NICHOLAS APPLEGATE MUTUAL FUNDS, 485APOS, 1997-05-22

NICHOLAS APPLEGATE MUTUAL FUNDS
485APOS, 1997-05-22

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON MAY 22, 1997
REGISTRATION NO. 33-56094
811-7428

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. __ [ ]
POST-EFFECTIVE AMENDMENT NO. 42 [X]

AND/OR

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 44

(CHECK APPROPRIATE BOX OR BOXES)
------------------

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

600 WEST BROADWAY, 30TH FLOOR
SAN DIEGO, CALIFORNIA 92101
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

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

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

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

[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)
[ ] ON ______________ PURSUANT TO PARAGRAPH (b)
[X] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(i)
[ ] ON ____________ PURSUANT TO PARAGRAPH (a)(i)
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(ii)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (a)(ii), OF RULE 485
------------
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT

PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, REGISTRANT
HAS REGISTERED AN INDEFINITE NUMBER OF SHARES BY THIS REGISTRATION STATEMENT.
REGISTRANT FILED A NOTICE UNDER SUCH RULE FOR ITS FISCAL YEAR ENDED MARCH 31,
1996 ON MAY 30, 1996. THIS REGISTRATION STATEMENT HAS BEEN EXECUTED BY THE
TRUSTEES AND PRINCIPAL OFFICERS OF THE REGISTRANT AND OF NICHOLAS-APPLEGATE
INVESTMENT TRUST.

<PAGE>

CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
N-1A ITEM NO. LOCATION
- ------------- --------
PART A

ITEM 1. COVER PAGE. . . . . . . . . . . . . COVER PAGE

ITEM 2. SYNOPSIS . . . . . . . . . . . . . OVERVIEW; INTERNATIONAL CORE
GROWTH INSTITUTIONAL
PORTFOLIO; WORLDWIDE GROWTH
INSTITUTIONAL PORTFOLIO;
INTERNATIONAL SMALL CAP GROWTH
INSTITUTIONAL PORTFOLIO;
GLOBAL GROWTH & INCOME
PORTFOLIO; EMERGING COUNTRIES
INSTITUTIONAL PORTFOLIO; LARGE
CAP GROWTH INSTITUTIONAL
PORTFOLIO; CORE GROWTH
INSTITUTIONAL PORTFOLIO;
EMERGING GROWTH INSTITUTIONAL
PORTFOLIO; MINI CAP
INSTITUTIONAL PORTFOLIO;
INCOME & GROWTH INSTITUTIONAL
PORTFOLIO; BALANCED GROWTH
INSTITUTIONAL PORTFOLIO;
SHORT-INTERMEDIATE
INSTITUTIONAL PORTFOLIO; FULLY
DISCRETIONARY INSTITUTIONAL
PORTFOLIO; STRATEGIC INCOME
INSTITUTIONAL PORTFOLIO; HIGH
YIELD BOND INSTITUTIONAL
PORTFOLIO

ITEM 3. CONDENSED FINANCIAL INFORMATION. . INTERNATIONAL CORE GROWTH
INSTITUTIONAL PORTFOLIO;
WORLDWIDE GROWTH INSTITUTIONAL
PORTFOLIO; INTERNATIONAL SMALL
CAP GROWTH INSTITUTIONAL
PORTFOLIO; GLOBAL GROWTH &
INCOME PORTFOLIO; EMERGING
COUNTRIES INSTITUTIONAL
PORTFOLIO; LARGE CAP GROWTH
INSTITUTIONAL PORTFOLIO; CORE
GROWTH INSTITUTIONAL
PORTFOLIO; EMERGING GROWTH
INSTITUTIONAL PORTFOLIO; MINI
CAP INSTITUTIONAL PORTFOLIO;
INCOME & GROWTH INSTITUTIONAL
PORTFOLIO; BALANCED GROWTH
INSTITUTIONAL

<PAGE>

PORTFOLIO; SHORT-INTERMEDIATE
INSTITUTIONAL PORTFOLIO; FULLY
DISCRETIONARY INSTITUTIONAL
PORTFOLIO; STRATEGIC INCOME
INSTITUTIONAL PORTFOLIO; HIGH
YIELD BOND INSTITUTIONAL
PORTFOLIO

