
in the "Appendix: Investment Policies, Strategies and Risks."

SPECIAL CONSIDERATIONS REGARDING MASTER/FEEDER STRUCTURE. The Portfolios seek to
achieve their investment objectives by investing all of their assets in the
Fund, which has the same objectives as the Portfolios. The Fund in turn holds
investment securities. Accordingly, the investment experience of each Portfolio
will correspond directly with the investment experience of the Fund. For a
description of the Fund's objectives, policies, restrictions, management and
expenses, see "Investment Objectives, Policies and Risk Considerations" below,
the Appendix and "Organization and Management." There can be no assurance that
any Portfolio or the Fund will achieve its investment objective. Each
Portfolio's and the Fund's investment objective is a fundamental policy which
may not be changed without the approval of the holders of a majority of the
outstanding shares of the Portfolio or the Fund, respectively, as defined in the
Investment Company Act of 1940 (the "Investment Company Act"). Upon any such
approval, each Portfolio will provide at least 30 days' written notice to its
shareholders before any change is made to its or the Fund's investment
objective.

There are certain risks to the Portfolios related to the use of the
"master/feeder" structure. Such risks include, but are not limited to, the
following: Large-scale redemptions by other investment companies of their
interests in the Fund could have adverse effects, such as lack of portfolio
diversity and decreased economics of scale, and could result in the shareholders
of a Portfolio, as the remaining investor in the Fund, bearing all the operating
costs of the Fund and thus experiencing higher pro rata operating expenses and
lower returns than would otherwise be the case. In addition, the total
withdrawal by another investment company as an investor in the Fund will cause
the Fund to terminate automatically in 120 days, unless the corresponding
Portfolio and any other investors in the Fund unanimously agree to continue the
business of the Fund. As the Portfolio is required to submit such matters to a
vote of its shareholders, it will be required to incur the expenses of
shareholder meetings in connection with such withdrawals. If unanimous agreement
is not reached to continue the Fund, the Board of Trustees of the Trust would
need to consider alternative arrangements for the Portfolio, including investing
all of the Portfolio's assets in another investment company with the same
investment objective as the Portfolio or hiring an investment adviser to manage
the Portfolio's assets in accordance with the investment policies described
below and in "Appendix: Investment Policies, Strategies and Risks." The absence
of substantial experience with the master/feeder structure could result in
accounting or other difficulties. Failure by shareholders of a Portfolio to
approve a change in the investment objective and policies of a Portfolio
parallel to a change that has been approved by the shareholders of the Fund
would require the Portfolio to redeem its shares of the Fund; this could result
in a distribution in kind to the Portfolio of the portfolio securities of the
Fund (rather than a cash distribution), causing the Portfolio to incur brokerage
fees or other transaction costs in converting such securities to cash, reducing
the diversification of the Portfolio's investments and adversely affecting its
liquidity. Other shareholders in the Fund may have a greater ownership interest
in the Fund than the Portfolios' interest, and could thus have effective voting
control over the operation of the Fund.

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<PAGE>

invest all or substantially all of their assets in the Fund. Accordingly, there
may be other investment companies through which you can invest indirectly in the
Fund. The fees charged by such other investment companies may be higher or lower
than those charged by the Portfolios, which may reflect, among other things,
differences in the nature and level of the services and features offered by such
companies to their shareholders. Information about the availability of other
investment companies that invest in the Fund can be obtained by calling (800)
551-8045.

A Portfolio may cease investing in the Fund only if the Board of Trustees of the
Trust determines that such action is in the best interests of the Portfolio and
its shareholders, and only with the approval of the Portfolio's shareholders. In
that event, the Board of Trustees would consider alternative arrangements,
including investing all of the Portfolio's assets in another investment company
with the same investment objective as the Portfolio or hiring an investment
adviser to manage the Portfolio's assets in accordance with the investment
policies described below and in "Appendix: Investment Policies, Strategies and
Risks."

GLOBAL GROWTH & INCOME PORTFOLIOS. The Global Growth & Income Portfolios seek
long-term capital appreciation while providing current income. They invest all
of their assets in the Nicholas-Applegate Global Growth & Income Fund, which has
the same investment objective as the Portfolios. Assets of the Fund are invested
primarily in a diversified portfolio of equity securities, bonds and money
market instruments of U.S. and foreign issuers. Although the Fund is not
restricted to investments in companies of any particular size, it currently
intends to invest principally in established companies in the world's leading
industrial nations and in other rapidly growing countries.

Under normal market conditions, as a fundamental policy which cannot be changed
without shareholder approval, at least 65% of the Fund's total assets will be
invested in securities of issuers located in at least three different countries
(one of which may be the United States). With this exception, the Fund is not
driven by allocation considerations with respect to any particular countries,
geographic regions or economic sectors. Although the Fund is authorized to
invest more than 25% of its total assets in the securities of issuers located in
any one country, it does not currently intend to do so. Countries in which
investment opportunities will be sought include Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Malaysia, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland, the United Kingdom and the United States. The Fund may also invest
up to 10% of its net assets in securities issued by companies based in other
countries such as countries of Eastern Europe and South America, Indonesia,
Korea, Mexico, the Philippines, Portugal and Thailand. The Fund may also invest
up to 10% of its total assets in other registered investment Companies, which
may result in duplication of fees. See "Appendix: Investment Policies,
Strategies and Risks" for a discussion on the risks associated with investment
in foreign securities.

Under normal market conditions, at least 60% of the Fund's total assets will be
invested in equity securities (common and preferred stocks), and warrants to
acquire such securities. The remainder of the Fund's assets will be invested in
debt securities of foreign companies and foreign governments and their agencies
and instrumentalities which the Investment Adviser believes present attractive
opportunities for capital growth, as well as in various other securities and
instruments described in "Appendix: Investment Policies, Strategies and Risks".

The Fund's convertible and other debt securities will generally be investment
grade securities rated "Baa" or higher by Moody's, "BBB" or higher by S&P or
equivalent ratings by other recognized rating agencies, or will be unrated if
determined by the Investment Adviser to be of

10
<PAGE>

comparable quality. These securities are of investment grade, which means that
their issuers are believed to have adequate capacity to pay interest and repay
principal, although certain of such securities in the lower grades may have
speculative characteristics, and changes in economic conditions or other
circumstances may be more likely to lead to a weakened capacity to pay interest
and principal than would be the case with higher rated securities. However, a
portion (less than 35%) of the Fund's net assets may be invested in debt
securities rated below investment grade or in unrated securities of comparable
quality if the Investment Adviser believes that the financial condition of the
issuer or the protection afforded to the particular securities is stronger than
would otherwise be indicated by such low ratings or the lack thereof. Debt
securities with ratings below "Baa" or "BBB" or equivalent ratings, commonly
referred to as "junk bonds," are speculative and subject to greater market
fluctuations and risk of loss of income and principal than higher rated bonds.
If the rating of an investment grade security held by the Fund is downgraded,
the Investment Adviser will determine whether it is in the best interests of the
Fund to continue to hold such security in its investment portfolio. However, if
the downgrading of a debt security causes the Fund to retain 35% or more of its
net assets in junk bonds, the Fund will sell sufficient principal amount of junk
bonds as promptly as practicable to ensure that it does not hold 35% or more of
its net assets in such securities. See "Appendix Investment Policies, Strategies
and Risks" for discussion of the risks associated with investment in junk bonds.

The Fund intends to invest principally in securities that are listed on a bona
fide securities exchange or are actively traded in an over-the-counter market
(either within or outside the issuer's domicile country). The Fund will not
invest in securities denominated in a foreign currency unless, at the time of
investment, such currency is considered by the Investment Adviser to be fully
exchangeable into United States dollars without significant legal restriction.
The Fund may purchase securities issued by the government of, or a company
located in, one nation but denominated in the currency of another nation (or in
a multinational currency unit).

The decision to invest assets of the Fund in any particular debt security will
be based on such factors as the Investment Adviser's analysis of the effect of
the yield to maturity of the security on the average yield to maturity of the
total debt security portfolio of the Fund, the Investment Adviser's assessment
of the credit quality of the issuer and other factors the Investment Adviser
deems relevant. In managing the Fund's debt security investments, the

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<PAGE>
Investment Adviser seeks to capture major moves in interest rates and utilizes a
proprietary model to identify interest rate trends in the bond market. There can
be no assurance that use of these techniques will be successful.

INVESTMENT POLICIES, STRATEGIES AND RISKS. The Appendix and the Statement of
Additional Information describe certain investment securities and techniques of
the Funds and the associated risks. These include short-term investments in cash
and cash equivalents; investment in sovereign debt securities of U.S. and
foreign governments and their agencies and instrumentalities; floating and
variable rate demand notes and bonds; commercial paper; non-convertible
corporate debt securities; convertible securities, synthetic convertible
securities and warrants; closed-end country funds; depository receipts;
over-the-counter securities; when-issued securities and firm commitment
agreements; foreign exchange contracts; put and call options on securities;
stock index futures contracts; repurchase agreements; illiquid securities;
securities lending; and borrowing.

INVESTMENT RESTRICTIONS. Each Portfolio and the Fund is subject to certain
investment restrictions which constitute fundamental policies. Fundamental
policies may not be changed without the approval of the holders of a majority of
the outstanding shares of the affected Portfolio or the Fund, respectively, as
defined in the Investment Company Act. An investment policy or restriction which
is not described as fundamental in this Prospectus or the Statement of
Additional Information may be changed or modified by the Board of Trustees of
the Trust or Master Trust, as the case may be, without shareholder approval.

Certain of the investment restrictions which are fundamental policies are set
forth below. Additional investment restrictions are discussed in the Appendix
and Statement of Additional Information.

1. Neither the Fund nor any Portfolio may invest more than 5% of its total
assets in the securities of any one issuer. However, up to 25% of a
Portfolio's or Fund's total assets can be invested without regard to
this limitation, and this limitation does not apply to investments in
securities of the U.S. Government or its agencies and instrumentalities.

2. Neither the Fund nor any Portfolio may purchase more than 10% of the
outstanding voting securities of any one issuer, or purchase the
securities of any issuer for the purpose of exercising control.

3. Neither the Fund nor any Portfolio may invest 25% or more of its total
assets in any one particular industry; however, this restriction does
not apply to the securities of the U.S. Government, its agencies and
instrumentalities.

4. Neither the Fund nor any Portfolio may make loans of its portfolio
securities in an aggregate amount exceeding 30% of the value of its
total assets, or borrow money (except from banks for temporary,
extraordinary or emergency purposes or for the clearance of transactions
and in an aggregate amount not exceeding 20% of the value of its total
assets).

5. Neither the Fund nor any Portfolio may invest more than 15% of its net
assets in illiquid securities.

The investment restrictions described above do not apply to an investment by a
Portfolio of all of its assets in the Fund.

PORTFOLIO TURNOVER. The Investment Adviser's investment approach results in
above-average portfolio turnover for the Fund as the Investment Adviser sells
portfolio securities when it

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<PAGE>

believes the reasons for their initial purchase are no longer valid or when it
believes that the sale of a security owned by the Fund and the purchase of
another security of better value can enhance principal or increase income. A
security may also be sold to avoid a prospective decline in market value or
purchased in anticipation of a market rise. Although it is not possible to
predict future portfolio turnover rates accurately, and such rates may vary
greatly from year to year, the Investment Adviser anticipates that the annual
portfolio turnover rate for the Fund may be up to 200%, which is substantially
greater than that of many other investment companies. A high rate of portfolio
turnover (100% or more) will result in the Fund paying greater brokerage
commissions on equity securities (other than those effected with dealers on a
principal basis) than would otherwise be the case, which will be borne directly
by the Fund and ultimately by the shareholders of the Portfolios. High portfolio
turnover should not result in the Fund paying greater brokerage commissions on
debt securities, as most transactions in debt securities are effected with
dealers on a principal basis. However, debt securities, as well as equity
securities traded on a principal basis, are subject to mark-ups by the dealers.
High portfolio turnover may also result in the realization of substantial net
capital gains, and any distributions derived from such gains may be ordinary
income for federal tax purposes.

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ORGANIZATION AND MANAGEMENT

INVESTMENT ADVISER. The Trust has not retained the services of an investment
adviser for the Portfolios, as the Portfolios seek to achieve their investment
objectives by investing all of their assets in corresponding Funds.
Nicholas-Applegate Capital Management, 600 West Broadway, 30th Floor, San Diego,
California 92101, serves as the Investment Adviser to the Funds. The Investment
Adviser currently manages over approximately $30 billion of discretionary assets
for numerous clients, including employee benefit plans of corporations, public
retirement systems and unions, university endowments, foundations and other
institutional investors, and individuals. The Investment Adviser was organized
in 1984 as a California limited partnership. Its general partner is
Nicholas-Applegate Capital Management Holdings, L.P., a California limited
partnership controlled by Arthur E. Nicholas. He and 13 other partners manage a
staff of approximately 325 employees.

As compensation for the services it provides, the Investment Adviser receives
from the Fund a monthly fee at the annual rate of 0.85% of the Fund's net
assets.

The Fund is managed under the general supervision of Mr. Nicholas, who has been
the Chief Investment Officer of the Investment Adviser since its organization.
John D. Wylie, as Chief Investment Officer-Investor Services Group, is also
responsible for general oversight of the Fund's portfolio. The Investment
Adviser's global management team, headed by Lawrence S. Speidell and Catherine
Somhegyi, is primarily responsible for the Investment Adviser's day-to-day
management of the Fund's portfolio. Mr. Wylie and Ms. Somhegyi have managed
institutional investments for the Investment Adviser for more than the last five
years.

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<PAGE>

Mr. Speidell has been a portfolio manager with the Investment Adviser since
March 1994; from 1983 until he joined the Investment Adviser, he was an
institutional portfolio manager with Batterymarch Financial Management.

ADMINISTRATOR. Investment Company Administration Corporation, a Delaware
corporation, is the Administrator of each Portfolio. Pursuant to an
Administration Agreement with the Trust, and subject to the supervision of the
Board of Trustees of the Trust, the Administrator supervises the overall
administration of the Trust. Its responsibilities include preparing and filing
all documents required for compliance by the Trust with applicable laws and
regulations, arranging for the maintenance of books and records of the Trust and
supervision of other organizations that provide services to the Trust. Certain
officers of the Trust are also provided by the Administrator. For the services
it provides to the Trust, the Administrator receives an annual fee of between
$5,000 and $30,000 for each of the groups of portfolios of the Trust investing
in the various series of the Master Trust; the fee is allocated among the
various series of the Trust, including the Portfolios, in accordance with
relative net asset values. The Administrator provides similar services as the
administrator of the Master Trust, subject to the supervision of its Board of
Trustees, and is compensated separately for the services rendered to the Fund at
an annual rate of approximately 0.02% of the average daily net assets of the
Fund.

EXPENSE LIMITATION. To limit the expenses of each Portfolio, the Investment
Adviser has agreed to defer its fees, and to absorb the other operating expenses
of each Portfolio, to ensure that the expenses of each Portfolio (excluding
interest, taxes, brokerage commissions and other portfolio transaction expenses,
capital expenditures and extraordinary expenses, but including such Portfolio's
proportionate share of the Fund's similar operating expenses) do not exceed the
following respective percentage of such Portfolio's average net assets on an
annual basis through March 31, 1997: Series A Portfolio-1.85%; Series B
Portfolio-2.50%; Series C Portfolio-2.50%; Institutional Portfolio-1.35%. Each
Portfolio will reimburse the Investment Adviser for fees deferred or other
expenses paid by the Investment Adviser pursuant to this agreement in later
years in which operating expenses for the Portfolio are less than the applicable
percentage limitation set forth above for any such year. No interest, carrying
or finance charge will be paid by a Portfolio with respect to any amounts
representing fees deferred or other expenses paid by the Investment Adviser. In
addition, neither the Fund nor any Portfolio will be required to repay any
unreimbursed amounts to the Investment Adviser upon termination or non-renewal
of its Investment Advisory Agreement with the Master Trust.

The Trust has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act with respect to the Series A, B and C Portfolios. Under
the Distribution Plan, each of the Series A, B and C Portfolios compensates the
Distributor for services rendered and costs incurred in connection with
distribution of shares of such Portfolio. The Trust has also adopted a
Shareholder Service Plan under which each of the Series A, B and C Portfolios
reimburses the Distributor for shareholder servicing expenses actually incurred
with respect to shares of such Portfolio.

Under the Distribution Plan and a related distribution agreement (the
"Distribution Agreement"), the Distributor incurs the expenses of distributing
the shares of each of the Series A, B and C Portfolios. These expenses include
advertising and marketing expenses,

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<PAGE>

commissions and other payments to broker-dealers and others which have entered
into agreements with the Distributor, the expenses of preparing, printing and
distributing prospectuses for the the Series A, B and C Portfolios, and indirect
and overhead costs associated with the sale of Portfolio shares. The Distributor
recovers the distribution expenses it incurs through the receipt of compensation
payments from each of the Series A, B and C Portfolios under the Distribution
Plan at the following annual rates: for the Series A Portfolio, 0.25% of the
Portfolio's average daily net assets; for the Series B Portfolio, 0.75% of the
Portfolio's average daily net costs; for the Series C Portfolio, 0.75% of the
Portfolio's average daily net assets. Moreover, under the Distribution
Agreement, the Distributor retains a portion of an initial sales charge from
purchases of shares of the Series A Portfolios, and a contingent deferred sales
charge from redemptions of shares of the Series A, B and C Portfolios. The
Distribution Plan is a "compensation" plan, which means that the distribution
fees paid by the Series A, B and C Portfolios under the Distribution Plan are
intended to compensate the Distributor for services rendered and commission fees
borne even if the amounts paid exceed the Distributor's actual expenses (in
which case the Distributor would realize a profit). If in any year the
Distributor's expenses incurred in connection with the distribution of the
shares of any of the Series A, B or C Portfolios exceed the distribution fees
paid by that Portfolio, the Distributor will recover such excess if the
Distribution Plan with respect to such shares continues to be in effect in some
later year when the distribution fees exceed the Distributor's expenses with
respect to that Portfolio. There is no limit on the periods during which
unreimbursed expenses may be carried forward; no Portfolio pays interest,
carrying or other finance charges on any carried forward amounts; and no
Portfolio will be obligated to pay any unreimbursed expenses that may exist at
such time, if any, as the Distribution Plan terminates or is not continued.

Under the Shareholder Service Plan, which is a "reimbursement" plan, each of the
Series A, B and C Portfolios, pays the Distributor an annual fee of up to 0.10%,
0.25% and 0.25%, respectively, of the Portfolio's average daily net assets as
reimbursement for certain expenses actually incurred in connection with
shareholder services provided by the Distributor and payments to broker-dealers
and others for the provision of such services. Support services with respect to
the beneficial owners of Portfolio shares include establishing and maintaining
accounts and records relating to clients of the Distributor, broker-dealers and
others who invest in the Portfolio shares, preparing tax reports, assisting
clients in processing exchange and redemption requests and account designations,
and responding to client inquiries concerning their investments. If in any month
the Distributor is due more monies for shareholder services than are immediately
payable because of the expense limitations under the Shareholder Service Plan,
the unpaid amount is carried forward from month to month while the Shareholder
Service Plan is in effect until such time when it may be paid. However, no
carried forward amount will be payable beyond the fiscal year during which the
amounts were incurred, and no interest, carrying or other finance charge is
borne by the Series A, B and C Portfolios with respect to any amount carried
forward.

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<PAGE>

dealers who institute special promotional programs for sales of shares of the
Series A, B and C Portfolios or other series of the Trust, such incentives may
be up to 0.50% of sales during the promotion period. Dealers may obtain further
information by calling (800) 551-8045.

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PURCHASING SHARES

Purchases of shares of the Portfolios can be made by check or by wiring federal
funds to the Transfer Agent. Checks should be in U.S. dollars and made payable
to Nicholas-Applegate Mutual Funds or, in the case of a retirement account, the
custodian or trustee. Third party checks will not be accepted. Checks should be
sent to the Transfer Agent, State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, Attention: Nicholas-Applegate Mutual Funds.
Please specify the name of the Portfolio, the account number assigned by the
Transfer Agent, and your name. See "Purchase by Wire" below for wiring
instructions.

You may make subsequent investments in any of the Series A, B and C Portfolios
by completing the subsequent investments form at the bottom of a recent account
statement, making your check payable to the Trust, writing your account number
on the check and mailing it in the envelope provided with your account
statement. Subsequent investments may also be made by mailing your check
directly to your dealer's address printed on your account statement.

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<PAGE>

Shares of the Institutional Portfolio are offered to institutional investors,
high net worth individuals and participants in certain mutual fund asset
allocation programs. Shares of the Institutional Portfolio are also offered to
former limited partners and participants of certain investment partnerships and
pooled trusts previously managed by the Investment Adviser (the "former
partners"); to partners, officers and employees of the Investment Adviser and
Distributor and their immediate family members; and to certain other persons
determined from time to time by the Distributor.

Investments by individual participants of qualified retirement plans are made
through their plan sponsor or administrator, who is responsible for transmitting
all orders for the purchase, redemption and exchange of Institutional Portfolio
shares. The availability of an investment by a plan participant in the
Institutional Portfolio, and the procedures for investing, depend upon the
provisions of the qualified retirement plan and whether the plan sponsor or
administrator has contracted with the Trust or the Transfer Agent for special
processing services, including subaccounting. Other institutional investors and
eligible purchasers must arrange for services through the Transfer Agent or
Distributor by calling (800) 551-8043.

Shares of the Institutional Portfolio may be purchased at net asset value
without a sales charge. Shares of the Institutional Portfolio may also be
purchased with securities which are otherwise appropriate for investment by the
Institutional Portfolio. Shares will be purchased for a participant of a
qualified retirement plan only upon receipt by the plan's recordkeeper of the
participant's funds accompanied by the information necessary to determine the
proper share allocation for the participant.

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<PAGE>

Subsequent purchases by wire may be made at any time by calling the Transfer
Agent and wiring federal funds as outlined above. For purchases of shares of
Series A, B and C Portfolios, be sure that the wire specifies the name of the
Portfolio, your name and the account number. In the Series A, B and C
Portfolios, the minimum amount which may be invested by wire is $100, except as
noted below.

SHARE PRICE. Shares are purchased at the next offering price after the order is
received in proper form by the Transfer Agent or, in the case of the purchase of
shares of the Institutional Portfolio, a sub-transfer agent. An order in proper
form must include all correct and complete information, documents and signatures
required to process your purchase, as well as a check or bank wire payment
properly drawn and collectable. For purchases of shares of the Institutional
Portfolio by a qualified retirement plan, an order in proper form is defined as
receipt of funds and the information necessary to determine the proper share
allocation for each participant. The price per share is its net asset value,
which is determined as of the close of trading of the New York Stock Exchange on
each day the Exchange is open for normal trading. Orders received before 4:00
P.M. (Eastern time) on a day when the Exchange is open for normal trading will
be processed as of the close of trading on that day. Otherwise, processing will
occur on the next business day. To determine a Portfolio's net asset value per
share, the current value of the Portfolio's total assets, less all liabilities,
is divided by the total number of shares outstanding, and the result is rounded
to the nearer cent.

INVESTMENT MINIMUMS. The minimum initial investment in each of the Series A, B
and C Portfolios is $2,000. For retirement plan investments and custodial
accounts under the Uniform Gifts/Transfers to Minors Act, the minimum is $250.
The minimum is reduced to $50 for purchases through the Automatic Investment
Plan or to $25 for purchases by retirement plans through payroll deductions. The
minimum is $100 for additional investments (except as noted above).

The minimum initial investment in the Institutional Portfolio is $250,000 and
the minimum subsequent investment is $10,000. The minimum initial and subsequent
investments are waived for individual participants of qualified retirement plans
and for the former partners and trust participants described above, and may be
waived from time to time by the Distributor for other investors.

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ALTERNATIVE PURCHASE ARRANGEMENTS

Purchases of shares of the Series A Portfolio are generally subject to a maximum
initial sales charge of 5.25% and lower distribution and shareholder service
fees than shares of the Series B or C Portfolios. Purchases of the Series B
Portfolio are subject to a contingent deferred sales charge, ranging from 5.00%
on redemptions made within 12 months after the shares were purchased to zero for
redemptions made more than six years after purchase, and higher distribution and
shareholder service fees than shares of the Series A Portfolio. Purchases of
shares of the Series C Portfolio are subject to a contingent deferred sales
charge of 1.00% imposed on redemptions made within 12 months after the shares
were purchased, and higher distribution and shareholder service fees than shares
of the Series A Portfolio. Shares of the Series B Portfolio may be exchanged for
shares of the Series A Portfolio seven years after purchase; an exchange will be
treated as a redemption and purchase for tax purposes.

You may choose the method of purchasing Portfolio shares that is most beneficial
given the amount of your intended purchase, the length of time you expect to
hold the shares, whether you qualify for any reduction or waiver of any
applicable sales charge, and other relevant circumstances. You should consider
which method of purchase best suits your individual circumstances, I.E., whether
it is more advantageous to incur an initial sales charge and lower annual fees
(the Series A Portfolio), to have the entire purchase price invested in
Portfolio shares with the investment thereafter being subject to a contingent
deferred sales charge for a period of six years and higher annual fees for a
period of seven years from date of purchase (the Series B Portfolio), or to have
the entire purchase price invested in Portfolio shares with the investment
thereafter being subject to a contingent deferred sales charge for a period of
one year from date of purchase and higher annual fees (the Series C Portfolio).

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<PAGE>
and shareholder service fees on those shares to exceed the initial sales charge
plus cumulative distribution and shareholder service fees on Series A Portfolio
shares. This does not take into account the time value of money, which further
reduces the impact of the higher Series B or C Portfolio distribution and
shareholder service fees on the investment, fluctuations in net asset value, the
effect of the return on the investment over this period of time or redemptions
at a time when the contingent deferred sales charge is applicable.

SERIES A PORTFOLIO

The sales charges you pay when purchasing shares of the Series A Portfolio are
set forth below:

In addition, although no initial sales charge applies on a purchase of $1
million or more of the Series A Portfolio, a contingent deferred sales charge of
1.00% is imposed on certain redemptions within one year of the $1 million
purchase. See "Redeeming Shares-Contingent Deferred Sales Charge on Redemptions
of Portfolio A Shares." Commissions will be paid by the Distributor to dealers
who initiate and are responsible for purchases of $1 million or more and for
purchases made at net asset value by certain retirement plans of organizations
with 50 or more eligible employees as set forth in the Statement of Additional
Information.

NET ASSET VALUE PURCHASES. The Trust may sell shares of the Series A Portfolio
at net asset value to:

(1) current or retired directors, trustees, partners, officers and
employees of the Trust, the Master 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;

(2) current or retired registered representatives or full-time employees
and their spouses and minor children of dealers having selling group
agreements with the Trust and plans for such persons;

(3) former limited partners and participants of certain investment
partnerships and pooled trusts previously managed by the Investment Adviser;

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such other mutual fund (to obtain this benefit, the redemption check,
endorsed to the Trust, or a copy of the confirmation showing the redemption
must be forwarded to the Transfer Agent);

(5) companies or other entities exchanging securities with the Trust or
Master Trust through a merger, acquisition or exchange offer;

(6) trustees or other fiduciaries purchasing shares for certain
retirement plans of organizations with 50 or more eligible employees;

(7) participants in certain pension, profit-sharing or employee benefit
plans that are sponsored by the Distributor and its affiliates;

(8) investment advisers and financial planners who place trades for
their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services;

(9) clients of investment advisers and financial planners referred to in
item (8) who place trades for their own accounts if the accounts are linked
to the master account of the investment adviser or financial planner on the
books and records of a broker, agent, investment adviser or financial
institution;

(10) employee-sponsored benefit plans in connection with redemptions of
shares of Series A or C Portfolios made as a result of participant-directed
exchanges between options in such a plan;

(11) "wrap accounts" for the benefit of clients of broker-dealers,
financial institutions or financial planners having sales or service
agreements with the Distributor or another broker-dealer or financial
institution with respect to sales of shares of the Series A Portfolios; and

AGGREGATION. Sales charge discounts on purchases of shares of the Series A
Portfolio are available for certain aggregated investments. Investments which
may be aggregated include those by you, your spouse and your children under the
age of 21, if all parties are purchasing shares for their own accounts, which
may include purchases through employee benefit plans such as an IRA,
individual-type 403(b) plan or single-participant Keogh-type plan or by a
business solely controlled by these individuals (for example, the individuals
own the entire business) or by a trust (or other fiduciary arrangement) solely
for the benefit of these individuals. Individual purchases by trustees or other
fiduciaries may also be aggregated if the investments are (1) for a single trust
estate or fiduciary account, including an employee benefit plan other than those
described above, or (2) made for two or more employee benefit plans of a single
employer or of affiliated employers as defined in the Investment Company Act,
again excluding employee benefit plans described above, or (3) for a common
trust fund or other pooled account not specifically formed for the purpose of
accumulating Portfolio shares. Purchases made for nominee or street name
accounts (securities held in the name of a dealer

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or another nominee such as a bank trust department instead of the customer) may
not be aggregated with those made for other accounts and may not be aggregated
with other nominee or street name accounts unless otherwise qualified as
described above.

RIGHT OF ACCUMULATION. The sales charge for your investment may be reduced by
taking into account your existing holdings in the Series A Portfolio. See the
account application for further details.

LETTER OF INTENT. You may reduce sales charges on all investments by meeting the
terms of a letter of intent, a non-binding commitment to invest a certain amount
within a 13-month period. Your existing holdings in the Series A Portfolio may
also be combined with the investment commitment set forth in the letter of
intent to further reduce your sales charge. Up to 5% of the letter amount will
be held in escrow to cover additional sales charges which may be due if your
total investments over the letter period are not sufficient to qualify for a
sales charge reduction. See the account application for further details.

SERIES B PORTFOLIO

You may purchase shares of the Series B Portfolio without an initial sales
charge. However, you will bear your proportionate share of payments pursuant to
the Distribution and Shareholder Service Plans, as described above, which
affects the net asset value of your shares in the Series B Portfolio. In
addition, a contingent deferred sales charge applies to redemptions of shares of
the Series B Portfolio made within six years from date of their purchase. No
such charge is imposed if the shares redeemed have been acquired through the
reinvestment of dividends or capital gains distributions or if the amount
redeemed is derived from increases in the value of the account above the amount
of purchase payments. The contingent deferred sales charge is paid to the
Distributor. The Distributor pays sales commissions of up to 4.00% of the
purchase price to participating broker-dealers and others at the end of the
month during which purchases of shares of the Series B Portfolio are made by
their customers. See "Redeeming Shares-Contingent Deferred Sales Charge or
Redemption of Portfolio B Shares"

Portfolio B shares may be exchanged for the Portfolio A shares seven years after
purchase. Exchanges will be effected at relative net asset value without the
imposition of any additional sales charge, and will be treated as a redemption
and purchase for tax purposes. Since annual distribution-related fees are lower
for Portfolio A shares than Portfolio B shares, the per share net asset value of
the Portfolio A shares may be higher than that of the Portfolio B shares at the
time of conversion. Thus, although the aggregate dollar value will be the same,
you may receive fewer Portfolio A shares than Portfolio B shares converted.

For Portfolio B shares previously exchanged for shares of the Trust's Money
Market Portfolio, the time period during which such shares were held in the
Money Market Portfolio will be excluded in calculating the applicable holding
period. For example, Portfolio B shares held in the Trust's Money Market
Portfolio for one year will not be exchangeable for Portfolio A shares until
eight years from purchase. Portfolio B shares acquired through exchange may be
exchanged for Portfolio A shares after expiration of the exchange period
applicable to the original purchase of such shares.

The Trust currently intends to establish, prior to 2002, an additional class of
the Series B Portfolio with the same distribution and shareholder service fees
as the Series A Portfolio, and to provide for the automatic conversion of the
shares of the current class of Series B Portfolio into the new class seven years
after purchase without any sales charge, if in the opinion of

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counsel such conversion would not constitute a taxable event for U.S. income tax
purposes. No assurance exists that the Trust will be able to establish such a
class of the Series B Portfolio in a manner that will provide such benefit.

SERIES C PORTFOLIO

You may purchase shares of any Series C Portfolio without an initial sales
charge. However, you will bear your proportionate share of payments pursuant to
the Distribution and Shareholder Service Plans, as described above, which
affects the net asset value of your shares in the Series C Portfolios. In
addition, a contingent deferred sales charge of 1.00% applies to redemptions of
shares of a Series C Portfolio made within one year from date of their purchase.
Shares of the Series C Portfolios may not be exchanged for shares of the Series
A Portfolios, which may affect their performance for long-term investors. The
Distributor pays sales commissions of up to 1.00% of the purchase price to
participating broker-dealers and others at the end of the month during which
purchases of shares of the Series C Portfolios are made by their customers.

OTHER PORTFOLIOS

Currently, the Trust offers nine Series A Portfolios, nine Series B Portfolios,
nine Series C Portfolios and a Money Market Portfolio. Portfolios other than the
Global Growth & Income Portfolios are covered by separate prospectuses which can
be obtained by calling (800) 551-8045.

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SHAREHOLDER SERVICES

AUTOMATIC INVESTMENT PLAN. You may make regular monthly or quarterly investments
in each Portfolio through automatic withdrawals of specified amounts from your
bank account once an automatic investment plan is established. Individual
participants of qualified retirement plans may make regular investments in the
Portfolio through payroll deductions in accordance with procedures adopted by
the plan sponsor or administrator. See the account application or your plan
sponsor or administrator for further details about this service or call the
Transfer Agent at (800) 551-8043.

CROSS-REINVESTMENT. You may cross-reinvest dividends or dividends and capital
gain distributions paid by one Portfolio into shares of another Portfolio within
the same series (A, B, C or Institutional), subject to conditions outlined in
the Statement of Additional Information and the applicable provisions of the
qualified retirement plan, if applicable. Generally, to use this service the
value of your account in the Portfolio which paid the dividend or capital gain
distribution must equal at least $5,000.

EXCHANGE PRIVILEGE. You may exchange shares of any Portfolio into shares of
other Portfolios within the same series (A, B, C or Institutional) by writing to
the Transfer Agent, State Street Bank and Trust Company, Attention: Mutual Funds
Division, Nicholas-Applegate, P.O. Box 8326, Boston, Massachusetts 02266-8326.
Please specify the name of the applicable Portfolio, the number of shares or
dollar amount to be exchanged and your name and account

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number. You may also exchange shares by contacting your dealer or-if you have
authorized telephone exchanges on the account application-by telephoning the
Transfer Agent at (800) 551-8043 or by sending the Transfer Agent a facsimile at
(617) 774-2651, between the hours of 8:00 A.M. and 4:00 P.M. (Eastern time) on a
day when the New York Stock Exchange is open for normal trading (see "Telephone
Privilege" below).

Individual participants of qualified retirement plans may exchange shares
(depending upon the provisions of the plan) by written or telephone request
through the plan sponsor or administrator. Such participants holding shares of
the Institutional Portfolio may exchange shares only for shares of other
Institutional Series that are included in their plan. In addition, the exchange
privilege may not be available to investors in the Institutional Portfolio who
are eligible to purchase shares of a Portfolio as a result of agreements between
the Distributor and certain broker-dealers, financial planners and similar
institutions.

Before effecting an exchange, you should obtain the currently effective
prospectus of the series into which the exchange is to be made. All exchanges
will be made on the basis of the relative net asset values of the two Series
next determined after a completed request is received. Exchange purchases are
subject to the minimum investment requirements of the series being purchased. An
exchange will be treated as a redemption and purchase for tax purposes.

The Trust will employ procedures designed to provide reasonable assurance that
instructions communicated by telephone are genuine and, if it does not do so, it
may be liable for any losses due to unauthorized or fraudulent instructions. The
procedures employed by the Trust include requiring personal identification by
account number and social security number, tape recording of telephone
instructions, and providing written confirmation of transactions. The Trust
reserves the right to refuse a telephone exchange or redemption request if it
believes, for example, that the person making the request is neither the record
owner of the shares being exchanged or redeemed nor otherwise authorized by the
investor to request the exchange or redemption. Investors will be promptly
notified of any refused request for a telephone

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exchange or redemption. No Portfolio or its agents will be liable for any loss,
liability or cost which results from acting upon instructions of a person
reasonably believed to be an investor with respect to the telephone privilege.

AUTOMATIC EXCHANGES. You may automatically exchange shares (in increments of $50
or more) among any of the Series A, B or C Portfolios within the same series (A,
B or C) on a monthly or quarterly basis. You must either meet the minimum
initial investment requirement for the receiving Portfolio or the originating
Portfolio's balance must be at least $5,000 and the receiving Portfolio's
minimum must be met within one year.

AUTOMATIC WITHDRAWALS. You may make automatic withdrawals from a Series A, B or
C Portfolio of $50 or more on a monthly or quarterly basis if you have an
account of $5,000 or more in the Portfolio. Withdrawal proceeds will normally be
received prior to the end of the month or quarter. See the account application
for further information.

An automatic withdrawal plan may be established for the Institutional Portfolio
by an investor or by a qualified retirement plan sponsor or administrator for
its participants subject to the requirements of the plan and applicable Federal
law. Individual participants of qualified retirement plans must establish
automatic withdrawal plans with the plan sponsor or administrator rather than
the Trust. Automatic withdrawals of $250 or more may be made on a monthly,
quarterly, semi-annual or annual basis if you have an account of at least
$15,000 when the automatic withdrawal plan begins. Withdrawal proceeds will
normally be received prior to the end of the period designated. All income
dividends and capital gain distributions on shares under the Automatic
Withdrawal Plan must be reinvested in additional shares of the Institutional
Portfolio. For the protection of investors and the Trust, wiring instructions
must be on file prior to executing any request for the wire transfer of
automatic withdrawal proceeds.

The services referred to above are available only in states where the Portfolio
to be purchased may be legally offered and may be terminated or modified at any
time upon 60 days' written notice. Investors seeking to add to, change or cancel
their selection of available services should contact the Transfer Agent at the
address and telephone number provided above.

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REDEEMING SHARES

HOW TO REDEEM SHARES. You may redeem shares of any Portfolio by writing to the
Transfer Agent, State Street Bank and Trust Company, Attention:
Nicholas-Applegate Mutual Funds, P.O. Box 8326, Boston, Massachusetts
02266-8326. Redemptions by participants in qualified retirement plans must be
made in writing to the plan sponsor or administrator rather than the Trust.
Please specify the name of the Portfolio, the number of shares or dollar amount
to be sold and your name and account number. You should also enclose any
certificated shares you wish to redeem. Shares may also be redeemed by
contacting your dealer, who may charge you for this service. Shares held in
street name must be redeemed through your dealer.

Except as noted in the discussions of contingent deferred sales charges below,
the price you receive for the Portfolio shares redeemed is at the next
determined net asset value for the shares after a completed redemption request
is received by the Transfer Agent, or, in the case of the Institutional
Portfolio, a sub-transfer agent. No charge will be imposed by the Trust or the
Transfer Agent for redemptions of shares of the Institutional Portfolio.

If redemption is requested by a corporation, partnership, trust or fiduciary,
written evidence of authority acceptable to the Transfer Agent must be submitted
before such request will be accepted. If the proceeds of the redemption exceed
$50,000, are to be paid to a person other than the record owner, are to be sent
to an address other than the address on the Transfer Agent's records, or are to
be paid to a corporation, partnership, trust or fiduciary, the signature(s) on
the redemption request may be required to be guaranteed by an "eligible
guarantor", which includes a bank or savings and loan association that is
federally insured or a member firm of a national securities exchange.

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<PAGE>

except as indicated below. When purchases are made by check or periodic account
investment, redemption will not be allowed until the investment being redeemed
has been in the account for 14 calendar days. 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 Portfolio of securities owned by it is not reasonably practicable or it is
not reasonably practicable for the Portfolio fairly to determine the value of
its net assets, or during any other period when the Securities and Exchange
Commission, by order, so permits. Payment for redemption of recently purchased
shares will be delayed until the Transfer Agent has been advised that the
purchase check has been honored, up to 15 calendar days from the time of receipt
of the purchase check by the Transfer Agent. Such delay may be avoided by
purchasing shares by wire or by certified or official bank checks.

CONTINGENT DEFERRED SALES CHARGE ON REDEMPTIONS OF PORTFOLIO A SHARES. A
contingent deferred sales charge of 1.00% applies to certain redemptions of
shares of the Series A Portfolio less than one year after investments of $1
million or more. The charge is 1.00% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares. The charge will be deducted from the redemption
proceeds and will reduce the amount paid to you. The charge is waived for:

(1) exchanges for other Portfolio A Shares (except if shares acquired by
exchange are then redeemed within 12 months of the initial purchase);

(2) redemptions in connection with mergers, acquisitions and exchange
offers involving the Series A Portfolio;

(3) qualifying distributions from qualified retirement plans and other
employee benefit plans;

(4) distributions from custodial accounts under Section 403(b)(7) of the
Internal Revenue Code or from IRAs due to death, disability or attainment of
age 59 1/2;

(5) tax-free returns of excess contributions to IRAs;

(6) any partial or complete redemptions following the death or
disability of a shareholder, provided the redemption is made within one year
of death or initial determination of disability;

(7) redemptions through certain automatic withdrawals; and

(8) redemptions by qualified retirement and employee benefit plans with
50 or more eligible employees.

There is no contingent deferred sales charge on redemptions of shares of the
Money Market Portfolio unless such shares were acquired in an exchange for
shares of the Series A Portfolio and the redemption is made less than one year
after the initial $1 million purchase of such shares.

CONTINGENT DEFERRED SALES CHARGE ON REDEMPTION OF PORTFOLIO B SHARES. A
contingent deferred sales charge ("CDSC") applies to redemptions of shares of
the Series B Portfolio within six years of investment. The charge declines from
5.00% to zero over a six-year period. The CDSC will be deducted from the
redemption proceeds and will reduce the amount paid to you. A CDSC will be
applied to the lesser of the original purchase price or the current value of the
shares being redeemed. Increases in the value of your shares or shares acquired
through reinvestment of dividends or distributions are not subject to a CDSC.

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The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Portfolio B shares until the time the
shares are redeemed. Solely for purposes of determining the number of years from
the time of any payment for the purchase of shares, all payments during a month
will be aggregated and deemed to have been made on the last day of the month
preceding the purchase and the time shares were held in the Trust's Money Market
Portfolio will be excluded.

The following table sets forth the rates of the CDSC applicable to redemptions
of shares of the Portfolio B series:

In determining whether a CDSC is applicable to a redemption of shares of the
Series B Portfolio, the calculation will be made in a manner that results in the
lowest possible rate. It will be assumed that the redemption is made first of
amounts representing shares of the Series B Portfolio acquired pursuant to the
reinvestment of dividends and distributions; then of amounts representing the
increase in net asset value of your holdings of the Series B Portfolio above the
total amount of payments for the purchase of the shares of the Series during the
preceding six years; then of amounts representing the cost of shares of the
Series B Portfolio held beyond the applicable CDSC period; and finally, of
amounts representing the cost of shares of the Series B Portfolio held for the
longest period of time.

For example, assume you purchased 100 shares of Portfolio B at $10 per share for
a cost of $1,000. Subsequently, you acquired 5 additional shares of Portfolio B
through dividend reinvestment. During the second year after the purchase, you
decided to redeem $500 of your investment. Assuming at the time of the
redemption the net asset value had appreciated to $12 per share, the value of
your Portfolio B shares would be $1,260 (105 shares at $12 per share). The CDSC
would not be applied to the value of the reinvested dividend shares and the
amount which represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged a CDSC at a rate of 4%
(the applicable rate in the second year after purchase) for a total CDSC of
$9.60.

For Federal income tax purposes, the amount of the CDSC will reduce the gain or
increase the loss, as the case may be, on the amount recognized on the
redemption of shares.

The CDSC is waived for redemptions of shares of the Series B Portfolio by: (1)
current or retired directors, trustees, partners, officers and employees of the
Trust, the Master 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; (2) former limited partners and participants of
certain investment partnerships and pooled trusts previously managed by the
Investment Adviser; and (3) participants in certain pension, profit-sharing or
employee benefit plans that are sponsored by the Distributor and its affiliates.

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The CDSC is also waived for:

(1) exchanges of shares for other Series B Portfolio shares (however,
the shares acquired by exchange will continue to be subject to a contingent
deferred sales charge on the same basis as the shares exchanged);

(2) redemptions in connection with mergers, acquisitions and exchange
offers involving the Series B Portfolio;

(3) qualifying distributions from qualified retirement plans and other
employee benefit plans;

(4) distributions from custodial accounts under Section 403(b)(7) of the
Internal Revenue Code or IRAs due to death, disability or attainment of age
59 1/2;

(5) tax-free returns of excess contributions to IRAs; and

(6) any partial or complete redemptions following the death or
disability of a shareholder, provided the redemption is made within one year
of death or initial determination of disability.

There is no CDSC on redemptions of shares of the Money Market Portfolio unless
such shares were acquired in an exchange for shares of the Series B Portfolio
and the redemption is made within six years after the initial purchase.

CONTINGENT DEFERRED SALES CHARGE ON REDEMPTION OF PORTFOLIO C SHARES. A
contingent deferred sales charge of 1.00% applies to redemptions of shares of
the Series C Portfolio made less than one year after the date of their purchase.
No such charge is imposed if the shares redeemed have been acquired through the
reinvestment of dividends or capital gains distributions or if the amount
redeemed is derived from increases in the value of the account above the amount
of purchase payments. In determining whether a contingent deferred sales charge
is payable, the same procedures are followed as described above with respect to
redemptions of shares of Series B Portfolio. The contingent deferred sales
charge is paid to the Distributor. The contingent deferred sales charge is
waived for redemptions of shares of the Series C Portfolio, on the same basis as
for redemptions of shares of the Series B Portfolio. See "Contingent Deferred
Sales Charge on Redemption of Portfolio B Shares."

REINSTATEMENT PRIVILEGE. You may reinvest proceeds from a redemption of
Portfolio shares, or proceeds of a dividend or capital gain distribution paid to
you with respect to Portfolio shares, without a sales charge in any of the
Portfolios. Upon such a reinvestment, the Distributor will credit to your
account any contingent deferred sales charge imposed on the redeemed shares.
Send a written request and a check to the Transfer Agent within 90 days after
the date of the redemption, dividend or distribution. Reinvestment will be at
the next calculated net asset value after receipt. The tax status of a gain
realized on a redemption will not be affected by exercise of the reinstatement
privilege, but a loss may be nullified if you reinvest in the same series within
30 days.

INVOLUNTARY REDEMPTION. In order to reduce expenses of a Portfolio, the Trust
may redeem all of the shares of any shareholder of the Series A, B or C
Portfolios whose account has a net asset value of less than $500, or any
shareholder of the Institutional Portfolio whose account has a net asset value
of less than $10,000, other than a shareholder which is an IRA or other
tax-deferred retirement plan, due to redemptions. The Trust will give such
shareholders 60 days' prior written notice in which to purchase sufficient
additional shares to avoid such redemption. No contingent deferred sales charge
is imposed on such redemptions.

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DIVIDENDS, DISTRIBUTIONS AND TAXES

The Portfolios declare and pay quarterly dividends of net investment income.
Each Portfolio makes distributions at least annually of its net capital gains,
if any. In determining amounts of capital gains to be distributed by a
Portfolio, any capital loss carryovers from prior years will be offset against
its capital gains.

You should consult your own tax adviser regarding specific questions as to
federal, state or local taxes. See "Taxes" in the Statement of Additional
Information.

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GENERAL INFORMATION

PERFORMANCE INFORMATION. From time to time the Trust may advertise each
Portfolio's total return and, if applicable, its yield. These figures are based
on historical earnings and are not intended to indicate future performance.
Total return shows how much an investment in the Portfolio would have increased
(or decreased) over a specified period of time (I.E., one, five or ten years or
since inception of the Portfolio) assuming that all distributions and dividends
by the Trust to shareholders of the Portfolio were reinvested on the
reinvestment dates during the period. Total return takes into account any
applicable sales charges, but does not take into account any federal or state
income taxes which may be payable by the investor. The Trust also may include
comparative performance information in advertising or marketing Portfolio
shares. Such performance information may include data from Lipper Analytical
Services, Inc., Morningstar Inc., other industry publications, business
periodicals, rating services and market indices. See "Performance Information"
in the Statement of Additional Information.

Further information about the performance of the Portfolios will be contained in
the Trust's 1996 Annual Report to Shareholders, which may be obtained without
charge by calling (800) 551-8043.

Shareholders of the Portfolios are entitled to one vote for each full share held
and fractional votes for fractional shares held, and will vote by series or
class except as otherwise required by law or when the Board of Trustees of the
Trust determines that a matter to be voted upon affects only the interests of
shareholders of a particular series or class. Shares of the Trust do not have
cumulative voting rights for the election of Trustees. The Trust does not intend
to hold annual meetings of its shareholders unless otherwise required by law.
The Trust will not be required to hold meetings of shareholders unless the
election of Trustees or any other matter is required to be acted on by
shareholders under the Investment Company Act. Shareholders have certain rights,
including the right to call a meeting upon the request of 10% of the outstanding
shares of a Portfolio, for the purpose of voting on the removal of one or more
Trustees.

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APPENDIX

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INVESTMENT POLICIES, STRATEGIES AND RISKS

The investment policies and strategies of the Portfolios (as implemented through
their investment in the Fund) encompass the following securities, techniques and
risk considerations.

SHORT-TERM INVESTMENTS. The Fund may invest in short-term investments to
maintain liquidity for redemptions or during periods when, in the opinion of the
Investment Adviser, attractive investments are temporarily unavailable. Under
normal circumstances, no more than 10% of the Fund's total assets will be
retained in cash (U.S. dollars, foreign currencies or multinational currency
units) and cash equivalents. In addition, the Fund may invest without
restriction in short-term investments for temporary defensive purposes, such as
when the securities markets or economic conditions are expected to enter a
period of decline. Short-term investments in which the Fund may invest include
U.S. Treasury bills or other U.S. Government or Government agency or
instrumentality obligations; certificates of deposit; bankers' acceptances; time
deposits; high quality commercial paper and other short-term high grade
corporate obligations; shares of money market mutual funds; or repurchase
agreements with respect to such securities. These instruments are described
below. The Fund will only invest in short-term investments which, in the opinion
of the Investment Adviser present minimal credit and interest rate risk.

GOVERNMENT OBLIGATIONS. Securities issued or guaranteed by the U.S. Government
or its agencies and instrumentalities in which the Fund may invest include U.S.
Treasury securities, which differ only in their interest rates, maturities and
times of issuance. Treasury bills have initial maturities of one year or less;
Treasury notes have initial maturities of one to ten years; and Treasury bonds
generally have initial maturities of more than ten years.

Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, for example, Government National Mortgage Association
("GNMA") pass-through certificates, are supported by the full faith and credit
of the U.S. Treasury; others, such as those of the Federal Home Loan Banks, by
the right of the issuer to borrow money from the Treasury; others, such as those
issued by the Federal National Mortgage Association, by the discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
While the U.S. Government provides financial support to U.S.
Government-sponsored agencies and instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law. The Fund will
invest in securities issued or guaranteed by U.S. Government agencies and
instrumentalities only when the Investment Adviser is satisfied that the credit
risk with respect to the issuer is minimal.

The Fund may invest in sovereign debt securities of emerging market governments
and their agencies and instrumentalities. Investments in such securities involve
special risks. The issuer of the debt or the governmental authorities that
control the repayment of the debt may be unable or unwilling to pay principal or
interest when due in accordance with the terms of the debt. Periods of economic
uncertainty may result in the volatility of market prices of sovereign debt, and
in turn the Fund's net asset value, to a greater extent than the volatility
inherent in domestic fixed income securities.

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ZERO COUPON SECURITIES. The Fund may invest up to 35% of its net assets in "zero
coupon" securities issued or guaranteed by the U.S. Government and its agencies
and instrumentalities. Zero coupon securities may be issued by the U.S. Treasury
or by a U.S. Government agency, authority or instrumentality (such as the
Student Loan Marketing Association or the Resolution Funding Corporation). Zero
coupon securities are sold at a substantial discount from face value and
redeemed at face value at their maturity date without interim cash payments of
interest and principal. This discount is amortized over the life of the security
and such amortization will constitute the income earned on the security for both
accounting and tax purposes. Because of these features, such securities may be
subject to greater volatility as a result of changes in prevailing interest
rates than interest paying investments in which the Fund may invest. Because
income on such securities is accrued on a current basis, even though the Fund
does not receive the income currently in cash, the Fund may have to sell other
portfolio investments to obtain cash needed by the Institutional Portfolio to
make income distributions.

CERTIFICATES OF DEPOSIT, TIME DEPOSITS AND BANKERS' ACCEPTANCES. The Fund may
invest in certificates of deposit, time deposits and bankers' acceptances issued
by domestic banks, foreign banks, foreign branches of domestic banks, domestic
and foreign branches of foreign banks, and domestic savings and loan
associations, all of which at the date of investment have capital, surplus and
undivided profits as of the date of their most recent published financial
statements in excess of $100 million, or less than $100 million if the principal
amount of such bank obligations is insured by the Federal Deposit Insurance
Corporation. Certificates of deposit are certificates evidencing the obligation
of a bank to repay funds deposited with it for a specified period of time. Time
deposits are non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Bankers' acceptances are
credit instruments evidencing the obligation of a bank to pay a draft drawn on
it by a customer; these instruments reflect the obligation both of the bank and
of the drawer to pay the face amount of the instrument upon maturity.

COMMERCIAL PAPER. The Fund may invest in commercial paper of domestic and
foreign entities which is rated (or guaranteed by a corporation the commercial
paper of which is rated) in the two highest rating categories by at least two
nationally recognized statistical rating organizations ("NRSROs"), including
"P-1" or "P-2" by Moody's or "A-1" or "A-2" by S&P, or, if rated by only one
NRSRO, in such NRSRO's two highest grades, or, if not rated, is issued by an
entity which the Investment Adviser, acting pursuant to guidelines established
by the Master Trust's Board of Trustees, has determined to be of minimal credit
risk and comparable quality. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs.

VARIABLE RATE DEMAND SECURITIES. The Fund may purchase floating and variable
rate demand notes and bonds, which are obligations ordinarily having stated
maturities in excess of one year, but which permit the holder to demand payment
of principal at any time, or at specified intervals not exceeding one year, in
each case upon not more than 30 days' notice. Variable rate demand notes include
master demand notes, which are obligations that permit the Fund to invest
fluctuating amounts, which may change daily without penalty. The interest rates
on these notes are adjusted at designated intervals or whenever there are
changes in the market rates of interest on which the interest rates are based.
The issuer of such obligations normally has a corresponding right, after a given
period, to prepay in its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified number of days' notice to the
holders of such obligations. Because these obligations are direct lending
arrangements between the lender and borrower, it is not contemplated that such
instruments

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generally will be traded, and there generally is no established secondary market
for these obligations, although they are redeemable at face value. Such
obligations frequently are not rated by credit rating agencies and the Fund may
invest in obligations which are not so rated only if the Investment Adviser
determines that at the time of investment the obligations are of comparable
quality to the other obligations in which the Fund may invest. The Investment
Adviser will monitor the creditworthiness of the issuers of such obligations and
their earning power and cash flow, and will also consider situations in which
all holders of such notes would redeem at the same time. Investment by the Fund
in floating or variable rate demand obligations as to which it cannot exercise
the demand feature on not more than seven days' notice will be subject to the
Fund's limit on illiquid securities of 15% of net assets if there is no
secondary market available for these obligations.

CORPORATE DEBT SECURITIES. The non-convertible corporate debt securities in
which the Fund may invest include obligations of varying maturities (such as
debentures, bonds and notes) over a cross-section of industries. The value of a
debt security changes as interest rates fluctuate, with longer-term securities
fluctuating more widely in response to changes in interest rates than those of
shorter-term securities. A decline in interest rates usually produces an
increase in the value of debt securities, while an increase in interest rates
generally reduces their value. For short-term purposes, the Fund may invest in
corporate obligations issued by domestic and foreign issuers which mature in one
year or less and which are rated "Aa" or higher by Moody's, "AA" or higher by
S&P, rated in the two highest rating categories by any other NRSRO, or which are
unrated but determined by the Investment Adviser to be of minimal credit risk
and comparable quality.

CONVERTIBLE SECURITIES AND WARRANTS. The Fund may invest in securities which may
be exchanged for, converted into, or exercised to acquire a predetermined number
of shares of the issuer's common stock at the option of the holder during a
specified time period (such as convertible preferred stocks, convertible
debentures and warrants). Convertible securities generally pay interest or
dividends and provide for participation in the appreciation of the underlying
common stock but at a lower level of risk because the yield is higher and the
security is senior to common stock. Convertible securities may also include
warrants which give the holder the right to purchase at any time during a
specified period a predetermined number of shares of common stock at a fixed
price but which do not pay a fixed dividend. Investments in warrants involve
certain risks, including the possible lack of a liquid market for resale,
potential price fluctuations as a result of speculation or other factors, and
the failure of the price of the underlying security to reach or have reasonable
prospects of reaching a level at which the warrant can be prudently exercised,
in which event the warrant may expire without being exercised, resulting in a
loss of the Fund's entire investment therein. As a matter of operating policy,
the Fund will not invest more than 5% of its net assets in warrants.

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Like other debt securities, the market value of convertible securities tends to
vary inversely with the level of interest rates. The value of the security
declines as interest rates increase and increases as interest rates decline.
Although under normal market conditions longer term securities have greater
yields than do shorter term securities of similar quality, they are subject to
greater price fluctuations. Fluctuations in the value of the Fund's investments
will be reflected in its and the corresponding Portfolio's net asset value per
share. A convertible security may be subject to redemption at the option of the
issuer at a price established in the instrument governing the convertible
security. If a convertible security held by the Fund is called for redemption,
the Fund will be required to permit the issuer to redeem the security, convert
it into the underlying common stock or sell it to a third party.

Convertible debt securities purchased by the Fund, which are acquired in
substantial part for their equity characteristics, are not subject to certain
minimum rating requirements (see "Junk Bond Considerations" below).

EURODOLLAR CONVERTIBLE SECURITIES. The Fund may invest in Eurodollar convertible
securities, which are fixed-income securities of a U.S. issuer or a foreign
issuer that are issued outside the United States and are convertible into or
exchangeable for equity securities of the same or a different issuer. Interest
and dividends on Eurodollar securities are payable in U.S. dollars outside of
the United States. The Fund may invest without limitation in Eurodollar
convertible securities that are convertible into or exchangeable for foreign
equity securities listed, or represented by ADRs listed, on the New York Stock
Exchange or the American Stock Exchange or convertible into or exchangeable for
publicly traded common stock of U.S. companies. The Fund may also invest up to
15% of its total assets invested in convertible securities, taken at market
value, in Eurodollar convertible securities that are convertible into or
exchangeable for foreign equity securities which are not listed, or represented
by ADRs listed, on such exchanges.

JUNK BOND CONSIDERATIONS. The Fund may invest a portion (less than 35%) of its
net assets in convertible and other debt securities rated below "Baa" by
Moody's, "BBB" by S&P or investment grade by other recognized rating agencies,
or in unrated securities determined by the Investment Adviser to be of
comparable quality if the Investment Adviser believes that the financial
condition of the issuer or the protection afforded to the particular securities
is stronger than would otherwise be indicated by such low ratings or the lack
thereof. Securities rated below "Baa" or "BBB" or equivalent ratings, commonly
referred to as "junk bonds," are subject to greater risk of loss of income and
principal than higher rated bonds and are considered to be predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal, which may in any case decline during sustained periods of
deteriorating economic conditions or rising interest rates. Junk bonds are also
generally considered to be subject to greater market risk in times of
deteriorating economic conditions and to wider market and yield fluctuations
than higher-rated securities. Junk bonds may also be more susceptible to real or
perceived adverse economic and competitive industry conditions than investment
grade securities. The market for such securities may be thinner and less active
than that for higher-rated securities, which can adversely affect the prices at
which these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, the Fund may experience difficulty
in valuing such securities and, in turn, its assets. In addition, adverse
publicity and investor perceptions about junk bonds, whether or not based on
fundamental analysis, may tend to decrease the market value and liquidity of
such securities.

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<PAGE>

Legislation has been and could be adopted limiting the use, or tax and other
advantages, of junk bonds which could adversely affect their value. Under the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989, for
example, federally insured savings and loan associations were required to divest
their investments in non-investment grade corporate debt securities by July 1,
1994. Such divestiture could have a material adverse effect on the market for,
and prices of, such securities. Other pending Congressional proposals could, if
enacted, have a similar adverse effect.

The Investment Adviser will try to reduce the risk inherent in the Fund's
investment in such securities through credit analysis, diversification and
attention to current developments and trends in interest rates and economic
conditions. However, there can be no assurance that losses will not occur. Since
the risk of default is higher for lower-rated bonds, the Investment Adviser's
research and credit analysis are a correspondingly more important aspect of its
program for managing the Fund's investments in such debt securities. The
Investment Adviser will attempt to identify those issuers of high-yielding
securities whose financial condition is adequate to meet future obligations, or
has improved or is expected to improve in the future.

The Fund will in no event purchase securities rated below "C" or equivalent by
Moody's, S&P or another rating agency, or determined by the Investment Adviser
to be of comparable quality. Debt securities with such ratings are predominantly
speculative with respect to the capacity of the issuer to pay interest and repay
principal. Non-rated securities will also be considered for investment when the
Investment Adviser believes that the financial condition of the issuers of such
securities, or the protection afforded by the terms of the securities
themselves, limit the risk to the Fund to a degree comparable to that of rated
securities which are consistent with the Fund's investment objective and
policies. See the Statement of Additional Information for a description of
credit ratings.

Credit ratings evaluate the safety of principal and interest payments of
securities, not their market value. The rating of an issuer is also heavily
weighted by past developments and does not necessarily reflect probable future
conditions. There is frequently a lag between the time a rating is assigned and
the time it is updated. As credit rating agencies may fail to timely change
credit ratings of securities to reflect subsequent events, the Investment
Adviser will also monitor issuers of such securities to determine if such
issuers will have sufficient cash flow and profits to meet required principal
and interest payments and to assure their liquidity. If the rating of a debt
security held by the Fund is downgraded below "C" or an equivalent rating, or if
the Investment Adviser determines that an unrated security is of a comparable
quality, the Investment Adviser will determine whether it is in the best
interests of the Fund to continue to hold such security in its investment
portfolio. However, if the downgrading of an investment grade security causes
the Fund to hold 35% or more of its net assets in securities rated below
investment grade or determined by the Investment Adviser to be of comparable
quality, the Fund will sell sufficient principal amount of such securities as
promptly as practicable to make sure that it holds less than 35% of its net
assets in such securities.

SYNTHETIC CONVERTIBLE SECURITIES. The Fund may invest in "synthetic" convertible
securities, which are derivative positions composed of two or more different
securities whose investment characteristics, taken together, resemble those of
convertible securities. For example, the Fund may purchase a non-convertible
debt security and a warrant or option, which enables the Fund to have a
convertible-like position with respect to a company, group of companies or stock
index. Synthetic convertible securities are typically offered by financial
institutions and investment banks in private placement transactions. Upon
conversion, the Fund generally receives an amount in cash equal to the
difference between the conversion price and the then

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<PAGE>

current value of the underlying security. Unlike a true convertible security, a
synthetic convertible comprises two or more separate securities, each with its
own market value. Therefore, the market value of a synthetic convertible is the
sum of the values of its fixed-income component and its convertible component.
For this reason, the values of a synthetic convertible and a true convertible
security may respond differently to market fluctuations. The 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 S&P, and will
not invest more than 15% of its net assets in such synthetic securities and
other illiquid securities. See "Illiquid Securities" below.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES. The Fund may invest in
certificates issued by the Government National Mortgage Association ("GNMA") as
a short-term investment. GNMA certificates are mortgage-backed securities
representing part ownership of a pool of mortgage loans, which are issued by
lenders such as mortgage bankers, commercial banks and savings associations, and
are either insured by the Federal Housing Administration or the Veterans
Administration. A pool of these mortgages is assembled and, after being approved
by GNMA, is offered to investors through securities dealers. The timely payment
of interest and principal on each mortgage is guaranteed by GNMA and backed by
the full faith and credit of the U.S. Government. Principal is paid back monthly
by the borrower over the term of the loan rather than returned in a lump sum at
maturity. Due to the prepayment feature and the need to reinvest prepayments of
principal at current market rates, GNMA certificates can be less effective than
typical bonds of similar maturities at "locking in" yields during periods of
declining interest rates.

COUNTRY FUNDS. Country funds in which the Fund may invest are registered
closed-end and open-end investment companies which hold portfolio securities of
issuers operated or located in a single country or geographical region. The
extent to which the Fund may invest in closed-end and open-end country funds is
limited by the Investment Company Act and various state securities or "blue sky"
laws. Accordingly, as a fundamental policy, the Fund will not own more than 3%
of the outstanding voting stock of any investment company, will not invest more
than 10% of its total assets in securities issued by investment companies nor,
together with other investment companies managed by the Investment Adviser, will
own more than 10% of any investment company. Assets of the Fund invested in
closed-end and open-end country funds are subject to advisory and other fees
imposed by the closed-end or open-end country fund, as well as to fees imposed
by the Fund.

DEPOSITORY RECEIPTS. The Fund may invest in American Depository Receipts
("ADRs"), which are receipts issued by an American bank or trust company
evidencing ownership of underlying securities issued by a foreign issuer. ADRs,
in registered form, are designed for use in U.S. securities markets. The Fund
may also invest in European and Global Depository Receipts ("EDRs" and "GDRs"),
which, in bearer form, are designed for use in European and other foreign
securities markets, and in other instruments representing securities of foreign
companies. Such depository receipts may be sponsored by the foreign issuer or
may be unsponsored. Unsponsored depository receipts are organized independently
and without the cooperation of the foreign issuer of the underlying securities;
as a result, available information regarding the issuer may not be as current as
for sponsored depository receipts, and the prices of unsponsored depository
receipts may be more volatile than if they were sponsored by the issuers of the
underlying securities.

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EQUITY SECURITIES. The Fund may invest in equity securities, including common
stocks, convertible securities and warrants. Common stocks, the most familiar
type of equity securities, represent an equity (ownership) interest in a
corporation. See "Convertible Securities and Warrants" for a description of
convertible securities and warrants.

The Fund may invest in equity securities of companies of any size. These may
include equity securities of growth companies, cyclical companies, companies
with smaller market capitalizations (i.e., $500 million or less at the time of
purchase) or companies believed to be undergoing a basic change in operations or
markets which could result in a significant improvement in earnings. Small
companies and new companies often have limited product lines, markets or
financial resources, and may be dependent upon one or few key persons for
management. The securities of such companies may be subject to more volatile
market movements than securities of larger, more established companies, both
because the securities typically are traded in lower volume and because the
issuers typically are more subject to changes in earnings and prospects. To the
extent of such investments, a Portfolio's net asset value can be expected to
experience above-average fluctuations, as above-average risk is assumed by the
Fund in investing in such growth companies in seeking higher than average growth
in capital.

FOREIGN INVESTMENT CONSIDERATIONS. There are special risks associated with the
Fund's investments in securities of foreign companies and governments, which add
to the usual risks inherent in domestic investments. Such special risks include
fluctuations in foreign exchange rates, political or economic instability in the
country of issue, and the possible imposition of exchange controls or other laws
or restrictions. In addition, securities prices in foreign markets are generally
subject to different economic, financial, political and social factors than are
the prices of securities in United States markets. With respect to some foreign
countries there may be the possibility of expropriation or confiscatory
taxation, limitations on liquidity of securities or political or economic
developments which could affect the foreign investments of the Fund. Moreover,
securities of foreign issuers generally will not be registered with the
Securities and Exchange Commission and such issuers generally will not be
subject to the Commission's reporting requirements. Accordingly, there is likely
to be less publicly available information concerning certain of the foreign
issuers of securities held by the Fund than is available concerning U.S.
companies. Foreign companies are also generally not subject to uniform
accounting, auditing and financial reporting standards or to practices and
requirements comparable to those applicable to U.S. companies. There may also be
less government supervision and regulation of foreign broker-dealers, financial
institutions and listed companies than exists in the United States. The Funds
will not invest in securities denominated in a foreign currency unless, at the
time of investment, such currency is considered by the Investment Adviser to be
fully exchangeable into United States dollars without significant legal
restriction. See "Investment Objectives, Policies and Risks-Foreign Investments"
in the Statement of Additional Information.

SPECIAL CONSIDERATIONS REGARDING EMERGING MARKETS INVESTMENTS. Investments by
the Fund in securities issued by the governments of emerging or developing
countries, and of companies within those countries, involves greater risks than
other foreign investments. Investments in emerging or developing markets involve
exposure to economic and legal structures that are generally less diverse and
mature (and in some cases the absence of developed legal structures governing
private and foreign investments and private property), and to political systems
which can be expected to have less stability, than those of more developed
countries. The risks of investment in such countries may include matters such as
relatively unstable governments, higher degrees of government involvement in the
economy, the absence until recently of

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<PAGE>
capital market structures or market-oriented economies, economies based on only
a few industries, securities markets which trade only a small number of
securities, restrictions on foreign investment in stocks, and significant
foreign currency devaluations and fluctuations.

Emerging markets can be substantially more volatile than both U.S. and more
developed foreign markets. Such volatility may be exacerbated by illiquidity.
The average daily trading volume in all of the emerging markets combined is a
small fraction of the average daily volume of the U.S. market. Small trading
volumes may result in the Fund being forced to purchase securities at
substantially higher prices than the current market, or to sell securities at
much lower prices than the current market.

OVER-THE-COUNTER SECURITIES. Securities owned by the Fund may be traded in the
over-the-counter market or on a regional securities exchange and may not be
traded every day or in the volume typical of securities trading on a national
securities exchange. As a result, disposition by the Fund of portfolio
securities to meet redemptions by shareholders or otherwise may require the Fund
to sell these securities at a discount from market prices, to sell during
periods when such disposition is not desirable, or to make many small sales over
a lengthy period of time.

WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS. The Fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions in which the payment obligation and interest
rate are fixed at the time of the transaction but the settlement is delayed).
Delivery and payment for these securities typically occur 15 to 45 days after
the commitment to purchase. No interest accrues to the purchaser during the
period before delivery. There is a risk in these transactions that the value of
the securities at settlement may be more or less than the agreed upon price, or
that the party with which the Fund enters into such a transaction may not
perform its commitment. The Fund will normally enter into these transactions
with the intention of actually receiving or delivering the securities. The Fund
may sell the securities before the settlement date.

To the extent the Fund engages in any of these transactions it will do so for
the purpose of acquiring securities for its portfolio consistent with its
investment objective and policies and not for the purpose of investment
leverage. The Fund will segregate liquid assets such as cash, U.S. Government
securities and other liquid, high quality debt securities in an amount
sufficient to meet their payment obligations with respect to these transactions.
The Fund may not purchase when-issued securities or enter into firm commitments
if, as a result, more than 15% of the Fund's net assets would be segregated to
cover such contracts.

FOREIGN EXCHANGE CONTRACTS. Since the Fund may invest primarily in securities
denominated in currencies other than the U.S. dollar, changes in foreign
currency exchange rates will affect the values of its portfolio securities and
the unrealized appreciation or depreciation of its investments. The rate of
exchange between the U.S. dollar and other currencies is determined by forces of
supply and demand in the foreign exchange markets. These forces are affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors.

The Fund may enter into derivative positions such as foreign exchange forward
contracts or currency futures or options contracts for the purchase or sale of
foreign currency to "lock in" the U.S. dollar price of the securities
denominated in a foreign currency or the U.S. dollar equivalent of interest and
dividends to be paid on such securities, or to hedge against the possibility
that the currency of a foreign country in which the Fund has investments may
suffer a decline against the U.S. dollar. A forward currency contract is an
obligation to

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<PAGE>

purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. For example, the Fund may purchase a
particular currency or enter into a forward currency contract to preserve the
U.S. dollar price of securities it intends to or has contracted to purchase.
Alternatively, the Fund might sell a particular currency on either a spot (cash)
basis at the rate then prevailing in the currency exchange market or on a
forward basis by entering into a forward contract to purchase or sell currency,
to hedge against an anticipated decline in the U.S. dollar value of securities
it intends or has contracted to sell. This method of attempting to hedge the
value of the Fund's portfolio securities against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices of the
securities. The Fund is not obligated to engage in any such currency hedging
operations, and there can be no assurance as to the success of any hedging
operations which the Fund may implement. Although the strategy of engaging in
foreign currency transactions could reduce the risk of loss due to a decline in
the value of the hedged currency, it could also limit the potential gain from an
increase in the value of the currency. The Fund does not intend to maintain a
net exposure to such contracts where the fulfillment of the Fund's obligations
under such contracts would obligate the Fund to deliver an amount of foreign
currency in excess of the value of the Fund's portfolio securities or other
assets denominated in that currency.

OPTIONS. The Fund may purchase listed covered "put" and "call" options with
respect to securities which are otherwise eligible for purchase by the Fund and
with respect to various stock indices, for hedging purposes, subject to the
following restrictions: the aggregate premiums on call options purchased by the
Fund may not exceed 5% of the market value of net assets of the Fund as of the
date the call options are purchased, and the aggregate premiums on put options
may not exceed 5% of the market value of the net assets of the Fund as of the
date such options are purchased. In addition the Fund will not purchase or sell
options if, immediately thereafter, more than 25% of its net assets would be
hedged. A "put" gives a holder the right, in return for the premium paid, to
require the writer of the put to purchase from the holder a security at a
specified price. A "call" gives a holder the right, in return for the premium
paid, to require the writer of the call to sell a security to the holder at a
specified price. An option on a securities index (such as a stock index) gives
the holder the right, in return for the premium paid, to require the writer to
pay cash equal to the difference between the closing price of the index and the
exercise price of the option, expressed in dollars, times a specified
multiplier.

Put and call options are derivative securities traded on United States and
foreign exchanges, including the American Stock Exchange, Chicago Board Options
Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange and New York Stock
Exchange. Additionally, the Fund may purchase options not traded on a securities
exchange, which may bear a greater risk of nonperformance than options traded on
a securities exchange. Options not traded on an exchange are considered dealer
options and generally lack the liquidity of an exchange traded option.
Accordingly, dealer options may be subject to the Fund's restriction on
investment in illiquid securities, as described below. Dealer options may also
involve the risk that the securities dealers participating in such transactions
will fail to meet their obligations under the terms of the option.

The Fund may also write listed covered options on up to 25% of the value of
their respective net assets. Call options written by the Fund give the holder
the right to buy the underlying securities from the Fund at a stated exercise
price; put options written by the Fund give the holder the right to sell the
underlying security to the Fund. A call option is covered if the Fund owns the
security underlying the call or has an absolute and immediate right to acquire

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<PAGE>

that security without additional cash consideration upon conversion or exchange
of securities currently held by the Fund. A put option is covered if the Fund
maintains cash or cash equivalents equal to the exercise price in a segregated
amount with its Custodian. If an option written by a Fund expires unexercised,
the Fund realizes a gain equal to the premium received at the time the option
was written. If an option purchased by the Fund expires unexercised, the Fund
realizes a capital loss equal to the premium paid.

Prior to the earlier of exercise or expiration, an option written by the Fund
may be closed out by an offsetting purchase or sale of an option of the same
series. The Fund will realize a gain from a closing purchase transaction if the
cost of the closing transaction is less than the premium received from writing
the option; if it is more, the Fund will realize a capital loss. If the premium
received from a closing sale transaction is more than the premium paid to
purchase the option, the Fund will realize a gain; if it is less, the Fund will
realize a loss.

FUTURES CONTRACTS. The Fund may purchase and sell stock index futures contracts
as a hedge against changes in market conditions. A stock index futures contract
is a bilateral agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of the last trading day of
the contract and the price at which the futures contract is originally struck.
No physical delivery of the underlying stocks in the index is made.

The Fund may also purchase and sell financial futures contracts as a hedge
against changes in interest rates. Additionally, the Fund may purchase and sell
currency futures contracts to hedge against foreign currency fluctuations, and
the Fund may purchase and sell related options on futures contracts. A financial
or currency futures contract obligates the seller of the contract to deliver and
the purchaser of the contract to take delivery of the type of financial
instrument or currency called for in the contract at a specified future time
(the settlement date) for a specified price. Although the terms of a contract
call for actual delivery or acceptance of the financial instrument or currency,
the contracts will be closed out before the delivery date without delivery or
acceptance taking place. Futures options possess many of the same
characteristics as options on securities and indices. A futures option gives the
holder, in return for the premium paid, the right to buy (call) from or sell
(put) to the writer of the option a futures contract at a specified price at any
time during the period of the option. Upon exercise of a call option, the holder
acquires a long position in the futures contract and the writer is assigned the
opposite short position. In the case of a put option, the opposite is true. A
futures option may be closed out before exercise or expiration by an offsetting
purchase or sale of a futures option of the same series.

The Fund will not engage in transactions in futures contracts for speculation,
but only as a hedge against the risk of unexpected changes in the values of
securities held or intended to be held by the Fund. As a general rule, the Fund
will not purchase or sell futures if, immediately thereafter, more than 25% of
its net assets would be hedged. In addition, the Fund may not purchase or sell
futures or related options if, immediately thereafter, the sum of the amount of
margin deposits on the Fund's existing futures positions and premiums paid for
such options

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<PAGE>

would exceed 5% of the market value of the Fund's net assets. In instances
involving the purchase of futures contracts by the Fund, an amount of cash and
cash equivalents equal to the market value of the futures contracts will be
deposited in a segregated account with the Fund's Custodian or with a broker to
collateralize the position and thereby insure that the use of such futures is
unleveraged. See "Investment Objectives, Policies and Risks-Futures Contracts
and Related Options" in the Statement of Additional Information.

SPECIAL HEDGING CONSIDERATIONS. Special risks are associated with the use of
options and futures contracts as hedging techniques. There can be no guaranty of
a correlation between price movements in the hedging vehicle and in the
portfolio securities being hedged. A lack of correlation could result in a loss
on both the hedged securities in the Fund and the hedging vehicle, so that the
Fund's return might have been better had hedging not been attempted. In
addition, a decision as to whether, when and how to use options or futures
involves the exercise of skill and judgment which are different from those
needed to select portfolio securities, and even a well-conceived transaction may
be unsuccessful to some degree because of market behavior, currency fluctuations
or interest rate trends. If the Investment Adviser is incorrect in its forecasts
regarding market values, currency fluctuations, interest rate trends or other
relevant factors, the Fund may be in a worse position than if the Fund had not
engaged in options or futures transactions. The potential loss incurred by the
Fund in writing options on futures and engaging in futures transactions is
unlimited. The Investment Adviser is experienced in the use of options and
futures contracts as an investment technique.

There can be no assurance that a liquid market will exist at a time when the
Fund seeks to close out an option position or futures contract. Most futures
exchanges and boards of trade limit the amount of fluctuation in futures
contract prices during a single day; once the daily limit has been reached on a
particular contract, no trades may be made that day at a price beyond that
limit. In addition, certain of these instruments are relatively new and without
a significant trading history. As a result, there is no assurance that an active
secondary market will develop or continue to exist. Lack of a liquid market for
any reason may prevent the Fund from liquidating an unfavorable position and the
Fund would remain obligated to meet margin requirements until the position is
closed. See "Investment Objectives, Policies and Risks-Options on Securities and
Securities Indices" and "-Futures Contracts and Related Options" in the
Statement of Additional Information.

The Fund's ability to enter into options and futures contracts is limited by the
requirements of the Internal Revenue Code with respect to the corresponding
Portfolio's qualification as a regulated investment company. See "Taxes" in the
Statement of Additional Information.

