NICHOLAS APPLEGATE MUTUAL FUNDS, 497, 1996-08-12

NICHOLAS APPLEGATE MUTUAL FUNDS
497, 1996-08-12

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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" 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 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. THE FUND MAY INVEST WITHOUT LIMITATION 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. SEE "APPENDIX: CORPORATE BOND RATINGS."

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.
- --------------------------------------------------------------------------------

SHARES OF THE PORTFOLIOS AND INTERESTS IN THE FUNDS 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 August 2, 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.

AUGUST 2, 1996

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NICHOLAS--APPLEGATE MUTUAL FUNDS

-------------------------------------------------
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 of Investment Adviser................... 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
<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 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>
- ---------------------------------------------------------------------------------------------------------------------------------
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)
- ---------------------------------------------------------------------------------------------------------------------------------
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 0.48% 0.39% 0.50% 0.50% 0.15% 0.20%
Total other expenses 0.58% 0.49% 0.60% 0.60% 0.25% 0.30%
Total operating expenses (after expense deferral)(5) 1.58% 1.74% 1.60% 1.60% 0.90% 0.45%
</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. The Trust may sell shares of the Series A Portfolios to
certain persons at net asset value. 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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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 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>
- -------------------------------------------------------------------------------------
CORE GROWTH
Portfolio A(1) $68 $100 $135 $233
- -------------------------------------------------------------------------------------
EMERGING GROWTH
Portfolio A(1) $69 $104 $142 $247
- -------------------------------------------------------------------------------------
INCOME & GROWTH
Portfolio A(1) $68 $100 $135 $233
- -------------------------------------------------------------------------------------
BALANCED GROWTH
Portfolio A(1) $68 $100 $135 $233
- -------------------------------------------------------------------------------------
GOVERNMENT INCOME
Portfolio A(1) $56 $ 75 $ 95 $153
- -------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO(1) $ 3 $ 10 $ 17 $ 39
- -------------------------------------------------------------------------------------
</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
<PAGE>
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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.

5
<PAGE>

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.

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 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 charge 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 and Income & Growth Portfolios declare and pay quarterly
dividends; the Government Income Portfolio declares and pays monthly 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
- ------------------------------------------------------------------------------------------------------------------------
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
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 $ 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%* 1.76% 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%) (0.89%) (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% 144.97%
Average commission
rate paid** N/A N/A $ 0.0593 N/A N/A $ 0.0523 N/A N/A $ 0.0597

<CAPTION>
BALANCED GOVERNMENT
GROWTH INCOME MONEY
Portfolio Portfolio MARKET
A A Portfolio
- --------------------- --------------------------------------------------------------------------------------------------
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
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 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>

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. 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 of comparable quality.
Such securities or "junk bonds" are speculative and subject to greater

13
<PAGE>
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-year
duration is approximately nine years. In some situations the standard duration
calculation

14
<PAGE>
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>

The investment objective of each Fund and Portfolio is a fundamental policy.
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.

For the fiscal year ended March 31, 1996, the Investment Adviser received fees
and expense recoupments from the Portfolios and 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. 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 information regarding institutional private accounts
managed by the Investment Adviser that have investment objectives, policies,
strategies and risks substantially

18
<PAGE>

similar to those of the Balanced Growth Portfolio, see "Appendix: Prior
Performance of Investment Adviser." For historical performance information
regarding certain of the other Portfolios and their predecessor pooled
investment vehicles, see "Performance Information -- Prior Performance of
Certain Portfolios and Their Predecessors" in the Statement of Additional
Information.

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 0.015% 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 management fees payable by the Funds, and to
absorb the other operating expenses payable by the Funds and the Portfolios, 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% (0.16%); Balanced Growth Portfolio A-1.60% (0.70%);
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>
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; 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 from time to time pay additional cash bonuses
or other incentives to selected participating brokers or financial institutions
in connection with the sale, administration and servicing of all Portfolios. In
some cases, these bonuses or incentives may be offered only to certain brokers
or financial institutions which have sold or may sell significant amounts of
shares of the Portfolios or other series of the Trust. The Distributor currently
expects that any such additional bonuses or incentives will not exceed 0.50%.
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.

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<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>
Sales Charges as Percentage of the: Dealer Commission
Amount of Purchase NET AMOUNT OFFERING as Percentage of the
at the Offering Price INVESTED PRICE 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 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);

23
<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 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 purchases of shares of
Series A Portfolio 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

(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 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

24
<PAGE>
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.

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.

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

25
<PAGE>
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 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 charge 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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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 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

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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.

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. 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 and Income & Growth Portfolios
declare and pay quarterly dividends of net investment income. The Government
Income Portfolio declares and pays monthly 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

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

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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 of Investment Adviser," 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 June 30, 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 -- John M. Quinn and Rauscher Pierce Refnes
FBO John M. O'Quinn Foundation (53.09%), and PaineWebber, Trustee FBO John F.
Jose (25.11%); Income & Growth Portfolio A -- First Union National Bank of
Florida, Custodian for Attorney Title Insurance Fund (25.80%).

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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.

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 debt and equity 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 debt 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 debt securities
have greater yields than do shorter term debt 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 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.

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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 Balanced Growth 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.

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 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

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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
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

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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 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

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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.

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, debt or equity 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.

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"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 debt or equity
securities 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. 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

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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, U.S. Government securities or other liquid debt or equity 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 such collateral required to be
deposited 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, U.S. Government
securities or other liquid debt or equity 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. Each Fund will comply
with these requirements. In addition, 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 "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 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

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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 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

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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 or liquid debt or equity securities 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 (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.

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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. See "Investment Objectives, Policies and Risks -- Options on
Securities and Securities Indices" and "-- Futures Contracts and Related
Options" in the Statement of Additional Information.