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT. OVERVIEW; INTERNATIONAL CORE
GROWTH INSTITUTIONAL
PORTFOLIO; WORLDWIDE GROWTH
INSTITUTIONAL PORTFOLIO;
INTERNATIONAL SMALL CAP GROWTH
INSTITUTIONAL PORTFOLIO;
GLOBAL GROWTH & INCOME
PORTFOLIO; EMERGING COUNTRIES
INSTITUTIONAL PORTFOLIO; LARGE
CAP GROWTH INSTITUTIONAL
PORTFOLIO; CORE GROWTH
INSTITUTIONAL PORTFOLIO;
EMERGING GROWTH INSTITUTIONAL
PORTFOLIO; MINI CAP
INSTITUTIONAL PORTFOLIO;
INCOME & GROWTH INSTITUTIONAL
PORTFOLIO; BALANCED GROWTH
INSTITUTIONAL PORTFOLIO;
SHORT-INTERMEDIATE
INSTITUTIONAL PORTFOLIO; FULLY
DISCRETIONARY INSTITUTIONAL
PORTFOLIO; STRATEGIC INCOME
INSTITUTIONAL PORTFOLIO; HIGH
YIELD BOND INSTITUTIONAL
PORTFOLIO; MASTER/FEEDER
STRUCTURE; RISK FACTORS AND
SPECIAL CONSIDERATIONS

ITEM 5. MANAGEMENT OF FUND . . . . . . . . MASTER/FEEDER STRUCTURE;
PORTFOLIO TEAMS

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES YOUR ACCOUNT; DISTRIBUTION OF
SHARES

ITEM 7. PURCHASE OF SECURITIES BEING OFFERED YOUR ACCOUNT; DISTRIBUTION OF
SHARES

<PAGE>

ITEM 8. REDEMPTION OF REPURCHASE . . . . . YOUR ACCOUNT

ITEM 9. PENDING LEGAL PROCEEDINGS. . . . . NOT APPLICABLE

PART B

ITEM 10. COVER PAGE . . . . . . . . . . . . COVER PAGE

ITEM 11. TABLE OF CONTENTS. . . . . . . . . TABLE OF CONTENTS

ITEM 12. GENERAL INFORMATION AND HISTORY. . GENERAL INFORMATION

ITEM 13. INVESTMENT OBJECTIVES AND POLICIES INVESTMENT OBJECTIVES AND
POLICIES; INVESTMENT
RESTRICTIONS

ITEM 14. MANAGEMENT OF THE FUND . . . . . . TRUSTEES AND OFFICERS;
ADMINISTRATORS; DISTRIBUTOR

ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
PRINCIPAL HOLDERS OF SECURITIES

ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES ADMINISTRATORS; INVESTMENT
ADVISER; DISTRIBUTOR;
CUSTODIAN, TRANSFER AND
DIVIDEND DISBURSING AGENT,
INDEPENDENT AUDITORS AND LEGAL
COUNSEL

ITEM 17. BROKERAGE ALLOCATION AND OTHER PORTFOLIO TRANSACTIONS AND
PRACTICES. . . . . . . . . . . . . . . .BROKERAGE

ITEM 18. CAPITAL STOCK AND OTHER SECURITIES. . . MISCELLANEOUS

ITEM 19. PURCHASE, REDEMPTION AND PRICING OF
SECURITIES BEING OFFERED . . . . . . . .PURCHASE AND REDEMPTION OF
PORTFOLIO SHARES; SHAREHOLDER
SERVICES

ITEM 20. TAX STATUS . . . . . . . . . . . . DIVIDENDS, DISTRIBUTIONS AND
TAXES

ITEM 21. UNDERWRITERS . . . . . . . . . . . DISTRIBUTOR

<PAGE>

ITEM 22. CALCULATION OF PERFORMANCE DATA. . PERFORMANCE INFORMATION

ITEM 23. FINANCIAL STATEMENTS . . . . . . . FINANCIAL STATEMENTS

PART C
INFORMATION REQUIRED TO BE INCLUDED IN PART C IS SET FORTH UNDER THE
APPROPRIATE ITEM, SO NUMBERED, IN PART C TO THE REGISTRATION STATEMENT.