REPURCHASE AGREEMENTS. The Fund may on occasion enter into repurchase
agreements, in which the Fund purchases securities and the seller agrees to
repurchase them from the Fund at a mutually agreed-upon time and price. The
period of maturity is usually overnight or a few days, although it may extend
over a number of months. The resale price is in excess of the purchase price,
reflecting an agreed-upon rate of return effective for the period of time the
Fund's money is invested in the security. The Fund's repurchase agreements will
at all times be fully collateralized in an amount at least equal to 102% of the
purchase price, including accrued interest earned on the underlying securities.
The instruments held as collateral are valued daily and, if the value of the
instruments declines, the Fund will require additional collateral. If the seller
defaults and the value of the collateral securing the repurchase agreement
declines, the Fund may incur a loss. If bankruptcy proceedings are commenced
with respect to the seller, realization upon the collateral by the Fund may be
delayed or

43
<PAGE>

limited. The Fund will only enter into repurchase agreements involving
securities in which it could otherwise invest and with selected financial
institutions and brokers and dealers which meet certain creditworthiness and
other criteria.

ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
securities that at the time of purchase have legal or contractual restrictions
on resale or are otherwise illiquid. Historically, illiquid securities have
included securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of 1933
("restricted securities"), securities which are otherwise not readily marketable
such as over-the-counter, or dealer traded, options, and repurchase agreements
having a maturity of more than seven days. Mutual funds do not typically hold a
significant amount of restricted or other illiquid securities because of the
potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and the Fund might not be able to dispose of restricted or other securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions. The Fund might also have to register such restricted
securities in order to dispose of them, resulting in additional expense and
delay.

SECURITIES LENDING. To increase its income, the Fund may lend its portfolio
securities to financial institutions such as banks and brokers if the loan is
collateralized in accordance with applicable regulatory requirements. The Master
Trust's Board of Trustees has adopted an operating policy that limits the amount
of loans made by the Fund to not more than 30% of the value of the total assets
of the Fund. During the time portfolio securities are on loan, the borrower pays
the Fund an amount equivalent to any dividends or interest paid on such
securities, and the Fund may invest the cash collateral and earn additional
income, or it may receive an agreed-upon amount of interest income from the
borrower who has delivered equivalent collateral or secured a letter of credit.
Such loans involve risks of delay in receiving additional collateral or in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially. However, such securities
lending will be made only when, in the Investment Adviser's judgment, the income
to be earned from the loans justifies the attendant risks. Loans are subject to
termination at the option of the Fund or the borrower.

44
<PAGE>

BORROWING. The Fund may borrow money from banks in amounts up to 20% of its
total assets (calculated when the loan is made) only for temporary,
extraordinary or emergency purposes or for the clearance of transactions.
Borrowing involves special risk considerations. Interest costs on borrowings may
fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds (or on the assets that were retained
rather than sold to meet the needs for which funds were borrowed). Under adverse
market conditions, 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. All borrowings by the Fund will be
made only to the extent that the value of the Fund's total assets, less its
liabilities other than borrowings, is equal to at least 300% of all borrowings.
If such asset coverage of 300% is not maintained, the Fund will take prompt
action to reduce its borrowings as required by applicable law. Short sales "not
against the box" and roll transactions are considered borrowings for purposes of
the percentage limitations applicable to borrowings.

45
<PAGE>

NICHOLAS-APPLEGATE MUTUAL FUNDS
SERIES A, B, C AND INSTITUTIONAL PORTFOLIOS
600 West Broadway, 30th Floor
San Diego, California 92101
(800) 551-8043

STATEMENT OF ADDITIONAL INFORMATION

July __, 1996

Nicholas-Applegate Mutual Funds (the "Trust") is an open-end
management investment company currently offering a number of separate
diversified portfolios. This Statement of Additional Information contains
information regarding 37 of these portfolios (each a "Portfolio" and
collectively the "Portfolios"): Nicholas-Applegate Core Growth Portfolio A,
Portfolio B, Portfolio C and Institutional Portfolio (the "Core Growth
Portfolios"); Nicholas-Applegate Emerging Growth Portfolio A, Portfolio B,
Portfolio C and Institutional Portfolio (the "Emerging Growth Portfolios");
Nicholas-Applegate Income & Growth Portfolio A, Portfolio B, Portfolio C and
Institutional Portfolio (the "Income & Growth Portfolios");
Nicholas-Applegate Balanced Growth Portfolio A, Portfolio B, Portfolio C and
Institutional Portfolio (the "Balanced Portfolios"); Nicholas-Applegate
Worldwide Growth Portfolio A, Portfolio B, Portfolio C and Institutional
Portfolio (the "Worldwide Portfolios"); Nicholas-Applegate International
Growth Portfolio A, Portfolio B, Portfolio C and Institutional Portfolio (the
"International Growth Portfolios"); Nicholas-Applegate Emerging Countries
Portfolio A, Portfolio B, Portfolio C and Institutional Portfolio (the
"Emerging Countries Portfolios"); Nicholas-Applegate Government Income
Portfolio A, Portfolio B and Portfolio C (the "Government Portfolios");
Nicholas-Applegate Global Growth & Income Portfolio A, Portfolio B, Portfolio
C and Institutional Portfolio (the "Global Growth & Income Portfolios");
Nicholas-Applegate Money Market Portfolio (the "Money Market Portfolio"); and
Nicholas-Applegate Value Institutional Portfolio (the "Value Portfolio").

This Statement of Additional Information is not a prospectus, but
contains information in addition to and more detailed than that set forth in
the Portfolios' Prospectuses and should be read in conjunction with each such
Prospectus. Each Portfolio Prospectus may be obtained without charge by
calling or writing the Trust at the address and phone number given above.

TABLE OF CONTENTS

Page
----
General Information B-2
Investment Objectives, Policies and Risks B-2
Investment Restrictions B-24
Principal Holders of Securities B-25
Trustees and Principal Officers B-29
Investment Adviser B-35
Administrator B-37
Distributor B-39
Portfolio Transactions and Brokerage B-42
Purchase and Redemption of Portfolio Shares B-44
Shareholder Services B-49
Net Asset Value B-48
Taxes B-50
Performance Information B-56
Custodian, Transfer and Dividend Disbursing Agent,
Independent Auditors and Legal Counsel B-58
Miscellaneous B-58
Appendix A - Description of Securities Ratings

<PAGE>

GENERAL INFORMATION

The Trust and the Master Trust were organized in December 1992 as
business trusts under the laws of Delaware. Information regarding 37 of the
portfolios of the Trust is included in this Statement of Additional
Information. Nine Portfolios (each a "Series A Portfolio" and collectively
the "Series A Portfolios") have an initial sales charge and lower annual
distribution fees; nine Portfolios (each a "Series B Portfolio" and
collectively the "Series B Portfolios") have a contingent deferred sales
charge and annual distribution fees; nine Portfolios (each a "Series C
Portfolio" and collectively the "Series C Portfolios") have a different
contingent deferred sales charge and annual distribution fees; one Money
Market Portfolio has no initial or contingent deferred sales charges and
lower annual distribution fees; and nine Portfolios are offered to
institutional investors and high net worth individuals and other eligible
purchasers without any sales charge or distribution fees (each an
"Institutional Portfolio" and collectively the "Institutional Portfolios").

The various Portfolios of the Trust seek to achieve their
respective investment objectives by investing all of their assets in
corresponding series of the Nicholas-Applegate Investment Trust (the "Master
Trust"), a diversified open-end management investment company organized as a
Delaware business trust. The Master Trust offers shares of thirteen separate
series (each a "Fund" and collectively the "Funds") to the Portfolios and
other investment companies and institutional investors: the
Nicholas-Applegate Core Growth Fund (the "Core Growth Fund"), in which the
Core Growth Portfolios invest; the Nicholas-Applegate Emerging Growth Fund
(the "Emerging Growth Fund"), in which the Emerging Growth Portfolios invest;
the Nicholas-Applegate Income & Growth Fund (the "Income & Growth Fund"), in
which the Income & Growth Portfolios invest; the Nicholas-Applegate Balanced
Fund (the "Balanced Fund"), in which the Balanced Growth Portfolios invest;
the Nicholas-Applegate Worldwide Growth Fund (the "Worldwide Fund"), in which
the Worldwide Portfolios invest; the Nicholas-Applegate International Growth
Fund (the "International Growth Fund"), in which the International Growth
Portfolios invest; the Nicholas-Applegate Emerging Countries Fund (the
"Emerging Countries Fund"), in which the Emerging Countries Portfolios
invest; the Nicholas-Applegate Government Income Fund (the "Government
Fund"), in which the Government Portfolios invest; the Nicholas-Applegate
Global Growth & Income Fund (the "Global Growth & Income Fund"), in which the
Global Growth & Income Portfolios invest; and the Nicholas-Applegate Money
Market Fund (the "Money Market Fund"), in which the Money Market Portfolio
invests; and the Nicholas-Applegate Value Fund (the "Value Fund"), in which
the Value Portfolio invests.

INVESTMENT OBJECTIVES, POLICIES AND RISKS

The following discussion supplements the discussion of each
Portfolio's investment objective and policies as set forth in the Portfolios'
Prospectus. As each Portfolio seeks to achieve its investment objective by
investing all of its assets in a corresponding Fund with the same investment
objective as the Portfolio, the following discussion describes the various
investment policies and techniques employed by the Funds. There can be no
assurance that the investment objective of any of the Funds or Portfolios can
be achieved.

EQUITY SECURITIES OF GROWTH COMPANIES

Each of the Core Growth, Emerging Growth, Income & Growth, Balanced,
Worldwide, International Growth and Emerging Countries Funds invests in
equity securities of domestic

B-2

<PAGE>

and foreign companies, the earnings and stock prices of which are expected by
the Master Trust's Investment Adviser to grow at an above-average rate. Such
investments will be diversified over a cross-section of industries and
individual companies. Some of these companies will be organizations with
market capitalizations of $500 million or less or companies that have limited
product lines, markets and financial resources and are dependent upon a
limited management group. Examples of possible investments include emerging
growth companies employing new technology, cyclical companies, initial public
offerings of companies offering high growth potential, or other corporations
offering good potential for high growth in market value. The securities of
such companies may be subject to more abrupt or erratic market movements than
larger, more established companies both because the securities typically are
traded in lower volume and because the issuers typically are subject to a
greater degree to changes in earnings and prospects.

CONVERTIBLE SECURITIES AND WARRANTS

The Core Growth, Emerging Growth, Income & Growth, Balanced,
Worldwide, International Growth, Emerging Countries, Government, Global
Growth & Income and Value Funds each may invest in convertible securities and
warrants. A convertible security is a fixed income security (a bond or
preferred stock) which may be converted at a stated price within a specified
period of time into a certain quantity of the common stock of the same or a
different issuer. Convertible securities are senior to common stocks in an
issuer's capital structure, but are usually subordinated to similar
non-convertible securities. While providing a fixed income stream (generally
higher in yield than the income derivable from common stock but lower than
that afforded by a similar nonconvertible security), a convertible security
also affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation attendant upon a market price advance
in the convertible security's underlying common stock.

A warrant gives the holder a right to purchase at any time during a
specified period a predetermined number of shares of common stock at a fixed
price. Unlike convertible debt securities or preferred stock, warrants do
not pay a fixed dividend. Investments in warrants involve certain risks,
including the possible lack of a liquid market for resale of the warrants,
potential price fluctuations as a result of speculation or other factors, and
failure of the price of the underlying security to reach or have reasonable
prospects of reaching a level at which the warrant can be prudently exercised
(in which event the warrant may expire without being exercised, resulting in
a loss of the Fund's entire investment therein).

OTHER CORPORATE DEBT SECURITIES

The Core Growth, Emerging Growth, Income & Growth, Balanced,
Worldwide, International Growth, Emerging Countries, Government, Global
Growth & Income and Value Funds invest in non-convertible debt securities of
foreign and domestic companies over a cross-section of industries. The debt
securities in which such Funds may invest will be of varying maturities and
may include corporate bonds, debentures, notes and other similar corporate
debt instruments. The value of a longer-term debt security fluctuates more
widely in response to changes in interest rates than do shorter-term debt
securities.

RISKS OF INVESTING IN DEBT SECURITIES

There are a number of risks generally associated with an investment in
debt securities (including convertible securities). Yields on short,
intermediate, and long-term securities depend on a variety of factors,
including the general condition of the money and bond markets, the size

B-3

<PAGE>

of a particular offering, the maturity of the obligation, and the rating of
the issue. Debt securities with longer maturities tend to produce higher
yields and are generally subject to potentially greater capital appreciation
and depreciation than obligations with short maturities and lower yields.
The market prices of debt securities usually vary, depending upon available
yields. An increase in interest rates will generally reduce the value of
such portfolio investments, and a decline in interest rates will generally
increase the value of such portfolio investments. The ability of the Funds
to achieve their investment objectives also depends on the continuing ability
of the issuers of the debt securities in which the Funds invest to meet their
obligations for the payment of interest and principal when due.

RISKS OF INVESTING IN LOWER-RATED DEBT SECURITIES

As set forth in the applicable Prospectuses, the Income & Growth,
Balanced and Global Growth & Income Funds may invest a portion of their net
assets in debt securities rated below "Baa" by Moody's or "BBB-" by S&P or
below investment grade by other recognized rating agencies or in unrated
securities of comparable quality under certain circumstances. Securities
with ratings below "Baa" and/or "BBB-" are commonly referred to as "junk
bonds." Such bonds are subject to greater market fluctuations and risk of
loss of income and principal than higher rated bonds for a variety of
reasons, including the following:

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES. The economy and
interest rates affect high yield securities differently from other
securities. For example, the prices of high yield bonds have been found to be
less sensitive to interest rate changes than higher-rated investments, but
more sensitive to adverse economic changes or individual corporate
developments. Also, during an economic downturn or substantial period of
rising interest rates, highly leveraged issuers may experience financial
stress which would adversely affect their ability to service their principal
and interest obligations, to meet projected business goals, and to obtain
additional financing. If the issuer of a bond defaults, the Funds may incur
additional expenses to seek recovery. In addition, periods of economic
uncertainty and changes can be expected to result in increased volatility of
market prices of high yield bonds and the Funds' asset values.

PAYMENT EXPECTATIONS. High yield bonds present certain risks based on
payment expectations. For example, high yield bonds may contain redemption
and call provisions. If an issuer exercises these provisions in a declining
interest rate market, a Fund would have to replace the security with a lower
yielding security, resulting in a decreased return for investors.
Conversely, a high yield bond's value will decrease in a rising interest rate
market, as will the value of the Fund's assets. If a Fund experiences
unexpected net redemptions, it may be forced to sell its high yield bonds
without regard to their investment merits, thereby decreasing the asset base
upon which the Fund's expenses can be spread and possibly reducing the Fund's
rate of return.

LIQUIDITY AND VALUATION. To the extent that there is no established
retail secondary market, there may be thin trading of high yield bonds, and
this may impact the Investment Adviser's ability to accurately value high
yield bonds and the Fund's assets and hinder the Fund's ability to dispose of
the bonds. Adverse publicity and investor perceptions, whether or not based
on fundamental analysis, may decrease the values and liquidity of high yield
bonds, especially in a thinly traded market.

CREDIT RATINGS. Credit ratings evaluate the safety of principal and
interest payments, not the market value risk of high yield bonds. Also,
since credit rating agencies may fail to timely change the credit ratings to
reflect subsequent events, the Investment Adviser must monitor the issuers of
high yield bonds in the Funds' portfolios to determine if the issuers will
have sufficient cash flow and

B-4

<PAGE>

profits to meet required principal and interest payments, and to assure the
bonds' liquidity so the Funds can meet redemption requests. The Funds will
not necessarily dispose of a portfolio security when its rating has been
changed.

SHORT-TERM INVESTMENTS

Each of the Funds invests in any of the following securities and
instruments:

BANK CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS.
Each Fund may acquire certificates of deposit, bankers' acceptances and time
deposits. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are negotiable drafts or
bills of exchange, normally drawn by an importer or exporter to pay for
specific merchandise, which are "accepted" by a bank, meaning in effect that
the bank unconditionally agrees to pay the face value of the instrument on
maturity. Certificates of deposit and bankers' acceptances acquired by the
Funds will be dollar-denominated obligations of domestic or foreign banks or
financial institutions which at the time of purchase have capital, surplus
and undivided profits in excess of $100 million (including assets of both
domestic and foreign branches), based on latest published reports, or less
than $100 million if the principal amount of such bank obligations are fully
insured by the U.S. Government.

A Fund holding instruments of foreign banks or financial institutions
may be subject to additional investment risks that are different in some
respects from those incurred by a fund which invests only in debt obligations
of U.S. domestic issuers. See "Foreign Investments" below. Such risks
include future political and economic developments, the possible imposition
of withholding taxes by the particular country in which the issuer is located
on interest income payable on the securities, the possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls or the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest on these
securities.

Domestic banks and foreign banks are subject to different governmental
regulations with respect to the amount and types of loans which may be made
and interest rates which may be charged. In addition, the profitability of
the banking industry depends largely upon the availability and cost of funds
for the purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important
part in the operations of the banking industry.

As a result of federal and state laws and regulations, domestic banks
are, among other things, required to maintain specified levels of reserves,
limited in the amount which they can loan to a single borrower, and subject
to other regulations designed to promote financial soundness. However, such
laws and regulations do not necessarily apply to foreign bank obligations
that a Fund may acquire.

In addition to purchasing certificates of deposit and bankers'
acceptances, to the extent permitted under their respective investment
objectives and policies stated above and in their Prospectuses, a Fund may
make interest-bearing time or other interest-bearing deposits in commercial
or savings banks. Time deposits are non-negotiable deposits maintained at a
banking institution for a specified period of time at a specified interest
rate.

SAVINGS ASSOCIATION OBLIGATIONS. The Funds may invest in certificates
of deposit (interest-bearing time deposits) issued by savings banks or
savings and loan associations that have

B-5

<PAGE>

capital, surplus and undivided profits in excess of $100 million, based on
latest published reports, or less than $100 million if the principal amount
of such obligations is fully insured by the U.S. Government.

COMMERCIAL PAPER, SHORT-TERM NOTES AND OTHER CORPORATE OBLIGATIONS.
The Funds may invest a portion of their assets in commercial paper and
short-term notes. Commercial paper consists of unsecured promissory notes
issued by corporations. Issues of commercial paper and short-term notes will
normally have maturities of less than nine months and fixed rates of return,
although such instruments may have maturities of up to one year.

Commercial paper and short-term notes will consist of issues rated at
the time of purchase "A-2" or higher by S&P, "Prime-l" or "Prime-2" by
Moody's, or similarly rated by another nationally recognized statistical
rating organization or, if unrated, will be determined by the Investment
Adviser to be of comparable quality. These rating symbols are described in
Appendix A.

Corporate obligations include bonds and notes issued by corporations
to finance longer-term credit needs than supported by commercial paper.
While such obligations generally have maturities of ten years or more, the
Funds may purchase corporate obligations which have remaining maturities of
one year or less from the date of purchase and which are rated "AA" or higher
by S&P or "Aa" or higher by Moody's.

MONEY MARKET FUNDS

The Funds may under certain circumstances invest a portion of their
assets in money market funds. The Investment Company Act prohibits the Funds
from investing more than 5% of the value of their total assets in any one
investment company, or more than 10% of the value of their total assets in
investment companies as a group, and also restricts their investment in any
investment company to 3% of the voting securities of such investment company.
The Investment Adviser will not impose an advisory fee on assets of a Fund
invested in a money market mutual fund. (This restriction does not apply to
assets of the Money Market Portfolio invested in the Money Market Fund.)
However, an investment in a money market mutual fund will involve payment by
a Fund of its pro rata share of advisory and administrative fees charged by
such fund.

GOVERNMENT OBLIGATIONS

Each Fund may make short-term investments in U.S. Government
obligations. Such obligations include Treasury bills, certificates of
indebtedness, notes and bonds, and issues of such entities as the Government
National Mortgage Association ("GNMA"), Export-Import Bank of the United
States, Tennessee Valley Authority, Resolution Funding Corporation, Farmers
Home Administration, Federal Home Loan Banks, Federal Intermediate Credit
Banks, Federal Farm Credit Banks, Federal Land Banks, Federal Housing
Administration, Federal National Mortgage Association ("FNMA"), Federal Home
Loan Mortgage Corporation, and the Student Loan Marketing Association.

Some of these obligations, such as those of the GNMA, are supported by
the full faith and credit of the U.S. Treasury; others, such as those of the
Export-Import Bank of the United States, are supported by the right of the
issuer to borrow from the Treasury; others, such as those of the FNMA, are
supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; still others, such as those of the Student Loan
Marketing Association, are supported only by the credit

B-6

<PAGE>

of the instrumentality. No assurance can be given that the U.S. Government
would provide financial support to U.S. Government-sponsored
instrumentalities if it is not obligated to do so by law.

Certain Funds may invest in sovereign debt obligations of foreign
countries. A sovereign debtor's willingness or ability to repay principal
and interest in a timely manner may be affected by a number of factors,
including its cash flow situation, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of the debt service burden to the economy as a whole, the
sovereign debtor's policy toward principal international lenders and the
political constraints to which it may be subject. Emerging market
governments could default on their sovereign debt. Such sovereign debtors
also may be dependent on expected disbursements from foreign governments,
multilateral agencies and other entities abroad to reduce principal and
interest arrearages on their debt. The commitments on the part of these
governments, agencies and others to make such disbursements may be
conditioned on a sovereign debtor's implementation of economic reforms and/or
economic performance and the timely service of such debtor's obligations.
Failure to meet such conditions could result in the cancellation of such
third parties' commitments to lend funds to the sovereign debtor, which may
further impair such debtor's ability or willingness to service its debt in a
timely manner.

ZERO COUPON SECURITIES

The Income & Growth, Balanced, Government and Global Growth & Income
Funds may each invest in zero coupon securities issued by the U.S. Treasury
on up to 35% of their respective net assets. Zero coupon Treasury securities
are U.S. Treasury notes and bonds which have been stripped of their unmatured
interest coupons and receipts, or certificates representing interests in such
stripped debt obligations or coupons. Because a zero coupon security pays no
interest to its holder during its life or for a substantial period of time,
it usually trades at a deep discount from its face or par value and will be
subject to greater fluctuations of market value in response to changing
interest rates than debt obligations of comparable maturities which make
current distributions of interest.

VARIABLE AND FLOATING RATE INSTRUMENTS

The Funds may acquire variable and floating rate instruments. Such
instruments are frequently not rated by credit rating agencies; however,
unrated variable and floating rate instruments purchased by a Fund will be
determined by the Investment Adviser under guidelines established by the
Master Trust's Board of Trustees to be of comparable quality at the time of
the purchase and rated instruments eligible for purchase by the Fund. In
making such determinations, the Investment Adviser will consider the earning
power, cash flow and other liquidity ratios of the issuers of such
instruments (such issuers include financial, merchandising, bank holding and
other companies) and will monitor their financial condition. An active
secondary market may not exist with respect to particular variable or
floating rate instruments purchased by the Fund. The absence of such an
active secondary market could make it difficult for the Fund to dispose of
the variable or floating rate instrument involved in the event of the issuer
of the instrument defaulting on its payment obligation or during periods in
which the Fund is not entitled to exercise its demand rights, and the Fund
could, for these or other reasons, suffer a loss to the extent of the
default. Variable and floating rate instruments may be secured by bank
letters of credit.

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<PAGE>

MORTGAGE-RELATED SECURITIES

The Government Fund invests in mortgage-related securities.
Mortgage-related securities are derivative interests in pools of mortgage
loans made to U.S. residential home buyers, including mortgage loans made by
savings and loan institutions, mortgage bankers, commercial banks and others.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations. The
Government Fund may also invest in debt securities which are secured with
collateral consisting of U.S. mortgage-related securities, and in other types
of U.S. mortgage-related securities.

U.S. MORTGAGE PASS-THROUGH SECURITIES. Interests in pools of
mortgage-related securities differ from other forms of debt securities, which
normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, these
securities provide a monthly payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their residential
mortgage loans, net of any fees paid to the issuer or guarantor of such
securities. Additional payments are caused by repayments of principal
resulting from the sale of the underlying residential property, refinancing
or foreclosure, net of fees or costs which may be incurred. Some
mortgage-related securities (such as securities issued by the Government
National Mortgage Association) are described as "modified pass-throughs."
These securities entitle the holder to receive all interest and principal
payments owed on the mortgage pool, net of certain fees, at the scheduled
payment dates regardless of whether or not the mortgagor actually makes the
payment.

The principal governmental guarantor of U.S. mortgage-related
securities is the Government National Mortgage Association ("GNMA"). GNMA is
a wholly owned United States Government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the
full faith and credit of the United States Government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of mortgages insured by the Federal Housing
Agency or guaranteed by the Veterans Administration.

Government-related guarantors include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). FNMA is a government-sponsored corporation owned entirely by
private stockholders and subject to general regulation by the Secretary of
Housing and Urban Development. FNMA purchases conventional residential
mortgages not insured or guaranteed by any government agency from a list of
approved seller/services which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit
unions and mortgage bankers. FHLMC is a government-sponsored corporation
created to increase availability of mortgage credit for residential housing
and owned entirely by private stockholders. FHLMC issues participation
certificates which represent interests in conventional mortgages from FHLMC's
national portfolio. Pass-through securities issued by FNMA and participation
certificates issued by FHLMC are guaranteed as to timely payment of principal
and interest by FNMA and FHLMC, respectively, but are not backed by the full
faith and credit of the United States Government.

Although the underlying mortgage loans in a pool may have maturities
of up to 30 years, the actual average life of the pool certificates typically
will be substantially less because the 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

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life of the pool certificates. Conversely, when interest rates are rising,
the rate of prepayments tends to decrease, thereby lengthening the actual
average life of the certificates. Accordingly, it is not possible to predict
accurately the average life of a particular pool.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). A domestic or foreign
CMO in which the Government Fund may invest is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Like a bond,
interest is paid, in most cases, semiannually. CMOs may be collateralized by
whole mortgage loans, but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by GNMA, FHLMC, FNMA or
equivalent foreign entities.

CMOs are structured into multiple classes, each bearing a different
stated maturity. Actual maturity and average life depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
and interest received from the pool of underlying mortgages, including
prepayments, is first returned to the class having the earliest maturity date
or highest seniority. Classes that have longer maturity dates and lower
seniority will receive principal only after the higher class has been retired.

FOREIGN MORTGAGE-RELATED SECURITIES. Foreign mortgage-related
securities are interests in pools of mortgage loans made to residential home
buyers domiciled in a foreign country. These include mortgage loans made by
trust and mortgage loan companies, credit unions, chartered banks, and
others. Pools of mortgage loans are assembled as securities for sale to
investors by various governmental, government-related, and private
organizations (e.g., Canada Mortgage and Housing Corporation and First
Australian National Mortgage Acceptance Corporation Limited). The mechanics
of these mortgage-related securities are generally the same as those issued
in the United States. However, foreign mortgage markets may differ materially
from the U.S. mortgage market with respect to matters such as the sizes of
loan pools, pre-payment experience, and maturities of loans.

FOREIGN INVESTMENTS

The Funds may invest in securities of foreign issuers that are not
publicly traded in the United States. The Funds (other than the Money Market
Fund) may also invest in depository receipts, and the Worldwide,
International Growth, Emerging Countries, Global Growth & Income and Value
Funds may invest in foreign currency futures contracts.

The United States government has from time to time imposed
restrictions, through taxation or otherwise, on foreign investments by U.S.
entities such as the Funds. If such restrictions should be reinstituted, it
might become necessary for such Funds to invest substantially all of their
assets in United States securities. In such event, the Board of Trustees of
the Trust would consider alternative arrangements, including reevaluation of
the Portfolios' investment objectives and policies, investment of all of the
Portfolios' assets in another investment company with different investment
objectives and policies than the Funds, or hiring an investment adviser to
manage the Portfolios' assets. However, a Portfolio would adopt any revised
investment objective and fundamental policies only after approval by the
shareholders holding a majority (as defined in the Investment Company Act) of
the shares of the Portfolio.

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DEPOSITORY RECEIPTS. American Depository Receipts ("ADRs") may be
listed on a national securities exchange or may trade in the over-the-counter
market. ADR prices are denominated in the United States dollars; the
underlying security may be denominated in a foreign currency, although the
underlying security may be subject to foreign government taxes which would
reduce the yield on such securities.

RISKS OF INVESTING IN FOREIGN SECURITIES. Investments in foreign
securities involve certain inherent risks, including the following:

POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of
certain countries may differ favorably or unfavorably from the United States'
economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency, diversification
and balance of payments position. The internal politics of certain foreign
countries may not be as stable as those of the United States. Governments in
certain foreign countries also continue to participate to a significant
degree, through ownership interest or regulation, in their respective
economies. Action by these governments could include restrictions on foreign
investment, nationalization, expropriation of goods or imposition of taxes,
and could have a significant effect on market prices of securities and
payment of interest. The economies of many foreign countries are heavily
dependent upon international trade and are accordingly affected by the trade
policies and economic conditions of their trading partners. Enactment by
these trading partners of protectionist trade legislation could have a
significant adverse effect upon the securities markets of such countries.

CURRENCY FLUCTUATIONS. All of the Funds other than the Money Market
Fund may invest in securities denominated in foreign currencies.
Accordingly, a change in the value of any such currency against the U.S.
dollar will result in a corresponding change in the U.S. dollar value of a
Fund's assets denominated in that currency. Such changes will also affect
the Fund's income. The value of the Fund's assets may also be affected
significantly by currency restrictions and exchange control regulations
enacted from time to time.

MARKET CHARACTERISTICS. The Investment Adviser expects that most
foreign securities in which the Funds invest will be purchased in
over-the-counter markets or on exchanges located in the countries in which
the principal offices of the issuers of the various securities are located,
if that is the best available market. Foreign exchanges and markets may be
more volatile than those in the United States. While growing in volume, they
usually have substantially less volume than U.S. markets, and the Funds'
portfolio securities may be less liquid and more volatile than U.S.
Government securities. Moreover, settlement practices for transactions in
foreign markets may differ from those in United States markets, and may
include delays beyond periods customary in the United States. Foreign
security trading practices, including those involving securities settlement
where Fund assets may be released prior to receipt of payment or securities,
may expose the Fund to increased risk in the event of a failed trade or the
insolvency of a foreign broker-dealer.

Transactions in options on securities, futures contracts, futures
options and currency contracts may not be regulated as effectively on foreign
exchanges as similar transactions in the United States, and may not involve
clearing mechanisms and related guarantees. The value of such positions also
could be adversely affected by the imposition of different exercise terms and
procedures and margin requirements than in the United States. The value of a
Fund's positions may also be adversely impacted by delays in its ability to
act upon economic events occurring in foreign markets during non-business
hours in the United States.

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LEGAL AND REGULATORY MATTERS. Certain foreign countries may have less
supervision of securities markets, brokers and issuers of securities, and
less financial INFORMATION available to issuers, than is available in the
United States.

TAXES. The interest payable on certain of the Funds' foreign
portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to the
Portfolios' shareholders. A shareholder otherwise subject to United States
federal income taxes may, subject to certain limitations, be entitled to
claim a credit or deduction of U.S. federal income tax purposes for his
proportionate share of such foreign taxes paid by the Funds.

COSTS. The expense ratios of the Funds are likely to be higher than
those of investment companies investing in domestic securities, since the
cost of maintaining the custody of foreign securities is higher.

In considering whether to invest in the securities of a foreign
company, the Investment Adviser considers such factors as the characteristics
of the particular company, differences between economic trends and the
performance of securities markets within the U.S. and those within other
countries, and also factors relating to the general economic, governmental
and social conditions of the country or countries where the company is
located. The extent to which a Fund (other than the International and
Emerging Countries Funds) will be invested in foreign companies and countries
and depository receipts will fluctuate from time to time within the
limitations described in the Prospectuses, depending on the Investment
Adviser's assessment of prevailing market, economic and other conditions.

OPTIONS ON SECURITIES AND SECURITIES INDICES

PURCHASING PUT AND CALL OPTIONS. The Core Growth, Emerging Growth,
Income & Growth, Balanced, Worldwide, International Growth, Emerging
Countries and Global Growth & Income Funds are each authorized to purchase
covered "put" and "call" options with respect to securities which are
otherwise eligible for purchase by the Funds and with respect to various
stock indices subject to certain restrictions. Such Funds will engage in
trading of such derivative securities exclusively for hedging purposes.

If a Fund purchases a put option, the Fund acquires the right to sell
the underlying security at a specified price at any time during the term of
the option (for "American-style" options) or on the option expiration date
(for "European-style" options). Purchasing put options may be used as a
portfolio investment strategy when the Investment Adviser perceives
significant short-term risk but substantial long-term appreciation for the
underlying security. The put option acts as an insurance policy, as it
protects against significant downward price movement while it allows full
participation in any upward movement. If the Fund is holding a stock which
it feels has strong fundamentals, but for some reason may be weak in the near
term, the Fund may purchase a put option on such security, thereby giving
itself the right to sell such security at a certain strike price throughout
the term of the option. Consequently, the Fund will exercise the put only if
the price of such security falls below the strike price of the put. The
difference between the put's strike price and the market price of the
underlying security on the date the Fund exercises the put, less transaction
costs, will be the amount by which the Fund will be able to hedge against a
decline in the underlying security. If during the period of the option the
market price for the underlying security remains at or above the put's strike
price, the put will expire worthless, representing a loss of the price the
Fund paid for the put, plus transaction costs. If the price of the underlying
security increases, the profit the Fund realizes on the

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<PAGE>

sale of the security will be reduced by the premium paid for the put option
less any amount for which the put may be sold.

If a Fund purchases a call option, it acquires the right to purchase
the underlying security at a specified price at any time during the term of
the option. The purchase of a call option is a type of insurance policy to
hedge against losses that could occur if the Fund has a short position in the
underlying security and the security thereafter increases in price. The Fund
will exercise a call option only if the price of the underlying security is
above the strike price at the time of exercise. If during the option period
the market price for the underlying security remains at or below the strike
price of the call option, the option will expire worthless, representing a
loss of the price paid for the option, plus transaction costs. If the call
option has been purchased to hedge a short position of the Fund in the
underlying security and the price of the underlying security thereafter
falls, the profit the Fund realizes on the cover of the short position in the
security will be reduced by the premium paid for the call option less any
amount for which such option may be sold.

Prior to exercise or expiration, an option may be sold when it has
remaining value by a purchaser through a "closing sale transaction," which is
accomplished by selling an option of the same series as the option previously
purchased. The Funds generally will purchase only those options for which
the Investment Adviser believes there is an active secondary market to
facilitate closing transactions.

WRITING CALL OPTIONS. The Core Growth, Emerging Growth, Income &
Growth, Worldwide, International Growth, Emerging Countries and Global Growth
& Income Funds may write covered call options. A call option is "covered" if
the Fund owns the security underlying the call or has an absolute right to
acquire the security without additional cash consideration (or, if additional
cash consideration is required, cash or cash equivalents in such amount as
are held in a segregated account by the Custodian). The writer of a call
option receives a premium and gives the purchaser the right to buy the
security underlying the option at the exercise price. The writer has the
obligation upon exercise of the option to deliver the underlying security
against payment of the exercise price during the option period. If the
writer of an exchange-traded option wishes to terminate his obligation, he
may effect a "closing purchase transaction." This is accomplished by buying
an option of the same series as the option previously written. A writer may
not effect a closing purchase transaction after it has been notified of the
exercise of an option.

Effecting a closing transaction in the case of a written call option
will permit a Fund to write another call option on the underlying security
with either a different exercise price, expiration date or both. Also,
effecting a closing transaction will permit the cash or proceeds from the
concurrent sale of any securities subject to the option to be used for other
investments of the Fund. If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, it will effect a
closing transaction prior to or concurrent with the sale of the security.

A Fund will realize a gain from a closing transaction if the cost of
the closing transaction is less than the premium received from writing the
option or if the proceeds from the closing transaction are more than the
premium paid to purchase the option. A Fund will realize a loss from a
closing transaction if the cost of the closing transaction is more than the
premium received from writing the option or if the proceeds from the closing
transaction are less than the premium paid to purchase the option. However,
because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss to the
Fund resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by the Fund.

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STOCK INDEX OPTIONS. The Funds (other than the Government and Money
Market Funds) may also purchase put and call options with respect to the S&P
500 and other stock indices. Such options may be purchased as a hedge
against changes resulting from market conditions in the values of securities
which are held in a Fund's portfolio or which it intends to purchase or sell,
or when they are economically appropriate for the reduction of risks inherent
in the ongoing management of the Fund.

The distinctive characteristics of options on stock indices create
certain risks that are not present with stock options generally. Because the
value of an index option depends upon movements in the level of the index
rather than the price of a particular stock, whether the Fund will realize a
gain or loss on the purchase or sale of an option on an index depends upon
movements in the level of stock prices in the stock market generally rather
than movements in the price of a particular stock. Accordingly, successful
use by a Fund of options on a stock index would be subject to the Investment
Adviser's ability to predict correctly movements in the direction of the
stock market generally. This requires different skills and techniques than
predicting changes in the price of individual stocks.

Index prices may be distorted if trading of certain stocks included in
the index is interrupted. Trading of index options also may be interrupted
in certain circumstances, such as if trading were halted in a substantial
number of stocks included in the index. If this were to occur, the Fund
would not be able to close out options which it had purchased, and if
restrictions on exercise were imposed, the Fund might be unable to exercise
an option it holds, which could result in substantial losses to the Fund. It
is the policy of the Funds to purchase put or call options only with respect
to an index which the Investment Adviser believes includes a sufficient
number of stocks to minimize the likelihood of a trading halt in the index.

RISKS OF INVESTING IN OPTIONS. There are several risks associated
with transactions in options on securities and indices. Options may be more
volatile than the underlying instruments and, therefore, on a percentage
basis, an investment in options may be subject to greater fluctuation than an
investment in the underlying instruments themselves. There are also
significant differences between the securities and options markets that could
result in an imperfect correlation between these markets, causing a given
transaction not to achieve its objective. In addition, a liquid secondary
market for particular options may be absent for reasons which include the
following: there may be insufficient trading interest in certain options;
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of option of underlying
securities; unusual or unforeseen circumstances may interrupt normal
operations on an exchange; the facilities of an exchange or clearing
corporation may not at all times be adequate to handle current trading
volume; or one or more exchanges could, for economic or other reasons, decide
or be compelled at some future date to discontinue the trading of options (or
a particular class or series of options), in which event the secondary market
on that exchange (or in that class or series of options) would cease to
exist, although outstanding options that had been issued by a clearing
corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.

A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.
The extent to which a Fund may enter into options transactions may be limited
by the Internal Revenue Code requirements for qualification of the
corresponding Portfolio as a regulated investment company. See "Dividends,
Distributions and Taxes."

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<PAGE>

In addition, when trading options on foreign exchanges, many of the
protections afforded to participants in United States option exchanges will
not be available. For example, there may be no daily price fluctuation
limits in such exchanges or markets, and adverse market movements could
therefore continue to an unlimited extent over a period of time. Although
the purchaser of an option cannot lose more than the amount of the premium
plus related transaction costs, this entire amount could be lost. Moreover,
a Fund as an option writer could lose amounts substantially in excess of its
initial investment, due to the margin and collateral requirements typically
associated with such option writing. See "Dealer Options" below.

DEALER OPTIONS. The Core Growth, Emerging Growth, Worldwide,
International Growth, Emerging Countries and Global Growth & Income Funds
will engage in transactions involving dealer options as well as
exchange-traded options. Certain risks are specific to dealer options.
While the Funds might look to a clearing corporation to exercise
exchange-traded options, if a Fund were to purchase a dealer option it would
need to rely on the dealer from which it purchased the option to perform if
the option were exercised. Failure by the dealer to do so would result in
the loss of the premium paid by the Fund as well as loss of the expected
benefit of the transaction.

Exchange-traded options generally have a continuous liquid market
while dealer options may not. Consequently, a Fund may generally be able to
realize the value of a dealer option it has purchased only by exercising or
reselling the option to the dealer who issued it. Similarly, when a Fund
writes a dealer option, the Fund may generally be able to close out the
option prior to its expiration only by entering into a closing purchase
transaction with the dealer to whom the Fund originally wrote the option.
While the Fund will seek to enter into dealer options only with dealers who
will agree to and which are expected to be capable of entering into closing
transactions with the Fund, there can be no assurance that the Fund will at
any time be able to liquidate a dealer option at a favorable price at any
time prior to expiration. Unless the Fund, as a covered dealer call option
writer, is able to effect a closing purchase transaction, it will not be able
to liquidate securities (or other assets) used as cover until the option
expires or is exercised. In the event of insolvency of the other party, the
Fund may be unable to liquidate a dealer option. With respect to options
written by the Fund, the inability to enter into a closing transaction may
result in material losses to the Fund. For example, since the Fund must
maintain a secured position with respect to any call option on a security it
writes, the Fund may not sell the assets which it has segregated to secure
the position while it is obligated under the option. This requirement may
impair the Portfolio's ability to sell portfolio securities at a time when
such sale might be advantageous.

The Staff of the Securities and Exchange Commission (the "Commission")
has taken the position that purchased dealer options are illiquid securities.
A Fund may treat the cover used for written dealer options as liquid if the
dealer agrees that the Fund may repurchase the dealer option it has written
for a maximum price to be calculated by a predetermined formula. In such
cases, the dealer option would be considered illiquid only to the extent the
maximum purchase price under the formula exceeds the intrinsic value of the
option. Accordingly, the Fund will treat dealer options as subject to the
Fund's limitation on unmarketable securities. If the Commission changes its
position on the liquidity of dealer options, the Fund will change its
treatment of such instruments accordingly.

FOREIGN CURRENCY OPTIONS

The Worldwide, International Growth, Emerging Countries and Global
Growth & Income Funds may buy or sell put and call options on foreign
currencies. A put or call option on a foreign currency gives the purchaser
of the option the right to sell or purchase a foreign currency at the
exercise price until the option expires. The Funds will use foreign currency
options separately or

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<PAGE>

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 call
option on the same currency with the same expiration date but with different
exercise (or "strike") prices. Generally, the put option will have an
out-of-the-money strike price, while the call option will have either an
at-the-money strike price or an in-the-money strike price. Foreign currency
options are derivative securities. Currency options traded on U.S. or other
exchanges may be subject to position limits which may limit the ability of
the Funds to reduce foreign currency risk using such options.

As with other kinds of option transactions, the writing of an option
on foreign currency will constitute only a partial hedge, up to the amount of
the premium received. 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 movement adverse to a Fund's position, the Fund may forfeit the
entire amount of the premium plus related transaction costs.

FORWARD CURRENCY CONTRACTS

The Worldwide, International Growth, Emerging Countries and Global
Growth & Income Funds may enter into forward currency contracts in
anticipation of changes in currency exchange rates. A forward currency
contract is an obligation to purchase or sell a specific currency at a future
date, which may be any fix number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. For
example, 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 AND RELATED OPTIONS

Each of the Funds other than the Balanced and Money Market Funds may
invest in futures contracts and options on futures contracts as a hedge
against changes in market conditions or interest rates. Such Funds will
trade in such derivative securities for bona fide hedging purposes and
otherwise in accordance with the rules of the Commodity Futures Trading
Commission ("CFTC"). Each such Fund will segregate liquid assets in a
separate account with its Custodian when required to do so by CFTC guidelines
in order to cover its obligation in connection with futures and options
transactions.

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No price is paid or received by a Fund upon the purchase or sale of a
futures contract. When it enters into a domestic futures contract, the Fund
will be required to deposit in a segregated account with its Custodian an
amount of cash or U.S. Treasury bills equal to approximately 5% of the
contract amount. This amount is known as initial margin. The margin
requirements for foreign futures contracts may be different.

The nature of initial margin in futures transactions is different from
that of margin in securities transactions. Futures contract margin does not
involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good
faith deposit on the contract which is returned to the Fund upon termination
of the futures contract, assuming all contractual obligations have been
satisfied. Subsequent payments (called variation margin) to and from the
broker will be made on a daily basis as the price of the underlying stock
index fluctuates, to reflect movements in the price of the contract making
the long and short positions in the futures contract more or less valuable.
For example, when the Fund has purchased a stock index futures contract and
the price of the underlying stock index has risen, that position will have
increased in value and the Fund will receive from the broker a variation
margin payment equal to that increase in value. Conversely, when the Fund
has purchased a stock index futures contract and the price of the underlying
stock index has declined, the position will be less valuable and the Fund
will be required to make a variation margin payment to the broker.

At any time prior to expiration of a futures contract, the Fund may
elect to close the position by taking an opposite position, which will
operate to terminate the Fund's position in the futures contract. A final
determination of variation margin is made on closing the position.
Additional cash is paid by or released to the Fund, which realizes a loss or
a gain.

STOCK INDEX FUTURES CONTRACTS. The Core Growth, Emerging Growth,
Income & Growth, Balanced, Worldwide, International Growth, Emerging
Countries, Global Growth & Income and Value Funds may invest in futures
contracts on stock indices. Currently, stock index futures contracts can be
purchased or sold with respect to the S&P 500 Stock Price Index on the
Chicago Mercantile Exchange, the Major Market Index on the Chicago Board of
Trade, the New York Stock Exchange Composite Index on the New York Futures
Exchange and the Value Line Stock Index on the Kansas City Board of Trade.
Foreign financial and stock index futures are traded on foreign exchanges
including the London International Financial Futures Exchange, the Singapore
International Monetary Exchange, the Sydney Futures Exchange Limited and the
Tokyo Stock Exchange.

INTEREST RATE OR FINANCIAL FUTURES CONTRACTS. The Income & Growth,
Worldwide, International Growth, Emerging Countries, Government, Global
Growth & Income and Value Funds may invest in interest rate or financial
futures contracts. Bond prices are established in both the cash market and
the futures market. In the cash market, bonds are purchased and sold with
payment for the full purchase price of the bond being made in cash, generally
within five business days after the trade. In the futures market, a contract
is made to purchase or sell a bond in the future for a set price on a certain
date. Historically, the prices for bonds established in the futures markets
have generally tended to move in the aggregate in concert with cash market
prices, and the prices have maintained fairly predictable relationships.

The sale of an interest rate or financial futures sale by a Fund would
create an obligation by the Fund, as seller, to deliver the specific type of
financial instrument called for in the contract at a specific future time for
a specified price. A futures contract purchased by a Fund would create an
obligation by the Fund, as purchaser, to take delivery of the specific type
of financial instrument at a specific future time at a specific price. The
specific securities delivered or taken,

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respectively, at settlement date, would not be determined until at or near
that date. The determination would be in accordance with the rules of the
exchange on which the futures contract sale or purchase was made.

Although interest rate or financial futures contracts by their terms
call for actual delivery or acceptance of securities, in most cases the
contracts are closed out before the settlement date without delivery of
securities. Closing out of a futures contract sale is effected by the Fund's
entering into a futures contract purchase for the same aggregate amount of
the specific type of financial instrument and the same delivery date. If the
price in the sale exceeds the price in the offsetting purchase, the Fund is
paid the difference and thus realizes a gain. If the offsetting purchase
price exceeds the sale price, the Fund pays the difference and realizes a
loss. Similarly, the closing out of a futures contract purchase is effected
by the Fund's entering into a futures contract sale. If the offsetting sale
price exceeds the purchase price, the Fund realizes a gain, and if the
purchase price exceeds the offsetting sale price, the Fund realizes a loss.

The Funds deal only in standardized contracts on recognized exchanges.
Each exchange guarantees performance under contract provisions through a
clearing corporation, a nonprofit organization managed by the exchange
membership. Domestic interest rate futures contracts are traded in an
auction environment on the floors of several exchanges - principally, the
Chicago Board of Trade and the Chicago Mercantile Exchange. A public market
now exists in domestic futures contracts covering various financial
instruments including long-term United States Treasury bonds and notes;
Government National Mortgage Association (GNMA) modified pass-through
mortgage-backed securities; three-month United States Treasury bills; and
90-day commercial paper. A Fund may trade in any futures contract for which
there exists a public market, including, without limitation, the foregoing
instruments. International interest rate futures contracts are traded on the
London International Financial Futures Exchange, the Singapore International
Monetary Exchange, the Sydney Futures Exchange Limited and the Tokyo Stock
Exchange.

FOREIGN CURRENCY FUTURES CONTRACTS. The Worldwide, International
Growth, Emerging Countries, Global Growth & Income and Value Funds may use
foreign currency future contracts for hedging purposes. A foreign currency
futures contract provides for the future sale by one party and purchase by
another party of a specified quantity of a foreign currency at a specified
price and time. A public market exists in futures contracts covering several
foreign currencies, including the Australian dollar, the Canadian dollar, the
British pound, the German mark, the Japanese yen, the Swiss franc, and
certain multinational currencies such as the European Currency Unit ("ECU").
Other foreign currency futures contracts are likely to be developed and
traded in the future. The Funds will only enter into futures contracts and
futures options which are standardized and traded on a U.S. or foreign
exchange, board of trade, or similar entity, or quoted on an automated
quotation system.

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS. There are several risks
related to the use of futures as a hedging device. One risk arises because
of the imperfect correlation between movements in the price of the futures
contract and movements in the price of the securities which are the subject
of the hedge. The price of the future may move more or less than the price of
the securities being hedged. If the price of the future moves less than the
price of the securities which are the subject of the hedge, the hedge will
not be fully effective, but if the price of the securities being hedged has
moved in an unfavorable direction, a Fund would be in a better position than
if it had not hedged at all. If the price of the securities being hedged has
moved in a favorable direction, this advantage will be partially offset by
the loss on the future. If the price of the future moves more than the price
of the hedged securities, the Fund will experience either a loss or a gain on
the future which will not be completely offset by movements in the price of
the securities which are subject to the hedge.

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To compensate for the imperfect correlation of movements in the price
of securities being hedged and movements in the price of the futures
contract, a Fund may buy or sell futures contracts in a greater dollar amount
than the dollar amount of securities being hedged if the historical
volatility of the prices of such securities has been greater than the
historical volatility over such time period of the future. Conversely, the
Fund may buy or sell fewer futures contracts if the historical volatility of
the price of the securities being hedged is less than the historical
volatility of the futures contract being used. It is possible that, when the
Fund has sold futures to hedge its portfolio against a decline in the market,
the market may advance while the value of securities held in the Fund's
portfolio may decline. If this occurs, the Fund will lose money on the
future and also experience a decline in value in its portfolio securities.
However, the Investment Adviser believes that over time the value of a
diversified portfolio will tend to move in the same direction as the market
indices upon which the futures are based.

Where futures are purchased to hedge against a possible increase in
the price of securities before 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 the Fund then decides not to invest
in securities or options at that time because of concern as to possible
further market decline or for other reasons, it will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.

In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and
the securities being hedged, the price of futures may not correlate perfectly
with movement in the stock index or cash market due to certain market
distortions. All participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through
offsetting transactions, which could distort the normal relationship between
the index or cash market and futures markets. In addition, the deposit
requirements in the futures market are less onerous than margin requirements
in the securities market. Therefore, increased participation by speculators
in the futures market may also cause temporary price distortions. As a
result of price distortions in the futures market and the imperfect
correlation between movements in the cash market and the price of securities
and movements in the price of futures, a correct forecast of general trends
by the Investment Adviser may still not result in a successful hedging
transaction over a very short time frame.

Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures position, and in the event of adverse price
movements, the Funds would continue to be required to make daily cash
payments of variation margin. When futures contracts have been used to hedge
portfolio securities, such securities will not be sold until the futures
contract can be terminated. In such circumstances, an increase in the price
of the securities, if any, may partially or completely offset losses on the
futures contract. However, as described above, there is no guarantee that the
price of the securities will in fact correlate with the price movements in
the futures contract and thus provide an offset to losses on a futures
contract.

Most United States futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. The daily
limit establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price

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at the end of a trading session. Once the daily limit has been reached in a
particular type of futures contract, no trades may be made on that day at a
price beyond that limit. The daily limit governs only price movement during
a particular trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable positions.
Futures contract prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.

Successful use of futures by a Fund is also subject to the Investment
Adviser's ability to predict correctly movements in the direction of the
market. For example, if the Fund has hedged against the possibility of a
decline in the market adversely affecting stocks held in its portfolio and
stock prices increase instead, the Fund will lose part or all of the benefit
of the increased value of the stocks which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations,
if the Fund has insufficient cash, it may have to sell securities to meet
daily variation margin requirements. Such sales of securities may be, but
will not necessarily be, at increased prices which reflect the rising market.
The Fund may have to sell securities at a time when it may be
disadvantageous to do so.

In the event of the bankruptcy of a broker through which a Fund
engages in transactions in futures contracts or options, the Fund could
experience delays and losses in liquidating open positions purchased or sold
through the broker, and incur a loss of all or part of its margin deposits
with the broker.

OPTIONS ON FUTURES CONTRACTS. As described above, certain of the
Funds may purchase options on the futures contracts they can purchase or
sell, as described above. A futures option gives the holder, in return for
the premium paid, the right to buy (call) from or sell (put) to the writer of
the option a futures contract at a specified price at any time during the
period of the option. Upon exercise, the writer of the option is obligated
to pay the difference between the cash value of the futures contract and the
exercise price. Like the buyer or seller of a futures contract, the holder
or writer of an option has the right to terminate its position prior to the
scheduled expiration of the option by selling, or purchasing an option of the
same series, at which time the person entering into the closing transaction
will realize a gain or loss. There is no guarantee that such closing
transactions can be effected.

Investments in futures options involve some of the same considerations
as investments in futures contracts (for example, the existence of a liquid
secondary market). In addition, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract will not be
fully reflected in the value of the option. Depending on the pricing of the
option compared to either the futures contract upon which it is based, or
upon the price of the securities being hedged, an option may or may not be
less risky than ownership of the futures contract or such securities. In
general, the market prices of options can be expected to be more volatile
than the market prices on the underlying futures contracts. Compared to the
purchase or sale of futures contracts, however, the purchase of call or put
options on futures contracts may frequently involve less potential risk to
the Funds because the maximum amount at risk is limited to the premium paid
for the options (plus transaction costs).

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND RELATED OPTIONS. A
Fund will not engage in transactions in futures contracts or related options
for speculation, but only as a hedge against changes resulting from market
conditions in the values of securities held in the Fund's portfolio or which
it intends to purchase and where the transactions are economically
appropriate to the

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reduction of risks inherent in the ongoing management of the Funds. A Fund
may not purchase or sell futures or purchase related options if, immediately
thereafter, more than 25% of its net assets would be hedged. A Fund also may
not purchase or sell futures or purchase related options if, immediately
thereafter, the sum of the amount of margin deposits on the Fund's existing
futures positions and premiums paid for such options would exceed 5% of the
market value of the Fund's net assets.

Upon the purchase of futures contracts by a Fund, an amount of cash
and cash equivalents, equal to the market value of the futures contracts,
will be deposited in a segregated account with the Custodian or in a margin
account with a broker to collateralize the position and thereby insure that
the use of such futures is unleveraged.

These restrictions, which are derived from current federal and state
regulations regarding the use of options and futures by mutual funds, are not
"fundamental restrictions" and may be changed by the Trustees of the Master
Trust if applicable law permits such a change and the change is consistent
with the overall investment objective and policies of the Fund.

The extent to which a Fund may enter into futures and options
transactions may be limited by the Internal Revenue Code requirements for
qualification of the corresponding Portfolio as a regulated investment
company. See "Taxes."

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements with respect to its
portfolio securities. Pursuant to such agreements, the Fund acquires
securities from financial institutions such as banks and broker-dealers as
are deemed to be creditworthy by the Investment Adviser, subject to the
seller's agreement to repurchase and the Fund's agreement to resell such
securities at a mutually agreed upon date and price. The repurchase price
generally equals the price paid by the Fund plus interest negotiated on the
basis of current short-term rates (which may be more or less than the rate on
the underlying portfolio security). Securities subject to repurchase
agreements will be held by the Custodian or in the Federal Reserve/Treasury
Book-Entry System or an equivalent foreign system. The seller under a
repurchase agreement will be required to maintain the value of the underlying
securities at not less than 102% of the repurchase price under the agreement.
If the seller defaults on its repurchase obligation, the Fund holding the
repurchase agreement will suffer a loss to the extent that the proceeds from
a sale of the underlying securities is less than the repurchase price under
the agreement. Bankruptcy or insolvency of such a defaulting seller may cause
the Fund's rights with respect to such securities to be delayed or limited.
Repurchase agreements are considered to be loans under the Investment Company
Act.

WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED SETTLEMENTS

Each of the Funds may purchase securities on a "when-issued," forward
commitment or delayed settlement basis. In this event, the Custodian will
set aside cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. Normally, the Custodian will set aside
portfolio securities to satisfy a purchase commitment. In such a case, a
Fund may be required subsequently to place additional assets in the separate
account in order to assure that the value of the account remains equal to the
amount of the Fund's commitment. It may be expected that the Fund's net
assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash.

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The Funds do not intend to engage in these transactions for
speculative purposes but only in furtherance of their investment objectives.
Because a Fund will set aside cash or liquid portfolio securities to satisfy
its purchase commitments in the manner described, the Fund's liquidity and
the ability of the Investment Adviser to manage it may be affected in the
event the Fund's forward commitments, commitments to purchase when-issued
securities and delayed settlements ever exceeded 15% of the value of its net
assets.

A Fund will purchase securities on a when-issued, forward commitment
or delayed settlement basis only with the intention of completing the
transaction. If deemed advisable as a matter of investment strategy, however,
a Fund may dispose of or renegotiate a commitment after it is entered into,
and may sell securities it has committed to purchase before those securities
are delivered to the Fund on the settlement date. In these cases the Fund
may realize a taxable capital gain or loss. When a Fund engages in
when-issued, forward commitment and delayed settlement transactions, it
relies on the other party to consummate the trade. Failure of such party to
do so may result in a Fund's incurring a loss or missing an opportunity to
obtain a price credited to be advantageous.

The market value of the securities underlying a when-issued purchase,
forward commitment to purchase securities, or a delayed settlement and any
subsequent fluctuations in their market value is taken into account when
determining the market value of a Fund starting on the day the Fund agrees to
purchase the securities. A Fund does not earn interest on the securities it
has committed to purchase until they are paid for and delivered on the
settlement date.

BORROWING

Each of the Funds is authorized to borrow money from time to time for
temporary, extraordinary or emergency purposes or for clearance of
transactions in amounts up to 20% of the value of its total assets at the
time of such borrowings. The use of borrowing by a Fund involves special
risk considerations that may not be associated with other funds having
similar objectives and policies. Since substantially all of a Fund's assets
fluctuate in value, whereas the interest obligation resulting from a
borrowing will be fixed by the terms of the Fund's agreement with its lender,
the asset value per share of the Fund will tend to increase more when its
portfolio securities increase in value and to decrease more when its
portfolio assets decrease in value than would otherwise be the case if the
Fund did not borrow funds. In addition, interest costs on borrowings may
fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds. Under adverse market conditions,
the Fund might have to sell portfolio securities to meet interest or
principal payments at a time when fundamental investment considerations would
not favor such sales.

The Trust has entered into a Credit Agreement on behalf of its various
Portfolios with several banks and Chemical Bank, as administrative agent for
the lenders, to borrow up to $50,000,000 from time to time for purposes of
meeting shareholder redemption requests without the necessity of requiring
the Funds to sell portfolio securities, at times when the Investment Adviser
believes such sales are not in the best interests of the Portfolios'
shareholders, in order to provide the Portfolios with cash to meet such
redemption requests. The Credit Agreement expires on April 10, 1997, unless
renewed by the parties.

Under the Credit Agreement, each Portfolio may borrow, repay and
reborrow amounts (collectively, the "Revolving Credit Loans") in increments
of $50,000, provided the Revolving Credit Loans outstanding at any time
aggregate at least $350,000 (the "Credit Facility"). The Trust will pay a
commitment fee at the rate of 0.40% per annum of the average daily unused
portion of the

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<PAGE>

Credit Facility, and may at any time terminate the Credit Agreement or reduce
the lenders' commitment thereunder in increments of $2,500,000.

While outstanding, the Revolving Credit Loans will bear interest,
fluctuating daily and payable monthly, at either of the following rates or a
combination thereof, at the Trust's option: (i) at the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, plus 0.625% per annum; or
(ii) the prime rate of interest of Chemical Bank. If, as a result of changes
in applicable laws, regulations or guideline with respect to the capital
adequacy of any lender, the return on such lender's capital is reduced, the
Trust may be required to adjust the rate of interest to compensate such
lender for such reduction. Each Revolving Credit Loan is payable in thirty
days, and may be prepaid at any time in increments of $100,000 without
premium or penalty. No Portfolio is liable for repayment of a Revolving
Credit Loan to any other Portfolio.

The Credit Agreement contains, among other things, covenants that
require each Portfolio to maintain certain minimum ratios of debt to net
worth; limit the ability of the Trust to incur other indebtedness and create
liens on its assets or guarantee obligations of others; merge or consolidate
with, or sell its assets to, others; make material changes in its method of
conducting business; make distributions to shareholders in excess of the
requirements of Subchapter M of the Internal Revenue Code in the event of a
default under the Credit Agreement; or make changes in fundamental investment
policies. The Credit Agreement also contains other terms and conditions
customary in such agreements, including various events of default.

LENDING PORTFOLIO SECURITIES

Each of the Funds may lend its portfolio securities in an amount not
exceeding 30% of its total assets to financial institutions such as banks and
brokers if the loan is collateralized in accordance with applicable
regulations. Under the present regulatory requirements which govern loans of
portfolio securities, the loan collateral must, on each business day, at
least equal the value of the loaned securities and must consist of cash,
letters of credit of domestic banks or domestic branches of foreign banks, or
securities of the U.S. Government or its agencies. To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts demanded by
the Fund if the demand meets the terms of the letter. Such terms and the
issuing bank would have to be satisfactory to the Fund. Any loan might be
secured by any one or more of the three types of collateral. The terms of
the Fund's loans must permit the Fund to reacquire loaned securities on five
days' notice or in time to vote on any serious matter and must meet certain
tests under the Internal Revenue Code.

SHORT SALES

The Investment Adviser's growth equity management approach is aimed
principally at identifying equity securities the earnings and prices of which
it expects to grow at a rate above that of the S&P 500. However, the
Investment Adviser believes that its approach also identifies securities the
prices of which can be expected to decline. Therefore, the Core Growth,
Emerging Growth, Worldwide and International Growth Funds are authorized to
make short sales of securities they own or have the right to acquire at no
added cost through conversion or exchange of other securities they own
(referred to as short sales "against the box") and to make short sales of
securities which they do not own or have the right to acquire.

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In a short sale that is not "against the box," a Fund sells a security
which it does not own, in anticipation of a decline in the market value of
the security. To complete the sale, the Fund must borrow the security
generally from the broker through which the short sale is made) in order to
make delivery to the buyer. The Fund is then obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. The Fund is said to have a "short position" in the securities
sold until it delivers them to the broker. The period during which the Fund
has a short position can range from one day to more than a year. Until the
security is replaced, the proceeds of the short sale are retained by the
broker, and the Fund is required to pay to the broker a negotiated portion of
any dividends or interest which accrue during the period of the loan. To
meet current margin requirements, the Fund is also required to deposit with
the broker additional cash or securities so that the total deposit with the
broker is maintained daily at 150% of the current market value of the
securities sold short (100% of the current market value if a security is held
in the account that is convertible or exchangeable into the security sold
short within 90 days without restriction other than the payment of money).

Short sales by a Fund that are not made "against the box" create
opportunities to increase the Fund's return but, at the same time, involve
specific risk considerations and may be considered a speculative technique.
Since the Fund in effect profits from a decline in the price of the
securities sold short without the need to invest the full purchase price of
the securities on the date of the short sale, the Fund's net asset value per
share will tend to increase more when the securities it has sold short
decrease in value, and to decrease more when the securities it has sold short
increase in value, than would otherwise be the case if it had not engaged in
such short sales. The amount of any gain will be decreased, and the amount
of any loss increased, by the amount of any premium, dividends or interest
the Fund may be required to pay in connection with the short sale.
Furthermore, under adverse market conditions the Fund might have difficulty
purchasing securities to meet its short sale delivery obligations, and might
have to sell portfolio securities to raise the capital necessary to meet its
short sale obligations at a time when fundamental investment considerations
would not favor such sales.

If a Fund makes a short sale "against the box," the Fund would not
immediately deliver the securities sold and would not receive the proceeds
from the sale. The seller is said to have a short position in the securities
sold until it delivers the securities sold, at which time it receives the
proceeds of the sale. To secure its obligation to deliver securities sold
short, a Fund will deposit in escrow in a separate account with the Custodian
an equal amount of the securities sold short or securities convertible into
or exchangeable for such securities. The Fund can close out its short
position by purchasing and delivering an equal amount of the securities sold
short, rather than by delivering securities already held by the Fund, because
the Fund might want to continue to receive interest and dividend payments on
securities in its portfolio that are convertible into the securities sold
short.

A Fund's decision to make a short sale "against the box" may be a
technique to hedge against market risks when the Investment Adviser believes
that the price of a security may decline, causing a decline in the value of a
security owned by the Fund or a security convertible into or exchangeable for
such security. In such case, any future losses in the Fund's long position
would be reduced by a gain in the short position. The extent to which such
gains or losses in the long position are reduced will depend upon the amount
of securities sold short relative to the amount of the securities the Fund
owns, either directly or indirectly, and, in the case where the Fund owns
convertible securities, changes in the investment values or conversion
premiums of such securities.

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The extent to which a Fund may enter into short sales transactions may
be limited by the Internal Revenue Code requirements for qualification of the
corresponding Portfolio as a regulated investment company. See "Taxes."

ILLIQUID SECURITIES

No Fund may invest more than 15% (10% in the case of the Money Market
Fund) of the value of its net assets in securities that at the time of
purchase have legal or contractual restrictions on resale or are otherwise
illiquid. The Investment Adviser will monitor the amount of illiquid
securities in the Fund's portfolio, under the supervision of the Master
Trust's Board of Trustees, to ensure compliance with the Fund's investment
restrictions.

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act 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. Securities which
have not been registered under the Securities Act are referred to as private
placement or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the
potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio
securities and the Fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemption within seven days. The Fund
might also have to register such restricted securities in order to 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 Master Trust's Board of Trustees
may determine that such securities are not illiquid securities
notwithstanding their legal or contractual restrictions on resale. In all
other cases, however, securities subject to restrictions on resale will be
deemed illiquid.

The Emerging Countries Fund may invest in foreign securities that are
restricted against transfer within the United States or to United States
persons. Although securities subject to such transfer restrictions may be
marketable abroad, they may be less liquid than foreign securities of the
same class that are not subject to such restrictions. Unless these
securities are acquired directly from the issuer or its underwriter, the Fund
treats such foreign securities whose principal market is abroad as not
subject to the investment limitation on securities subject to legal or
contractual restrictions on resale.

INVESTMENT TECHNIQUES AND PROCESSES

The Investment Adviser's investment techniques and processes, which it
has used in managing institutional portfolios for many years, are described
generally in the Portfolios'

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prospectuses under "Investment Objectives and Policies -- Investment
Techniques and Processes." In making decisions with respect to equity
securities for the Funds, GROWTH OVER TIME-Registered Trademark- is the
Investment Adviser's underlying goal. It's how the Investment Adviser built
its reputation. Over the past ten years, the Investment Adviser has built a
record as one of the finest performing investment managers in the United
States. It has successfully delivered growth over time to many institutional
investors, pension plans, foundations, endowments and high net worth
individuals. The Investment Adviser's methods have proven their ability to
achieve growth over time through a variety of investment vehicles.

The Investment Adviser emphasizes growth over time through investment
in securities of companies with earnings growth potential. The Investment
Adviser's style is a "bottom-up" growth approach that focuses on the growth
prospects of individual companies rather than on economic trends. It builds
portfolios stock by stock. The Investment Adviser's decision-making is
guided by three critical questions: Is there a positive change? Is it
sustainable? Is it timely? The Investment Adviser uses these three factors
because it focuses on discovering positive developments when they first show
up in an issuer's earnings, but before they are fully reflected in the price
of the issuer's securities. The Investment Adviser is always looking for
companies that are driving change and surpassing analysts' expectations. It
seeks to identify companies poised for rapid growth. The Investment Adviser
focuses on recognizing successful companies, regardless of their
capitalization or whether they are domestic or foreign companies.

As indicated in the Portfolios' prospectuses, the Investment Adviser's
techniques and processes include relationships with an extensive network of
brokerage research firms located throughout the world. These analysts are
often located in the same geographic regions as the companies they follow,
have followed those companies for a number of years, and have developed
excellent sources of information about them. The Investment Adviser does not
employ in-house analysts other than the personnel actually engaged in
managing investments for the Funds and the Investment Adviser's other
clients. However, information obtained from a brokerage research firm is
confirmed with other research sources or the Investment Adviser's
computer-assisted quantitative analysis (including "real time" pricing data)
of a substantial universe of potential investments.

As indicated in the Portfolios' prospectuses, the equity investments
of a Portfolio are diversified, as with respect to at least 75% of each
Fund's assets no Fund may invest more than 5% of its total assets in the
equity securities of any one issuer. The equity securities of each issuer
that are included in the investment portfolio of a Fund are purchased by the
Investment Adviser in approximately equal amounts, and the Investment Adviser
attempts to stay fully invested within the applicable percentage limitations
set forth in the prospectus. In addition, for each issuer whose securities
are added to an investment portfolio, the Investment Adviser sells the
securities of one of the issuers currently included in the portfolio.

INVESTMENT RESTRICTIONS

The Trust, on behalf of the Portfolios, and the Master Trust, on
behalf of the corresponding Funds, have adopted the following fundamental
policies that cannot be changed without the affirmative vote of a majority of
the outstanding shares of the appropriate Portfolio or Fund, respectively (as
defined in the Investment Company Act). Whenever a Portfolio is requested to
vote on a change in the investment restrictions of a Fund, the Trust will
hold a meeting of its shareholders and will cast its vote as instructed by
the shareholders. If the investment restrictions of a Fund are changed, the
corresponding Portfolio may withdraw its investment in the Fund if the
Trust's Board of

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Trustees determines that withdrawal is in the best interests of the Portfolio
and its shareholders, but only upon shareholder approval. Upon such
withdrawal, the Trust's Board would consider alternative investments,
including investing all of the Portfolio's assets in another investment
company with the same investment objective, policies and restrictions as the
Portfolio or hiring an investment adviser to manage the Portfolio's assets in
accordance with the investment objectives, policies and restrictions of the
Portfolio described in the Portfolio's Prospectus and in this Statement of
Additional Information.

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.

No Portfolio or Fund:

1. May 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 Portfolio or Fund's total assets may
be invested without regard to this restriction and a Portfolio will be
permitted to invest all or a portion of its assets in a corresponding Fund or
other diversified, open-end management investment company with substantially
the same investment objective, policies and restrictions as the Portfolio.
This restriction also does not apply to investments by a Portfolio or Fund in
securities of the U.S. Government or any of its agencies and
instrumentalities.

2. May purchase more than 10% of the outstanding voting securities,
or of any class of securities, of any one issuer, or purchase the securities
of any issuer for the purpose of exercising control or management, except
that a Portfolio will be permitted to invest all or a portion of its assets
in a corresponding Fund or other diversified, open-end management investment
company with substantially the same investment objective, policies and
restrictions as the Portfolio.

3. May 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
Portfolio will be permitted to invest all or a portion of its assets in a
corresponding Fund or other diversified, open-end management investment
company with substantially the same investment objective, policies and
restrictions as the Portfolio. This restriction does not apply to
investments by a Portfolio or Fund in securities of the U.S. Government or
its agencies and instrumentalities, or to investments by the Money Market
Portfolio or Money Market Fund in obligations of domestic branches of U.S.
banks and U.S. branches of foreign banks which are subject to the same
regulation as U.S. banks.

4. May purchase or sell real estate. However, a Portfolio or Fund
may invest in securities secured by, or issued by companies that invest in,
real estate or interests in real estate.

5. May make loans of money, except that a Portfolio or Fund may
purchase publicly distributed debt instruments and certificates of deposit
and enter into repurchase agreements. Each Portfolio and 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, except for
temporary, extraordinary or emergency purposes or for the clearance of
transactions in amounts not exceeding 20% of the value of its total assets at
the time of the borrowing, provided that, pursuant to the Investment Company
Act, borrowings will only be made from banks and will be made only to the
extent that the value of the Fund's total assets, less its liabilities other
than borrowings, is equal to at least 300% of all borrowings (including the
proposed borrowing). If such asset coverage of 300% is not

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maintained, the Portfolio or Fund will take prompt action to reduce its
borrowings as required by applicable law.

7. May pledge or in any way transfer as security for indebtedness any
securities owned or held by it, except to secure indebtedness permitted by
restriction 6 above. This restriction shall not prohibit the Portfolios or
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% (10% in the case of each of the Money
Market Portfolio or the Money Market Fund) of the value of its net assets in
securities that at the time of purchase have legal or contractual
restrictions on resale or are otherwise illiquid.

10. May purchase securities on margin, except for initial and
variation margin on options and futures contracts, and except that a
Portfolio or 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 Core Growth Portfolios
and Fund, the Emerging Growth Portfolios and Fund, the Worldwide Portfolios
and Fund and the International Growth Portfolios and Fund), except that a
Portfolio or 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 Portfolio may invest all or a portion of its assets in a corresponding
Fund or other diversified, open-end management investment company with the
same investment objective policies and restrictions as the Portfolio; (b) in
compliance with the Investment Company Act and applicable state securities
laws, or (c) as part of a merger, consolidation, acquisition or
reorganization involving the Portfolio or Fund.

13. May issue senior securities, except that a Portfolio or Fund may
borrow money as permitted by restrictions 6 and 7 above. This restriction
shall not prohibit the Portfolios or 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 or
Portfolio 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 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.

MONEY MARKET FUND RESTRICTIONS

Investment by the Money Market Portfolio and Fund are subject to
limitations imposed under regulations adopted by the Commission. These
regulations generally require the Money Market Portfolio and Fund to acquire
only U.S. dollar denominated obligations maturing in 397 days or

B-27

<PAGE>

less and to maintain a dollar-weighted average portfolio maturity of 90 days
or less. In addition, the Money Market Portfolio and Fund may acquire only
obligations that present minimal credit risks and that are "eligible
securities" which means they are (i) rated, at the time of investment, by at
least two nationally recognized security rating organizations (one if it is
the only organization rating such obligation) in the highest short-term
rating category or, if unrated, determined to be of comparable quality (a
"first tier security"), or (ii) rated according to the foregoing criteria in
the second highest short-term rating category or, if unrated, determined to
be of comparable quality ("second tier security"). A security is not
considered to be unrated if its issuer has outstanding obligations of
comparable priority and security that have a short-term rating. The
Investment Adviser will determine that an obligation presents minimal credit
risks or that unrated instruments are of comparable quality in accordance
with guidelines established by the Boards of Trustees of the Trust and Master
Trust. The Trustees must also approve or ratify the acquisition of unrated
securities or securities rated by only one rating organization. In addition,
investments in second tier securities are subject to the further constraints
that (i) no more than 5% of the Money Market Portfolio's or Fund's assets may
be invested in such securities in the aggregate, and (ii) any investment in
such securities of one issuer is limited to the greater of 1% of the
Portfolio's or Fund's total assets or $1 million. In addition, the Portfolio
or Fund may only invest up to 25% of its total assets in the first tier
securities of a single issuer for three business days.

OPERATING RESTRICTIONS

As a matter of operating (not fundamental) policy adopted by the
Boards of Trustees of the Trust, no Portfolio or Fund:

1. May invest in interests in oil, gas or other mineral exploration
or development programs or leases, or real estate limited partnerships,
although a Portfolio or a Fund may invest in the securities of companies
which invest in or sponsor such programs.

2. May purchase any security if as a result the Portfolio or Fund
would then have more than 5% of its total assets (taken at current value)
invested in securities of companies (including predecessors) having a record
of less than three years of continuous operation, except (a) that a Portfolio
may invest all or a portion of its assets in a corresponding Fund or other
diversified, open-end management investment company with the same investment
objective, policies and restrictions as the Portfolio in compliance with the
Investment Company Act or (b) as part of a merger, consolidation, acquisition
or reorganization involving the Portfolio or Fund.

3. May purchase securities of any issuer if any officer or trustee of
the Portfolio or Fund, or of the Administrator, the Distributor, or
Investment Adviser, owning more than 1/2 of 1% of the outstanding securities
of such issuer, own in the aggregate more than 5% of the outstanding
securities of such issuer.

4. May lend any securities from its portfolio unless the value of the
collateral received therefor is continuously maintained in an amount not less
than 100% of the value of the loaned securities by marking to market daily.

5. May invest in warrants, valued at the lower of cost or market, in
excess of 5% of the market value of the Portfolio's or Fund's net assets, or
in excess of 2% of the market value of the Portfolio's or Fund's net assets
if such warrants are not listed on the New York Stock Exchange or the
American Stock Exchange, as of the date of investment.

B-28

<PAGE>

In addition, the Value Fund may not purchase or write options on
securities.

BLUE SKY RESTRICTIONS

In order to permit the sale of shares of a Portfolio in certain
states, the Boards of Trustees of the Trust and the Master Trust may, in its
sole discretion, adopt additional restrictions on investment policies more
restrictive than those described above. Should either of such Boards
determine that any such restrictive policy is no longer in the best interests
of such respective trust or its investors, the Trust may cease offering
shares of a Portfolio in the state involved and the Boards of Trustees may
revoke such restrictive policy. Moreover, if the states involved no longer
require any such restrictive policy, the Board of Trustees may, at their sole
discretion, revoke such policy.

The Master Trust has agreed, in connection with certain undertakings
given by the Trust to the State of South Dakota, that (i) no Fund will invest
more than 10% of its total assets in interests in real estate investment
trusts, (ii) no Fund will invest more than 15% of its total assets in equity
securities of issuers which are not readily marketable, in securities of
issuers which the Portfolio or Fund is restricted from selling without
registration under the Securities Act (other than restricted securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933
that have been determined by the Master Trust's Board of Trustees to be
liquid based upon the trading markets for the securities), and securities of
unseasoned issuers referred to in restriction 2 above (these restrictions
will not affect the ability of a Portfolio to invest in securities of a
corresponding Fund or other diversified, open-end management investment
companies with the same investment objectives, policies and restrictions as
the Portfolio), and (iii) the Master Trust will provide adequate notice to
the Trust of changes in such restrictions to enable the Trust to provide at
least 30 days advance notice of such changes to its shareholders.

The Master Trust has agreed, in connection with certain undertakings
given by the Trust to the State of Texas, that the International Growth Fund
will not make short sales of securities or maintain a short position if to do
so could create liabilities or require collateral deposits and segregation of
assets aggregating more than 25% of the Fund's net assets.

The Master Trust has agreed, in connection with certain undertakings
given by the Trust to the State of Ohio, that no Fund will invest more than
50% of its total assets in the securities of issuers which together with any
predecessors have a record of less than three years continuous operation or
securities of issuers which are restricted as to disposition (including
without limitation securities issued pursuant to Rule 144A under the
Securities Act of 1933).

PRINCIPAL HOLDERS OF SECURITIES

As of March 31, 1996, the following persons held of record more than
5% of the outstanding shares of the Portfolios:

CORE GROWTH PORTFOLIO A: Merrill Lynch Pierce Fenner & Smith, Mutual Fund
Operations, Attn: Bank Reconciliations, 4800 Deer Lake Drive East,
Jacksonville, Florida 32246 ("Merrill Lynch") (74.12%).

EMERGING GROWTH PORTFOLIO A: Merrill Lynch (79.50%).

B-29

<PAGE>

INCOME & GROWTH PORTFOLIO A: Merrill Lynch (57.89%); First Union National
Bank of Florida, Custodian for Attorney Title Insurance Fund Corp.,
Jacksonville, Florida 32231 (20.90%); North Shore Medical Center Inc., 1100
N.W. 95 Street, Miami, Florida 33150 (7.36%).