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 "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>

may determine, pursuant to guidelines established by the Master Trust's Board of
Trustees, 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 OF INVESTMENT ADVISER

The following table sets forth the Investment Adviser's composite performance
data relating to the historical performance of institutional private accounts
managed by the Investment Adviser, since the date indicated, that have
investment objectives, policies, strategies and risks substantially similar to
those of the Balanced Growth Portfolio. The data is provided to illustrate the
past performance of the Investment Adviser in managing substantially similar
accounts as measured against specified market indices and does not represent the
performance of the Balanced Growth Portfolio. Investors should not consider this
performance data as an indication of future performance of the Balanced Growth
Portfolio or of the Investment Adviser.

The Investment Adviser's composite performance data shown below were calculated
in accordance with recommended standards of the Association for Investment
Management and Research ("AIMR"*), retroactively applied to all time periods.
All returns presented were calculated on a total return basis and include all
dividends and interest, accrued income and realized and unrealized gains and
losses. All returns reflect the deduction of investment advisory fees, brokerage
commissions and execution costs paid by the Investment Adviser's institutional
private accounts, without provision for federal or state income taxes. Custodial
fees, if any, were not included in the calculation. The Investment Adviser's
composite includes all actual, fee-paying, discretionary institutional private
accounts managed by the Investment Adviser that have investment objectives,
policies, strategies and risks substantially similar to those of the Balanced
Growth Portfolio. Securities transactions are accounted for on the trade date
and accrual accounting is utilized. Cash and equivalents are included in
performance returns. The monthly returns of the Investment Adviser's composite
combine the individual accounts' returns (calculated on a time-weighted rate of
return that is revalued whenever cash flows exceed $500) by asset-weighing each
individual account's asset value as of the beginning of the month. Quarterly and
yearly returns are calculated by geometrically linking the monthly and quarterly
returns, respectively. The yearly returns are computed by geometrically linking
the returns of each quarter within the calendar year.

The institutional private accounts that are included in the Investment Adviser's
composite are not subject to the same types of expenses to which the Balanced
Growth Portfolio are subject nor to the diversification requirements, specific
tax restrictions and investment limitations imposed on the Balanced Growth
Portfolio by the Investment Company Act or Subchapter M of the Internal Revenue
Code. Consequently, the performance results for the Investment Adviser's
composite could have been adversely affected if the institutional private
accounts included in the composite had been regulated as investment companies
under the federal securities laws.

The investment results of the Investment Adviser's composite presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the

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

*AIMR is a non-profit membership and education organization with more than
60,000 members worldwide that, among other things, has formulated a set of
performance presentation standards for investment advisers. These AIMR
performance presentation standards are intended to (i) promote full and fair
presentations by investment advisers of their performance results, and (ii)
ensure uniformity in reporting so that performance results of investment
advisers are directly comparable.

49
<PAGE>

Balanced Growth Portfolio or an individual investor investing in such Portfolio.
Investors should also be aware that the use of a methodology different from that
used below to calculate performance could result in different performance data.

<TABLE>
<CAPTION>
BALANCED GROWTH PERFORMANCE
--------------------------------------------------
INVESTMENT ADVISER'S LEHMAN BROS.
BALANCED GROWTH S&P 500 GOVT./CORP.
YEAR COMPOSITE INDEX(1) INDEX(2)
- ------------------------------ ---------------------- ---------- --------------
<S> <C> <C> <C>
1988(3)....................... 4.98% 10.25% 3.80%
1989.......................... 17.61% 31.61% 14.23%
1990.......................... 5.69% (3.04%) 8.29%
1991.......................... 32.73% 30.46% 16.13%
1992.......................... 9.40% 7.62% 7.57%
1993.......................... 20.14% (3.80%) 11.06%
1994.......................... (5.37%) 1.32% (3.61%)
1995.......................... 29.23% 37.60% 19.24%
1996(4)....................... 7.17% 10.09% (1.88%)
Last year(4).................. 21.69% 25.99% 4.66%
Last 5 years(4)............... 15.50% 16.73% 8.48%
Since inception(4)............ 14.17% 15.73% 8.84%

60% S&P 500
INDEX
40% LEHMAN
BROS.
GOV'T./CORP.
YEAR INDEX
- ------------------------------ ------------
<S> <C>
1988(3)....................... 7.67%
1989.......................... 24.59%
1990.......................... 1.58%
1991.......................... 24.61%
1992.......................... 7.67%
1993.......................... 10.52%
1994.......................... (0.67% )
1995.......................... 30.02%
1996(4)....................... 5.18%
Last year(4).................. 17.08%
Last 5 years(4)............... 12.86%
Since inception(4)............ 13.06%
</TABLE>

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

(1)The S&P 500 Index is an unmanaged index containing common stocks of 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 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.

(3) Commencement of investment operations is April 1, 1988.

(4) Through June 30, 1996.

50
<PAGE>

ADOMPRO896

<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.

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

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. THE FUND MAY INVEST WITHOUT
LIMITATION 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. SEE "APPENDIX: CORPORATE BOND RATINGS."

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.

AUGUST 2, 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................................. 19
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 of Investment Adviser................... 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(6) 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 0.48% 0.50% 0.39% 0.39% 0.58% 0.35% 0.50% 0.50% 0.50%
Total other expenses 0.58% 0.75% 0.64% 0.49% 0.83% 0.60% 0.60% 0.75% 0.75%
Total operating expenses
(after expense
deferral)(5) 1.58% 2.25% 2.14% 1.74% 2.58% 2.35% 1.60% 2.25% 2.25%
</TABLE>