<PAGE>

NICHOLAS | APPLEGATE-Registered Trademark-
MUTUAL FUNDS

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

PROSPECTUS

This prospectus contains vital information about these Portfolios. For your own
benefit and protection, please read it before you invest, and keep it on hand
for future reference.

Please note that these Portfolios:

- - are not bank deposits
- - are not federally insured
- - are not endorsed by any bank or government agency
- - are not guaranteed to achieve their investment objectives

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

U.S. INSTITUTIONAL PORTFOLIOS
LARGE CAP
CORE GROWTH
VALUE
EMERGING GROWTH
MINI CAP
INCOME & GROWTH
BALANCED GROWTH

July __, 1997
<PAGE>

[Left side: visual of marbles]

TABLE OF CONTENTS

OVERVIEW

U.S. PORTFOLIOS
Large Cap
Core Growth
Value
Emerging Growth
Mini Cap
Income & Growth
Balanced Growth

YOUR ACCOUNT
Transaction Policies
Dividends and Account Policies
Opening an Account
Adding to an Account
Exchanging Shares
Selling or Redeeming Shares
Signature Guarantees

ORGANIZATION AND MANAGEMENT
Master/Feeder Structure
Investment Adviser Compensation
Administrator Compensation
Distributor
Portfolio Trades
Investment Objectives
Diversification
Portfolio Teams

RISK FACTORS AND SPECIAL CONSIDERATIONS
<PAGE>

OVERVIEW

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

FUND INFORMATION
Concise Portfolio descriptions begin on the next page. Each description
provides the following information:

- - GOAL AND STRATEGY. The Fund's particular investment goals and the
strategies it intends to use in pursuing those goals.

- - PORTFOLIO SECURITIES. The primary types of securities in which the Fund
invests. Secondary investments are described in "Risk Factors and Special
Considerations" at the end of the prospectus.

- - RISK FACTORS. The major risk factors associated with the Fund. Other risk
factors are also described in "Risk Factors and Special Considerations."

- - PORTFOLIO MANAGEMENT. The individuals who manage the Fund.

- - EXPENSES. The overall costs borne by an investor in the Portfolio,
including sales charges and annual expenses.

- - FINANCIAL HIGHLIGHTS. A table showing the financial performance for each
Portfolio since inception.

<PAGE>

GOAL OF THE NICHOLAS-APPLEGATE MUTUAL FUNDS

The Portfolios of Nicholas-Applegate Mutual Funds (the "Trust") are designed to
provide investors with a well rounded investment program. Each Portfolio
invests in a corresponding fund (the "Fund") of Nicholas-Applegate Investment
Trust (the "Master Trust"). Each respective Fund in turn invests in and holds
investment securities. This structure is called a "master/feeder" structure.

Each Fund employs its own strategy and has its own risk/reward profile.
Because you could lose money by investing in these Portfolios, be sure to
read all risk disclosures carefully before investing.

WHO MAY WANT TO INVEST IN THE U.S. PORTFOLIOS
- - those who are investing for long-term goals
- - those who are willing to accept higher short-term risks associated with
investing in foreign companies along with higher potential long-term results
- - those who want professional portfolio management
- - those who are seeking funds for the international growth portion of an asset
allocation portfolio

WHO MAY NOT WANT TO INVEST IN THE U.S. PORTFOLIOS
- - those who are investing with a shorter frame
- - those who are uncomfortable with an investment that will go up and down in
value those who are unable to accept the special risks associated with
foreign investing

********************************************************************************

THE INVESTMENT ADVISER
Nicholas-Applegate Capital Management (the "Investment Adviser") serves as
investment adviser to the Funds. Arthur E. Nicholas and 14 other partners with a
staff of approximately 350 employees currently manage 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.

<PAGE>

LARGE CAP GROWTH INSTITUTIONAL PORTFOLIO
- --------------------------------------------------------------------------------

[bullet point icon]
INVESTMENT OBJECTIVE: Maximum long-term capital appreciation.

[bullet point icon]
INVESTMENT STRATEGY: The Investment Adviser focuses on a "bottom-up" analysis
that evaluates the financial condition and competitiveness of individual
companies. It uses a blend of both traditional fundamental research and
computer intensive systematic disciplines to uncover signs of "change at the
margin" - positive business developments which are not yet fully reflected in a
company's stock price. It searches for successful, growing companies that are
managing change advantageously and poised to exceed growth expectations.