BALANCED GROWTH PORTFOLIO A: Merrill Lynch (75.60%); Van Dijk, Pace Westlake
& Partners Profit Sharing Plan & Trust dated 12/27/94, 700 West St. Clair,
Suite 400, Cleveland, Ohio 44113 (5.22%).

WORLDWIDE GROWTH PORTFOLIO A: Merrill Lynch (83.02%).

INTERNATIONAL GROWTH PORTFOLIO A: Merrill Lynch (46.86%); Beverly R. Peake,
Janice Mellecker JT TEN, 9131-C Derbyshire Road, Richmond, VA 23229 (5.99%)
Louis D. Nacewon, Carolyn D. Nacewon, Trustees, Nacewon Enterprises, Inc.
Defined Benefit Plan, 5034 Crooked Stick Way, Las Vegas, Nevada 89113
(5.21%); Mark A. Warren, Trustee, Arnetta F. Warren Irrevocable Life
Insurance Trust, 650 College Street, Milton, Wisconsin 53563 (17.69%).

EMERGING COUNTRIES PORTFOLIO A: Merrill Lynch (70.45%); Robert A. Warren,
TTEE, Robert A. Warren Rev. Trust U/A/D 2/2/93, 5518 Isleworth Country Club
Dr., Windermere, Florida 34786 (5.96%).

GOVERNMENT INCOME PORTFOLIO A: Merrill Lynch (35.50%); Paine Webber for the
Benefit of Helen E. Lawson, Tod Paul E. Lawson and John A. Lawson, 739 Birch
Street, Anoka, Minnesota 55303 (20.33%); Nicholas-Applegate 401K Profit
Sharing Plan c/o Thomas Pindelski, Trustee, 600 West Broadway, San Diego,
California 92101 (18.57%); Van Dijk, Pace Westlake & Partners Profit Sharing
Plan & Trust dated 12/27/94, 700 West St. Clair, Suite 400, Cleveland, Ohio
44113 (12.10%).

CORE GROWTH PORTFOLIO C: Merrill Lynch (86.84%).

EMERGING GROWTH PORTFOLIO C: Merrill Lynch (90.60%).

INCOME & GROWTH PORTFOLIO C: Merrill Lynch (90.72%).

BALANCED GROWTH PORTFOLIO C: Merrill Lynch (87.81%).

WORLDWIDE GROWTH PORTFOLIO C: Merrill Lynch (84.33%)

INTERNATIONAL GROWTH PORTFOLIO C: Merrill Lynch (53.00%).

EMERGING COUNTRIES PORTFOLIO C: Merrill Lynch (80.66%); Advest, Inc., 90
State House Square, Hartford, Connecticut 06103 (5.41%).

B-30

<PAGE>

GOVERNMENT INCOME PORTFOLIO C: Merrill Lynch (70.29%); Betty Elliot, 22386
Estallins, Mission Viejo, California 92692 (6.35%).

CORE GROWTH INSTITUTIONAL PORTFOLIO: Metz Baking Co. Pension Trust, Attn:
William K. Stoneburg, 1014 Nebraska St., P.O. Box 448, Sioux City, Iowa 51102
(5.79%); Robert Bosch Corp. Master Retirement Fund, Master Retirement Trust,
Attn: RBUS/TRS, 2800 S. 25th Avenue, Broadview, Illinois 60153 (12.07%); U.S.
National Bank of Oregon FBO Ford Family Foundation, Security Processing, P.O.
Box 3168, Portland, Oregon 97204 (7.99%); LIBCO Liberty Bank & Trust Co. of
Oklahoma City, P.O. Box 25848, Oklahoma City, Oklahoma 73125 (10.09%); NBD
Bank TTEE Consumers Power Co. Employees' Savings Plan, P.O. Box 771072,
Detroit, Michigan, 43277 (7.85%); Pacificorp Veba Trust, 700 North East
Multnomah, Suite 1600, Portland, Oregon 97232 (7.64%).

EMERGING GROWTH INSTITUTIONAL PORTFOLIO: KPMG Peat Marwick, Partner &
Employee Benefits, 3 Chestnut Ridge Road, Bldg. 3, Floor 2, Montvale, New
Jersey 07645 (5.82%); Bankers Trust Co. TTEE Johnson & Johnson Retirement
Trust DTD 8/1/82, 84 Exchange Place, Jersey City, New Jersey 07302 (24.88%);
U.S. National Bank of Oregon FBO The Ford Family Foundation, c/o Trust Group,
P.O. Box 3168, Portland, Oregon 97208 (5.82%); City of Sarasota General
Employees' Pension Plan, P.O. Box 1058, Sarasota, Florida 34230 (5.21%).

INCOME & GROWTH INSTITUTIONAL PORTFOLIO: Dalton L. Knauss, TTEE Elaine V.
Knauss Revocable Trust dated 7/21/89, P.O. Box 2173, Carefree, Arizona 85377
(8.11%); Edyth Bush Charitable Foundation Inc., P.O. Box 1867, Winter Park,
Florida 32780 (20.31%); Charles Johnston, 706 Ocean Drive, Juno Beach,
Florida 33403 (5.23%); Nicholas-Applegate 401K Profit Sharing Plan, c/o
Thomas Pindelski, Trustee, 600 West Broadway, San Diego, California 92101
(5.96%); Butler Family Fund 501(c)(3) Exempt Private Foundation, 1600 20th
Street NW, Washington, D.C. 20009 (19.42%); Dalton L. Knauss TTEE Dalton L.
Knauss Revocable Trust dated 7/21/89, P.O. Box 2173, Carefree, Arizona 85377
(8.11%).

BALANCED GROWTH INSTITUTIONAL PORTFOLIO: Nicholas-Applegate Capital
Management, Attention Thomas Pindelski, 600 West Broadway, San Diego,
California 92101 (19.46%); Nicholas-Applegate 401K Profit Sharing Plan, c/o
Thomas Pindelski Trustee, 600 West Broadway, San Diego, California 92101
(32.28%); Neil F. Marley, MD, Dianne Wylie Marley TTEES N. Marley MD PS Keogh
Plan, 732 Grimswood Court, San Jose, California 95120 (9.88%); Nicholas
Applegate Pension Plan, c/o Thomas Pindelski Trustee, 600 West Broadway, San
Diego, CA 92101 (12.66%); George C. Kenney, Olga Kitsakos-Kenney, 1934 Via
Casa Alta, La Jolla, California 92037 (7.93%); New Orleans Museum of Art,
P.O. Box 19123, New Orleans, Louisiana 70179 (10.80%).

WORLDWIDE GROWTH INSTITUTIONAL PORTFOLIO: Nicholas-Applegate 401K Profit
Sharing Plan, c/o Thomas Pindelski Trustee, 600 West Broadway, San Diego,
California 92101

B-31

<PAGE>

(15.54%); Panpipes International Ltd., c/o A.H. Haynes & Co., 245 Park
Avenue, New York, New York 10167 (10.49%); Nicholas-Applegate Pension Plan,
c/o Thomas Pindelski, Trustee, 600 West Broadway, San Diego, California 92101
(10.03%); Panpipes Offshore Ltd., 48 Par-la-Ville Road, Suite 464, Hamilton,
NMI Bermuda (8.58%); Edyth Bush Charitable Foundation, Inc., .O. Box 1967,
Winter Park, Florida 32790 (29.16%).

INTERNATIONAL GROWTH INSTITUTIONAL PORTFOLIO: Bankers Trust TTEE, FBO Mary
Kay Cosmetics Inc., Employees PSP & Savings Plan & Money Purchase Plan, 8787
Stemons Frwy., Dallas, Texas 75247 (12.73%); Arthur E. Nicholas, P.O. Box
2169, Del Mar, California 92014 (10.12%); Sherryl A. Nicholas JT TEN, P.O.
Box 2295, Rancho Santa Fe, California 92067 (8.89%); Austin Fire Fighters
Relief & Retirement Fund, 3305 Northland Drive, Ste. 203, Austin, Texas 78731
(43.86%); New Orleans Museum of Art, P.O. Box 9123, New Orleans, Louisiana
70179 (5.19%); Nicholas Applegate 401K Profit Sharing Plan, c/o Thomas
Pindelski Trustee, 600 West Broadway, San Diego, California 92101 (6.0%).

EMERGING COUNTRIES INSTITUTIONAL PORTFOLIO: Sherryl A. Nicholas, P.O. Box
2295, Rancho Santa Fe, California 92067 (25.16%); Firstcinco, P.O. Box 1118
Mail Location 6120, Cincinnati, Ohio 45201 (5.54%); Arthur E. Nicholas, P.O.
Box 2169, Del Mar, California 92014 (33.70%); Nicholas-Applegate 401K Profit
Sharing Plan, c/o Thomas Pindelski, Trustee, 600 West Broadway, San Diego,
California 92101 (13.18%).

MONEY MARKET PORTFOLIO: Martin C. Zetterberg, 99 Ridgeview Road, Princeton,
New Jersey 08540 (8.33%); Citicorp U.S.A., Inc., Custodian for Marlboro
Equity Partners, L.P. 153 East 53rd St., 5th Floor, Zone 3, New York, New
York 10043 (26.71%); Van Dijk Pace Westlake Partners Profit Sharing Plan &
Trust DID 12/27/94, 700 West St. Clair, Suite 400, Cleveland, Ohio 44113
(18.14%); Nicholas-Applegate Capital Management Holdings L.P.,
Nicholas-Applegate Capital Management Holdings, L.P., P.O. Box 2169, Del Mar,
California 92014 (13.13%).

As of such date, 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 Portfolios, except as follows: Government Income Portfolio A -
18.57%; Income & Growth Institutional Portfolio, 5.96%; Balanced Growth
Institutional Portfolio, 64.40%; Emerging Countries Institutional Portfolio,
13.18%; Worldwide Growth Institutional Portfolio, 25.57%; International
Growth Institutional Portfolio, 6.00%; Money Market Portfolio, 13.13%. The
Portfolios currently own beneficially and of record substantially all of the
outstanding shares of the corresponding Funds.

B-32

<PAGE>

TRUSTEES AND PRINCIPAL OFFICERS

TRUST

The names and addresses 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.

FRED C. APPLEGATE, TRUSTEE AND CHAIRMAN OF THE BOARD OF TRUSTEES. 885
La Jolla Corona Court, La Jolla, California. President, Hightower Management
Co., a financial management firm (since January 1992); formerly President,
Nicholas-Applegate Capital Management (from August 1984 to December 1991).
Director of Nicholas-Applegate Fund, Inc. (since 1987). Mr. Applegate's
interests in Nicholas-Applegate Capital Management, Inc., the general partner
of the Investment Adviser, were acquired by Mr. Nicholas in 1991 and 1992.

ARTHUR B. LAFFER, TRUSTEE.* 5405 Morehouse Drive, Suite 340, San
Diego, California. Chairman, A.B. Laffer, V.A. Canto & Associates, an
economic consulting firm (since 1979); Chairman, Laffer Advisors
Incorporated, economic consultants (since 1981); Director, Nicholas-Applegate
Fund, Inc. (since 1987); Director, U.S. Filter Corporation (since March 1991)
and MasTec, Inc. (construction) (since 1994); Chairman, Calport Asset
Management, Inc. (since 1992); formerly Distinguished University Professor
and Director, Pepperdine University (from Sept. 1985 to May 1988) and
Professor of Business Economics, University of Southern California (1976 to
1984). Mr. Laffer is considered to be an "interested person" of the Trust
because A.B. Laffer, V.A. Canto & Associates received $100,000 in 1994 from
the Investment Adviser as compensation for consulting services provided from
time to time to the Investment Adviser.

CHARLES E. YOUNG, TRUSTEE. UCLA, 2147 Murphy Hall, Los Angeles,
California. Chancellor, UCLA (since 1968); Director, Nicholas-Applegate
Fund, Inc. (since 1992); Director, Intel Corp. (since 1974), Academy of
Television Arts and Sciences Foundation (since October 1988), Los Angeles
World Affairs Council (since 1977) and Town Hall of California (since 1982).

JOHN D. WYLIE, PRESIDENT. Partner (since January 1994), Chief
Investment Officer - Investor Services Group (since December 1995), and
Portfolio Manager (since January 1990), Nicholas-Applegate Capital
Management. Mr. Wylie is also the President of the Master Trust.

THOMAS PINDELSKI, CHIEF FINANCIAL OFFICER. Partner (since January
1996) and Chief Financial Officer, Nicholas-Applegate Capital Management
(since January 1993), and Chief

B-33

<PAGE>

Financial Officer, Nicholas-Applegate Securities (since January 1993),
formerly Chief Financial Officer, Aurora Capital Partners/WSGP Partners L.P.,
an investment partnership (from November 1988 to January 1993), and Vice
President and Controller, Security Pacific Merchant Banking Group (from
November 1986 to November 1988). Mr. Pindelski is also the Chief Financial
Officer of the Master Trust.

PETER J. JOHNSON, VICE PRESIDENT. Partner and Director-Client
Services/Marketing, Nicholas-Applegate Capital Management (since January
1992) and Vice President, Nicholas-Applegate Securities (since December
1995); formerly, Marketing Director, Pacific Financial Asset Management
Company, an investment management firm (from July 1989 to December 1991), and
Senior Marketing Representative, Fidelity Investments Institutional Services
(from August 1987 to July 1989). Mr. Johnson is also the Vice President of
the Master Trust.

E. BLAKE MOORE, JR., SECRETARY. General Counsel and Secretary,
Nicholas-Applegate Capital Management and Nicholas-Applegate Securities
(since 1993); formerly Attorney, Luce, Forward, Hamilton & Scripps (from 1989
to 1993). Mr. Moore is also the Secretary of the Master Trust.

Each Trustee of the Trust who is not an officer or affiliate of the
Trust, the Investment Adviser or the Distributor receives an aggregate annual
fee of $10,000 for services rendered as a Trustee of the Trust, and $1,000
for each meeting attended. Each Trustee is also reimbursed for out-of-pocket
expenses incurred as a Trustee.

The following table sets forth the aggregate compensation paid by the
Trust for the fiscal year ended March 31, 1996, to the Trustees who are not
affiliated with the Investment Adviser and the aggregate compensation paid to
such Trustees for service on the Trust's board and that of all other funds in
the "Trust complex" (as defined in Schedule 14A under the Securities Exchange
Act of 1934):

<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Benfits Estimated Annual Total Compensation from
Compensation Accrued as Part of Benefits Upon Trust and Trust Complex
Name from Trust Trust Expenses Retirement Paid to Trustee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fred C. Applegate $15,000 None N/A $29,000 (45*)

Arthur B. Laffer $15,500 None N/A $31,500 (45*)

Charles E. Young $15,000 None N/A $31,500 (45*)
</TABLE>

* Indicates total number of funds in Trust complex, including the Portfolios.

B-34

<PAGE>

MASTER TRUST

The names and addresses of the Trustees and principal officers of the
Master Trust, including their positions and principal occupations during the
past five years, are shown below. The positions and principal occupations of
the officers during the past five years, are set forth above. 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.

ARTHUR E. NICHOLAS, TRUSTEE AND CHAIRMAN OF THE BOARD OF TRUSTEES.*/
Managing Partner and Chief Investment Officer, Nicholas-Applegate Capital
Management (since 1984), and Director and Chairman of the Board,
Nicholas-Applegate Securities. Director and Chairman of the Board of
Directors of Nicholas-Applegate Fund, Inc., a registered open-end investment
company, since 1987.

DANN V. ANGELOFF, TRUSTEE. 727 West Seventh Street, Los Angeles,
California. President, The Angeloff Company, corporate financial advisers
(since 1976); Director, Nicholas-Applegate Fund, Inc. (since 1987); Trustee
(1979 to 1987) and University Counselor to the President (since 1987),
University of Southern California (since 1987); Director, Public Storage,
Inc., a real estate investment trust (since 1980), Storage Properties, a real
estate investment trust (since 1989), Datametrics Corporation, a producer of
computer peripherals and communication products (since 1993), SEDA Specialty
Packaging, Inc. (since 1993) and Bonded Motors, Inc., an automotive engine
remanufacturer (since 1996).

WALTER E. AUCH, TRUSTEE. 6001 North 62nd Place, Paradise Valley,
Arizona. Director, Geotech Communications, Inc., a mobile radio
communications company (since 1987); Express America Corporation, a mortgage
banking company (since 1992); Fort Dearborn Fund (since 1987); Brinson Funds
(since 1994), Smith Barney Trak Fund (since 1992), registered investment
companies; Pimco L.P., an investment manager (since 1994); and Banyan Realty
Fund (since 1987), Banyan Strategic Land Fund (since 1987), Banyan Strategic
Land Fund II (since 1988), and Banyan Mortgage Fund (since 1988), real estate
investment trusts. Formerly Chairman and Chief Executive Officer, Chicago
Board Options Exchange (1979 to 1986) and Senior Executive Vice President,
Director and Member of the Executive Committee, PaineWebber, Inc. (until
1979).

THEODORE J. COBURN, TRUSTEE. 17 Cotswold Road, Brookline,
Massachusetts. Partner, Brown Coburn & Co. an investment banking firm (since
1991), and student, Harvard Graduate School of Education (since September
1991). Director, Nicholas-Applegate Fund, Inc. (since 1987), Emerging Germany
Fund (since 1991), Premiere Radio Networks, Inc. (since 1991); Sage Analytics
International (since 1991), Tonights Feature Ltd. (since 1995). Formerly
Managing Director of Global Equity Transactions Group and member of Board of
Directors, Prudential Securities (from 1986 to June 1991).

DARLENE DEREMER, TRUSTEE.* 155 South Street, Wrentham, Massachusetts.
President and Founder, DeRemer Associates, a marketing consultant for the
financial services industry (since 1987); formerly Vice President and
Director, Asset Management Division, State Street Bank and Trust Company
(from 1982 to 1987), and Vice President, T. Rowe Price & Associates (1979 to
1982); Director, Jurika & Voyles Fund Group (since 1994), Nicholas-Applegate
Strategic Opportunities Ltd. (since 1994), Nicholas-Applegate Securities
International (since 1994), and King's Wood Montessori School (since 1995);
Member of Advisory Board, Financial Women's Association (since 1995). Mr.
DeRemer is considered to be an "interested person" of the Master Trust under
the 1940 Act because DeRemer Associates received $100,736 in 1995 and $54,247
in 1994 from the Investment Adviser as compensation for consulting services
provided in connection with its institutional business.

B-35

<PAGE>

GEORGE F. KEANE, TRUSTEE.* 450 Post Road East, Westport, Connecticut.
President Emeritus and Senior Investment Adviser, The Common Fund, a
non-profit investment management organization representing educational
institutions (since 1993), after serving as its President (from 1971 to
1992); Member of Investment Advisory Committee, New York State Common
Retirement Fund (since 1982); Director and Chairman of the Investment
Committee, United Negro College Fund (since 1987); Director, United Educators
Risk Retention Group (since 1989); Director, RCB Trust Company (since 1991);
Director, School, College and University Underwriters Ltd. (since 1986);
Trustee, Fairfield University (since 1993); Director, The Bramwell Funds,
Inc. (since 1994); Chairman of the Board, Trigen Energy Corporation (since
1994); Director Universal Stainless & Alloy Products Inc. (since 1994).
Formerly President, Endowment Advisers, Inc. (from August 1987 to December
1992). Mr. Keane is considered to be an "interested person" of the Master
Trust under the 1940 Act because he is a registered representative of a
broker-dealer.

JOHN D. WYLIE, PRESIDENT.

THOMAS PINDELSKI, CHIEF FINANCIAL OFFICER.

PETER J. JOHNSON, VICE PRESIDENT.

E. BLAKE MOORE, JR., SECRETARY.

Each Trustee of the Trust (or Master Trust) who is not an officer or
affiliate of the Master Trust, the Investment Adviser or the Distributor
receives an aggregate annual fee of $10,000 for services rendered as a
Trustee of the Trust (or Master Trust), and $1,000 for each meeting attended.
Each Trustee is also reimbursed for out-of-pocket expenses incurred as a
Trustee.

The following table sets for the aggregate compensation paid by the
Master Trust for the fiscal year ended March 31, 1996, to the Trustees who
are not affiliated with the Investment Adviser and the aggregate
compensation paid to such Trustees for service on the Master Trust's board
and that all other funds in the "Master Trust complex" (as defined in
Schedule 14A under the Securities Exchange Act of 1934):

<TABLE>
<CAPTION>
Pension or Total Compensation
Retirement Benefits from Master Trust
Aggregate Accrued as Part of Estimated Annual and Master Trust
Compensation from Master Trust Benefits Upon Complex Paid to
Name Master Trust Expenses Retirement Trustee
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dann V. Angeloff $15,500 None N/A $32,500 (13*)
Walter E. Auch $15,000 None N/A $15,000 (12*)
Theodore J. Coburn $15,000 None N/A $29,000 (13*)
</TABLE>

B-36

<PAGE>

<S> <C> <C> <C> <C>
Darlene DeRemer $15,000 None N/A $15,000 (12*)
George F. Keane $15,000 None N/A $15,000 (12*)
</TABLE>

* Indicates total number of funds in Master Trust complex, including the Master
Trust Funds.

INVESTMENT ADVISER

The Trust has not engaged the services of an investment adviser with
respect to the Portfolios because the Portfolios invest all of their assets
in corresponding Funds. The Investment Adviser to the Master 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. Its general
partner is Nicholas-Applegate Capital Management Holdings, L.P., a California
limited partnership, the general partner of which is Nicholas-Applegate
Capital Management Holdings, Inc., a California corporation owned by Mr.
Nicholas. The Investment Adviser currently has fourteen partners (including
Mr. Nicholas) who manage a staff of approximately 325 employees, including 28
portfolio managers.

Personnel of the Investment Adviser may invest in securities for their
own accounts pursuant to a Code of Ethics that sets forth all partners' and
employees' fiduciary responsibilities regarding the Funds, establishes
procedures for personal investing, and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance, and
participation in initial public offerings is prohibited. In addition,
restrictions on the timing of personal investing in relation to trades by the
Funds and on short-term trading having been adopted.

THE INVESTMENT ADVISORY AGREEMENT

Under the Investment Advisory Agreement between the Master Trust and
the Investment Adviser with respect to the Funds, the Master Trust retains
the Investment Adviser to manage the Funds' investment portfolios, subject to
the direction of the Master 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 Adviser
will not be liable for any error of judgment or for any loss suffered by a
Fund or the Master Trust in connection with the matters to which the
Investment Advisory Agreement relates, except for liability resulting from
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of the Investment Adviser's reckless disregard of its
duties and obligations under the Investment Advisory Agreement. The Master
Trust has agreed to indemnify the Investment Adviser against liabilities,
costs and expenses that the Investment

B-37
<PAGE>

Adviser may incur in connection with any action, suit, investigation or other
proceeding arising out of or otherwise based on any action actually or
allegedly taken or omitted to be taken by the Investment Adviser in
connection with the performance of its duties or obligations under the
Investment Advisory Agreement or otherwise as an investment adviser of the
Master Trust. The Investment Adviser is not entitled to indemnification with
respect to any liability to the Master 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 paid to the Investment Adviser for the
fiscal year ended March 31, 1996, and the amounts of the reductions in fees (or
recoupment of fees previously deferred) as a result of the expense limitations
and fee waivers described below under "Expense Limitation" were as follows:

Fund Advisory Fees Fee Reductions
- ---- ------------- --------------
Core Growth Fund $2,563,061 $ -0-
Emerging Growth Fund 5,190,853 -0-
Income & Growth Fund 723,032 (4,263)
Balanced Growth Fund 75,048 94,371
Worldwide Growth Fund 922,328 58,228
International Growth Fund 69,849 117,278
Government Fund -0- 80,735
Money Market Fund -0- 93,976
Emerging Countries Fund 49,827 57,853

The Investment Advisory Agreement provides that it will terminate in
the event of its assignment (as defined in the Investment Company Act). The
Investment Advisory Agreement may be terminated with respect to any Fund by
the Master Trust (by the Board of Trustees of the Master Trust or vote of a
majority of the outstanding voting securities of the Fund, as defined in the
Investment Company Act) or the Investment Adviser upon not more than 60 days'
written notice, without payment of any penalty. The Investment Advisory
Agreement provides that it will continue in effect with respect to each Fund
for a period of more than two years from its execution only so long as such
continuance is specifically approved at least annually in conformity with the
Investment Company Act.

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<PAGE>

EXPENSE LIMITATION

Under the Investment Advisory Agreement, the Investment Adviser has
agreed to defer its fees, and to absorb other expenses of each Portfolio
(including administrative fees and distribution expenses for the Portfolio,
and the Portfolio's allocable share of the operating expenses of the
corresponding Fund, but excluding interest, taxes, brokerage commissions and
other costs incurred in connection with portfolio securities transactions,
organizational expenses and other capitalized expenditures and extraordinary
expenses), to ensure that the operating expenses for the Series A Portfolios
do not exceed the amounts specified in the Portfolios' prospectuses.

In addition, each of the Portfolios is subject to certain limitations
on expenses imposed by state securities laws. At present, the only expense
limitation in effect is in California. Under California law, each Portfolio
will be subject to an annual expense limitation equal to the sum of 2.5% of
the first $30 million of the Portfolio's average net assets, 2.0% of the next
$70 million of average net assets, and 1.5% of the remaining average net
assets. If a Portfolio's expenses (excluding interest, brokerage commissions
litigation expenses and certain other items), including its allocable share
of the expenses incurred by the corresponding Fund, were to exceed such limit
in any fiscal year, the Investment Adviser has agreed to bear the amount of
such excess to the extent required by such limitations.

ADMINISTRATOR

The Administrator of the Trust is Investment Company Administration
Corporation, 4455 East Camelback Road, Suite 261-E, Phoenix, Arizona 85018.

Pursuant to an Administration Agreement with the Trust, the
Administrator is responsible for performing all administrative services
required for the daily business operations of the Trust, subject to the
supervision of the Board of Trustees of the Trust. The Administrator has no
supervisory responsibility over the investment operations of the Portfolios.
The management or administrative services of the Administrator for the Trust
are not exclusive under the terms of the Administration Agreement and the
Administrator is free to, and does, render management and administrative
services to others. Investment Company Administration Corporation also serves
as the Administrator for the Master Trust.

For its services, the Administrator receives under the Administration
Agreement $35,000 for each grouping of five similar portfolios (e.g., Core
Growth Portfolio A, Portfolio B, Portfolio C, Institutional and Qualified
Portfolios), $25,000 for each grouping of three similar portfolios, $20,000
for a grouping of two similar portfolios and $5,000 for one portfolio, except
as follows: The Administrator receives $15,000 for its services with respect
to the Emerging Growth Portfolios. As a result, the Administrator currently
receives aggregate compensation at the rate of $230,000 per year for all of
the series of the Trust. Such fees will be allocated among the series in
each grouping based on relative net asset values. For its services to the
Master Trust, the Administrator receives, pursuant to an Administration
Agreement, a monthly fee at the following annual rates: 0.05% on the first
$100 million of aggregate net assets of the Funds, 0.04% on the next $150
million, 0.03% on the next $300 million, 0.02% on the next $300 million, and
0.01% on the portion of aggregate net assets of the Funds in excess of $850
million. The Administrator will receive a minimum of $150,000 per year
allocated among the Funds based on average net assets.

B-39

<PAGE>

In connection with its management of the corporate affairs of the
Trust, the Administrator pays the salaries and expenses of all its personnel
and pays all expenses incurred in connection with managing the ordinary
course of the business of the Trust, other than expenses assumed by the Trust
as described below.

Under the terms of the Administration Agreement, the Trust is
responsible for the payment of the following expenses: (a) the fees and
expenses incurred by the Trust in connection with the management of the
investment and reinvestment of their assets, (b) the fees and expenses of
Trustees and officers of the Trust who are not affiliated with the
Administrator, the Investment Adviser, (c) out-of-pocket travel expenses for
the officers and Trustees of the Trust and other expenses of Board of
Trustees' meetings, (d) the fees and certain expenses of the Custodian, (e)
the fees and expenses of the Transfer and Dividend Disbursing Agent that
relate to the maintenance of each shareholder account, (f) the charges and
expenses of the Trust's legal counsel and independent accountants, (g)
brokerage commissions and any issue or transfer taxes chargeable to Trustees
and officers of the Trust in connection with securities transactions, (h) all
taxes and corporate fees payable by the Trust to federal, state and other
governmental agencies, (i) the fees of any trade association of which the
Trust may be a member, (j) the cost of maintaining the Trust's existence,
taxes and interest, (k) the cost of fidelity and liability insurance, (l) the
fees and expenses involved in registering and maintaining the registration of
the Trust and of its shares with the Commission and registering the Trust as
a broker or dealer and qualifying their shares under state securities laws,
including the preparation and printing of the Trust's registration statement,
prospectuses and statements of additional information, (m) allocable
communication expenses with respect to investor services and all expenses of
shareholders' and Board of Trustees' meetings and of preparing, printing and
mailing prospectuses and reports to shareholders, (n) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the business of the Trust, and (o) expenses assumed by the
Trust pursuant to any plan of distribution adopted in conformity with Rule
12b-1 under the Investment Company Act.

The Administration Agreement provides that the Administrator will not
be liable for any error of judgment or for any loss suffered by the Trust in
connection with the matters to which the Administration Agreement relates,
except a loss resulting from the Administrator's willful misfeasance, bad
faith, gross negligence or reckless disregard of its duties. The
Administration Agreement will terminate automatically if assigned, and may be
terminated without penalty by either the Administrator or the Trust (by the
Board of Trustees of the Trust or vote of a majority of the outstanding
voting securities of the Trust, as defined in the Investment Company Act),
upon 60 days' written notice. The Administration Agreement will continue in
effect only so long as such continuance is specifically approved at least
annually in conformity with the Investment Company Act.

B-40

<PAGE>

DISTRIBUTOR

Nicholas-Applegate Securities (the "Distributor"), 600 West Broadway,
30th Floor, San Diego, California 92101, is the principal underwriter and
distributor for the Trust and, in such capacity, is responsible for
distributing shares of the Portfolios. 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.

DISTRIBUTION AGREEMENT

Pursuant to its Distribution Agreement with the Trust, the Distributor
has agreed to use its best efforts to effect sales of shares of the
Portfolios, 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. 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.

Sales charges on sales of Series A Portfolio shares are payable only
with respect to purchases of less than $1,000,000. However, the Distributor
pays an initial commission to broker-dealers and others on purchases of
Series A Portfolios of $1 million or more, and on purchases made at net asset
value by certain retirement plans. See "Purchase and Redemption of Portfolio
Shares -- Dealer Commissions."

The aggregate commissions received by the Distributor in connection
with sales of the Portfolios for the fiscal year ended March 31, 1996 were
$1,446,918, and the aggregate payments received by the Distributor pursuant
to the Distribution Plan for the fiscal year ended March 31, 1996, were as
follows:

Payments under
Distribution
Portfolio Plan
- --------- --------------
Core Growth Portfolio A $ 175,655
Core Growth Portfolio B 27,248
Core Growth Portfolio C 1,210,723
Emerging Growth Portfolio A 305,011
Emerging Growth Portfolio B 40,174
Emerging Growth Portfolio C 1,354,501
Income & Growth Portfolio A 77,118
Income & Growth Portfolio B 5,372
Income & Growth Portfolio C 447,785
Balanced Portfolio A 13,884
Balanced Portfolio B 2,587
Balanced Portfolio C 122,238
Worldwide Portfolio A 59,962
Worldwide Portfolio B 3,870
Worldwide Portfolio C 531,203
International Portfolio A 2,087

B-41

<PAGE>

International Portfolio B 2,106
International Portfolio C 2,574
Emerging Countries Portfolio A 6,257
Emerging Countries Portfolio B 6,687
Emerging Countries Portfolio C 11,112
Government Portfolio A 2,846
Government Portfolio B 205
Government Portfolio C 17,881
Money Market Portfolio 5,585

DISTRIBUTION PLAN

Under a plan of distribution for the Trust with respect to the Series
A Portfolios, Series B Portfolios and Series C Portfolios (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 shares of the Portfolios. The Distribution Plan
provides for compensation to the Distributor for the services it provides,
and the costs and expenses it incurs, related to marketing shares of the
Portfolios. The Distributor is paid for: (a) expenses incurred in connection
with advertising and marketing shares of the Portfolios 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 shares owned by
clients of such service organizations, and (c) expenses incurred in
preparing, printing and distributing the Portfolios' prospectuses and
statements of additional information.

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 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 with respect to
any Portfolio 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 the Portfolio. The Distribution Plan may not be
amended to increase materially the amounts to be paid by a Portfolio for the
services described therein without approval by the shareholders of the
Portfolio, 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. A Portfolio will not
be contractually obligated to pay expenses incurred under the Distribution
Plan if the Plan is terminated or not continued with respect to the Portfolio.

Under the Distribution Plan, the Distributor is compensated for
distribution-related expenses with respect to the Portfolios at the following
annual rates, payable monthly, based on the average daily net assets of each
Portfolio: for the Series A Portfolios, 0.25%; for the Money Market
Portfolio, 0.15%; for the Series B and C Portfolios (other than the
Government Portfolio B and C), 0.75%; for the Government Portfolio B and C,
0.50%. The Distributor recovers the distribution expenses it incurs through
the receipt of

B-42

<PAGE>

compensation payments from the Trust under the Distribution Plan and the
receipt of that portion of initial sales charges on purchases of shares of
the Portfolios remaining after the Distributor's reallowance to selected
dealers. No separate compensation is paid to the Distributor for
distributing shares of the Institutional Portfolios.

If the Distributor incurs expenses greater than the maximum
distribution fees payable under the Distribution Plan, as described above,
with respect to a Portfolio, the Portfolio will not reimburse the Distributor
for the excess in the subsequent fiscal year. However, because the
Distribution 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 Distributor pays broker-dealers and others out of its distribution
fees quarterly trail commissions of up to the following annual percentages of
the average daily net assets attributable to shares of respective Portfolios
held in the accounts of their customers: 0.25% for the Series A and B
Portfolios; 0.15% for the Money Market Portfolio; 0.75% for the Series C Core
Growth, Emerging Growth, Income & Growth, Balanced, Worldwide, International
Growth, Emerging Countries and Global Growth & Income Portfolios; and 0.50%
for the Series C Government Portfolio.

SHAREHOLDER SERVICE PLAN

The Trust has also adopted a Shareholder Service Plan with respect to
the Portfolios. Under the Shareholder Service Plan, the Distributor is
compensated at the annual rate of 0.10% of each Series A Portfolio's average
daily net assets, 0.10% of the Money Market Portfolio's average daily net
assets, and 0.25% of each Series B and C Portfolio's average daily net
assets, for certain shareholder service expenses provided by the Distributor
and fees paid to broker-dealers and others for the provision of support
services to their clients who are beneficial owners of shares of the
Portfolios.

Support services include, among other things, establishing and
maintaining accounts and records relating to their clients that invest in
Portfolio shares; processing dividend and distribution payments from the
Portfolios on behalf of clients; preparing tax reports; arranging for bank
wires; responding to client inquiries concerning their investments in
Portfolio shares; providing the information to the Portfolios 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.

The Shareholder Service 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 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 a 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

B-43

<PAGE>

Plan. The Shareholder Service Plan may be terminated with respect to any
Portfolio at any time, without penalty, by the Board.

Under the Shareholder Service Plan, the Distributor pays
broker-dealers and others an account servicing fee of up to 0.20% annually of
the average daily net assets of the Series C Government Income Portfolio and
0.15% annually of other Series C Portfolios, attributable to shares in the
accounts of their customers, as compensation for providing certain
shareholder-related services.

MISCELLANEOUS

Pursuant to the Distribution Plan and Shareholder Service Plan, the
Board of Trustees will review at least quarterly a written report of the
distribution and service expenses incurred on behalf of shares of the
Portfolios by the Distributor. The report will include an itemization of the
distribution and service expenses and the purposes of such expenditures. In
addition, as long as the Plans remain in effect, the selection and nomination
of Trustees who are not interested persons of the Trust will be committed to
the Trustees who are not interested persons of the Trust.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Subject to policies established by the Master Trust's Board of
Trustees, the Investment Adviser is primarily responsible for the execution
of the Funds' portfolio transactions and the allocation of the brokerage
business. In executing such transactions, the Investment Adviser will seek
to obtain the best price and execution for the Funds, taking into account
such factors as price, size of order, difficulty and risk of execution and
operational facilities of the firm involved. Securities in which the Funds
invest may be traded in the over-the-counter markets, and the Funds deal
directly with the dealers who make markets in such securities except in those
circumstances where better prices and execution are available elsewhere.
Commission rates are established pursuant to negotiation with brokers or
dealers based on the quality or quantity of services provided in light of
generally prevailing rates, and while the Investment Adviser generally seeks
reasonably competitive commission rates, the Funds do not necessarily pay the
lowest commissions available. The allocation of orders among brokers and the
commission rates paid are reviewed periodically by the Board of Trustees of
the Master Trust.

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
Portfolios 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 to investment decisions. Information,
services and products so received are in addition to and not in lieu of the
services required to be performed by the Investment Adviser under the
Investment Advisory Agreement, and the expenses of the Investment Adviser are
not necessarily reduced as a result of the receipt of such supplemental
information, services and products. Such information, services and products
may be useful to the Investment Adviser in providing services to clients
other than the Master

B-44

<PAGE>

Trust, and not all such information, services and products are used by the
Investment Adviser in connection with the Funds. Similarly, such
information, services and products provided to the Investment Adviser by
brokers and dealers through whom other clients of the Investment Adviser
effect securities transactions may be useful to the Investment Adviser in
providing services to the Funds. The Investment Adviser is authorized to pay
higher commission on brokerage transactions for the Funds to brokers in order
to secure the information, services and products described above, subject to
review by the Master Trust's Board of Trustees from time to time as to the
extent and continuation of this practice.

Although investment decisions for the Master Trust are made
independently from those of the other accounts managed by the Investment
Adviser, investments of the kind made by the Funds may often also be made by
such other accounts. When a purchase or sale of the same security is made at
substantially the same time on behalf of the Funds and one or more other
accounts managed by the Investment Adviser, available investments are
allocated in the discretion of the Investment Adviser by such means as, in
its judgment, result in fair treatment. The Investment Adviser aggregates
orders for purchases and sales of securities of the same issuer on the same
day among the Funds and its other managed accounts, and the price paid to or
received by the Funds and those accounts is the average obtained in those
orders. In some cases, such aggregation and allocation procedures may affect
adversely the price paid or received by the Funds or the size of the position
purchased or sold by the Funds.

In the over-the-counter market, securities are generally traded on a
"net" basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security usually includes a
profit to the dealer. In underwritten offerings, securities are purchased at
a fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's commission or discount. On
occasion, certain money market instruments and agency securities may be
purchased directly from the issuer, in which case no commissions or discounts
are paid.

During the fiscal year ended March 31, 1996, the following Funds
acquired securities of their regular brokers or dealers (as defined in Rule
10b-1 under the Investment Company Act) or their parents, the holdings of
which were as follows as of March 31, 1996: Core Growth Fund - J.P. Morgan &
Co., Inc. ($8,197,548); Money Market Fund - J.P. Morgan & Co., Inc.
($1,962,750); Balanced Growth Fund - Salomon, Inc. ($150,000), Bear Stearns
($150,975), Lehman Bros. ($139,100); Worldwide Growth Fund - Lehman Bros.
($358,450), Morgan Stanley ($372,600); Government Income Fund - J.P. Morgan &
Co., Inc. ($103,846).

B-45

<PAGE>

The aggregate dollar amount of brokerage commissions paid by the Funds
during the last three fiscal years of the Trust were as follows:

Year Ended
----------------------------------------------
March 31, 1996 March 31, 1995 March 31, 1994
----------------------------------------------
Worldwide Fund $ 484,310 $344,167 $390,163
International Growth Fund 116,735 69,187 3,146
Core Growth Fund 862,396 728,347 698,807
Emerging Growth Fund 1,038,140 649,053 525,555
Income & Growth Fund 83,459 174,247 131,675
Balanced Fund 51,038 44,386 51,142
Government Fund 3 0 516
Money Market Fund 0 0 0
Emerging Countries Fund 169,728 20,701 N/A

Of the total commissions paid during the fiscal year ended March 31, 1996,
$2,136,382 (75.1%) were paid to firms which provided research, statistical or
other services to the Investment Adviser.

PURCHASE AND REDEMPTION OF PORTFOLIO SHARES

Shares of the Portfolios may be purchased and redeemed at their net
asset value without any initial or deferred sales charge by former partners
of Whitehall Partners and Coventry Partners, California limited partnerships,
who received shares of the Core Growth Institutional Portfolio and Income &
Growth Institutional Portfolio, respectively, in the reorganization and
conversion of such partnerships into such Portfolios. Similarly, shares of
the Portfolios may be purchased and redeemed at their net asset value without
any initial or deferred sales charge by former partners and participants of
Stratford Partners and Nicholas-Applegate Emerging Growth Pooled Trust who
received shares of the Emerging Growth Institutional Portfolio in the
reorganization and conversion of such partnerships and pooled trust into such
Portfolio.

The price paid for purchase and redemption of shares of the Portfolios
is based on the net asset value per share, which is calculated once daily at
the close of trading (currently 4:00 P.M. New York time) each day the New
York Stock Exchange is open. The New York Stock Exchange is currently closed
on weekends and on the following holidays: New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day. The offering price is effective for orders
received by the Transfer Agent prior to the time of determination of net
asset value. Dealers are responsible for promptly transmitting purchase
orders to the Transfer Agent. The Trust reserves the right in its sole
discretion to suspend the continued offering of the Portfolios' 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 Portfolios.

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<PAGE>

REDUCED SALES CHARGES

Sales charges on purchases of Series A Portfolio shares are subject to
a reduction in certain circumstances, as indicated in the Prospectuses for
the Series A Portfolios.

RIGHTS OF ACCUMULATION. Each Series A Portfolio makes available to
its shareholders the ability to aggregate the value (at the current maximum
offering price on the date of the purchase) of their existing holdings of all
Series A Portfolio shares to determine the reduced sales charge, provided the
shares are held in a single account. The value of existing holdings for
purposes of determining the reduced sales charge is calculated using the
maximum offering price (net asset value plus sales charge) as of the previous
business day. The Transfer Agent must be notified at the time of purchase
that the shareholder is entitled to a reduced sales charge. The reduced
sales charges will be granted subject to confirmation of the investor's
holdings.

CONCURRENT PURCHASES. Purchasers may combine concurrent purchases of
shares of two or more Series A Portfolios to qualify for a reduced sales
charge. If the shares of the Portfolios purchased concurrently are subject to
different sales charges, the concurrent purchases are aggregated to determine
the reduced sales charge applicable to each Portfolio purchased, and each
separate reduced sales charge is imposed on the amount of shares purchased
for that Portfolio.

To illustrate, suppose an investor concurrently purchases $40,000 of
the Series A Core Growth Portfolio and $20,000 of the Series A Government
Income Portfolio, for an aggregate concurrent purchase of $60,000. Because
the sales charges are reduced for purchases of $50,000 or more and because
concurrent purchases can be combined, the applicable sales charge imposed on
the $40,000 purchase of shares of the Core Growth Portfolio would be reduced
to 4.50% (from 5.25%), and the sales charge imposed on the concurrent $20,000
purchase of shares of the Government Income Portfolio would be reduced to
4.00% (from 4.75%).

LETTER OF INTENT. Reduced sales charges are available to purchasers
of Series A Portfolio shares who enter into a written Letter of Intent
providing for the purchase, within a 13-month period, of shares of the Series
A Portfolios, provided the shares are held in a single account. All shares
of the Series A Portfolios which were previously purchased and are still
owned are also included in determining the applicable reduction. The Letter
of Intent privilege may be withdrawn by the Distributor or the Transfer Agent
for future purchases upon receipt of information that any shares subject to
the Letter of Intent have been transferred or redeemed during the 13-month
Period.

A Letter of Intent permits a purchaser to establish a total investment
goal to be achieved by any number of investments over a 13-month period.
Each investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. Investors should refer to their Letter of Intent when placing
orders for shares of a Series A Portfolio. During the 13-month period, an
investor may increase his or her Letter of Intent goal and all subsequent
purchases will be treated as a new Letter of Intent except as to the 13-month
period, which does not change. The sales charge paid on purchases made
before the increase to the Letter of Intent goal will be retroactively
reduced at the end of the period.

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<PAGE>

Shares of the Series A Portfolios totaling 5% of the dollar amount of
the Letter of Intent will be held in escrow by the Transfer Agent in the name
of the purchaser. Any dividends and capital gains distributions on the
escrowed shares will be paid to the investor or as otherwise directed by the
investor. The effective date of a Letter of Intent may be back-dated up to 90
days, in order that any investments made during this 90-day period, valued at
the purchaser's cost, can be applied to the fulfillment of the Letter of
Intent goal. Upon completion of the Letter of Intent goal within the
13-month period, the escrowed shares will be promptly delivered to the
investor or as otherwise directed by the investor.

The Letter of Intent does not obligate the investor to purchase, or
any Series A Portfolio to sell, the indicated amount. In the event the
Letter of Intent goal is not achieved within the 13-month period, the
investor is required to pay the difference between the sales charge otherwise
applicable to the purchases made during this period and sales charges
actually paid. Such payment may be made directly to the Transfer Agent or,
if not paid within 20 days after written request, the Transfer Agent will
liquidate sufficient escrowed shares to obtain such difference. If the
redemption or liquidation proceeds are inadequate to cover the differences,
investors will be liable for the extent of the inadequacy. By executing the
Letter of Intent, investors irrevocably appoint the Transfer Agent as
attorney in fact with full power of substitution in the premises to surrender
for redemption any or all escrowed shares. If the goal Letter of Intent is
exceeded in an amount which qualified for a lower sales charge, a price
adjustment is made by refunding to the purchaser the amount of excess sales
charge, if any, paid during the 13-month period.

DEALER COMMISSIONS

The following commissions will be paid by the Distributor to dealers
who initiate and are responsible for purchases of Series A Portfolio shares
of $1 million or more to an investor made over a 12-month period and for
purchases made over a 12-month period at net asset value by qualified
retirement plans of organizations with 50 or more eligible employees. Such
commissions are paid twice monthly at the following annual rates: 1% of the
net asset value of such shares held in the Portfolio to $2,000,000; 0.80% of
the next $3,000,000; 0.50% of the next $20,000,000; and 0.25% of the excess
over $25,000,000. For this purpose, exchanges between Portfolios are not
considered to be purchases, and purchases made by a broker on behalf of a
single client are combined so that the broker's commission is based on the
aggregate amount of such client's purchases of shares over a rolling
twelve-month period from the date of the transaction. The Distributor
reserves the right to require reimbursement of any such commissions paid with
respect to Series A Portfolio shares of qualified retirement plans redeemed
within twelve months after purchase; other investors will be required to pay
a contingent deferred sales charge on such redemptions. Dealers requesting
further information may call (800) 551-8045.

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SHAREHOLDER SERVICES

SHAREHOLDER INVESTMENT ACCOUNT

Upon the initial purchase of shares of a Portfolio, a Shareholder
Investment Account is established for each investor under which the shares
are held for the investor by the Transfer Agent. If a share certificate is
desired, it must be requested in writing for each transaction. Certificates
are issued only for full shares and may be redeposited in the Account at any
time. There is no charge to the investor for issuance of a certificate.
Whenever a transaction takes place in the Shareholder Investment Account, the
shareholder will be mailed a statement showing the transaction and the status
of the Account. No certificates will be issued for shares of the Money
Market or Institutional Portfolios.

AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS

For the convenience of investors, all dividends and distributions are
automatically reinvested in full and fractional shares of the applicable
Portfolio at net asset value. An investor may direct the Transfer Agent in
writing not less than five full business days prior to the record date to
have subsequent dividends and/or distributions sent in cash rather than
reinvested. In the case of recently purchased shares for which registration
instructions have not been received on the record date, cash payment will be
made directly to the dealer. Any shareholder who receives a cash payment
representing a dividend or distribution may reinvest such distribution at net
asset value by returning the check or the proceeds to the Transfer Agent
within 30 days after the payment date. Such investment will be made at the
net asset value per share next determined after receipt of the check or
proceeds by the Transfer Agent.

AUTOMATIC INVESTMENT PLAN

Under the Automatic Investment Plan, an investor may arrange to have a
fixed amount automatically invested in shares of a Portfolio on a monthly or
quarterly basis on any day of the month or quarter by authorizing his or her
bank account to be debited to invest specified dollar amounts in shares of
the Portfolio. The investor's bank must be a member of the Automatic
Clearing House System. Stock certificates are not issued to participants of
the Automatic Investment Plan. Participation in the Plan will begin within
30 days after receipt of the account application. If the investor's bank
account cannot be charged due to insufficient funds, a stop-payment order or
closing of the account, the investor's Plan may be terminated and the related
investment reversed. The investor may change the amount of the investment or
discontinue the Plan at any time by writing to the Transfer Agent. Further
information about this program and an application form can be obtained from
the Transfer Agent or the Distributor.

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS

A shareholder in one Portfolio may elect to cross-reinvest dividends
or dividends and capital gain distributions paid by that Portfolio (the
"paying Portfolio") into any other Portfolio (the "receiving Portfolio")
subject to the following conditions: (i) the aggregate value of the
shareholder's account(s) in the paying Portfolio(s) must equal or exceed
$5,000 (this condition is waived if the value of the account in the receiving
Portfolio equals or exceeds that Portfolio's minimum initial investment
requirement), (ii) as long as the value of the account in

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the receiving Portfolio is below that Portfolio's minimum initial investment
requirement, dividends and capital gain distributions paid by the receiving
Portfolio must be automatically reinvested in the receiving Portfolio, (iii)
there is no cross-reinvestment from a Portfolio of one series to a Portfolio
of another series, and (iv) if this privilege is discontinued with respect to
a particular receiving Portfolio, the value of the account in that Portfolio
must equal or exceed the Fund's minimum initial investment requirement or the
Portfolio will have the right, if the shareholder fails to increase the value
of the account to such minimum within 90 days after being notified of the
deficiency, automatically to redeem the account and send the proceeds to the
shareholder. These cross-reinvestments 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 Portfolio 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.

REDEMPTION IN KIND

The Trust intends to pay in cash for all shares of a Portfolio
redeemed, but when the Master Trust makes payment to a Portfolio in readily
marketable investment securities, the Trust reserves the right to make
payment wholly or partly in shares of such securities. In such cases, a
shareholder may incur brokerage costs in converting such securities to cash.
However, the Trust has elected to be governed by the provisions of Rule 18f-1
under the Investment Company Act, pursuant to which it is obligated to pay in
cash all requests for redemptions by any 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.

INSTITUTIONAL PORTFOLIOS

The services offered by the Trust to shareholders of the Institutional
Portfolios can vary, depending on the needs of the qualified retirement plan
or other institutional investor, and should be arranged by contacting the
Trust, the Distributor, the Administrator or the Transfer Agent.

NET ASSET VALUE

The net asset value of a share of a Portfolio is calculated by
dividing (i) the value of the securities held by the Portfolio (I.E., the
value of its investments in a Fund), plus any cash or other assets, minus all
liabilities (including accrued estimated expenses on an annual basis), by
(ii) the total number of shares of the Portfolio outstanding. The net asset
value of an interest in a Fund is calculated in the same manner. The value
of the investments and assets of the Portfolio or a Fund is determined each
business day.

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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 deemed by the Investment Adviser best to reflect fair value. A
security which is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such
security by the Investment Adviser. Listed securities that are not traded on
a particular day and other over-the-counter securities are valued at the mean
between the closing bid and asked prices.

In the event that the New York Stock Exchange 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 Boards
of Trustees of the Trust and the Master Trust will reconsider the time at
which net asset value is computed. In addition, the asset value of the
Portfolio or the Fund may be computed as of any time permitted pursuant to
any exemption, order or statement of the Commission or its staff.

Long-term debt obligations are valued at the mean of representative
quoted bid and asked prices for such securities or, if such prices are not
available, at prices for securities of comparable maturity, quality and type;
however, when the Investment Adviser deems it appropriate, prices obtained
for the day of valuation from a bond pricing service will be used, as
discussed below. Debt securities with maturities of 60 days or less are
valued at amortized cost if their term to maturity from date of purchase is
less than 60 days, or by amortizing, from the sixty-first day prior to
maturity, their value on the sixty-first day prior to maturity if their term
to maturity from date of purchase by the Portfolio or the Fund is more than
60 days, unless this is determined by the Board of Trustees of the Master
Trust not to represent fair value. Repurchase agreements are valued at cost
plus accrued interest.

U.S. Government securities are traded in the over-the-counter market
and are valued at the mean between the last available bid and asked prices,
except that securities with a demand feature exercisable within one to seven
days are valued at par. Such valuations are based on quotations of one or
more dealers that make markets in the securities as obtained from such
dealers, or on the evaluation of a pricing service.

Options, futures contracts and options thereon, which are traded on
exchanges, are valued at their last sale or settlement price as of the close
of such exchanges or, if no sales are reported, at the mean between the last
reported bid and asked prices. If an options or futures exchange closes
later than 4:00 p.m. New York time, the options or futures traded on it are
valued based on the sale price, or on the mean between the bid and ask
prices, as the case may be, as of 4:00 p.m. New York time.

Trading in securities on foreign securities exchanges and
over-the-counter markets is normally completed well before the close of
business day in New York. In addition, foreign securities trading may not
take place on all business days in New York, and may occur in various foreign
markets on days which are not business days in New York and on which net
asset value is not calculated. The calculation of net asset value may not
take place contemporaneously with the determination of the prices of
portfolio securities used in such

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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 Master 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 1:00 p.m. New York time
or at such other rates as the Investment Adviser may determine to be
appropriate in computing net asset value.

Securities and assets for which market quotations are not readily
available, or for which the Master 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 Master Trust's
Board of Trustees. Such valuations and procedures will be reviewed
periodically by the Board of Trustees.

The Master 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 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 Master 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.

MONEY MARKET PORTFOLIO

The calculation of the net asset value per share of the Money Market
Portfolio, as well as the Money Market Fund, is based upon the penny-rounding
method of pricing pursuant to Rule 2a-7 under the Investment Company Act.
Under the rule, the Money Market Portfolio and its corresponding Fund must
maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase instruments having remaining maturities of 13 months or less only
(25 months or less in the case of U.S. Government securities), and invest
only in securities determined by the Board of Trustees to be of high quality
with minimal credit risks. The net asset value per share of the Money Market
Portfolios and Fund will normally remain constant at $1.00.

The Money Market Fund determines the value of its portfolio securities
by the amortized cost method. This method involves valuing an instrument at
its cost and thereafter assuming a constant amortization to maturity of any
discount or premium regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Money Market Fund would
receive if it sold the instrument. During these periods, the yield to an
existing shareholder may differ somewhat from that which could be obtained
from a similar fund which marks its portfolio securities to market each day.

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TAXES

MASTER TRUST'S TAX STATUS

Each Fund of the Master Trust will be treated as a partnership rather
than as a regulated investment company or a corporation under the Internal
Revenue Code (the "Code"). As a partnership under the Code, any interest,
dividends and gains or losses of the Master Trust attributable to each Fund
will be deemed to have been "passed through" to the Trust and other investors
in such Fund, regardless of whether such interest, dividends or gains have
been distributed by the Fund or such losses have been realized and recognized
by the Trust and other investors. Therefore, to the extent a Fund were to
accrue but not distribute any interest, dividends or gains, the Trust and
other investors in the Fund would be deemed to have realized and recognized
their proportionate shares of interest, dividends, gains or losses realized
and recognized by the Fund without receipt of any corresponding distribution.
However, the Master Trust will seek to minimize recognition by investors in
the Funds of interest, dividends, gains or losses allocable to the Funds
without a corresponding distribution.

REGULATED INVESTMENT COMPANY

The Trust has elected to qualify each Portfolio as a regulated
investment company under Subchapter M of the Code, and intends that each
Portfolio will remain so qualified.

As a regulated investment company, a Portfolio 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 Portfolio (a) derive
at least 90% of its gross income from 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 from options, futures or forward contracts) derived with respect to
its business of investing in such securities or currencies; (b) derive less
than 30% of its 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
Portfolio'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 Portfolio'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 or foreign 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 Portfolio 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
Portfolio must distribute during each calendar year an amount equal to the
sum of (1) at least 98% of its ordinary income and net capital gain (not

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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 Portfolio in October, November, or 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 than 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 Portfolios 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 Portfolio from ordinary income, and distributions
of the Portfolio'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 Portfolios is derived from dividends on common or preferred
stock of domestic corporations. Dividend income earned by a Portfolio will
be eligible for the dividends received deduction only if the Portfolio and
corresponding Fund have satisfied a 46-day holding period requirement 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 its shares in the Portfolio for not less than 46
days (91 days 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 its taxable year, the Portfolio 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.

Under the Code, any distributions designated as being made from net
capital gains are taxable to a Portfolio's shareholders as long-term capital
gains, regardless of the holding period of such shareholders. Such
distributions of net capital gains will be designated by the Portfolio as a
capital gains distribution in a written notice to its shareholders which
accompanies the distribution payment. Any loss on the sale of shares held
for less than six months will be treated as a long-term capital loss for
federal tax purposes to the extent a shareholder receives net capital gain
distributions on such shares. The maximum federal income tax rate applicable
to long-term capital gains is currently 28% for individual shareholders and
35% for corporate shareholders. Dividends and distributions are taxable as
such whether received in cash or reinvested in additional shares of a
Portfolio.

Any loss realized on a sale, redemption or exchange of shares of a
Portfolio by a shareholder will be disallowed to the extent the shares are
replaced within a 61-day period (beginning 30 days before the disposition of
shares). Shares purchased pursuant to the reinvestment of a dividend will
constitute a replacement of shares.

A shareholder who acquires shares of a Portfolio and sells or
otherwise disposes of such shares within 90 days of acquisition may not be
allowed to include certain sales charges incurred in acquiring such shares
for purposes of calculating gain or loss realized upon a sale or exchange of
shares of the Portfolio if the shareholder acquires shares in a Portfolio of

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the Trust pursuant to a reinvestment right that reduces the sales charges in
the subsequent acquisition of shares.

SPECIAL TAX CONSIDERATIONS

U.S. GOVERNMENT OBLIGATIONS. Income received on direct U.S.
Government obligations is exempt from tax at the state level when received
directly and may be exempt, depending on the state, when received by a
shareholder from a Portfolio provided that certain conditions are satisfied.
Interest received on repurchase agreements collateralized by U.S. Government
obligations normally is not exempt from state taxation. The Trust will
inform shareholders annually of the percentage of income and distributions
derived from direct U.S. Government obligations. Shareholders should consult
their tax advisers to determine whether any portion of the income dividends
received from the Portfolio is considered tax exempt in their particular
states.

With respect to investments in STRIPS and CUBES (as defined in the
Appendix) made by the Money Market Fund that are sold at original issue
discount and thus do not make periodic cash interest payments, the Fund and
the Money Market Portfolios will be required to include as part of their
current income the imputed interest on such obligations even though the Fund
and the Portfolios have not received any interest payment on such obligations
during that period. Because the Fund may have to sell portfolio securities to
distribute such imputed income, which may occur at a time when the Investment
Adviser would not have chosen to sell such securities and which may result in
a taxable gain or loss.

SECTION 1256 CONTRACTS. Many of the futures contracts and forward
contracts used by the Funds are "section 1256 contracts." Any gains or
losses on section 1256 contracts are generally credited 60% long-term and 40%
short-term capital gains or losses ("60/40") although gains and losses from
hedging transactions, certain mixed straddles and certain foreign currency
transactions from such contracts may be treated as ordinary in character.
Also, section 1256 contracts held by 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
Portfolios. In addition, losses realized by the Portfolio on positions that
are part of a straddle may be deferred under the straddle rules, rather than
being taken into account in calculating the taxable income for the taxable
year in which such losses are realized. Because only a few regulations
implementing the straddle rules have been promulgated, the tax consequences
of transactions in options, futures and forward contracts to the Portfolio
are not entirely clear. The transactions may increase the amount of
short-term capital gain realized by the Portfolio which is taxed as ordinary
income when distributed to shareholders.

The Portfolios may make one or more of the elections available under
the Code which are applicable to straddles. If the Portfolios make any of
the elections, the amount, character and timing of the recognition of gains
or losses from the affected straddle positions

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will be determined under rules that vary according to the election(s) made.
The rules applicable under certain of the elections operate to accelerate the
recognition of gains or losses from the affected straddle positions.

Because applications of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to the shareholders, and which will be taxed to shareholders as
ordinary income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not engage in such hedging
transactions.

The 30% limit on gains from the disposition of certain options,
futures, and forward contracts held less than three months and the qualifying
income and diversification requirements applicable to the Portfolios' and 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.

SECTION 988 GAINS AND LOSSES. Under the Code, gains or losses
attributable to fluctuations in exchange rates which occur between the time a
Fund accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund actually
collects such receivables or pays such liabilities generally are treated as
ordinary income or loss. Similarly, gains or losses on disposition of debt
securities denominated in a foreign currency and on disposition of certain
futures attributable to fluctuations in the value of the foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. These gains and
losses, referred to under the Code as "section 988" gains or losses, may
increase or decrease the amount of the Portfolio's investment company taxable
income to be distributed to the shareholders.

FOREIGN TAX. Income received by a Fund from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the U.S. may reduce
or eliminate such taxes. In addition, the Investment Adviser intends to
manage the Funds with the intention of minimizing foreign taxation in cases
where it is deemed prudent to do so. If more than 50% of 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 Portfolio's shareholders the amount of foreign income and similar
taxes paid by the Fund. Each shareholder will be notified within 60 days
after the close of the Portfolio'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 pass-through
election is made, the source of the Fund's income will flow through to
shareholders of the Portfolio. With respect to such election, gains from the
sale of

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securities will be treated as derived from U.S. sources and certain currency
fluctuation gains, including fluctuation gains from foreign currency
denominated debt securities, receivables and payables will be treated as
ordinary income derived from U.S. sources. The limitation on the foreign tax
credit is applied 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.

SHORT SALES. Generally, capital gain or loss realized by the Fund in
a short sale may be long-term or short-term depending on the holding period
of the short position. Under a special rule, however, the capital gain will
be short-term gain if (1) as of the date of the short sale, the Fund owned
property for the short-term holding period that was substantially identical
to that which the Fund used to close the sale or (2) after the short sale and
on or before its closing, the Fund acquired substantially similar property.
Similarly, if property substantially identical to that sold short was held by
the Fund for the long-term holding period as of the date of the short sale,
any loss on closing the short position will be long-term capital loss. These
special rules do not apply to substantially similar property to the extent
such property exceeds the property used by the Fund to close its short
position.

ORIGINAL ISSUE DISCOUNT. Some of the debt securities (with a fixed
maturity date of more than one year from the date of issuance) that may be
acquired by the Funds may be treated as debt securities that are issued
originally at a discount. Generally, the amount of the original issue
discount ("OID") is treated as interest income and is included in income over
the term of the debt security, even though payment of that amount is not
received until a later time, usually when the debt security matures. A
portion of the OID includable in income with respect to certain high-yield
corporation debt securities may be treated as a dividend for Federal income
tax purposes.

Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by the Funds in the
secondary market may be treated as having market discount. Generally, any
gain recognized on the disposition of, and any partial payment of principal
on, a debt security having market discount is treated as ordinary income to
the extent the gain, or principal payment, does not exceed the "accrued
market discount" on such debt security. Market discount generally accrues in
equal daily installments. The Funds may make one or more of the elections
applicable to debt securities having market discount, which could affect the
character and timing the recognition of income.

Some of the debt securities (with a fixed maturity date of one year or
less from the date of issuance) that may be acquired by the Funds may be
treated as having an acquisition discount, or OID in the case of certain
types of debt securities. Generally, a Fund will be required to include the
acquisition discount, or OID, in income over the term of the debt security,
even though payment of that amount is not received until a later time,
usually when the debt security matures. The Fund may make one or more of the
elections applicable to the debt securities having acquisition discount, or
OID, which could affect the character and timing of recognition of income.

The Portfolios generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includible in income, even though cash

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<PAGE>

representing such income may not have been received by the Funds. Cash to
pay such dividends may be obtained from sales proceeds of securities held by
the Funds.

OTHER TAX INFORMATION

The Portfolios may be required to withhold for U.S. federal income
taxes 31% of all taxable distributions payable to shareholders who fail to
provide the Portfolios with their correct taxpayer identification number or
to make required certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding. Corporate
shareholders and certain other shareholders specified in the Code generally
are exempt from such backup withholding. Backup withholding is not an
additional tax. Any amounts withheld may be credited against the
shareholder's U.S. federal tax liability.

The Trust may also be subject to state or local taxes in certain other
states where it is deemed to be doing business. Further, in those states
which have income tax laws, the tax treatment of the Trust and of
shareholders of a Portfolio with respect to distributions by the Portfolio
may differ from federal tax treatment. Distributions to shareholders may be
subject to additional state and local taxes. Shareholders should consult
their own tax advisers regarding specific questions as to federal, state or
local taxes.

PERFORMANCE INFORMATION

The Trust may from time to time advertise total returns and yields for
the Portfolios, compare Portfolio performance to various indices, and publish
rankings of the Portfolios prepared by various ranking services. Any
performance information should be considered in light of the Portfolio's and
Fund's investment objectives and policies, characteristics and quality of the
its portfolio, and the market conditions during the given time period, and
should not be considered to be representative of what may be achieved in the
future.

TOTAL RETURN

The total return for a Portfolio is computed by assuming a
hypothetical initial payment of $1,000. It is assumed that all investments
are made at net asset value (as opposed to market price) and that all of the
dividends and distributions by the Portfolio 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

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<PAGE>

payment to grow to the amount which would have 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:

n
P(1 + T) = 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.

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<PAGE>

YIELD

The yield for a Portfolio (other than the Money Market Portfolios) is
calculated based on a 30-day or one-month period, according to the following
formula:

6
Yield = 2[{a - b + 1) -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 following Portfolios for the thirty-day period ended
June 30, 1996 were as follows:

Income & Growth Portfolio A 2.3701%
Income & Growth Portfolio B 1.8765%
Income & Growth Portfolio C 1.8604%
Income & Growth Institutional
Portfolio 3.1004%
Balanced Growth Portfolio A 1.4884%
Balanced Growth Portfolio B 0.9636%
Balanced Growth Portfolio C 0.9390%
Balanced Growth Institutional
Portfolio 2.1822%
Government Income Portfolio A 5.5250%
Government Income Portfolio B 5.5145%
Government Income Portfolio C 5.4359%

The Money Market Portfolio will prepare a current quotation of yield
daily. The yield quoted will be the simple annualized yield for an
identified seven-calendar-day period. The yield calculation will be based on
a hypothetical account having a balance of exactly one share at the beginning
of the seven-day period. The base return will be the change in the value of
the hypothetical account during the seven-day period, including dividends
declared on any shares purchased with dividends on the shares, but excluding
any capital changes. The yield will vary as interest rates and market
conditions change. Yield also depends on the quality, length of maturity and
type of instruments in the Money Market Fund, and its operating expenses.
The Money Market Portfolio may also prepare an effective annual yield
computed by compounding the unannualized seven-day period return as follows:
by adding 1 to the unannualized seven-day period return, raising the sum to a
power equal to 365 divided by 7, and subtracting 1 from the result. The
yield for the Money Market Portfolio for the seven days ended June 30, 1996
was ___%.

COMPARISON TO INDICES AND RANKINGS

Performance information for a Portfolio may be compared to various
unmanaged indices, such as the Standard & Poor's 500 Stock Price Index, the Dow
Jones Industrial Average, the IFC Emerging Markets Investible Index, the MSCI
Emerging Markets Free Index,

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<PAGE>

and indices prepared by Lipper Analytical Services. Unmanaged indices (i.e.,
other than Lipper) generally do not reflect deductions for administrative and
management costs and expenses.

Performance rankings are prepared by a number of mutual fund ranking
entities that are independent of the Trust and its affiliates. These
entities categorize and rank funds by various criteria, including fund type,
performance over a given period of years, total return, standardized yield,
variations in sales charges and risk\reward considerations.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
INDEPENDENT AUDITORS AND LEGAL COUNSEL

PNC Bank, Airport Business Center, International Court 2, 200 Stevens
Drive, Lester, Pennsylvania 19113, serves as Custodian for the portfolio
securities and cash of the Portfolios and Funds and in that capacity
maintains certain financial and accounting books and records pursuant to
agreements with the Trust and Master Trust. PFPC Inc., 103 Bellevue Parkway,
Wilmington, Delaware, an affiliate of the Custodian, provides additional
accounting services to the Portfolios and Funds.

State Street Bank and Trust Company, 2 Heritage Drive, 7th Floor,
North Quincy, Massachusetts, 02171, serves as the Dividend Disbursing Agent
and as the Transfer Agent for the Portfolios and 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.

The following act as sub-transfer agents for the Portfolios:
Financial Data Services, Inc., 4800 Deer Lake Drive, 2nd Floor, Jacksonville,
Florida 32246; and William M. Mercer Plan Participant Services, Inc., 1417
Lake Cook Road, Deerfield, Illinois 60015.

Ernst & Young, L.L.P., 515 South Flower Street, Los Angeles,
California 90071, serves as the independent auditors for the Trust and
Master Trust, and in that capacity examines the annual financial statements
of the Trust and Master Trust.

Paul, Hastings, Janofsky & Walker, 555 South Flower Street, Los
Angeles, California 90071, is legal counsel for the Trust and Master Trust.
It also acts as legal counsel for the Investment Adviser and Distributor.

MISCELLANEOUS

SHARES OF BENEFICIAL INTEREST

The Trust is currently comprised of 45 series of shares -- 8 A
Portfolios, 8 B Portfolios, 8 C Portfolios, 12 Institutional Portfolios, one
Money Market Portfolio, and 8 Qualified Portfolios.

On any matter submitted to a vote of shareholders of the Trust, all
shares then entitled to vote will be voted by the affected Portfolio(s) unless
otherwise required by the

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<PAGE>

Investment Company Act, in which case all shares of the Trust will be voted
in the aggregate. For example, a change in a Portfolio's fundamental
investment policies would be voted upon only by shareholders of that
Portfolio, as would the approval of any advisory or distribution contract for
the Portfolio. 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 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an
investment company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by a majority of the outstanding
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 Portfolio 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 Portfolio.

As used in the Portfolios' prospectuses and in this Statement of
Additional Information, the term "majority," when referring to approvals to
be obtained from shareholders of a Portfolio, means the vote of the lesser of
(i) 67% of the shares of the Portfolio represented at a meeting if the
holders of more than 50% of the outstanding shares of the Portfolio are
present in person or by proxy, or (ii) more than 50% of the outstanding
shares of the Portfolio. The term "majority," when referring to the approvals
to be obtained from shareholders of the Trust, means the vote of the lesser
of (i) 67% of the Trust's shares represented at a meeting if the holders of
more than 50% of the Trust's outstanding shares are present in person or by
proxy, or (ii) more than 50% of the Trust's outstanding shares. 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.

Whenever a Portfolio or the Trust is requested to vote on a matter
with respect to the Master Trust, the Trust will hold a meeting of its
shareholders and will cast its votes as instructed by such shareholders and,
in the case of a matter affecting only a Fund, as instructed by the
shareholders of the corresponding Portfolio(s).

The Trust will dispense with 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 a Portfolio represents an equal proportional interest in
the Portfolio with each other share and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the
Portfolio as are declared in the discretion of the Trustees. In the event of
the liquidation or dissolution of the Trust, shareholders of a Portfolio are
entitled to receive the assets attributable to the Portfolio that are
available for distribution, and a

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<PAGE>

distribution of any general assets not attributable to a particular Portfolio
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.

DECLARATIONS OF TRUST

In accordance with Delaware law and in connection with the tax
treatment sought by the Master Trust, the Master Trust's Declaration of Trust
provides that its investors will be personally and jointly and severally
responsible (with rights of contribution inter se in proportion to their
respective ownership interests in the Master Trust) for the Master Trust's
liabilities and obligations in the event that the Master Trust fails to
satisfy such liabilities and obligations. However, to the extent assets are
available from the Master Trust, the Master Trust will indemnify each
investor from any claim or liability to which the investor may become subject
solely by reason of his or her having been an investor, and will reimburse
the investor for all legal and other expenses reasonably incurred by him or
her in connection with any such claim or liability.

The Declarations of Trust of both the Trust and Master Trust provide
that obligations of the Trust and the Master Trust are not binding upon their
respective Trustees, officers, employees and agents individually and that the
Trustees, officers, employees and agents will not be liable to the trusts or
their respective investors for any action or failure to act, but nothing in the
Declarations of Trust protect a Trustee, officer, employee or agent against any
liability to the trusts or their respective 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 Declarations of Trust also provide that the debts, liabilities,
obligations and expenses incurred, contracted for or existing with respect to a
designated Portfolio or Fund shall be enforceable against the assets and
property of such Portfolio or Fund only (and, in the case of a Fund, its
investors), and not against the assets or property of any other Portfolio or
Fund (or in the case of a Portfolio, the investors therein).

FINANCIAL STATEMENTS

The Trust's 1996 Annual Reports to Shareholders of the Portfolios
accompany this Statement of Additional Information. The financial statements
in such Annual Reports are incorporated in this Statement of Additional
Information by reference. Such financial statements for the fiscal year
ended March 31, 1996 have been audited by the Fund's independent auditors,
Ernst & Young L.L.P., whose reports thereon appear in such Annual Reports and
are incorporated herein by reference. Such financial statements for prior
periods have been audited by Coopers & Lybrand L.L.P., whose reports thereon
appear in the Trust's 1995 Annual Reports to Shareholders of the Portfolios
and are incorporated herein by reference. Such financial statements have
been incorporated herein in reliance upon such reports given upon their
authority as experts in accounting and auditing. Additional copies of the
Trust's 1996 Annual Reports to Shareholders may be obtained at no charge by
writing or telephoning the Trust at the address or number on the front page
of this Statement of Additional Information.

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<PAGE>

REGISTRATION STATEMENT

The Registration Statement of the Trust and the Master Trust,
including the Portfolios' Prospectuses, the Statements of Additional
Information and the exhibits filed therewith, may be examined at the office
of the Commission in Washington, D.C. Statements contained in the
Portfolios' Prospectuses or the Statements of Additional Information as to
the contents of any contract or other document referred to herein or in the
Prospectuses are not necessarily complete, and, in each instance, reference
is made to the copy of such contract or other document filed as an exhibit to
these Registration Statements, each such statement being qualified in all
respects by such reference.

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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 Master Trust, are
opinions of the ability of 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.

A-1

<PAGE>

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 the 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-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 having only 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.

A-2

<PAGE>

FITCH INVESTORS SERVICE, 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 quality. Commercial paper assigned this rating has
a satisfactory degree of assurance for timely payment but the margin of
safety is not as great as for 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 of Duff & Phelps for investment grade
commercial paper are "Duff 1," "Duff 2" and "Duff 3." Duff & Phelps employs
three designations, "Duff 1+," Duff 1" and "Duff 1-," within the highest
rating category. The following summarizes the rating categories used by Duff
& Phelps for commercial paper:

DUFF 1+ - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.

DUFF 1 - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.

DUFF 1- - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors.
Risk factors are very small.

DUFF 2 - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs
may enlarge total financing requirements, access to capital markets is good.
Risk factors are small.

DUFF 3 - Debt possesses satisfactory liquidity, and other protection
factors qualify issue as investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is expected.

DUFF 4 - Debt possesses speculative investment characteristics.

DUFF 5 - Issuer has failed to meet scheduled principal and/or interest
payments.

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:

A-3
<PAGE>

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

MOODY'S

Moody's corporate bond ratings are opinions of the relative investment
qualities of bonds. Moody's employs nine designations to indicate such
relative qualities, ranging from "Aaa" for the highest quality obligations to
"C" for the lowest. Issues are further refined with the designation 1,2, and
3 to indicate the relative ranking within designations. Bonds with the
following Moody's ratings have the following investment qualities:

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

Aa: Bonds in this category are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally
known as high grade bonds.

A-4

<PAGE>

They are rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

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

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

Caa: Bonds in this category 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 in this category represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcoming.

C: Bonds in this category are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

STANDARD & POOR'S

A Standard & Poor's corporate debt rating is a current assessment of
the creditworthiness of an obligor with respect to a specific obligation.
Ratings are graded into ten categories, ranging from "AAA" for the highest
quality obligation to "D" for debt in default. Issues are further refined
with a "PLUS" or "MINUS" sign to show relative standing within the
categories. Bonds with the following Standard & Poor's ratings have the
following investment qualities:

AAA: Bonds in this category have the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal is extremely
strong.

AA: Bonds in this category have a very strong capacity to pay
interest and repay principal and differ from the higher rated issues only in
small degree.

A-5

<PAGE>

A: Bonds in this category have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher rated categories.

BBB: Bonds in this category have an adequate capacity to pay interest
and repay principal. Whereas such issues normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher-rated categories.

BB: Bonds in this category have less near-term vulnerability to
default than other speculative issues. However, they face 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: Bonds in this category have a greater vulnerability to default but
currently have the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. The "B"
rating is also used for debt subordinated to senior debt that is assigned an
actual or implied "BB" or "BB-" rating.

CCC: Bonds in this category have currently identifiable vulnerability
to default, and are 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, they are
not likely to have the capacity to pay interest and repay principal. The
"CCC" rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied "B" or "B-" rating.

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

DUFF & PHELPS

The following summarizes the ratings used by Duff & Phelps for
corporate and municipal long-term debt:

AAA - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.

AA - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because
of economic conditions.

A - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.

BBB - Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.

A-6

<PAGE>

BB, B, CCC, DD, AND DP - Debt that possesses one of these ratings is
considered to be below investment grade. Although below investment grade,
debt rated "BB" is deemed likely to meet obligations when due. Debt rated
"B" possesses the risk that obligations will not be met when due. Debt rated
"CCC" is well below investment grade and has considerable uncertainty as to
timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.

To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.

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 - Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.

BB, B, CCC, CC, C, DDD, DD, AND D - Bonds that possess one of these
ratings are considered by Fitch to be speculative investments. The ratings
"BB" to "C" represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating "DDD" to "D" is an
assessment of the ultimate recovery value through reorganization or
liquidation.

To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "C" may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major
rating categories.

A-7

<PAGE>

ICBA

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.

AA - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions
may increase investment risk albeit not very significantly.

A - Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic or financial conditions may
lead to increased investment risk.

BBB - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial
conditions are more likely to lead to increased investment risk than for
obligations in higher categories.

BB, B, CCC, CC, AND C - Obligations are assigned one of these ratings
where it is considered that speculative characteristics are present. "BB"
represents the lowest degree of speculation and indicates a possibility of
investment risk developing. "C" represents the highest degree of speculation
and indicates that the obligations are currently in default.

IBCA may append a rating of plus (+) or minus (-) to a rating to
denote relative status within major rating categories.

THOMSON BANKWATCH

Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and
preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The
following summarizes the rating categories used by Thomson BankWatch for
long-term debt ratings:

AAA - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is very high.

AA - This designation indicates a superior ability to repay principal
and interest on a timely basis with limited incremental risk versus issues
rated in the highest category.

A-8

<PAGE>

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
payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.

D - This designation indicates that the long-term debt is in default.

PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.

A-9

<PAGE>

NICHOLAS-APPLEGATE MUTUAL FUNDS

FORM N-1A

PART C: OTHER INFORMATION

Item 24. FINANCIAL STATEMENTS AND EXHIBITS.

a. Financial Statements:

Registrant's Schedules of Investments as of March 31, 1996, Statements
of Assets and Liabilities as of March 31, 1996, Statements of
Operations for the fiscal year ended March 31, 1996, Statements of
Changes in Net Assets for the fiscal years ended March 31, 1995 and
1996, related Notes, and Independent Auditors' Reports dated May 10,
1996, with respect to the Portfolios are included as part of
Registrant's Annual Reports to Shareholders for the fiscal year
ended March 31, 1996, incorporated by reference in Part B.

b. Exhibits:

(1.1) Certificate of Trust of Registrant.