<TABLE>
<CAPTION>
BALANCED GOVERNMENT
GROWTH INCOME MONEY
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio MARKET
A B C A B C Portfolio
<S> <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 4.75% None None None
Sales charge on reinvested dividends 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
Redemption fee(3) None None None None None None None
Exchange fee None None 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% 0.75% 0.40% 0.40% 0.40% 0.00%
12b-1 expenses(6) 0.25% 0.75% 0.75% 0.25% 0.50% 0.50% 0.15%
All other expenses (after expense
deferral)(5)
Shareholder service expenses 0.10% 0.25% 0.25% 0.10% 0.25% 0.25% 0.10%
Other expenses 0.50% 0.50% 0.50% 0.15% 0.15% 0.15% 0.20%
Total other expenses 0.60% 0.75% 0.75% 0.25% 0.40% 0.40% 0.30%
Total operating expenses (after expense
deferral)(5) 1.60% 2.25% 2.25% 0.90% 1.30% 1.30% 0.45%
</TABLE>

(1)
Sales charges are reduced for purchases of $50,000 or more of shares of the
Series A Portfolios. The Trust may sell shares of the Series A Portfolios to
certain persons at net asset value. 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 less than 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
management fees payable by the Funds, and to absorb other operating expenses
payable by the Funds and the Portfolios, 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
Portfolios A, B and C-1.56%, 3.39% and 2.14%; Emerging Growth Portfolios A, B
and C-1.74%, 3.26% and 2.35%; Income & Growth Portfolios A, B and C-1.76%,
7.08% and 2.28%; Balanced Growth Portfolios A, B and C-3.30%, 13.05% and 3.01%;
Government Income Portfolios 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) $ 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
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:

The Income & Growth, Balanced Growth and Government Income Funds are each
permitted to invest 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 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.

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.

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;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>

charge 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 and Income & Growth Portfolios declare and pay quarterly
dividends; the Government Income Portfolios declare and pay monthly 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 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
GROWTH GROWTH
Portfolio Portfolio
A A
- -------------------------------------------------------------------------------------------------------------
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
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
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++ (0.82%)* (0.70%) (0.89%) (1.51%)* (1.25%) (1.20%)
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
- -------------------------------- ------------------------------------
4-19-93 4-1-94 4-1-95
to to to
3-31-94 3-31-95 3-31-96
---------- ---------- ----------
<S> <C> <C> <C>
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% 1.76%
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++ 2.59%* 3.55% 3.12%
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
- ----------------------------------------------------------------------------------------------------------------------------
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
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
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 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 $0.0594 N/A N/A N/A

<CAPTION>
MONEY
MARKET
Portfolio
- ---------------------------------------------- --------------------------------------
4-19-93 4-1-94 4-1-95
to to to
3-31-94 3-31-95 3-31-96
----------- ----------- -----------
<S> <C> <C> <C>
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 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** $0.0593 $0.0523 $0.0597 $0.0594 N/A
</TABLE>

<TABLE>
<CAPTION>
CORE GROWTH EMERGING GROWTH
Portfolio C Portfolio 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
--------- ----------- ----------- --------- ----------- -----------
<S> <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
Income from investment operations:
Net investment income (deficit) (0.11) (0.17) (0.27) (0.06) (0.22) (0.29)
Net realized and unrealized gains
(losses) on securities 0.80 0.44 4.88 (0.37) 1.11 5.03
--------- ----------- ----------- --------- ----------- -----------
Total from investment operations 0.69 0.27 4.61 (0.43) 0.89 4.74
Less distributions:
Dividends from net investment income -- -- -- -- -- --
Distributions from capital gains (0.01) -- -- -- -- (0.08)
--------- ----------- ----------- --------- ----------- -----------
Net asset value, end of period $ 13.18 $ 13.45 $ 18.06 $ 12.07 $ 12.96 $ 17.62
--------- ----------- ----------- --------- ----------- -----------
--------- ----------- ----------- --------- ----------- -----------
TOTAL RETURN:+ 5.54% 2.05% 34.28% (3.44%) 7.37% 37.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 141,489 $ 143,390 $ 177,461 $ 142,874 $ 157,292 $ 207,332
Ratio of expenses to average net
assets, after expense reimbursement++ 2.17%* 2.24% 2.14% 2.34%* 2.44% 2.35%
Ratio of expenses to average net
assets, before expense reimbursement++ 2.17%* 2.24% 2.14% 2.34%* 2.44% 2.35%
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%)
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%)
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 C
- --------------------------------------- ------------------------------------
4-19-93 4-1-94 4-1-95
to to to
3-31-94 3-31-95 3-31-96
--------- ----------- -----------
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $ 12.50 $ 14.28 $ 13.03
Income from investment operations:
Net investment income (deficit) 0.24 0.41 0.40
Net realized and unrealized gains
(losses) on securities 2.11 (0.89) 2.86
--------- ----------- -----------
Total from investment operations 2.35 (0.48) 3.26
Less distributions:
Dividends from net investment income (0.24) (0.41) (0.40)
Distributions from capital gains (0.33) (0.36) --
--------- ----------- -----------
Net asset value, end of period $ 14.28 $ 13.03 $ 15.89
--------- ----------- -----------
--------- ----------- -----------
TOTAL RETURN:+ 18.76% (3.26%) 25.24%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 69,265 $ 61,792 $ 58,997
Ratio of expenses to average net
assets, after expense reimbursement++ 2.22%* 2.25% 2.25%
Ratio of expenses to average net
assets, before expense reimbursement++ 2.23%* 2.29% 2.28%
Ratio of net investment income
(deficit) to average net assets, after
expense reimbursement++ 2.28%* 3.05% 2.64%
Ratio of net investment income
(deficit) to average net assets,
before expense reimbursement++ 2.27%* 3.01% 2.61%
Portfolio turnover** 177.52% 125.51% 144.97
Average commission rate paid** N/A N/A $ 0.0597
</TABLE>