The Fund emphasizes equity securities of U.S. companies with market
capitalizations generally above $3 billion and whose earnings and stock
prices are expected to grow faster than the S & P 500.

[bullet point icon]
PRINCIPAL INVESTMENTS: Under normal conditions, the Fund invests at least 65%
of its total assets in common and preferred stocks, warrants, and convertible
securities of U.S. companies. It invests the remainder of its assets primarily
in investment grade corporate debt securities, U.S. Government securities, and
securities of foreign issuers. The Fund may use also options and futures
contracts as hedging techniques.

[bullet point icon]
PORTFOLIO MANAGEMENT: The Investment Adviser emphasizes a team approach to
maximize overall effectiveness. For a complete list of the portfolio team, see
"Portfolio Teams" on page ___.

[bullet point icon]
PRINCIPAL RISKS: As with any growth fund, the value of your investment will
fluctuate day to day with movements in the stock markets as well as in response
to the activities of individual companies. To the extent the Fund is
over-weighted in certain market sectors compared to the S & P 500, the Fund
may be more volatile than the S & P 500. Additionally, to the extent the Fund
invests in foreign issuers, the risks and volatility are magnified since the
performance of foreign stocks depends on changes in foreign currency values,
different regulatory and political environments, and overall political and
economic conditions in countries where the Fund invests. For a further
explanation, see "Risk Factors and Special Considerations" on page____.

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

[bullet point icon]
INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below show the expenses for the Portfolio and its
corresponding Fund for the past year. Actual expenses may be more or less
than those shown.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
- ----------------------------------------------------------------------------------------------
<S> <C>
Maximum sales charge on purchases (as a percentage of offering price) None
- ----------------------------------------------------------------------------------------------
Sales charge on reinvested dividends None
- ----------------------------------------------------------------------------------------------
Deferred sales charge (as a percentage of original purchase price or redemption None
proceeds, whichever is lower)
- ----------------------------------------------------------------------------------------------
Redemption fee None
- ----------------------------------------------------------------------------------------------
Exchange fee None
- ----------------------------------------------------------------------------------------------

- ----------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(AFTER EXPENSE DEFERRAL)
- ----------------------------------------------------------------------------------------------
Management fees 0.75%
- ----------------------------------------------------------------------------------------------
12b-1 expenses None
- ----------------------------------------------------------------------------------------------
Total other expenses 0.25%
- ----------------------------------------------------------------------------------------------
Total operating expenses (after expense deferral)(1) 1.00%
- ----------------------------------------------------------------------------------------------
</TABLE>

1. The Investment Adviser has agreed to waive or defer its management fees
and to absorb other operating expenses payable by the Funds and the
Portfolios. Total operating expenses would have been _____% absent
the waiver and deferral. See "Investment Adviser Compensation".

<PAGE>

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

- ----------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------
$10 $32 $55 $122
- ----------------------------------------------------------------

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

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

FINANCIAL HIGHLIGHTS: The figures below have been audited by Ernst & Young,
L.L.P. for the fiscal years ended March 31, 1997. Ernst & Young, L.L.P. is an
independent auditor whose report was unqualified. This information should be
read in conjunction with the financial statements and the notes thereto which
appear in the Trust's 1997 Annual Report.

<PAGE>

CORE GROWTH INSTITUTIONAL PORTFOLIO
- --------------------------------------------------------------------------------
[bullet point icon]
INVESTMENT OBJECTIVE: Maximum long-term capital appreciation.

[bullet point icon]
INVESTMENT STRATEGY The Investment Adviser focuses on a "bottom-up" analysis
that evaluates the financial condition and competitiveness of individual
companies. It uses a blend of both traditional fundamental research and
computer intensive systematic disciplines to uncover what it calls "change at
the margin" - positive business developments which are not yet fully reflected
in the company's stock price. It searches for successful, growing companies
that are managing change advantageously and poised to exceed growth
expectations.

The Fund emphasizes companies with market capatilizations above $500 million.

[bullet point icon]
PRINCIPAL INVESTMENTS: Under normal conditions, the Fund invests at least 75%
of its total assets in common stocks. It invests the remainder of the assets
primarily in preferred and convertible securities, investment grade debt
securities, and securities issued by the U.S. government and its agencies and
instrumentalities. The Fund may invest up to 20% of its total assets in
foreign securities. The Fund may also use options and futures contracts as
hedging techniques.