(1.2) Certificate of Amendment to Certificate of Trust of
Registrant.

(1.3) Amended and Restated Declaration of Trust of Registrant.

(1.4) Certificate of Trustees dated August 6, 1993, establishing
Emerging Growth Portfolio series.

(1.5) Certificate of Trustees dated December 15, 1993,
establishing International Growth Portfolio series.

(1.6) Amendment No. 2 to Amended and Restated Declaration of
Trust.

(1.7) Amendment No. 3 to Amended and Restated Declaration of
Trust.

(1.8) Amendment No. 4 to Amended and Restated Declaration of
Trust.

(1.9) Amendment No. 5 to Amended and Restated Declaration of
Trust.

(1.10) Amendment No. 6 to Amended and Restated Declaration of
Trust.

(1.11) Amendment No. 7 to Amended and Restated Declaration of
Trust.

(1.12) Form of Amendment No. 8 to Amended and Restated Declaration
of Trust.

(1.13) Amendment No. 9 to Amended and Restated Declaration of
Trust.

(1.14) Form of Amendment No. 10 to Amended and Restated Declaration
of Trust (b).

(2.1) Amended Bylaws of Registrant.

(2.2) Amendment to Section 2.5 of Bylaws of Registrant.

C-1

<PAGE>

(3) None.

(4) None.

(5) None.

(6.1) Distribution Agreement between Registrant and Nicholas-
Applegate Securities dated as of April 19, 1993.

(6.2) Letter agreement between Registrant and Nicholas-Applegate
Securities dated May 17, 1993, adding certain Institutional
(formerly Qualified) Portfolio series and Emerging Growth
Portfolio series to Distribution Agreement.

(6.3) Letter agreement between Registrant and Nicholas-Applegate
Securities dated December 15, 1993, adding International
Growth Portfolio series to Distribution Agreement.

(6.4) Letter agreement between Registrant and Nicholas-Applegate
Securities dated April 22, 1994, adding Qualified Portfolio
series to Distribution Agreement.

(6.5) Letter agreement between Registrant and Nicholas-Applegate
Securities, adding Emerging Countries Growth Portfolio
series, Global Growth & Income Portfolio series and Mini-Cap
Growth Portfolio series to Distribution Agreement.

(6.6) Letter agreement between Registrant and Nicholas-Applegate
Securities, adding Series B Portfolios to Distribution
Agreement.

(6.7) Letter agreement between Registrant and Nicholas-Applegate
Securities, adding Fixed Income and Qualified Portfolio
series to Distribution Agreement.

(6.8) Form of letter agreement between Registrant and Nicholas-
Applegate Securities, adding Value Institutional Portfolio
series to Distribution Agreement (a).

(6.9) Form of letter agreement between Registrant and Nicholas-
Applegate Securities, adding High Yield Bond and Strategic
Income Institutional Portfolio series to Distribution
Agreement (b).

(7) None.

(8.1) Custodian Services Agreement between Registrant and PNC Bank
dated as of April 1, 1993.

(8.2) Letter agreement between Registrant and PNC Bank dated July
19, 1993, adding certain Institutional (formerly Qualified)
Portfolio series to Custodian Services Agreement.

(8.3) Letter agreement between Registrant and PNC Bank dated
August 20, 1993, adding Emerging Growth Portfolio series to
Custodian Services Agreement.

(8.4) Letter agreement between Registrant and PNC Bank dated
December 15, 1993, adding International Growth Portfolio
series to Custodian Services Agreement.

(8.5) Letter agreement between Registrant and PNC Bank dated April
22, 1994, adding Core Growth Qualified Portfolio series to
Custodian Services Agreement.

(8.6) Letter agreement between Registrant and PNC Bank, adding
Emerging Countries Growth Portfolio series, Global Growth &
Income Portfolio series and Mini-Cap Growth Portfolio series
to Custodian Services Agreement.

C-2

<PAGE>

(8.7) Letter agreement between Registrant and PNC Bank, adding
Series B Portfolios to Custodian Services Agreement.

(8.8) Letter agreement between Registrant and PNC Bank, adding
Fixed Income Portfolio series to Custodian Services
Agreement.

(8.9) Form of letter agreement between Registrant and PNC Bank
adding Value Institutional Portfolio series to Custodian
Services Agreement (a).

(8.10) Form of letter agreement between Registrant and PNC Bank
adding High Yield Bond and Strategic Income Institutional
Portfolio series to Custodian Services Agreement (b).

(9.1) Administration Agreement between Registrant and Investment
Company Administration Corporation dated as of April 1,
1993.

(9.2) Transfer Agency and Service Agreement between Registrant and
State Street Bank and Trust Company dated as of April 1,
1993.

(9.3) Letter agreement between Registrant and State Street Bank
and Trust Company dated July 19, 1993, adding certain
Institutional (formerly Qualified) Portfolio series to
Transfer Agency and Service Agreement.

(9.4) Letter agreement between Registrant and State Street Bank
and Trust Company dated August 20, 1993, adding Emerging
Growth Portfolio Series to Transfer Agency and Service
Agreement.

(9.5) Letter agreement between Registrant and State Street Bank
and Trust Company dated December 15, 1993, adding
International Growth Portfolio series to Transfer Agency and
Service Agreement.

(9.6) Letter agreement between Registrant and State Street Bank
and Trust Company dated April 22, 1994, adding Core Growth
Qualified Portfolio series to Transfer Agency and Service
Agreement.

(9.7) Letter agreement between Registrant and State Street Bank
and Trust Company, adding Emerging Countries Growth
Portfolio series, Global Growth & Income Portfolio series
and Mini-Cap Growth Portfolio series to Transfer Agency and
Service Agreement.

(9.8) Letter agreement between Registrant and State Street Bank
and Trust Company, adding Series B Portfolios to Transfer
Agency and Service Agreement.

(9.9) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Fixed Income Portfolio series
to Transfer Agency and Service Agreement.

(9.10) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Value Institutional Portfolio
series to Transfer Agency and Service Agreement (a).

(9.11) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding High Yield Bond and Strategic
Income Institutional Portfolio series to Transfer Agency and
Service Agreement (b).

(9.12) Shareholder Service Plan between Registrant and Nicholas-
Applegate Securities.

(9.13) License Agreement dated as of December 17, 1992, between
Registrant and Nicholas-Applegate Capital Management.

C-3

<PAGE>

(9.14) Accounting Services Agreement between Registrant and PFPC
Inc. dated as of April 1, 1993.

(9.15) Letter agreement between Registrant and PFPC Inc. dated July
19, 1993, adding certain Institutional (formerly Qualified)
Portfolio series to Accounting Services Agreement.

(9.16) Letter agreement between Registrant and PFPC Inc. dated
August 20, 1993, adding Emerging Growth Portfolio series to
Accounting Services Agreement.

(9.17) Letter agreement between Registrant and PFPC Inc. dated
December 15, 1993, adding International Growth Portfolio
series to Accounting Services Agreement.

(9.18) Letter agreement between Registrant and PFPC Inc. dated
April 22, 1994, adding Core Growth Qualified Portfolio
series to Accounting Services Agreement.

(9.19) Letter agreement between Registrant and PFPC Inc., adding
Emerging Countries Growth Portfolio series, Global Growth &
Income Portfolio series and Mini-Cap Growth Portfolio series
to Accounting Services Agreement.

(9.20) Letter agreement between Registrant and PFPC Inc., adding
Series B Portfolios to Accounting Services Agreement.

(9.21) Letter agreement between Registrant and PFPC Inc., adding
Fixed Income Portfolio series to Accounting Services
Agreement.

(9.22) Form of letter agreement between Registrant and PFPC, Inc.
adding Value Institutional Portfolio series to Accounting
Services Agreement (a).

(9.23) Form of letter agreement between Registrant and PFPC, Inc.
adding High Yield Bond and Strategic Income Institutional
Portfolio series to Accounting Services Agreement (b).

(9.24) Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated September 27, 1993 regarding
expense reimbursements.

(9.25) Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated December 15, 1993, adding
International Growth Portfolio series to agreement regarding
expense reimbursements.

(9.26) Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated April 22, 1994, adding Qualified
Portfolio series to agreement regarding expense
reimbursements.

(9.27) Letter agreement between Registrant and Nicholas-Applegate
Capital Management, adding Emerging Growth Institutional
Portfolio series, Global Growth & Income Portfolio series
and Mini-Cap Growth Portfolio series to agreement regarding
expense reimbursements.

(9.28) Letter agreement between Registrant and Nicholas-Applegate
Capital Management, adding Series B Portfolios to agreement
regarding expense reimbursement.

(9.29) Letter agreement between Registrant and Nicholas-Applegate
Capital Management, adding Qualified and Fixed Income
Portfolio series to agreement regarding expense
reimbursement.

(9.30) Letter agreement between Registrant and Nicholas-Applegate
Capital Management revising expense reimbursement agreement
with respect to Government Income Portfolios.

(9.31) Form of letter agreement between Registrant and Nicholas-
Applegate Capital Management, adding Value Institutional
Portfolio series to agreement regarding expense
reimbursement (a).

C-4

<PAGE>

(9.32) Form of letter agreement between Registrant and Nicholas-
Applegate Capital Management, adding High Yield Bond and
Strategic Income Institutional Portfolio series to agreement
regarding expense reimbursement (b).

(9.33) Credit Agreement among Registrant, Chemical Bank and certain
other banks dated April 10, 1996.

(10) Opinion of Counsel (c).

(11.1) Consent of Coopers & Lybrand L.L.P.

(11.2) Consent of Ernst & Young L.L.P.

(12) Not applicable.

(13) Investment Letter of initial investor in Registrant dated
April 1, 1993.

(14.1) IRA Plan Materials (d).

(14.2) 401(k) Profit-Sharing Plan Materials (d).

(15) Amended Distribution Plan of Registrant.

(16) Schedule of Computation of Performance Quotations (c).

(17) Financial Data Schedules (g).

(18.1) Limited Powers of Attorney of Trustees (d).

(18.2) Limited Power of Attorney of Walter E. Auch (e).

(18.3) Limited Power of Attorney of John D. Wylie (f).

(18.4) Certified Resolution of Board of Trustees of Registrant
regarding Limited Power of Attorney of John D. Wylie.

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

(a) Filed as an Exhibit to Amendment No. 28 to Registrant's Form N-1A
Registration Statement on January 19, 1996 and incorporated herein by
reference.

(b) Filed as an Exhibit to Amendment No. 29 to Registrant's Form N-1A
Registration Statement on May 3, 1996 and incorporated herein by reference.

(c) Filed as an Exhibit to Amendment No. 1 to Registrant's Form N-1A
Registration Statement on March 15, 1993 and incorporated herein by
reference.

(d) 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.

(e) 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.

(f) Filed as an Exhibit to Amendment No. 27 to Registrant's Form N-1A
Registration Statement on January 19, 1996 and incorporated herein by
reference.

C-5

<PAGE>

(g) Filed as an Exhibit to Registrant's Form N-SAR Report on May 29, 1996 and
incorporated herein by reference.

Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Fred C. Applegate, Arthur B. Laffer and Charles E. Young, members of
the Board of Trustees of Registrant, are also three of the seven members of the
Board of Directors of Nicholas-Applegate Fund, Inc., a registered investment
company. Accordingly, Registrant and Nicholas-Applegate Fund, Inc. may be
deemed to be under common control.

C-6

<PAGE>

Item 26. NUMBER OF HOLDERS OF SECURITIES.

As of March 31, 1996, the number of record holders of each series of
Registrant was as follows:

Title of Series Number of Record Holders
--------------- ------------------------

Core Growth Portfolio A 6,152
Emerging Growth Portfolio A 473
Income & Growth Portfolio A 1,880
Balanced Growth Portfolio A 536
International Growth Portfolio A 77
Worldwide Growth Portfolio 1,756
Government Income Portfolio 110
Emerging Countries Portfolio A 473
Money Market Portfolio 124
Core Growth Portfolio B 942
Emerging Growth Portfolio B 1,058
Income & Growth Portfolio B 128
Balanced Growth Portfolio B 56
International Growth Portfolio B 94
Worldwide Growth Portfolio B 152
Government Income Portfolio B 13
Emerging Countries Portfolio B 338
Core Growth Portfolio C 14,347
Emerging Growth Portfolio C 16,309
Income & Growth Portfolio C 5,216
Balanced Growth Portfolio C 1,316
Worldwide Growth Portfolio C 5,905
International Growth Portfolio C 136
Government Income Portfolio C 266
Emerging Countries Portfolio C 399
Core Growth Institutional Portfolio 173
Emerging Growth Institutional Portfolio 159
Income & Growth Institutional Portfolio 104
Balanced Growth Institutional Portfolio 21
Worldwide Growth Institutional Portfolio 74
International Growth Institutional Portfolio 59
Emerging Countries Institutional Portfolio 75
Mini-Cap Growth Institutional Portfolio 70
Fully Discretionary Institutional Fixed Income Portfolio 11
Short-Intermediate Institutional Fixed Income Portfolio 10
Core Growth Qualified Portfolio 15
Income & Growth Qualified Portfolio 9
Balanced Growth Qualified Portfolio 9
Worldwide Growth Qualified Portfolio 9
Government Income Qualified Portfolio 9
Emerging Growth Qualified Portfolio 6
International Growth Qualified Portfolio 9
Emerging Countries Qualified Portfolio 7

Item 27. INDEMNIFICATION.

Registrant's trustees, officers, employees and agents against
liabilities incurred by them in connection with the defense or disposition of
any action or proceeding in which they may be involved or with which they may be
threatened, while in office or thereafter, by reason of being or having been in
such office, except with respect to

C-7

<PAGE>

matters as to which it has been determined that they acted with willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their office ("Disabling Conduct").

Section 8 of Registrant's Administration Agreement, filed herewith as
Exhibit 9.1, provides for the indemnification of Registrant's Administrator
against all liabilities incurred by it in performing its obligations under the
Agreement, except with respect to matters involving its Disabling Conduct.
Section 9 of Registrant's Distribution Agreement, filed herewith as Exhibit 6,
provides for the indemnification of Registrant's Distributor against all
liabilities incurred by it in performing its obligations under the Agreement,
except with respect to matters involving its Disabling Conduct. Section 4 of
the Shareholder Service Agreement, filed herewith as Exhibit 9.3, provides for
the indemnification of Registrant's Distributor against all liabilities incurred
by it in performing its obligations under the Agreement, except with respect to
matters involving its Disabling Conduct.

Registrant has obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and omissions.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

Nicholas-Applegate Capital Management, the investment adviser to the
Master Trust, is a California limited partnership, the general partner of which
is Nicholas-Applegate Capital Management, Inc. (the "General Partner"). During
the two fiscal years ended December 31, 1995 Nicholas-Applegate Capital
Management has engaged principally in the business of providing investment
services to institutional and other clients. All of the additional information
required by this Item 28 with respect to the Investment Adviser is set forth in
the Form ADV, as amended, of Nicholas-Applegate Capital Management (File No.
801-21442), which is incorporated herein by reference.

Item 29. PRINCIPAL UNDERWRITERS.

(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 Portfolios, is a California limited partnership and its general
partner is Nicholas-Applegate Capital Management Holdings, L.P. (the "General
Partner"). Information is furnished below with respect to the officers,
partners and directors of the General Partner and

C-8

<PAGE>

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.

Positions and Positions and
Name and Principal Offices with Principal Offices with
Business Address Underwriter Registrant
- ------------------ ----------- -------------

<S> <C> <C>
Arthur E. Nicholas Chairman and President None

Peter J. Johnson Vice President Vice President

Thomas Pindelski Chief Financial Officer Chief Financial Officer

E. Blake Moore, Jr. Secretary Secretary

Todd Spillane Director of Compliance None
</TABLE>

Item 30. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 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 to
the Trust and Master Trust, Nicholas-Applegate Capital Management (600 West
Broadway, 30th Floor, San Diego, California 92101); the Administrator for the
Trust and Master Trust, Investment Company Administration Corporation (4455 East
Camelback Road, Suite 261-E, Phoenix, Arizona 85018); the Custodian, PNC Bank
(Airport Business Center, International Court 2, 200 Stevens Drive, Lester,
Pennsylvania 19113); or the Transfer and Dividend Disbursing Agent, State Street
Bank & Trust Company (2 Heritage Drive, 7th Floor, North Quincy, Massachusetts
02171).

Item 31. MANAGEMENT SERVICES.

Not Applicable.

Item 32. UNDERTAKINGS.

Registrant hereby undertakes that if it is requested by the holders of
at least 10% of its outstanding shares to call a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee, it will do so and
will assist in communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.

Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders, upon request and without charge.

C-9

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California, on the 31st day
of May, 1996.

NICHOLAS-APPLEGATE MUTUAL FUNDS

By John D. Wylie*
--------------------------------
John D. Wylie
President

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
<S> <C> <C>
John D. Wylie* Principal Executive Officer May 31, 1996
- ------------------------------
John D. Wylie

S/Thomas Pindelski Principal Financial and
- ------------------------------ Accounting Officer May 31, 1996
Thomas Pindelski

Fred C. Applegate* Trustee May 31, 1996
- ------------------------------
Fred C. Applegate

Arthur B. Laffer* Trustee May 31, 1996
- ------------------------------
Arthur B. Laffer

Charles E. Young* Trustee May 31, 1996
- ------------------------------
Charles E. Young

*S/E. Blake Moore, Jr.
- ------------------------------
By: E. Blake Moore, Jr.
Attorney In Fact
</TABLE>

C-10

<PAGE>

SIGNATURES

Nicholas-Applegate Investment Trust has duly caused this Amendment to
Registration Statement on Form N-1A of Nicholas-Applegate Mutual Funds to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of San Diego, State of California, on the 31st day of May, 1996.

NICHOLAS-APPLEGATE INVESTMENT TRUST

By John D. Wylie*
--------------------------------
John D. Wylie
President

This Amendment to Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
<S> <C> <C>
John D. Wylie* Principal Executive Officer May 31, 1996
- ------------------------------
John D. Wylie

S/Thomas Pindelski Principal Financial
- ------------------------------ and Accounting Officer May 31, 1996
Thomas Pindelski

George F. Keane* Trustee May 31, 1996
- ------------------------------
George F. Keane

Dann V. Angeloff* Trustee May 31, 1996
- ------------------------------
Dann V. Angeloff

Walter E. Auch* Trustee May 31, 1996
- ------------------------------
Walter E. Auch

Theodore J. Coburn* Trustee May 31, 1996
- ------------------------------
Theodore J. Coburn

Darlene DeRemer* Trustee May 31, 1996
- ------------------------------
Darlene DeRemer

Arthur E. Nicholas* Trustee May 31, 1996
- ------------------------------
Arthur E. Nicholas

*S/E. Blake Moore, Jr.
- ------------------------------
By: E. Blake Moore, Jr.
Attorney in Fact
</TABLE>

C-11
<PAGE>

EXHIBIT INDEX
-------------
NICHOLAS-APPLEGATE MUTUAL FUNDS
AMENDMENT NO. 32 TO
FORM N-1A REGISTRATION STATEMENT
FILE NO. 811-7428

EXHIBIT NO. TITLE OF EXHIBIT
----------- ----------------

(1.1) Certificate of Trust of Registrant.

(1.2) Certificate of Amendment to Certificate of Trust of
Registrant.

(1.3) Amended and Restated Declaration of Trust of
Registrant.

(1.4) Certificate of Trustees dated August 6, 1993,
establishing Emerging Growth Portfolio series.

(1.5) Certificate of Trustees dated December 15, 1993,
establishing International Growth Portfolio series.

(1.6) Amendment No. 2 to Amended and Restated Declaration of
Trust.

(1.7) Amendment No. 3 to Amended and Restated Declaration of
Trust.

(1.8) Amendment No. 4 to Amended and Restated Declaration of
Trust.

(1.9) Amendment No. 5 to Amended and Restated Declaration of
Trust.

(1.10) Amendment No. 6 to Amended and Restated Declaration of
Trust.

(1.11) Amendment No. 7 to Amended and Restated Declaration of
Trust.

(1.12) Form of Amendment No. 8 to Amended and Restated
Declaration of Trust.

(1.13) Amendment No. 9 to Amended and Restated Declaration of
Trust.

(1.14) Form of Amendment No. 10 to Amended and Restated
Declaration of Trust (b).

(2.1) Amended Bylaws of Registrant.

(2.2) Amendment to Section 2.5 of Bylaws of Registrant.

(3) None.

(4) None.

(5) None.

C-12

<PAGE>

EXHIBIT NO. TITLE OF EXHIBIT
----------- ----------------

(6.1) Distribution Agreement between Registrant and Nicholas-
Applegate Securities dated as of April 19, 1993.

(6.2) Letter agreement between Registrant and Nicholas-
Applegate Securities dated May 17, 1993, adding certain
Institutional (formerly Qualified) Portfolio series and
Emerging Growth Portfolio series to Distribution Agreement.

(6.3) Letter agreement between Registrant and Nicholas-
Applegate Securities dated December 15, 1993, adding
International Growth Portfolio series to Distribution
Agreement.

(6.4) Letter agreement between Registrant and Nicholas-
Applegate Securities dated April 22, 1994, adding Qualified
Portfolio series to Distribution Agreement.

(6.5) Letter agreement between Registrant and Nicholas-
Applegate Securities, adding Emerging Countries Growth
Portfolio series, Global Growth & Income Portfolio series
and Mini-Cap Growth Portfolio series to Distribution
Agreement.

(6.6) Letter agreement between Registrant and Nicholas-
Applegate Securities, adding Series B Portfolios to
Distribution Agreement.

(6.7) Letter agreement between Registrant and Nicholas-
Applegate Securities, adding Fixed Income and Qualified
Portfolio series to Distribution Agreement.

(6.8) Form of letter agreement between Registrant and
Nicholas-Applegate Securities, adding Value
Institutional Portfolio series to Distribution
Agreement (a).

(6.9) Form of letter agreement between Registrant and
Nicholas-Applegate Securities, adding High Yield Bond
and Strategic Income Institutional Portfolio series to
Distribution Agreement (b).

(7) None.

(8.1) Custodian Services Agreement between Registrant and PNC
Bank dated as of April 1, 1993.

(8.2) Letter agreement between Registrant and PNC Bank dated
July 19, 1993, adding certain Institutional (formerly
Qualified) Portfolio series to Custodian Services
Agreement.

(8.3) Letter agreement between Registrant and PNC Bank
dated August 20, 1993, adding Emerging Growth
Portfolio series to Custodian Services Agreement.

(8.4) Letter agreement between Registrant and PNC Bank dated
December 15, 1993, adding International Growth
Portfolio series to Custodian Services Agreement.

C-13

<PAGE>

EXHIBIT NO. TITLE OF EXHIBIT
----------- ----------------

(8.5) Letter agreement between Registrant and PNC Bank dated
April 22, 1994, adding Core Growth Qualified Portfolio
series to Custodian Services Agreement.

(8.6) Letter agreement between Registrant and PNC Bank,
adding Emerging Countries Growth Portfolio series,
Global Growth & Income Portfolio series and Mini-Cap
Growth Portfolio series to Custodian Services
Agreement.

(8.7) Letter agreement between Registrant and PNC Bank,
adding Series B Portfolios to Custodian Services
Agreement.

(8.8) Letter agreement between Registrant and PNC Bank,
adding Fixed Income Portfolio series to Custodian
Services Agreement.

(8.9) Form of letter agreement between Registrant and PNC
Bank adding Value Institutional Portfolio series to
Custodian Services Agreement (a).

(8.10) Form of letter agreement between Registrant and PNC
Bank adding High Yield Bond and Strategic Income
Institutional Portfolio series to Custodian Services
Agreement (b).

(9.1) Administration Agreement between Registrant and
Investment Company Administration Corporation dated as
of April 1, 1993.

(9.2) Transfer Agency and Service Agreement between
Registrant and State Street Bank and Trust Company
dated as of April 1, 1993.

(9.3) Letter agreement between Registrant and State Street
Bank and Trust Company dated July 19, 1993, adding
certain Institutional (formerly Qualified) Portfolio
series to Transfer Agency and Service Agreement.

(9.4) Letter agreement between Registrant and State
Street Bank and Trust Company dated August 20,
1993, adding Emerging Growth Portfolio Series to
Transfer Agency and Service Agreement.

(9.5) Letter agreement between Registrant and State Street
Bank and Trust Company dated December 15, 1993, adding
International Growth Portfolio series to Transfer
Agency and Service Agreement.

(9.6) Letter agreement between Registrant and State Street
Bank and Trust Company dated April 22, 1994, adding
Core Growth Qualified Portfolio series to Transfer
Agency and Service Agreement.

(9.7) Letter agreement between Registrant and State Street
Bank and Trust Company, adding Emerging Countries
Growth Portfolio series, Global Growth & Income
Portfolio series and Mini-Cap Growth Portfolio series
to Transfer Agency and Service Agreement.

C-14

<PAGE>

EXHIBIT NO. TITLE OF EXHIBIT
----------- ----------------

(9.8) Letter agreement between Registrant and State Street
Bank and Trust Company, adding Series B Portfolios to
Transfer Agency and Service Agreement.

(9.9) Form of letter agreement between Registrant and State
Street Bank and Trust Company, adding Fixed Income
Portfolio series to Transfer Agency and Service
Agreement.

(9.10) Form of letter agreement between Registrant and State
Street Bank and Trust Company, adding Value
Institutional Portfolio series to Transfer Agency and
Service Agreement (a).

(9.11) Form of letter agreement between Registrant and State
Street Bank and Trust Company, adding High Yield Bond
and Strategic Income Institutional Portfolio series to
Transfer Agency and Service Agreement (b).

(9.12) Shareholder Service Plan between Registrant and
Nicholas-Applegate Securities.

(9.13) License Agreement dated as of December 17, 1992,
between Registrant and Nicholas-Applegate Capital
Management.

(9.14) Accounting Services Agreement between Registrant and
PFPC Inc. dated as of April 1, 1993.

(9.15) Letter agreement between Registrant and PFPC Inc. dated
July 19, 1993, adding certain Institutional (formerly
Qualified) Portfolio series to Accounting Services
Agreement.

(9.16) Letter agreement between Registrant and PFPC Inc.
dated August 20, 1993, adding Emerging Growth
Portfolio series to Accounting Services Agreement.

(9.17) Letter agreement between Registrant and PFPC Inc. dated
December 15, 1993, adding International Growth
Portfolio series to Accounting Services Agreement.

(9.18) Letter agreement between Registrant and PFPC Inc. dated
April 22, 1994, adding Core Growth Qualified Portfolio
series to Accounting Services Agreement.

(9.19) Letter agreement between Registrant and PFPC Inc.,
adding Emerging Countries Growth Portfolio series,
Global Growth & Income Portfolio series and Mini-Cap
Growth Portfolio series to Accounting Services
Agreement.

(9.20) Letter agreement between Registrant and PFPC Inc.,
adding Series B Portfolios to Accounting Services
Agreement.

(9.21) Letter agreement between Registrant and PFPC Inc.,
adding Fixed Income Portfolio series to Accounting
Services Agreement.

C-15

<PAGE>

EXHIBIT NO. TITLE OF EXHIBIT
----------- ----------------

(9.22) Form of letter agreement between Registrant and PFPC,
Inc. adding Value Institutional Portfolio series to
Accounting Services Agreement (a).

(9.23) Form of letter agreement between Registrant and PFPC,
Inc. adding High Yield Bond and Strategic Income
Institutional Portfolio series to Accounting Services
Agreement (b).

(9.24) Letter agreement between Registrant and Nicholas-
Applegate Capital Management dated September 27, 1993
regarding expense reimbursements.

(9.25) Letter agreement between Registrant and Nicholas-
Applegate Capital Management dated December 15, 1993, adding
International Growth Portfolio series to agreement regarding
expense reimbursements.

(9.26) Letter agreement between Registrant and Nicholas-
Applegate Capital Management dated April 22, 1994, adding
Qualified Portfolio series to agreement regarding expense
reimbursements.

(9.27) Letter agreement between Registrant and Nicholas-
Applegate Capital Management, adding Emerging Growth
Institutional Portfolio series, Global Growth & Income
Portfolio series and Mini-Cap Growth Portfolio series to
agreement regarding expense reimbursements.

(9.28) Letter agreement between Registrant and Nicholas-
Applegate Capital Management, adding Series B Portfolios to
agreement regarding expense reimbursement.

(9.29) Letter agreement between Registrant and Nicholas-
Applegate Capital Management, adding Qualified and Fixed
Income Portfolio series to agreement regarding expense
reimbursement.

(9.30) Letter agreement between Registrant and Nicholas-
Applegate Capital Management revising expense reimbursement
agreement with respect to Government Income Portfolios.

(9.31) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding Value
Institutional Portfolio series to agreement regarding
expense reimbursement (a).

(9.32) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding High
Yield Bond and Strategic Income Institutional Portfolio
series to agreement regarding expense reimbursement
(b).

(9.33) Credit Agreement among Registrant, Chemical Bank and
certain other banks dated April 10, 1996.

(10) Opinion of Counsel (c).

C-16

<PAGE>

EXHIBIT NO. TITLE OF EXHIBIT
----------- ----------------

(11.1) Consent of Coopers & Lybrand L.L.P.

(11.2) Consent of Ernst & Young L.L.P.

(12) Not applicable.

(13) Investment Letter of initial investor in Registrant dated
April 1, 1993.

(14.1) IRA Plan Materials (d).

(14.2) 401(k) Profit-Sharing Plan Materials (d).

(15) Amended Distribution Plan of Registrant.

(16) Schedule of Computation of Performance Quotations (c).

(17) Financial Data Schedules (g).

(18.1) Limited Powers of Attorney of Trustees (d).

(18.2) Limited Power of Attorney of Walter E. Auch (e).

(18.3) Limited Power of Attorney of John D. Wylie (f).

(18.4) Certified Resolution of Board of Trustees of Registrant
regarding Limited Power of Attorney of John D. Wylie.

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

(a) Filed as an Exhibit to Amendment No. 28 to Registrant's Form N-1A
Registration Statement on January 19, 1996 and incorporated herein by
reference.

(b) Filed as an Exhibit to Amendment No. 29 to Registrant's Form N-1A
Registration Statement on May 3, 1996 and incorporated herein by
reference.

(c) Filed as an Exhibit to Amendment No. 1 to Registrant's Form N-1A
Registration Statement on March 15, 1993 and incorporated herein by
reference.

(d) 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.

(e) 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.

(f) Filed as an Exhibit to Amendment No. 27 to Registrant's Form N-1A
Registration Statement on January 19, 1996 and incorporated herein by
reference.

C-17

<PAGE>

EXHIBIT NO. TITLE OF EXHIBIT
----------- ----------------

(g) Filed as an Exhibit to Registrant's Form N-SAR Report on May 29, 1996
and incorporated herein by reference.

C-18

<PAGE>

EXHIBIT 1.1
-----------

CERTIFICATE OF TRUST

NICHOLAS-APPLEGATE MUTUAL FUNDS

The undersigned, constituting the sole member of the Board of Trustees
of Nicholas-Applegate Mutual Funds (the "Trust"), in order to form a Delaware
Business Trust pursuant to Section 3810 of the Delaware Business Trust Act, does
hereby certify the following:

1. The name of the Delaware business trust is:

NICHOLAS-APPLEGATE MUTUAL FUNDS

2. The registered office of the Trust in Delaware is Incorporating
Services, Ltd., 15 E. North Street, County of Kent, Dover, Delaware 19901.

3. Prior to the issuance of beneficial interests, the Trust will
become a registered investment company under the Investment Company Act of 1940,
as amended.

4. The registered agent for service of process on the Trust is
Incorporating Services Ltd., 15 E. North Street, County of Kent, Dover, Delaware
19901.

5. This Certificate of Trust shall be effective the date it is filed
with the Office of the Delaware Secretary of State.

IN WITNESS WHEREOF, the undersigned Trustee of the Nicholas-Applegate
Mutual Funds has executed this Certificate on the 17th day of December, 1992.

s/ Michael Glazer
----------------------
Michael Glazer

<PAGE>

EXHIBIT 1.2
-----------

CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF TRUST

NICHOLAS-APPLEGATE MUTUAL FUNDS

THIS CERTIFICATE OF AMENDMENT OF CERTIFICATE OF TRUST of Nicholas-
Applegate Mutual Funds (the "Trust") is being duly executed and filed by Michael
Glazer, as sole Trustee, under the Delaware Business Trust Act.

1. The name of the Trust is Nicholas-Applegate Mutual Funds.

2. The Certificate of Trust is hereby amended to add the following
paragraph thereto as paragraph no. 6:

"Notice is hereby given that pursuant to Section 3804 of the
Delaware Business Trust Act, the debts, liabilities,
obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular series of
the Trust shall be enforceable against the assets of such
series only and not against the assets of the Trust
generally."

3. This Certificate of Amendment shall be effective upon the date
and time of filing.

IN WITNESS WHEREOF, the undersigned, being the sole Trustee of the
Trust, has executed this Certificate of Amendment as of the 17th day of
December, 1992.

s/ Michael Glazer
----------------------------
Michael Glazer, Trustee

<PAGE>

EXHIBIT 1.3
-----------

AMENDED AND RESTATED
DECLARATION OF TRUST

NICHOLAS-APPLEGATE MUTUAL FUNDS

a Delaware Business Trust

December 17, 1992

<PAGE>

AMENDED AND RESTATED
DECLARATION OF TRUST
OF
NICHOLAS-APPLEGATE MUTUAL FUNDS

TABLE OF CONTENTS

PAGE

ARTICLE I -- The Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Trust Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.3 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

ARTICLE II -- Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

2.1 Number and Qualification . . . . . . . . . . . . . . . . . . . . . . .4
2.2 Term and Election. . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.3 Resignation and Removal. . . . . . . . . . . . . . . . . . . . . . . .5
2.4 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.5 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.6 Officers; Chairman of the Board. . . . . . . . . . . . . . . . . . . .7
2.7 By-Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

ARTICLE III -- Powers of Trustees. . . . . . . . . . . . . . . . . . . . . . .7

3.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.2 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.3 Legal Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.4 Sale of Interests. . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.5 Borrow Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.6 Delegation; Committees . . . . . . . . . . . . . . . . . . . . . . . .9
3.7 Collection and Payment . . . . . . . . . . . . . . . . . . . . . . . .9
3.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.9 Miscellaneous Powers . . . . . . . . . . . . . . . . . . . . . . . . 10
3.10 Further Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE IV -- Investment Advisory,
Administrative Services and Placement Agent
Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

4.1 Investment Advisory and Other Arrangements . . . . . . . . . . . . . 11
4.2 Parties to Contract. . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE V -- Limitations of Liability. . . . . . . . . . . . . . . . . . . . 12
5.1 No Personal Liability of Trustees, Officers, Employees, Agents . . . 12

-i-

<PAGE>

5.2 Indemnification of Trustees, Officers, Employees, Agents . . . . . . 12
5.3 Liability of Holders; Indemnification. . . . . . . . . . . . . . . . 13
5.4 No Bond Required of Trustees . . . . . . . . . . . . . . . . . . . . 13
5.5 No Duty of Investigation; Notice in Trust Instruments, Etc.. . . . . 14
5.6 Reliance on Experts, Etc. . . . . . . . . . . . . . . . . . . . . . 14
5.7 Assent to Declaration. . . . . . . . . . . . . . . . . . . . . . . . 14

ARTICLE VI -- Interests in the Trust . . . . . . . . . . . . . . . . . . . . 15

6.1 Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Rights of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Register of Interests. . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.5 No Pre-emptive Rights; Derivative Suits. . . . . . . . . . . . . . . 15
6.6 No Appraisal Rights. . . . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE VII -- Purchases and Redemptions . . . . . . . . . . . . . . . . . . 16

7.1 Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.2 Redemption by Holder . . . . . . . . . . . . . . . . . . . . . . . . 16
7.3 Redemption by Trust. . . . . . . . . . . . . . . . . . . . . . . . . 16
7.4 Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . 16

ARTICLE VIII -- Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . 17

8.1 Meetings of Holders. . . . . . . . . . . . . . . . . . . . . . . . . 17
8.2 Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.3 Record Date for Meetings . . . . . . . . . . . . . . . . . . . . . . 18
8.4 Proxies, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.6 Inspection of Records. . . . . . . . . . . . . . . . . . . . . . . . 19
8.7 Voting Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.8 Series of Interests. . . . . . . . . . . . . . . . . . . . . . . . . 20
8.9 Holder Action by Written Consent . . . . . . . . . . . . . . . . . . 23
8.10 Holder Communications. . . . . . . . . . . . . . . . . . . . . . . 23

ARTICLE IX -- Duration; Termination of Trust;
Amendment; Mergers; Etc. . . . . . . . . . . . . . . . . . . . . . . . . 24

9.1 Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.2 Termination of Trust . . . . . . . . . . . . . . . . . . . . . . . . 24
9.3 Amendment Procedure. . . . . . . . . . . . . . . . . . . . . . . . . 25
9.4 Merger, Consolidation and Sale of Assets . . . . . . . . . . . . . . 26
9.5 Incorporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

-ii-

<PAGE>

ARTICLE X -- Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 27

10.1 Certificate of Designation; Agent for Service of Process27
10.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.4 Reliance by Third Parties . . . . . . . . . . . . . . . . . . . . . 28
10.5 Provisions in Conflict With Law or
Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.6 Trust Only. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.7 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.8 Headings and Construction . . . . . . . . . . . . . . . . . . . . . 29

-iii-

<PAGE>

AMENDED AND RESTATED
DECLARATION OF TRUST

NICHOLAS-APPLEGATE MUTUAL FUNDS

This AMENDED AND RESTATED DECLARATION OF TRUST of NICHOLAS-APPLEGATE
MUTUAL FUNDS is made on the 17th day of December, 1992 by the party signatory
hereto, as trustee.

WHEREAS, Nicholas-Applegate Mutual Funds has heretofore been formed as
a business trust under the law of Delaware for the investment and reinvestment
of its assets, by the execution of the Declaration of Trust of
Nicholas-Applegate Mutual Funds on December 17, 1992; and

WHEREAS, the Trustee desires to amend and restate such Declaration of
Trust in its entirety; and

WHEREAS, it is proposed that the Trust assets be composed of cash,
securities and other assets contributed to the Trust by the holders of interests
in the Trust entitled to ownership rights in the Trust;

NOW, THEREFORE, the Trustee hereby declares that the Trustees will
hold in trust all cash, securities and other assets which they may from time to
time acquire in any manner as Trustees hereunder, and manage and dispose of the
same for the benefit of the holders of interests in the Trust and subject to the
following terms and conditions, and the Declaration of Trust is amended and
restated to read in full as set forth herein.

ARTICLE I

THE TRUST

1.1 NAME. The name of the trust created hereby (the "Trust") shall be
"Nicholas-Applegate Mutual Funds", and so far as may be practicable the Trustees
shall conduct the Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever hereinafter used)
shall not refer to the Trustees in their individual capacities or to the
officers, agents, employees or holders of interest in the Trust. However, should
the Trustees determine that the use of the name of the Trust is not advisable,
they may select such other name for the Trust as they deem proper and the Trust
may hold its property and conduct its activities under such other name.

<PAGE>

Any name change shall become effective upon the execution by a majority of the
then Trustees of an instrument setting forth the new name and the filing of a
certificate of amendment pursuant to Section 3810(b) of the DBTA. Any such
instrument shall not require the approval of the holders of interests in the
Trust, but shall have the status of an amendment to this Declaration.

1.2 TRUST PURPOSE. The purpose of the Trust is to conduct, operate and
carry on the business of an open-end management investment company registered
under the 1940 Act. In furtherance of the foregoing, it shall be the purpose of
the Trust to do everything necessary, suitable, convenient or proper for the
conduct, promotion and attainment of any businesses and purposes which at any
time may be incidental or may appear conducive or expedient for the
accomplishment of the business of an open-end management investment company
registered under the 1940 Act and which may be engaged in or carried on by a
trust organized under the DBTA, and in connection therewith the Trust shall have
and may exercise all of the powers conferred by the laws of the State of
Delaware upon a Delaware business trust.

1.3 DEFINITIONS. As used in this Declaration, the following terms
shall have the following meanings:

(a) "1940 ACT" shall mean the Investment Company Act of 1940, as
amended from time to time, and the rules and regulations thereunder, as adopted
or amended from time to time.

(b) "AFFILIATED PERSON", "ASSIGNMENT" and "Interested Person" shall
have the meanings given them in the 1940 Act.

(c) "ADMINISTRATOR" shall mean any party furnishing services to the
Trust pursuant to any administrative services contract described in Section 4.1
hereof.

(d) "BY-LAWS" shall mean the By-Laws of the Trust as amended from time
to time.

(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations thereunder, as adopted or
amended from time to time.

(f) "COMMISSION" shall mean the Securities and Exchange Commission.

-2-

<PAGE>

(g) "DECLARATION" shall mean this Declaration of Trust as amended from
time to time. References in this Declaration to "DECLARATION," "HEREOF,"
"HEREIN" and "HEREUNDER" shall be deemed to refer to the Declaration rather than
the article or section in which such words appear. This Declaration shall,
together with the By-Laws, constitute the governing instrument of the Trust
under the DBTA.

(h) "DBTA" shall mean the Delaware Business Trust Act, Delaware Code
Annotated title 12, Sections 3801 et seq., as amended from time to time.

(i) "FISCAL YEAR" shall mean an annual period as determined by the
Trustees unless otherwise provided by the Code or applicable regulations.

(j) "HOLDERS" shall mean as of any particular time any or all holders
of record of Interests in the Trust or in Trust Property, as the case may be, at
such time.

(k) "INTEREST" shall mean a Holder's units of interest into which the
beneficial interest in the Trust and each series of the Trust shall be divided
from time to time.

(l) "INVESTMENT ADVISER" shall mean any party furnishing services to
the Trust pursuant to any investment advisory contract described in Section 4.1
hereof.

(m) "MAJORITY INTERESTS VOTE" shall mean the vote, at a meeting of the
Holders of Interests, of the lesser of (A) 67% or more of the Interests present
or represented at such meeting, provided the Holders of more than 50% of the
Interests are present or represented by proxy or (B) more than 50% of the
Interests.

(n) "PERSON" shall mean and include an individual, corporation,
partnership, trust, association, joint venture and other entity, whether or not
a legal entity, and a government and agencies and political subdivisions
thereof.

(o) "REGISTRATION STATEMENT" as of any particular time shall mean the
Registration Statement of the Trust which is effective at such time under the
1940 Act.

(p) "TRUST PROPERTY" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust or the Trustees. The Trustees may
authorize the division of Trust Property into

-3-

<PAGE>

two or more series, in accordance with the provisions of Section 8.8 hereof, in
which case all references in this Declaration to the Trust, Trust Property,
Interests therein or Holders thereof shall be deemed to refer to each such
series, as the case may be, except as the context otherwise requires. Any series
of Trust Property shall be established and designated, and the variations in the
relative rights and preferences as between the different series shall be fixed
and determined, by the Trustees.

(q) "TRUSTEES" shall mean such persons who are indemnified as trustees
of the Trust on the signature page of this Declaration, so long as they shall
continue in office in accordance with the terms of this Declaration of Trust,
and all other persons who at the time in question have been duly elected or
appointed as trustees in accordance with the provisions of this Declaration of
Trust and are then in office, in their capacity as trustees hereunder.

ARTICLE II

TRUSTEES

2.1 NUMBER AND QUALIFICATION. The number of Trustees shall initially
be one and shall thereafter be fixed from time to time by written instrument
signed by majority of the Trustees so fixed then in office, provided, however,
that the number of Trustees shall in no event be less than one. A Trustee shall
be an individual at least 21 years of age who is not under legal disability.

(a) Any vacancy created by an increase in Trustees shall be
filled by the appointment or election of an individual having the qualifications
described in this Article as provided in Section 2.4. Any such appointment shall
not become effective, however, until the individual appointed or elected shall
have accepted in writing such appointment or election and agreed in writing to
be bound by the terms of the Declaration. No reduction in the number of Trustees
shall have the effect of removing any Trustee from office.

(b) Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided in Section 2.4 hereof, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by this
Declaration.

-4-

<PAGE>

2.2 TERM AND ELECTION. Each Trustee named herein, or elected or
appointed prior to the first meeting of the Holders, shall (except in the event
of resignations or removals or vacancies pursuant to Section 2.3 or 2.4 hereof)
hold office until his or her successor has been elected at such meeting and has
qualified to serve as Trustee. Beginning with the Trustees elected at the first
meeting of Holders, each Trustee shall hold office during the lifetime of this
Trust and until its termination as hereinafter provided unless such Trustee
resigns or is removed as provided in Section 2.3 below.

2.3 RESIGNATION AND REMOVAL. Any Trustee may resign (without need for
prior or subsequent accounting) by an instrument in writing signed by him or her
and delivered or mailed to the Chairman, if any, the President or the Secretary
and such resignation shall be effective upon such delivery, or at a later date
according to the terms of the instrument.

(a) Any of the Trustees may be removed with or without cause by
the affirmative vote of the Holders of two-thirds (2/3) of the Interests or
(provided the aggregate number of Trustees, after such removal and after giving
effect to any appointment made to fill the vacancy created by such removal shall
not be less than the number required by Section 2.1 hereof) with cause, by the
action of two-thirds (2/3) of the remaining Trustees. Removal with cause shall
include, but not be limited to, the removal of a Trustee due to physical or
mental incapacity.

(b) Upon the resignation or removal of a Trustee or his or her
otherwise ceasing to be a Trustee, he or she shall execute and deliver such
documents as the remaining Trustees shall require for the purpose of conveying
to the Trust or the remaining Trustees any Trust Property held in the name of
the resigning or removed Trustee. Upon the death of any Trustee or upon removal
or resignation due to any Trustee's incapacity to serve as trustee, his or her
legal representative shall execute and deliver on his or her behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.

2.4 VACANCIES. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the death, resignation, adjudicated
incompetence or other incapacity to perform the duties of the office, or
removal, of a Trustee. A vacancy shall also occur in the event of an increase in
the number of trustees as provided in

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Section 2.1. No such vacancy shall operate to annul this Declaration or to
revoke any existing trust created pursuant to the terms of this Declaration. In
the case of a vacancy, the Holders of at least a majority of the Interests
entitled to vote, acting at any meeting of the Holders held in accordance with
Section 8.1 hereof, or, to the extent permitted by the 1940 Act, a majority vote
of the Trustees continuing in office acting by written instrument or instruments
may fill such vacancy, and any Trustee so elected by the Trustees or the Holders
shall hold office as provided in this Declaration. There shall be no cumulative
voting by the Holders in the election of Trustees.

2.5 MEETINGS. Meetings of the Trustees shall be held from time to time
within or without the State of Delaware upon the call of the Chairman, if any,
the President, the Chief Operating Officer, the Secretary, an Assistant
Secretary or any two Trustees.

(a) Regular meetings of the Trustees may be held without call or
notice at a time and place fixed by the By-Laws or by resolution of the
Trustees. Notice of any other meeting shall be given not later than 72 hours
preceding the meeting by United States mail or by electronic transmission to
each Trustee at his business address as set forth in the records of the Trust or
otherwise given personally not less than 24 hours before the meeting but may be
waived in writing by any Trustee either before or after such meeting. The
attendance of a Trustee at a meeting shall constitute a waiver of notice of such
meeting except where a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.

(b) A quorum for all meetings of the Trustees shall be one-third
of the total number of Trustees, but (except at such time as there is only one
Trustee) no less than two Trustees. Unless provided otherwise in this
Declaration, any action of the Trustees may be taken at a meeting by vote of a
majority of the Trustees present (a quorum being present) or without a meeting
by written consent of a majority of the Trustees, which written consent shall be
filed with the minutes of proceedings of the Trustees or any such committee. If
there be less than a quorum present at any meeting of the Trustees, a majority
of those present may adjourn the meeting until a quorum shall have been
obtained.

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meeting. A quorum for all meetings of any such committee shall be two or more of
the members thereof, unless the Board shall provide otherwise. Unless provided
otherwise in this Declaration, any action of any such committee may be taken at
a meeting by vote of a majority of the members present (a quorum being present)
or without a meeting by written consent of a majority of the members, which
written consent shall be filed with the minutes of proceedings of the Trustees
or any such committee.

(d) With respect to actions of the Trustees and any committee of
the Trustees, Trustees who are Interested Persons of the Trust or are otherwise
interested in any action to be taken may be counted for quorum purposes under
this Section 2.5 and shall be entitled to vote to the extent permitted by the
1940 Act.

(e) All or any one or more Trustees may participate in a meeting
of the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to such
communications system shall constitute presence in person at such meeting,
unless the 1940 Act specifically requires the Trustees to act "in person," in
which case such term shall be construed consistent with Commission or staff
releases or interpretations.

2.6 OFFICERS: CHAIRMAN OF THE BOARD. The Trustees shall, from time to
time, elect officers of the Trust, including a President, a Secretary and a
Treasurer. The Trustees shall elect or appoint, from time to time, a Trustee to
act as Chairman of the Board who shall preside at all meetings of the Trustees
and carry out such other duties as the Trustees shall designate. The Trustees
may elect or appoint or authorize the President to appoint such other officers
or agents with such powers as the Trustees may deem to be advisable. The
President, Secretary and Treasurer may, but need not, be a Trustee. The Chairman
of the Board and such officers of the Trust shall serve in such capacity for
such time and with such authority as the Trustees may, in their discretion, so
designate or as provided by in the By-Laws.

2.7 BY-LAWS. The Trustees may adopt and, from time to time, amend or
repeal the By-Laws for the conduct of the business of the Trust not inconsistent
with this Declaration and such ByLaws are hereby incorporated in this
Declaration by reference thereto.

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ARTICLE III

POWERS OF TRUSTEES

3.1 GENERAL. The Trustees shall have exclusive and absolute
control over management of the business and affairs of the Trust, but with such
powers of delegation as may be permitted by this Declaration and the DBTA. The
Trustees may perform such acts as in their sole discretion are proper for
conducting the business and affairs of the Trust. The enumeration of any
specific power herein shall not be construed as limiting the aforesaid power.
Such powers of the Trustee may be exercised without order of or recourse to any
court.

3.2 INVESTMENTS. The Trustees shall have power to:

(a) conduct, operate and carry on the business of an investment
company;

(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise
deal in or dispose of United States and foreign currencies and related
instruments including forward contracts, and securities, including common and
preferred stock, warrants, bonds, debentures, time notes and all other evidences
of indebtedness, negotiable or non-negotiable instruments, obligations,
certificates of deposit or indebtedness, commercial paper, repurchase
agreements, reverse repurchase agreements, convertible securities, forward
contracts, options, futures contracts, and other securities, including, without
limitation, those issued, guaranteed or sponsored by any state, territory or
possession of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the United States
Government, any foreign government, or any agency, instrumentality or political
subdivision of the United States Government or any foreign government, or
international instrumentalities, or by any bank, savings institution,
corporation or other business entity organized under the laws of the United
States or under foreign laws; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investments
of every kind and description, including, without limitation, the right to
consent and otherwise act with respect thereto, with power to designate one or
more persons, firms, associations, or corporations to exercise any of said
rights, powers and privileges in respect of any of said instruments; and the
Trustees shall be deemed to

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have the foregoing powers with respect to any additional securities in which the
Trustees may determine to invest.

The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.

3.3 LEGAL TITLE. Legal title to all the Trust Property shall be vested
in the Trust as a separate legal entity under the DBTA, except that the Trustees
shall have the power to cause legal title to any Trust Property to be held by or
in the name of one or more of the Trustees or in the name of any other Person on
behalf of the Trust on such terms as the Trustees may determine.

In the event that title to any part of the Trust Property is vested in
one or more Trustees, the right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter become a
Trustee upon his or her due election and qualification. Upon the resignation,
removal or death of a Trustee he or she shall automatically cease to have any
right, title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. To the extent permitted by law, such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.

3.4 SALE OF INTERESTS. Subject to the more detailed provisions set
forth in Article VII, the Trustees shall have the power to permit persons to
purchase Interests and to add or reduce, in whole or in part, their Interest in
the Trust.

3.5 BORROW MONEY. The Trustees shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, including the lending
of portfolio securities, and to endorse, guarantee or undertake the performance
of any obligation, contract or engagement of any other person, firm, association
or corporation.

3.6 DELEGATION: COMMITTEES. The Trustees shall have the power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments,

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either in the name of the Trust or the names of the Trustees or otherwise, as
the Trustees may deem expedient.

3.7 COLLECTION AND PAYMENT. The Trustees shall have power to collect
all property due to the Trust; to pay all claims, including taxes, against the
Trust Property; to prosecute, defend, compromise or abandon any claims relating
to the Trust Property; to foreclose any security interest securing any
obligations, by virtue of which any property is owned to the Trust; and to enter
into releases, agreements and other instruments.

3.8 EXPENSES. The Trustees shall have the power to incur and pay any
expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees. The Trustees
may pay themselves such compensation for special services, including legal and
brokerage services, as they in good faith may deem reasonable (subject to any
limitations in the 1940 Act), and reimbursement for expenses reasonably incurred
by themselves on behalf of the Trust.

3.9 MISCELLANEOUS POWERS. The Trustees shall have the power to: (a)
employ or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property, insurance policies (including, but not
limited to, fidelity bonding and errors and omission policies) insuring the
Investment Adviser, Administrator, distributor, Holders, Trustees, officers,
employees, agents, or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such person in such capacity, whether or not the Trust would
have the power to indemnify such Person against liability; (d) establish
pension, profit-sharing and other retirement, incentive and benefit plans for
any Trustees, officers, employees and agents of the Trust; (e) to the extent
permitted by law, indemnify any Person with whom the Trust has dealings,
including the Investment Adviser, Administrator, distributor, Holders, Trustees,
officers, employees, agents or independent contractors of the Trust, to such
extent as the Trustees shall determine; (f) guarantee indebtedness or
contractual obligations of others; (g) determine and change

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the Fiscal Year of the Trust and the method by which its accounts shall be kept;
and (h) adopt a seal for the Trust, but the absence of such seal shall not
impair the validity of any instrument executed on behalf of the Trust.

3.10 FURTHER POWERS. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices, whether within or without the State of Delaware, in any
and all states of the United States of America, in the District of Columbia, in
any foreign countries, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities of the United
States of America and of foreign countries, and to do all such other things and
execute all such instruments as they deem necessary, proper or desirable in
order to promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive and shall be
binding upon the Trust and the Holders, past, present and future. In construing
the provisions of this Declaration, the presumption shall be in favor of a grant
of power to the Trustees. The Trustees shall not be required to obtain any court
order to deal with Trust Property.

ARTICLE IV

Investment Advisory, Administrative Services
AND PLACEMENT AGENT ARRANGEMENTS

4.1 INVESTMENT ADVISORY AND OTHER ARRANGEMENTS. The Trustees may in
their discretion, from time to time, enter into contracts or agreements for
investment advisory services, administrative services (including transfer and
dividend disbursing agency services), distribution services, fiduciary
(including custodian) services, placement agent services, Holder servicing and
distribution services, or other services, whereby the other party to such
contract or agreement shall undertake to furnish the Trustees such services as
the Trustees shall, from time to time, consider desirable and all upon such
terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any other provisions of this Declaration to the contrary, the
Trustees may authorize any Investment Adviser (subject to such general or
specific instructions as the Trustees may, from time to time, adopt) to effect
purchases, sales, loans or exchanges of Trust Property on behalf of the Trustees
or may authorize any officer, employee or Trustee to effect such purchases,
sales, loans or exchanges pursuant
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to recommendations of any such Investment Adviser (all without further action by
the Trustees). Any such purchases, sales, loans and exchanges shall be binding
upon the Trust.

4.2 PARTIES TO CONTRACT. Any contract or agreement of the character
described in Section 4.1 of this Article IV or in the By-Laws of the Trust may
be entered into with any Person, although one or more of the Trustees or
officers of the Trust or any Holder may be an officer, director, trustee,
shareholder, or member of such other party to the contract or agreement, and no
such contract or agreement shall be invalidated or rendered voidable by reason
of the existence of any such relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of such contract or agreement or
accountable for any profit realized directly or indirectly therefrom, provided
that the contract or agreement when entered into was reasonable and fair and not
inconsistent with the provisions of this Article IV or the By-Laws. Any Trustee
or officer of the Trust or any Holder may be the other party to contracts or
agreements entered into pursuant to Section 4.1 hereof or the By-Laws of the
Trust, and any Trustee or officer of the Trust or any Holder may be financially
interested or otherwise affiliated with Persons who are parties to any or all of
the contracts or agreements mentioned in this Section 4.2.

ARTICLE V

LIMITATIONS OF LIABILITY

5.1 NO PERSONAL LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES, AGENTS.
No Trustee, officer, employee or agent of the Trust when acting in such capacity
shall be subject to any personal liability whatsoever, in his or her individual
capacity, to any Person, other than the Trust or its Holders, in connection with
Trust Property or the affairs of the Trust; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature against a
Trustee, officer, employee or agent of the Trust arising in connection with the
affairs of the Trust. No Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, Holders of Interests therein, or to any Trustee,
officer, employee, or agent thereof for any action or failure to act (including,
without limitation, the failure to compel in any way any former or acting
Trustee to redress any breach of trust) except for his or her own bad faith,
willful misfeasance, gross negligence or reckless disregard of his or her
duties.

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5.2 INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES, AGENTS. The
Trust shall indemnify each of its Trustees, officers, employees, and agents
(including Persons who serve at its request as directors, officers or trustees
of another organization in which it has any interest, as a shareholder, creditor
or otherwise) against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as counsel
fees) reasonably incurred by him or her in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which he or she may be involved or with which he or she may be threatened,
while in office or thereafter, by reason of his or her being or having been such
a Trustee, officer, employee or agent, except with respect to any matter as to
which he or she shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her duties;
provided, however, that as to any matter disposed of by a compromise payment by
such Person, pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be provided unless there
has been a determination that such Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office by the court or other body approving the settlement
or other disposition or by a reasonable determination, based upon review of
readily available facts (as opposed to a full trial-type inquiry), that he or
she did not engage in such conduct by written opinion from independent legal
counsel approved by the Trustees. The rights accruing to any Person under these
provisions shall not exclude any other right to which he or she may be lawfully
entitled; provided that no Person may satisfy any right of indemnity or
reimbursement granted herein or in Section 5.1 or to which he or she may be
otherwise entitled except out of the Trust Property. The Trustees may make
advance payments in connection with indemnification under this Section 5.2,
provided that the indemnified Person shall have given a written undertaking to
reimburse the Trust in the event it is subsequently determined that he or she is
not entitled to such indemnification.

5.3 LIABILITY OF HOLDERS; INDEMNIFICATION. The Trust shall indemnify
and hold each Holder harmless from and against any claim or liability to which
such Holder may become subject solely by reason of his or her being or having
been a Holder and not because of such Holder's acts or omissions or for some
other reason, and shall reimburse such Holder for all legal and other expenses
reasonably

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incurred by him or her in connection with any such claim or liability (upon
proper and timely request by the Holder); provided, however, that no Holder
shall be entitled to indemnification by any series established in accordance
with Section 8.8 unless such Holder is a Holder of Interests of such series. The
rights accruing to a Holder under this Section 5.3 shall not exclude any other
right to which such Holder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a Holder in
any appropriate situation even though not specifically provided herein.

5.4 NO BOND REQUIRED OF TRUSTEES. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance of
any of his or her duties hereunder.

5.5 NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC. No
purchaser, lender, or other Person dealing with the Trustees or any officer,
employee or agent of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by said
officer, employee or agent or be liable for the application of money or property
paid, loaned, or delivered to or on the order of the Trustees or of said
officer, employee or agent. Every obligation, contract, instrument, certificate
or other interest or undertaking of the Trust, and every other act or thing
whatsoever executed in connection with the Trust, shall be conclusively taken to
have been executed or done by the executors thereof only in their capacity as
Trustees, officers, employees or agents of the Trust. Every written obligation,
contract, instrument, certificate or other interest or undertaking of the Trust
made by the Trustees or by any officer, employee or agent of the Trust, in his
or her capacity as such, shall contain an appropriate recital to the effect that
the Trustee, officer, employee and agent of the Trust shall not personally be
bound by or liable thereunder, nor shall resort be had to their private property
or the private property of the Holders for the satisfaction of any obligation or
claim thereunder, and appropriate references shall be made therein to the
Declaration, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any of the Trustees, officers, employees or agents of the
Trust. The Trustees may maintain insurance for the protection of the Trust
Property, Holders, Trustees, officers, employees and agents in such amount as
the Trustees shall deem advisable.

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5.6 RELIANCE ON EXPERTS, ETC. Each Trustee and officer or employee of
the Trust shall, in the performance of his or her duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by any Investment Adviser, Administrator,
accountant, appraiser or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.

5.7 ASSENT TO DECLARATION. Every Holder, by virtue of having become a
Holder in accordance with the terms of this Declaration, shall be held to have
expressly assented and agreed to the terms hereof and to have become a party
hereto.

ARTICLE VI

INTERESTS IN THE TRUST

6.1 INTERESTS. The beneficial interests in the property of the Trust
shall consist of an unlimited number of Interests. No certificates certifying
the ownership of Interests need be issued except as the Trustees may otherwise
determine from time to time.

6.2 RIGHTS OF HOLDERS. The ownership of the Trust Property of every
description and the right to conduct any business hereinbefore described are
vested exclusively in the Trust or the Trustees, and the Holders shall have no
right or title therein other than the beneficial interest conferred by their
Interests and they shall have no right to call for any partition or division of
any property, profits or rights of the Trust. The Interests shall be personal
property giving only the rights specifically set forth in this Declaration.

6.3 REGISTER OF INTERESTS. A register shall be kept by the Trust under
the direction of the Trustees which shall contain the names and addresses of the
Holders and Interests held by each Holder. Each such register shall be
conclusive as to the identity of the Holders of the Trust and the Persons who
shall be entitled to payments of distributions or otherwise to exercise or enjoy
the rights of Holders. No Holder shall be entitled to receive payment of any
distribution, nor to have notice given to it as herein provided, until it has
given its address to such

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officer or agent of the Trustees as shall keep the said register for entry
thereon.

6.4 NOTICES. Any and all notices to which any Holder hereunder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Holder of record at its last known
address as recorded on the register of the Trust.

6.5 NO PRE-EMPTIVE RIGHTS; DERIVATIVE SUITS. Holders shall have no
pre-emptive or other right to subscribe to any additional Interests or other
securities issued by the Trust or any series thereof. No action may be brought
by a Holder on behalf of the Trust unless Holders owning no less than 10% of the
then outstanding Interests join in the bringing of such action.

6.6 NO APPRAISAL RIGHTS. Holders shall have no right to demand payment
for their Interests or to any other rights of dissenting Holders in the event
the Trust participates in any transaction which would give rise to appraisal or
dissenters' rights by a holder of a corporation organized under the General
Corporation Law of Delaware, or otherwise.

ARTICLE VII

PURCHASES AND REDEMPTIONS

7.1 PURCHASES. The Trustees, in their discretion, may, from time to
time, without a vote of the Holders, permit the purchase of Interests by such
party or parties (or increase in the Interests of a Holder) and for such type of
consideration, including, without limitation, cash or property, at such time or
times (including, without limitation, each business day), and on such terms as
the Trustees may deem best, and may in such manner acquire other assets
(including, without limitation, the acquisition of assets subject to, and in
connection with the assumption of, liabilities) and businesses.

7.2 REDEMPTION BY HOLDER. Each Holder of Interests of the Trust or any
series thereof shall have the right at such times as may be permitted by the
Trust to require the Trust to redeem all or any part of his or her Interests of
the Trust or series thereof at a redemption price equal to the net asset value
per Interest of the Trust or series thereof next determined in accordance with
Section 7.4 hereof after the Interests are properly tendered for

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redemption, subject to any contingent deferred sales charge in effect at the
time of redemption. Payment of the redemption price shall be in cash; provided,
however, that if the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in cash unwise or
undesirable, the Trust may, subject to the requirements of the 1940 Act, make
payment wholly or partly in securities or other assets belonging to the Trust or
series thereof of which the Interests being redeemed are part at the value of
such securities or assets used in such determination of net asset value.

Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the Holders of Interests of the
Trust or series thereof to require the Trust to redeem Shares of the Trust of
series during any period or at any time when and to the extent permissible under
the 1940 Act.

7.3 REDEMPTION BY TRUST. Each Interest of the Trust or series thereof
that has been established and designated is subject to redemption by the Trust
at the redemption price which would be applicable if such Interest was then
being redeemed by the Holder pursuant to Section 7.2 hereof: (i) at any time,
if the Trustees determine in their sole discretion and by majority vote that
failure to so redeem may have materially adverse consequences to the Trust or
any series or to the Holders of the Interests of the Trust or any series
thereof, or (ii) upon such other conditions as may from time to time be
determined by the Trustees and set forth in the then current Prospectus of the
Trust with respect to maintenance of Holder accounts of a minimum amount. Upon
such redemption the Holders of the Interests so redeemed shall have no further
right with respect thereto other than to receive payment of such redemption
price.

7.4 NET ASSET VALUE. The net asset value per Interest of any series
shall be (i) in the case of a series whose Interests are not divided into
classes, the quotient obtained by dividing the value of the net assets of that
series (being the value of the assets belonging to that series less the
liabilities belonging to that series) by the total number of Interests of that
series outstanding, and (ii) in the case of a class of Interests of a series
whose Interests are divided into classes, the quotient obtained by dividing the
value of the net assets of that series allocable to such class (being the value
of the assets belonging to that series allocable to such class less the
liabilities belonging to such class) by the total number of

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Interests of such class outstanding; all determined in accordance with the
methods and procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time.

The Trustees may determine to maintain the net asset value per
Interest of any series at a designated constant dollar amount and in connection
therewith may adopt procedures consistent with the 1940 Act for continuing
declarations of income attributable to that series as dividends payable in
additional Interests of that series at the designated constant dollar amount and
for the handling of any losses attributable to that series.

ARTICLE VIII

HOLDERS

8.1 MEETINGS OF HOLDERS. Meetings of the Holders may be called at any
time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests, such request specifying the purpose or purposes for which such
meeting is to be called. Any such meeting shall be held within or without the
State of Delaware on such day and at such time as the Trustees shall designate.
Holders of one-third of the Interests in the Trust, present in person or by
proxy, shall constitute a quorum for the transaction of any business, except as
may otherwise be required by the 1940 Act or other applicable law or by this
Declaration or the By-Laws of the Trust. If a quorum is present at a meeting, an
affirmative vote by the Holders present, in person or by proxy, holding more
than 50% of the total Interests of the Holders present, either in person or by
proxy, at such meeting constitutes the action of the Holders, unless the 1940
Act, other applicable law, this Declaration or the By-Laws of the Trust requires
a greater number of affirmative votes.

8.2 NOTICE OF MEETINGS. Written or printed notice of all meetings of
the Holders, stating the time, place and purposes of the meeting, shall be given
by the Trustees either by presenting it personally to a Holder, leaving it at
his or her residence or usual place of business, or by sending it via United
States mail or by electronic transmission to a Holder, at his or her registered
address, at least 10 business days and not more than 90 business days before the
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail addressed to the Holder at his or her address as it is

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registered with the Trust, with postage thereon prepaid. At any such meeting,
any business properly before the meeting may be considered whether or not stated
in the notice of the meeting. Any adjourned meeting may be held as adjourned
without further notice.

8.3 RECORD DATE FOR MEETINGS. For the purpose of determining the
Holders who are entitled to notice of any meeting and to vote at any meeting, or
to participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time fix a date, not more than 90 calendar days prior
to the date of any meeting of the Holders or payment of distributions or other
action, as the case may be, as a record date for the determination of the
persons to be treated as Holders of record for such purposes. If the Trustees
shall divide the Trust Property into two or more series in accordance with
Section 8.8 herein, nothing in this Section 8.3 shall be construed as precluding
the Trustees from setting different record dates for different series.

8.4 PROXIES, ETC. At any meeting of Holders, any Holder entitled to
vote thereat may vote by proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the Secretary, or with
such other officer or agent of the Trust as the Secretary may direct, for
verification prior to the time at which such vote shall be taken.

(a) Pursuant to a resolution of a majority of the Trustees,
proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Holders of record shall be entitled to vote.
Each Holder shall be entitled to a vote proportionate to its Interest in the
Trust.

(b) When Interests are held jointly by several persons, any one
of them may vote at any meeting in person or by proxy in respect of such
Interest, but if more than one of them shall be present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect of such
Interest.

(c) A proxy purporting to be executed by or on behalf of a Holder
shall be deemed valid unless challenged at or prior to its exercise, and the
burden of proving invalidity shall rest on the challenger. If the Holder is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person

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<PAGE>

regarding the charge or management of its Interest, he or she may vote by his or
her guardian or such other person appointed or having such control, and such
vote may be given in person or by proxy.

8.5 REPORTS. The Trustees shall cause to be prepared, at least
annually, a report of operations containing a balance sheet and statement of
income and undistributed income of the Trust prepared in conformity with
generally accepted accounting principles and an opinion of an independent public
accountant on such financial statements. The Trustees shall, in addition,
furnish to the Holders at least semi-annually interim reports containing an
unaudited balance sheet as of the end of such period and an unaudited statement
of income and surplus for the period from the beginning of the current Fiscal
Year to the end of such period.

8.6 INSPECTION OF RECORDS. The records of the Trust shall be open to
inspection by Holders during normal business hours and for any purpose not
harmful to the Trust.

8.7 VOTING POWERS. The Holders shall have power to vote only (a) for
the election of Trustees as contemplated by Section 2.2 hereof, (b) with respect
to any investment advisory contract as contemplated by Section 4.1 hereof, (c)
with respect to termination of the Trust as provided in Section 9.2 hereof, (d)
with respect to any merger, consolidation or sale of assets as provided in
Section 9.4 hereof, (e) with respect to incorporation of the Trust to the extent
and as provided in Section 9.5 hereof, (f) with respect to such additional
matters relating to the Trust as may be required by the 1940 Act, DBTA, or any
other applicable law, the Declaration, the By-Laws or any registration of the
Trust with the Commission (or any Successor agency) or any state, or as and when
the Trustees may consider necessary or desirable.

Each Holder shall be entitled to vote based on the ratio its Interest
bears to the Interests of all Holders entitled to vote. Until Interests are
issued, the Trustees may exercise all rights of Holders and may take any action
required by law, the Declaration or the By-Laws to be taken by Holders. The
By-Laws may include further provisions for Holders' votes and meetings and
related matters not inconsistent with this Declaration.

8.8 SERIES OF INTERESTS. Without limiting the authority of the
Trustees set forth in this Section 8.8 to

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<PAGE>

establish and designate any further series, the Trustees hereby establish and
designate seventeen series, as follows:

Nicholas-Applegate Core Growth Portfolio A
Nicholas-Applegate Core Growth Portfolio B
Nicholas-Applegate Core Growth Qualified Portfolio
Nicholas-Applegate Government Income Portfolio A
Nicholas-Applegate Government Income Portfolio B
Nicholas-Applegate Government Income Qualified
Portfolio
Nicholas-Applegate Income & Growth Portfolio A
Nicholas-Applegate Income & Growth Portfolio B
Nicholas-Applegate Income & Growth Portfolio
Qualified Portfolio
Nicholas-Applegate Balanced Growth Portfolio A
Nicholas-Applegate Balanced Growth Portfolio B
Nicholas-Applegate Balanced Growth Portfolio
Qualified Portfolio
Nicholas-Applegate Worldwide Growth Portfolio A
Nicholas-Applegate Worldwide Growth Portfolio B
Nicholas-Applegate Worldwide Growth Qualified
Portfolio
Nicholas-Applegate Money Market Portfolio
Nicholas-Applegate Money Market Qualified Portfolio

The following provisions shall be applicable to such series and any
further series that may from time to time be established and designated by the
Trustees:

(a) All consideration received by the Trust for the issue or sale of
Interests of a particular series together with all Trust Property in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. In the event that there is any Trust Property, or any income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular series, the Trustees shall allocate
them among any one or more of the series established and designated from time to
time in such manner and on such basis as they, in their sole discretion, deem
fair and equitable. Each such

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<PAGE>

allocation by the Trustees shall be conclusive and binding upon the Holders of
all Interests for all purposes.

(b) The Trust Property belonging to each particular series shall
be charged with the liabilities of the Trust in respect of that series and all
expenses, costs, charges and reserves attributable to that series, and any
general liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as belonging to any particular series shall be
allocated and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Holders of all Interests for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital, and each such determination and allocation shall be conclusive and
binding upon the Holders. Without limitation of the foregoing provisions of this
Section, but subject to the right of the Trustees in their discretion to
allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular series shall be
enforceable against the assets of such series only, and not against the assets
of any other series. Notice of this limitation on inter-series liabilities may,
in the Trustees' sole discretion, be set forth in the certificate of trust of
the Trust (whether originally or by amendment) as filed or to be filed in the
Office of the Secretary of State of the State of Delaware pursuant to the DBTA,
and upon the giving of such notice in the certificate of trust, the statutory
provisions of Section 3804 of the DBTA relating to limitations on interseries
liabilities (and the statutory effect under Section 3804 of setting forth such
notice in the certificate of trust) shall become applicable to the Trust and
each series. Every note, bond, contract or other undertaking issued by or on
behalf of a particular series shall include a recitation limiting the obligation
represented thereby to that series and its assets.

(c) Dividends and distributions on Interests of a particular
series may be paid with such frequency as the Trustees may determine, which may
be daily or otherwise, pursuant to a standing resolution or resolution adopted
only once or with such frequency as the Trustees may determine, to the Holders
of Interests in that series, from such of the

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<PAGE>

income and capital gains, accrued or realized, from the Trust Property belonging
to that series as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that series. All dividends and distributions on
Interests in a particular series shall be distributed pro rata to the Holders of
Interests in that series in proportion to the total outstanding Interests in
that series held by such Holders at the date and time of record establishment
for the payment of such dividends or distribution.

(d) The Interests in a series of the Trust shall represent
beneficial interests in the Trust Property belonging to such series. Each Holder
of Interests in a series shall be entitled to receive its pro rata share of
distributions of income and capital gains made with respect to such series. Upon
reduction or withdrawal of its Interests or indemnification for liabilities
incurred by reason of being or having been a Holder of Interests in a series,
such Holder shall be paid solely out of the funds and property of such series of
the Trust. Upon liquidation or termination of a series of the Trust, Holders of
Interests in such series shall be entitled to receive a pro rata share of the
Trust Property belonging to such series. A Holder of Interests in a particular
series of the Trust shall not be entitled to participate in a derivative or
class action lawsuit on behalf of any other series or the Holders of Interests
in any other series of the Trust.

(e) Notwithstanding any other provision hereof, if the Trust
Property has been divided into two or more series, then on any matter submitted
to a vote of Holders of Interests in the Trust, all Interests then entitled to
vote shall be voted by individual series, except that (1) when required by the
1940 Act, Interests shall be voted in the aggregate and not by individual
series, and (2) when the Trustees have determined that the matter affects only
the interests of Holders of Interests in a limited number of series, then only
the Holders of Interests in such series shall be entitled to vote thereon.
Except as otherwise provided in this Article VIII, the Trustees shall have the
power to determine the designations, preferences, privileges, limitations and
rights, including voting and dividend rights, of each series of Interests.

(f) The establishment and designation of any series of Interests
other than those set forth above shall be effective upon the execution by a
majority of the then Trustees of an instrument setting forth such establishment
and designation and the relative rights and preferences of

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<PAGE>

such series, or as otherwise provided in such instrument. At any time that there
are no Interests outstanding of any particular series previously established and
designated, the Trustees may by an instrument executed by a majority of their
number abolish that series and the establishment and designation thereof. Each
instrument referred to in this paragraph shall have the status of an amendment
to this Declaration.

(g) If the Trust Property has been divided into two or more
series, then Section 9.2 of this Agreement shall apply also with respect to each
such series as if such series were a separate trust.

(h) The Trustees shall be authorized to issue an unlimited number
of Interests of each series.

(i) Subject to compliance with the requirements of the 1940 Act,
the Trustees shall have the authority to provide that Holders of Interests of
any series shall have the right to convert said Interests into one or more other
series in accordance with such requirements and procedures as may be established
by the Trustees.

8.9 HOLDER ACTION BY WRITTEN CONSENT. Any action which may be taken by
Holders may be taken without notice and without a meeting if Holders holding
more than 50% of the total Interests entitled to vote (or such larger proportion
thereof as shall be required by any express provision of this Declaration) shall
consent to the action in writing and the written consents shall be filed with
the records of the meetings of Holders. Such consents shall be treated for all
purposes as votes taken at a meeting of Holders.

8.10 HOLDER COMMUNICATIONS. Whenever ten or more Holders who have been
such for at least six months preceding the date of application, and who hold in
the aggregate at least 1% of the total Interests, shall apply to the Trustees in
writing, stating that they wish to communicate with other Holders with a view to
obtaining signatures to a request for a meeting of Holders and accompanied by a
form of communication and request which they wish to transmit, the Trustees
shall within five business days after receipt of such application either (1)
afford to such applicants access to a list of the names and addresses of all
Holders as recorded on the books of the Trust; or (2) inform such applicants as
to the approximate number of Holders, and the approximate cost of transmitting
to them the proposed communication and form of request.

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<PAGE>

If the Trustees elect to follow the course specified in clause (2)
above, the Trustees, upon the written request of such applicants, accompanied by
a tender of the material to be transmitted and of the reasonable expenses of
transmission, shall, with reasonable promptness, transmit, by United States mail
or by electronic transmission, such material to all Holders at their addresses
as recorded on the books, unless within five business days after such tender the
Trustees shall transmit, by United States mail or by electronic transmission, to
such applicants and file with the Commission, together with a copy of the
material to be transmitted, a written statement signed by at least a majority of
the Trustees to the effect that in their opinion either such material contains
untrue statements of fact or omits to state facts necessary to make the
statements contained therein not misleading, or would be in violation of
applicable law, and specifying the basis of such opinion. The Trustees shall
thereafter comply with any order entered by the Commission and the requirements
of the 1940 Act and the Securities Exchange Act of 1934.

ARTICLE IX

DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS; ETC.

9.1 DURATION. Subject to possible termination in accordance with the
provisions of Section 9.2, the Trust created hereby shall continue perpetually
pursuant to Section 3808 of DBTA.

9.2 TERMINATION OF TRUST.

(a) The Trust may be terminated (i) by the affirmative vote of
the Holders of not less than two-thirds of the Interests in the Trust at any
meeting of the Holders, or (ii) by an instrument in writing, without a meeting,
signed by a majority of the Trustees and consented to by the Holders of not less
than two-thirds of such Interests, or (iii) by the Trustees by written notice to
the Holders. Upon any such termination,

(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.

(ii) The Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust,

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<PAGE>

collect its assets, sell, convey, assign, exchange, or otherwise dispose of all
or all or any part of the remaining Trust Property to one or more Persons at
public or private sale for consideration which may consist in whole or in part
of cash, securities or other property of any kind, discharge or pay its
liabilities, and do all other acts appropriate to liquidate its business;
provided that any sale, conveyance, assignment, exchange, or other disposition
of all or substantially all of the Trust Property shall require approval of the
principal terms of the transaction and the nature and amount of the
consideration by the Holders by a Majority Interests Vote.

(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly each,
among the Holders according to their respective rights.

(b) Upon termination of the Trust and distribution to the Holders
as herein provided, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination and file a certificate of cancellation in accordance with Section
3810 of the DBTA. Upon termination of the Trust, the Trustees shall thereon be
discharged from all further liabilities and duties hereunder, and the rights and
interests of all Holders shall thereupon cease.