<TABLE>
<CAPTION>
BALANCED GROWTH GOVERNMENT INCOME
Portfolio C Portfolio C
- --------------------------------------------------------------------------------------------------------------------
4-19-93 4-1-94 4-1-95 4-19-93 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 $ 13.54 $ 13.76 $ 12.50 $ 12.56 $ 12.27
Income from investment operations:
Net investment income 0.08 0.11 0.24 0.25 0.63 0.77
Net realized and unrealized gains
(losses) on securities 1.04 0.22 2.44 0.29 (0.28) 0.36
--------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 1.12 0.33 2.68 0.54 0.35 1.13
Less distributions:
Dividends from net investment income (0.08) (0.11) (0.24) (0.25) (0.63) (0.77)
Distributions from capital gains -- -- -- (0.23) (0.01) --
--------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 13.54 $ 13.76 $ 16.20 $ 12.56 $ 12.27 $ 12.63
--------- ----------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- ----------- -----------
TOTAL RETURN:+ 8.91% 2.47% 19.58% 4.28% 2.96% 9.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets ($000), end of period $ 16,248 $ 16,470 $ 16,586 $ 7,345 $ 4,278 $ 2,986
Ratio of expenses to average net assets,
after expense reimbursement++ 2.24%* 2.25% 2.25% 1.50%* 1.50% 1.33%
Ratio of expenses to average net assets,
before expense reimbursement++ 2.73%* 2.60% 3.01% 3.86%* 2.67% 5.77%
Ratio of net investment income to
average net assets, after expense
reimbursement++ 0.61%* 0.83% 1.53% 2.70%* 4.58% 5.46%
Ratio of net investment income to
average net assets, before expense
reimbursement++ 0.12%* 0.48% 1.19% 0.34%* 3.41% 3.13%
Portfolio turnover** 85.43% 110.40% 197.19% 159.17% 258.72% 190.47%
Average commission rate paid** N/A N/A $ 0.0594 N/A N/A N/A
</TABLE>

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, 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.

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, 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, the Income & Growth Fund's net assets may be invested without
limitation in debt securities rated below investment grade or in unrated
securities of comparable quality if the

14
<PAGE>

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. 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 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

15
<PAGE>
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>
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>
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.

18
<PAGE>
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.

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

19
<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.

For the fiscal year ended March 31, 1996, the Investment Adviser received fees
and expense recoupments from the Funds and Portfolios 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 Portfolios A, B and C, 0.77%, (0.23%) and 0.75%; Emerging Growth
Portfolios A, B and C, 1.00%, 0.44% and 1.00%; Income & Growth Portfolios A, B
and C, 0.58%, (3.27%) and 0.72%; Balanced Growth Portfolios A, B and C, (0.95%),
(8.28%) and (0.01%); Government Income Portfolios 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 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.

20
<PAGE>

For historical performance information regarding institutional private accounts
managed by the Investment Adviser that have investment objectives, policies,
strategies and risks substantially similar to those of the Balanced Growth
Portfolios, see "Appendix: Prior Performance of Investment Adviser." For
historical performance information regarding certain other Portfolios and their
predecessor pooled investment vehicles, see "Performance Information -- Prior
Performance of Certain Portfolios and Their Predecessors" in the Statement of
Additional Information.

EXPENSE LIMITATION. To limit the expenses of each Portfolio, the Investment
Adviser has agreed to defer its management fees payable by the Funds, and to
absorb the other operating expenses payable by the Funds and the Portfolios, 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% (0.16%), 2.25% (4.83%) and

21
<PAGE>

2.25% (0.03%); Balanced Growth Portfolio A, B and C-1.60% (0.70%), 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%).

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

22
<PAGE>
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.

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

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.

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.

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.

- --------------------------------------------------------------------------------
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.

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

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.

26
<PAGE>
SERIES A PORTFOLIOS

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

<TABLE>
<CAPTION>
Sales Charges as Percentage of the: Dealer Commission
Amount of Purchase as Percentage of the
at the Offering Price NET AMOUNT INVESTED OFFERING PRICE 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 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;

27
<PAGE>
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 purchases of shares
of Series A 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

(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.

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<PAGE>
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.

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 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.

29
<PAGE>
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.

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.

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SHAREHOLDER SERVICES

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<PAGE>
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 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 charge 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.

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<PAGE>
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, 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.

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REDEEMING SHARES

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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.

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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.

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 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.

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<PAGE>
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>

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 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);

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<PAGE>
(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.

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. Such charge is also waived for redemptions of shares
purchased at net asset value by qualified retirement plans through entities
which have entered into alliance agreements with the Distributor. 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."

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.

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.

36
<PAGE>
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.

37
<PAGE>
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DIVIDENDS, DISTRIBUTIONS AND TAXES

The Core Growth and Emerging Growth 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 Government
Income Portfolios declare and pay monthly 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.

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

38
<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.

39
<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.

40
<PAGE>
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.

40
<PAGE>
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>
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 debt and equity 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 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.

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

43
<PAGE>
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>
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 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

45
<PAGE>
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, 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>
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.

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>
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.

48
<PAGE>
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.

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

49
<PAGE>
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>
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. See "Investment Objectives, Policies and Risks -- Options on Securities
and Securities Indices" and "-- Futures Contracts and Related Options" in the
Statement of Additional Information.

52
<PAGE>

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 Investment Adviser may
determine, pursuant to guidelines established by the Master Trust's Board of
Trustees, 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 OF INVESTMENT ADVISER

The following table sets forth the Investment Adviser's composite performance
data relating to the historical performance of institutional private accounts
managed by the Investment Adviser, since the dates indicated, that have
investment objectives, policies, strategies and risks substantially similar to
those of the Balanced Growth Portfolios. The data is provided to illustrate the
past performance of the Investment Adviser in managing substantially similar
accounts as measured against specified market indices and does not represent the
performance

55
<PAGE>

of the Balanced Growth Portfolios. Investors should not consider this
performance data as an indication of future performance of the Balanced Growth
Portfolios or of the Investment Adviser.