[bullet point icon]
PORTFOLIO MANAGEMENT: The Investment Adviser emphasizes a team
approach to portfolio management to maximize its overall effectiveness. For a
complete list of the portfolio team, see "Portfolio Teams" on page __.

[bullet point icon]
RISK FACTORS: As with any growth fund, the value of your investment will
fluctuate day to day with movements in the stock markets. The companies in
which the Fund invests may be more subject to volatile market movements than
securities of larger, more established companies. To the extent the Fund
invests in foreign securities, the risks and volatility are magnified since
the performance of foreign stocks depends upon changes in foreign currency
values, different political and regulatory environments, and the overall
political and economic conditions in countries where the Fund invests. For a
further explanation, see "Risk Factors and Special Considerations" starting
on page ____.
- -------------------------------------------------------------------------------
[bullet point icon]
INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below show the expenses of the Portfolio and its
corresponding Fund for the past year. Actual expenses may be more or less
than those shown.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
- ----------------------------------------------------------------------------------------------
<S> <C>
Maximum sales charge on purchases (as a percentage of offering price) None
- ----------------------------------------------------------------------------------------------
Sales charge on reinvested dividends None
- ----------------------------------------------------------------------------------------------
Deferred sales charge (as a percentage of original purchase price
or redemption proceeds, whichever is lower) None
- ----------------------------------------------------------------------------------------------
Redemption fee None
- ----------------------------------------------------------------------------------------------
Exchange fee None
- ----------------------------------------------------------------------------------------------

1. The Investment Adviser has agreed to waive or defer its management fees
and to absorb other operating expenses payable by the Funds and the
Portfolios. Total operating expenses would have been _____% absent the
waiver and deferral. See "Investment Adviser Compensation".

<PAGE>

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

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

FINANCIAL HIGHLIGHTS: The figures below have been audited by Ernst & Young
L.L.P. with respect to the fiscal years ended March 31, 1996 and 1997, and by
another independent accounting firm with respect to the commencement of
operations through March 31, 1995. Both firms are independent auditors whose
reports were unqualified. This information should be read in conjunction with
the financial statements and the notes thereto which appear in the Trust's 1997
Annual Report.

-------------------------------------------------------
4/19/93 TO 4/1/94 TO 4/1/95 TO 4/1/96
3/31/94 3/31/95 3/31/96 TO
3/31/97
- --------------------------------------------------------------------------
PER SHARE $12.50 $12.68 $12.62
DATA:
- --------------------------------------------------------------------------
Net asset
value,
beginning of
period /
Income from (0.01) (0.01) (0.03)
investment
operations: 0.92 0.38 4.47
Net
investment
income
(deficit)
Net realized
and
unrealized
gains (losses)
on securities
and foreign
currency
- --------------------------------------------------------------------------
Total from
investment
operations 0.91 0.37 4.44
Less
distributions: -- -- --
Dividends (0.73)* (0.43) (0.80)
from net
investment
income
Distributions
from capital
gains
- --------------------------------------------------------------------------
Net asset $12.68 $12.62 $16.26
value, end of
period
- --------------------------------------------------------------------------
TOTAL 6.84% 3.30% 35.81%
RETURN+:
- --------------------------------------------------------------------------
RATIOS/SUPPLE-
MENTAL DATA: $77,947 $72,826 $149,969
Net Assets
($000), end of
period
- --------------------------------------------------------------------------
Ratio of
expenses to
average net 0.97% 0.99% 0.98%
assets, after
expense
reimbursement++
- --------------------------------------------------------------------------
Ratio of
expenses to
average net 1.14% 1.07% 1.06%
- --------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------
assets, before
expense
reimbursement++
- --------------------------------------------------------------------------
Ratio of net
investment
deficit to (0.07%) (0.06%) (0.32%)
average net
assets, after
expense
reimbursement++
- --------------------------------------------------------------------------
Ratio of net
investment
deficit to (0.24%) (0.14%) (0.40%)
average net
assets, before
expense
reimbursement++
- --------------------------------------------------------------------------
Portfolio 84.84% 98.09% 114.48%
Turnover**
- --------------------------------------------------------------------------
Average N/A N/A $0.0593
commission
rate paid**
- --------------------------------------------------------------------------

* Annualized
** For the corresponding Fund of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated form Master Trust Fund

<PAGE>

VALUE INSTITUTIONAL PORTFOLIO
- --------------------------------------------------------------------------------

[bullet point icon]
INVESTMENT OBJECTIVE: Maximum long-term capital appreciation.