9.3 AMENDMENT PROCEDURE.

(a) All rights granted to the Holders under this Declaration of
Trust are granted subject to the reservation of the right of the Trustees to
amend this Declaration of Trust as herein provided, except as set forth herein
to the contrary. Subject to the foregoing, the provisions of this Declaration of
Trust (whether or not related to the rights of Holders) may be amended at any
time, so long as such amendment is not in contravention of applicable law,
including the 1940 Act, by an instrument in writing signed by a majority of the
then Trustees (or by an officer of the Trust pursuant to the vote of a majority
of such Trustees). Any such amendment shall be effective as provided in the
instrument containing the terms of such amendment or, if there is no provision
therein with respect to effectiveness, upon the execution of such instrument and
of a certificate (which may be a part of such instrument)

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<PAGE>

executed by a Trustee or officer of the Trust to the effect that such amendment
has been duly adopted.

(b) No amendment may be made, under Section 9.4(a) above, which
would change any rights with respect to any Interest in the Trust by reducing
the amount payable thereon upon liquidation of the Trust, by repealing the
limitations on personal liability of any Holder or Trustee, or by diminishing or
eliminating any voting rights pertaining thereto, except with a Majority
Interests Vote.

(c) A certification signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by the Holders or by
the Trustees as aforesaid or a copy of the Declaration, as amended, and executed
by a majority of the Trustees, shall be conclusive evidence of such amendment
when lodged among the records of the Trust.

(d) Notwithstanding any other provision hereof, until such time
as Interests are first sold, this Declaration may be terminated or amended in
any respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.

9.4 MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust, or any series
thereof, may merge or consolidate with any other corporation, association, trust
or other organization or may sell, lease or exchange all or substantially all of
its property, including its good will, upon such terms and conditions and for
such consideration when and as authorized by no less than a majority of the
Trustees and by a Majority Interests Vote of the Trust or such series, as the
case may be, or by an instrument or instruments in writing without a meeting,
consented to by the Holders of not less than 50% of the total Interests of the
Trust or such series, as the case may be, and any such merger, consolidation,
sale, lease or exchange shall be deemed for all purposes to have been
accomplished under and pursuant to the statutes of the State of Delaware. In
accordance with Section 3815(f) of DBTA, an agreement of merger or consolidation
may effect any amendment to the Declaration or By-Laws or effect the adoption of
a new declaration of trust or by-laws of the Trust if the Trust is the surviving
or resulting business trust. A certificate of merger or consolidation of the
Trust shall be signed by a majority of the Trustees.

9.5 INCORPORATION. Upon a Majority Interests Vote, the Trustees may
cause to be organized or assist in

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<PAGE>

organizing a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, association or other organization to take over all
of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, association or organization in
exchange for the equity interests thereof or otherwise, and to lend money to,
subscribe for the equity interests of, and enter into any contracts with any
such corporation, trust, partnership, association or organization, or any
corporation, partnership, trust, association or organization in which the Trust
holds or is about to acquire equity interests. The Trustees may also cause a
merger or consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of the Holders for the
Trustees to organize or assist in organizing one or more corporations, trusts,
partnerships, associations or other organizations and selling, conveying or
transferring a portion of the Trust Property to such organizations or entities.

ARTICLE X

MISCELLANEOUS

10.1 CERTIFICATE OF DESIGNATION; AGENT FOR SERVICE OF PROCESS. The
Trust shall file, in accordance with Section 3812 of DBTA, in the office of the
Secretary of State of Delaware, a certificate of trust, in the form and with
such information required by Section 3810 by DBTA and executed in the manner
specified in Section 3811 of DBTA. In the event the Trust does not have at least
one Trustee qualified under Section 3807(a) of DBTA, then the Trust shall comply
with Section 3807(b) of DBTA by having and maintaining a registered office in
Delaware and by designating a registered agent for service of process on the
Trust, which agent shall have the same business office as the Trust's registered
office. The failure to file any such certificate, to maintain a registered
office, to designate a registered agent for service of process, or to include
such other information shall not affect the validity of the establishment of the
Trust, the Declaration, the By-Laws or any action taken by the Trustees, the
Trust officers or any other Person with respect to the Trust except insofar as a
provision of the DBTA would have governed, in which case the Delaware common law
governs.

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<PAGE>

10.2 GOVERNING LAW. This Declaration is executed by all of the
Trustees and delivered with reference to DBTA and the laws of the State of
Delaware, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to DBTA and
the laws of the State of Delaware (unless and to the extent otherwise provided
for and/or preempted by the 1940 Act or other applicable federal securities
laws); provided, however, that there shall not be applicable to the Trust, the
Trustees or this Declaration (a) the provisions of Section 3540 of Title 12 of
the Delaware Code or (b) any provisions of the laws (statutory or common) of the
State of Delaware (other than the DBTA) pertaining to trusts which are
inconsistent with the rights, duties, powers, limitations or liabilities of the
Trustees set forth or referenced in this Declaration.

10.3 COUNTERPARTS. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.

10.4 RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust or of any recording office
in which this Declaration may be recorded, appears to be a Trustee hereunder,
certifying to (a) the number or identity of Trustees or Holders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of any
vote passed at a meeting of Trustees or Holders, (d) the fact that the number of
Trustees or Holders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any person dealing with the Trustees and their successors.

10.5 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.

(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the DBTA, or with other applicable
laws and regulations, the conflicting provisions

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<PAGE>

shall be deemed never to have constituted a part of this Declaration; provided,
however, that such determination shall not affect any of the remaining
provisions of this Declaration or render invalid or improper any action taken or
omitted prior to such determination.

(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.

10.6 TRUST ONLY. It is the intention of the Trustees to create only a
business trust under DBTA with the relationship of Trustee and beneficiary
between the Trustees and each Holder from time to time. It is not the intention
of the Trustees to create a general partnership, limited partnership, joint
stock association, corporation, bailment, or any form of legal relationship
other than a Delaware business trust except to the extent such trust is deemed
to constitute a corporation under the Code and applicable state tax laws.
Nothing in this Declaration of Trust shall be construed to make the Holders,
either by themselves or with the Trustees, partners or members of a joint stock
association.

10.7 WITHHOLDING. Should any Holder be subject to withholding pursuant
to the Code or any other provision of law, the Trust shall withhold all amounts
otherwise distributable to such Holder as shall be required by law and any
amounts so withheld shall be deemed to have been distributed to such Holder
- -under this Declaration of Trust. If any sums are withheld pursuant to this
provision, the Trust shall remit the sums so withheld to and file the required
forms with the Internal Revenue Service, or other applicable government agency.

10.8 HEADINGS AND CONSTRUCTION. Headings are placed herein for
convenience of reference only and shall not be taken as a part hereof or control
or affect the meaning, construction or effect of this instrument. Whenever the
singular number is used herein, the same shall include the plural; and the
neuter, masculine and feminine genders shall include each other, as applicable.

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<PAGE>

IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.

s/ Michael Glazer December 17, 1992
- -------------------------
Trustee

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<PAGE>
EXHIBIT 1.4

NICHOLAS-APPLEGATE MUTUAL FUNDS
ESTABLISHMENT OF ADDITIONAL SERIES

The undersigned, constituting a majority of the Trustees of Nicholas-
Applegate Mutual Funds, a Delaware business trust, hereby establish the
following additional series of Interests of the Trust pursuant to Section 8.8 of
the Amended and Restated Declaration of Trust of the Trust:

Emerging Growth Portfolio A
Emerging Growth Portfolio B
Emerging Growth Qualified Portfolio

IN WITNESS WHEREOF, the undersigned have executed this instrument on
August 6, 1993.

s/ Arthur E. Nicholas
-----------------------
Arthur E. Nicholas

s/ Fred C. Applegate
-----------------------
Fred C. Applegate

s/ Eileen Delasandro
-----------------------
Eileen Delasandro

s/ Arthur B. Laffer
-----------------------
Arthur B. Laffer

s/ Charles E. Young
-----------------------
Charles E. Young

<PAGE>

EXHIBIT 1.5

NICHOLAS-APPLEGATE MUTUAL FUNDS
ESTABLISHMENT OF ADDITIONAL SERIES

International Growth Portfolio A
International Growth Portfolio B
International Growth Qualified Portfolio

IN WITNESS WHEREOF, the undersigned have executed this instrument as
or December 15, 1993.

s/ Arthur E. Nicholas
---------------------
Arthur E. Nicholas

s/ Fred C. Applegate
---------------------
Fred C. Applegate

s/ Arthur B. Laffer
---------------------
Arthur B. Laffer

s/ Charles E. Young
--------------------
Charles E. Young

<PAGE>

EXHIBIT 1.6

AMENDMENT NO. 2 TO
AMENDED AND RESTATED DECLARATION OF TRUST
OF
NICHOLAS-APPLEGATE MUTUAL FUNDS

THIS AMENDMENT NO. 2 TO THE AMENDED AND RESTATED DECLARATION OF TRUST
OF NICHOLAS-APPLEGATE MUTUAL FUNDS is made as of the 11th day of February, 1994
by the undersigned, constituting a majority of the Trustees of the Trust.

WHEREAS, the Amended and Restated Declaration of Trust of the Trust
adopted as of December 17, 1932 designated certain series of Interests of the
Trust; and

WHEREAS, from time to time thereafter the Board of Trustees has
established the following additional series of Interests of the Trust:

Nicholas-Applegate Emerging Growth Portfolio A
Nicholas-Applegate Emerging Growth Portfolio B
Nicholas-Applegate Emerging Growth Qualified
Portfolio
Nicholas-Applegate Emerging Growth Portfolio
Qualified Portfolio II
Nicholas-Applegate International Growth Portfolio A
Nicholas-Applegate International Growth Portfolio B
Nicholas-Applegate International Growth Qualified Portfolio

WHEREAS, the undersigned wish to change the designation of each of the
"Qualified Portfolio" series of Interests of the Trust to "Institutional
Portfolio" series;

NOW, THEREFORE, the Board of Trustees hereby amends the first sentence
of Section 8.8 of the Amended and Restated Declaration of Trust of the Trust to
read in full as follows:

"Without limiting the authority of the Trustees set forth in this
Section 8.8 to establish and designate any further series, the Trustee
hereby establish and designate twenty-four series, as follows:

<PAGE>

Nicholas-Applegate Core Growth Portfolio A
Nicholas-Applegate Core Growth Portfolio B
Nicholas-Applegate Core Growth Institutional Portfolio
Nicholas-Applegate Government Income Portfolio A
Nicholas-Applegate Government Income Portfolio B
Nicholas-Applegate Government Income Institutional Portfolio
Nicholas-Applegate Income & Growth Portfolio A
Nicholas-Applegate Income & Growth Portfolio B
Nicholas-Applegate Income & Growth Institutional Portfolio
Nicholas-Applegate Balanced Growth Portfolio A
Nicholas-Applegate Balanced Growth Portfolio B
Nicholas-Applegate Balanced Growth Institutional Portfolio
Nicholas-Applegate Worldwide Growth Portfolio A
Nicholas-Applegate Worldwide Growth Portfolio B
Nicholas-Applegate Worldwide Growth Institutional Portfolio
Nicholas-Applegate Emerging Growth Portfolio A
Nicholas-Applegate Emerging Growth Portfolio B
Nicholas-Applegate Emerging Growth Institutional Portfolio
Nicholas-Applegate Emerging Growth Institutional Portfolio II
Nicholas-Applegate International Growth Portfolio A
Nicholas-Applegate International Growth Portfolio B
Nicholas-Applegate International Growth Institutional Portfolio
Nicholas-Applegate Money Market Portfolio
Nicholas-Applegate Money Market Institutional Portfolio"

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<PAGE>

IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.

s/ Arthur E. Nicholas
-----------------------
Arthur E. Nicholas

s/ Fred C. Applegate
-----------------------
Fred C. Applegate

s/ Arthur B. Laffer
-----------------------
Arthur B. Laffer

s/ Charles E. Young
-----------------------
Charles E. Young

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<PAGE>
EXHIBIT 1.7

AMENDMENT NO. 3 TO
AMENDED AND RESTATED DECLARATION OF TRUST
OF
NICHOLAS-APPLEGATE MUTUAL FUNDS

THIS AMENDMENT NO. 3 TO THE AMENDED AND RESTATED DECLARATION OF TRUST
OF NICHOLAS-APPLEGATE MUTUAL FUNDS is made as of the 11th day of February, 1994
by the undersigned, constituting a majority of the Trustees of the Trust.

WHEREAS, the Amended and Restated Declaration of Trust of Trust
adopted as of December 17, 1992, as heretofore amended, designated certain
series of Interests of the Trust; and

WHEREAS, the undersigned wish to establish certain additional series
of Interests of the Trust;

NOW, THEREFORE, the Board of Trustees hereby amends the first sentence
of Section 8.8 of the Amended and Restated Declaration of Trust of the Trust to
read in full as follows:

"Without limiting the authority of the Trustees set forth in this
Section 8.8 to establish and designate any further series, the
Trustees hereby establish and designate thirty series, as follows:

Nicholas-Applegate Core Growth Portfolio A
Nicholas-Applegate Core Growth Portfolio B
Nicholas-Applegate Core Growth Institutional Portfolio
Nicholas-Applegate Core Growth Qualified Portfolio
Nicholas-Applegate Government Income Portfolio A
Nicholas-Applegate Government Income Portfolio B
Nicholas-Applegate Government Income Institutional
Portfolio
Nicholas-Applegate Government Income Qualified
Portfolio
Nicholas-Applegate Income & Growth Portfolio A
Nicholas-Applegate Income & Growth Portfolio B
Nicholas-Applegate Income Growth Institutional
Portfolio
Nicholas-Applegate Income & Growth Qualified
Portfolio
Nicholas-Applegate Balanced Growth Portfolio A
Nicholas-Applegate Balanced Growth Portfolio B

<PAGE>

Nicholas-Applegate Balanced Growth Institutional
Portfolio
Nicholas-Applegate Balanced Growth Qualified Portfolio
Nicholas-Applegate Worldwide Growth Portfolio A
Nicholas-Applegate Worldwide Growth Portfolio B
Nicholas-Applegate Worldwide Growth Institutional
Portfolio
Nicholas-Applegate Worldwide Growth Qualified Portfolio
Nicholas-Applegate Emerging Growth Portfolio A
Nicholas-Applegate Emerging Growth Portfolio B
Nicholas-Applegate Emerging Growth Institutional
Portfolio
Nicholas-Applegate Emerging Growth Institutional
Portfolio II
Nicholas-Applegate International Growth Portfolio A
Nicholas-Applegate International Growth Portfolio B
Nicholas-Applegate International Growth Institutional
Portfolio
Nicholas-Applegate International Growth Qualified
Portfolio
Nicholas-Applegate Money Market Portfolio
Nicholas-Applegate Money Market Institutional
Portfolio"

IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.

s/Arthur E. Nicholas
-----------------------
Arthur E. Nicholas

s/ Fred C. Applegate
-----------------------
Fred C. Applegate

s/ Arthur B. Laffer
-----------------------
Arthur B. Laffer

s/ Charles E. Young
-----------------------
Charles E. Young

-2-

<PAGE>

EXHIBIT 1.8

AMENDMENT NO. 4 TO
AMENDED AND RESTATED DECLARATION OF TRUST
OF
NICHOLAS-APPLEGATE MUTUAL FUNDS

THIS AMENDMENT NO. 4 TO THE AMENDED AND RESTATED DECLARATION OF TRUST
OF NICHOLAS-APPLEGATE MUTUAL FUNDS is made as of the 4th day of November, 1994
by the undersigned, constituting a majority of the Trustees of the Trust.

WHEREAS, the Amended and Restated Declaration of Trust of the Trust
adopted as of December 17, 1992, as heretofore amended, designated certain
series of Interests of the Trust; and

WHEREAS, the undersigned wish to establish certain additional series
of Interests of the Trust;

NOW THEREFORE, the Board of Trustees hereby amends the first sentence
of Section 8.8 of the Amended and Restated Declaration of Trust of the Trust to
read in full as follows:

"Without limiting the authority of the Trustees set forth in this
Section 8.8 to establish and designate any further series, the
Trustees hereby establish and designate thirty-three series, as
follows:

Nicholas-Applegate Core Growth Portfolio A
Nicholas-Applegate Core Growth Portfolio B
Nicholas-Applegate Core Growth Institutional Portfolio
Nicholas-Applegate Core Growth Qualified Portfolio
Nicholas-Applegate Government Income Portfolio A
Nicholas-Applegate Government Income Portfolio B
Nicholas-Applegate Government Income Institutional
Portfolio
Nicholas-Applegate Government Income Qualified
Portfolio
Nicholas-Applegate Income & Growth Portfolio A
Nicholas-Applegate Income & Growth Portfolio B
Nicholas-Applegate Income & Growth Institutional
Portfolio
Nicholas-Applegate Income & Growth Qualified Portfolio
Nicholas-Applegate Balanced Growth Portfolio A
Nicholas-Applegate Balanced Growth Portfolio B
Nicholas-Applegate Balanced Growth Institutional
Portfolio

<PAGE>

Nicholas-Applegate Balanced Growth Qualified Portfolio
Nicholas-Applegate Worldwide Growth Portfolio A
Nicholas-Applegate Worldwide Growth Portfolio B
Nicholas-Applegate Worldwide Growth Institutional
Portfolio
Nicholas-Applegate Worldwide Growth Qualified
Portfolio
Nicholas-Applegate International Growth Portfolio A
Nicholas-Applegate International Growth Portfolio B
Nicholas-Applegate International Growth Institutional
Portfolio
Nicholas-Applegate International Growth Qualified
Portfolio II
Nicholas-Applegate International Growth Portfolio A
Nicholas-Applegate International Growth Portfolio B
Nicholas-Applegate International Growth International
Portfolio
Nicholas-Applegate International Growth Qualified
Portfolio
Nicholas-Applegate Money Market Portfolio
Nicholas-Applegate Money Market Institutional Portfolio
Nicholas-Applegate Emerging Countries Growth Portfolio
A
Nicholas-Applegate Emerging Countries Growth Portfolio
B
Nicholas-Applegate Emerging Countries Growth
Institutional Portfolio
Nicholas-Applegate Global Growth & Income Portfolio A
Nicholas-Applegate Global Growth & Income Portfolio B
Nicholas-Applegate Global Growth & Income Institutional
Portfolio
Nicholas-Applegate Mini-Cap Growth Institutional
Portfolio

-2-

<PAGE>

IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.

s/ Arthur E. Nicholas
-----------------------
Arthur E. Nicholas

s/ Fred C. Applegate
-----------------------
Fred C. Applegate

s/ Arthur B. Laffer
-----------------------
Arthur B. Laffer

s/ Charles E. Young
-----------------------
Charles E. Young

-3-

<PAGE>

EXHIBIT 1.9

AMENDMENT NO. 5 TO
AMENDED AND RESTATED DECLARATION OF TRUST
OF
NICHOLAS-APPLEGATE MUTUAL FUNDS

THIS AMENDMENT NO. 5 TO THE AMENDED AND RESTATED DECLARATION OF TRUST
OF NICHOLAS-APPLEGATE MUTUAL FUNDS is made as of the 28th day of November, 1994
by the undersigned, constituting a majority of the Trustees of the Trust.

WHEREAS, the Amended and Restated Declaration of Trust of the Trust
adopted as of December 17, 1992, as heretofore amended, designated certain
series of Interests of the Trust; and

WHEREAS, the undersigned wish to change the name of the Emerging
Countries Growth Portfolio series of Interests of the Trust to the Emerging
Countries Portfolio series;

NOW THEREFOR, the Board of Trustees hereby amends the first sentence
of Section 8.8 of the Amended and Restated Declaration of Trust of the Trust to
read in full as follows:

"Without limiting the authority of the Trustees set forth in this Section
8.8 to establish and designate any further series, the Trustees hereby
establish and designate thirty-three series, as follows:

Nicholas-Applegate Core Growth Portfolio A
Nicholas-Applegate Core Growth Portfolio B
Nicholas-Applegate Core Growth Institutional Portfolio
Nicholas-Applegate Core Growth Qualified Portfolio
Nicholas-Applegate Government Income Portfolio A
Nicholas-Applegate Government Income Portfolio B
Nicholas-Applegate Government Income Institutional
Portfolio
Nicholas-Applegate Government Income Qualified
Portfolio
Nicholas-Applegate Income & Growth Portfolio A
Nicholas-Applegate Income & Growth Portfolio B
Nicholas-Applegate Income & Growth Institutional
Portfolio
Nicholas-Applegate Income & Growth Qualified Portfolio
Nicholas-Applegate Balanced Growth Portfolio A

<PAGE>

Nicholas-Applegate Balanced Growth Portfolio B
Nicholas-Applegate Balanced Growth Institutional
Portfolio
Nicholas-Applegate Balanced Growth Qualified Portfolio
Nicholas-Applegate Worldwide Growth Portfolio A
Nicholas-Applegate Worldwide Growth Portfolio B
Nicholas-Applegate Worldwide Growth Institutional
Portfolio
Nicholas-Applegate Worldwide Growth Qualified Portfolio
Nicholas-Applegate Emerging Growth Portfolio A
Nicholas-Applegate Emerging Growth Portfolio B
Nicholas-Applegate Emerging Growth Institutional
Portfolio
Nicholas-Applegate Emerging Growth Institutional
Portfolio II
Nicholas-Applegate International Growth Portfolio A
Nicholas-Applegate International Growth Portfolio B
Nicholas-Applegate International Growth Institutional
Portfolio
Nicholas-Applegate International Growth Qualified
Portfolio
Nicholas-Applegate Money Market Portfolio
Nicholas-Applegate Money Market Institutional Portfolio
Nicholas-Applegate Emerging Countries Portfolio A
Nicholas-Applegate Emerging Countries Portfolio B
Nicholas-Applegate Emerging Countries Institutional
Portfolio
Nicholas-Applegate Global Growth & Income Portfolio A
Nicholas-Applegate Global Growth & Income Portfolio B
Nicholas-Applegate Global Growth & Income Institutional
Portfolio
Nicholas-Applegate Mini-Cap Growth Institutional
Portfolio

-2-

<PAGE>

IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.

s/ Arthur E. Nicholas
-----------------------
Arthur E. Nicholas

s/ Fred C. Applegate
-----------------------
Fred C. Applegate

s/ Arthur B. Laffer
-----------------------
Arthur B. Laffer

s/ Charles E. Young
-----------------------
Charles E. Young

-3-

<PAGE>

EXHIBIT 1.10

AMENDMENT NO. 6 TO
AMENDED AND RESTATED DECLARATION OF TRUST
OF
NICHOLAS-APPLEGATE MUTUAL FUNDS

THIS AMENDMENT NO. 6 TO THE AMENDED AND RESTATED DECLARATION OF TRUST
OF NICHOLAS-APPLEGATE MUTUAL FUNDS is made as of the 10th day of February 1995
by the undersigned, constituting a majority of the Trustees of the Trust.

WHEREAS, the Amended and Restated Declaration of Trust of the Trust
adopted as of December 17, 1992, as heretofore amended, designated certain
series of Interests of the Trust; and

WHEREAS, the undersigned wish to change the name of the various
Portfolio B series of the Trust to the Portfolio C series of the Trust, so that
each Interest of a Portfolio B series of the Trust outstanding as of the date
hereof shall thereafter be referred to as a like Interest of the corresponding
Portfolio C series of the Trust; and

WHEREAS, the undersigned wish to establish and designate various new
Portfolio B series of the Trust;

NOW THEREFORE, the Board of Trustees hereby amends the first sentence
of Section 8.8 of the Amended and Restated Declaration of Trust of the Trust to
read in full as follows:

"Without limiting the authority of the Trustees set forth in this
Section 8.8 to establish and designate any further series, the
Trustees hereby establish and designate forty-six series, as follows:

<PAGE>

Nicholas-Applegate Government Income Qualified
Portfolio
Nicholas-Applegate Income & Growth Portfolio A
Nicholas-Applegate Income & Growth Portfolio B
Nicholas-Applegate Income & Growth Portfolio C
Nicholas-Applegate Income & Growth Institutional
Portfolio
Nicholas-Applegate Income & Growth Qualified Portfolio
Nicholas-Applegate Balanced Growth Portfolio A Balanced
Nicholas-Applegate Growth Portfolio B
Nicholas-Applegate Balanced Growth Portfolio C
Nicholas-Applegate Balanced Growth Institutional
Portfolio
Nicholas-Applegate Balanced Growth Qualified Portfolio
Nicholas-Applegate Worldwide Growth Portfolio A
Nicholas-Applegate Worldwide Growth Portfolio B
Nicholas-Applegate Worldwide Growth Portfolio C
Nicholas-Applegate Worldwide Growth Institutional
Portfolio
Nicholas-Applegate Worldwide Growth Qualified Portfolio
Nicholas-Applegate Emerging Growth Portfolio A
Nicholas-Applegate Emerging Growth Portfolio B
Nicholas-Applegate Emerging Growth Portfolio C
Nicholas-Applegate Emerging Growth Institutional
Portfolio
Nicholas-Applegate Emerging Growth Institutional
Portfolio II
Nicholas-Applegate International Growth Portfolio A
Nicholas-Applegate International Growth Portfolio B
Nicholas-Applegate International Growth Portfolio C
Nicholas-Applegate International Growth Institutional
Portfolio
Nicholas-Applegate International Growth Qualified
Portfolio
Nicholas-Applegate Money Market Portfolio
Nicholas-Applegate Money Market Institutional Portfolio
Nicholas-Applegate Emerging Countries Portfolio A
Nicholas-Applegate Emerging Countries Portfolio B
Nicholas-Applegate Emerging Countries Portfolio C
Nicholas-Applegate Emerging Countries Institutional
Portfolio
Nicholas-Applegate Global Growth & Income Portfolio A
Nicholas-Applegate Global Growth & Income Portfolio B
Nicholas-Applegate Global Growth & Income Portfolio C
Nicholas-Applegate Global Growth & Income Institutional
Portfolio
Nicholas-Applegate Mini-Cap Growth Institutional
Portfolio

-2-

<PAGE>

IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.

s/ Arthur E. Nicholas s/ Fred C. Applegate
- ---------------------- ---------------------
Arthur E. Nicholas Fred C. Applegate

s/ Arthur B. Laffer s/ Charles E. Young
- ------------------------ ---------------------
Arthur B. Laffer Charles E. Young

-3-

<PAGE>

EXHIBIT 1.11

AMENDMENT NO. 7 TO
AMENDED AND RESTATED DECLARATION OF TRUST
OF
NICHOLAS-APPLEGATE MUTUAL FUNDS

THIS AMENDMENT NO. 7 TO THE AMENDED AND RESTATED DECLARATION OF TRUST
OF NICHOLAS-APPLEGATE MUTUAL FUNDS is made as of the 12th day of May, 1995 by
the undersigned, constituting a majority of the Trustees of the Trust.

WHEREAS, the Amended and Restated Declaration of Trust of the Trust
adopted as of December 17, 1992, as heretofore amended, designated certain
series of Interests of the Trust; and

WHEREAS, there are no outstanding Interests of the Emerging Growth
Institutional Portfolio II and Mini-Cap Growth Institutional Portfolio series of
the Trust, and the undersigned wish to terminate such series; and

WHEREAS, the undersigned wish to establish and designate various new
series of the Trust;

NOW THEREFORE, the Board of Trustees hereby amends the first sentence
of Section 8.8 of the Amended and Restated Declaration of Trust of the Trust to
read in full as follows:

"Without limiting the authority of the Trustees set forth in this
Section 8.8 to establish and designate any further series, the
Trustees hereby establish and designate forty-nine series, as follows:

<PAGE>

Nicholas-Applegate Income & Growth Portfolio C
Nicholas-Applegate Income & Growth Institutional
Portfolio
Nicholas-Applegate Income & Growth Qualified Portfolio
Nicholas-Applegate Balanced Growth Portfolio A
Nicholas-Applegate Balanced Growth Portfolio B
Nicholas-Applegate Balanced Growth Portfolio C
Nicholas-Applegate Balanced Growth Institutional
Portfolio
Nicholas-Applegate Balanced Growth Qualified Portfolio
Nicholas-Applegate Worldwide Growth Portfolio A
Nicholas-Applegate Worldwide Growth Portfolio B
Nicholas-Applegate Worldwide Growth Portfolio C
Nicholas-Applegate Worldwide Growth Institutional
Portfolio
Nicholas-Applegate Worldwide Growth Qualified Portfolio
Nicholas-Applegate Emerging Growth Portfolio A
Nicholas-Applegate Emerging Growth Portfolio B
Nicholas-Applegate Emerging Growth Portfolio C
Nicholas-Applegate Emerging Growth Institutional
Portfolio
Nicholas-Applegate Emerging Growth Qualified Portfolio
Nicholas-Applegate International Growth Portfolio A
Nicholas-Applegate International Growth Portfolio B
Nicholas-Applegate International Growth Portfolio C
Nicholas-Applegate International Growth Institutional
Portfolio
Nicholas-Applegate International Growth Qualified
Portfolio
Nicholas-Applegate Money Market Portfolio
Nicholas-Applegate Money Market Institutional Portfolio
Nicholas-Applegate Emerging Countries Portfolio A
Nicholas-Applegate Emerging Countries Portfolio B
Nicholas-Applegate Emerging Countries Portfolio C
Nicholas-Applegate Emerging Countries Institutional
Portfolio
Nicholas-Applegate Emerging Countries Qualified
Portfolio
Nicholas-Applegate Global Growth & Income Portfolio A
Nicholas-Applegate Global Growth & Income Portfolio B
Nicholas-Applegate Global Growth & Income Portfolio C
Nicholas-Applegate Global Growth & Income Institutional
Portfolio
Nicholas-Applegate Global Growth & Income Qualified
Portfolio
Nicholas-Applegate Short-Intermediate Institutional
Fixed Income Portfolio
Nicholas-Applegate Fully Discretionary Institutional
Fixed Income Portfolio

-2-

<PAGE>

IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.

s/ Arthur E. Nicholas s/ Fred C. Applegate
- --------------------- ----------------------
Arthur E. Nicholas Fred C. Applegate

s/ Charles E. Young
- --------------------- ----------------------
Arthur B. Laffer Charles E. Young

-3-

<PAGE>

EXHIBIT 1.12

AMENDMENT NO. 8 TO
AMENDED AND RESTATED DECLARATION OF TRUST
OF
NICHOLAS-APPLEGATE MUTUAL FUNDS

THIS AMENDMENT NO. 8 TO THE AMENDED AND RESTATED DECLARATION OF TRUST
OF NICHOLAS-APPLEGATE MUTUAL FUNDS is made as of the 10th day of July, 1995 by
the undersigned, constituting a majority of the Trustees of the Trust.

WHEREAS, the Amended and Restated Declaration of Trust of the Trust
adopted as of December 17, 1992, as heretofore amended, designated certain
series of Interests of the Trust; and

WHEREAS, the undersigned wish to reestablish and redesignate the
Mini-Cap Growth Institutional Portfolio as a new series of the Trust;

NOW THEREFORE, the Board of Trustees hereby amends the first sentence
of Section 8.8 of the Amended and Restated Declaration of Trust of the Trust to
read in full as follows:

"Without limiting the authority of the Trustees set forth in this
Section 8.8 to establish and designate any further series, the
Trustees hereby establish and designate forty-nine series, as follows:

<PAGE>

Nicholas-Applegate Income & Growth Institutional
Portfolio
Nicholas-Applegate Income & Growth Qualified
Portfolio
Nicholas-Applegate Balanced Growth Portfolio A
Nicholas-Applegate Balanced Growth Portfolio B
Nicholas-Applegate Balanced Growth Portfolio C
Nicholas-Applegate Balanced Growth Institutional
Portfolio
Nicholas-Applegate Balanced Growth Qualified
Portfolio
Nicholas-Applegate Worldwide Growth Portfolio A
Nicholas-Applegate Worldwide Growth Portfolio B
Nicholas-Applegate Worldwide Growth Portfolio C
Nicholas-Applegate Worldwide Growth Institutional
Portfolio
Nicholas-Applegate Worldwide Growth Qualified
Portfolio
Nicholas-Applegate Emerging Growth Portfolio A
Nicholas-Applegate Emerging Growth Portfolio B
Nicholas-Applegate Emerging Growth Portfolio C
Nicholas-Applegate Emerging Growth Institutional
Portfolio
Nicholas-Applegate Emerging Growth Qualified
Portfolio
Nicholas-Applegate International Growth Portfolio
A
Nicholas-Applegate International Growth Portfolio
B
Nicholas-Applegate International Growth Portfolio
C
Nicholas-Applegate International Growth
Institutional Portfolio
Nicholas-Applegate International Growth Qualified
Portfolio
Nicholas-Applegate Money Market Portfolio
Nicholas-Applegate Money Market Institutional
Portfolio
Nicholas-Applegate Emerging Countries Portfolio A
Nicholas-Applegate Emerging Countries Portfolio B
Nicholas-Applegate Emerging Countries Portfolio C
Nicholas-Applegate Emerging Countries
Institutional Portfolio
Nicholas-Applegate Emerging Countries Qualified
Portfolio
Nicholas-Applegate Global Growth & Income
Portfolio A
Nicholas-Applegate Global Growth & Income
Portfolio B

-2-

<PAGE>

Nicholas-Applegate Global Growth & Income
Portfolio C
Nicholas-Applegate Global Growth & Income
Institutional Portfolio
Nicholas-Applegate Global Growth & Income
Qualified Portfolio
Nicholas-Applegate Short-Intermediate
Institutional Fixed Income Portfolio
Nicholas-Applegate Fully Discretionary
Institutional Income Portfolio
Nicholas-Applegate Mini-Cap Growth Institutional
Portfolio

IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.

s/ Arthur E. Nicholas s/ Fred C. Applegate
- ---------------------- ----------------------
Arthur E. Nicholas Fred C. Applegate

s/ Arthur B. Laffer s/ Charles E. Young
- ---------------------- ----------------------
Arthur B. Laffer Charles E. Young

-3-

<PAGE>

EXHIBIT 1.13

AMENDMENT NO. 9 TO
AMENDED AND RESTATED DECLARATION OF TRUST
OF
NICHOLAS-APPLEGATE MUTUAL FUNDS

THIS AMENDMENT NO. 9 TO THE AMENDED AND RESTATED DECLARATION OF TRUST
OF NICHOLAS-APPLEGATE MUTUAL FUNDS is made as of the 23rd day of February, 1996
by the undersigned, constituting a majority of the Trustees of the Trust.

WHEREAS, the Amended and Restated Declaration of Trust of the Trust
adopted as of December 17, 1992, as heretofore amended, designated certain
series of Interests of the Trust; and

WHEREAS, the undersigned wish to designate the Value Institutional
Portfolio as a new series of the Trust;

NOW THEREFORE, the Board of Trustees hereby amends the first sentence
of Section 8.8 of the Amended and Restated Declaration of Trust of the Trust to
read in full as follows:

"Without limiting the authority of the Trustees set forth in this
Section 8.8 to establish and designate any further series, the
Trustees hereby establish and designate forty-nine series, as follows:

Nicholas-Applegate Core Growth Portfolio A
Nicholas-Applegate Core Growth Portfolio B
Nicholas-Applegate Core Growth Portfolio C
Nicholas-Applegate Core Growth Institutional Portfolio
Nicholas-Applegate Core Growth Qualified Portfolio
Nicholas-Applegate Government Income Portfolio A
Nicholas-Applegate Government Income Portfolio B
Nicholas-Applegate Government Income Portfolio C
Nicholas-Applegate Government Income Institutional Portfolio
Nicholas-Applegate Government Income Qualified Portfolio
Nicholas-Applegate Income & Growth Portfolio A
Nicholas-Applegate Income & Growth Portfolio B
Nicholas-Applegate Income & Growth Portfolio C
Nicholas-Applegate Income & Growth Institutional Portfolio
Nicholas-Applegate Income & Growth Qualified Portfolio
Nicholas-Applegate Balanced Growth Portfolio A
Nicholas-Applegate Balanced Growth Portfolio B
Nicholas-Applegate Balanced Growth Portfolio C
Nicholas-Applegate Balanced Growth Institutional Portfolio
Nicholas-Applegate Balanced Growth Qualified Portfolio

<PAGE>

Nicholas-Applegate Worldwide Growth Portfolio A
Nicholas-Applegate Worldwide Growth Portfolio B
Nicholas-Applegate Worldwide Growth Portfolio C
Nicholas-Applegate Worldwide Growth Institutional Portfolio
Nicholas-Applegate Worldwide Growth Qualified Portfolio
Nicholas-Applegate Emerging Growth Portfolio A
Nicholas-Applegate Emerging Growth Portfolio B
Nicholas-Applegate Emerging Growth Portfolio C
Nicholas-Applegate Emerging Growth Institutional Portfolio
Nicholas-Applegate Emerging Growth Qualified Portfolio
Nicholas-Applegate International Growth Portfolio A
Nicholas-Applegate International Growth Portfolio B
Nicholas-Applegate International Growth Portfolio C
Nicholas-Applegate International Growth Institutional Portfolio
Nicholas-Applegate International Growth Qualified Portfolio
Nicholas-Applegate Money Market Portfolio
Nicholas-Applegate Money Market Institutional Portfolio
Nicholas-Applegate Emerging Countries Portfolio A
Nicholas-Applegate Emerging Countries Portfolio B
Nicholas-Applegate Emerging Countries Portfolio C
Nicholas-Applegate Emerging Countries Institutional Portfolio
Nicholas-Applegate Emerging Countries Qualified Portfolio
Nicholas-Applegate Global Growth & Income Portfolio A
Nicholas-Applegate Global Growth & Income Portfolio B
Nicholas-Applegate Global Growth & Income Portfolio C
Nicholas-Applegate Global Growth & Income Institutional Portfolio
Nicholas-Applegate Global Growth & Income Qualified Portfolio
Nicholas-Applegate Short-Intermediate Institutional Fixed Income
Portfolio
Nicholas-Applegate Fully Discretionary Institutional Fixed Income
Portfolio
Nicholas-Applegate Mini-Cap Growth Institutional Portfolio
Nicholas-Applegate Value Institutional Portfolio

IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.

s/ Arthur B. Laffer s/ Fred C. Applegate
- ---------------------- ----------------------
Arthur B. Laffer Fred C. Applegate

- ----------------------
Charles E. Young

-2-

<PAGE>

EXHIBIT 2.1

NICHOLAS-APPLEGATE MUTUAL FUNDS

BY-LAWS

These By-Laws are made as of the 18th day of December, 1992 and
adopted pursuant to Section 2.7 of the Declaration of Trust establishing
Nicholas-Applegate Investment Trust dated December 17, 1992, as from time to
time amended (hereinafter called the "Declaration"). All words and terms
capitalized in these By-Laws shall have the meaning or meanings set forth for
such words or terms in the Declaration.

ARTICLE I
MEETINGS OF HOLDERS

Section 1.1 ANNUAL MEETING. An annual meeting of the Holders of
Interests in the Trust, which may be held on such date and at such hour as may
from time to time be designated by the Board of Trustees and stated in the
notice of such meeting, is not required to be held unless certain actions must
be taken by the Holders as set forth in Section 8.7 of the Declaration, or
except when the Trustees consider it necessary or desirable.

Section 1.2 CHAIRMAN. The President or, in his or her absence, the
Chief Operating Officer shall act as chairman at all meetings of the Holders
and, in the absence of both of them, the Trustee or Trustees present at the
meeting may elect a temporary chairman for the meeting, who may be one of
themselves or an officer of the Trust.

Section 1.3 PROXIES; VOTING. Holders may vote either in person or by
duly executed proxy and each Holder shall be entitled to a vote proportionate to
his or her Interest in the Trust, all as provided in Article IX of the
Declaration. No proxy shall be valid after eleven (11) months from the date of
its execution, unless a longer period is expressly stated in such proxy.

Section 1.4 FIXING RECORD DATES. For the purpose of determining the
Holders who are entitled to notice of or to vote or act at a meeting, including
any adjournment thereof, or who are entitled to participate in any
distributions, or for any other proper purpose, the Trustees

<PAGE>

may from time to time fix a record date in the manner provided in Section 9.3 of
the Declaration. If the Trustees do not, prior to any meeting of the Holders,
so fix a record date, then the date of mailing notice of the meeting shall be
the record date.

Section 1.5 INSPECTORS OF ELECTION. In advance of any meeting of the
Holders, the Trustees may appoint Inspectors of Election to act at the meeting
or any adjournment thereof. If Inspectors of Election are not so appointed, the
chairman, if any, of any meeting of the Holders may, and on the request of any
Holder or his or her proxy shall, appoint Inspectors of Election of the meeting.
The number of Inspectors shall be either one or three. If appointed at the
meeting on the request of one or more Holders or proxies, a Majority Interests
Vote shall determine whether one or three Inspectors are to be appointed, but
failure to allow such determination by the Holders shall not affect the validity
of the appointment of Inspectors of Election. In case any person appointed as
Inspector fails to appear or fails or refuses to act, the vacancy may be filled
by appointment made by the Trustees in advance of the convening of the meeting
or at the meeting by the person acting as chairman. The Inspectors of Election
shall determine the Interests owned by Holders, the Interests represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results, and
do such other acts as may be proper to conduct the election or vote with
fairness to all Holders. If there are three Inspectors of Election, the
decision, act or certificate of a majority is effective in all respects as the
decision, act or certificate of all. On request of the chairman, if any, of the
meeting, or of any Holder or his or her proxy, the Inspectors of Election shall
make a report in writing of any challenge or question or matter determined by
them and shall execute a certificate of any facts found by them.

Section 1.6 RECORDS OF MEETINGS OF HOLDERS. At each meeting of the
Holders there shall be open for inspection the minutes of the last previous
meeting of Holders of the Trust and a list of the Holders of the Trust,
certified to be true and correct by the Secretary or other proper agent of the
Trust, as of the record date of the meeting. Such list of Holders shall contain
the name of each Holder in alphabetical order, the Holder's address and
Interests owned by such Holder. Holders shall have the

-2-

<PAGE>

right to inspect books and records of the Trust during normal business hours for
any purpose not harmful to the Trust.

ARTICLE II
TRUSTEES

Section 2.1 ANNUAL AND REGULAR MEETINGS. The Trustees shall hold an
Annual Meeting of the Trustees for the election of officers and the transaction
of other business which may come before such meeting. Regular meetings of the
Trustees may be held without call or notice at such place or places and times as
the Trustees may by resolution provide from time to time.

Section 2.2 SPECIAL MEETINGS. Special Meetings of the Trustees shall
be held upon the call of the chairman, if any, the President, the Secretary, or
any two Trustees, at such time, on such day and at such place, as shall be
designated in the notice of the meeting.

Section 2.3 NOTICE. Notice of a meeting shall be given by United
States mail (which term shall include overnight mail) or by electronic
transmission (which term shall include, without limitation by telephone,
cablegram or telefacsimile) or delivered personally to each trustee at his or
her business address as set forth in the records of the trust. If notice is
given by mail, it shall be mailed not later than 72 hours preceding the meeting
and if given by telegram or personally, such notice shall be delivered not later
than 24 hours preceding the meeting. Notice of a meeting of Trustees may be
waived before or after any meeting by signed written waiver. Neither the
business to be transacted at, nor the purpose of, any meeting of the Board of
Trustees need be stated in the notice or waiver of notice of such meeting, and
no notice need be given of action proposed to be taken by written consent. The
attendance of a Trustee at a meeting shall constitute a waiver of notice of such
meeting except where a Trustee attends a meeting for the express purpose of
objecting, at the commencement of such meeting, to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened.

Section 2.4 CHAIRMAN; RECORDS. The Trustees shall appoint a Chairman
of the Board from among their number. Such Chairman of the Board shall act as
chairman at all meetings of the Trustees; in his or her absence the President
shall act as chairman; and, in the absence of all

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of them, the Trustees present shall elect one of their number to act as
temporary chairman. The results of all actions taken at a meeting of the
Trustees, or by written consent of the Trustees, shall be recorded by the
Secretary.

Section 2.5 AUDIT COMMITTEE. The Audit Committee shall (a) recommend
independent public accountants for selection by the Board, (b) review the scope
of audit, accounting and financial internal controls and the quality and
adequacy of the Trust's accounting staff with the independent public accountants
and such other persons as may be deemed appropriate, (c) review with the
accounting staff and the independent public accountants the compliance of
transactions of the Trust with its investment adviser, administrator or any
other service provider with the financial terms of applicable contracts or
agreements, (d) review reports of the independent public accountants and comment
to the Board when warranted, (e) report to the Board at least once each year and
at such other times as the committee deems desirable, and (f) be directly
available at all times to independent public accountants and responsible
officers of the Trust for consultation on audit, accounting and related
financial matters.

Section 2.6 NOMINATING COMMITTEE OF TRUSTEES. The Board of Trustees
may, by the affirmative vote of a majority of the entire Board, appoint from its
members a Trustee Nominating Committee composed of two or more Trustees. The
Trustee Nominating Committee shall recommend to the Board a slate of persons to
be nominated for election as Trustees by the Holders at a meeting of the Holders
and a person to be elected to fill any vacancy occurring for any reason in the
Board. Notwithstanding anything in this Section to the contrary, if the Trust
has in effect a plan pursuant to Rule 12b-1 under the 1940 Act, the selection
and nomination of those Trustees who are not "interested persons" (as defined in
the Act) shall be committed to the discretion of such Disinterested Trustees.

Section 2.7 EXECUTIVE COMMITTEE. The Board of Trustees may appoint
from its members an Executive Committee composed of those Trustees as the Board
may from time to time determine, of which committee the Chairman of the Board
shall be a member. In the intervals between meetings of the Board, the
Executive Committee shall have the power of the Board to (a) determine the value
of securities and assets owned by the Trust, (b) elect or appoint officers of
the Trust to serve until the next meeting of the Board, and (c) take such action
as may be necessary to manage the portfolio security loan business of the Trust.
All action

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by the Executive Committee shall be recorded and reported to the Board at its
meeting next succeeding such action.

Section 2.8 OTHER COMMITTEES. The Board of Trustees may appoint from
among its members other committees composed of two or more of its Trustees which
shall have such powers as may be delegated or authorized by the resolution
appointing them.

Section 2.9 COMMITTEE PROCEDURES. The Board of Trustees may at any
time change the members of any committee, fill vacancies or discharge any
committee. In the absence of any member of any committee, the member or members
thereof present at any meeting, whether or not they constitute a quorum, may
unanimously appoint to act in the place of such absent member a member of the
Board who, except in the case of the Executive Committee, is not an "interested
person" of the Trust as the Board may from time to time determine. Each
committee may fix its own rules of procedure and may meet as and when provided
by those rules. Copies of the minutes of all meetings of committees other than
the Nominating Committee and the Executive Committee shall be distributed to the
Board unless the Board shall otherwise provide.

ARTICLE III
OFFICERS

Section 3.1 OFFICERS OF THE TRUST; COMPENSATION. The officers of the
Trust shall consist of a President, a Secretary, a Treasurer and such other
officers or assistant officers, including Vice Presidents, as may be elected by
the Trustees. Any two or more of the offices may be held by the same person.
The Trustees may designate a Vice President as an Executive Vice President and
may designate the order in which the other Vice Presidents may act. No officer
of the Trust need be a Trustee. The Board of Trustees may determine what, if
any, compensation shall be paid to officers of the Trust.

Section 3.2 ELECTION AND TENURE. At the initial organization meeting
and thereafter at each annual meeting of the Trustees, the Trustees shall elect
the Chairman, President, Secretary, Treasurer and such other officers as the
Trustees shall deem necessary or appropriate in order to carry out the business
of the Trust. The Chairman of the Board and such officers shall hold office
until the next annual meeting of the Trustees and until their successors have
been duly elected and qualified. The Trustees may fill

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any vacancy in office or add any additional officers at any time.

Section 3.3 REMOVAL OF OFFICERS. Any officer may be removed at any
time, with or without cause, by action of a majority of the Trustees. This
provision shall not prevent the making of a contract of employment for a
definite term with any officer and shall have no effect upon any cause of action
which any officer may have as a result of removal in breach of a contract of
employment. Any officer may resign at any time by notice in writing signed by
such officer and delivered or mailed to the President or Secretary, and such
resignation shall take effect immediately, or at a later date according to the
terms of such notice in writing.

Section 3.4 BONDS AND SURETY. Any officer may be required by the
Trustees to be bonded for the faithful performance of his or her duties in such
amount and with such sureties as the Trustees may determine.

Section 3.5 PRESIDENT AND VICE-PRESIDENTS. The President shall be
the chief executive officer of the Trust and, subject to the control of the
Trustees, shall have general supervision, direction and control of the business
of the Trust and of its employees and shall exercise such general powers of
management as are usually vested in the office of president of a corporation.
The President shall preside at all meetings of the Holders and, in the absence
of the Chairman of the Board, the President shall preside at all meetings of the
Trustees. The President shall be, ex officio, a member of all standing
committees. Subject to direction of the Trustees, the President shall have the
power, in the name and on behalf of the Trust, to execute any and all loan
documents, contracts, agreements, deeds, mortgages, and other instruments in
writing, and to employ and discharge employees and agents of the Trust. Unless
otherwise directed by the Trustees, the President shall have full authority and
power, on behalf of all of the Trustees, to attend and to act and to vote, on
behalf of the Trust at any meetings of business organizations in which the Trust
holds an interest, or to confer such powers upon any other persons, by executing
any proxies duly authorizing such persons. The President shall have such
further authorities and duties as the Trustees shall from time to time
determine. In the absence or disability of the President, the Vice Presidents
in order of their rank or the Vice President designated by the Trustees, shall
perform all of the duties of President, and when so acting shall have all the
powers of and be subject to all of the restrictions upon

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the President. Subject to the direction of the President, the Treasurer and
each Vice President shall have the power in the name and on behalf of the Trust
to execute any and all loan documents, contracts, agreements, deeds, mortgages
and other instruments in writing, and, in addition, shall have such other duties
and powers as shall be designated from time to time by the Trustees, the
Chairman, or the President;

Section 3.6 SECRETARY. The Secretary shall keep the minutes of all
meetings of, and record all votes of, Holders, Trustees and any committees of
Trustees, provided that, in the absence or disability of the Secretary, the
Holders or Trustees or committee may appoint any other person to keep the
minutes of a meeting and record votes. The Secretary shall attest the signature
or signatures of the officer or officers executing any instrument on behalf of
the Trust. The Secretary shall also perform any other duties commonly incident
to such office in a Delaware corporation, and shall have such other authorities
and duties as the Trustees shall from time to time determine.

Section 3.7 TREASURER. Except as otherwise directed by the Trustees,
the Treasurer shall have the general supervision of the monies, funds,
securities, notes receivable and other valuable papers and documents of the
Trust, and shall have and exercise under the supervision of the Trustees and of
the Chairman and the President all powers and duties normally incident to his
office. He may endorse for deposit or collection all notes, checks and other
instruments payable to the Trust or to its order. He shall deposit all funds of
the Trust as may be ordered by the Trustees, the Chairman or the President. He
shall keep accurate account of the books of the Trust's transactions which shall
be the property of the Trust and which, together with all other property of the
Trust in his possession, shall be subject at all times to the inspection and
control of the Trustees. Unless the Trustees shall otherwise determine, the
Treasurer shall be the principal accounting officer of the Trust and shall also
be the principal financial officer of the Trust. He shall have such other
duties and authorities as the Trustees shall from time to time determine.
Notwithstanding anything to the contrary herein contained, the Trustees may
authorize any adviser or administrator to maintain bank accounts and deposit and
disburse funds on behalf of the Trust.

Section 3.8 OTHER OFFICERS AND DUTIES. The Trustees may elect such
other officers and assistant officers as they shall from time to time determine
to be

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necessary or desirable in order to conduct the business of the Trust. Assistant
officers shall act generally in the absence of the officer whom they assist and
shall assist that officer in the duties of his office. Each officer, employee
and agent of the Trust shall have such other duties and authority as may be
conferred upon him by the Trustees or delegated to him by the President.

ARTICLE IV
CUSTODIAN

Section 4.1 APPOINTMENT AND DUTIES. The Trustees shall at all times
employ a custodian or custodians with authority as its agent, but subject to
such restrictions, limitations and other requirements, if any, as may be
contained in these By-Laws:

(1) to hold the securities owned by the Trust and deliver the
same upon written order;

(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the Trustees
may direct;

(3) to disburse such funds upon orders or vouchers;

(4) if authorized by the Trustees, to keep the books and
accounts of the Trust and furnish clerical and accounting services; and

(5) if authorized to do so by the Trustees, to compute the net
income and net assets of the Trust;

all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. The Trustees may also authorize the custodian to employ one
or more subcustodians, from time to time, to perform such of the acts and
services of the custodian and upon such terms and conditions as may be agreed
upon between the custodian and such sub-custodian and approved by the Trustee.

Section 4.2 CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities

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<PAGE>

association registered with the Commission under the Securities Exchange Act of
1934, any such other person or entity with which the Trustees may authorize
deposit in accordance with the 1940 Act, pursuant to which system all securities
of any particular class or series of any issuer deposited within the system are
treated as fungible and may be transferred or pledged by bookkeeping entry
without physical delivery of such securities. All such deposits shall be
subject to withdrawal only upon the order of the Trust.

ARTICLE V
MISCELLANEOUS

Section 5.1 DEPOSITORIES. In accordance with Article IV of these
By-Laws, the funds of the Trust shall be deposited in such depositories as the
Trustees shall designate and shall be drawn out on checks, drafts or other
orders signed by such officer, officers, agent or agents (including any adviser
or administrator), as the Trustees may from time to time authorize.

Section 5.2 SIGNATURES. All contracts and other instruments shall be
executed on behalf of the Trust by such officer, officers, agent or agents, as
provided in these ByLaws or as the Trustees may from time to time by resolution
or authorization provide.

Section 5.3 FISCAL YEAR. The fiscal year of the Trust shall end on
December 31 of each year, subject, however, to change from time to time by the
Board of Trustees.

ARTICLE VI
INTERESTS

Section 6.1 INTERESTS. Except as otherwise provided by law, the
Trust shall be entitled to recognize the exclusive right of a person in whose
name Interests stand on the record of Holders as the owners of such Interests
for all purposes, including, without limitation, the rights to receive
distributions, and to vote as such owner, and the Trust shall not be bound to
recognize any equitable or legal claim to or interest in any such Interests on
the part of any other person.

Section 6.2 REGULATIONS. The Trustees may make such additional rules
and regulations, not inconsistent with

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these By-Laws, as they may deem expedient concerning the sale and purchase of
Interests of the Trust.

Section 6.3 DISTRIBUTION DISBURSING AGENTS AND THE LIKE. The
Trustees shall have the power to employ and compensate such distribution
disbursing agents, warrant agents and agents for the reinvestment of
distributions as they shall deem necessary or desirable. Any of such agents
shall have such power and authority as is delegated to any of them by the
Trustees.

ARTICLE VII
AMENDMENT OF BY-LAWS

Section 7.1 AMENDMENT AND REPEAL OF BY-LAWS. In accordance with
Section 2.7 of the Declaration, the Trustees shall have the power to alter,
amend or repeal the By-Laws or adopt new By-Laws at any time. The Trustees
shall in no event adopt By-Laws which are in conflict with the Declaration,
DBTA, the 1940 Act or applicable federal securities laws.

Section 7.2 NO PERSONAL LIABILITY. The Declaration establishing
Nicholas-Applegate Mutual Funds provides that the name Nicholas-Applegate Mutual
Funds does not refer to the Trustees as individuals or personally; and no
Trustee, officer, employee or agent of, or Holder of Interest in, Nicholas-
Applegate Mutual Funds shall be held to any personal liability, nor shall resort
be had to their private property for the satisfaction of any obligation or claim
or otherwise in connection with the affairs of Nicholas-Applegate Mutual Funds
(except to the extent of a HOlder's Interest in the Trust).

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EXHIBIT 2.2

WHEREAS, the Bylaws of the Trust currently provide that the Audit
Committee of the Board of Trustees must be comprised of Trustees who are not
"interested persons" of the Trust as such term is defined in the Investment
Company Act of 1940; and

WHEREAS, such definition includes persons who are not affiliated with
Nicholas-Applegate Capital Management and have no substantial business or
professional relationships with it, but are broker-dealers or affiliates of
broker-dealers; and

WHEREAS, it is in the best interests of the Trust that any such
persons be eligible to serve on the Audit Committee;

NOW, THEREFORE, BE IT RESOLVED, that the first sentence of Article II,
Section 2.5 of the Bylaws of the trust is hereby amended to read as follows:
"The Board of Trustees may, by the affirmative vote of a majority of the entire
Board, appoint from its members an Audit Committee composed of two or more
Trustees who (i) are not "interested persons" (as defined in the 1940 Act) of
the Trust, or (ii) are "interested persons' of the Trust solely by reason of
being brokers or dealers registered under the Securities Exchange Act of 1934,
or being affiliated persons (as defined in the 1940 Act) of registered brokers
or dealers (other than brokers or dealers affiliated with the Trust's investment
adviser or distributor)".

<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS

DISTRIBUTION AGREEMENT

This DISTRIBUTION AGREEMENT (this "Agreement") is made as of this 19th
day of April, 1993 by and between Nicholas-Applegate Mutual Funds, a Delaware
business trust (the "Trust"), and Nicholas-Applegate Securities, a California
limited partnership (the "Distributor").

WHEREAS, the Trust is a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act");

WHEREAS, the Trust currently consists of 13 series (each a "Portfolio"
and collectively the "Portfolios"), including Nicholas-Applegate Core Growth
Portfolio A, Nicholas-Applegate Income & Growth Portfolio A, NicholasApplegate
Balanced Growth Portfolio A, Nicholas-Applegate Worldwide Growth Portfolio A,
Nicholas-Applegate Government Income Portfolio A and Nicholas-Applegate Money
Market Portfolio (each a "Portfolio A Series" and collectively the "Portfolio A
Series"); Nicholas-Applegate Core Growth Portfolio B, Nicholas-Applegate Income
& Growth Portfolio B, Nicholas-Applegate Balanced Growth Portfolio B,
NicholasApplegate Worldwide Growth Portfolio B and Nicholas-Applegate Government
Income Portfolio B (each a "Portfolio B Series" and collectively the "Portfolio
B Series"); and Nicholas-Applegate Core Growth Qualified Portfolio, and
Nicholas-Applegate Income & Growth Qualified Portfolio (each a "Qualified
Portfolio" and collectively the "Qualified Portfolios");

WHEREAS, the Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended, and a member of the National
Association of Securities Dealers, Inc. (the "NASD");

WHEREAS, the Trust desires to retain the Distributor as its agent to
provide services in connection with the distribution of shares of beneficial
interest ("shares") of each of the Portfolio A Series, Portfolio B Series and
Qualified Portfolios (collectively, the "Portfolios"), and the Distributor is
willing to provide such services upon the terms set forth herein; and

<PAGE>

WHEREAS, the Trust has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act, whereby the Trust will compensate the
Distributor for certain services rendered and costs incurred by the Distributor
in connection with distributing shares of the Portfolios;

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein set forth, the parties hereto agree as follows:

Section 1. APPOINTMENT OF DISTRIBUTOR.

The Trust hereby appoints the Distributor as its agent to act as the
principal underwriter and distributor of shares of the Portfolios, and the
Distributor hereby accepts such appointment and agrees to act hereunder. The
Trust hereby agrees during the term of this Agreement to sell shares of the
Portfolios exclusively to or through the Distributor on the terms and conditions
set forth below.

In the event that the Trust establishes one or more series other than
the Portfolios with respect to which it desires to appoint the Distributor as
the principal underwriter and distributor hereunder, it will notify the
Distributor in writing. If the Distributor is willing to accept such
appointment under this Agreement it will so notify the Trust in writing,
whereupon such series will be subject to the provisions of this Agreement to the
same extent as the Portfolios except to the extent that such provisions
(including those relating to the compensation payable by the Trust to the
Distributor) are modified with respect to such series in writing by the Trust
and the Distributor at the time.

Section 2. PURCHASE OF SHARES FROM THE TRUST.

2.1 The Distributor shall have the right to sell as agent for the
Trust the shares of a Portfolio needed, but not more than the shares needed, to
fill unconditional orders for shares placed with the Distributor by investors or
registered and qualified securities dealers and others ("selected dealers").

2.2 The shares of the Portfolios are to be sold by the Distributor or
selected dealers, as described in Section 5.4 hereof, to investors at the
offering price as set forth in the applicable prospectus and statement of
additional information for the Portfolio then in effect (the "Prospectus").

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2.3 The Trust shall have the right to suspend the sale of its shares
at times when redemption is suspended pursuant to the conditions in Section 3.3
hereof or at such other times as may be determined by the Trust's Board of
Trustees (the "Board").

2.4 The Trust, or any agent of the Trust designated in writing by the
Board, shall be promptly advised of all purchase orders for shares of the
Portfolios received by the Distributor or selected dealer. Any order may be
rejected by the Trust or the Distributor; provided, however, that the Trust and
the Distributor will not arbitrarily or without reasonable cause refuse to
accept or confirm orders for the purchase of shares of a Portfolio. The Trust
(or its agent) will confirm orders upon their receipt, will make appropriate
book entries and, upon receipt by the Trust (or its agent) of payment therefor,
will deliver deposit receipts for the shares pursuant to the instructions of the
Distributor or selected dealer. Payment shall be made to the Trust (or its
agent) in New York Clearing House funds or federal funds. The Distributor
agrees, and selected dealers shall agree, to cause such payment and such
instructions to be delivered promptly to the Trust (or its agent).

Section 3. REDEMPTION OF SHARES BY THE TRUST.

3.1 Any of the outstanding shares of a Portfolio may be tendered for
redemption at any time, and the Trust agrees to repurchase or redeem the shares
so tendered in accordance with the Trust's Declaration of Trust and Bylaws and
the applicable provisions of the respective Portfolio's Prospectus. The price
to be paid to redeem or repurchase the shares shall be equal to the net asset
value, less a contingent deferred sales charge, if any, determined as set forth
in the applicable Prospectus (the "redemption price"). All payments by the Trust
hereunder shall be made in the manner set forth in Section 3.2 below.

3.2 The Trust (or its agent) shall pay the total amount of the
redemption price pursuant to the instructions of the Distributor or selected
dealer on or before the seventh calendar day subsequent to the Trust (or its
agent) having received the notice of redemption in proper form. The proceeds of
any redemption of shares shall be paid by the Trust (or its agent) to or for the
account of the redeeming shareholder, in each case in accordance with the
applicable provisions of the respective Portfolio's Prospectus.

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3.3 Redemption of shares or payment therefor may be suspended at
times when the New York Stock Exchange is closed for other than customary
weekends and holidays, when trading on the Exchange is restricted, when an
emergency exists as a result of which disposal by the Portfolios of securities
owned by it is not reasonably practicable or when it is not reasonably
practicable for the Portfolios fairly to determine the value of its net assets,
or during any other period when the Securities and Exchange Commission, by
order, so permits.

Section 4. DUTIES OF THE TRUST.

4.1 Subject to the possible suspension of the sale of shares of a
Portfolio, and the right to reject orders, as provided herein, the Trust agrees
to sell shares of the Portfolios so long as shares are available for sale.

4.2 The Trust (or its agent) shall furnish the Distributor copies of
all information, financial statements and other documents which the Distributor
may reasonably request for use in connection with the distribution of shares,
which information shall include one certified copy, upon request by the
Distributor, of all financial statements prepared for the Trust by its
independent public accountants. The Trust (or its agent) shall make available
to the Distributor such number of copies of the Prospectuses for each Portfolio
and annual and interim reports as the Distributor shall reasonably request.

4.3 The Trust shall use its best efforts to take from time to time,
but subject to the necessary approval of the Board and the shareholders, all
necessary action to register authorized shares under the Securities Act of 1933,
as amended (the "1933 Act"), so that there will be available for sale such
number of shares of the Portfolios as the Distributor and the selected dealers
reasonably may expect to sell. The Trust shall file from time to time such
amendments, reports and other documents as may be necessary in order that there
will be no untrue statement of a material fact in the Trust's Registration
Statement on Form N-1A covering the shares of the Portfolios (the "Registration
Statement"), or necessary in order that there wi 11 be no omission to state a
material fact in the Registration Statement which omission would make the
statements therein misleading. The Distributor shall furnish such information
and other material relating to its affairs and activities as may be required by
the Trust in connection with such Registration Statement.

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4.4 The Trust shall use its best efforts to qualify and maintain the
qualification of an appropriate number of shares of the Portfolios for sale
under the securities laws of such states as the Distributor and the Trust may
approve; provided that the Trust shall not be required to amend its Declaration
of Trust or Bylaws to comply with the laws of any state, to maintain an office
in any state, to change the terms of the offering of its shares in any state
from the terms set forth in its Registration Statement, to qualify as a foreign
corporation in any state or to consent to service of process in any state other
than with respect to claims arising out of the offering of its shares. Any such
qualification may be withheld, terminated or withdrawn by the Trust at any time
in its discretion. As provided in Section 8.1 hereof, the expense of
qualification and maintenance of qualification shall be borne by the Trust. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Trust in connection with such
qualifications.

Section 5. DUTIES OF THE DISTRIBUTOR.

5.1 The Distributor shall devote reasonable time and effort to effect
sales of shares of the Portfolios, but shall not be obligated to sell any
specific number of shares. Sales of shares of a Portfolio shall be on the terms
described in its Prospectus. The Distributor shall compensate the selected
dealers as set forth in the Prospectus. To the extent not otherwise provided
herein, the Distributor shall bear all of the costs and expenses it incurs in
fulfilling its obligations hereunder.

5.2 In selling shares of the Portfolios, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer nor any other person is authorized by the
Trust to give any information or to make any representations, other than those
contained in the Registration Statement or applicable Prospectus for the
respective Portfolio and any sales literature approved by appropriate officers
of the Trust.

5.3 The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales and the
cancellation of unsettled transactions, as may be necessary to comply with the
requirements established by the NASD.

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5.4 The Distributor shall have the right to enter into selling group
agreements with registered and qualified securities dealers and other persons of
its choice for the sale to the public of shares of the Portfolios, provided that
the Trust shall approve the form of such agreements. The Distributor shall offer
and sell shares only through such selected dealers as are members in good
standing of the NASD. Shares sold through selected dealers shall be for sale by
such dealers only at the offering price determined as set forth in the
Prospectus. The Distributor and selected dealers may repurchase shares from an
investor seeking to redeem such shares, for a fee, and, in turn, redeem such
shares with the applicable Portfolio.

5.5 The Distributor shall be the exclusive distributor of shares of
the Portfolios appointed by the Trust; however, the Distributor is an
independent contractor and may enter into like arrangements with other
investment companies.

Section 6. PAYMENTS TO THE DISTRIBUTOR.

The Distributor shall receive and may retain any portion of any
front-end or contingent deferred sales charge which is imposed on sales and
redemptions of shares of the Portfolios and not reallowed to selected dealers as
set forth in the applicable Prospectus. Upon termination of this Agreement for
any reason, the obligation to pay any such contingent deferred sales charge on
shares sold prior to the date of termination shall survive the termination, and
the Trust (or its agent) shall collect and pay any such charges thereafter
imposed on such shares to the Distributor.

Section 7. COMPENSATION OF THE DISTRIBUTOR UNDER THE PLAN.

7.1 The Trust shall compensate the Distributor for costs it incurs,
and the services and facilities it provides, under this Agreement pursuant to
the terms of the Plan, including amounts paid to securities dealers or others
under selling group agreements between the Distributor and such dealers and
others. Amounts payable under the Plan shall be determined by the Board from
time to time and shall be accrued daily and paid monthly or at such other
intervals as the Board may determine.

7.2 So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of the commissions and other fees to be paid
by the Distributor to

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broker-dealers and others which have selling group agreements with the
Distributor. So long as the Plan (or any amendment thereto) is in effect, at
the request of the Board or any agent or representative of the Trust, the
Distributor shall provide such additional information as may reasonably be
requested concerning the activities of the Distributor hereunder and the costs
incurred in performing such activities.

7.3 Costs of the Distributor subject to compensation hereunder are
costs of performing distribution activities with respect to the shares of the
Portfolios and may include, among others:

(a) advertising for the Portfolios in various forms through any
available medium, including the cost of printing and mailing
Prospectuses, and periodic financial reports and sales literature to
persons other than current shareholders of the Trust;

(b) sales commissions and other fees paid to, or on account of,
broker-dealers and others which have entered into selling group
agreements with the Distributor with respect to shares of the
Portfolios: and

(c) indirect and overhead costs including (i) lease expenses,
(ii) salaries and benefits of personnel including operations and sales
support personnel, (iii) utility expenses, (iv) communications
expenses, (v) sales promotion expenses, (vi) expenses of postage,
stationery and supplies and (vii) general overhead.

Section 8. ALLOCATION OF EXPENSES.

8.1 The Trust shall bear all costs and expenses of the continuous
offering of shares of the Portfolios, including fees and disbursements of its
counsel and auditors, in connection with the preparation and filing of any
required registration statements and/or prospectuses under the 1940 Act or the
1933 Act, and preparing and mailing annual and periodic reports and proxy
materials to shareholders (including but not limited to the expense of
typesetting any such registration statements, prospectuses, annual or periodic
reports or proxy materials). The Trust shall also bear the costs and expenses
of qualifying the shares for sale, and, if necessary or advisable in connection
therewith, of qualifying the Trust as a broker or

-7-

<PAGE>

dealer, in such states or other jurisdictions as shall be selected by the Trust
and the Distributor pursuant to Section 4.4 hereof, and the cost and expense
payable to each such state for continuing qualification therein until the Trust
decides to discontinue such qualification pursuant to Section 4.4 hereof.

8.2 As set forth in Section 7 above, the Trust shall also bear the
expenses it assumes pursuant to the Plan with respect to shares, so long as the
Plan is in effect. If the Plan is terminated or discontinued, the costs
previously incurred by the Distributor in performing the duties set forth in
Section 5 hereof shall be borne by the Distributor and shall not be subject to
reimbursement by the Trust; provided, however, that the Distributor shall have
the continued right to receive all contingent deferred sales charges, if any, on
redemptions of shares of the Portfolios following the termination or
discontinuation of the Plan, as set forth in Section 6.

Section 9. INDEMNIFICATION.

9.1 The Trust agrees to indemnify, defend and hold the Distributor,
its partners and officers, and any person who controls the Distributor within
the meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Distributor, its partners and
officers or any such controlling person may incur under the 1933 Act, or under
common law or otherwise, arising out of or based upon any untrue statement of a
material fact contained in the Registration Statement or Prospectuses for any of
the Portfolios or arising out of or based upon any alleged omission to state a
material fact required to be stated in the Registration Statement or
Prospectuses or necessary to make the statements therein not misleading, except
insofar as such claims, demands, liabilities or expenses arise out of or are
based upon any such untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information furnished in
writing by the Distributor to the Trust for use in the Registration Statement or
Prospectuses; provided, however, that this indemnity agreement shall not inure
to the benefit of any such partner, officer or controlling person unless a court
of competent jurisdiction shall determine, in a final decision on the merits,
that the person to be indemnified was not liable by reason of willful
misfeasance, bad faith

-8-

<PAGE>

or gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations under this Agreement ("disabling
conduct"), or, in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnified person was not liable by
reason of disabling conduct by (a) a vote of a majority of a quorum of Trustees
of the Trust who are neither "interested persons" of the Trust as defined in
Section 2(a)(19) of the 1940 Act nor parties to the proceeding, or (b) an
independent legal counsel in a written opinion. The Trust's agreement to
indemnify the Distributor, its partners and officers and any such controlling
person as aforesaid is expressly conditioned upon the Trust's being promptly
notified of any action brought against the Distributor, its partners, officers
or any such controlling person. The Trust agrees promptly to notify the
Distributor of the commencement of any litigation or proceedings against it or
any of its officers or Trustees in connection with the issue and sale of any
shares.

9.2 The Distributor agrees to indemnify, defend and hold the Fund,
its officers and Trustees and any person who controls the Trust, if any, within
the meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Trust, its officers and
Trustees or any such controlling person may incur under the 1933 Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Trust, its Trustees or officers or such controlling person
resulting from such claims or demands shall arise out of or be based upon any
alleged untrue statement of a material fact contained in information furnished
in writing by the Distributor to the Trust for use in the Registration Statement
or Prospectuses for any of the Portfolios or shall arise out of or be based upon
any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or Prospectuses
or necessary to make such information not misleading. The Distributor's
agreement to indemnify the Trust, its officers and Trustees and any such
controlling person as aforesaid, is expressly conditioned upon the Distributor's
being promptly notified of any action brought against the Trust, its officers
and Trustees or any such controlling person.

9.3 No Trustee, officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever,

-9-

<PAGE>

in his or her official or individual capacity, to any person, including the
Distributor, other than the Trust or its shareholders, in connection with the
property or affairs of the Trust, save only that arising from his or her bad
faith, willful misfeasance, gross negligence or reckless disregard of his or her
duty to such person; and all such persons shall look solely to the Trust
property for satisfaction of claims of any nature against a Trustee, officer,
employee or agent of the Trust arising in connection with the affairs of the
Trust. Moreover, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a Portfolio shall be
enforceable against the assets and property of such Portfolio only, and not
against the assets and property of any other series of the Trust.

Section 10. DURATION AND TERMINATION OF THIS AGREEMENT.

10.1 This Agreement shall become effective with respect to a
Portfolio as of the date first above written and, except as set forth in Section
6, shall remain in force for two years from the date hereof and thereafter, but
only so long as such continuance is specifically approved at least annually by
(a) the Board, or by the vote of a majority of the outstanding voting securities
of the shares of the Portfolio, and (b) by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such parties and who have no direct or indirect financial
interest in this Agreement or in the operation of the Plan or in any agreement
related thereto (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting upon such approval.

10.2 Except as set forth in Section 6, this Agreement may be
terminated with respect to a Portfolio at any time, without the payment of any
penalty, by a majority of the Disinterested Trustees or by vote of a majority of
the outstanding voting securities of the Portfolio, or by the Distributor, on
not less than sixty (60) days' written notice to the other party. Except as set
forth in Section 6, this Agreement shall automatically terminate in the event of
its assignment.

10.3 The terms "affiliated person," "assignment," "interested person"
and "vote of a majority of the outstanding voting securities," when used in this
Agreement, shall have the respective meanings specified in the 1940 Act.

-10-

<PAGE>

Section 11. AMENDMENTS TO THIS AGREEMENTS.

This Agreement may be amended with respect to a Portfolio by the
parties only if such amendment is specifically approved by (a) the Board, or by
the vote of a majority of the outstanding voting securities of the Portfolio and
(b) by the vote of a majority of the Disinterested Trustees cast in person at a
meeting called for the purpose of voting on such amendment.

Section 12. GOVERNING LAW.

The provisions of this Agreement shall be construed and interpreted in
accordance with the internal laws (and not the laws of conflicts of law) of the
State of California as at the time in effect and the applicable provisions of
the 1940 Act. To the extent that the applicable law of the State of California,
or any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.

Section 13. MISCELLANEOUS.

(a) Notices of any kind to be given to the Distributor by the Trust
shall be in writing and shall be duly given if mailed, delivered or communicated
by answer back facsimile transmission to the Distributor at 600 West Broadway,
30th Floor, San Diego, California 92101, Facsimile: (619) 234-7726, Attention:
President, or at such other address or to such individual as shall be so
specified by the Distributor. Notices of any kind to be given to the Trust
hereunder by the Distributor shall be in writing and will be duly given if
mailed or delivered to the Trust at 600 West Broadway, 30th Floor, San Diego,
California 92101, Facsimile: (619) 234-7726, Attention: President, or at such
other address or to such individual as shall be so specified by the Trust to the
Distributor.

(b) This Agreement constitutes the entire agreement and understanding
between the parties hereto, and supersedes all prior agreements and
understandings relating to the subject matter hereof.

(c) The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.

(d) If any provision of this Agreement is held or made invalid by a
court decision, statute, rule or

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<PAGE>

otherwise, the remainder of this Agreement shall not be affected thereby.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year above written.

NICHOLAS-APPLEGATE MUTUAL FUNDS

By: s/ Thomas Pindelski
---------------------------
Chief Financial Officer

NICHOLAS-APPLEGATE SECURITIES

By: Nicholas-Applegate Capital
Management, Inc.
Its General Partner

By: s/ Thomas Pindelski
---------------------------
Chief Financial Officer

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<PAGE>
EXHIBIT 6.2

May 17, 1993

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

Nicholas-Applegate Securities
600 West Broadway, 30th Floor
San Diego, California 92101

Ladies and Gentlemen:

This will confirm our agreement that the Distribution Agreement
between us dated April 19, 1993 is amended by adding the Balanced Growth
Qualified Portfolio, Worldwide Growth Qualified Portfolio, Government Income
Qualified Portfolio, Money Market Qualified Portfolio, Emerging Growth Portfolio
A, Emerging Growth Portfolio B and Emerging Growth Qualified Portfolio as
Portfolios thereunder.

In all other respects, the Distribution Agreement will remain in full
force and effect. Please sign this letter below to confirm your agreement with
this amendment.

Very truly yours,

s/ Ashley Rabun
-----------------------
Ashley Rabun, President

AGREED:

Nicholas-Applegate Securities
By: Nicholas-Applegate Capital
Management, Inc., its
General Partner

By: s/ Arthur E. Nicholas
-----------------------------
Arthur E. Nicholas, President

<PAGE>

EXHIBIT 6.3

December 15, 1993

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

Nicholas-Applegate Securities
600 West Broadway, 30th Floor
San Diego, California 92101

Ladies and Gentlemen:

This will confirm our agreement that the Distribution Agreement
between us dated April 19, 1993 is amended by adding the International Growth
Portfolio A, International Growth Portfolio B and International Growth Qualified
Portfolio as Portfolios thereunder.

In all other respects, the Distribution Agreement will remain in full
force and effect. Please sign this letter below to confirm your agreement with
this amendment.

Very truly yours,

s/ Ashley Rabun
-----------------------
Ashley Rabun, President

AGREED:

Nicholas-Applegate Securities
By: Nicholas-Applegate Capital
Management, Inc., its
general partner

By: s/ Arthur E. Nicholas
-----------------------------
Arthur E. Nicholas, President

<PAGE>

EXHIBIT 6.4

April 22, 1994

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

Nicholas-Applegate Securities
600 West Broadway, 30th Floor
San Diego, California 92101

Ladies and Gentlemen:

This will confirm our advice to you that the names of each of our
existing "Qualified Portfolio" series have been changed to the "Institutional
Portfolio" series.

This letter will also confirm our agreement that the Distribution
Agreement between us dated April 19, 1993 is amended by adding the following
newly created series as Portfolios thereunder:

Core Growth Qualified Portfolio
Income & Growth Qualified Portfolio
Balanced Growth Qualified Portfolio
Worldwide Growth Qualified Portfolio
International Growth Qualified Portfolio
Government Income Qualified Portfolio

In all other respects, the Distribution Agreement, as previously
amended, will remain in full force and effect.
<PAGE>

Please sign this letter below to confirm your agreement with this amendment.

Very truly yours,

s/ Ashley Rabun
-----------------------
Ashley Rabun, President

AGREED:

Nicholas-Applegate Securities
By: Nicholas-Applegate Capital
Management, Inc., its
general partner

By: s/ Arthur E. Nicholas
-----------------------------
Arthur E. Nicholas, President

<PAGE>

EXHIBIT 6.5

November 15, 1994

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

Nicholas-Applegate Securities
600 West Broadway, 3Oth Floor
San Diego, California 92101

Ladies and Gentlemen:

This will confirm our agreement that the Distribution Agreement
between us dated April 19, 1993 is amended by adding the following as additional
Portfolios thereunder: Nicholas-Applegate Emerging Countries Portfolio A;
Nicholas-Applegate Emerging Countries Portfolio B; Nicholas-Applegate Emerging
Countries Institutional Portfolio; Nicholas-Applegate Global Growth & Income
Portfolio A; Nicholas-Applegate Global Growth & Income Portfolio B;
Nicholas-Applegate Global Growth & Income Institutional Portfolio; and
Nicholas-Applegate Mini-Cap Growth Institutional Portfolio.