The Investment Adviser's composite performance data shown below were calculated
in accordance with recommended standards of the Association for Investment
Management and Research ("AIMR"*), retroactively applied to all time periods.
All returns presented were calculated on a total return basis and include all
dividends and interest, accrued income and realized and unrealized gains and
losses. All returns reflect the deduction of investment advisory fees, brokerage
commissions and execution costs paid by the Investment Adviser's institutional
private accounts, without provision for federal or state income taxes. Custodial
fees, if any, were not included in the calculation. The Investment Adviser's
composite includes all actual, fee-paying, discretionary institutional private
accounts managed by the Investment Adviser that have investment objectives,
policies, strategies and risks substantially similar to those of the Balanced
Growth Portfolios. Securities transactions are accounted for on the trade date
and accrual accounting is utilized. Cash and equivalents are included in
performance returns. The monthly returns of the Investment Adviser's composite
combine the individual accounts' returns (calculated on a time-weighted rate of
return that is revalued whenever cash flows exceed $500) by asset-weighing each
individual account's asset value as of the beginning of the month. Quarterly and
yearly returns are calculated by geometrically linking the monthly and quarterly
returns, respectively. The yearly returns are computed by geometrically linking
the returns of each quarter within the calendar year.

The institutional private accounts that are included in the Investment Adviser's
composite are not subject to the same types of expenses to which the Balanced
Growth Portfolios are subject nor to the diversification requirements, specific
tax restrictions and investment limitations imposed on the Balanced Growth
Portfolios by the Investment Company Act or Subchapter M of the Internal Revenue
Code. Consequently, the performance results for the Investment Adviser's
composite could have been adversely affected if the institutional private
accounts included in the composite had been regulated as investment companies
under the federal securities laws.

The investment results of the Investment Adviser's composite presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the Balanced Growth Portfolios or an individual investor
investing in such Portfolios. Investors should also be aware that the use of a
methodology different from that used below to calculated performance could
result in different performance data.

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

56
<PAGE>

<TABLE>
<CAPTION>
BALANCED GROWTH PERFORMANCE
----------------------------------------------------
INVESTMENT ADVISER'S LEHMAN BROS.
BALANCED GROWTH S&P 500 GOVT./CORP.
YEAR COMPOSITE INDEX(1) INDEX(2)
- -------------------------------------------------- ---------------------- ----------- ---------------
<S> <C> <C> <C>
1988(3)........................................... 4.98% 10.25% 3.80%
1989.............................................. 17.61% 31.61% 14.23%
1990.............................................. 5.69% (3.04%) 8.29%
1991.............................................. 32.73% 30.46% 16.13%
1992.............................................. 9.40% 3.62% 7.57%
1993.............................................. 20.14% (3.80%) 11.06%
1994.............................................. (5.37%) 1.32% (3.61%)
1995.............................................. 29.23% 37.60% 19.24%
1996(4)........................................... 7.17% 10.09% (1.88%)
Last year(4)...................................... 21.69% 25.99% 4.66%
Last 5 years(4)................................... 15.50% 16.73% 8.48%
Since inception(4)................................ 14.17% 15.73% 8.84%

60% S&P 500
INDEX
40% LEHMAN
BROS.
GOVT./CORP.
YEAR INDEX
- -------------------------------------------------- ------------
<S> <C>
1988(3)........................................... 7.67%
1989.............................................. 24.59%
1990.............................................. 1.58%
1991.............................................. 24.61%
1992.............................................. 7.67%
1993.............................................. 10.52%
1994.............................................. (0.67% )
1995.............................................. 30.02%
1996(4)........................................... 5.18%
Last year(4)...................................... 17.08%
Last 5 years(4)................................... 12.86%
Since inception(4)................................ 13.06%
</TABLE>

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

(1)
The S&P 500 Index is an unmanaged index containing common stocks of 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 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.

(3)

Commencement of investment operations is April 1, 1988.

(4)

Through June 30, 1996.

57
<PAGE>

ABCDOMPRO896

<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 8.

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

AUGUST 2, 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

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)(4)
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>

(1) Sales charges are reduced for purchases of $50,000 or more of shares of the
Series A Portfolios. The Trust may sell shares of the Series A Portfolios to
certain persons at net asset value. 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
management fees payable by the Funds, and to absorb other operating expenses
payable by the Funds and the Portfolios, 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 charge 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 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.

10
<PAGE>
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.

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."

11
<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 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.

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.

12
<PAGE>
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.

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, 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.

13
<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 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 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 performance information regarding the Portfolios and predecessor
pooled investment vehicles, see "Performance Information -- Prior Performance of
Certain Portfolios and Their Predecessors" in the Statement of Additional
Information.

14
<PAGE>

EXPENSE LIMITATION. To limit the expenses of each Portfolio, the Investment
Adviser has agreed to defer its management fees payable by the Funds, and to
absorb the other operating expenses payable by the Funds and the Portfolios, 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%).

15
<PAGE>
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.

16
<PAGE>

institutions which have sold or may sell significant amounts of shares of the
Portfolios or other series of the Trust. The Distributor currently expects that
any such additional bonuses or incentives will not exceed 0.50%. Dealers may
obtain further information by calling (800) 551-8045.

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

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

17
<PAGE>
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.

18
<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>
- -------------------------------------------------------------------------------------------
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)
- -------------------------------------------------------------------------------------------
</TABLE>

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;

19
<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 purchases of shares
of Series A Portfolio 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

(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.

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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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

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 charge 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

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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.

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(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.

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DIVIDENDS, DISTRIBUTIONS AND TAXES

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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

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.

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<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.

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
debt and equity 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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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

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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.

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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.

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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 debt or equity 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.

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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.

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 or liquid debt or equity securities 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.

37
<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 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. See "Investment Objectives, Policies and Risks-- Options on Securities
and Securities Indices" and "--Futures Contracts and Related Options" in the
Statement of Additional Information.

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 Investment Adviser may
determine, pursuant to guidelines established by the Master Trust's Board of
Trustees, 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>

AGLOPRO896

<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.