[bullet point icon]
INVESTMENT STRATEGY The Investment Adviser focuses on a "bottom-up" analysis
that evaluates the financial condition and competitiveness of individual
companies. It uses a blend of traditional fundamental research and computer
intensive systematic disciplines to uncover what it calls "change at the
margin" - positive business developments which are not yet fully reflected in
the company's stock price. It searches for successful, growing companies that
are managing change advantageously and poised to exceed growth expectations.

The Fund emphasizes companies with market capitalizations generally above
$5 billion.

[bullet point icon]
PRINCIPAL INVESTMENTS: Under normal conditions, the Fund invests at least 80%
of its total assets equity securities. It invests the remainder primarily in
preferred and convertible securities, investment grade debt securities, and
securities issued by the U.S. government and its agencies and
instrumentalities. The Fund may invest up to 20% of its total assets in
foreign securities. The Fund may also use options and futures contracts as
hedging techniques.

The Fund's portfolio is designed to have risk, capitalization and industry
characteristics similar to those of the S&P 500 Index.

[bullet point icon]
RISK FACTORS: As with any equity fund, the value of your investment will
fluctuate day to day with movements in the stock markets. The companies in
which the Fund will invest may be more subject to volatile market movements than
securities of larger, more established companies. To the extent the Fund
invests in foreign securities, the risks and volatility are magnified since the
performance of foreign stocks depends upon changes in foreign currency values,
different political and regulatory environments, and the overall political and
economic conditions in countries where the Fund invests. For a further
explanation, see "Risk Factors and Special Considerations" starting on
page_____.

- --------------------------------------------------------------------------------
[bullet point icon]
INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below show the expenses of the Portfolio and its
corresponding Fund for the past year. Actual expenses may be more or less
than those shown.

1 The Investment Adviser has agreed to waive or defer its management fees
and to absorb other operating expenses payable by the Funds and the
Portfolios. Total operating expenses would have been _____% absent the
waiver and deferral. See "Investment Adviser Compensation".

<PAGE>

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

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

FINANCIAL HIGHLIGHTS: The figures below have been audited by Ernst & Young
L.L.P. with respect to the fiscal years ended March 31, 1997,
Ernst & Young, L.L.P. is an independent auditor whose reports were unqualified.
This information should be read in conjunction with the financial statements and
the notes thereto which appear in the Trust's 1997 Annual Report.

-------------
4/30/96
TO
3/31/97
- -------------------------------------
PER SHARE
DATA:
- -------------------------------------
Net asset value,
beginning of
period/Income from
investment
operations:
Net investment
income (deficit)
Net realized
and unrealized
gains (losses)
on securities
and foreign
currency
- -------------------------------------
Total from
investment
operations
Less
distributions:
Dividends from net
investment
income
Distributions
from capital
gains
- -------------------------------------
Net asset value,
end of period
- -------------------------------------
TOTAL RETURN+:
- -------------------------------------
RATIOS/SUPPLE
MENTAL DATA:
Net Assets ($000),
end of period
- -------------------------------------
Ratio of
expenses to
average net
assets, after
expense
reimbursement++
- -------------------------------------
Ratio of
expenses to
average net
assets, before
- -------------------------------------

<PAGE>

- -------------------------------------
expense
reimbursement++
- -------------------------------------
Ratio of net
investment
deficit to
average net
assets, after
expense
reimbursement++
- -------------------------------------
Ratio of net
investment
deficit to
average net
assets, before
expense
reimbursement++
- -------------------------------------
Portfolio
Turnover**
- -------------------------------------
Average
commission
rate paid**
- -------------------------------------

* Annualized
** For the corresponding Fund of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated form Master Trust Fund

<PAGE>

EMERGING GROWTH INSTITUTIONAL PORTFOLIO
- --------------------------------------------------------------------------------

[bullet point icon]
INVESTMENT OBJECTIVE: Maximum long-term capital appreciation.