In all other respects, the Distribution Agreement, as previously
amended, will remain in full force and effect.

<PAGE>

Please sign this letter below to confirm your agreement with this amendment.

Very truly yours,

s/ Ashley Rabun
-----------------------
Ashley Rabun, President

AGREED:

Nicholas-Applegate Securities
By: Nicholas-Applegate Capital
Management, Inc., its
general partner

By: s/ Arthur E. Nicholas
------------------------------------
Arthur E. Nicholas, Managing Partner

<PAGE>

EXHIBIT 6.6

May 22, 1995

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

Nicholas-Applegate Securities
600 West Broadway, 30th Floor
San Diego, California 92101

Ladies and Gentlemen:

This will confirm that the names of the various "Portfolio B" series
of Nicholas-Applegate Mutual Funds have been changed to the "Portfolio C"
series.

This will also confirm our agreement that the Distribution Agreement
between us dated April 19, 1993, as previously amended, is hereby further
amended by adding the following as additional Portfolios thereunder: Nicholas-
Applegate Core Growth Portfolio B; Nicholas-Applegate Government Income
Portfolio B; Nicholas-Applegate Income & Growth Portfolio B; Nicholas-Applegate
Balanced Growth Portfolio B; Nicholas-Applegate Worldwide Growth Portfolio B;
Nicholas-Applegate Emerging Growth Portfolio B; Nicholas-Applegate International
Growth Portfolio B; Nicholas-Applegate Emerging Countries Portfolio B; and
Nicholas-Applegate Global Growth & Income Portfolio B.

In all other respects, the Distribution Agreement, as previously
amended, will remain in full force and effect.
<PAGE>

Please sign this letter below to confirm your agreement with this amendment.

Very truly yours,

s/ Ashley Rabun
-----------------------
Ashley Rabun, President

AGREED:

Nicholas-Applegate Securities
By: Nicholas-Applegate Capital
Management Holdings, Inc., its
General Partner

By:s/ E. Blake Moore, Jr.
------------------------------
E. Blake Moore, Jr., Secretary

<PAGE>

EXHIBIT 6.7

August 1, 1995

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

Nicholas-Applegate Securities
600 West Broadway, 30th Floor
San Diego, California 92101

Ladies and Gentlemen:

This will confirm our agreement that the Distribution Agreement
between us dated April 19, 1993, as previously amended, is hereby further
amended by adding the following as additional Portfolios thereunder: Nicholas-
Applegate Income & Growth Qualified Portfolio; Nicholas-Applegate Balanced
Growth Qualified Portfolio; Nicholas-Applegate Emerging Countries Qualified
Portfolio; Nicholas-Applegate Global Growth & Income Qualified Portfolio;
Nicholas-Applegate Worldwide Growth Qualified Portfolio; Nicholas-Applegate
International Growth Qualified Portfolio; Nicholas-Applegate Short-Intermediate
Institutional Fixed Income Portfolio; and Nicholas-Applegate Discretionary
Institutional Fixed Income Portfolio.

In all other respects, the Distribution Agreement, as previously
amended, will remain in full force and effect. Please sign this letter below to
confirm your agreement with this amendment.

Very truly yours,

s/ E. Blake Moore, Jr.
------------------------------
E. Blake Moore, Jr., Secretary

AGREED:
Nicholas-Applegate Securities
By: Nicholas-Applegate Capital
Management Holdings, L.P.,
its general partner
By: Nicholas-Applegate Capital
Management Holdings, Inc.,
its general partner

By: s/ E. Blake Moore, Jr.
------------------------------
E. Blake Moore, Jr., Secretary

<PAGE>

EXHIBIT 8.1

CUSTODIAN SERVICES AGREEMENT TERMS AND CONDITIONS

This Agreement is made as of April 1, 1993 by and between PNC BANK,
NATIONAL ASSOCIATION, a national banking association ("PNC"), and
NICHOLAS-APPLEGATE MUTUAL FUNDS, a Delaware business trust (the "Fund").

The Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund wishes to
retain PNC to provide custodian services, and PNC wishes to furnish custodian
services, either directly or though an affiliate or affiliates, as more fully
described herein.

In consideration of the promises and mutual covenants herein contained, the
parties agree as follows:

1. DEFINITIONS.

(b) "BOOK-ENTRY SYSTEM". The term "Book-Entry System" means Federal
Reserve Treasury book-entry system for

<PAGE>

United States and federal agency securities, its successor or successors, and
its nominee or nominees and any book-entry system maintained by an exchange
registered with the SEC under the 1934 Act.

(d) "GOVERNING BOARD". The term "Governing Board" shall mean the
Fund's Board of Trustees, or, where duly authorized, a competent committee
thereof.

(e) "ORAL INSTRUCTIONS". The term "Oral Instructions" shall mean
oral instructions received by PNC from an Authorized Person or from a person
reasonably believed by PNC to be an Authorized Person.

(f) "PNC". The term "PNC" shall mean PNC Bank, National Association
or a subsidiary or affiliate of PNC Bank, National Association.

(g) "PORTFOLIOS". The term "Portfolios" shall mean the following
series of Shares of the Fund: Nicholas-Applegate Core Growth Portfolio A,
Nicholas-Applegate Core Growth Portfolio B, Nicholas-Applegate Core Growth
Qualified Portfolio, Nicholas-Applegate Income & Growth Portfolio A,
Nicholas-Applegate Income & Growth Portfolio B, Nicholas-Applegate Income &
Growth Qualified Portfolio, Nicholas-Applegate Balanced Growth Portfolio A,
Nicholas- Applegate Balanced Growth Portfolio B, Nicholas-Applegate

-2-

<PAGE>

Balanced Growth Qualified Portfolio, Nicholas-Applegate Worldwide Growth
Portfolio A, Nicholas-Applegate Worldwide Growth Portfolio B, Nicholas-Applegate
Worldwide Growth Qualified Portfolio, Nicholas-Applegate Government Income
Portfolio A, Nicholas-Applegate Government Income Portfolio B,
Nicholas-Applegate Government Income Qualified Portfolio, Nicholas-Applegate
Money Market Portfolio and Nicholas- Applegate Money Market Qualified Portfolio
and any other series of the Fund which may be established in the future and to
which PFPC provides accounting services.

(h) "PROPERTY". The term "Property" shall mean:

(i) any and all securities and other investment items of a
Portfolio which the Fund may from time to time deposit, or
cause to be deposited, with PNC or which PNC may from time
to time hold for a Portfolio;

(ii) All income in respect of any of such securities or other
investment items;

(iii) all proceeds of the sale of any of such securities or
investment items; and

(iv) all proceeds of the sale of Shares issued by the Fund, which
are received by PNC from time to time, from or on behalf of
the Fund.

(i) "SEC". The term "SEC" shall mean the Securities and Exchange
Commission.

(j) "SECURITIES AND COMMODITIES LAWS". The term shall mean the "1933
Act" (which shall mean the Securities Act of 1933, as amended), the "1934 Act"
(which shall mean

-3-

<PAGE>

the Securities Exchange Act of 1934, as amended), the 1940 Act, and the "CEA"
(which shall mean the Commodities Exchange Act, as amended).

(k) "SHARES". The term "Shares" shall mean the shares of beneficial
interest of any Portfolio of the Fund.

(1) "WRITTEN INSTRUCTIONS". The term "Written Instructions" shall
mean written instructions signed by one or more Authorized Persons and received
by PNC. The instructions may be delivered by hand, mail, tested telegram,
cable, telex or facsimile sending device.

2. APPOINTMENT. The Fund hereby appoints PNC to provide custodian
services for each Portfolio, and PNC accepts such appointment and agrees to
furnish such services. In the event the Fund establishes one or more series
other than the Portfolios with respect to which it desires to appoint PNC to
provide custodian services, it shall notify PNC in writing. If PNC is willing
to accept such appointment under this Agreement it will so notify such
appointment under this Agreement it will so notify the Fund in writing,
whereupon such series will be subject to the same provisions of this Agreement
as are the Portfolios except to the extent that such provisions are modified
with respect to such series in writing between the Fund and PNC.

3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PNC with the following:

-4-

<PAGE>

(a) certified or authenticated copies of the resolutions of the
Fund's Governing Board, approving the appointment of PNC or its
affiliates to provide custodian services;

(b) a copy of the Fund's most recent effective registration
statement;

(d) a copy of the Fund's distribution agreement or agreements;

(e) a copy of the Fund's administration agreements if PFPC Inc.
("PFPC") is not providing the Fund with such services;

(f) copies of any shareholder servicing agreements made in respect of
the Fund; and

(g) certified or authenticated copies of any and all amendments or
supplements to the foregoing.

4. COMPLIANCE WITH GOVERNMENT RULES AND REGULATIONS. PNC undertakes to
comply with all applicable requirements of the 1933 Act, the 1934 Act, the
1940 Act, and the CEA, and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to all duties to be performed by
PNC hereunder. Except as specifically set forth herein, PNC assumes no
responsibility for compliance by the Fund with any laws, rules and
regulations applicable to the Fund.

5. INSTRUCTIONS. Unless otherwise provided in this Agreement, PNC shall
act only upon Oral and Written Instructions. PNC shall be entitled to rely upon
any Oral and Written Instructions it receives from an Authorized

-5-

<PAGE>

Person (or from a person reasonably believed by PNC to be an Authorized Person)
pursuant to this Agreement. PNC may assume that any Oral or Written
Instructions received hereunder are not in any way inconsistent with the
provisions of organizational documents of the Fund or of any vote, resolution or
proceeding of the Fund's Governing Board or of the Fund's shareholders.

The Fund agrees to forward to PNC Written Instructions confirming Oral
Instructions so that PNC receives the Written Instructions by the close of
business on the same day that such Oral Instructions are received. The fact
that such confirming Written Instructions are not received by PNC shall in no
way invalidate the transactions or enforceability of the transactions authorized
by the Oral Instructions.

The Fund further agrees that PNC shall incur no liability to the Fund in
acting upon Oral or Written Instructions provided such instructions reasonably
appear to have been received from an Authorized Person.

6. RIGHT TO RECEIVE ADVICE.

(a) ADVICE OF THE FUND. If PNC is in doubt as to any action it
should or should not take, PNC may request directions or advice, including Oral
or Written Instructions, from the Fund.

-6-

<PAGE>

(b) ADVICE OF COUNSEL. If PNC shall be in doubt as to any questions
of law pertaining to any action it should or should not take, PNC may request
advice at its own cost from such counsel of its own choosing (who may be counsel
for the Fund, the Fund's advisor or other reasonably qualified counsel selected
by PNC, at the option of PNC).

(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice or Oral or Written Instructions PNC receives from the Fund,
and the advice it receives from counsel referred to in paragraph (b) above, PNC
shall be entitled to rely upon and follow the advice of such counsel.

(d) PROTECTION OF PNC. Subject the provisions of Section 13 hereof,
PNC shall be protected in any action it takes or does not take in reliance upon
directions, advice or Oral or Written Instructions it receives from the Fund or
from counsel and which PNC believes, in good faith, to be consistent with those
directions, advice or Oral or Written Instructions.

Nothing in this paragraph shall be construed so as to impose an obligation
upon PNC (i) to seek such directions, advice or Oral or Written Instructions, or
(ii) to act in accordance with such directions, advice or Oral or Written
Instructions unless, under the terms of other provisions of

-7-

<PAGE>

this Agreement, the same is a condition of PNC's properly taking or not taking
such action.

7. RECORDS. The books and records pertaining to the Fund and each
Portfolio, which are in the possession of PNC, shall be the property of the
Fund. Such books and records shall be prepared and maintained as required by
the 1940 Act and other applicable securities laws, rules and regulations. The
Fund, or the Fund's authorized representatives, shall have access to such books
and records at all times during PNC's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided by PNC to the Fund or to an authorized representative of the Fund, at
the Fund's expense.

8. CONFIDENTIALITY. PNC agrees to keep confidential all records of the
Fund and each Portfolio and information relative to the Fund and each Portfolio
and the shareholders (past, present and potential) of each Portfolio, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund. The Fund further agrees that, should PNC be required to provide such
information or records to duly constituted authorities (who may institute civil
or criminal contempt proceedings for failure to comply), PNC shall not be
required to seek the Fund's consent prior to disclosing such information;

-8-

<PAGE>

provided that PNC gives the Fund prior written notice of the provision of such
information and records.

9. COOPERATION WITH ACCOUNTANTS. PNC shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to ensure that the necessary
information is made available to such accountants for the expression of their
opinion, as required by the Fund.

10. DISASTER RECOVERY. PNC shall enter into and shall maintain in effect,
at no additional expense to the Fund, with appropriate parties one or more
agreements making reasonable provision for emergency use of electronic data
processing equipment to the extent appropriate equipment is available. In the
event of equipment failures, PNC shall, at no additional expense to the Fund,
take reasonable steps to minimize service interruptions but shall have no
liability with respect thereto.

11. COMPENSATION. As compensation for custody services rendered by PNC
during the term of this Agreement, the Fund will pay to PNC a fee or fees as may
be agreed to in writing from time to time by the Fund and PNC.

12. INDEMNIFICATION. The Fund agrees to indemnify and hold harmless PNC
and its affiliates from all taxes, charges, expenses, assessment, claims and
liabilities

-9-

<PAGE>

(including, without limitation, liabilities arising under the 1933 Act, the 1934
Act, the 1940 Act, the CEA, and any state and foreign securities and blue sky
laws, and amendments thereto, and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly from any
action which PNC takes or does not take (i) at the request or on the direction
of or in reliance on the advice of the Fund or (ii) upon Oral or Written
Instructions. Neither PNC, nor any of its affiliates, shall be indemnified
against any liability to the Fund or to its shareholders (or any expenses
incident to such liability) arising out of PNC's or its nominees' own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties and
obligations under this Agreement or PNC's failure to perform its duties under
this Agreement.

13. RESPONSIBILITY OF PNC. PNC shall be under no duty to take any action
on behalf of the Fund or a Portfolio except as specifically set forth herein or
as may be specifically agreed to by PNC, in writing. PNC shall be obligated to
exercise care and diligence in the performance of its duties hereunder, to act
in good faith and to use its best efforts, within reasonable limits, in
performing services provided for under this Agreement. PNC shall be responsible
for, and shall indemnify the Fund and its affiliates from all taxes, charges,
responses, assessments,

-10-

<PAGE>

claims and liabilities resulting from, PNC's own or its affiliates' own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties and
obligations under this Agreement or PNC's own failure to perform its duties
under this Agreement.

Without limiting the generality of the foregoing or of any other provision
of this Agreement, PNC, in connection with its duties under this Agreement,
shall not be under any duty or obligation to inquire into and shall not be
liable for (a) the validity or invalidity or authority or lack thereof of any
Oral or Written Instruction, notice or other instrument which conforms to the
applicable requirements of this Agreement, and which PNC reasonably believes to
be genuine; or (b) delays or errors or loss of data occurring by reason of
circumstances beyond PNC's control, including acts of civil or military
authority, national emergencies, fire, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.

Notwithstanding anything in this Agreement to the contrary, PNC shall have
no liability to the Fund for any consequential, special or indirect losses or
damages which the Fund may incur or suffer by or as a consequence of PNC's
performance of the services provided hereunder, whether or

-11-

<PAGE>

not the likelihood of such losses or damages was known by PNC.

14. DESCRIPTION OF SERVICES.

(a) DELIVERY OF THE PROPERTY. The Fund will deliver or arrange for
delivery to PNC, all the property of each Portfolio it owns, including cash
received as a result of the distribution of its Shares, during the period that
is set forth in this Agreement. PNC will not be responsible for such property
until actual receipt.

(b) RECEIPT AND DISBURSEMENT OF MONEY. PNC, acting upon Written
Instructions, shall open and maintain separate account(s) in the Fund's name
using all cash received from or for the account of the Fund, subject to the
terms of this Agreement. In addition, upon Written Instructions, PNC shall open
separate custodial accounts for each separate series, Portfolio or class of the
Fund and shall hold in such account(s) all cash received from or for the
accounts of the Fund specifically designated to each separate series, Portfolio
or class.

PNC shall make cash payments from or for the accounts of the Portfolios
only for:

(i) purchases of securities in the name of the Fund on behalf of a
Portfolio or PNC or PNC's nominee as provided in sub-paragraph j
and for which PNC has received a copy of the broker's or dealer's
confirmation or payee's invoice, as appropriate;

-12-

<PAGE>

(ii) purchase or redemption of Shares of the Fund delivered to PNC;

(iii) payment of, subject to Written Instructions, interest, taxes,
administration, accounting, distribution, shareholder service,
advisory, management fees or similar expenses which are to be
borne by the Fund;

(iv) payment to, subject to Written Instructions from the Fund or the
Fund's transfer agent, the Fund's transfer agent, as agent for
the shareholders, an amount equal to the amount of dividends and
distributions stated in the Written Instructions to be
distributed in cash by the transfer agent to shareholders, or, in
lieu of paying the Fund's transfer agent, PNC may arrange for the
direct payment of cash dividends and distributions to
shareholders in accordance with procedures mutually agreed upon
from time to time by and among the Fund, PNC and the Fund's
transfer agent.

(v) payments, upon receipt Written Instructions, in connection with
the conversion, exchange or surrender of securities owned or
subscribed to by a Portfolio and held by or delivered to PNC;

(vi) payments of the amounts of dividends received with respect to
securities sold short;

(vii) payments made to a sub-custodian pursuant to provisions in
sub-paragraph c of this Paragraph 14; and

(viii) payments, upon Written Instructions made for other proper Fund
purposes.

PNC is hereby authorized to endorse and collect all checks, drafts or other
orders for the payment of money received as custodian for the account of the
Fund or the Portfolios.

-13-

<PAGE>

(i) PNC shall hold all securities received by it for the
account of each Portfolio in a separate account that
physically segregates such securities from those of any
other persons, firms or corporations. All such securities
shall be held or disposed of only upon Written Instructions
of the Fund pursuant to the terms of this Agreement. PNC
shall have no power or authority to assign, hypothecate,
pledge or otherwise dispose of any such securities or
investment, except upon the express terms of this Agreement
and upon Written Instructions. In no case may any member of
the Fund's Board of Trustees, or any officer, employee or
agent of the Fund withdraw any securities.

(ii) At PNC's own expense and for its own convenience, PNC may
enter into sub-custodian agreements with other banks or
trust companies to perform duties described in this
subparagraph c. Such bank or trust company shall have an
aggregate capital, surplus and undivided profits, according
to its last published report, of at least one million
dollars ($1,000,000), if it is a subsidiary or affiliate of
PNC, or at least twenty million dollars ($20,000,000) if
such bank or trust company is not a subsidiary or affiliate
of PNC. In addition, such bank or trust company must be
qualified to act as custodian and agree to comply with the
relevant provisions of the 1940 Act and other applicable
rules and regulations. Any such arrangement will not be
entered into without prior written notice to, and prior
written consent of, the Governing Board. By separate
agreement to which the Fund shall be a party, PNC may
appoint foreign banking institutions to hold custody of
foreign securities.

-14-

<PAGE>

Assets of a Portfolio deposited by PNC with sub-custodians
shall be identified on the books of PNC as belonging to the
Portfolio holding such assets. PNC will (to the extent
permitted by law and what PNC reasonably believes to be the
local banking practice) only deposit the assets in an
account in the name of the Portfolio with a sub-custodian
which account is comprised solely of assets held for the
Portfolio and will cause such account to be designated in
the books of PNC, and PNC will instruct the sub-custodian to
designate such account in its books, as an account for
assets of the Portfolio only.

Each agreement pursuant to which PNC employs a sub-custodian
shall require the institution to exercise reasonable care in
the performance of its duties and to indemnify and hold
harmless the Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection
with the institution's performance of such obligations. At
the election of the Fund, it shall be entitled to be
subrogated to the rights of PNC with respect to any claims
against a sub-custodian as a consequence of any such loss,
damage, cost, expense, liability or claim if and to the
extent that the Fund has not been made whole for any such
loss, damage, cost, expense, liability or claim.

PNC shall remain responsible for the performance of all of
its duties as described in this Agreement and shall hold the
Fund and each Portfolio harmless from its own acts or
omissions, under the standards of care provided for herein,
or the acts and omissions of any sub-custodian (except a
foreign subcustodian) chosen by PNC under the terms of this
sub-paragraph c.

-15-

<PAGE>

(d) TRANSACTIONS REQUIRING INSTRUCTIONS. Upon receipt of Oral or
Written Instructions and not otherwise, PNC, directly or through the use of the
Book-Entry System, shall:

(i) deliver any securities held for a Portfolio against the receipt
of payment for the sale of such securities;

(ii) execute and deliver to such persons as may be designated in such
Oral or Written Instructions, proxies, consents, authorizations,
and any other instruments whereby the authority of the Fund as
owner of any securities may be exercised;

(iii) deliver any securities to the issuer thereof, or its agent, when
such securities are called, redeemed, retired or otherwise become
payable; provided that, in any such case, the cash or other
consideration is to be delivered to PNC;

(iv) deliver any securities held for a Portfolio against receipt of
other securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, tender offer, merger,
consolidation or recapitalization of any corporation, or the
exercise of any conversion privilege;

(v) deliver any securities held for a Portfolio to any protective
committee, reorganization committee or other person in connection
with the reorganization, refinancing, merger, consolidation,
recapitalization or sale of assets of any corporation, and
receive and hold under the terms of this Agreement such
certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;

(vi) make such transfer or exchanges of the assets of the Portfolios
and take such other steps as shall be stated in said Oral or
Written

-16-

<PAGE>

Instructions to be for the purpose of effectuating a duly
authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund or a Portfolio:

(vii) release securities belonging to any Portfolio to any bank or
trust company for the purpose of a pledge or hypothecation to
secure any loan incurred by a Portfolio; provided, however, that
securities shall be released only upon payment to PNC of the
monies borrowed, except that in cases where additional collateral
is required to secure a borrowing already made subject to proper
prior authorization, further securities may be released for that
purpose; and repay such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon surrender of
the note or notes evidencing the loan;

(viii) release and deliver securities owned by a Portfolio in connection
with any repurchase agreement entered into on behalf of that
Portfolio, but only on receipt of payment therefor; and pay out
moneys of that Portfolio in connection with such repurchase
agreements, but only upon the delivery of the securities;

(ix) release and deliver or exchange securities owned by a Portfolio
in connection with any conversion of such securities, pursuant to
their terms, into other securities;

(x) release and deliver securities owned by a Portfolio for the
purpose of redeeming in kind shares of the Fund upon delivery
thereof to PNC; and

(xi) release and deliver or exchange securities owned by a Portfolio
for other trust purposes.

(e) USE OF BOOK-ENTRY SYSTEM. The Fund shall deliver to PNC certified
resolutions of the Fund's Governing Board approving, authorizing and instructing
PNC on a continuous

-17-

<PAGE>

basis, to deposit in the Book-Entry System all securities belonging to the
Portfolios eligible for deposit therein and to utilize the Book-Entry System to
the extent possible in connection with settlements of purchases and sales or
securities by the Fund, and deliveries and returns of securities loaned, subject
to repurchase agreements or used as collateral in connection with borrowings.
PNC shall continue to perform such duties until it receives Written or Oral
Instructions authorizing contrary actions(s).

To administer the Book-Entry System properly, the following provisions
shall apply:

(i) With respect to securities of the Fund which are maintained in
the Book-Entry system, established pursuant to this sub-paragraph
e hereof, the records of PNC shall identify by Book-Entry or
otherwise those securities belonging to each Portfolio. PNC shall
furnish the Fund a detailed statement of the Property held for
each Portfolio under this Agreement at least monthly and from
time to time and upon written request.

(ii) Securities and any cash of the Fund deposited in the Book-Entry
System will at all times be segregated from any assets and cash
controlled by PNC in other than a fiduciary or custodian capacity
but may be commingled with other assets held in such capacities.
PNC and its sub-custodian, if any, will pay out money only upon
receipt of securities and will deliver securities only upon the
receipt of money.

(iii) All books and records maintained by PNC which relate to the
Fund's participation in the Book-Entry System will at all times
during PNC's regular business hours be open to the inspection of
the Fund's duly authorized

-18-

<PAGE>

employees or agents, and the Fund will be furnished with all
information in respect of the services rendered to it as it may
require.

(iv) PNC will provide the Fund with copies of any report obtained by
PNC on the system of internal accounting control of the
Book-Entry System promptly after receipt of such a report by PNC.

PNC will also provide the Fund with such reports on its own system of
internal control as the Fund may reasonably request from time to time.

(f) REGISTRATION OF SECURITIES. All Securities held for the Fund
which are issued or issuable only in bearer form, except such securities held in
the Book-Entry System, shall be held by PNC in bearer form; all other securities
held for the Fund may be registered in the name of the Fund on behalf of a
Portfolio, PNC, the Book-Entry System, a duly appointed sub-custodian, or any
duly appointed nominee(s) of the Fund, PNC, Book-Entry System or sub-custodian.
The Fund reserves the right to instruct PNC as to the method of registration and
safekeeping of the securities of the Fund. The Fund agrees to furnish to PNC
appropriate instruments to enable PNC to hold or deliver in proper form for
transfer, or to register its registered nominee or in the name of the Book-Entry
System, any securities which it may hold for the account of a Portfolio and
which may from time to time be registered in the name of the Fund on behalf of a
Portfolio. PNC shall hold all such

-19-

<PAGE>

securities which are not held in the Book-Entry System in a separate account
for the appropriate Portfolio in the name of the Portfolio physically segregated
at all times from those of any other person or persons.

(g) VOTING AND OTHER ACTION. Neither PNC nor its nominee shall
vote any of the securities held pursuant to this Agreement by or for the
account of the Fund, except in accordance with Written Instructions. PNC,
directly or through the use of the Book-Entry System, shall execute in blank and
promptly deliver all notice, proxies, and proxy soliciting materials to the
registered holder of such securities. If the registered holder is not the Fund
then Written or Oral Instructions must designate the person(s) who owns such
securities.

(h) TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence of
contrary Written Instructions, PNC is authorized to take the following actions:

(i) Collection of Income and Other Payments.

(A) collect and receive for the account of the appropriate
Portfolio, all income, dividends, distributions,
coupons, option premiums, other payments and similar
items, included or to be included in the Property, and,
in addition, promptly advise the Fund of such receipt
and credit such income, as collected, to the
Portfolio's custodian account;

(B) endorse and deposit for collection, in the name of the
appropriate

-20-

<PAGE>

Portfolio, checks, drafts, or other orders for the
payment of money;

(C) receive and hold for the account of the appropriate
Portfolio all securities received as a distribution on
that Portfolio's securities as a result of a stock
dividend, share split-up or reorganization,
recapitalization, readjustment or other rearrangement
or distribution of rights or similar securities
issued with respect to any portfolio securities
belonging to the that Portfolio held by PNC hereunder;

(D) present for payment and collect the amount payable upon
all securities which may mature or be called, redeemed,
or retired, or otherwise become payable on the date
such securities become payable; and

(E) take any action which may be necessary and proper in
connection with the collection and receipt of such
income and other payments and the endorsement for
collection of checks, drafts, and other negotiable
instruments.

(ii) MISCELLANEOUS TRANSACTIONS.

(A) PNC is authorized to deliver or cause to be delivered Property against
payment or other consideration or written receipt therefor in the following
cases:

(1) for examination by a broker or dealer selling for the account of
the appropriate Portfolio in accordance with street delivery
custom;

(2) for the exchange of interim receipts or temporary securities
for definitive securities; and

(3) for transfer of securities into the name of the Fund on behalf of
a Portfolio or PNC or

-21-

<PAGE>

nominee of either, or for exchange of securities for a different
number of bonds, certificates, or other evidence, representing
the same aggregate face amount or number of units bearing the
same interest rate, maturity date and call provisions, if any;
provided that, in any such case, the new securities are to be
delivered to PNC.

(B) Unless and until PNC receives Oral or Written Instructions to the
contrary, PNC shall:

(1) pay all income items held by it which call for payment upon
presentation and hold the cash received by it upon such payment
for the account of the appropriate Portfolio;

(2) collect interest and cash dividends received, with notice to the
appropriate Portfolio, to the account of the appropriate
Portfolio:

(3) hold for the account of the appropriate Portfolio all stock
dividends, rights and similar securities issued with respect to
any securities held by PNC; and

(4) execute as agent on behalf of the Fund all necessary ownership
certificates required by the Internal Revenue Code or the Income
Tax Regulations of the United States Treasury Department or under
the laws of any State now or hereafter in effect, inserting the
Fund's name on behalf of a Portfolio on such certificate as the
owner of the securities covered thereby, to the extent it may
lawfully do so.

(i) SEGREGATED ACCOUNTS.

(i) PNC shall upon receipt of Written or Oral Instructions establish
and maintain a segregated accounts(s) on its records for and on
behalf of the Fund and each Portfolio. Such account(s) may be
used to transfer cash and securities, including securities in the
Book-Entry System:

(A) for the purposes of compliance by the Fund with the
procedures required by a securities, commodities or option

-22-

<PAGE>

exchange or related organization, providing such procedures
comply with the 1940 Act and any releases of the SEC
relating to the maintenance of segregated accounts by
registered investment companies; and

(B) Upon receipt of Written Instructions, for other proper
purposes.

(ii) PNC shall arrange for the establishment of IRA custodian accounts
for such shareholders holding Shares through IRA accounts, in
accordance with the Prospectus, the Internal Revenue Code
(including regulations), and with such other procedures as are
mutually agreed upon from time to time by and among the Fund, PNC
and the Fund's transfer agent.

(j) PURCHASES OF SECURITIES. PNC shall settle purchased securities
upon receipt of Oral or Written Instructions from the fund or its investment
advisor(s) that specify:

(i) the name of the issuer and the title of the securities,
including CUSIP number if applicable;

(ii) the number of shares or the principal amount purchased and
accrued interest, if any;

(iii) the date of purchase and settlement;

(iv) the purchase price per unit;

(v) the total amount payable upon such purchase; and

(vi) the name of the person from whom or the broker through whom
the purchase was made. PNC shall upon receipt of securities
purchased by or for a Portfolio pay out of the moneys held
for the account of the Portfolio the total amount payable to
the person from whom or the broker through whom the purchase

-23-

<PAGE>

was made, provided that the same conforms to the total
amount payable as set forth in such Oral or Written
Instructions.

(k) SALES OF SECURITIES. PNC shall sell securities
upon receipt of Oral Instructions from the Fund or its investment advisors that
specify:

(i) the name of the issuer and the title of the security, including
CUSIP number if applicable;

(ii) the number of shares or principal amount sold, and accrued
interest, if any;

(iii) the date of trade, settlement and sale;

(iv) the sale price per unit;

(v) the total amount payable to the appropriate Portfolio upon such
sale;

(vi) the name of the broker through whom or the person to whom the
sale was made; and

(vii) the location to which the security must be delivered and delivery
deadline, if any.

PNC shall deliver the securities upon receipt of the total amount payable
to the Portfolio upon such sale, provided that the total amount payable is the
same as was set forth in the Oral or Written Instructions. Subject to the
foregoing, PNC may accept as shall be satisfactory to it, and may Written
Instructions. payment in such form deliver securities and arrange for payment in
accordance with the customs prevailing among dealers in securities.

-24-

<PAGE>

(1) REPORTS.

(i) PNC shall furnish the Fund the following reports:

(A) such periodic and special reports as the Fund may reasonably
request;

(B) a monthly statement summarizing all transactions and entries
for the account of each Portfolio, listing the portfolio
securities belonging to each Portfolio with the adjusted
average cost of each issue and the market value at the end
of such month, and stating the cash account of each
Portfolio including disbursement;

(D) such other information as may be agreed upon from time to
time between the Fund and PNC.

(ii) PNC shall transmit promptly to the Fund any proxy statement,
proxy material, notice of a call or conversion or similar
communication received by it as custodian of the Property. PNC
shall be under no other obligation to inform the Fund as to such
actions or events.

(m) COLLECTIONS. All collections of monies or other property in respect,
or which are to become part, of the Property (but not the safekeeping thereof
upon receipt by PNC) shall be at the sole risk of the Fund. If payment is not
received by PNC within a reasonable time after proper demands have been made,
PNC shall notify the Fund in writing, including copies of all demand letters,
any written responses, memoranda of all oral responses and to telephonic demands
thereto, and await instructions from the Fund. PNC

-25-

<PAGE>

shall not be obliged to take legal action for collection unless and until
reasonably indemnified to its satisfaction. PNC shall also notify the Fund as
soon as reasonably practicable whenever income due on securities is not
collected in due course.

15. DURATION AND TERMINATION. This Agreement shall continue until
terminated by the Fund or by PNC on sixty (60) days' prior written notice to the
other party. In the event this Agreement is terminated (pending appointment of
a successor to PNC or vote of the shareholders of the Fund to dissolve or to
function without a custodian of its cash, securities or other property), PNC
shall not deliver cash, securities or other property of the Fund to the Fund.
It may deliver them to a bank or trust company of PNC's choice, having an
aggregate capital, surplus and undivided profits, as shown by its last
published report, of not less than twenty million dollars ($20,000,000), as a
custodian for the Fund to be held under terms similar to those of this
Agreement. PNC shall not be required to make any such delivery or payment until
full payment shall have been made to PNC of all of its fees, compensation, costs
and expenses. PNC shall have a security interest in and shall have a right of
setoff against Property in the Fund's possession as security for the payment of
such fees, compensation, costs and expenses.

-26-

<PAGE>

16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing and sent by registered or certified mail,
return receipt requested, or by confirming telegram, cable, telex or facsimile
sending device. Notice shall be addressed (a) if to PNC, at PNC's address,
Airport Business Center, International Court 2, 200 Stevens Drive, Lester,
Pennsylvania 19113, marked for the attention of the Custodian Services
Department (or its successor) (b) if to the Fund, at the Fund's address, 600 W.
Broadway, 30th Floor, San Diego, California 92101; or (c) if to neither of the
foregoing, at such other address as shall have been notified to the sender of
any such Notice or other communication. If notice is sent by confirming
telegram, cable, telex or facsimile sending device, it shall be deemed to have
been given immediately. If notice is sent by registered or certified mail,
return receipt requested, it shall be deemed to have been given three days after
it has been mailed. If notice is sent by messenger, it shall be deemed to have
been given on the day it is delivered.

17. AMENDMENTS. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against which
enforcement of such change or waiver is sought.

18. DELEGATION. PNC may assign its rights and delegate its duties
hereunder to any wholly-owned direct or

-27-

<PAGE>

indirect subsidiary of PNC or PNC Bank Corp., provided that (i) PNC gives the
Fund thirty (30) days prior written notice of such assignment; (ii) the delegate
agrees with PNC to comply with all relevant provisions of the 1940 Act; (iii)
PNC and such delegate promptly provide such information as the Fund may request,
and respond to such questions as the Fund may ask, relative to the delegation,
including (without limitation) the capabilities of the delegate; and (iv) PNC
remains primarily responsible and liable for the acts or omissions of any such
subsidiary.

19. LIMITATIONS ON LIABILITY. Pursuant to the Fund's Declaration of
Trust, no trustee, officer, employee or agent of the Fund shall be subject to
any personal liability whatsoever, in his or her official or individual
capacity, to any person, including PNC, other than to the Fund or its
shareholders, in connection with Fund property or the affairs of the Fund, save
only that arising from his or her bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duty to such person; and all such
persons shall look solely to the Fund property for satisfaction of claims of any
nature against a trustee, officer, employee or agent of the Fund arising in
connection with the affairs of the Fund. Moreover, the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing with
respect to a particular

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<PAGE>

Portfolio shall be enforceable against the assets and property of such Portfolio
only, and not against the assets and property of any other series or Portfolio.

20. Reports by Independent Public Accountants. PNC shall provide the
Fund, at such times as the Fund may reasonably request, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding the Property of each Portfolio held by
PNC pursuant to this Agreement. Such reports shall be of sufficient detail as
may reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed thereby and, if there are no such
inadequacies, shall so state.

21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

22. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.

23. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may

-29-

<PAGE>

embody in one more separate documents their agreement, if any, with respect to
delegated and/or Oral Instructions.

The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.

This Agreement shall be deemed to be a contract made in Pennsylvania and
governed by Pennsylvania law (without regard to principles of conflicts of law).
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding and shall inure to the
benefit of the parties hereto and their respective successors.

-30-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.

PNC BANK, NATIONAL ASSOCIATION

By:s/ Illegible Signature
----------------------------
Title: V.P.
------------------------

NICHOLAS-APPLEGATE MUTUAL FUNDS

By:s/ Thomas Pindelski
----------------------------
Title:
------------------------

-31-

<PAGE>

AUTHORIZED PERSONS
APPENDIX

Name (Typed) Signature

Mark Bjorstrom s/ Mark Bjorstrom
- --------------------- ---------------------
Operations

Ashley Rabun
- --------------------- ---------------------
President

Peter Johnson
- -------------------- ---------------------
Vice President

Joan Sundstrom s/ Joan Sundstrom
- --------------------- ---------------------
Secretary

Thomas Pindelski s/ Thomas Pindelski
- --------------------- ---------------------
Treasurer

Eric Banhazl s/ Eric Banhazl
- --------------------- ---------------------
Assistant Treasurer

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<PAGE>

EXHIBIT 8.2

July 19, 1993

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

PNC Bank, National Association
Airport Business Center
International Court 2
200 Stevens Drive
Lester, Pennsylvania 19113

Ladies and Gentlemen:

Reference is made to the Custodian Services Agreement between us dated
as of April 1, 1993 (the "Agreement").

Pursuant to Section 2 of the Agreement, we wish to add the following
Portfolios to the Agreement; Balanced Growth Qualified Portfolio, Worldwide
Growth Qualified Portfolio, Government Income Qualified Portfolio, and Money
Market Qualified Portfolio.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance
regarding this matter.

Very truly yours,

s/ Joan Sundstrom
--------------------
Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

PNC BANK, NATIONAL ASSOCIATION

By: s/ Illegible Signature
----------------------
Title: Vice President

<PAGE>

EXHIBIT 8.3

August 20, 1993

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

PNC Bank, National Association
Airport Business Center
International Court 2
200 Stevens Drive
Lester, Pennsylvania 19113

Ladies and Gentlemen:

Reference is made to the Custodian Services Agreement between us dated
as of April 1, 1993 (the "Agreement").

Pursuant to Section 2 of the Agreement, we wish to add the following
Portfolios to the Agreement: Emerging Growth Portfolio A, Emerging Growth
Portfolio B and Emerging Growth Qualified Portfolio.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance
regarding this matter.

Very truly yours,

s/ Joan Sundstrom
--------------------
Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

PNC BANK, NATIONAL ASSOCIATION

By: s/ Illegible Signature
-----------------------
Title: V.P.
---------------------

<PAGE>

EXHIBIT 8.4
-----------

December 15, 1993

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

PNC Bank, National Association
Airport Business Center
International Court 2
200 Stevens Drive
Lester, Pennsylvania 19113

Ladies and Gentlemen:

Reference is made to the Custodian Services Agreement between us dated
as of April 1, 1993 (the "Agreement").

Pursuant to section 2 of the Agreement, we wish to add the following
Portfolios to the Agreement: International Growth Portfolio A, International
Growth Portfolio B and International Growth Qualified Portfolio.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance
regarding this matter.

Very truly yours,

s/ Joan Sundstrom
-------------------------
Joan Sundstrom
President

APPOINTMENT ACCEPTED:

PNC BANK, NATIONAL ASSOCIATION

By: /s/ Illegible Signature
------------------------
Title: Vice President
- --------------------

<PAGE>

EXHIBIT 8.5
-----------

April 22, 1994

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

PNC Bank, National Association
Airport Business Center
International Court 2
200 Stevens Drive
Lester, Pennsylvania 19113

Ladies and Gentlemen:

Reference is made to the Custodian Services Agreement between us dated
as of April 1, 1993 (the "Agreement").

This will confirm our advice to you that the names of each of our
existing "Qualified Portfolio" series have been changed to the "Institutional
Portfolio" series.

Pursuant to section 2 of the Agreement, we wish to add the following
Portfolios to the Agreement: Core Growth Qualified Portfolio.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance
regarding this matter.

Very truly yours,

/s/Joan Sundstrom
--------------------------
Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

PNC BANK, NATIONAL ASSOCIATION

By: /s/ Illegible Signature
------------------------
Title: Vice President
------------------------

<PAGE>

EXHIBIT 8.6
-----------

November 15, 1994

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

PNC Bank, National Association
Airport Business Center
International Court 2
200 Stevens Drive
Lester, Pennsylvania 19113

Ladies and Gentlemen:

Reference is made to the Custodian Services Agreement between us dated
as of April 1, 1993 (the "Agreement").

Pursuant to Section 2 of the Agreement, we wish to add the following
Portfolios to the Agreement: Emerging Countries Portfolio A, Emerging Countries
Portfolio B, Emerging Countries Institutional Portfolio, Global Growth & Income
Portfolio A, Global Growth & Income Portfolio B, Global Growth & Income
Institutional Portfolio and Mini-Cap Growth Institutional Portfolio.

<PAGE>

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance
regarding this matter.

Very truly yours,

/s/Joan Sundstrom
--------------------------
Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

PNC BANK, NATIONAL ASSOCIATION

By: /s/ Illegible Signature
------------------------
Title: Vice President
---------------------

- 2 -

<PAGE>

EXHIBIT 8.7
-----------

May 22, 1995

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

PNC Bank, National Association
Airport Business Center
International Court 2
200 Stevens Drive
Lester, Pennsylvania 19113

Ladies and Gentlemen:

Reference is made to the Custodian Services Agreement between us dated
as of April 1, 1993 (the "Agreement").

This will confirm that the names of the various "Portfolio B" series
of Nicholas-Applegate Mutual Funds have been changed to the "Portfolio C"
series.

Pursuant to section 2 of the Agreement, we wish to add the following
Portfolios to the Agreement: Core Growth Portfolio B; Government Income
Portfolio B; Income & Growth Portfolio B; Balanced Growth Portfolio B; Worldwide
Growth Portfolio B; Emerging Growth Portfolio B; International Growth Portfolio
B; Emerging Countries Portfolio B; Global Growth & Income Portfolio B.

<PAGE>

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance
regarding this matter.

Very truly yours,

/s/ E. Blake Moore, Jr.
--------------------------
E. Blake Moore, Jr.
Secretary

APPOINTMENT ACCEPTED:

PNC BANK, NATIONAL ASSOCIATION

By: /s/ Illegible Signature
---------------------------
Title: Assistant Vice President

-2-

<PAGE>

Exhibit 8.8
-----------

August 1, 1995

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

PNC Bank, National Association
Airport Business Center
International Court 2
200 Stevens Drive
Lester, Pennsylvania 19113

Ladies and Gentlemen:

Reference is made to the Custodian Services Agreement between us dated
as of April 1, 1993 (the "Agreement").

Pursuant to section 2 of the Agreement, this will confirm that we wish
to appoint you to provide custodian services under the Agreement to our newly
established Short-Intermediate Fixed Income Fund and Fully Discretionary Fixed
Income Fund.

Please indicate your acceptance of this appointment by signing the
letter below and returning a copy to us. Thank you for your assistance
regarding this matter.

Very truly yours,

s/ E. Blake Moore, Jr.
-------------------------
E. Blake Moore, Jr.
Secretary

APPOINTMENT ACCEPTED:

PNC BANK, NATIONAL ASSOCIATION

By: s/ Illegible Signature
- ---------------------------
Title: Vice President
--------------------

<PAGE>

EXHIBIT 9.1
-----------

ADMINISTRATION AGREEMENT

THIS AGREEMENT is made as of the 1st day of April, 1993 by and between
NICHOLAS-APPLEGATE MUTUAL FUNDS, a Delaware business trust, (the "Trust"), and
INVESTMENT COMPANY ADMINISTRATION CORPORATION, a Delaware Corporation (the
"Administrator").

WITNESSETH

WHEREAS, the Trust is a diversified open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"; and

WHEREAS, the Trust wishes to retain the Administrator to provide certain
administrative services in connection with the management of the Trust's
operations and the Administrator is willing to furnish such services:

NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:

1. APPOINTMENT. The Trust hereby appoints the Administrator to provide
certain administrative services, hereinafter enumerated, in connection with the
management of the operations of the Trust and its various series ("Portfolios")
for the period and on the terms set forth in this Agreement. The Administrator
hereby accepts such appointment and agrees in performing its services hereunder
to comply with all relevant provisions of the 1940 Act, applicable rules and
regulations thereunder, and other applicable law, the Trust's Declaration of
Trust and Bylaws, prospectuses and statements of additional information, and the
instructions of the Board of Trustees of the Trust.

2. SERVICES ON A CONTINUING BASIS. The Administrator will perform on a
regular basis (daily weekly or as otherwise appropriate) all administrative
services required for the operation of the Trust (other than those services
provided by the Trust's adviser, distributor, custodian, transfer agent,
accounting agent, independent accountants and legal counsel) including, without
limitation, the following:

(A) prepare and coordinate reports and other materials to be supplied
to the Board of Trustees of the Trust as the officers and Trustees of the Trust
may request;

<PAGE>

(B) prepare and supervise the preparation and filing of all filings
required by the federal securities laws, (including, without limitation,
periodic reports on Form N-SAR and Notices under 1940 Act Rule 24f-2), periodic
financial reports, prospectuses, statements of additional information, marketing
materials, tax returns, shareholder reports and other regulatory reports or
filings required of the Trust.

(C) supervise and monitor the preparation of all required filings
necessary to maintain the Trust's qualification and/or registration to sell
shares of the Portfolios in all states where the Trust currently sells, or
intends to sell, shares of the Portfolios;

(D) coordinate the preparation, printing and mailing of all materials
(including, without limitation, Annual Reports and prospectuses) required to be
sent to shareholders;

(E) coordinate the preparation and payment of Trust related expenses;

(F) monitor and oversee the activities of the Trust's servicing
agents (including, without limitation, its transfer agent, custodian, and fund
accountants);

(G) monitor the calculation of the net asset value per share of each
Portfolio on each business day, and review and adjust as necessary the Trust's
daily expense accruals;

(H) monitor the Trust's daily, monthly and periodic compliance with
respect to 1940 Act, Internal Revenue Code, Board of Trustees and prospectus
guidelines, restrictions and policies;

(I) send periodic information (including, without limitation,
performance figures) to service organizations that compile and track investment
company information;

(J) assist the Trust's custodian, investment adviser, and
sub-advisers, accounting agent, counsel and auditors as required to carry out
the business and operations of the Trust;

(K) oversee the maintenance by the Trust's custodian and account
agent of the books and records pertaining to the Trust under the 1940 Act, and
maintain such other books and records (other than those required to

-2-

<PAGE>

be maintained by the Trust's adviser and sub-advisers) as may be required by law
or may be required for the proper operation of the Trust (which other books and
records shall be the property of the Trust, shall be surrendered promptly to the
Trust upon its request, and shall be preserved for the periods required by the
1940 Act).

(L) perform such additional services as may be agreed upon by the
Trust and the Administrator.

3. RESPONSIBILITY OF THE ADMINISTRATOR. The Administrator shall be under
no duty to take any action on behalf of the Trust or any Portfolio except as set
forth herein or as may be agreed to by the Administrator in writing. In the
performance of its duties hereunder, the Administrator shall be obligated to
exercise reasonable care and diligence and to act in good faith and to use its
best efforts. Without limiting the generality of the foregoing or any other
provision of this Agreement, the Administrator shall not be liable for delays or
errors or loss of data occurring by reason of circumstances beyond the
Administrator's control.

4. RELIANCE UPON INSTRUCTIONS. The Trust agrees that the Administrator
shall be entitled to rely upon any instructions, oral or written, actually
received by the Administrator from the Board of Trustees of the Trust or from a
person duly authorized by the Board of Trustees to give oral or written
instructions on behalf of the Trust, and, subject to the provisions of Section 3
hereof, shall incur no liability to the Trust or the Trust's Advisor in acting
upon such oral or written instructions, provided such instructions reasonably
appear to have been received from a person duly authorized by the Board of
Trustees of the Trust to give oral or written instructions on behalf of the
Trust.

5. CONFIDENTIALITY. The Administrator agrees on behalf of itself and its
employees to treat confidentially all records and other information relative to
the Trust and the Portfolios and all prior, present or potential shareholders of
each Portfolio of the Trust, except after prior notification to, and approval of
release of information in writing by, the Trust, which approval shall not be
unreasonably withheld where the Administrator may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so requested by the
Trust.

-3-

<PAGE>

6. EQUIPMENT FAILURES. In the event of equipment failures or the
occurrence of events beyond the Administrator's control which render the
performance of the Administrator's functions under this agreement impossible,
the Administrator shall take reasonable steps to minimize service interruptions
and is authorized to engage the services of third parties to prevent or remedy
such service interruptions at no cost to the Trust.

7. EXPENSES ASSUMED AS ADMINISTRATOR. Except as otherwise stated in this
Agreement, the Administrator shall pay all expenses incurred by it in performing
its services and duties hereunder as Administrator except for postage,
telephone, courier and messenger services, copying, and any filing or other fees
paid by the Administrator to federal or state securities authorities or
self-regulatory organizations under applicable laws or regulations. The Trust
will bear all other expenses incurred in the operation of the Trust (other than
those borne by its custodian, investment adviser and subadvisers, distributor,
accounting agent and transfer agent), including, without limitation, taxes,
interest, brokerage fees and commissions, fees of disinterested Trustees, SEC
fees, state blue sky and registration and qualification fees, advisory fees,
charges of custodians, transfer agents and accounting agents, insurance
premiums, outside auditing and legal expenses, costs of maintaining trust
existence, shareholder services expenses, costs of printing and distributing
prospectuses and supplements and amendments thereto necessary for the continued
effective registration of the Trust shares under federal and state securities
laws, costs of printing and distributing prospectuses and supplements and
amendments thereto for existing shareholders of the Trust, and costs of
shareholders' reports and meetings. It is understood that certain distribution
and shareholder servicing expenses may be paid by the Trust as provided in any
plan which may in the sole discretion of the Trust be adopted in accordance with
Rule 12b-1 under the 1940 Act or otherwise, and that such expenses will be paid
apart from any fees paid under this Agreement.

8. COMPENSATION. As compensation for services rendered to the Trust and
Portfolios by the Administrator during the term of this agreement, the Trust and
the Portfolios will pay to the Administrator a monthly fee at the annual rates
set forth on Schedule A to this Agreement.

9. INDEMNIFICATION. The Trust agrees to indemnify and hold harmless the
Administrator and its officers, directors and employees from all taxes, filing
fees,

-4-

<PAGE>

charges, expenses, assessments, claims and liabilities (including without
limitation, liabilities arising under the Securities Act of 1933, the Securities
Exchange Act of 1934, the 1940 Act, and any state and foreign securities laws,
all as amended from time to time) and expenses, including (without limitation)
reasonable attorneys fees and disbursements, arising directly or indirectly from
any action or thing which the Administrator takes or does or omits to take or do
at the request of or in reliance upon the advice of the Board of Trustees of the
Trust, provided that the Administrator will not be indemnified against any
liability to the Trust, the shareholders of any Portfolio or to any third party
(or any expenses incident to such liability) arising out of the Administrator's
own willful misfeasance, bad faith, negligence or reckless disregard of its
duties and obligations under this Agreement. The Administrator agrees to
indemnify and hold harmless the Trust and each of its Trustees, officers, and
employees and shareholders from all claims and liabilities (including without
limitation, liabilities under the Securities Act of 1933, the Securities
Exchange Act of 1934, the 1940 Act, and any state and foreign securities laws,
all as amended from time to time) and expenses, including (without limitation)
reasonable attorneys fees and disbursements, arising directly or indirectly from
any action or thing which the Administrator takes or does or omits to take or do
which is in violation of this Agreement or not in accordance with instructions
properly given to the Administrator, or arising out of the Administrator's own
willful misfeasance, bad faith, negligence or reckless disregard of its duties
and obligations under this Agreement.

Pursuant to the Fund's Declaration of Trust, no trustee, officer, employee
or agent of the Fund shall be subject to any personal liability whatsoever, in
his or her official or individual capacity, to any person, including the
Administrator, other than to the Fund or its shareholders, in connection with
Fund property or the affairs of the Fund, save only that arising from his or her
bad faith, willful misfeasance, gross negligence or reckless disregard of his or
her duty to such person; and all such persons shall look solely to the Fund
property for satisfaction of claims of any nature against a trustee, officer,
employee or agent of the Fund arising in connection with the affairs of the
Fund. Moreover, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Portfolio
shall be enforceable against the assets and property of such Portfolio only, and
not against the assets and property of any other series or Portfolio.

-5-

<PAGE>

10. DURATION AND TERMINATION. This Agreement shall continue until
termination by the Trust (through the Board of Trustees) or the Administrator on
60 days' written notice to the other. All notices and other communications
hereunder shall be in writing.

11. AMENDMENTS. This Agreement or any part hereof may be changed or
waived only by instrument in writing signed by the party against which
enforcement of such change or waiver is sought.

12. NOTICES. All notices and other communications shall be in writing and
personally delivered, sent by registered or certified mail, return receipt
requested, or communicated by telegram, telex, or facsimile transmission, (i) if
to the Administrator, at 560 Hudson St., 2nd floor, Hackensack, NJ 07601,
Facsimile: (201) 641-5024 or (ii) if to the Trust, at 600 West Broadway, 30th
Floor, San Diego, CA 92101, Facsimile: (619) 234-7726, or such other address as
a party may specify by written notice to the other party. Each such notice
shall be treated as having been given when personally delivered or transmitted
by telegram, telex or facsimile transmission or, if mailed, on the earlier of
actual receipt of three days after deposit in the U.S. mail.

13. MISCELLANEOUS. This Agreement, together with any exhibits,
appendices, or attachments hereto, embodies the entire agreement and
understanding between the parties thereto with respect to the services to be
performed hereunder, and supersedes all prior agreements and understandings,
relating to the subject matter hereof. The captions in this Agreement are
included for convenience of reference only and in no way define or limit any of
the provisions hereof or otherwise affect their construction or effect. This
Agreement shall be deemed to be a contract made in California and governed by
California law (without regard to principles of conflicts of law). If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will not be affected
thereby. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors; provided, however, that this
Agreement may not be assigned by any party without the prior written consent of
the other party.

-6-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first written
above.

NICHOLAS-APPLEGATE MUTUAL FUNDS

By: s/ Thomas Pindelski
---------------------------------------------
Title: Thomas Pindelski, Chief Financial Officer
-----------------------------------------

INVESTMENT COMPANY ADMINISTRATION CORPORATION

By: s/ Eric M. Banhazl
---------------------------------------------
Title: Vice President
-----------------------------------------

-7-

<PAGE>

Schedule A

Nicholas-Applegate Investment Trust ("Trust")
Nicholas-Applegate Mutual Fund (Portfolio")

Administrative Services Fees

March, 1993

Nicholas-Applegate Investment Trust

Average Assets for Trust* Annual Fee Rate

First $100 million 0.05% (5 basis points)
Next $150 million 0.04% (4 basis points)
Next $300 million 0.03% (3 basis points)
Next $300 million 0.02% (2 basis points)
Thereafter 0.01% (1 basis point)

Trust minimum: $150,000 per year (to be allocated among the six Funds based on
average net assets)

*Trust = Nicholas-Applegate Investment Trust (6 funds).

Nicholas-Applegate Mutual Funds

$25,000 annual fee per Fund ("Master") and three Portfolio ("Feeder)
relationship.

$20,000 annual fee per Fund ("Master") and two Portfolio (Feeder) relationship.

Note: The annual fees will be allocated among the Portfolios based on relative
assets under management.

-8-

<PAGE>

July 28, 1993

Ms. Joan Sundstrom
Nicholas-Applegate Capital Management
600 West Broadway, 29th Fl.
San Diego, CA 92101

Dear Joan:

Enclosed please find the agreed upon fee schedule for the Nicholas-
Applegate Emerging Growth Funds. The schedule is an addendum to the existing
Administration Agreement between Nicholas-Applegate Investment Trust, Nicholas-
Applegate Mutual Funds and Investment Company Administration Corporation.

Please contact me should you have any questions or require any additional
information.

Sincerely yours,

s/ Eric M. Banhazl
Eric M. Banhazl

EMB/gc

Enclosure

cc: Mike Glazer
Robert Wadsworth

<PAGE>

NICHOLAS-APPLEGATE EMERGING GROWTH FUNDS
ADMINISTRATION FEES - ICAC
JULY 1993

Nicholas-Applegate Emerging Growth Portfolios (A, B & Qualified Portfolios):
- ----------------------------------------------------------------------------

- $15,000 per annum

Nicholas-Applegate Emerging Growth Fund:
- ----------------------------------------

- $35,000 per annum

<PAGE>

Nicholas-Applegate Mutual Funds(1)
Nicholas-Applegate Investment Trust(1)
Administration Services Fees
(Revised June 27, 1995)

NICHOLAS-APPLEGATE INVESTMENT TRUST

Average Assets for Trust Basis Points
- ------------------------ ------------

First $100 million 5
Next $150 million 4
Next $300 million 3
Next $300 million 2
Thereafter 1

Trust minimum: $25,000 per master fund per year. Total aggregate Trust amount
to be allocated amongst the Investment Trust's Funds based on
average net assets.

NICHOLAS-APPLEGATE MUTUAL FUNDS ("PORTFOLIOS")

$5,000 annual fee per single client Portfolio ("Feeder").

$20,000 annual fee per Fund ("Master") & two Portfolio
("Feeder") relationship.

$25,000 annual fee per Fund ("Master") & three Portfolio
("Feeder") relationship.

$30,000 annual fee per Fund ("Master") & four Portfolio
("Feeder") relationship.

$35,000 annual fee per Fund ("Master") & five Portfolio
("Feeder") relationship.

$40,000 annual fee per Fund ("Master") & six Portfolio
("Feeder") relationship.

Note: The annual fees will be allocated amongst the portfolios based on
relative assets under management.

- ------------------------------
(1) Excluding the Emerging Growth Fund and its related Portfolios.

<PAGE>

Nicholas-Applegate Mutual Funds(1)
Nicholas-Applegate Investment Trust(1)
Administration Services Fees
(Revised January 1994)

NICHOLAS-APPLEGATE INVESTMENT TRUST

Average Assets for Trust Basis Points
- ------------------------ ------------

First $100 million 5
Next $150 million 4
Next $300 million 3
Next $300 million 2
Thereafter 1

Trust minimum: $150,000 per year. To be allocated amongst the Investment
Trust's Funds based on average net assets

NICHOLAS-APPLEGATE MUTUAL FUNDS ("PORTFOLIOS")

$30,000 annual fee per Fund (Master) & four Portfolio
("Feeder") relationship.

$25,000 annual fee per Fund ("Master") & three Portfolio
("Feeder") relationship.

$20,000 annual fee per Fund ("Master") & two Portfolio
("Feeder") relationship.

$5,000 annual fee per single client Portfolio ("Feeder").

Note: The annual fees will be allocated amongst the portfolios based on
relative assets under management.

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

(1) Excluding the Emerging Growth Fund and its related Portfolios.

<PAGE>

EXHIBIT 9.2
-----------

TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
NICHOLAS-APPLEGATE MUTUAL FUNDS
AND
STATE STREET BANK AND TRUST COMPANY

<PAGE>

TABLE OF CONTENTS
-----------------

Page
----

Article 1 Terms of Appointment; Duties of the Bank . . . . . . . . . . . . .2

Article 2 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . .6

Article 3 Representations and Warranties of the Bank . . . . . . . . . . . .7

Article 4 Representations and Warranties of the Fund . . . . . . . . . . . .8

Article 5 Data Access and Proprietary Information. . . . . . . . . . . . . .8

Article 6 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 11

Article 7 Standard of Care . . . . . . . . . . . . . . . . . . . . . . . . 13

Article 8 Covenants of the Fund and the Bank . . . . . . . . . . . . . . . 14

Article 9 Termination of Agreement . . . . . . . . . . . . . . . . . . . . 15

Article 10 Additional Funds . . . . . . . . . . . . . . . . . . . . . . . . 15

Article 11 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Article 12 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Article 13 Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . 17

Article 14 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . 17

Article 15 Consequential Damages. . . . . . . . . . . . . . . . . . . . . . 17

Article 16 Merger of Agreement. . . . . . . . . . . . . . . . . . . . . . . 17

Article 17 Limitations of Liability of the Trustees . . . . . . . . . . . . 17

Article 18 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 18

<PAGE>

TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------

AGREEMENT made as of the 1st day of April, 1993, by and between
NICHOLAS-APPLEGATE MUTUAL FUNDS, a Delaware business trust, having its principal
office and place of business at 600 West Broadway, 30th Floor, San Diego,
California 92101 (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of business at
225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").

WHEREAS, the Fund is authorized to issue shares of beneficial interest
of series, with each such series representing interests in a separate portfolio
of securities and other assets; and

WHEREAS, the Fund intends to initially offer shares in thirteen
series, the Series A Portfolios - Nicholas-Applegate Core Growth Portfolio A,
Nicholas-Applegate Income and Growth Portfolio A, Nicholas-Applegate Balanced
Growth Portfolio A, Nicholas-Applegate Worldwide Growth Portfolio A, Nicholas-
Applegate Government Income Portfolio A; the Series B Portfolios - Nicholas-
Applegate Core Growth Portfolio B, Nicholas-Applegate Income and Growth
Portfolio B, Nicholas-Applegate Balanced Growth Portfolio B, Nicholas-Applegate
Worldwide Growth Portfolio

<PAGE>

B, Nicholas-Applegate Government Income Portfolio B; the Qualified Portfolios -
Nicholas-Applegate Core Growth Qualified Portfolio and Nicholas-Applegate Income
& Growth Qualified Portfolio; and Money Market Portfolios - Nicholas Applegate
Money Market Portfolio (each such series, together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with Article 10, being herein referred to as a "Portfolio", and
collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the
Bank as its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with certain other activities, and the
Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:

Article 1 TERMS OF APPOINTMENT: DUTIES OF THE BANK

1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund, on behalf of the Portfolios, hereby employs and appoints
the Bank to act as, and the Bank agrees to act as its transfer agent for the
authorized and issued shares of beneficial interest of the Fund representing
interests in each of the respective Portfolios ("Shares"), dividend disbursing
agent, custodian

<PAGE>

of certain retirement plans and agent in connection with any accumulation, open-
account or similar plans provided to the shareholders of each of the respective
Portfolios of the Fund ("Shareholders") and set out in the currently effective
prospectus and statement of additional information ("prospectus") of the Fund on
behalf of the applicable Portfolio, including without limitation any periodic
investment plan or periodic withdrawal program.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time
by agreement between the Fund on behalf of each of the Portfolios, as applicable
and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation thereof to the Custodian of the Fund
authorized pursuant to the Declaration of Trust of the
Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the
appropriate Shareholder account;

<PAGE>

(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate
documentation thereof to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and
(iii) above, the Bank shall execute transactions
directly with broker-dealers authorized by the Fund who
shall thereby be deemed to be acting on behalf of the
Fund;
(v) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any
redemption, pay over or cause to be paid over in the
appropriate manner such monies as instructed by the
redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;
(viii) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon
receipt by the Bank of indemnification satisfactory to
the Bank

<PAGE>

and protecting the Bank and the Fund, and the Bank at
its option, may issue replacement certificates in place
of mutilated stock certificates upon presentation
thereof and without such indemnity;
(ix) Maintain records of account for and advise the Fund and
its Shareholders as to the foregoing; and
(x) Record the issuance of Shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total
number of Shares which are authorized, based upon data
provided to it by the Fund, and issued and outstanding.
The Bank shall also provide the Fund on a regular basis
with the total number of Shares which are authorized
and issued and outstanding and shall have no
obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take
cognizance of any laws relating to the issue or sale of
such Shares, which functions shall be the sole
responsibility of the Fund.

<PAGE>

(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall: (i) perform
the customary services of a transfer agent, dividend disbursing agent, custodian
of certain retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to: maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be

<PAGE>

treated as exempt from blue sky reporting for each State and (ii) verify the
establishment of transactions for each State on the system prior to activation
and thereafter monitor the daily activity for each State. The responsibility of
the Bank for the Fund's blue sky State registration status is solely limited to
the initial establishment of transactions subject to blue sky compliance by the
Fund and the reporting of such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services
in Article 1 may be established from time to time by agreement between the Fund
on behalf of each Portfolio and the Bank per the attached service responsibility
schedule. The Bank may at times perform only a portion of these services and
the Fund or its agent may perform these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the
Fund (i.e., escheatment services) which may be agreed upon in writing between
the Fund and the Bank.

Article 2 FEES AND EXPENSES

2.01 For performance by the Bank pursuant to this Agreement, the
Fund agrees on behalf of each of the Portfolios to pay the Bank an annual
maintenance fee for each Shareholder account as set out in the initial fee
schedule attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 2.02 below

<PAGE>

may be changed from time to time subject to mutual written agreement between the
Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund agrees on behalf of each of the Portfolios to reimburse the Bank for
out-of-pocket expenses, including but not limited to confirmation production,
postage, forms, telephone, microfilm, microfiche, tabulating proxies, records
storage or advances incurred by the Bank for the items set out in the fee
schedule attached hereto. In addition, any other expenses incurred by the Bank
at the request or with the consent of the Fund, will be reimbursed by the Fund
on behalf of the applicable Portfolio.
2.03 The Fund agrees on behalf of each of the Portfolios to pay
all fees and reimbursable expenses within five days following the mailing of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all Shareholder accounts shall be advanced to the
Bank by the Fund at least seven (7) days prior to the mailing date of such
materials.

Article 3 REPRESENTATIONS AND WARRANTIES OF THE BANK

The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in
good standing under the laws of the Commonwealth of Massachusetts.

<PAGE>

3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.

Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND

The Fund represents and warrants to the Bank that:
4.01 It is a Delaware business trust duly organized and existing
and in good standing under the laws of Delaware.
4.02 It is empowered under applicable laws and by its Declaration
of Trust and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of
Trust and By-Laws have been taken to authorize it to enter into and perform this
Agreement.

<PAGE>

4.04 It is an open-end and diversified management investment
company registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933,
as amended on behalf of each of the Portfolios is currently effective and will
remain effective, and appropriate state securities law filings have been made
and will continue to be made, with respect to all Shares of the Fund being
offered for sale.

Article 5 DATA ACCESS AND PROPRIETARY INFORMATION

5.01 The Fund acknowledges that the data bases, computer
programs, screen format, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by the Bank as part of the Fund's
ability to access certain Fund-related data ("Customer Data") maintained by the
Bank on data bases under the control and ownership of the Bank or other third
party ("Data Access Services") constitute copyrighted, trade secret, or other
proprietary information (collectively, "Proprietary Information") of substantial
value to the Bank or other third party. In no event shall Proprietary
Information be deemed Customer Data. The Fund agrees to treat all Proprietary
Information as proprietary to the Bank and further agrees that it shall not
divulge any Proprietary Information to any person or organization except as may
be

<PAGE>

provided hereunder. Without limiting the foregoing, the Fund agrees for itself
and its employees and agents:
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance with the Bank's
applicable user documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any portion
of the Proprietary Information, and if such access is inadvertently obtained, to
inform the Bank in a timely manner of such fact and dispose of such information
in accordance with the Bank's instructions;
(d) to refrain from causing or allowing third-party data
required hereunder from being retransmitted to any other computer facility or
other location, except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in Proprietary Information
at common law, under federal copyright law and under other federal or state law.
Each party shall take reasonable efforts to advise its employees
of their obligations pursuant to this Article 5. The obligations of this

<PAGE>

Article shall survive any termination of this Agreement.
5.02 If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently issued
user documentation for such services, the Bank shall endeavor in a timely manner
to correct such failure. Organizations from which the Bank may obtain certain
data included in the Data Access Services are solely responsible for the
contents of such data and the Fund agrees to make no claim against the Bank
arising out of the contents of such third-party data, including, but not limited
to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND
SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS,
AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE
EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.03 If the transactions available to the Fund include the
ability to originate electronic instructions to the Bank in order to (i) effect
the transfer or movement of cash of Shares or (ii) transmit Shareholder
information or other information, then in such event the Bank shall be entitled
to rely on the validity and authenticity of any such instruction without
undertaking any further inquiry as

<PAGE>

long as such instruction is undertaken in conformity with security procedures
established by the Bank from time to time.

Article 6 INDEMNIFICATION

6.01 The Bank shall not be responsible for, and the Fund shall on
behalf of the applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person or firm on
behalf of the Fund including but not limited to any previous transfer agent or
registrar.

<PAGE>

(d) Subject to the provisions of Article 7, the reliance on, or
the carrying out by the Bank or its agents or subcontractors of any instructions
or requests of the Fund on behalf of the applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
6.02 At any time the Bank may apply to any officer of the Fund
for instructions, and may consult with reasonably qualified legal counsel with
respect to any matter arising in connection with the services to be performed by
the Bank under this Agreement, and the Bank and its agents or subcontractors
shall not be liable and shall be indemnified by the Fund on behalf of the
applicable Portfolio for any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. Subject to the provisions of
Article 7, the Bank, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any

<PAGE>

instruction, information, data, records or documents provided the Bank or its
agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and hall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. Subject to the provisions of Article 7, the Bank, its
agents and subcontractors shall also be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.
6.03 In order that the indemnification provisions contained in
this Article 6 shall apply, upon the assertion of a claim for which the Fund may
be required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all developments
concerning such claim. The Fund shall have the option to participate with the
Bank in the defense of such claim or to defend against said claim in its own
name or in the name of the Bank. The Bank shall in no case confess any claim or
make any compromise in any case in which the Fund may be required to indemnify
the Bank except with the Fund's prior written consent.

<PAGE>

Article 7 STANDARD OF CARE

7.01 The Bank shall at all times act in good faith and agrees to
use its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are caused by
its negligence, bad faith, or willful misconduct of that of its employees.

Article 8 COVENANTS OF THE FUND AND THE BANK

8.01 The Fund shall on behalf of each of the Portfolios promptly
furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the
Fund authorizing the appointment of the Bank and the execution and delivery of
this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund
and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
8.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section

<PAGE>

31 of the Investment Company Act of 1940, as amended, and the Rules thereunder,
the Bank agrees that all such records prepared or maintained by the Bank
relating to the services to be performed by the Bank hereunder are the property
of the Fund and will be preserved, maintained and made available in accordance
with such Section and Rules, and will be surrendered promptly to the Fund on and
in accordance with its request.
8.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
8.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.

Article 9 TERMINATION OF AGREEMENT

9.01 This Agreement may be terminated by either party upon sixty
(60) days written notice to the other.

<PAGE>

9.02 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material will
be borne by the Fund on behalf of the applicable Portfolio(s). Additionally,
the Bank reserves the right to charge for any other reasonable expenses
associated with such termination.

Article 10 ADDITIONAL FUNDS

10.01 In the event that the Fund establishes one or more
series other than the Portfolios with respect to which it desires to appoint the
Bank to act as Transfer Agent, it shall notify the Bank in writing. If the Bank
is willing to accept such appointment under this Agreement it will so notify the
Fund in writing, whereupon such series will be subject to the me provisions of
this Agreement as are the Portfolios except to the extent that such provisions
are modified with respect to such series in writing between the Fund and the
Bank.

Article 11 ASSIGNMENT

11.01 Except as provided in Section 11.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
11.02 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and assigns.

<PAGE>

11.03 The Bank may, without further consent on the part of
the Fund, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered as
a transfer agent pursuant to Section 17A(c)(l) of the Securities Exchange Act of
1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(l) or (iii) a BFDS affiliate;
provided, however, that the Bank shall be as fully responsible to the Fund for
the acts and omissions of any subcontractor as it is for its own acts and
omissions.

Article 12 AMENDMENT

12.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Trustees of the Fund.

Article 13 MASSACHUSETTS LAW TO APPLY

13.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts (without regard to principles of conflicts of law).

Article 14 FORCE MAJEURE

14.01 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission

<PAGE>

failure or damage reasonably beyond its control, or other causes reasonably
beyond its control, such party shall not be liable for damages to the other for
any damages resulting from such failure to perform or otherwise from such
causes.

Article 15 CONSEQUENTIAL DAMAGES

15.01 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement or
for any consequential damages arising out of any act or failure to act
hereunder.

Article 16 MERGER OF AGREEMENT

16.01 This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with respect to the
subject matter hereof whether oral or written.

Article 17 LIMITATIONS OF LIABILITY OF THE TRUSTEES

17.01 Pursuant to the Fund's Declaration of Trust, no
trustee, officer, employee or agent of the Fund shall be subject to any personal
liability whatsoever, in his or her official or individual capacity, to any
person, including the Bank, other than to the Fund or its shareholders, in
connection with Fund property or the affairs of the Fund, save only that arising
from his or her bad faith, willful misfeasance, gross negligence or reckless
disregard of his or her duty to such person; and all such persons shall look
solely to the Fund property for

<PAGE>

satisfaction of claims of any nature against a trustee, officer, employee or
agent of the Fund arising in connection with the affairs of the Fund. Moreover,
the debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular Portfolio shall be enforceable
against the assets and property of such Portfolio only, and not against the
assets of property of any other series or Portfolio.

Article 18 COUNTERPARTS

18.01 This Agreement may be executed by the parties hereto on
any number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.

NICHOLAS-APPLEGATE MUTUAL FUNDS

BY: s/ Thomas Pindelski
-----------------------------
ATTEST:

s/ Joan Sundstrom
- -------------------------

STATE STREET BANK AND TRUST COMPANY

BY: s/ Illegible Signature
-----------------------------
Executive Vice President
ATTEST:

s/ Illegible Signature
- -------------------------
Assistant Secretary

<PAGE>

STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*

Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----

1. Receives orders for the purchase X
of Shares.

2. Issue Shares and hold Shares in X
Shareholders accounts.

3. Receive redemption requests. X

4. Effect transactions 1-3 above X
Directly with broker-dealers.

5. Pay over monies to redeeming X
Shareholders.

6. Effect transfers of Shares. X

7. Prepare and transmit dividends X
and distributions.

8. Issue Replacement Certificates. X

9. Reporting of abandoned property. X

10. Maintain records of account. X

11. Maintain and keep a current and X
accurate control book for each
issue of securities.

12. Mail proxies. X

13. Mail Shareholder reports. X

14. Mail prospectuses to current X
Shareholders.

15. Withhold taxes on U.S. resident X
and non-resident alien accounts.

16. Prepare and file U.S. Treasury X
Department forms.

<PAGE>

Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----

17. Prepare and mail account and X
confirmation statements for
Shareholders.

18. Provide Shareholder account X
information.

19. Blue sky reporting. X X

* Such services are more fully described in Article 1.02 (a), (b) and
(c) of the Agreement.

NICHOLAS-APPLEGATE MUTUAL FUNDS

BY:_____________________________

ATTEST:

_____________________

STATE STREET BANK AND TRUST COMPANY

BY:s/ Illegible Signature
----------------------------------

Executive Vice President

ATTEST:

s/ Illegible Signature
- ----------------------------
Assistant Secretary

<PAGE>

NICHOLAS APPLEGATE MUTUAL FUNDS

BOSTON FINANCIAL DATA SERVICES, INC.
FEE INFORMATION FOR SERVICES AS
PLAN, TRANSFER AND DIVIDEND DISBURSING AGENT

GENERAL
- -------

Fee are based on an annual per shareholder account charge for account
maintenance plus out-of-pocket expenses. Annual maintenance charges for
various kinds of Mutual Funds are given below. There is a minimum charge
based on each class of shares.

$2,000/Month Class (A) Front End Load
$ 900/Month Class (B) Level Load
$ 900/Month Qualified (Waived for First Six Months)

ANNUAL MAINTENANCE CHARGES
- --------------------------

Fees are billed on a monthly basis at the rate of 1/12 of the annual fee.
A charge is made for an account in the month that an account opens or
closes.

Daily Dividend Funds $9.00
Non-Daily Dividend Funds $7.00

The above rates are to be incremented
$0.25 per dividend payment cycle
(e.g., monthly dividend, add
$3.00 to the annual maintenance fee) $0.25

The following features will each
be assessed an additional $1.00
as an add-on to the annual per
account rate if they are present:

Commission Reporting
12(b)1
Contingent Deferred Sales Charge $1.00 Each

Closed Accounts 0.20 Per Month

Other Fees
----------

Checkwriting
------------

Each check presented for payment $1.00 Each

Set-up of checkwriting function $5.00 Per Account

<PAGE>

N. Applegate
Page 26

OUT-OF POCKET EXPENSES
- ----------------------

Out-of-pocket expenses include but are not limited to: confirmation
statements, postage, forms, telephone, microfilm, microfiche, and expenses
incurred at the specific direction of the Fund.

TELEPHONE PRICING
- -----------------

1. Monthly Minimum $2,000.00
2. Cost Per Call $0.75 per minute
3. Data Entry $1.00 per entry
4. Setup Expenses $500-$5,000.00

NICHOLAS APPLEGATE MUTUAL FUNDS STATE STREET BANK & TRUST CO.

By:s/ Joan Sundstrom By:s/ Illegible Signature
------------------------------ --------------------------

Title: Secretary Title: Vice President
--------------------------- -----------------------

Date:April 16, 1993 Date: March 25, 1993
---------------------------- ------------------------

<PAGE>

EXHIBIT 9.3
-----------

July 19, 1993

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

State Street Bank
and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Ladies and Gentlemen:

Reference is made to the Transfer Agency and Service Agreement between
us dated as of April 1, 1993 (the "Agreement").

Pursuant to Section 10.01 of the Agreement, we wish to add the
following Portfolios to the Agreement: Balanced Growth Qualified Portfolio,
Worldwide Growth Qualified Portfolio, Government Income Qualified Portfolio, and
Money Market Qualified Portfolio.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance regarding
this matter.

Very truly yours,
/s/ Joan Sundstrom

Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

STATE STREET BANK AND TRUST COMPANY

By: /s/ Illegible Signature
-----------------------------
Title: Vice President
----------------------

<PAGE>

EXHIBIT 9.4
-----------

August 20, 1993

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

State Street Bank
and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Ladies and Gentlemen:

Reference is made to the Transfer Agency and Service Agreement between
us dated as of April 1, 1993 (the "Agreement").

Pursuant to Section 10.01 of the Agreement, we wish to add the
following Portfolios to the Agreement: Emerging Growth Portfolio A, Emerging
Growth Portfolio B and Emerging Growth Qualified Portfolio.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance regarding
this matter.

Very truly yours,

/s/ Joan Sundstrom
Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

STATE STREET BANK AND TRUST COMPANY

By: /s/ Maureen P. Corcoran
----------------------------
Title: Vice President
----------------------

<PAGE>

EXHIBIT 9.5
-----------

August 20, 1993

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

State Street Bank
and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Ladies and Gentlemen:

Reference is made to the Transfer Agency and Service Agreement between
us dated as of April 1, 1993 (the "Agreement").

Pursuant to Section 10.01 of the Agreement, we wish to add the
following Portfolios to the Agreement: International Growth Portfolio A,
International Growth Portfolio B and International Growth Qualified Portfolio.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance regarding
this matter.

Very truly yours,

/s/ Joan Sundstrom
Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

STATE STREET BANK AND TRUST COMPANY

By: /s/ Illegible Signature
----------------------------
Title: Vice President
----------------------------

<PAGE>

EXHIBIT 9.6
-----------

April 22, 1994

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

State Street Bank
and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Ladies and Gentlemen:

Reference is made to the Transfer Agency and Service Agreement between
us dated as of April 1, 1993 (the "Agreement").

This will confirm our advice to you that the names of each of our
existing "Qualified Portfolio" series have been changed to the "Institutional
Portfolio" series.

Pursuant to Section 10.01 of the Agreement, we wish to add the
following Portfolios to the Agreement: Core Growth Qualified Portfolio.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance regarding
this matter.