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

AUGUST 2, 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............................................ 11
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

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)(4)
Management fees 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
12b-1 expenses(5) 0.25% 0.75% 0.75% 0.25% 0.75% 0.75%
All other expenses (after expense
deferral)(4)
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)(4) 1.85% 2.50% 2.50% 1.95% 2.60% 2.60%

<CAPTION>
EMERGING
COUNTRIES
Portfolio Portfolio Portfolio
A B C
<S> <C> <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)(4)
Management fees 1.25% 1.25% 1.25%
12b-1 expenses(5) 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%
Total other expenses 0.75% 0.90% 0.90%
Total operating expenses (after expense
deferral)(4) 2.25% 2.90% 2.90%
</TABLE>

(1)
Sales charges are reduced for purchases of $50,000 or more of shares of the
Series A Portfolios. The Trust may sell shares of the Series A Portfolios to
certain persons at net asset value. 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 less than 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>

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 annualized percentages of such
Portfolios' average net assets: Worldwide Growth Portfolios 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 Portfolios 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 and C 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.

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."

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 charge 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."

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 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
GROWTH
Portfolio Portfolio Portfolio
A B C
------------------------------- --------- -------------------------------
4-19-93 4-1-94 4-1-95 5-31-95 4-19-93 4-1-94 4-1-95
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
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA: $ 12.50 $ 14.94 $ 14.29 $ 12.50 $ 12.50 $ 14.86 $ 14.44
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)
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
--------- --------- --------- --------- --------- --------- ---------
Total from
investment
operations 2.44 (0.14) 2.79 1.84 2.36 (0.23) 2.71
Less
distributions:
Dividends from
net investment
income -- (0.02) (0.12) -- -- -- (0.01)
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
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN:+ 19.52% (0.90%) 19.79% 14.72% 18.88% (1.49%) 18.95%
RATIOS/SUPPLEMENTAL
DATA:
Net assets
($000), end of
period $ 20,194 $ 22,208 $ 23,481 $ 1,972 $ 66,577 $ 71,201 $ 71,155
Ratio of expenses
to average net
assets, after
expense
reimbursement++ 1.85%* 1.85% 1.85% 2.50%* 2.44%* 2.50% 2.50%
Ratio of expenses
to average net
assets, before
expense
reimbursement++ 2.23%* 2.18% 2.17% 9.50%* 2.44%* 2.57% 2.57%
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%)
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%)
Portfolio
turnover** 95.09% 98.54% 132.20% 132.20% 95.09% 98.54% 132.20%
Average
commission rate
paid** N/A N/A $ 0.0187 $ 0.0187 N/A N/A $ 0.0187

<CAPTION>
INTERNATIONAL EMERGING
GROWTH COUNTRIES
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
A B C A B C
--------------------- --------- -------------------- -------------------- --------- ---------------------
8-31-94 4-1-95 5-31-95 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 to to to
3-31-95 3-31-96 3-31-96 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> <C> <C> <C>
PER SHARE DATA: $ 12.50 $ 11.51 $ 12.50 $ 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) -- (0.02) (0.02) (0.04) 0.01 0.04 (0.04) (0.04) -- (0.05)
Net realized
and unrealized
gains (losses)
on securities
and foreign
currency (0.98) 1.79 1.48 (1.12) 1.72 (1.54) 3.15 1.56 (1.70) 2.97
--------- --------- --------- --------- --------- --------- --------- --------- ---------- ---------
Total from
investment
operations (0.98) 1.77 1.46 (1.16) 1.73 (1.50) 3.11 1.52 (1.70) 2.92
Less
distributions:
Dividends from
net investment
income (0.01) (0.13) -- (0.02) -- -- (0.02) -- (0.01) --
Distributions
from capital
gains -- -- -- -- -- -- (0.06) -- -- --
--------- --------- --------- --------- --------- --------- --------- --------- ---------- ---------
Net asset value,
end of period $ 11.51 $ 13.15 $ 13.96 $ 11.32 $ 13.05 $ 11.00 $ 14.03 $ 14.02 $ 10.79 $ 13.71
--------- --------- --------- --------- --------- --------- --------- --------- ---------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------- ---------
TOTAL RETURN:+ (7.85%) 15.46% 11.68% (9.25%) 15.30% (11.98%) 28.43% 12.16% (13.64%) 27.30%
RATIOS/SUPPLEMENT
DATA:
Net assets
($000), end of
period $ 610 $ 1,056 $ 1,487 $ 24 $ 933 $ 1,197 $ 4,718 $ 3,557 $ 59 $ 4,345
Ratio of expenses
to average net
assets, after
expense
reimbursement++ 1.95%* 1.95% 2.60%* 2.61%* 2.60% 2.25%* 2.25% 2.90%* 2.90%* 2.90%
Ratio of expenses
to average net
assets, before
expense
reimbursement++ 9.77%* 10.06% 16.15%* 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++ (0.07%)* (0.27%) (0.64%)* (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++ (7.89%)* (7.75%) (13.26%)* (73.52%)* (13.95%) (4.99%)* (3.61%) (5.44%)* (239.73%)* (4.15%)
Portfolio
turnover** 74.85% 141.02% 141.02% 74.85% 141.02% 60.79% 118.21% 118.21% 60.79% 118.21%
Average
commission rate
paid** N/A $ 0.0128 $ 0.0128 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

10
<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."

11
<PAGE>
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.

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.

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

12
<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, 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>
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 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>
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 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.

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>
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 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.