Very truly yours,

/s/ Joan Sundstrom
Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

STATE STREET BANK AND TRUST COMPANY

By:/s/ Illegible Signature
------------------------------
Title: Vice President
----------------------

<PAGE>

EXHIBIT 9.7
-----------

November 15, 1994

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

State Street Bank
and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Ladies and Gentlemen:

Reference is made to the Transfer Agency and Service Agreement between
us dated as of April 1, 1993 (the "Agreement").

Pursuant to Section 10.01 of the Agreement, we wish to add the
following Portfolios to the Agreement: Emerging Countries Portfolio A, Emerging
Countries Portfolio B, Emerging Countries Institutional Portfolio, Global Growth
& Income Portfolio A, Global Growth & Income Portfolio B, Global Growth & Income
Institutional Portfolio and Mini-Cap Growth Institutional Portfolio.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance regarding
this matter.

Very truly yours,

/s/ Joan Sundstrom
Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

STATE STREET BANK AND TRUST COMPANY

By:/s/ Illegible Signature
------------------------------
Title: Vice President
----------------------

<PAGE>

EXHIBIT 9.8
-----------

May 22, 1995

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

State Street Bank
and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Ladies and Gentlemen:

Reference is made to the Transfer Agency and Service Agreement between
us dated as of April 1, 1993 (the "Agreement").

This will confirm that the names of the various "Portfolio B" series
of Nicholas-Applegate Mutual Funds have been changed to the "Portfolio C"
series.

Pursuant to Section 10.01 of the Agreement, we wish to add the
following Portfolios to the Agreement: Core Growth Qualified Portfolio B,
Government Income Portfolio B; Income & Growth Portfolio B, Balanced Growth
Portfolio B; Worldwide Growth Portfolio B; Emerging Growth Portfolio B;
International Growth Portfolio B; Emerging Countries Portfolio B; and Global
Growth & Income Portfolio B.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance regarding
this matter.

Very truly yours,

/s/ E. Blake Moore, Jr.
E. Blake Moore, Jr.
Secretary

APPOINTMENT ACCEPTED:

STATE STREET BANK AND TRUST COMPANY

By:/s/ Illegible Signature
------------------------------
Title: Vice President
----------------------

<PAGE>

Exhibit 9.12
------------

NICHOLAS-APPLEGATE MUTUAL FUNDS
SHAREHOLDER SERVICE PLAN

INTRODUCTION

The Board of Trustees (the "Board") of Nicholas-Applegate Mutual
Funds, a Delaware business trust (the "Trust"), has approved this Shareholder
Service Plan (this "Plan"), with respect to its various series (each a
"Portfolio"), including its various Portfolio A series existing from time to
time (collectively the "Portfolio A Series"), its various Portfolio B series
existing from time to time (collectively the "Portfolio B Series"), and its
various Qualified Portfolio series existing from time to time (collectively the
"Qualified Portfolio Series").

THE PLAN

The material aspects of the Plan are as follows:

SECTION 1. The Portfolios will pay Nicholas-Applegate Securities
(the "Distributor"), the distributor of shares of beneficial interest (the
"Shares") of the Portfolios, for expenses incurred in connection with non-
distribution shareholder services provided by the Distributor to securities
broker-dealers, and other securities professionals ("Service Organizations")
and/or beneficial owners of Shares of the Portfolios, including but not limited
to shareholder servicing provided by the Distributor at facilities dedicated to
Portfolio use, provided that such shareholder servicing is not duplicative of
the servicing otherwise provided on behalf of the Portfolios.

SECTION 2. The Portfolios will also reimburse the Distributor for
fees paid by the Distributor to Service Organizations (which may include the
Distributor itself) for the provision of support services to their clients
("Clients") who are beneficial owners of Shares of the Portfolios. Such
services may include: (a) establishing and maintaining accounts and records
relating to Clients who invest in Shares of the Portfolios; (b) aggregating and
processing purchase, exchange and redemption requests for Shares from Clients
and placing net purchase and redemption orders with respect to the Shares; (c)
investing, or causing to be invested, the assets of Clients' accounts in Shares

<PAGE>

pursuant to specific or pre-authorized instructions; (d) processing dividend and
distribution payments from the Trust on behalf of Clients; (e) providing
information periodically to Clients showing their positions in Shares; (f)
arranging for bank wires; (g) responding to Client inquiries relating to the
services performed by Service Organizations; (h) providing subaccounting
services with respect to Shares beneficially owned by Clients or the information
to the Trust necessary for subaccounting services; (i) preparing any necessary
tax reports or forms on behalf of Clients; (j) if required by law, forwarding
shareholder communications from the Portfolios (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to Clients; (k) assisting Clients in changing dividend options,
account designations and addresses; and (l) providing such other similar
services as the Distributor may reasonably request to the extent the Service
Organization is permitted to do so under applicable statutes, rules or
regulations.

SECTION 3. While this Plan is in effect, the Distributor will be
paid for such shareholder servicing expenses that are incurred in connection
with Shares of the Portfolios on a monthly basis, at the annual rates set forth
in Schedule A hereto which are based on each Portfolio's average daily net
assets during such month. These monthly payments to the Distributor may be
amended or discontinued at any time by the Board, in its sole discretion.

SECTION 4. The monthly payments to the Distributor under this Plan
shall be made in accordance with, and subject to, the following conditions:

(a) if in any month the Distributor expends or is due more
monies than can be immediately paid under this Plan, due to the
percentage limitation noted therein, the unpaid amount shall be
carried forward from month to month while this Plan is in effect until
such time, if ever, when it can be paid in accordance with the
provisions of Sections 1, 2 and 3; provided, however, that no
interest, carrying or finance charge will be imposed on any amounts
carried forward;

(b) if in any month the Distributor does not expend the entire
amount then available under Section 1,2 and 3, and assuming that no
unpaid amounts have been carried forward and remain unpaid under such
sections, then the amount not expended shall be considered a credit
and may be

- 2 -

<PAGE>

drawn upon from month to month by the Distributor to permit payment
under Sections 1, 2 and 3 when necessary in the future;

(c) notwithstanding any provision of items (a) and (b) above, no
amounts payable or credit due pursuant to this Plan for any fiscal
year may be carried over for payment or utilized as a credit, as the
case may be, beyond the end of such year. In addition, any amount
being carried forward during any given year will be extinguished in
the event this Plan is terminated in that year;

(d) payments made out of or charged against the assets of a
particular Portfolio must be in payment for shareholder servicing
expenses incurred on behalf of such Portfolio; and

(e) payments made pursuant to Sections 1, 2 and 3 must be for
the shareholder servicing expenses described therein.

Payments to a Service Organization under this Plan shall be subject to
compliance by the Service Organization with the terms of a shareholder service
agreement between the Service Organization and the Distributor. If an investor
in a Portfolio ceases to be a Client of a Service Organization that has entered
into a shareholder service agreement with the Distributor, but continues to hold
Shares of the Portfolio, the Distributor will be entitled to receive similar
payments in respect of any shareholder servicing provided with respect to such
investor.

SECTION 5. For purposes of determining the amounts payable under
this Plan, the value of a Portfolio's net assets shall be computed in the manner
specified in the Portfolio's prospectus and statement of additional information
as then in effect for the computation of the value of the Portfolio's net
assets.

SECTION 6. The Distributor shall provide the Board, at least
quarterly, with a written report of all amounts expended pursuant to this Plan.
The report shall state the purpose for which the amounts were expended.

Section 7. This Plan shall continue in full force and effect upon
approval and adoption by the Board and shall continue thereafter automatically
for successive annual periods provided such continuance is approved by a
majority of the Board, including a majority of the Trustees

- 3 -

<PAGE>

who are not "interested persons" (as defined in the Investment Company Act of
1940, as amended) of the Trust and who have no direct or indirect financial
interest in the operation of this Plan or in any agreements entered into in
connection with this Plan (the "Disinterested Trustees"), pursuant to a vote
cast in person at a meeting called for the purpose of voting on the continuance
of the Plan. This Plan may be amended at any time by the Board, provided that
any material amendments of the terms of this Plan shall become effective only
upon the approval by a majority of the Board and a majority of the Disinterested
Trustees pursuant to a vote cast in person at a meeting called for the purpose
of voting on the Plan. This Plan is terminable, as to any Portfolio, without
penalty at any time by the Board.

SECTION 8. The Board has adopted this Plan as of March 29, 1993,
as amended on February 11, 1994.

- 4 -

<PAGE>

SCHEDULE A

SHAREHOLDER SERVICE FEES

The Distributor will be reimbursed by the Portfolios for the services
and facilities provided by the Distributor pursuant to the Plan at the following
annual rates:

1. For the Portfolio A Series, up to 0.10% of the average daily net
asset value of the Shares of each such Portfolio.

2. For the Portfolio B Series, up to 0.25% of the average daily net
asset value of the Shares of each such Portfolio.

3. For the Qualified Portfolio Series, up to 0.25% of the average
daily net asset value of the Shares of each such Portfolio.

- 5 -

<PAGE>

Exhibit 9.13
------------

LICENSE AGREEMENT

This License Agreement is entered into as of the 17th day of December,
1992, by and between Nicholas-Applegate Capital Management, a California limited
partnership ("NACM") and Nicholas-Applegate Mutual Funds, a Delaware business
trust (the "Trust").

WHEREAS, NACM was organized under the laws of the State of California
and commenced doing business under a name including the phrase "Nicholas-
Applegate" in 1984, and has used such name at all times thereafter; and

WHEREAS, the Trust was organized under the laws of the State of
Delaware on December 17, 1992; and

WHEREAS, the Trust has requested NACM's consent to the use of the
phrase "Nicholas-Applegate" in the name of the Trust and/or one or more of the
series of shares of beneficial interest of the Trust (collectively
"Portfolios"), and NACM wishes to permit such use; and

WHEREAS, the parties wish to enter into a written agreement to confirm
the terms of such use by the Trust and the Portfolios;

NOW, THEREFORE, in consideration of the premises and of the covenants
hereinafter contained, NACM and the Trust hereby agree as follows:

1. The Trust hereby acknowledges and agrees that the name "Nicholas-
Applegate" is a valuable proprietary rights of NACM and that the Trust has no
rights to use such name in the name of the Trust or that of any of its
Portfolios except as are provided to the Trust by NACM pursuant to this License
Agreement. The Trust shall not in any manner represent that it has any rights
of ownership or use with respect to the name "Nicholas-Applegate" except as set
forth herein, and acknowledges that all uses of such initials by it shall inure
to the benefit of NACM.

2. NACM hereby grants the Trust a non-exclusive license to use the
name "Nicholas-Applegate" in the names of the Trust and/or any one or more of
its Portfolios, so long as such name is used in conjunction with other
descriptive phrases such as "Investment Trust" or phrases describing the
investment objectives or purposes of a Fund (such as "Growth

<PAGE>

& Income Fund"). NACM hereby consents to the qualification of the Trust to do
business under the laws of any state of the United States with the name
"Nicholas-Applegate" in its name or that of any of its Portfolios and agrees to
execute such formal consents as may be necessary in connection with such
qualifications.

3. NACM reserves and retains the right to grant to any other person,
including without limitation any other investment company, the right to use the
name "Nicholas-Applegate" or variations thereof in its name and no consent or
permission of the Trust shall be necessary for such use; provided, however, that
if required by the applicable law of any state, the Trust shall forthwith grant
all requisite consents. The Trust shall take such actions as NACM may
reasonably require to protect the rights of NACM to such name.

4. The Trust shall have no right to grant to any other person a
sublicense to use a name containing the name "Nicholas-Applegate" The Trust
shall have no right to assign its interest in this Agreement or any part thereof
to any other person without the prior written consent of NACM.

5. The license provided to the Trust hereunder shall terminate and be
of no further force or effect at such time as NACM no longer provides investment
advisory services to the Trust, any Portfolio or (in the event all assets of the
Trust or any Portfolios are invested in Nicholas-Applegate Investment Trust, a
Delaware business trust) Nicholas-Applegate Investment Trust. In such event,
the Trust shall as promptly as practicable take such actions as may be necessary
to change its name and the names of the Portfolios to names that do not include
the names "Nicholas" or "Applegate".

6. This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof and may not be amended at any time
except by a writing signed by the parties hereto.

7. All of the terms of this Agreement shall be binding upon, and
except as set forth herein shall inure to the benefit of, the successors and
assigns of the parties.

8. NACM acknowledges that it has received a copy of the Amended and
Restated Declaration of Trust of the Trust dated December 17, 1992. NACM
further acknowledges and agrees that the obligations of the Trust under this
Agreement are not binding on any officers, trustees or

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<PAGE>

shareholders of the Trust individually, but are binding only upon the assets and
properties of the Trust.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

NICHOLAS-APPLEGATE CAPITAL
MANAGEMENT, A CALIFORNIA
LIMITED PARTNERSHIP

By: Nicholas-Applegate Capital
Management, Inc., its General Partner

By: s/ Thomas Pindelski
--------------------------------------
Title: Chief Financial Officer

NICHOLAS-APPLEGATE MUTUAL FUNDS

By: s/ Thomas Pindelski
--------------------------------------
Title:
-------------------------------

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<PAGE>

EXHIBIT 9.14
------------

ACCOUNTING SERVICES AGREEMENT
-----------------------------

This Agreement is made as of April 1, 1993 by and between
NICHOLAS-APPLEGATE MUTUAL FUNDS, a Delaware business trust (the "Fund"), and
PFPC INC., a Delaware corporation ("PFPC"), which is an indirect wholly-owned
subsidiary of PNC Bank Corp. wishes to retain PFPC to provide accounting
services, wishes to furnish such services.
In consideration of the promises and mutual covenants herein contained, the
parties agree as follows:

1. DEFINITIONS.

(a) "AUTHORIZED PERSON". The term "Authorized Person" shall mean any
officer of the Fund, and any other person, who is duly authorized by the Fund's
Governing Board to give Oral and Written Instructions on behalf of the Fund.
Such persons are listed in the Authorized Persons Appendix to this Agreement.
If PNC provides more than one service hereunder, the Fund's designation
of Authorized Persons may vary by service.
(b) "CFTC". The term "CFTC" shall mean the Commodities Futures
Trading Commission.
(c) "GOVERNING BOARD". The Term "Governing Board" shall mean the
Fund's Board of Trustees, or, where duly authorized, a competent committee
thereof.

<PAGE>

(d) "ORAL INSTRUCTIONS". The term "Oral Instructions" shall mean
oral instructions received by PFPC from an Authorized Person or from a person
reasonably believed by PFPC to be an Authorized Person.
(e) "PORTFOLIOS". The term "Portfolios" shall mean the following
series of Shares core Growth of the Fund:
Nicholas-Applegate Core Growth Portfolio A,
Nicholas-Applegate Core Growth Portfolio B,
Nicholas-Applegate Core Growth Qualified Portfolio,
Nicholas-Applegate Income & Growth Portfolio A,
Nicholas-Applegate Income & Growth Portfolio B,
Nicholas-Applegate Income & Growth Qualified Portfolio,
Nicholas-Applegate Balanced Growth Portfolio A,
Nicholas-Applegate Balanced Growth Portfolio B,
Nicholas-Applegate Worldwide Growth Portfolio A,
Nicholas-Applegate Worldwide Growth Portfolio B,
Nicholas-Applegate Government Income Portfolio A,
Nicholas-Applegate Government Income Portfolio B,
Nicholas-Applegate Money Market Portfolio and any other series of the Fund which
may be established in the future and to which PFPC provides accounting services.
(f) "SEC". The term "SEC" shall mean the Securities and Exchange
Commission.
(g) "SECURITIES AND COMMODITIES LAWS". The term "Securities
and Commodities Laws" shall mean the "1933

-2-

<PAGE>

Act" (which shall mean the Securities Act of 1933, as amended), the "1934 Act"
(which shall mean the Securities Exchange Act of 1934, as amended), the "1940
Act" (which shall mean the Investment Company Act of 1940, as amended), and the
"CEA" (which shall mean the Commodities Exchange Act, as amended).
(h) "SHARES". The terms "Shares" shall mean the shares of beneficial
interest of any portfolio of the Fund.
(i) "WRITTEN INSTRUCTIONS". The term "Written Instructions"
shall mean written instructions signed by at least one Authorized Person and
received by PFPC. The instructions may be delivered by hand, mail, tested
telegram, cable, telex or facsimile sending device.

2. APPOINTMENT. The Fund hereby appoints PFPC to provide the accounting
services for each of the Portfolios listed in Appendix A hereto, in accordance
with the terms set forth in this Agreement. PFPC accepts such appointment and
agrees to furnish such services. In the event the Fund establishes one or more
series other than the Portfolios with respect to which it desires to appoint
PFPC to provide accounting services, it shall notify PFPC in writing. If PFPC
is willing to accept such appointment under this Agreement, it will so notify
the Fund in writing, whereupon such series will be subject to the same
provisions of this Agreement as are the Portfolios except to the extent that

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<PAGE>

such provisions are modified with respect to such series in writing between the
Fund and PFPC.

3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Governing Board, approving the appointment of PFPC or its affiliates to
provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreement or agreements;
(d) a copy of the Fund's distribution agreement or agreements;
(e) a copy of the Fund's administration agreement if PFPC is not
providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in respect
of the Fund; and
(g) certified or authenticated copies of any and all amendments or
supplements to the foregoing.

4. COMPLIANCE WITH GOVERNMENT RULES AND REGULATIONS.
PFPC undertakes to comply with all applicable requirements of the 1933 Act,
the 1934 Act, the 1940 Act, and the CEA, and any laws, rules and regulations of
governmental authorities having jurisdiction with respect to

-4-

<PAGE>

all duties to be performed by PFPC hereunder. Except as specifically set forth
herein, PFPC assumes no responsibility for compliance by the Fund with any laws,
rules and regulations applicable to the Fund.

5. INSTRUCTIONS. Unless otherwise provided in this Agreement, PFPC shall
act only upon Oral and Written Instructions. PFPC shall be entitled to rely
upon any Oral and Written Instructions it receives from an Authorized Person (or
from a person reasonably believed by PFPC to be an Authorized Person) pursuant
to this Agreement. PFPC may assume that any Oral or Written Instruction
received hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote, resolution or
proceeding of the Fund's Governing Board or of the Fund's shareholders.
The Fund agrees to forward to PFPC Written Instructions confirming Oral
Instructions so that PFPC receives the Written Instructions by the close of
business on the same day that such Oral Instructions are received. The fact
that such confirming Written Instructions are not received by PFPC shall in no
way invalidate the transactions or enforceability of the transactions authorized
by the Oral Instructions. The Fund further agrees that PFPC shall incur no
liability to the Fund in acting upon Oral or Written

-5-

<PAGE>

Instructions provided such instructions reasonably appear to have been received
from an Authorized Person.

6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including Oral
or Written Instructions, from the Fund.
(b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any questions
of law pertaining to any action it should or should not take, PFPC may request
advice at its own cost from such counsel of its own choosing (who may be counsel
for the Fund, the Fund's advisor or other reasonably qualified counsel selected
by PFPC, at the option of PFPC).
(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice or Oral or Written Instructions Provident receives from the
Fund, and the advice it receives from counsel referred to in paragraph (b), PFPC
shall be entitled to rely upon and follow the advice of such counsel.
(d) PROTECTION OF PFPC. Subject to the provisions of Section 13
hereof, PFPC shall be protected in any action it takes or does not take in
reliance upon directions, advice or Oral or Written Instructions it receives
from the Fund or from counsel and which PFPC

-6-

<PAGE>

believes, in good faith, to be consistent with those directions, advice and Oral
or Written Instructions.
Nothing in this paragraph shall be construed so as to impose an obligation
upon PFPC (i) to seek such directions, advice or Oral or Written Instructions,
or (ii) to act in accordance with such directions, advice or Oral or Written
Instructions unless, under the terms of other provisions of this Agreement, the
same is a condition of PFPC's properly taking or not taking such action.

7. RECORDS. The book and records pertaining to the Fund and each
Portfolio, which are in the possession of PFPC, shall be the property of the
Fund. The Fund, or the Fund's Authorized Persons, shall have access to such
books and records at all times during PFPC's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided by PFPC to the Fund or to an Authorized Person of the Fund, at the
Fund's expense.
PFPC shall keep the following records:
(a) all books and records with respect to each Portfolio's books of
account, including without limitation the books and records referenced in
Appendix B;
(b) records of each Portfolio's securities transactions.

-7-

<PAGE>

8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the
Fund and each Portfolio and information relative to the Fund and each Portfolio
and the shareholders (past, present and potential) of each Portfolio, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund. The Fund further agrees that, should PFPC be required to provide such
information or records to duly constituted authorities (who may institute civil
or criminal contempt proceedings for failure to comply), PFPC shall not be
required to seek the Fund's consent prior to disclosing such information but
PFPC shall nonetheless inform the Fund prior to disclosing such information.

9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's
independent public accountants and shall provide such accountants with account
analyses, fiscal year summaries, and other audit-related schedules. PFPC shall
take all reasonable action in the performance of its obligations under this
Agreement to assure that the necessary information is made available to such
accountants for the expression of their opinion, as such may be required by the
Fund from time to time.

10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in
effect with appropriate parties, at no additional expense to the Fund, one or
more agreements

-8-

<PAGE>

making reasonable provision of emergency use of electronic data processing
equipment to the extent appropriate equipment is available. In the event of
equipment failures, PFPC shall, at no additional expense to the Fund, take all
necessary steps to minimize service interruptions but shall have no liability
with respect thereto.

11. COMPENSATION. As compensation for services rendered by PFPC during
the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be
agreed to in writing by the Fund and Provident.

12. INDEMNIFICATION. The Fund agrees to indemnify and hold harmless PFPC
and its affiliates from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the 1933
Act, the 1934 Act, the 1940 Act, the CEA and any state and foreign securities
and blue sky laws, and amendments thereto), and expenses, including (without
limitation) attorneys' fees and disbursements, arising directly or indirectly
from any action which PFPC takes or does not take (i) at the request or on the
direction of or in reliance on the advice of the Fund or (ii) upon Oral or
Written Instructions. Neither PFPC, nor any of its affiliates, shall be
indemnified against any liability to the Fund or to its shareholders (or any
expenses incident to such liability) arising out of PFPC's own willful

-9-

<PAGE>

misfeasance, bad faith, gross negligence or reckless disregard of its duties and
obligations under this Agreement.

13. RESPONSIBILITY OF PFPC. PFPC shall be under no duty to take any
action on behalf of the Fund except as specifically set forth herein or as may
be specifically agreed to by PFPC, in writing. PFPC shall be obligated to
exercise care and diligence in the performance of its duties hereunder, to act
in good faith and to use its best efforts, within reasonable limits, in
performing services provided for under this Agreement. PFPC shall be
responsible for, and shall indemnify the Fund and its affiliates from all taxes,
charges, expenses, assessments, claims and liabilities to the extent resulting
from, PFPC's failure to perform its duties under this Agreement arising out of
PFPC's willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties hereunder. Notwithstanding the foregoing, PFPC shall not be
responsible for losses beyond its control, provided that PFPC has acted in
accordance with the standard of care set forth above.
Without limiting the generality of the foregoing or of any other provision
of this Agreement, PFPC, in connection with its duties under this Agreement,
shall not be liable for (a) the validity or invalidity or authority or lack
thereof of any Oral or Written Instruction, notice or other

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<PAGE>

instrument which conforms to the applicable requirements of this Agreement, and
which PFPC reasonably believes to be genuine; or (b) delays or errors or loss of
data occurring by reason of circumstances beyond PFPC's control, including acts
of civil or military authority, national emergencies, labor difficulties, fire,
flood or catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
Notwithstanding anything in this Agreement to the contrary, PFPC shall have
no liability to the Fund for any consequential, special or indirect losses or
damages which the Fund may incur or suffer by or as a consequence of PFPC's
performance of the services provided hereunder, whether or not the likelihood of
such losses or damages was known by PFPC.

14. DESCRIPTION OF ACCOUNTING SERVICES. PFPC will perform the following
accounting functions on a continuing basis if required by the Fund:
i) Journalize the Fund's and each Portfolio's investment, capital
share and income and expense activities;
ii) Verify investment buy/sell trade tickets when received from the
Fund's and each Portfolio's investment advisor or sub-advisor and

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<PAGE>

transmit trades to the Fund's custodian for proper settlement;
iii) Maintain individual ledgers for investment securities in both
U.S. dollars and foreign currency terms;
iv) Maintain historical tax lots for each security and foreign
currency;
v) Reconcile cash and investment balances of each Portfolio with the
custodian, and provide the Fund's and each Portfolio's investment
advisor or sub-advisor with the beginning cash balance available
for investment purposes in both U.S. dollar and foreign currency
terms;
vi) Update the cash availability throughout the day as required by
the Fund's or each Portfolio's advisor or sub-advisor;
vii) Post to and prepare the Fund's and each Portfolio's Statement of
Assets and Liabilities and the Statement of Operations in U.S.
dollar terms;
viii) Calculate various contractual expenses (e.g., advisory and
custody fees);
ix) Monitor the expense accruals and notify Fund management of any
proposed adjustments;

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<PAGE>

x) Control all disbursements from the Fund and authorize such
disbursements upon Written Instructions;
xi) Calculate capital gains and losses and foreign exchange gains and
losses;
xii) Determine the Fund's and each Portfolio's net income in both U.S.
dollar and foreign currency terms;
xiii) Obtain security market quotes and foreign exchange rates from
independent pricing services approved by the Advisor (or
sub-advisor), or if such quotes are unavailable, then obtain them
from the Advisor (or sub-advisor), and in either case calculate`
the market value of the Fund's and each Portfolio's investments
in both U.S. dollar and foreign currency terms;
xiv) Transmit or mail a copy of the daily portfolio valuation for each
Portfolio to the Advisor (or sub-advisor);
xv) Compute the net asset value of each Portfolio in U.S. dollars;
xvi) As appropriate, compute each Portfolio's yields, total return,
expense ratios, portfolio turnover rate, and, if required,

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<PAGE>

portfolio average dollar-weighted maturity; and
xvii) Prepare a monthly financial statement in U.S. dollars with
respect to each Portfolio, which will include the following
items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses.

15. DURATION AND TERMINATION. This Agreement shall continue until
terminated by the Fund or by PFPC on sixty (60) days prior written notice to the
other party.

16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable,
telex or facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first-class mail, it shall be deemed to have
been given three days after it has been mailed. If notice is sent by messenger,
it shall be deemed to have been given on the day it is delivered. Notices shall
be addressed (a) if to PFPC at PFPC's address, 103 Bellevue Parkway, Wilmington,

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<PAGE>

Delaware 19809; (b) if to the Fund, at the Fund's address, 600 W. Broadway, 30th
Floor, San Diego, CA 92101; or (c) if to neither of the foregoing, at such
other address as shall have been notified to the sender of any such Notice or
other communication.

17. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against which enforcement
of such change or waiver is sought.

18. DELEGATION. PFPC may assign its rights and delegate its duties
hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PFPC gives the Fund
thirty (30) days prior written notice of such assignment; (ii) the delegate
agrees with PFPC to comply with all relevant provisions of the 1940 Act; (iii)
PFPC and such delegate promptly provide such information as the Fund may
request, and respond to such questions as the Fund may ask, relative to the
delegation, including (without limitation) the capabilities of the delegate and
(iv) PFPC remains primarily responsible and fully liable for the acts or
omissions of any such subsidiary or affiliate.

19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an

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<PAGE>

original, but all of which together shall constitute one and the same
instrument.

20. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.

21. MISCELLANEOUS. This Agreement, together with all exhibits,
appendices and attachments hereto, embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to fees and/or Oral Instructions. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
This Agreement shall be deemed to be a contract made in Delaware and
governed by Delaware law (without regard to principles of conflicts of law). If
any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding and shall inure to the
benefit of the parties hereto and their respective successors.

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<PAGE>

22. LIMITATION OF LIABILITY. Pursuant to the Fund's Declaration of Trust,
no trustee, officer, employee or agent of the Fund shall be subject to any
person liability whatsoever, in his or her official or individual capacity, to
any person, including PFPC, other than to the Fund or its shareholders, in
connection with Fund property or the affairs of the Fund, save only that arising
from his or her bad faith, willful misfeasance, gross negligence or reckless
disregard of his or her duty to such person; and all such persons shall look
solely to the Fund property for satisfaction of claims of any nature against a
trustee, officer, employee or agent of the Fund arising in connection with the
affairs of the Fund. Moreover, the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a particular
Portfolio shall be enforceable against the assets and property of such Portfolio
only, and not against the assets and property of any other series or Portfolio.

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
PFPC INC.

By: s/ Stephen M. Wynne
----------------------------
Title: S.V.P.
------------------------

NICHOLAS-APPLEGATE MUTUAL FUNDS

By: s/ Thomas Pindelski
----------------------------
Title: C.F.O.
------------------------

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<PAGE>

APPENDIX A

Portfolios
----------

Nicholas-Applegate Core Growth Portfolio A
Nicholas-Applegate Core Growth Portfolio B
Nicholas-Applegate Core Growth Qualified Portfolio
Nicholas-Applegate Income & Growth Portfolio A
Nicholas-Applegate Income & Growth Portfolio B
Nicholas-Applegate Income & Growth Qualified Portfolio
Nicholas-Applegate Balanced Growth Portfolio A
Nicholas-Applegate Balanced Growth Portfolio B
Nicholas-Applegate Worldwide Growth Portfolio A
Nicholas-Applegate Worldwide Growth Portfolio B
Nicholas-Applegate Government Income Portfolio A
Nicholas-Applegate Government Income Portfolio B
Nicholas-Applegate Money Market Portfolio

Dated: April 1, 1993

-19-

<PAGE>

APPENDIX B

List Books and Records to be Maintained by PFPC

All books and records required under Section 31(a) of the Investment Company Act
of 1940.

All special records agreed to by the parties.

-20-

<PAGE>

AUTHORIZED PERSONS
APPENDIX

Name (Typed) Signature

Mark Bjorstrom s/ Mark Bjorstrom
Operations

Ashley Rabun ______________________
President

Peter Johnson ______________________
Vice President

Joan Sundstrom s/ Joan Sundstrom
Secretary

Thomas Pindelski s/ Thomas Pindelski
Treasurer

Eric Banhazl s/ Eric Banhazl
Assistant Treasurer

-21-

<PAGE>

April 1, 1993

NICHOLAS-APPLEGATE MUTUAL FUNDS

Re: Accounting Services Fees
------------------------

Dear Sir/Madam:

This letter constitutes our agreement with respect to compensation to be
paid to PFPC Inc. ("PFPC") under the terms of an Accounting Service Agreement
dated April 1, 1993 between you Nicholas-Applegate Mutual Funds (the "Fund")
and PFPC (the "Agreement") relating to the portfolios of the Fund listed on
Exhibit A attached hereto (the "Portfolios"). Pursuant to paragraph 11 of that
Agreement, and in consideration of the services to be provided, each Portfolio
will pay PFPC an annual accounting fee, to be calculated daily and paid monthly.
Each Portfolio will also reimburse PFPC for its out-of-pocket expenses incurred
on behalf of that Portfolio, including, but not limited to : postage,
telephone, telex, federal express, and outside independent pricing service
charges.

The annual accounting fee for each Portfolio shall be $2,600 per month.

The fee for the period from the day of the year this agreement is entered
into until the end of that year shall be prorated according to the proportion
which such period bears to the full annual period.

In pricing the services as set forth above, PFPC has assumed that the
Portfolios will invest exclusively in shares of Nicholas-Applegate Investment
Trust.

-22-

<PAGE>

If the foregoing accurately sets forth our agreement, and you intend to be
legally bound thereby, please execute a copy of this letter and return it to us.

Very truly yours,

PFPC INC.

By: s/ Stephen M. Wynne
Title S.V.P.

Accepted:

NICHOLAS-APPLEGATE MUTUAL FUNDS

By: s/ Thomas Pindelski
Title

-23-

<PAGE>

EXHIBIT A

Portfolios
----------

Nicholas-Applegate Core Growth Portfolio A
Nicholas-Applegate Core Growth Portfolio B
Nicholas-Applegate Core Growth Qualified Portfolio
Nicholas-Applegate Income & Growth Portfolio A
Nicholas-Applegate Income & Growth Portfolio B
Nicholas-Applegate Income & Growth Qualified Portfolio
Nicholas-Applegate Balanced Growth Portfolio A
Nicholas-Applegate Balanced Growth Portfolio B
Nicholas-Applegate Balanced Growth Qualified Portfolio
Nicholas-Applegate Worldwide Growth Portfolio A
Nicholas-Applegate Worldwide Growth Portfolio B
Nicholas-Applegate Worldwide Growth Qualified Portfolio
Nicholas-Applegate Government Income Portfolio A
Nicholas-Applegate Government Income Portfolio B
Nicholas-Applegate Government Income Qualified Portfolio
Nicholas-Applegate Money Market Portfolio
Nicholas-Applegate Money Market Qualified Portfolio

And any other portfolios of the Fund, whether now existing or hereafter
created, for which the Fund has approved PFPC to provide accounting services and
for which PFPC provides accounting services.

-24-

<PAGE>

EXHIBIT 9.15
------------

July 19, 1993

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809

Ladies and Gentlemen:

Reference is made to the Accounting Services Agreement between us
dated as of April 1, 1993 (the "Agreement").

Pursuant to Section 2 of the Agreement, we wish to add the following
Portfolios to the Agreement: Balanced Growth Qualified Portfolio, Worldwide
Growth Qualified Portfolio, Government Income Qualified Portfolio, and Money
Market Qualified Portfolio.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance regarding
this matter.

Very truly yours,

s/ Joan Sundstrom
Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

PFPC INC.

By: s/ Vincent J. Cravardem
Title: President

<PAGE>

EXHIBIT 9.16
------------

August 20, 1993

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809

Ladies and Gentlemen:

Reference is made to the Accounting Services Agreement between us
dated as of April 1, 1993 (the "Agreement").

Pursuant to Section 2 of the Agreement, we wish to add the following
Portfolios to the Agreement: Emerging Growth Portfolio A, Emerging Growth
Portfolio B and Emerging Growth Qualified Portfolio.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance regarding
this matter.

Very truly yours,

s/ Joan Sundstrom
Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

PFPC INC.

By: s/ Illegible Signature
-----------------------
Title: Vice President

<PAGE>

EXHIBIT 9.17
------------

December 15, 1993

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809

Ladies and Gentlemen:

Reference is made to the Accounting Services Agreement between us
dated as of April 1, 1993 (the "Agreement").

Pursuant to Section 2 of the Agreement, we wish to add the following
Portfolios to the Agreement: International Growth Portfolio A, International
Growth Portfolio B and International Growth Qualified Portfolio.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance regarding
this matter.

Very truly yours,

s/ Joan Sundstrom
Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

PFPC INC.

By: s/ Stephen M. Wynne
Title: F.V.P.

<PAGE>

EXHIBIT 9.18
------------

April 22, 1994

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809

Ladies and Gentlemen:

Reference is made to the Accounting Services Agreement between us
dated as of April 1, 1993 (the "Agreement").

This will confirm our advice to you that the names of each of our
existing "Qualified Portfolio" series have been changed to the "Institutional
Portfolio" series.

Pursuant to Section 2 of the Agreement, we wish to add the following
Portfolios to the Agreement: Core Growth Qualified Portfolio.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance regarding
this matter.

Very truly yours,

s/ Joan Sundstrom
Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

PFPC INC.

By: s/ Norman D. Van Horn
Title: Vice President

<PAGE>

EXHIBIT 9.19
------------

April 22, 1994

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809

Ladies and Gentlemen:

Reference is made to the Accounting Services Agreement between us
dated as of April 1, 1993 (the "Agreement").

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance regarding
this matter.

Very truly yours,

Joan Sundstrom
Secretary

APPOINTMENT ACCEPTED:

PFPC INC.

By: s/ Norman D. Van Horn
Title: Vice President

<PAGE>

EXHIBIT 9.20
------------

May 22, 1995

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809

Ladies and Gentlemen:

Reference is made to the Accounting Services Agreement between us
dated as of April 1, 1993 (the "Agreement").

This will confirm that the names of the various "Portfolio B" series
of Nicholas-Applegate Mutual Funds have been changed to the "Portfolio C"
series.

Pursuant to Section 2 of the Agreement, we wish to add the following
Portfolios to the Agreement: Nicholas-Applegate Core Growth Portfolio B;
Nicholas-Applegate Government Income Portfolio B; Nicholas-Applegate Income &
Growth Portfolio B; Nicholas-Applegate Balanced Growth Portfolio B; Nicholas-
Applegate Worldwide Growth Portfolio B, Nicholas-Applegate Emerging Growth
Portfolio B; Nicholas-Applegate International Growth Portfolio B; Nicholas-
Applegate Emerging Countries Portfolio B; and Nicholas-Applegate Global Growth &
Income Portfolio B.

<PAGE>

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance
regarding this matter.

Very truly yours,

s/ E. Blake Moore, Jr.
---------------------------
E. Blake Moore, Jr.
Secretary

APPOINTMENT ACCEPTED:

PFPC INC.

By: Norman D. Van Horn
Title: Vice President

-2-

<PAGE>

EXHIBIT 9.21

August 1, 1995

Nicholas-Applegate Investment Trust
600 West Broadway, 30th Floor
San Diego, California 92101

PFPC INC.
103 Bellevue Parkway
Wilmington, Delaware 19809

Ladies and Gentlemen:

Reference is made to the Accounting Services Agreement between us
dated as of April 1, 1993 (the "Agreement").

Pursuant to Section 2 of the Agreement, we wish to add the following
Portfolios to the Agreement: Short-Intermediate Fixed Income Fund; and Fully
Discretionary Fixed Income Fund.

Please indicate your acceptance of these additions by signing the
letter below and returning a copy to us. Thank you for your assistance
regarding this matter.

Very truly yours,

s/ E. Blake Moore, Jr.
-----------------------
E. Blake Moore, Jr.
Secretary

APPOINTED ACCEPTED:

PFPC, INC.

By: s/ Norman D. Van Horn
Title: Vice President

<PAGE>

EXHIBIT 9.24

NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
600 West Broadway, 30th Floor
San Diego, California 92101

September 27, 1993

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

Re: Expense Limitation

Ladies and Gentlemen:

The letter will confirm our amended and restated agreement whereby
Nicholas-Applegate Capital Management (the "Investment Adviser") will reduce its
fees and absorb other operating expenses of the various series (each a
"Portfolio") of Nicholas-Applegate Mutual Funds to ensure that total operating
expenses for each Portfolio listed on Appendix A hereto do not exceed the
percentage set forth opposite the name of the Portfolio, through March 31, 1994
and thereafter until completion of the first 12 months of the Portfolio's
operations, or (with respect to all Portfolios other than the Emerging Growth
Portfolios) until the corresponding series of Nicholas-Applegate Investment
Trust has assets of $100 million, whichever occurs sooner.

NICHOLAS-APPLEGATE CAPITAL MANAGEMENT

By: s/ Arthur E. Nicholas
------------------------------------
Arthur E. Nicholas

Accepted and agreed to
this 27th day of September, 1993

NICHOLAS-APPLEGATE MUTUAL FUNDS

By: s/ Ashley Rabun
--------------------------
Ashley Rabun, President

<PAGE>

APPENDIX A

APPLICABLE EXPENSE LIMITATIONS

The Investment Adviser has agreed to the following expense
limitations, subject to the terms of the letter agreement. All percentages set
forth below are based on average daily net assets.

<TABLE>
<CAPTION>
Name of Portfolio Percentage Limitations
----------------- ----------------------
<S> <C>

Core Growth Portfolio A 1.60%
Core Growth Portfolio B 2.25%
Core Growth Qualified Portfolio 1.00%
Income & Growth Portfolio A 1.60%
Income & Growth Portfolio B 2.25%
Income & Growth Qualified Portfolio 1.00%
Balanced Growth Portfolio A 1.60%
Balanced Growth Portfolio B 2.25%
Balanced Growth Qualified Portfolio 1.00%
Worldwide Growth Portfolio A 1.85%
Worldwide Growth Portfolio B 2.50%
Worldwide Growth Qualified Portfolio 1.35%
Government Income Portfolio A 1.10%
Government Income Portfolio B 1.50%
Government Income Qualified Portfolio 0.85%
Money Market Portfolio 1.10%
Money Market Qualified Portfolio 0.50%
Emerging Growth Portfolio A 1.95%
Emerging Growth Portfolio B 2.60%
Emerging Growth Qualified Portfolio 1.35%

</TABLE>

- 3 -

<PAGE>

EXHIBIT 9.25

December 15, 1993

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

Nicholas-Applegate Capital Management
600 West Broadway, 30th Floor
San Diego, California 92101

Ladies and Gentlemen:

This will confirm our agreement that the letter agreement between us
dated April 19, 1993 regarding reduction of your fees, as previously amended, is
further amended to add the following expense limitations:

International Growth Portfolio A -- 1.95%
International Growth Portfolio B -- 2.60%
International Growth Qualified Portfolio -- 1.40%

In all other respects the letter agreement, as previously amended,
will remain in full force and effect. Please sign this letter below to confirm
your agreement with this amendment.

Very truly yours,

s/ Joan Sundstrom
--------------------------------
Joan Sundstrom
Secretary

AGREED:

NICHOLAS-APPLEGATE CAPITAL
MANAGEMENT

By: s/ Arthur E. Nicholas
--------------------------
Arthur E. Nicholas
President

<PAGE>

EXHIBIT 9.26

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

April 22, 1994

Nicholas-Applegate Capital Management
600 West Broadway, 30th Floor
San Diego, California 92101

Re: EXPENSE LIMITATION

Ladies and Gentlemen:

This will confirm our advice to you that the names of each of our
existing "Qualified Portfolio" series have been changed to the "Institutional
Portfolio" series.

This letter will also confirm our agreement that the expense
limitation letter agreement between us dated September 27, 1993 is amended by
adding the following newly created Portfolios and Percentage Limitations to
Appendix A thereof:

Name of Portfolio Percentage Limitation
----------------- ---------------------
<S> <C>
Core Growth Qualified Portfolio 1.25%
Income & Growth Qualified Portfolio 1.25%
Balanced Growth Qualified Portfolio 1.25%
Worldwide Growth Qualified Portfolio 1.60%
International Growth Qualified Portfolio 1.65%
Government Income Qualified Portfolio 1.10%

</TABLE>
In all other respects, the expense limitation letter agreement will
remain in full force and effect.

<PAGE>

Please sign this letter below to confirm your agreement with this amendment.

Very truly yours,

s/ Joan Sundstrom
-----------------------------
Joan Sundstrom, Secretary

AGREED:

Nicholas-Applegate Capital Management

By: s/ Arthur E. Nicholas
--------------------------
Arthur E. Nicholas, President

-2-

<PAGE>

EXHIBIT 9.27

NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
600 West Broadway, 30th Floor
San Diego, California 92101

November 15, 1994

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

Re: Expense Limitation

Ladies and Gentlemen:

The letter will confirm our agreement whereby Nicholas-Applegate
Capital Management will reduce its fees and absorb other operating expenses of
the various series (each a "Portfolio") of Nicholas-Applegate Mutual Funds set
forth below to ensure that total annual operating expenses for each such
Portfolio (other than interest, taxes, brokerage commissions and other portfolio
transaction expenses, capital expenditures and extraordinary expenses) do not
exceed the percentage of average daily net assets of such Portfolio set forth
opposite the name of such Portfolio below, through March 31, 1996.

<TABLE>
<CAPTION>
Name of Portfolio Percentage Limitation
----------------- ---------------------
<S> <C>

Emerging Countries
Portfolio A 2.25%
Emerging Countries
Portfolio B 2.90%
Emerging Countries
Institutional Portfolio 1.65%
Global Growth & Income
Portfolio A 1.85%
Global Growth & Income
Portfolio B 2.50%
Global Growth & Income
Institutional Portfolio 1.35%
Mini-Cap Growth Institutional
Portfolio 1.56%

</TABLE>

<PAGE>

Please sign this letter below to confirm your agreement with these
limitations.

Very truly yours,

s/ Arthur E. Nicholas
--------------------------------
Arthur E. Nicholas, Managing Partner

AGREED:

Nicholas-Applegate Mutual Funds

By: s/ Ashley Rabun
------------------------------
Ashley Rabun, President

-2-

<PAGE>

EXHIBIT 9.28

May 22, 1995

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

Nicholas-Applegate Capital Management
600 West Broadway, 30th Floor
San Diego, California 92101

Ladies and Gentlemen:

This will confirm that the names of the various "Portfolio B" series
of Nicholas-Applegate Mutual Funds have been changes to the "Portfolio C"
series.

This will also confirm our agreement that the expense limitation
letter agreement between us dated September 27, 1993, as previously amended, is
hereby further amended to add the following new Portfolios and Percentage
Limitations to Appendix A thereof:

<TABLE>
<CAPTION>
Name of Portfolio Percentage Limitation
----------------- ---------------------
<S> <C>

Core Growth Portfolio B 2.25%
Government Income Portfolio B 1.50%
Income & Growth Portfolio B 2.25%
Balanced Growth Portfolio B 2.25%
Worldwide Growth Portfolio B 2.50%
Emerging Growth Portfolio B 2.60%
International Growth Portfolio B 2.60%
Emerging Countries Portfolio B 2.90%
Global Growth & Income Portfolio B 2.50%
</TABLE>

In all other respects, the expense limitation letter agreement, as
previously amended, will remain in full force and effect. Please sign this
letter below to confirm your agreement with these amendments.

Very truly yours,

s/ Ashley Rabun
-------------------------------
Ashley Rabun, President

<PAGE>

AGREED:

Nicholas-Applegate Capital Management
By: Nicholas-Applegate Capital
Management Holdings, L.P.,
its general partner
By: Nicholas-Applegate Capital
Management Holdings, Inc.,
its general partner

By: s/ E. Blake Moore, Jr.
---------------------------------
E. Blake Moore, Jr., Secretary

-2-

<PAGE>

EXHIBIT 9.29
------------

August 1, 1995

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

Nicholas-Applegate Capital Management
600 West Broadway, 30th Floor
San Diego, California 92101

Ladies and Gentlemen:

This will confirm our agreement that the expense limitation letter
agreement between us dated September 27, 1993, as previously amended, is hereby
further amended to add the following new Portfolios and Percentage Limitations
to Appendix A thereof:

Name of Portfolio Percentage Limitation
----------------- ---------------------

Emerging Growth Qualified 1.50%
Income & Growth Qualified 1.25%
Balanced Growth Qualified 1.25%
Government Income Qualified 0.80%
Emerging Countries Qualified 1.90%
Global Growth & Income
Qualified 1.60%
Worldwide Growth Qualified 1.60%
International Growth Qualified 1.65%
Short-Intermediate Institutional
Fixed Income 0.35%
Discretionary Institutional
Fixed Income 0.45%

The Percentage Limitations set forth above with respect to the Short-
Intermediate Institutional Fixed Income Portfolio and the Discretionary
Institutional Fixed Income Portfolio will continue without any termination based
on the size of the Portfolios' assets. The Percentage Limitations set forth
above with respect to the other Portfolios will continue until March 31, 1996,
unless voluntarily extended by you.

<PAGE>

Very truly yours,

s/ E. Blake Moore, Jr.
--------------------------------
E. Blake Moore, Jr., Secretary

AGREED:

Nicholas-Applegate Capital Management
By: Nicholas-Applegate Capital
Management Holdings, L.P.,
its general partner
By: Nicholas-Applegate Capital
Management Holdings, Inc.,
its general partner

By: s/ E. Blake Moore, Jr.
--------------------------------
E. Blake Moore, Jr., Secretary

-2-

<PAGE>

EXHIBIT 9.30
------------

May 25, 1995

Nicholas-Applegate Mutual Funds
600 West Broadway, 30th Floor
San Diego, California 92101

Nicholas-Applegate Capital Management
600 West Broadway, 30th Floor
San Diego, California 92101

Ladies and Gentlemen:

This letter will confirm our agreement that the expense limitation
letter agreement between us dated September 27, 1993, as previously amended, is
hereby further amended to reduce the expense limitations in Appendix A thereof
for the following Portfolios to the following Percentage Limitations:

Name of Portfolio Percentage Limitation
----------------- ---------------------

Government Income Portfolio A 0.90%
Government Income Portfolio B 1.30%
Government Income Portfolio C 1.30%

In all other respects, the expense limitation letter agreement, as
previously amended, will remain in full

<PAGE>

force and effect. Please sign this letter below to confirm your agreement with
these amendments.

Very truly yours,

s/ E. Blake Moore, Jr.
------------------------------
E. Blake Moore, Jr., Secretary

AGREED:

Nicholas-Applegate Capital Management
By: Nicholas-Applegate Capital
Management Holdings, L.P.,
its general partner
By: Nicholas-Applegate Capital
Management Holdings, Inc.,
its general partner

By:s/ E. Blake Moore, Jr.
-------------------------------
E. Blake Moore, Jr., Secretary

-2-

<PAGE>

EXHIBIT 9.33
------------

CREDIT AGREEMENT, dated as of April 10, 1996 among Nicholas-Applegate
Mutual Funds, a Delaware business trust (the "Fund"), on behalf of itself and
each series of shares of the Fund listed on Schedule I hereto as revised from
time to time (collectively, all such series, the "BORROWERS" and each series
individually, a "Borrower"), the several banks and other financial institutions
from time to time parties to this Agreement (the "LENDERS") and CHEMICAL BANK, a
New York banking corporation, as administrative agent for the Lenders hereunder
(in such capacity, the "Administrative Agent");

W I T N E S S E T H :
- - - - - - - - - - -

WHEREAS, the Fund is an open-end registered investment company under the
Investment Company Act of 1940 and each Borrower is a separate series issued by
the Fund;

WHEREAS, the Fund has requested the Lenders on behalf of each Borrower to
make Loans (as hereinafter defined) severally to each Borrower and to make
available to each Borrower a credit facility for the purposes and on the terms
and conditions set forth herein; and

WHEREAS, each Lender acknowledges that each Borrower shall be liable
hereunder only for the loans made to such Borrower hereunder and interest
thereon and for such Borrower's pro rata share of fees and expenses hereunder;

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:

SECTION 1. DEFINITIONS

1.1 DEFINED TERMS. As used in this Agreement, the following terms shall
have the following meanings:

"ADMINISTRATION AGREEMENT": as to the Fund or each Borrower, as
applicable, the Administration Agreement(s) set forth in Schedule VI hereto.

"ADMINISTRATIVE AGENT": Chemical Bank, together with its affiliates,
as the arranger of the Commitments and

<PAGE>

as the administrative agent for the Lenders under this Agreement and the other
Loan Documents.

"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (a)
vote 10% or more of the securities having ordinary voting power for the election
of directors of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.

"AGREEMENT": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.

"ALLOCATION": as to any Borrower, the percentage which such
Borrower's Average Net Assets constitutes of the Average Net Assets of all
Borrowers in the aggregate, calculated, for each calendar quarter, as of the
time of calculation.

"ALTERNATE BASE RATE": for any day, the per annum fluctuating rate of
interest announced by Chemical as its prime rate from time to time in New York,
New York. The Alternate Base Rate is not intended to be the lowest rate of
interest charged by Chemical to its borrowers.

"ALTERNATE BASE RATE LOANS": Loans the rate of interest applicable to
which is based upon the Alternate Base Rate.

"APPLICABLE MARGIN": 0.625% per annum.

"ASSET COVERAGE RATIO": with respect to any Borrower, the ratio which
the value of the Total Assets of such Borrower less all liabilities and
indebtedness not represented by Senior Securities, bears to the aggregate amount
of Senior Securities representing Indebtedness of such Borrower.

"ASSIGNEE": as defined in subsection 9.6(c).

"AVAILABILITY PROCEDURES": as defined in Section 3.4.

"AVAILABLE COMMITMENT": as to any Lender with respect to any Borrower
at any time, an amount equal to the excess, if any, of (a) the amount of such
Lender's

-2-

<PAGE>

Commitment for such Borrower less the aggregate principal amount of all Loans
made by such Lender to such Borrower then outstanding; collectively, as to all
the Lenders, the"AVAILABLE COMMITMENTS".

"AVERAGE NET ASSETS": as to any Borrower at any date, an amount equal
to the average daily value of the aggregate net assets of such Borrower during
the quarterly period prior to such date, determined in the manner and at the
times specified in that Borrower's Prospectus.

"BENEFITTED LENDER": as defined in subsection 9.7(a).

"BORROWER" and "BORROWERS": as defined in the preamble hereto.

"BORROWING DATE": any Business Day specified in a notice pursuant to
subsection 2.2 as a date on which a Borrower requests the Lenders to make Loans
hereunder.

"BUSINESS DAY": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.

"CASH EQUIVALENTS": the collective reference to (a) securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed or insured by the United States Government or any agency thereof, (b)
certificates of deposit or bankers acceptances with maturities of one year or
less from the date of acquisition and overnight bank deposits of any commercial
bank having capital and surplus in excess of $500,000,000 or (c) commercial
paper of a domestic issuer rated at least A-2 by SP or P-2 by Moody's.

"CHEMICAL": Chemical Bank, a New York banking corporation.

"CLOSING DATE": the date on which the conditions precedent set forth
in subsection 4.1 shall be satisfied.

"CODE": the Internal Revenue Code of 1986, as amended from time to
time.

"COMMITMENT": as to any Lender with respect to any Borrower, the
obligation of such Lender to make Loans to such Borrower hereunder in an
aggregate principal amount at any one time outstanding not to exceed the amount
set forth opposite such Lender's name on Schedule II with respect to

-3-

<PAGE>

such Borrower, as such amount may be reduced from time to time in accordance
with the provisions of this Agreement.

"COMMITMENT FEE": as defined in Section 2.3.

"COMMITMENT PERCENTAGE": as to any Lender at any time, the percentage
which such Lender's Commitment then constitutes of the aggregate Commitments of
all Lenders (or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such Lender's
Loans then outstanding constitutes of the aggregate principal amount of the
Loans then outstanding).

"COMMITMENT PERIOD": the period from and including the date hereof to
but not including the Termination Date.

"COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated,
which is under common control with any Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes any Borrower and which is
treated as a single employer under Section 414 of the Code.

"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.

"CUSTODY AGREEMENT": as to the Fund or each Borrower, as applicable,
the Custody Agreement(s) set forth in Schedule IV hereto.

"DEFAULT": any of the events specified in Section 7, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.

"DESIGNATED BORROWER": any of the entities designated as such on
Schedule I hereto.

""DOLLARS" AND "$": dollars in lawful currency of the United States
of America.

"DISTRIBUTION AGREEMENT": as to the Fund or each Borrower, the
Distribution Agreement(s) set forth in Schedule V hereto.

-4-

<PAGE>

"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.

"EVENT OF DEFAULT": any of the events specified in Section 7,
PROVIDED that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.

"FEDERAL FUNDS RATE": for any day, the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers for such day, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Administrative Agent
from three federal funds brokers of recognized standing selected by it.

"FEDERAL FUNDS RATE LOANS": Loans the rate of interest applicable to
which is based upon the Federal Funds Rate.

"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.

"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.

"GOVERNMENTAL AUTHORITY": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"),
any obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity
or similar obligation, in either case guaranteeing or in effect guaranteeing
any Indebtedness, leases, dividends or other obligations (the "PRIMARY
OBLIGATIONS") of any other third Person (the "PRIMARY OBLIGOR") in any manner,
whether directly or indirectly, including, without limitation, any obligation
of the guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or

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any property constituting direct or indirect security therefor, (ii) to advance
or supply funds (A) for the purchase or payment of any such primary obligation
or (B) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; PROVIDED, HOWEVER, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by
such guaranteeing person in good faith.

"INDEBTEDNESS": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar debt instrument, (c) all obligations of such Person under Financing
Leases, (d) all obligations of such Person in respect of acceptances (as
defined in Section 3-410 of the UCC) issued or created for the account of such
Person and (e) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable for
the payment thereof.

"INTEREST PAYMENT DATE": as to any Loan, the Maturity Date for such
Loan.

"INVESTMENT ADVISORY AGREEMENT": as to the Fund and each Borrower,
the Investment Advisory Agreements set forth on Schedule III hereto.

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"INVESTMENT POLICIES": as to each Borrower, the policies and
objectives for, and limits and restrictions on, investing by such Borrower set
forth in such Borrower's Prospectus.

"LENDERS": as defined in the preamble hereto.

"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Financing Lease
having substantially the same economic effect as any of the foregoing).

"LOAN DOCUMENTS": this Agreement and the Notes.

"LOANS": all loans made pursuant to this Agreement; individually, a
"Loan".

"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) of a Borrower
or (b) the validity or enforceability of this or any of the other Loan Documents
or the rights or remedies of the Administrative Agent or the Lenders hereunder
or thereunder.

"MATURITY DATE": as to each Loan, the date which is the earlier of
(a) 30 days after the Borrowing Date for such Loan, (b) the Termination Date or
(c) the payment in full of such Loan.

"MOODY'S": Moody's Investor Service, Inc.

"NACM": Nicholas-Applegate Capital Management, a California limited
partnership acting as investment advisor for NAIT, and its successors and
assigns.

"NAIT": Nicholas-Applegate Investment Trust, and its successors and
assigns.

"1940 ACT": the Investment Company Act of 1940, as amended, together
with all rules and regulations promulgated from time to time thereunder.

"NON-EXCLUDED TAXES": as defined in subsection 2.11.

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"NON-RECOURSE PERSON": as defined in subsection 9.15.

"NOTES": the collective reference to the Revolving Credit Notes; one
of the Notes, a "Note".

"PARTICIPANT": as defined in subsection 9.6(b).

"PERSON": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.

"PERMITTED TRUST INDEBTEDNESS": as to NAIT, shall mean Indebtedness
incurred (i) in the ordinary course of business of NAIT, (ii) in compliance
with its investment policies and (iii) not otherwise prohibited by law.

"PERMITTED TRUST LIENS": as to NAIT, shall mean Liens incurred (i)
for taxes not yet due or which are being contested in good faith by appropriate
proceedings, PROVIDED that adequate reserves with respect thereto are maintained
on the books of NAIT in conformity with GAAP, (ii) in connection with claims for
advances made by or payments due to any custodian or subcustodian under any
custodian agreements or sub-custodian agreements entered in.o in connection with
custody or sub-custody services provided to AIT in the ordinary course of its
business, and (iii) in the ordinary course of business in connection with the
short sales of securities and investments in repurchase agreements.

"PLAN": at a particular time, any employee benefit plan covered by
ERISA;. which the Fund or any Borrower maintains.

"PROSPECTUS": as to each Borrower at a particular time, shall mean
the currently effective prospectus and statement of additional information
delivered to purchasers of shares of such Borrower.

"REGISTER": as defined in subsection 9.6(d).

"REGULATION G": Regulation G of the Board of Governors of the Federal
Reserve System as in effect from time to time.

"REGULATION T": Regulation T of the Board of Governors of the Federal
Reserve System as in effect from time to time.

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"REGULATION U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.

"REGULATION X": Regulation X of the Board of Governors of the
Federal Reserve System as in effect from time to time.

"REQUIRED LENDERS": at any time, Lenders the Commitment Percentages
of which aggregate at least 66-2/3%.

"REQUIREMENT OF LAW": as to any Person, the certificate of
incorporation, by-laws, partnership agreement, or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.

"RESPONSIBLE OFFICER": the president, treasurer, secretary or any
vice president of the Fund, or, with respect to financial matters, the chief
financial officer or treasurer of the Fund.

"REVOLVING CREDIT LOAN": as defined in subsection 2.1.

"REVOLVING CREDIT NOTE": as defined in subsection 2.5(e).

"S&P": Standard & Poor's Ratings Group.

"SENIOR SECURITIES REPRESENTING INDEBTEDNESS": any Senior Security
other than stock.

"SENIOR SECURITY": any bond, debenture, note or similar obligation or
instrument constituting a security and evidencing indebtedness, and any share of
beneficial interest of a Borrower of a class having priority over any other
class of shares of such Borrower as to distribution of assets or payment of
dividends.

"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity

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are at the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by such
Person.

"TERMINATION DATE": the date which is 364 days following the Closing
Date or such earlier date on which the Commitments shall terminate as provided
herein.

"TOTAL ASSETS": at any time, all assets of a Borrower which in
accordance with GAAP would be classified as assets on a balance sheet of such
Borrower prepared as of such time; PROVIDED, however, that the term Total Assets
shall not include (a) equipment, (b) securities owned by a Borrower which are in
default and (c) deferred organizational and offering expenses.

"TRANSFEREE": as defined in subsection 9.6(f).

"UCC": the Uniform Commercial Code as from time to time in effect in
the State of New York.

1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Notes or any certificate or other document made or delivered
pursuant hereto.

(b) As used herein and in any Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to any
Borrower not defined in subsection 1.1 and accounting terms partly defined in
subsection 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP (as consistently applied).

(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.

(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.

1.3 ASSUMPTIONS REGARDING STRUCTURE. For the sake of clarity and
construction, the parties hereto hereby set forth their acknowledgment and
agreement that (i) the Borrowers under this Agreement are separate series of
shares

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of beneficial interest of the Fund, respectively, and as such are not separately
existing legal entities entitled to enter into contractual agreements or to
execute instruments and for these reasons, the Fund is executing this Agreement
and each respective Note on behalf of its series of shares of beneficial
interest, as Borrowers, and that such series of shares of beneficial interest
will utilize the Loans thus made on their behalf and (ii) while each Borrower
transfers its assets to NAIT in exchange for beneficial interests in NAIT, NAIT
is a separate legal entity which is not a Borrower pursuant to the terms of this
Agreement.

SECTION 2. AMOUNT AND TERMS OF COMMITMENTS

2.1 COMMITMENTS. (a) Subject to the terms and conditions hereof, each
Lender severally agrees to make revolving credit loans ("REVOLVING CREDIT
LOANS") to each Borrower, from time to time during the Commitment Period in an
aggregate principal amount at any one time outstanding not to exceed the amount
of such Lender's Commitment with respect to such Borrower. Notwithstanding the
foregoing, in no event shall (i) any Revolving Credit Loan be made if, after
giving effect to the making of such Loan and the use of proceeds thereof, the
sum of the aggregate outstanding principal amount of Revolving Credit Loans to
such Borrower would exceed the aggregate Commitments to such Borrower or (ii)
any Revolving Credit Loan be made to a Borrower if the amount of such Loan to be
made would, after giving effect to the use of proceeds, if any, thereof, exceed
the Available Commitments with respect to such Borrower. During the Commitment
Period a Borrower may use the Commitments available to it as set forth on
Schedule I by borrowing, prepaying Loans in whole or in part, and reborrowing,
all in accordance with the terms and conditions hereof.

(b) Each Revolving Credit Loan to a Borrower may be an (i) Alternate
Base Rate Loan or a (ii) Federal Funds Rate Loan or (iii) a combination thereof,
as determined by such Borrower and notified to the Administrative Agent in
accordance with subsection 2.2.

2.2 PROCEDURE FOR BORROWING. A Borrower may borrow under the Commitments
during the Commitment Period on any Business Day, PROVIDED that the Fund on
behalf of such Borrower shall give the Administrative Agent irrevocable notice
(which notice must be received by the Administrative Agent prior to 12:00 P.M.,
New York City time on the requested Borrowing Date), specifying (i) the amount
to be borrowed and (ii) the requested Borrowing Date. The aggregate amount of
all borrowings by the Borrowers under

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the Commitments on any Borrowing Date shall be in amount equal to $350,000 or a
whole multiple of $50,000 in excess thereof (or, if the then Available
Commitments are less than $350,000, such lesser amount). Upon receipt of any
such notice from the Fund on behalf of a Borrower, the Administrative Agent
shall promptly notify each Lender thereof. Each Lender will make the amount of
its pro rata share of each borrowing available to the Administrative Agent for
the account of such Borrower at the office of the Administrative Agent specified
in subsection 9.2 prior to 1:00 P.M., New York City time, on the Borrowing Date
requested by such Borrower in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to such Borrower by the
Administrative Agent crediting the account of the Fund on behalf of such
Borrower on the books of such office with the aggregate of the amounts made
available to the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent.

2.3 COMMITMENT FEES. Each Borrower severally agrees to pay to the
Administrative Agent for the account of each Lender such Borrower's Allocation
of a commitment fee ("COMMITMENT FEE") for the period from and including the
first day of the Commitment Period to the Termination Date, which Commitment Fee
shall be computed quarterly at the rate of 1/10th of 1% per annum on the average
daily amount of the Available Commitments of all Lenders in the aggregate during
each calendar quarter and each Borrower's Allocation shall be calculated on the
last Business Day of such quarter. Such Commitment Fee shall be payable
quarterly in arrears on the last Business Day of each March, June, September and
December and on the Termination Date or such earlier date as the Commitments
shall terminate as provided herein, commencing on the first of such dates to
occur after the date hereof, and shall be, if necessary, pro rated for any
portion of a calendar quarter in which the Commitment Fee accrues.

2.4 TERMINATION OR REDUCTION OF COMMITMENTS. (a) Each Borrower shall have
the right, upon not less than three Business Days' notice to the Administrative
Agent by the Fund on behalf of such Borrower, to terminate the Commitments with
respect to such Borrower or, from time to time, to reduce the amount of the
Commitments with respect to such Borrower. Any such reduction shall be in an
aggregate amount equal to $2,500,000 or whole multiples thereof (when added to
all other reductions of the Commitments of the other Borrowers being made at
such time) and shall reduce permanently the Commitments with respect to

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such Borrower then in effect. To the extent, if any, that the sum of the amount
of the evolving Credit Loans to such Borrower then outstanding exceeds the
amount of the Commitments with respect to such Borrower as then reduced, such
Borrower shall be required to make a prepayment equal to such excess amount, the
proceeds of which shall-be applied to payment of the Revolving Credit Loans of
such Borrower then outstanding. Any such termination of the Commitments of a
Borrower shall be accompanied by prepayment in full of the Revolving Credit
Loans of such Borrower then outstanding, and payment of such Borrower's
Allocation of (i) any accrued Commitment Fees payable hereunder and (ii) any
other accrued fees, expenses or indemnified liabilities payable by such Borrower
hereunder. The obligation to pay (i) Commitment Fees or (ii) any other fees,
expenses or indemnified liabilities due hereunder shall be allocated among the
remaining Borrowers in accordance with their Allocation, which Allocation shall
be recalculated as of the effective date of any such Borrower's termination.

(b) Interest accrued on the amount of any partial prepayment pursuant
to this subsection 2.4 up to the date of such partial prepayment shall be paid
on the date of such partial prepayment. In the case of the termination of the
Commitments, interest accrued on the amount of any prepayment relating thereto
and any unpaid Commitment Fee accrued hereunder shall be paid on the date of
such termination.

2.5 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) Each Borrower hereby
severally unconditionally promises to pay to the Administrative Agent for the
account of each Lender the then unpaid principal amount of each Loan of such
Lender to such Borrower on the Maturity Date for such Loan (or such earlier date
on which the Loans become due and payable pursuant to Section 7). Each Borrower
hereby further severally agrees to pay interest on the unpaid principal amount
of the Loans to such Borrower from time to time outstanding from the date hereof
until payment in full thereof at the rates per annum, and on the dates, set
forth in subsection 2.7.

(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of each Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.

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(c) The Administrative Agent shall maintain the Register pursuant to
subsection 9.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Loan made hereunder, (ii) the amount of any
principal or interest due and payable or to become due and payable from each
Borrower to each Lender hereunder and (iii) both the amount of any sum received
by the Administrative Agent hereunder from each Borrower and each Lender's share
thereof.

(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 2.6(b) shall, to the extent permitted by
applicable law, be PRIMA FACIE evidence of the existence and amounts of the
obligations of the Borrower therein recorded, PROVIDED, HOWEVER, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of any Borrower to repay (with applicable interest) the Loans made to
such Borrower by such Lender in accordance with the terms of this Agreement.

(e) The Fund agrees that, upon the request to the Administrative
Agent by any Lender, the Fund will execute and deliver to such Lender a
promissory note of each Borrower evidencing the Loans of such Lender to such
Borrower, substantially in the form of EXHIBIT 2.5(e) with appropriate
insertions as to date and principal amount (a "REVOLVING CREDIT NOTE").

(f) The obligations of each Borrower under its Notes shall be several
and not joint. No.withstanding anything to the contrary contained in this
Agreement, the parties hereto acknowledge and agree that the sole source of
payment of the obligations of each Borrower hereunder, including, without
limitation, the principal of and interest on each Loan made hereunder to any
Borrower, the Commitment Fee payable pursuant to Section 2.3 and any other
amounts attributable to the Loans made hereunder to any Borrower shall be the
revenues and assets of such Borrower, and not the revenues and assets of any
other Borrower or the revenues and assets of the Fund (except to the extent of
such Borrower).

2.6 OPTIONAL AND MANDATORY PREPAYMENTS. (a) Each Borrower may prepay the
Loans made to it, in whole or in part, WITHOUT premium or penalty, upon at least
one Business Day's irrevocable notice to the Administrative Agent, specifying
the date and amount of prepayment. Upon receipt of any such notice the
Administrative Agent shall promptly

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notify each Lender thereof. If any such notice is given, the amount specified
in such notice shall be due and payable on the date specified therein. Partial
prepayments shall be in an aggregate principal amount of $100,000 or an integral
multiple of $100,000 in excess thereof.

(b) If, at any time and from time to time, the Asset Coverage Ratio
for all borrowings of a Borrower (other than a Designated Borrower) shall be
less than 300%, or the Asset Coverage Ratio for a Designated Borrower shall be
less than 400%, such Borrower shall immediately repay Loans applicable to such
Borrower to the extent necessary to ensure that the Asset Coverage Ratio of all
borrowings of such Borrower is in compliance with applicable covenants
concerning minimum Asset Coverage Ratios set forth in this Agreement.

(c) If, at any time and from time to time, the aggregate amount of
Loans made to a Borrower then outstanding exceeds the borrowing limits provided
in such Borrower's Prospectus, such Borrower shall immediately repay such Loans
to the extent necessary to ensure that the aggregate amount of Loans made to
such Borrower then outstanding does not exceed such limits.

2.7 INTEREST RATES AND PAYMENT DATES. (a) Each Federal Funds Rate Loan
shall bear interest at a rate per annum equal to the Federal Funds Rate Plus the
Applicable Margin.

(b) Each Alternate Base Rate Loan shall bear Interest at a rate per
annum equal to the Alternate Base Rate.

(c) Notwithstanding any provision to the contrary contained herein,
upon the occurrence and continuance of any Event of Default specified in Section
7(e) with respect to a Borrower and upon notice given by the Administrative
Agent or the Required Lenders to the Fund on behalf of a Borrower upon any other
Event of Default, each Loan to such Borrower shall bear interest at a rate per
annum which is the rate that would otherwise be applicable thereto pursuant to
the foregoing provisions of this subsection plus 2%. If all or a portion of (i)
the principal amount of any Loan, (ii) any interest payable thereon or (iii) any
Commitment Fee or other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest at a rate per annum which is the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of this
subsection plus 2% from the date of such nonpayment

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until such amount is paid in full (as well after as before judgment).

(d) Interest shall be payable in arrears on each Interest Payment
Date, PROVIDED that interest accruing pursuant to paragraph (c) of this
subsection shall be payable from time to time on demand.

2.8 COMPUTATION OF INTEREST AND FEES. (a) Commitment Fees and interest
shall be calculated on the basis of a 360-day year for the actual days elapsed,
except that in the case of Alternate Base Rate Loans interest shall be
calculated on the basis of a 365- or 366-day year, as applicable, for the actual
days elapsed. Any change in the interest rate on a Loan resulting from a change
in the Federal Funds Rate or the Alternate Base Rate shall become effective as
of the opening of business on the day on which such change becomes effective.
The Administrative Agent shall as soon as practicable notify the Borrower and
the Lenders of the effective date and the amount of each such change in interest
rate.

(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on each Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of a Borrower, deliver to such
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to subsections 2.7(a) or (b).

2.9 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing by a Borrower from
the Lenders hereunder, each payment by a Borrower on account of any Commitment
Fee hereunder and any reduction of the Commitments of the Lenders shall be made
pro rata according to the respective Commitment Percentages of the Lenders.
Each payment (including each prepayment) by a Borrower on account of principal
of and interest on the Loans shall be made pro rata according to the respective
outstanding principal amounts of the Loans of such Borrower then held by the
Lenders. All payments (including prepayments) to be made by a Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without set off or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for the
account of the Lenders, at the Administrative Agent's office specified in
subsection 9.2 hereof, in Dollars and in immediately available funds. The
Administrative Agent shall distribute such payments to the

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Lenders promptly upon receipt in like funds as received. If any payment
hereunder becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day, and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.

(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its Commitment Percentage of such borrowing
available to the Administrative Agent, the Administrative Agent may assume that
such Lender is making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Fund on behalf of the requesting Borrower a corresponding amount. If such
amount is not made available to the Administrative Agent by the required time on
the Borrowing Date therefor, such Lender shall pay to the Administrative Agent,
on demand, such amount with interest thereon at a rate equal to the daily
average Federal Funds Rate for the period until such Lender makes such amount
immediately available to the Administrative Agent. A certificate of the
Administrative Agent submitted to any Lender with respect to any amounts owing
under this subsection shall be conclusive in the absence of manifest error. If
such Lender's Commitment Percentage of such borrowing is not made available to
the Administrative Agent by such Lender within three Business Days of such
Borrowing Date, the Administrative Agent shall also be entitled to recover such
amount with interest thereon at the rate per annum applicable to Loans
hereunder, on demand, from the relevant Borrower.

2.10 REQUIREMENTS OF LAW. (a) If any Lender shall have determined that the
adoption of or any change in any Requirement of Law regarding capital adequacy
or in the interpretation or application thereto or compliance by such Lender or
any corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, each Borrower shall

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promptly pay to such Lender such additional amount or amounts as will compensate
such Lender for such reduction.

(b) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify the Borrowers (with a copy
to the Administrative Agent) of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to this
subsection submitted by such Lender to the Borrowers (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.

2.11 TAXES. (a) All payments made by any Borrower under this Agreement and
any Notes shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on the Administrative Agent or any Lender as a result
of a present or former connection between the Administrative Agent or such
Lender and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any Note). If any such non-excluded
taxes, levies, imposts, duties, charges, fees deductions or withholdings
("NON-EXCLUDED TAXES") are required to be withheld from any amounts payable to
the Administrative Agent or any Lender hereunder or under any Note, the amounts
so payable to the Administrative Agent or such Lender shall be increased to the
extent necessary to yield to the Administrative Agent or such Lender (after
payment of all Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement, PROVIDED,
HOWEVER, that a Borrower shall not be required to increase any such amounts
payable to any Lender that is not organized under the laws of the United States
of America or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this subsection. Whenever any Non-Excluded
Taxes are payable by a Borrower, as promptly as possible thereafter such
Borrower shall send to the Administrative Agent for its own account or for the
account of such Lender,

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as the case may be, a certified copy of an original official receipt received by
such Borrower showing payment thereof. If a Borrower fails to pay any
Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Administrative Agent the required receipts or other required
documentary evidence, such Borrower shall indemnify the Administrative Agent and
the Lenders for any incremental taxes, interest or penalties that may become
payable by the Administrative Agent or any Lender as a result of an such
failure. The agreements in this subsection shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.

(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:

(i) deliver to the Fund and the Administrative Agent (A) two
duly completed copies of United States Internal Revenue Service Form 1001
or 4224, or successor applicable form, as the case may be, and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable form, as
the case may be;

(ii) deliver to the Fund and the Administrative Agent two
further copies of any such form or certification on or before the date that
any such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Fund; and

(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the Fund or
the Administrative Agent;

unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Fund and the
Administrative Agent. Such Lender shall certify (A) in the case of a Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and (B) in
the case of a Form W-3 or W-9, that it is entitled to an exemption from United
States backup withholding tax. Each Person that

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shall become a Lender or a Participant pursuant to subsection 9.6 shall, upon
the effectiveness of the related transfer, be required to provide all of the
forms and statements required pursuant to this subsection, provided that in the
case of a Participant such Participant shall furnish all such required forms and
statements to the Lender from which the related participation shall have been
purchased.

2.12 CHANGE OF LENDING OFFICE. Each Lender agrees that if it makes any
demand for payment under subsection 2.10, it will use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions and
so long as such efforts would not be disadvantageous to it, as determined in its
sole discretion) to designate a different lending office if the making of such a
designation would reduce or obviate the need for a Borrower to make payments
under subsection 2.10.

SECTION 3. REPRESENTATIONS AND WARRANTIES

To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans, the Fund on behalf of itself and each Borrower
hereby represents and warrants to the Administrative Agent and each Lender that
(it being agreed that the Fund represents and warrants only to matters with
respect to itself and each Borrower, and each Borrower represents and warrants
only to matters with respect to itself):

3.1 FINANCIAL CONDITION. For each Borrower, the statement of assets and
liabilities as of such Borrower's most recently ended fiscal year for which
annual reports have been prepared and the related statements of operations and
of changes in net assets for the fiscal year ended on such date, copies of which
financial statements, certified by the independent public accountants for the
Fund, have heretofore been delivered to each Lender, fairly present, in all
material respects, the financial position of such Borrower as of such date and
the results of its operations for such period, in conformity with GAAP (as
consistently applied).

3.2 NO CHANGE. For each Borrower, since the date of the statement of
asses any liabilities for the most recently ended fiscal year for which annual
reports have been prepared for such Borrower, there has been no development or
event which has had or could reasonably be expected to have a Material Adverse
Effect with respect to such Borrower;

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PROVIDED, HOWEVER, that a decrease in the per share value of such Borrower's
Average Net Assets shall not be deemed to be a Material Adverse Effect so long
as such decrease is no caused by a breach of the financial covenant set forth in
Section 6.1 hereof.

3.3 EXISTENCE; COMPLIANCE WITH LAW. The Fund (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the power and authority and the legal right, to own its
property and to conduct the business in which it is currently engaged, (c) is
duly qualified as a foreign business trust and is in good standing under the
laws of each jurisdiction where its ownership of property or the conduct of its
business requires such qualification and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect. The interests of the Fund representing an interest in each Borrower
have been validly authorized.

3.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The Fund on behalf of
itself and each Borrower has the power and authority and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and to
borrow hereunder and has taken all necessary action to authorize the borrowings
on the terms and conditions of this Agreement and any Notes and to authorize the
execution, delivery and performance of the Loan Documents to which it is a party
including, but not limited to, receiving the approval of the majority of
non-interested members of the board of trustees of the Fund as to entering into
the transactions contemplated hereby. No consent or authorization of, filing
with, notice to or other act by or in respect of, any Governmental Authority or
any other Person is required in connection with the borrowings hereunder or with
the execution, delivery, performance, validity or enforceability of the Loan
Documents to which the Fund and any Borrower is a party. This Agreement has
been, and each other Loan Document to which it is a party will be, duly executed
and delivered by the Fund on behalf of each Borrower. This Agreement
constitutes, and each other Loan Document to which it is a party when executed
and delivered will constitute, a legal, valid and binding obligation of the Fund
and each Borrower enforceable against the Fund and each Borrower in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether

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<PAGE>

enforcement is sought by proceedings in equity or at law). The board of
trustees for the Fund has adopted appropriate procedures governing the fair and
equitable distribution of Loans to and among the Borrowers ("AVAILABILITY
PROCEDURES").

3.5 NO LEGAL BAR. The execution, delivery and performance of the Loan
Documents to which the Fund and each Borrower is a party, the borrowings
hereunder and the use of the proceeds thereof will not violate any Requirement
of Law (including, without limitation, the 1940 Act) or Contractual Obligation
of the Fund or any Borrower and will not result in, or require, the creation or
imposition of any Lien on any of their respective properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation.

3.6 NO MATERIAL LITIGATION. No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Fund or any Borrower, threatened by or against the Fund or any
Borrower or against any of their respective properties or revenues (a) with
respect to any of the Loan Documents or any of the transactions contemplated
hereby or thereby, or (b) which could reasonably be expected to have a Material
Adverse Effect.

3.7 NO DEFAULT. Neither the Fund nor any Borrower is in default under or
with respect to any of its Contractual Obligations in any respect which could
reasonably be expected to have a Material Adverse Effect. No Default or Event
of Default has occurred and is continuing.

3.8 OWNERSHIP OF PROPERTY; LIENS. The Fund and each Borrower has good
title to all its property, and none of such property is subject to any Lien
except as permitted by subsection 6.3.

3.9 NO BURDENSOME RESTRICTIONS. No Requirement of Law or Contractual
Obligation of the Fund or any Borrower could reasonably be expected to have a
Material Adverse Effect.

3.10 TAXES. (a) The Fund and each Borrower has filed all tax returns
which, to the knowledge of the Fund and such Borrower, are required to be filed
and has paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its property and all other taxes, fees or
other charges imposed on it or any of its property by any Governmental Authority
(other than any the amount or validity of which are currently being contested in
good faith by appropriate proceedings and with

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<PAGE>

respect to which reserves in conformity with GAAP have been provided on the
books of the Fund or such Borrower); no tax Lien has been filed, and, to the
knowledge of the Fund and each Borrower, no claim is being asserted, with
respect to any such tax, fee or other charge.

(b) Each Borrower is a "regulated investment company" as defined in
the Code.

3.11 FEDERAL REGULATIONS. No filing or other action is required under the
provisions of Regulations G, T, U or X in connection with the execution and
delivery of the Agreement and the making of the Loans hereunder. If requested
by any Lender or the Administrative Agent from time to time, the Fund and each
Borrower will furnish to the Administrative Agent and each Lender a statement to
the foregoing effect in conformity with the requirements of FR Form U-l referred
to in said Regulation U.

3.12 ERISA. Neither the Fund, any Borrower nor any Commonly Controlled
Entity has currently or has had at any time any liability or obligation under
ERISA or the Code with respect to any Plan, other than with respect to the
delivery of Form K-ls by NAIT.

3.13 CERTAIN REGULATIONS. Neither the Fund nor any Borrower is subject to
regulation under any Federal or State statute or regulation (other than
Regulation X of the Board of Governors of the Federal Reserve System and the
1940 Act) which limits its ability to incur Indebtedness.

3.14 SUBSIDIARIES. The Fund has no Subsidiaries, other than NAIT, and no
equity investment or interest in any other Person (other than portfolio
securities which may have been acquired in the ordinary course of business).

3.15 REGISTRATION OF THE FUND. Each Borrower is a series of the Fund, and
the Fund is registered as an open-end, diversified, management investment
company under the 1940 Act.

3.16 OFFERING IN COMPLIANCE WITH SECURITIES LAWS. The Fund and each
Borrower has issued all of its securities pursuant to an effective registration
statement on Form N-lA or otherwise in accordance with all Federal and State
securities laws applicable thereto.

3.17 INVESTMENT POLICIES. Each Borrower is in compliance in all material
respects with all of its Investment Policies.

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<PAGE>

3.18 PERMISSION TO BORROW. Each Borrower is permitted to borrow hereunder
pursuant to the limits and restrictions set forth in its Prospectus.

3.19 ACCURACY OF INFORMATION. All factual information heretofore or
contemporaneously furnished by or on behalf of the Fund and each Borrower in
writing to the Administrative Agent or any Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby (in each
case, as amended, superseded, supplemented or otherwise modified with the
knowledge of the Administrative Agent or such Lender) is, and all other such
factual information hereafter furnished by or on behalf of the Fund and each
Borrower to the Administrative Agent or any Lender (in each case, as amended,
superseded, supplemented or otherwise modified with the knowledge of the
Administrative Agent or such Lender) will be, true and accurate in every
material respect on the date as of which such information is dated or certified,
and to the extent such information was furnished to the Administrative Agent or
such Lender heretofore or contemporaneously, as of the date of execution and
delivery of this Agreement by the Administrative Agent or such Lender, and such
information is not, or shall not be, as the case may be, incomplete by omitting
to state any material fact necessary to make such information not misleading.

3.20 AFFILIATED PERSONS. To the best knowledge of the Fund and each
Borrower, the Fund and such Borrower, together with their respective Affiliates
(a list of which has been provided to the Borrowers) is not an "Affiliated
Person" (as defined in the 1940 Act) of the Administrative Agent or any Lender.

SECTION 4. CONDITIONS PRECEDENT

4.1 CONDITIONS TO INITIAL LOANS. The agreement of each Lender to make the
initial Loan requested to be made by it is subject to the satisfaction, prior to
or concurrently with the making of such Loan, of the following conditions
precedent:

(a) EXECUTED AGREEMENT. The Administrative Agent shall have received
this Agreement, executed and delivered by a duly authorized officer of the
Fund on behalf of the Fund and on behalf of each Borrower, with a
counterpart for each Lender.

(b) NOTES. The Administrative Agent shall have received Notes for
each Lender which has requested

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<PAGE>

Notes pursuant to subsection 2.5(e), executed and delivered by a duly
authorized officer of the Fund on behalf of each Borrower.

(c) RELATED AGREEMENTS. The Administrative Agent shall have
received, with a copy for each Lender, true and correct copies, certified
as to authenticity by the Fund, of the most recent Prospectus for each
Borrower, the Administration Agreement for each Borrower, the Custody
Agreement for each Borrower, the Distribution Agreement for each Borrower,
the Investment Advisory Agreement of NAIT with respect to the series of
NAIT in which the assets of each Borrower are invested, the current
registration statement for each Borrower, the most recent annual and
semi-annual financial reports for each Borrower and such other documents or
instruments as may be reasonably requested by the Administrative Agent,
including, without limitation, a copy of any deb. instrument, security
agreement or o.her material contract to which any Borrower may be a party.

(d) PROCEEDINGS OF THE FUND AND THE BORROWERS. The Administrative
Agent shall have received, with a counterpart for each Lender, a copy of
the resolutions, in form and substance satisfactory to the Administrative
Agent, of the board of trustees of the Fund authorizing (i) the execution,
delivery and performance of this Agreement and the other Loan Documents o
which the Fund and each Borrower is a party and (ii) the borrowings
contemplated hereunder, certified by the Secretary or an Assistant
Secretary of the Fund as of the Closing Date, which certificate shall be in
form and substance satisfactory to the Administrative Agent and shall state
that the resolutions thereby certified have not been amended, modified,
revoked or rescinded and are in full force and effect.

(e) INCUMBENCY CERTIFICATE. The Administrative Agent shall have
received, with a counterpart for each Lender, a Certificate of the Fund,
dated the Closing Date, as to the incumbency and signature of the officers
of the Fund executing any Loan Document executed by the Secretary or any
Assistant Secretary of the Borrower, satisfactory in form and substance to
the Administrative Agent.

(f) ORGANIZATIONAL DOCUMENTS. The Administrative Agent shall have
received, with a counterpart for each

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<PAGE>

Lender, true and complete copies of the charter or certificate, as the case
may be, and by-laws of the Fund, certified as of the Closing Date as
complete and correct copies thereof by the Secretary or an Assistant
Secretary of the Fund.

(g) REGULATIONS U AND G, FORMS U-L AND G-1. The Lenders shall be
satisfied that the Loans and the use of proceeds thereof comply in all
respects with Regulation U and Regulation G (as applicable). If required
by Regulation U or Regulation G, the Administrative Agent shall have
received a copy of FR Form U-l or FR Form G-3 (as applicable), duly
executed and delivered by the Fund on behalf of each Borrower and completed
for delivery to each Lender.

(h) LEGAL OPINIONS. The Administrative Agent shall have received,
with a counterpart for each Lender, the executed legal opinion of counsel
to the Fund and each Borrower, in the form of EXHIBIT 4.1(h) hereto. Such
legal opinion shall cover such other matters incident to the transactions
contemplated by this Agreement as the Administrative Agent may reasonably
require.

(i) FINANCIAL INFORMATION. The Administrative Agent shall have
received, with a copy for each Lender, the most recent publicly available
financial information (which includes a list of portfolio securities) for
each Fund and each Borrower.

4.2 CONDITIONS TO EACH LOAN. The agreement of each Lender to make any
Loan requested to be made by it on any date (including, without limitation, its
initial Loan) is subject to he satisfaction of the following conditions
precedent:

(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Fund and the requesting Borrower in or pursuant to
the Loan Documents shall be true and correct in all material respects on
and as of such date as if made on and as of such date.

(b) NO DEFAULT. No Default or Event of Default shall have occurred
with respect to the requesting Borrower or the Fund and be continuing on
such date or after giving effect to the Loans requested to be made on such
date.

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<PAGE>

(c) MAXIMUM BORROWING LIMITATION. After giving effect to the
proposed Loans to be made, the Asset Coverage Ratio for all borrowings of
such Borrower shall not be less than 300% if such Borrower is not a
Designated Borrower, and not less than 400% if such Borrower is a
Designated Borrower.

(d) BORROWING LIMITATION IN PROSPECTUS. After giving effect to the
proposed Loans to be made, the requesting Borrower shall not have exceeded
the borrowing limits set forth by law and in its Prospectus.

(e) REGULATIONS U AND G: FORMS U-1 AND G-1. The Lenders shall be
satisfied that the Loans and the use of proceeds thereof comply in all
respects with Regulation U and Regulation G (as applicable). To the extent
required by Regulation U or Regulation G, the Administrative Agent shall
have received a copy of either (i) FR Form U-1 or FR Form G3 (as
applicable), duly executed and delivered by the Fund on behalf of each
Borrower and completed for delivery to each Lender, in for acceptable to
the Administrative Agent, or (ii) a current list of "margin stock" (as
defined in Regulation U) from each Borrower, in form acceptable to the
Administrative Agent and in compliance with Section 221.3(c)(2) of
Regulation U or Section 207.3(f)(2) of Regulation G, as applicable.

(f) ADDITIONAL MATTERS. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be satisfactory in form and substance to the Administrative Agent,
and the Administrative Agent shall have received such other documents and
legal opinions in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as it shall reasonably request.

Each borrowing by a Borrower hereunder shall constitute a representation and
warranty by such Borrower as of the date thereof that the conditions contained
in this subsection have been satisfied with respect to such Borrower.

SECTION 5. AFFIRMATIVE COVENANTS

The Fund for itself and on behalf of each Borrower hereby agrees that, so
long as the Commitments remain in

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effect with respect to such Borrower or any amount is owing by such Borrower to
any Lender or the Administrative Agent hereunder or under any other Loan
Document, such Borrower shall:

5.1 FINANCIAL STATEMENTS. Furnish to each Lender:

(a) as soon as available and in any event within 75 days after the
end of each fiscal year of such Borrower, a statement of assets and
liabilities of such Borrower as at the end of such fiscal year, a statement
of operations for such fiscal year, a statement of changes in net assets
for such fiscal year and the preceding fiscal year, a portfolio of
investments as at the end of such fiscal year and the per share and other
data for such fiscal year prepared in accordance with regulatory
requirements, and all reported on in a manner acceptable to the Securities
and Exchange Commission or any successor or analogous Governmental
Authority by Ernst & Young L.L.P. or other independent certified public
accountants of recognized standing;

(b) as soon as available and in any event within 45 days after the
close of the first six-month period of each fiscal year of such Borrower a
statement of assets and liabilities as at the end of such six-month period,
a statement of operations for such six-month period, a statement of changes
in net assets for such six-month period and a portfolio of investments as
at the end of such six month period, all prepared in accordance with
regulatory requirements and all certified (subject to normal year end
adjustments) as to fairness of presentation, GAAP (as consistently applied)
and consistency by a Responsible Officer; and

(c) as soon as available, but in any event not later than 10 days
after the end of each fiscal month of each fiscal year of each Borrower,
the net asset value sheet of such Borrower as at the end of such month, in
the form and detail similar to those customarily prepared by the Fund's
management for internal use and reasonably satisfactory to the
Administrative Agent, certified by a Responsible Officer as being fairly
stated in all material respects; PROVIDED, HOWEVER, that if any Borrower
has Loans outstanding, such Borrower shall provide each Lender with such
net asset value sheet described above in this subsection, within two
Business days after the end of each calendar week so long as any Loans to
such Borrower remain outstanding;

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all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).

5.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Lender:

(a) concurrently with the delivery of the financial statements
referred to in subsection 5.1(a), a certificate of the independent
certified public accountants reporting on such financial statements stating
that in making the examination necessary therefor no knowledge was obtained
of any Default or Event of Default, except as specified in such
certificate;

(b) concurrently with the delivery of the financial statements
referred to in subsections 5.1(a), (b) and (c) and the monthly report in
subsection 5.2(d), a certificate of a Responsible Officer stating that, to
the best of such Officer's knowledge, such Borrower during such period has
observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Agreement and the other Loan
Documents to be observed, performed or satisfied by it, and that such
Officer has obtained no knowledge of any Default or Event of Default except
as specified in such certificate;

(c) within five days after the same are sent, copies of all financial
statements and reports which each Borrower sends to its investors, and
within five days after the same are filed, copies of all financial
statements and reports which each Borrower may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority;

(d) as soon as available, but in any event not later than ten days
after the end of each month, a certificate of a Responsible Officer (i)
stating that, to the best of such Officer's knowledge, the list of each
Borrower's portfolio securities attached to such certificate is true and
correct, (ii) stating the market value (or if not available with respect to
portfolio securities, fair value) of such portfolio securities and (iii)
showing in reasonable detail the

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calculations supporting such Borrower's compliance with subsection 6.1; and

(e) promptly, such additional financial and other information as any
Lender may from time to time reasonably request, including, but not limited
to, copies of all changes to the Prospectus and registration statement.

5.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
such Borrower, as the case may be.

5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to engage
solely in the business of investing in investments in accordance with its
Investment Policies, Prospectus and registration statement (and all things
incidental to those activities) and preserve, renew and keep in full force and
effect its existence and take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business; comply with all Contractual Obligations and Requirements of Law except
to the extent that failure to comply therewith could not, in the aggregate, be
reasonably expected to have a Material Adverse Effect; maintain at all times its
status as an investment company or a series of an investment company registered
under the 1940 Act; maintain at all times a custodian which is a ban or trust
company organized under the laws of the United States or a political subdivision
thereof having assets of at least $10,000,000,000 and a long-term debt or
deposit rating of at least A from S&P's Rating Group or Moody's Investor
Service, Inc.; and continue to distribute Loans to and among all Borrowers in
accordance with and pursuant to the Availability Procedures.

5.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property useful and
necessary in its business, if any, in good working order and condition; maintain
with financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks as are usually
insured against in the same general area by entities engaged in the same or a
similar business or as may otherwise be required by the Securities and Exchange
Commission or any successor or analogous

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Governmental Authority (including, without limitation, (a) fidelity bond
coverage as shall be required by Rule 17g-1 promulgated under the 1940 Act or
any successor provision and (b) errors and omissions insurance); and furnish to
each Lender, upon written request, full information as to the insurance carried.

5.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of the Administrative Agent, upon its own discretion or at the
request of any Lender, to visit and inspect any of such Borrower's properties
and examine and make abstracts from any of its books and records during normal
business hours and to discuss the business, operations, properties and financial
and other condition of such Borrower with officers and employees of such
Borrower and with its independent certified public accountants. Any non-public
information provided to or learned by the Administrative Agent as a result of
such inspection shall be treated as confidential and proprietary and shall not
be disclosed to any third parties, other than to the Lenders.

5.7 NOTICES. Promptly give notice to the Administrative Agent and each
Lender of:

(a) the occurrence of any Default or Event of Default with respect to
such Borrower;

(b) any (i) default or event of default under any Contractual
Obligation of such Borrower or the Fund or (ii) litigation, investigation
or proceeding which may exist at any time between the Fund and/or any
Borrower and any Governmental Authority, which in either case, if not cured
or if adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;

(c) any litigation or proceeding affecting such Borrower in which the
amount reasonably determined to be at risk is $1,000,000 or more and not
covered by insurance or in which injunctive or similar relief is sought;

(d) any material change in such Borrower's Prospectus or registration
statement involving Investment Policies; and

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<PAGE>

(e) any development or event which could reasonably be expected to
have a Material Adverse Effect on any such Borrower.

Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Fund or such Borrower proposes to take with respect
thereto.

5.8 PURPOSE OF LOANS. Use the proceeds of the Loans for temporary or
emergency purposes, including, without limitation, to enable such Borrower to
finance temporarily the repurchase or redemption of shares of such Borrower
either (i) at the request of the holders of such shares or (ii) in the case of a
Borrower whose shareholders do not have the right to require such Borrower to
repurchase or redeem their shares for retirement of such shares, at the election
of such Borrower. Without limiting the foregoing, no Borrower will, directly or
indirectly, use any part of such proceeds for any purpose which would violate
any provision of any applicable statute, regulation, order or restriction.

SECTION 6. NEGATIVE COVENANTS

The Fund on its own behalf and on behalf of each Borrower hereby agrees
that, so long as the Commitments with respect to such Borrower remain in effect
or any amount is owing by such Borrower to any Lender or the Administrative
Agent hereunder or under any other Loan Document, the Fund shall not and shall
not permit such Borrower, without the prior written consent of the Required
Lenders, to, directly or indirectly:

6.1 FINANCIAL CONDITION COVENANT. Permit the Asset Coverage Ratio of such
Borrower, if such Borrower is not a Designated Borrower, to be less than 300%,
or, if such Borrower is a Designated Borrower, to be less than 400%, or allow
borrowings of such Borrower to exceed the limits set forth in such Borrower's
Prospectus.

6.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to exist
any Indebtedness of such Borrower, except Indebtedness of such Borrower incurred
(i) under this Agreement and the Notes, (ii) in the ordinary course of business
of such Borrower, (iii) in compliance with the Investment Policies of such
Borrower and (iv) not otherwise prohibited by law.

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6.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any
Lien upon any of the property, assets or revenues, whether now owned or
hereafter acquired of such Borrower, except for (i) Liens for taxes not yet due
or which are being contested in good faith by appropriate proceedings, PROVIDED
that adequate reserves with respect thereto are maintained on the books of such
Borrower in conformity with GAAP, (ii) Liens arising in connection with claims
for advances made by or payments due to any custodian under the Custodian
Agreements set forth in SCHEDULE IV hereto, (iii) any other Liens created,
incurred, assumed or suffered to exist in compliance with the Prospectus and
Investment Policies o such Borrower which the Administrative Agent has ten (10)
days prior written notice of and which is not otherwise prohibited by any
Requirement of Law.

6.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or suffer
to exist any Guarantee Obligation of such Borrower.

6.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve such Borrower
(or suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of all of the property, business or assets of such
Borrower, or make any material change in its present method of conducting
business; except that a Borrower will be permitted to liquidate, wind up or
convey, sell lease, assign, transfer or otherwise dispose of all of the
property, business or assets of such Borrower if it repays all Loans made to it
prior to liquidation.

6.6 LIMITATION ON DISTRIBUTIONS. During the occurrence and continuation
of an Event of Default specified in Sections 7(a) or (e), make any distribution
to the shareholders of such Borrower, whether now or hereafter existing, either
directly or indirectly, whether in cash or property or in obligations of the
Borrower, other than as required in order to maintain compliance with Subchapter
M of the Code.

6.7 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of or make any other investment in, any Person, except those
permitted by such Borrower's Investment Policies.

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6.8 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement and not in
violation of the 1940 Act, (b) in the ordinary course of such Borrower's
business, and (c) upon fair and reasonable terms no less favorable to such
Borrower than it would obtain in a comparable arm's length transaction with a
Person which is not an Affiliate; PROVIDED, HOWEVER, that such Borrower may
transfer to NAIT such Borrower's assets in exchange for beneficial interests in
NAIT on fair and reasonable terms.

6.9 LIMITATION ON CHANGES IN FISCAL YEAR. Without providing 30 days prior
written notice to the Administrative Agent, permit the fiscal year of any
Borrower to end on a day other than March 3lst.

6.10 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any Person any
agreement, other than this Agreement or the other Loan Documents, which
prohibits or limits the ability of such Borrower to create, incur, assume or
suffer to exist any Loan upon any of its property, assets or revenues, whether
now owed or hereafter acquired.

6.11 LIMITATION ON CHANGES TO INVESTMENT POLICIES. Make any material
amendment to the Prospectus or registration statement of such Borrower relating
to changes in the fundamental Investment Policies of such Borrower without the
consent of the Lenders, which consent shall not be unreasonably withheld.

SECTION 7. EVENTS OF DEFAULT

If any of the following events shall occur and be continuing with respect
to a Borrower (it being understood that a Default or Event of Default with
respect to one Borrower shall not constitute a Default or Event of Default to
any other Borrower):

(a) A Borrower shall fail to pay any principal of any Loan when due
in accordance with the terms thereof or hereof, including without
limitation any failure to make 2 mandatory prepayment due pursuant to the
provisions of Section 2.6(b) or Section 2.6(c); or a Borrower shall fail to
pay any interest on any Loan, or any other amount payable hereunder, within
five days

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after any such interest or other amount becomes due in accordance with the
terms thereof or hereof: or

(b) Any representation or warranty made or deemed made by a Borrower
herein or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other Loan
Document shall prove to have been incorrect in any material respect on or
as of the date made or deemed made; or

(c) A Borrower shall default in the observance or performance of any
other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) and (b) of this Section), and
such default shall continue unremedied for a period of 30 days; or

(d) A Borrower shall (i) default in any payment of principal of or
interest of any Indebtedness (other than the Loans) or in the payment of
any Guarantee Obligation, beyond the period of grace (not to exceed 30
days), if any, provided in the Instrumental or agreement under which such
Indebtedness of Guarantee Obligation was created, if the aggregate amount
of the Indebtedness and/or Guarantee Obligations in respect of which such
default or defaults shall have occurred is a least $1,000,000; or (ii)
default in the observance or performance of any other agreement or
condition relating to any such Indebtedness or Guarantee Obligation or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of
such Guarantee Obligation (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the giving of
notice if required, such Indebtedness to become due prior to its stated
maturity or such Guarantee Obligation to become payable; or

(e) (i) The Fund shall commence any case, proceeding or other action
with respect to a Borrower (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a

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bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for all
or any substantial part of its assets, or a Borrower shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against a Borrower any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against a Borrower any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) a Borrower shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) a
Borrower shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or

(f) Either a Borrower or any Commonly Controlled Entity of such
Borrower incurs any liability to any Plan which could reasonably be
expected to have a Material Adverse Effect; or

(g) One or more judgments or decrees shall be entered against a
Borrower involving in the aggregate a liability (not fully covered by
insurance or otherwise paid or discharged) of $1,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged, stayed
or bonded pending appeal within 60 days from the entry thereof; or

(h) NACM or a Person directly controlling, controlled by, or under
common control with NACM shall no longer act as investment advisor for the
Fund or a Borrower and the Required Lenders shall declare such event to be
an Event of Default; or

(i) The Fund or a Borrower's registration under the 1940 Act shall
lapse or be suspended; or

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(j) A Borrower shall fail to materially comply with its Investment
Policies in a manner which the Administrative Agent, in its sole
discretion, determines could reasonably be expected to have a Material
Adverse Effect;

(k) NAIT shall (i) create, incur, assume or suffer to exist
Indebtedness other than Permitted Trust Indebtedness, (ii) create, incur,
assume or suffer to exist any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired except for Permitted
Trust Liens, (iii) create, incur, assume or suffer to exist any Guarantee
Obligation, (iv) enter into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose
of, all or substantially all of its property, business or assets, or make
any material change in its present method of conducting business; (v) make
any advance, loan, extension of credit or capital contribution to, or
purchase any stock, bonds, notes, debentures or other securities of or any
assets constituting a business unit of or make any other investment in, any
Person, except those permitted by its Investment Policies; and (vi) enter
into any transaction, including, without limitation, any purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate unless such transaction is (a) otherwise permitted under this
Agreement and not in violation of the 1940 Act, (b) in the ordinary course
of its business, which includes, but is not limited to, a Borrower's
transfer to NAIT of such Borrower's assets in exchange for beneficial
interests in NAIT as permitted by Section 6.8 hereunder and redemptions of
such beneficial interests, and (c) upon fair and reasonable terms no less
favorable than it would obtain in a comparable arm's length transaction
with a Person which is not an Affiliate.

then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (e) of this Section with respect to such
Borrower, automatically the Commitments available to such Borrower shall
immediately terminate and the Loans hereunder made to such Borrower (with
accrued interest thereon) and all other amounts owing under this Agreement by
such Borrower shall immediately become due and payable, and (B) if such event is
any other Event of Default, any or all of the following actions may be taken:
(i) with the consent of the Required Lenders, the

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Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to such Borrower declare the Commitments
available to such Borrower to be terminated forthwith, whereupon such
Commitments shall immediately terminate; and (ii) with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to such Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement by such Borrower to be due and payable
forthwith, whereupon the same shall immediately become due and payable. Except
as expressly provided above in this Section, presentment, demand, protest and
all other notices of any kind are hereby expressly waived.

SECTION 8. THE ADMINISTRATIVE AGENT

8.1 APPOINTMENT. Each Lender hereby irrevocably designates and appoints
the Administrative Agent as the agent of such Lender under this Agreement and
the other Loan Documents, and each such Lender irrevocably authorizes the
Administrative Agent, in such capacity, to take such action on its behalf under
the provisions of this Agreement and the other Loan Documents and to exercise
such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.

8.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys in-fact
selected by it with reasonable care.

8.3 EXCULPATORY PROVISIONS. either the Administrative Agent nor any of
its officers, directors, employees, agents,

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attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or any other Loan Document (except for its or such Person's own
gross negligence or willful misconduct) or (b) responsible in any manner to any
of the Lenders for any recitals, statements, representations or warranties made
by the Fund or any Borrower or any officer thereof contained in this Agreement
or any other Loan Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Administrative Agent
under or in connection with, this Agreement or any other Loan Document or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Loan Document or for any failure of any Borrower
to perform its obligations hereunder or thereunder. The Administrative Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Fund or any Borrower.

8.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be
entitled to rely, and shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Fund or the Borrowers),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under,
his Agreement and the other Loan Documents in accordance with a request of the
Required Lenders, and such request and any action taken or failure to

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act pursuant thereto shall be binding upon all the Lenders and all future
holders of the Loans.

8.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or a
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent receives such a notice, the Administrative Agent
shall give notice thereof to the Lenders. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; PROVIDED that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.

8.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each Lender
expressly acknowledges that neither the Administrative Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by the Administrative
Agent hereinafter taken, including any review of the affairs of the Fund or
Borrowers, shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrowers and made its own decision to
make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrowers. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Administrative Agent hereunder, the Administrative Agent

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shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the Fund or the
Borrowers which may come into the possession of the Administrative Agent or any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.

8.7 INDEMNIFICATION. The Lenders agree to indemnify the Administrative
Agent in its capacity as such (to the extent not reimbursed by the Borrowers and
without limiting the obligation of the Borrowers to do so), ratably according to
their respective Commitment Percentages in effect on the date on which
indemnification is sought (or, if indemnification is sought after the date upon
which the Commitments shall have terminated and the Loans shall have been paid
in full, ratably in accordance with their Commitment Percentages immediately
prior to such date), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Loans) be imposed on,
incurred by or asserted against the Administrative Agent in any way relating to
or arising out of the Commitments, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Administrative Agent under or in connection with any of the foregoing;
PROVIDED that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's gross negligence or willful misconduct. The agreements in this
subsection shall survive the payment of the Loans and all other amounts payable
hereunder.

8.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The Administrative
Agent and its Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Fund or any Borrower as though the
Administrative Agent were not the Administrative Agent hereunder and under the
other Loan Documents. With respect to the Loans made by it, the Administrative
Agent shall have the same rights and powers under this Agreement and the other
Loan Documents as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.

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8.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign
as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Borrowers, whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Section 8 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement and the
other Loan Documents.

SECTION 9. MISCELLANEOUS

9.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other Loan
Document, nor any terms hereof or thereof, may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the Fund on
behalf of a Borrower written amendments, supplements or modifications hereto and
to the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of such Borrower hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; PROVIDED, however, that no such waiver and no such amendment,
supplement or modification shall (i) reduce the amount or extend the scheduled
date of maturity of any Loan or of any installment thereof, or reduce the stated
rate of any interest or fee payable hereunder or extend the scheduled date of
any payment thereof or increase the amount or extend the expiration date of any
Lender's Commitment, in each case without the consent of each Lender affected
thereby, or (ii) amend, modify or waive any provision of

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this subsection or reduce the percentage specified in the definition of Required
Lenders, or consent to the assignment or transfer by any Borrower of any of its
rights and obligations under this Agreement and the other Loan Documents, in
each case without the written consent of all the Lenders, or (iii) amend, modify
or waive any provision of Section 8 without the written consent of the then
Administrative Agent. Any such waiver and any such amendment, supplement or
modification shall be effective (i) only for such Borrower(s) on whose behalf of
which the Fund executed such document(s) and (ii) in the specific instance and
for the specific purpose for which given.

9.2 NOTICES. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by facsimile
transmission), and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered, or five days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Fund, any Borrower and the
Administrative Agent, and as set forth in Schedule I in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:

The Fund Nicholas-Applegate Mutual Funds
and 600 West Broadway
The Borrowers: San Diego, California 92101
Attention: Thomas Pindelski
Facsimile: (619) 687-8099

The Administrative
Agent: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Barbara Franklin
Facsimile: 212-270-6257

and

Chemical Bank Agency Services
140 East 45th Street, 29th Floor
New York, New York 10017
Attention: Sharon Miklave
Facsimile: 212-622-0130

PROVIDED that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.2, 2.4, 2.6, or 2.8 shall not be
effective until received.

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9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay
in exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder or under the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.

9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.

9.5 PAYMENT OF EXPENSES AND TAXES. Each Borrower agrees severally (a) to
pay or reimburse the Administrative Agent for its reasonable out-of-pocket costs
and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Loan Documents and any other documents prepared in connection
herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent;
PROVIDED, HOWEVER, that the fees and disbursements of counsel to the
Administrative Agent incurred for the preparation of this Agreement and the
other Loan Documents shall be limited to $20,000, (b) to pay or reimburse each
Lender and the Administrative Agent for all its costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement with respect to such Borrower, the other Loan Documents and any such
other documents, including, without limitation, the fees and disbursements of
counsel to each Lender and of counsel to the Administrative Agent, (c) to pay,
indemnify, and hold each Lender and the Administrative Agent harmless, in
accordance with its Allocation, from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other

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Loan Documents and any such other documents with respect to such Borrower, and
(d) to pay, indemnify, and hold each Lender and the Administrative Agent
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the other Loan
Documents and any such other documents (all the foregoing in this clause (d),
collectively, the "INDEMNIFIED LIABILITIES"), PROVIDED, that such Borrower shall
have no obligation hereunder to the Administrative Agent or any Lender with
respect to indemnified liabilities arising from (i) the gross negligence or
willful misconduct of the Administrative Agent or any such Lender or (ii) legal
proceedings commenced against the Administrative Agent or any such Lender by any
security holder or creditor thereof arising out of and based upon rights
afforded any such security holder or creditor solely in its capacity as such.
The agreements in this subsection shall survive repayment of the Loans and all
other amounts payable hereunder.

9.6 SUCCESSORS AND ASSIGNS; PARTICIPATION AND ASSIGNMENTS. (a) This
Agreement shall be binding upon and inure to the benefit of the Fund, the
Borrowers, the Lenders, the Administrative Agent and their respective successors
and assigns, except that neither the Fund nor any Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Lender.

(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable laws, at any time sell to one or more
banks or other entities (but only if such entity, together with its Affiliates,
does not own beneficially or of record 5% or more interest in any Borrower or
the Fund) ("Participants") participating interests in any Loan owing to such
Lender, any Commitment of such Lender or any other interest of such Lender
hereunder and under the other Loan Documents. In the event of any such sale by
a Lender of a participating interest to a Participant, such Lender's obligations
under this Agreement to the other parties to this Agreement shall remain
unchanged, such Lender shall remain solely responsible for the performance
thereof, such Lender shall remain the holder of any such Loan for all purposes
under this Agreement and the other Loan Documents, and the Borrowers and the
Administrative Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement

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and the other Loan Documents. Any agreement pursuant to which any Lender may
grant such a participating interest shall provide that such Lender shall retain
the sole right and responsibility to enforce the obligations of the Borrowers
hereunder including the right to approve any amendment, modification or waiver
of any provision of this Agreement; PROVIDED that such participation agreement
may provide that (i) such Lender will not agree to any modification, amendment
or waiver of this Agreement described in clauses (i) of the proviso in Section
9.1 without the consent of the Participant and (ii) the Participant may obtain
voting rights limited to changes in respect of the principal amount, interest
rates, fees and term of the Loans. Each Borrower agrees that if amounts
outstanding under this Agreement are due or unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event or Default,
each Participant shall, to the maximum extent permitted by applicable laws, be
deemed to have the right of setoff in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement, PROVIDED that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in subsection 9.7(a) as fully as if it were a
Lender hereunder. Each Borrower also agrees hat each Participant shall be
entitled to the benefits of subsections 2.10 and 2.11 with respect to its
participation in the Commitments and the Loans outstanding from time to time as
if it was a Lender; PROVIDED that, in the case of subsection 2.11, such
Participant shall have complied with the requirements of said subsection and
PROVIDED, further, that no Participant shall be entitled to receive any greater
amount pursuant to any such subsection than the transferor Lender would have
been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer
occurred.

(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time and from time to
time assign to any Lender or any affiliate thereof (but only if such affiliate,
together with its Affiliates, does not own beneficially or of record 5% or more
interest of the Fund or a Borrower) or, with the consent of the Fund and the
Administrative Agent (which in each case shall not be unreasonably withheld), to
an additional bank or financial institution (an "ASSIGNEE") all or any part of
its rights and obligations under this Agreement and the other Loan

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<PAGE>

Documents pursuant to an Assignment and Acceptance, substantially in the form of
EXHIBIT 9.6(C), executed by such Assignee, such assigning Lender (and, in the
case of an Assignee that is not then a Lender or an affiliate thereof, by the
Fund and the Administrative Agent) and delivered to the Administrative Agent for
its acceptance and recording in the Register; PROVIDED, HOWEVER, that
assignments to entities other than Lenders or Affiliates thereof must be in
amounts of at least $5,000,000. Upon such execution, delivery, acceptance and
recording, from and after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder with a Commitment as set forth therein,
and (y) the assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such assigning Lender shall cease to be a party hereto). Notwithstanding any
provision of this paragraph (a) and paragraph (e) of this subsection, the
consent of the Fund shall not be required, and, unless requested by the Assignee
and/or the assigning Lender, new Notes shall not be required to be executed and
delivered on behalf of the Borrowers, for any assignment which occurs at any
time when any of the events described in Section 7(e) shall have occurred and be
continuing.

(d) The Administrative Agent, on behalf of the Borrowers, shall
maintain at the address of the Administrative Agent referred to in subsection
9.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "REGISTER") for the recordation of the names and addresses of the Lenders
and the Commitment of, and principal amount of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrowers, the Administrative Agent and the
Lenders may (and, in the case of any Loan or other obligation hereunder not
evidenced by a Note, shall) treat each Person hose name is recorded in the
Register as the owner of a Loan or other obligation hereunder as the owner
thereof for all pu-poses of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or other
obligation hereunder not evidenced by a Note shall be effective only upon
appropriate entries with respect thereto being made in the Register. The
Register shall be available for inspection by the Borrowers or any

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<PAGE>

Lender at any reasonable time and from time to time upon reasonable prior
notice.

(e) Upon is receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Fund and the Administrative Agent)
together with payment by the assigning Lender or Assignee to the Administrative
Agent of a registration and processing fee of $3,000, the Administrative Agent
shall (i) promptly accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto record the information contained
therein in the Register and give notice of such acceptance and recordation to
the Lenders, the Fund and the Borrowers.

(f) The Fund and each Borrower authorize each Lender to disclose to
any Participant or Assignee (each, a"TRANSFEREE") and any prospective
Transferee, subject to the provisions of subsection 9.16, any and all financial
information in such Lender's possession concerning the Fund or any Borrower and
their Affiliates which has been delivered to such Lender by or on behalf of the
Fund or the Borrowers pursuant to this Agreement or which has been delivered to
such Lender by or on behalf of the Fund or the Borrowers in connection with such
Lender's credit evaluation of the Borrowers and their Affiliates prior to
becoming a party to this Agreement.

(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law.

9.7 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED LENDER") shall
at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by setoff, pursuant to events or proceedings of the nature
referred to in Section 7(e), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Loans, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loan, or shall provide such other Lenders
with the

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<PAGE>

benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such benefitted Lender to share the excess payment of benefits of such
collateral or proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest.

(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to any Borrower, any
such notice being expressly waived by each Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by a Borrower hereunder
(whether at the stated maturity, by acceleration or otherwise) to set-off and
appropriate and apply against such amount any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any branch or agency thereof to or for the credit or the
account of such Borrower. Each Lender agrees promptly to notify such Borrower
and the Administrative Agent after any such set-off and application made by such
Lender, PROVIDED that the failure to give such notice shall not affect the
validity of such set-off and application.

9.8 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Fund and the
Administrative Agent.

9.9 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

9.10 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Fund, each

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<PAGE>

Borrower, the Administrative Agent and the Lenders with respect to the subject
matter hereof, and there are no promises, undertakings, representations or
warranties by the Administrative Agent or any Lender relative to subject matter
hereof not expressly set forth or referred to herein or in the other Loan
Documents.

9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

9.12 SUBMISSION TO JURISDICTION; WAIVERS. The Fund and each Borrower
hereby irrevocably and unconditionally:

(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;

(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;

(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the Fund
or such Borrower at its address set forth in subsection 9.2 or at such
other address of which the Administrative Agent shall have been notified
pursuant thereto;

(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in

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<PAGE>

any legal action or proceeding referred to in this subsection any special,
exemplary, punitive or consequential damages.

9.13 ACKNOWLEDGEMENTS. The Fund and each Borrower hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;

(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Fund or such Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and the
Fund and each Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor: and

(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Funds, the Borrowers and the Lenders.

9.14 WAIVERS OF JURY TRIAL. THE FUND, EACH BORROWER, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

9.15 NON-RECOURSE. The Administrative Agent and the Lenders hereby agree
for the benefit of each and every trustee and officer of the Fund and the
Borrowers and any successor, assignee, heir, estate, executor, administrator or
personal representative of any such trustee and officer (a "NON-RECOURSE
PERSON") that: (a) no Non-Recourse person shall have any personal liability for
any obligation of any Borrower under this Agreement or any Loan Document or any
other instrument or document delivered pursuant hereto or thereto; (b) no claim
against any Non-Recourse Person may be made for any obligation of any Borrower
under this Agreement or any Loan Document or other instrument or document
delivered pursuant hereto or thereto, whether for payment of principal of, or
interest on, the Loans or for any fees, expense, or other amounts payable by any
Borrower hereunder or thereunder, or otherwise; and (c) the obligations of the
Borrowers under this Agreement or any Loan Document or other instrument or
document delivered pursuant hereto or thereto

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<PAGE>

are enforceable solely against the respective Borrower and such Borrower's
properties and assets.

9.16 DESIGNATION OF ADDITIONAL BORROWERS; AMENDMENTS TO SCHEDULE I. (a)
Other series of the Fund and other investment companies registered under the
1940 Act, in either case (a) which have at least $2,000,000 in Total Assets, (b)
are (I) equity funds, (II) fixed income funds or (III) any combination thereof,
in each case whether investing in domestic or foreign securities or any
combination thereof and (c) for which NACM or an Affiliate of NACM acts as the
investment advisor, or which are invested in other registered investment
companies for which NACM or an Affiliate of NACM acts as the investment adviser,
may, with the prior written consent of the Administrative Agent and each Lender,
become parties to this Agreement in addition to those Borrowers listed on
Schedule I, and be deemed Borrowers for all purposes of this Agreement by
executing an instrument substantially in the form of EXHIBIT 9.16(a) hereto
(with such changes therein as may be approved by the Administrative Agent and
the Lenders), which instrument shall (x) have attached to it a copy of this
Agreement (as the same may have been amended) with a revised Schedule I
reflecting the participation of such additional series of the Fund and any prior
revisions to Schedule I effected in accordance with the terms hereof and (y) be
accompanied by the documents and instruments required to be delivered by the
Borrowers pursuant to Section 4.1, including, without limitation, an opinion of
counsel for the Fund satisfactory to the Administrative Agent and the Lenders
and their respective counsel.

(b) No series of the Fund shall be admitted as a party to this
Agreement as a Borrower unless at the time of such admission and after giving
effect thereto: (i) the representations and warranties set forth in Section 3
shall be true and correct with respect to such Borrower; (ii) such Borrower
shall be in compliance in all material respects with all of the terms and
provisions set forth herein on its part to be observed or performed at the time
of the admission and after giving effect thereto; and (iii) no Default or Event
of Default with respect to such Borrower, nor any event which with the giving of
notice or expiration of any applicable grace period or both would constitute
such a Default or Event of Default with respect to such Borrower, shall have
occurred and be continuing.

(c) Notwithstanding the provisions of Subsection 9.1, Schedule I may
be amended, supplemented or modified at any time and from time to time by the
Fund on behalf of each

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<PAGE>

Borrower with the prior written approval of the Administrative Agent; PROVIDED
that, at the request of the Administrative Agent, the Fund and the Borrowers
shall deliver to the Administrative Agent, with a copy for each Lender, an
opinion of counsel in form and substance satisfactory to the Administrative
Agent; and PROVIDED, FURTHER, that following such amendment, supplement or
modification, as the case may be, the representations and warranties set forth
in Section 3 shall be true and correct with respect to the Fund and the
Borrowers.

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first written above.

NICHOLAS-APPLEGATE MUTUAL FUNDS, FOR ITSELF AND ON
BEHALF OF EACH BORROWER

By: s/ E. Blake Moore
--------------------------------
Name: E. Blake Moore, Jr.
Title: Secretary

CHEMICAL BANK, AS ADMINISTRATIVE AGENT AND AS A LENDER

By: ILLEGIBLE
--------------------------------
Name:
Title:

UNION BANK OF CALIFORNIA, N.A., AS LENDER

By: ILLEGIBLE
--------------------------------
Name:
Title:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED, AS
LENDER

By: ILLEGIBLE
--------------------------------
Name:
Title:

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<PAGE>

Nicholas-Applegate Investment Trust, in its individual capacity and on behalf of
the series listed on Schedule VII, does hereby acknowledge receipt of the above
Credit Agreement.

NICHOLAS-APPLEGATE INVESTMENT TRUST,
in its individual capacity, and on
on behalf of the series listed on
Schedule VII attached hereto

By: s/ E. Blake Moore
--------------------------------
Name: E. Blake Moore, Jr.
Title: Secretary

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<PAGE>

SCHEDULE I
----------

BORROWERS
---------

Nicholas-Applegate Emerging Growth Portfolio A
Nicholas-Applegate Emerging Growth Portfolio B
Nicholas-Applegate Emerging Growth Portfolio C
Nicholas-Applegate Emerging Growth Institutional Portfolio
Nicholas-Applegate Emerging Growth Qualified Portfolio

Nicholas-Applegate Income & Growth Portfolio A
Nicholas-Applegate Income & Growth Portfolio B
Nicholas-Applegate Income & Growth Portfolio C
Nicholas-Applegate Income & Growth Institutional Portfolio
Nicholas-Applegate Income & Growth Qualified Portfolio

Nicholas-Applegate Balanced Growth Portfolio A
Nicholas-Applegate Balanced Growth Portfolio B
Nicholas-Applegate Balanced Growth Portfolio C
Nicholas-Applegate Balanced Growth Institutional Portfolio
Nicholas-Applegate Balanced Growth Qualified Portfolio

Nicholas-Applegate Emerging Countries Portfolio A
Nicholas-Applegate Emerging Countries Portfolio B
Nicholas-Applegate Emerging Countries Portfolio C
Nicholas-Applegate Emerging Countries Institutional Portfolio
Nicholas-Applegate Emerging Countries Qualified Portfolio

Nicholas-Applegate Government Income Portfolio A
Nicholas-Applegate Government Income Portfolio B
Nicholas-Applegate Government Income Portfolio C
Nicholas-Applegate Government Income Qualified Portfolio

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<PAGE>

Nicholas-Applegate International Growth Portfolio A
Nicholas-Applegate International Growth Portfolio B
Nicholas-Applegate International Growth Portfolio C
Nicholas-Applegate International Growth Institutional Portfolio
Nicholas-Applegate International Growth Qualified Portfolio

Nicholas-Applegate Short-Intermediate Institutional Fixed Income Portfolio

Nicholas-Applegate Fully Discretionary Institutional Fixed Income Portfolio

Nicholas-Applegate Mini Cap Growth Institutional Portfolio

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<PAGE>

SCHEDULE II
-----------

COMMITMENTS. ADDRESSES, ETC.
----------------------------

Amount of
Name and Address of Lender Commitment
- ------------------------- ----------

CHEMICAL BANK $
270 Park Avenue
New York, New York 10017
Attention:
Facsimile:

UNION BANK OF CALIFORNIA, N.A. $
350 California Street, 11th Floor
San Francisco, CA 94104
Attention: David C. Hants, V.P.
Facsimile: (415) 705-7037

AUSTRALIA AND NEW ZEALAND $
BANKING GROUP LIMITED
1177 Avenue of the Americas
New York, New York 10036
Attention: Amit K. Walia, Firt V.P.
Facsimile: (212) 801-9131

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<PAGE>

EXHIBIT 2.5(e)
--------------

FORM OF NOTE

$ New York, New York
------------------------ 19
--------- ---, ---

FOR VALUE RECEIVED, the undersigned _________________ (the
"BORROWER"), hereby unconditionally promises to pay to the order of
_________________ (the "Lender") at the office of Chemical Bank, located at 270
Park Avenue, New York, New York 10017, in lawful money of the United States of
America and in immediately available funds, on the Termination Date the
principal amount of (a) ____________________ DOLLARS ($________), or, if less
(b) the aggregate unpaid principal amount of all Loans made by the Lender to the
Borrower pursuant to subsection 2.1 of the Credit Agreement, as hereinafter
defined. The Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time outstanding at
the rates and on the dates specified in such Credit Agreement.

Anything in this Note to the contrary notwithstanding, the Borrower
shall be liable hereunder only for Loans borrowed by it under the Credit
Agreement (as defined below) and shall not be liable for the borrowings of any
other borrower under the Credit Agreement. The sole source of repayment of the
principal of and interest on each Loan hereunder made with respect to the
Borrower shall be the revenues and assets of such Borrower, and not the revenues
and assets of any other Borrower under the Credit Agreement or the revenues and
assets of the Fund (as defined below) of which such Borrower is a series.

The holder of this Note is authorized to endorse on the schedule
annexed hereto and made a part hereof the date and amount of each Loan made to
the Borrower pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal thereof. Each such endorsement shall
constitute PRIMA FACIE evidence of the accuracy of the information endorsed.
The failure to make any such endorsement shall not affect the obligations of the
Borrower in respect of such Loan.

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<PAGE>

This Note (a) is one of the Notes referred to in the Credit Agreement,
dated as of April 10, 1996 (as amended, supplemented or otherwise modified from
time to time, the "CREDIT AGREEMENT"), among Nicholas-Applegate Mutual Funds, on
behalf of itself, the Borrower and each other series of the Fund named therein,
the Lender, the other banks and financial institutions from time to time parties
thereto and Chemical Bank, as Administrative Agent, (b) is subject to the
provisions of the Credit Agreement and (c) is subject to optional and mandatory
prepayment in whole or in part as provided in the Credit Agreement.

Upon the occurrence of one or more Events of Default, all amounts then
remaining unpaid on this Note shall become, or may be declared to be,
immediately due and payable, all as provided in the Credit Agreement.

All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.

As set forth in Section 9.15 of the Credit Agreement, no Non-Recourse
Person defined therein shall have any personal liability under or by reason of
this Note, the Credit Agreement or the Loan Documents, and all obligations of
the Borrower hereunder and thereunder are enforceable solely against the
Borrower and the Borrower's assets and properties.

Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK.

NICHOLAS-APPLEGATE MUTUAL FUNDS, on
behalf of the Borrower

By:
------------------------------
Name:
Title:

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<PAGE>

EXHIBIT 4.1(h)
--------------
FORM OF OPINION OF COUNSEL TO BORROWER

April 10, 1996

Chemical Bank, as Administrative Agent
270 Park Avenue
New York, New York 10017

And each of the Lenders parties to the
Credit Agreement referred to below

We have acted as counsel to Nicholas-Applegate Mutual Funds, a
Delaware business trust (the "Fund"), and Nicholas-Applegate Investment Trust, a
Delaware business trust ("NAIT"), in connection with the Credit Agreement dated
as of April 10, 1996 (the "Credit Agreement"), among the Fund, on behalf of
itself and certain of its series of shares (each of which series is a "Borrower"
and collectively the "Borrowers"), the Lenders parties thereto (the "Lenders")
and Chemical Bank, as administrative agent for the Lenders (in such capacity,
the "Administrative Agent"), receipt of which has been acknowledged by NAIT.

The opinions expressed below are furnished to you pursuant to
subsection 4.1(h) of the Credit Agreement. Unless otherwise defined herein,
terms defined in the Credit Agreement and used but not otherwise defined herein
shall have the meanings given to them in the Credit Agreement.

In arriving at the opinions expressed below, (a) we have examined and
relied on the originals, or copies certified or otherwise identified to our
satisfaction, of the Credit Agreement and the other Loan Documents, and (b) we
have examined such trust documents and records of the Fund, the Borrowers and
NAIT and such other instruments and certificates or statements of public
officials, officers and representatives of the Fund and the Borrowers and other
Persons as we have deemed necessary for the purposes of this opinion. We have
made such investigations of law, and have relied upon such certificates of
officers of the Fund, in each case as we have deemed necessary as a basis for
the opinions expressed below.

In rendering the opinions expressed below, we have assumed with your
permission, without independent investigation or inquiry: (a) the authenticity
of all documents submitted to us as originals, (b) the genuineness

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<PAGE>

of all signatures on all documents that we examined (other than those of the
Fund and officers of the Fund), (c) the conformity to authentic originals of
documents submitted to us as copies, (d) that the Lenders and the Administrative
Agent have each been duly authorized to execute and deliver, and have each duly
executed and delivered, the Credit Agreement and the other Loan Documents and
have each been duly authorized to perform their respective obligations
thereunder, and that the Credit Agreement and the other Loan Documents are valid
and binding obligations of the Lenders and the Administrative Agent enforceable
in accordance with their terms, (e) that each Lender is a "bank" as such term is
defined in the 1940 Act, (f) that the factual representations and warranties
contained in the Loan Documents are true and correct (we have no reason to
believe that this is not the case), and (g) that the facts contained in the
instruments and certificates or statements of public officials, officers and
representatives of the Fund and the Borrowers and other Persons on which we have
relied for the purposes of this opinion are true and correct (we have no reason
to believe that this is not the case).

When in the immediately preceding paragraph or in our opinions
expressed below we indicate that the existence or absence of facts is stated "to
our knowledge" or that "we have no reason to believe" the existence or absence
of facts, we mean the current actual knowledge or reason to believe of the
attorneys in this firm who have devoted substantive attention to the
transactions contemplated by the Loan Documents (but not the knowledge or reason
to believe of any other attorney in this firm or any constructive or imputed
knowledge of or reason to believe any information), without any investigation
for the purpose of rendering the opinions expressed below.

Based upon and subject to the foregoing, we are of the opinion that:

1. Each of the Fund and NAIT is duly organized, validly existing and
in good standing under the laws of State of Delaware, and has the trust power
and authority to own its property and to conduct the business in which it is
currently engaged.

2. The Fund, on its own behalf and on behalf of each Borrower, has
the requisite trust power and authority to execute, deliver and perform the Loan
Documents to which it is a party and to borrow under the Credit Agreement. The
Fund, on its own behalf and on behalf of each Borrower, has taken all necessary
trust action to authorize the borrowings

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<PAGE>

on the terms and conditions of the Credit Agreement and the other Loan Documents
and to authorize the execution, delivery and performance of the Loan Documents
to which it is a party. No consent or authorization of, filing with, notice to
or other act by or in respect of any New York state, California state or United
States Governmental Authority is required to be obtained or made, as the case
may be, by the Fund or any Borrower, or by NAIT, to ensure the validity or
enforceability of the Loan Documents against the Fund or the Borrowers.

3. Each of the Credit Agreement and the other Loan Documents to
which the Fund is a party has been duly executed and delivered by the Fund, on
its own behalf and on behalf of each Borrower, and is enforceable against the
Fund on behalf of each such Borrower in accordance with its terms.

4. The execution, delivery and performance of the Loan Documents to
which the Fund is a party (a) will not violate or constitute a default under any
existing New York state or United States Requirement of Law which is applicable
to the Fund or any other Borrower, or to NAIT, in connection with transactions
of the type contemplated by the Loan Documents, or to our knowledge any
Contractual Obligations of the Fund or any Borrower, or of NAIT, and (b) to our
knowledge, will not result in, or require, the creation or imposition of any
Lien on any of their respective properties or revenues pursuant to any such
Requirement of Law or Contractual Obligations.

5. To our knowledge, no litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or threatened by
or against the Fund or any Borrower, or NAIT, or against any of their respective
properties or revenues (a) with respect to the Loan Documents, or (b) which
could reasonably be expected to have a Material Adverse Effect.

6. To our knowledge, neither the Fund nor any Borrower, nor NAIT, is
in default with respect to any Contractual obligation or Requirement of Law,
which default could reasonably be expected to have a Material Adverse Effect.

7. A California court addressing the question should respect the
provisions of Section 9.11 of the Credit Agreement applying New York state law
to questions arising under the Credit Agreement.

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<PAGE>

The opinions expressed herein are limited to the laws of the State of
New York, the State of California, the Business Trust Act of the State of
Delaware, and applicable federal laws of the United States, and we express no
opinion herein with respect to the effect or applicability of the laws of any
other jurisdiction.

The opinions set forth above are subject to the following additional
qualifications, assumptions, limitations and exceptions:

Our opinions in paragraph 2 above are limited to laws and regulations
normally applicable to transactions of the type contemplated in the Loan
Documents.

Our opinions in paragraph 3 above are subject to the qualification
that each of the Loan Documents is subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and other laws and court
decisions currently or hereafter in effect affecting the rights or remedies of
creditors and general principles of equity. In this regard, without limiting
the foregoing, we wish to point out that (i) specific performance and other
equitable remedies may be unavailable, (ii) provisions of the Loan Documents to
the extent they expressly or by implication waive broadly or vaguely stated
rights, unknown future rights, defenses, or obligations or rights granted by
law, or waivers which are against public policy or prohibited by law, including,
without limitation, set-off without notice, may be unenforceable, (iii) the
provisions of the Loan Documents are subject to standards of materiality,
reasonableness and good faith, including an obligation on the part of the
Administrative Agent, each Lender or any other relevant Person to act, including
with respect to enforcement thereof and determinations thereunder, on a
commercially reasonable basis and in good faith, and such provisions will be
interpreted in a manner consistent with commercial reasonableness and good
faith, (iv) a holder of an obligation may, under certain circumstances, be
called upon to prove the outstanding amount thereof, (v) the indemnification
provisions may be limited to the extent they purport to provide for indemnity
for a Person's wrongful or grossly negligent acts and otherwise by applicable
laws and public policy considerations, including federal and state securities
laws and public policies related thereto, (vi) default interest rates,
liquidated damage provisions or other provisions which may be construed as a
penalty or forfeiture, may be unenforceable, and (vii) various rights and
remedies of the Administrative Agent and/or the Lenders contained in the

- 64 -

<PAGE>

Loan Documents may be unenforceable in whole or in part (however, such
unenforceability will not, in our opinion and subject to the other
qualifications set forth herein, make the rights and remedies afforded thereby,
taken as a whole, inadequate to enforce the Fund's or any Borrower's obligations
upon a material default by the Fund or any Borrower) and such rights and
remedies may be subject to the rights of or obligations to third parties. In
rendering our opinions in paragraph 3, we have also assumed that for purposes of
Section 5-501 6.b. of the New York General Obligation Law any loan made pursuant
to the Loan Documents will be treated as made to one borrower.

Our opinion in paragraph 7 above assumes that the question is properly
presented and argued, that New York is considered to have a substantial
relationship to the transactions contemplated by the Credit Agreement, and that
the Credit Agreement does not violate the public policy of the State of
California.

The foregoing opinions are also subject to the qualification that we
express no opinion as to:

(i) any rights in or title to any property;

(ii) the acceptance by a Federal court located in the State of New
York of the adjudication of a dispute arising under any of the Loan Documents;

(iii) the effect on our opinions regarding the Loan Documents arising
out of the status or activities of any Person (other than the Fund and the
Borrowers) in the State of New York or elsewhere, or arising out of the laws of
any jurisdiction other than the State of New York;

(iv) state securities laws or regulations, state or federal tax laws
or regulations, or any ERISA laws or regulations; or

(v) laws or regulations of any municipality or other political
subdivision of any State.

The opinions expressed herein are solely for your benefit, and for the
benefit of your successors and permitted assigns pursuant to the Credit
Agreement, in connection with the above transactions, and such opinions may not
be relied on in any manner or for any purpose by any other Person other than
your counsel, Pryor, Cashman, Sherman & Flynn. In addition, this opinion is
rendered as of the date hereof, and we do not undertake to advise you of

- 65 -

<PAGE>

matters which occur subsequent to the date hereof and which affect the opinions
expressed herein.

Very truly yours,

- 66 -
<PAGE>

EXHIBIT 9.6 (C)
---------------

FORM OF ASSIGNMENT AND ACCEPTANCE

Reference is made to the Credit Agreement, dated as of April 10, 1996
(as amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among Nicholas-Applegate Mutual Funds, on behalf of itself (the
"Fund") and each other series of the Fund named therein (the "BORROWERS"), the
Lender, the other banks and financial institutions from time to time parties
thereto and Chemical Bank, as Administrative Agent for the Lenders (in such
capacity, the "Administrative Agent"). Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement.

_____________________ (the "ASSIGNOR") and ___________________
ASSIGNEE") agree as follows:

1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below) the interest described in Schedule 1 hereto
(the "ASSIGNED INTEREST") in and to the Assignor's rights and obligations under
the Credit Agreement.

2. The Assignor (a) makes no representation or warranty and assumes
no responsibility with respect to any connection with the Credit Agreement or
with respect to the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Loan Document or any
other instrument or document furnished pursuant thereto, other than that the
Assignor has not created any adverse claim upon the interest being assigned by
it hereunder and that such interest is free and clear of any such adverse claim;
(b) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower, or any other obligor or the
performance or observance by any Borrower, or any other obligor of any of their
respective obligations under the Credit Agreement or any other Loan Document or
any other instrument or document furnished pursuant hereto or thereto; and (c)
attaches any Notes held by it evidencing the Assigned Interest and (i) requests
that the Administrative Agent, upon request by the Assignee, exchange the
attached Notes for a new Note or Notes payable to the Assignee and (ii) if the
Assignor has retained any interest in the Assigned Interest, requests

- 67 -

<PAGE>

that the Administrative Agent exchange the attached Notes for a new Note or
Notes payable to the Assignor, in each case in amounts which reflect the
assignment being made hereby (and after giving effect to any other assignments
which have become effective on the Effective Date).

3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit Agreement, together with copies of such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (c) agrees
that it will, independently and without reliance upon the Assignor, the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement, the
other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; (d) appoints and authorizes the Administrative Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under the Credit Agreement, the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto as are delegated to the
Administrative Agent by the terms thereof, together with such powers as are
incidental thereto; and (e) agrees that it will perform in accordance with its
terms all the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Lender including, if it is organized under
the laws of a jurisdiction outside the United States, its obligation pursuant to
subsection 2.11(b) of the Credit Agreement.

4. The effective date of this Assignment and Acceptance shall be
_____________ (the "EFFECTIVE DATE"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Administrative Agent for
acceptance by it and recording by the Administrative Agent pursuant to the
Credit Agreement, effective as of the Effective Date (which shall not, unless
otherwise agreed to by the Administrative Agent, be earlier than five Business
Days after the date of such acceptance and recording by the Administrative
Agent) .

5. Upon such acceptance and recording, from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignee whether such amounts have accrued prior to the
Effective Date or accrue subsequent to the Effective Date.

- 68 -

<PAGE>

The Assignor and the Assignee shall make all appropriate adjustments in payments
by the Administrative Agent for periods prior to the Effective Date or with
respect to the making of this assignment directly between themselves.

6. From and after the Effective Date, (a) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.

7. This Assignment and Acceptance shall be governed by and construed
in accordance with the substantive laws of the State of New York.

IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.

- 69 -

<PAGE>

SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE
RELATING TO THE CREDIT AGREEMENT
DATED AS OF APRIL 10, 1996,
AMONG
NICHOLAS-APPLEGATE MUTUAL FUNDS
ON BEHALF OF ITSELF
AND EACH SERIES OF SHARES
OF IT NAMED THEREIN,
THE LENDERS PARTIES THERETO
AND
CHEMICAL BANK, AS ADMINISTRATIVE AGENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Name of Assignor:

Name of Assignee:

Effective Date of Assignment:

Principal Commitment Percentage
Amount Assigned Assigned (1)
--------------- ------------
$ %
---------------- ----------------
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]

By: By:
------------------------ ----------------------
Name: Name:
Title: Title:

Accepted and Consented To: Consented To:

CHEMICAL BANK, NICHOLAS-APPLEGATE MUTUAL FUNDS,
as Administrative Agent on behalf of itself
and each series of shares of
it named therein

By: By:
------------------------ ----------------------
Name: Name:
Title: Title:

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

(1) Calculate the Commitment Percentage that is assigned to at least 15 decimal
places and show as a percentage of the aggregate commitments of all
Lenders.

-70-
<PAGE>

EXHIBIT 9.16(a)
---------------

FORM FOR DESIGNATION OF NEW BORROWERS

_________________ ___, 199__

Chemical Bank, as Administrative Agent
[List Lenders]

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement, dated as of April 10,
1996 (the "CREDIT AGREEMENT"), among Nicholas-Applegate Mutual Funds, on behalf
of itself (the "Fund") and each other series of the Fund named therein (the
"Borrowers"), the Lender, the other banks and financial institutions from time
to time parties thereto and Chemical Bank, as Administrative Agent for the
Lenders (in such capacity, the "ADMINISTRATIVE AGENT"). Capitalized terms used
herein shall have the meanings ascribed to them in the Credit Agreement.

The Fund on behalf of itself and [the new Series] (the "SERIES") hereby
requests pursuant to Section 9.16 of the Credit Agreement that the Series be
admitted as an additional Borrower under the Credit Agreement. Furthermore, the
Fund requests that Schedule I to the Credit Agreement be replaced with the form
of Schedule I attached hereto.

The Fund on behalf of itself and the Series hereby represents and warrants
to the Administrative Agent and each Lender that as of the date hereof and after
giving effect to the admission of the Series as an additional Borrower under the
Credit Agreement: (i) the representations and warranties set forth in Section 3
of the Credit Agreement are true and correct with respect to the Series; (ii)
the Series is in compliance in all material respects with all the terms and
provisions set forth in the Credit Agreement on its part to be observed or
performed as of the date hereof and after giving effect to the admission; (iii)
no Default or Event of Default with respect to the Series, nor any event which
with the giving of notice or expiration of any applicable grace period or both
would constitute such a Default or Event of Default with respect to the Series
has occurred and is continuing.

The Series agrees to be bound by the terms and conditions of the Credit
Agreement in all respects as a Borrower

-71-

<PAGE>

thereunder and hereby assumes all of the obligations of a Borrower thereunder.

Please indicate your assent to the admission of the Series as an additional
Borrower under the Credit Agreement and the replacement of Schedule I to the
Credit Agreement by signing below where indicated.

NICHOLAS-APPLEGATE MUTUAL FUNDS for itself and on
behalf of each Borrower

By:
-----------------------------------------------
Name:
Title:

AGREED AND ACCEPTED:

CHEMICAL BANK,
as Administrative Agent and as a Lender

By:
-------------------------------------
Name:
Title:

UNION BANK OF CALIFORNIA, N.A.

By:
-------------------------------------
Name:
Title:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

By:
-------------------------------------
Name:
Title:

-72-

<PAGE>
SCHEDULE III
------------

INVESTMENT ADVISORY AGREEMENTS
------------------------------

<PAGE>

SCHEDULE IV
-----------

CUSTODIAN AGREEMENTS
--------------------

<PAGE>

SCHEDULE V
----------

DISTRIBUTION AGREEMENTS
-----------------------

<PAGE>

SCHEDULE VI
-----------

ADMINISTRATION AGREEEMEMNTS
---------------------------

<PAGE>

SCHEDULE VII
------------

SERIES OF NICHOLAS-APPLEGATE INVESTMENT TRUST
---------------------------------------------

Nicholas-Applegate Emerging Growth Fund

Nicholas-Applegate Core Growth Fund

Nicholas-Applegate Worldwide Growth Fund

Nicholas-Applegate Income & Growth Fund

Nicholas-Applegate Balanced Growth Fund

Nicholas-Applegate Emerging Countries Fund

Nicholas-Applegate Government Income Fund

Nicholas-Applegate International Growth Fund

Nicholas-Applegate Short-Intermediate Fixed Income Fund

Nicholas-Applegate Fully Discretionary Fixed Income

Nicholas-Applegate Mini Cap Growth Fund

<PAGE>

SCHEDULE VIII
-------------

DESIGNATED BORROWERS
--------------------

Nicholas-Applegate Emerging Countries Portfolio A

Nicholas-Applegate Emerging Countries Portfolio B

Nicholas-Applegate Emerging Countries Portfolio C

Nicholas-Applegate Emerging Countries Institutional Portfolio

Nicholas-Applegate Emerging Countries Qualified Portfolio

<PAGE>

INSERT [FORM OF NOTE]

<PAGE>

Schedule A to Note
------------------

LOANS AND REPAYMENTS OF LOANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DATE AMOUNT OF AMOUNT OF UNPAID NOTATION
LOANS PRINCIPAL PRINCIPAL MADE BY
OF LOANS BALANCE OF
REPAID LOANS
- --------------------------------------------------------------------------------

<PAGE>
Exhibit 11.1

CONSENT OF INDEPENDENT ACCOUNTANTS

To the Board of Trustees and Shareholders
of Nicholas-Applegate Mutual Funds:

We consent to the following with respect to Post-Effective Amendment No. 30 to
the Registration Statement on Form N-1A of the Nicholas-Applegate Mutual Funds
(File No. 33-56094) (the "Registration Statement"):

1. The incorporation by reference of (a) our report dated May 12, 1995 on our
audits of the financial statements and financial highlights of the
following portfolios of the Nicholas-Applegate Mutual Funds: Emerging
Growth A & C Portfolios, Core Growth A & C Portfolios, Income and Growth A
& C Portfolios, Balanced Growth A & C Portfolios, Government Income A & C
Portfolios, and Money Market Portfolio, and (b) our report dated May 12,
1995 on our audits of the financial statements of the following series of
the Nicholas-Applegate Investment Trust: Emerging Growth Fund, Core Growth
Fund, Income & Growth Fund, Balanced Growth Fund, Government Income Fund,
and Money Market Fund, which reports are included in the Annual Report to
Shareholders for the year ended March 31, 1995 which is incorporated by
reference in the Registration Statement.

2. The incorporation by reference of (a) our report dated May 12, 1995 on our
audits of the financial statements and financial highlights of the
following portfolios of the Nicholas-Applegate Mutual Funds: Worldwide
Growth A & C Portfolios, International Growth A & C Portfolios, and
Emerging Countries A & C Portfolios, and (b) our report dated May 12, 1995
on our audits of the financial statements of the following series of the
Nicholas-Applegate Investment Trust: Worldwide Growth Fund, International
Growth Fund, and Emerging Countries Fund, which reports are included in the
Annual Report to Shareholders for the year ended March 31, 1995 which is
incorporated by reference in the Registration Statement.

3. The incorporation by reference of (a) our report dated May 12, 1995 on our
audits of the financial statements and financial highlights of the
following portfolios of

<PAGE>
the Nicholas-Applegate Mutual Funds: Worldwide Growth Institutional
Portfolio, International Growth Institutional Portfolio, and Emerging
Countries Institutional Portfolio, and (b) our report dated May 12, 1995 on
our audits of the financial statements of the following series of the
Nicholas-Applegate Investment Trust: Worldwide Growth Fund, International
Growth Fund, and International Growth Fund, which reports are included in
the Annual Report to Shareholders for the year ended March 31, 1995 which
is incorporated by reference in the Registration Statement.

4. The incorporation by reference of (a) our report dated May 12, 1995 on our
audits of the financial statements and financial highlights of the
following portfolios of the Nicholas-Applegate Mutual Funds: Emerging
Growth Institutional Portfolio, Core Growth Institutional Portfolio, Income
& Growth Institutional Portfolio, and Balanced Growth Institutional
Portfolio, and (b) our report dated May 12, 1995 on our audits of the
financial statements of the following series of the Nicholas-Applegate
Investment Trust: Emerging Growth Fund, Core Growth Fund, Income & Growth
Fund, and Balanced Growth Fund, which reports are included in the Annual
Report to Shareholders for the year ended March 31, 1995 which is
incorporated by reference in the Registration Statement.

5. The references to our Firm under the headings "Financial Highlights" in the
Prospectuses and "Financial Statements" in the Statement of Additional
Information which are included in the Registration Statement.

COOPERS & LYBRAND L.L.P.
Los Angeles, California
May 30, 1996

<PAGE>
Exhibit 11.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Financial
Highlights," "Additional Information," "Independent Auditors," and "Financial
Statements," and to the use of our reports dated May 10, 1996, in Post-Effective
Amendment No. 30 to the Registration Statement and related Statement of
Additional Information of Nicholas-Applegate Mutual Funds.

ERNST & YOUNG L.L.P.

Los Angeles, California
May 29, 1996

<PAGE>

EXHIBIT 13
----------
PUTNAM LOVELL
Incorporated Nicholas-Applegate Mutual Funds
501 West Broadway, Suite 2000
San Diego, CA 92101 April 1, 1993

Ladies and Gentlemen:

This letter is written in connection with your sale to us today
of 1,500 shares of beneficial interest ("Shares") of each of the
Nicholas-Applegate Core Growth Portfolio A, Nicholas-Applegate
Income and Growth Portfolio A, Nicholas-Applegate Balanced Growth
Portfolio A, Nicholas-Applegate Worldwide Growth Portfolio A, and
Nicholas-Applegate Government Income Portfolio A series of
Nicholas-Applegate Mutual Funds (the "Trust") at $12.50 per
share, and 6,250 shares of the Nicholas-Applegate Money Market
Portfolio series of the Trust.

In connection with such sales, we understand that: (i) the Shares
have not been registered under the Securities Act of 1993, as
amended (the "1933 Act"); (ii) your sale of the Shares to us is
made in reliance on such sale being exempt under Section 4 (2) of
the 1933 Act as not involving any public offering; and (iii) in
part, your reliance on such exemption is predicated on our
representation, which we hereby confirm, that we are acquiring
the Shares for investment for our own account as the sole
beneficial owner thereof, and not with a view to or in connection
with any resale or distribution of the Shares or of any interest
therein.

We hereby agree that we will not sell, assign or transfer the
Shares or any interest therein, except upon repurchase or
redemption by the Trust, unless and until the Shares have been
registered under the 1933 Act or you have received an opinion of
your counsel indicating to your satisfaction that such sale,
assignment or transfer will not violate the provisions of the
1933 Act or any rules or regulations promulgated thereunder. We
further agree that if any portion of the Shares is redeemed prior
to the full amortization of the Trust's organizational expenses,
the proceeds thereof will be reduced by a pro rata portion of
such unamortized balance in the same proportion as the number of
such Shares being redeemed bears to the number of such Shares
outstanding at the time of redemption.

PUTNAM LOVELL INCORPORATED
317 Rosecrans Avenue
Manhattan Beach
California 90266 By: ILLEGIBLE
--------------------------------
Tel (310) 545-3000 Chief Executive Officer
Fax (310) 545-2167

<PAGE>

EXHIBIT 15
----------

NICHOLAS-APPLEGATE MUTUAL FUNDS

DISTRIBUTION PLAN

INTRODUCTION

The Board of Trustees (the "Board") of Nicholas-Applegate Mutual Funds
(the "Trust") has approved the adoption of the Distribution plan (the "Plan")
set forth below with respect to the distribution of shares of beneficial
interest (the "Shares") of its various series currently and hereafter in effect
(each a "Portfolio" and collectively the "Portfolios"), including the Portfolio
A Series, Portfolio B Series and Portfolio C Series of Shares. This Plan is
designed to conform to the requirements of Rule 12b-1 promulgated under the
Investment Company Act of 1940, as amended (the "Act").

The Trust on behalf of each Portfolio has entered into a distribution
agreement (the "Distribution Agreement") pursuant to which the Trust will employ
the Distributor to distribute Shares of the Portfolio. Under the Distribution
Agreement, the Distributor will be entitled to receive payments from investors
of front-end sales charges with respect to the sale of Shares of the Portfolio A
Series and contingent deferred sales charges with respect to redemptions of
Shares of the Portfolio B Series and certain redemptions of Shares of the
Portfolio A Series and Portfolio C Series. Under this Plan, the Trust on behalf
of each Portfolio intends to compensate the Distributor for expenses incurred,
and services and facilities provided, by the Distributor in distributing Shares
of the Portfolio.

THE PLAN

The material aspects of the Plan are as follows:

SECTION 1. The Portfolios will pay the Distributor for: (a)
expenses incurred in connection with advertising and marketing shares of the
Portfolios including but not limited to any advertising or marketing via radio,
television, newspapers, magazines, telemarketing or direct mail solicitations;
(b) periodic payments of fees for distribution assistance made to one or more
securities dealers, or other industry professionals, such as investment
advisers, accountants, estate planning firms and the

<PAGE>

Distributor itself (collectively "Service Organizations") in respect of the
average daily value of the Portfolios' Shares beneficially owned by persons
("Clients") for whom the Service Organization is the dealer of record or holder
of record or with whom the Service Organization has a servicing relationship,
and (c) expenses incurred in preparing, printing and distributing the
Portfolios' prospectuses and statements of additional information (except those
used for regulatory purposes or for distribution to existing shareholders of the
Portfolios).

SECTION 2. While this Plan is in effect the Distributor will be
compensated by each Portfolio for such distribution expenses that are incurred,
and services and facilities that are provided, in connection with Shares of the
Portfolio on a monthly basis, at the annual rate set forth in Schedule A hereto
which is based on the Portfolio's average daily net assets during such month.
These monthly payments to the Distributor will be made in accordance with and
subject to the conditions set forth below. For the purposes of determining the
amounts payable under the Plan, the value of a Portfolio's net assets shall be
computed in the manner specified in the Portfolio's prospectus and statement of
additional information as then in effect for the computation of the value of the
Portfolio's net assets.

The distribution fees payable to the Distributor are designed to
compensate the Distributor for the expenses it incurs and the services it
renders in distributing shares of the Portfolios. However, because this Plan is
a compensation plan, the distribution fees are payable even if the amount paid
exceeds the Distributor's actual expenses. If an any year the Distributor's
expenses incurred in connection with the distribution of Shares of a Portfolio
exceed the distribution fees paid by the Portfolio, the Distributor will recover
such excess only if this Plan with respect to the Portfolio continues to be in
effect in some later year when the distribution fees exceed the Distributor's
expenses. There is no limit on the periods during which unreimbursed expenses
may be carried forward, although the Trust is not obligated to repay any
unreimubrsed expenses for a Portfolio that may exist at such time, if any, as
this Plan terminates or is not continued with respect to the Portfolio. No
interest, carrying or finance charge will be imposed on any amounts carried
forward.

Payment made out of or charged against the assets of a particular
Portfolio must be in payment for

-2-

<PAGE>

distribution expenses incurred on behalf of such Portfolio and which are
described herein.

SECTION 3. Payments by the Distributor to a Service Organization
described in this Plan shall be subject to compliance by the Service
Organization with the terms of a selling group agreement between the Service
Organization and the Distributor. If an investor in a Fund ceases to be a
client of a Service Organization that has entered into a selling group agreement
with the Distributor, but continues to hold shares of the Portfolio, the
Distributor will be entitled to receive similar payments in respect of the
distribution assistance provided with respect to such investor.

SECTION 4. The Distributor shall provide the Board, at least
quarterly, with a written report of all amounts expended pursuant to this Plan.
The report shall state the purposes for which the amounts were expanded.

SECTION 5. This Plan shall not take effect with respect to a
Portfolio until it has been approved by a vote of a majority of the outstanding
voting securities (as defined in the Act) of the Shares of the Portfolio, which
may be by vote of the initial shareholder of the Portfolio's Shares. If so
approved, this Plan, unless earlier terminated in accordance with its terms,
shall continue in full force and effect thereafter shall continue automatically
for successive annual periods provided such continuance is approved by a
majority of the Board, including a majority of the Trustees who are not
"interested person" (as defined in the Act) of the Trust and who have no direct
or indirect financial interest in the operation of this Plan or in any
agreements entered into in connection with this Plan (the "Disinterested
Trustees"), pursuant to a vote cast in person at a meeting called for the
purpose of voting on the continuance of the Plan.

SECTION 6. This Plan may be amended at any time by the Board
provided that (i) any amendment to increase materially the costs which any
Portfolio may bear for distribution pursuant to this Plan shall be effective
only upon approval by a vote of a majority of the outstanding voting securities
of the respective Portfolio, and (ii) any material amendments of the terms of
this Plan shall become effective only upon approval by a majority of the Board
and a majority of the Disinterested Trustees pursuant to a vote cast in person
at a meeting called for the purpose of voting on the Plan.

-3-

<PAGE>

SECTION 7. This Plan is terminable, as to any Portfolio, without
penalty at any time by (i) vote of the majority of the Disinterested Trustees,
or (ii) vote of a majority of the outstanding voting securities of such
Portfolio.

SECTION 8. The Board has adopted this Plan as of March 29, 1993,
as amended on February 10, 1995.

-4-

<PAGE>

SCHEDULE A

DISTRIBUTION FEES

Each Portfolio will pay the Distributor a distribution fee for the
expenses incurred, and the services and facilities provided, by the Distributor
under the Plan at the following annual rates:

1. For the Portfolio A Series (other than Nicholas-Applegate Money
Market Portfolio), an amount equal to 0.25% of each such Portfolio's average
daily net asset value.

2. For Nicholas-Applegate Money Market Portfolio, an amount equal to
0.15% of such Portfolio's average daily net asset value.

3. For the Portfolio B and C Series (other than Nicholas-Applegate
Government Income Portfolio B and C), an amount equal to 0.75% of each such
Portfolio's average daily net asset value.

4. For Nicholas-Applegate Government Income Portfolio B and C, an
amount equal to 0.50% of such Portfolio's average daily net asset value.

-5-

<PAGE>

EXHIBIT 18.4

CERTIFICATE OF SECRETARY

The undersigned hereby certifies as follows:

1. He is the duly elected and acting Secretary of Nicholas-Applegate
Mutual Funds, a Delaware business trust (the "Trust").

2. The following resolution was duly adopted by the Board of Trustees
of the Trust at a meeting held on May 17, 1996, and is in full force and effect:

RESOLVED, that in accordance with Rule 483(b) under the Securities Act of
1933, E. Blake Moore, Jr. and Ashley T. Rabun, and each of them, are hereby
authorized to sign the Registration Statement of the Trust on Form N-1A
under the Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended, and any or all amendments thereto, on behalf of
John D. Wylie, the President of the Trust, pursuant to the Limited Power of
Attorney granted by John D. Wylie to each of them dated January 11, 1996,
and any such signature is hereby authorized, approved and ratified.

IN WITNESS WHEREOF, the undersigned has executed this Certificate on
May 31, 1996.

s/E. Blake Moore, Jr.
_____________________
E. Blake Moore, Jr.
Secretary