For the fiscal year ended March 31, 1996, the Investment Adviser received fees
and expense recoupments from the Funds and Portfolios equal to the following
percentages of the

16
<PAGE>
Portfolios' respective average net assets, after the fee deferrals and expense
reimbursements 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 management fees payable by the Funds, and to
absorb the other operating expenses payable by the Funds and the Portfolios, 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 Portfolios A, B and C-1.85%, 2.50% and
2.50%; International Growth Portfolios A, B and C-1.95%, 2.60% and 2.60%;
Emerging Countries Portfolios 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 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: Worldwide Growth Portfolio A, B and
C-1.85% (0.32%), 2.50% (7.00%) and 2.50% (0.07%); International Growth Portfolio
A, B and C-1.95% (8.11%), 2.60% (13.55%) and 2.60% (13.55%); and Emerging
Countries Portfolio A, B and C-2.25% (4.47%), 2.90% (4.68%) and 2.90% (3.33%).

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.

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

18
<PAGE>
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, 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.

19
<PAGE>
- --------------------------------------------------------------------------------
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 purchases of
shares of Series A 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

(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.

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.

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<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

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.

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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 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.

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<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

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.

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.

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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;

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

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<PAGE>
(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>

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<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.

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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 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.

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DIVIDENDS, DISTRIBUTIONS AND TAXES

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.

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<PAGE>
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.

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

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.

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

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<PAGE>
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.

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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<PAGE>
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>
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 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 ("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

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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.

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.

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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.

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<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 debt or equity 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.

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

41
<PAGE>
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 assurance as to the success of any hedging
operations which a Fund may implement. Although

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<PAGE>
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.

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.

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<PAGE>
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.

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.

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 or liquid debt or equity securities 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.

44
<PAGE>
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.

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. See "Investment Objectives, Policies and Risks-- Options on Securities
and Securities Indices" and "--Futures Contracts and Related Options" in the
Statement of Additional Information.

45
<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.

46
<PAGE>
ABCGLOPRO896
<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.

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

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. THE FUND MAY INVEST WITHOUT
LIMITATION 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. SEE "APPENDIX: CORPORATE BOND RATINGS."

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 August 2, 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.

AUGUST 2, 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 of Investment Adviser................... 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
management fees payable by the Funds, and to absorb other operating expenses
payable by the Funds and the Portfolios, 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 a number of 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 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 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.

The investment approach of 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>
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>
$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.

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 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 $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.

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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

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<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

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<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, the Income & Growth Fund's net assets may be invested without
limitation 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. 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.

12
<PAGE>
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.

13
<PAGE>
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.

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.

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 investors of the corresponding
Portfolios. High portfolio turnover should not result in a Fund paying greater
brokerage commissions on debt securities,

14
<PAGE>

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.

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.

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<PAGE>

Somhegyi (since March 1996). Mr. Wylie, Mr. Marshall and 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 information regarding institutional accounts managed
by the Investment Adviser that have investment objectives, policies, strategies
and risks substantially similar to those of the Balanced Growth Portfolio, see
"Appendix: Prior Performance of Investment Adviser." For historical performance
information regarding certain other Portfolios and their predecessor pooled
investment vehicles, see "Performance Information -- Prior Performance of
Certain Portfolios and Their Predecessors" in the Statement of Additional
Information.

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 0.015% 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 management fees payable by the Funds, and to
absorb the other operating expenses payable by the Funds and the Portfolios, 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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<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.

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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; to
Trustees and officers of the Trust and the Master Trust 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>

$10,000). 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.

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.

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<PAGE>
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.

OTHER PORTFOLIOS. Currently, the Trust has thirteen Institutional Portfolios.
Five domestic Institutional Portfolios are offered pursuant to this Prospectus.
Eight other domestic and global 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.

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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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. 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 check.

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 of Investment Adviser," 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.

As of June 30, 1996, the following persons held of record more than 25% of the
outstanding shares of the following Portfolios, and may be deemed to control
such Portfolio: Balanced Growth Portfolio--Nicholas-Applegate 401k
Profit-Sharing Plan (32.14%); Emerging Growth Portfolio--KPMG Peat Marwick
(33.19%); Value Portfolio--Sherryl A. Nicholas, TTEE Sherryl A. Nicholas
Revocable Trust (90.78%).

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>
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.

JUNK BOND CONSIDERATIONS (INCOME & GROWTH AND BALANCED GROWTH FUNDS). The Income
& Growth and Balanced Growth Funds may invest 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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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 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

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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 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

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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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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 debt or equity 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 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

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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, U.S. Government securities or
other liquid debt or equity 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 such collateral required to be deposited 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, U.S. Government securities or other liquid
debt or equity 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. Each Fund will comply with these requirements. In
addition, 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

34
<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.

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 or liquid debt or equity securities 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 (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.

35
<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.

36
<PAGE>
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.

- --------------------------------------------------------------------------------
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.

37
<PAGE>
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.

38
<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 OF INVESTMENT ADVISER

The following table sets forth the Investment Adviser's composite performance
data relating to the historical performance of institutional private accounts
managed by the Investment Adviser, since the dates indicated, that have
investment objectives, policies, strategies and risks substantially similar to
those of the Value and Balanced Growth Portfolios. The data is provided to
illustrate the past performance of the Investment Adviser in managing
substantially similar accounts as measured against specified market indices and
does not represent the performance of the Value or Balanced Growth Portfolios.
Investors should not consider this performance data as an indication of future
performance of the Value or Balanced Growth Portfolios or of the Investment
Adviser.

The Investment Adviser's composite performance data shown below were calculated
in accordance with recommended standards of the Association for Investment
Management and Research ("AIMR"*), retroactively applied to all time periods.
All returns presented were calculated on a total return basis and include all
dividends and interest, accrued income and realized and unrealized gains and
losses. All returns reflect the deduction of investment advisory fees, brokerage
commissions and execution costs paid by the Investment Adviser's institutional
private accounts, without provision for the federal or state income taxes.
Custodial fees, if any, were not included in the calculation. The Investment
Adviser's composites include all actual, fee-paying, discretionary institutional
private accounts managed by the Investment Adviser that have investment
objectives, policies, strategies and risks substantially similar to those of the
Value and Balanced Growth Portfolios. Securities transactions are accounted for
on the trade date and accrual accounting is utilized. Cash and equivalents are
included in performance returns. The monthly returns of each Investment
Adviser's composite combine the individual accounts' returns (calculated on a
time-weighted rate of return that is revalued whenever cash flows exceed $500)
by asset-weighing each individual account's asset value as of the beginning of
the month. Quarterly and yearly returns are calculated by geometrically linking
the monthly and quarterly returns, respectively. The yearly returns are computed
by geometrically linking the returns of each quarter within the calendar year.

The institutional private accounts that are included in the Investment Adviser's
composites are not subject to the same types of expenses to which the Value and
Balanced Growth Portfolios are subject nor to the diversification requirements,
specific tax restrictions and investment limitations imposed on the Balanced
Growth and Value Portfolios by the Investment Company Act or Subchapter M of the
Internal Revenue Code. Consequently, the performance results for the Investment
Adviser's composites could have been adversely affected if the institutional
private accounts included in the composites had been regulated as investment
companies under the federal securities laws.

The investment results of the Investment Adviser's composites presented are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the Value or Balanced Growth Portfolios or an individual investor
investing in such Portfolios. Investors should also be aware that the use of a
methodology different from that used below to calculate performance could result
in different performance data.

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

40
<PAGE>

<TABLE>
<CAPTION>
BALANCED GROWTH PERFORMANCE
---------------------------------------------------------------------------------
60% S&P 500 INDEX
INVESTMENT ADVISER'S LEHMAN BROS. LEHMAN BROS.
BALANCED GROWTH S&P 500 GOVT./CORP. 40% GOVT./CORP.
YEAR COMPOSITE INDEX(1) INDEX(2) INDEX
- -------------------------- ----------------------- ------------ ----------------- -----------------------
<S> <C> <C> <C> <C>
1988(3)................... 4.98% 10.25% 3.80% 7.67%
1989...................... 17.61% 31.61% 14.23% 24.59%
1990...................... 5.69% (3.04%) 8.29% 1.58%
1991...................... 32.73% 30.46% 16.13% 24.61%
1992...................... 9.40% 3.62% 7.57% 7.87%
1993...................... 20.14% (3.80%) 11.06% 10.52%
1994(3)................... (5.37%) 1.32% (3.61%) (0.67%)
1995...................... 29.23% 37.60% 19.24% 30.02%
1996(4)................... 7.17% 10.09% (1.88%) 5.18%
Last year(4).............. 21.69% 25.99% 4.66% 17.08%
Last five years(4)........ 15.50% 16.73% 8.48% 12.86%
Since inception(4)........ 14.17% 15.73% 8.84% 13.06%

VALUE PERFORMANCE
-------------------------------------
INVESTMENT ADVISER'S S&P 500
YEAR VALUE COMPOSITE INDEX(1)
- -------------------------- ----------------------- ------------
<S> <C> <C>
1988(3)...................
1989......................
1990......................
1991......................
1992......................
1993......................
1994(3)................... 3.79% 5.32%
1995...................... 30.79% 37.60%
1996(4)................... 12.11% 10.09%
Last year(4).............. 27.98% 25.98%
Last five years(4)........ -- --
Since inception(4)........ 20.56% 23.10%
</TABLE>

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

(2)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.

(3)Commencement of investment operations is as follows: Balanced Growth
Composite -- April 1, 1988; Value Composite -- April 1, 1994.

(4)Through June 30, 1996.

41
<PAGE>

INSTDOMPRO896

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

-------------------------------------------------
GLOBAL INSTITUTIONAL PORTFOLIOS

PROSPECTUS

Nicholas-Applegate Mutual Funds is an open-end management investment company
comprised of a number of diversified 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" 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 AND INTERESTS IN THE FUNDS 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 August 2, 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.

AUGUST 2, 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

- --------------------------------------------
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
management fees payable by the Funds, and to absorb other operating expenses
payable by the Funds and the Portfolios, 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-2.60%; International Growth-2.44%; Emerging
Countries-3.59%. 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 a number of 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>
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 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).

12
<PAGE>
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.

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.

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

13
<PAGE>
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.

- --------------------------------------------------------------------------------
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 Countries Fund,
1.25% of the Fund's net assets; for each of the Worldwide Growth and
International Growth Funds, 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.

14
<PAGE>

For the fiscal year ended March 31, 1996, the Investment Adviser received fees
and expense reimbursements from the Funds and Portfolios 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 performance information regarding the Portfolios and predecessor
pooled investment vehicles, see "Performance Information--Prior Performance of
Certain Portfolios and Their Predecessors" in the Statement of Additional
Information.

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 0.015% of the average daily net assets of the Fund.

15
<PAGE>
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."

- --------------------------------------------------------------------------------
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; to
Trustees and officers of the Trust and the Master Trust 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,

16
<PAGE>
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 (but not below $10,000). 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.

17
<PAGE>
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 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 offers thirteen Institutional Portfolios.
Eleven other 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.

- --------------------------------------------------------------------------------
INVESTOR SERVICES

18
<PAGE>
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.

19
<PAGE>
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.

20
<PAGE>
- --------------------------------------------------------------------------------
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.

21
<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 check.

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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 "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 June 30, 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-Methodist Home Texas Non-Profit
Corporation (32.9%); International Growth Portfolio-Austin Firefighters Relief &
Retirement Fund, 25.5%.

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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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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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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.

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

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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.

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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 debt or equity 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.

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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, U.S. Government securities or
other liquid debt or equity 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 such collateral 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, U.S. Government securities
or other liquid debt or equity 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. Each Fund will comply with
these requirements. In addition, 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.

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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.

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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.

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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 investment transactions is
unlimited. The Investment Adviser is experienced in the use of options and
futures contracts as an investment technique.

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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 Investment Advisor may
determine, pursuant to guidelines established by the Master Trust's Board of
Trustees, 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.

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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INSTGLOPRO896