[bullet point icon]
INVESTMENT STRATEGY: The Investment Adviser focuses on a "bottom-up" analysis
that evaluates the financial condition and competitiveness of individual
companies. It uses a blend of traditional fundamental research and computer
intensive systematic disciplines to uncover what it calls a "change at the
margin" - positive business developments which are not yet fully reflected in a
company's stock price. It searches for successful growing companies that are
managing change advantageously and poised to exceed growth expectations.

The Fund emphasizes companies with market capitalizations below $500 million at
the time of purchase.

[bullet point icon]
PRINCIPAL INVESTMENTS: Under normal conditions, the Fund invests at least 75%
of its total assets in common stocks. It invests the remainder primarily in
preferred and convertible securities, investment grade debt securities, and
securities issued by the U.S. government, its agencies and instrumentalities.
The Fund may invest up to 20% of its total assets in foreign securities. The
Fund may also use options and futures contracts as hedging techniques.

[bullet point icon]
PORTFOLIO MANAGEMENT The Investment Adviser emphasizes a team approach to
portfolio management to maximize its overall effectiveness. For a complete list
of the portfolio team, see "Portfolio Team" on page_.

[bullet point icon]
RISK FACTORS: As with any growth fund, the value of your investment will
fluctuate day to day with movements in the stock markets. Although small cap
stocks have a history of long-term growth, they tend to be more volatile and
speculative than stocks of larger, more established companies. To the extent
the Fund invests in foreign issuers, the investment risks and volatility are
magnified since the performance of foreign stocks depends on changes in foreign
currency values, different political and regulatory environments, and the
overall political and economic conditions in the foreign countries where the
Fund invests. For a further explanation, see "Risk Factors and Special
Considerations" starting on page _____.

- --------------------------------------------------------------------------------
[bullet point icon]
INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below show the expenses of the Portfolio and
its corresponding Fund for the past year. Actual expenses may be more or less
than those shown.

- ----------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(AFTER EXPENSE DEFERRAL)
- ----------------------------------------------------------------------------------------------
Management fees 1.00%
- ----------------------------------------------------------------------------------------------
12b-1 expenses None
- ----------------------------------------------------------------------------------------------
Total other expenses 0.17%
- ----------------------------------------------------------------------------------------------
Total operating expenses (after expense deferral)(1) 1.17%
- ----------------------------------------------------------------------------------------------
</TABLE>

1 The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Funds and the Portfolios.
Total operating expenses would have been _____% absent the waiver and
deferral. See "Investment Adviser Compensation".

<PAGE>

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

- ----------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------
$12 $37 $64 $142
- ----------------------------------------------------------------

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

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

----------------------------------------------------------
10/1/93 TO 4/1/94 TO 4/1/95 TO 4/1/96 TO
3/31/94 3/31/95 3/31/96 3/31/97
- --------------------------------------------------------------------------------
PER SHARE DATA: $12.50 $11.38 $11.58

- --------------------------------------------------------------------------------
Net asset value,
beginning of
period / Income
from investment
operations: (0.04) (0.05) (0.11)
Net investment
income (deficit) (0.69) 0.95 4.45
Net realized
and unrealized
gains (losses)
on securities
and foreign
currency
- --------------------------------------------------------------------------------
Total from
investment
operations (0.73) 0.90 4.34
Less
distributions: -- -- --
Dividends from (0.39) (0.70) (0.82)
net investment
income
Distributions
from capital
gains
- --------------------------------------------------------------------------------
Net asset value, $11.38 $11.58 $15.10
end of period
- --------------------------------------------------------------------------------
TOTAL RETURN+: (6.60%) 8.69% 38.27%
- --------------------------------------------------------------------------------
RATIOS/SUPPLE-
MENTAL DATA: $165,940 $206,696 $224,077
Net Assets($000),
end of period
- --------------------------------------------------------------------------------
Ratio of expenses
to average net
assets, after 1.17% 1.18% 1.16%
expense
reimbursement++
- --------------------------------------------------------------------------------
Ratio of expenses
to average net
assets, before 1.18% 1.24% 1.20%
expense
reimbursement++
- --------------------------------------------------------------------------------
Ratio of net
investment
deficit to average (0.83%) (0.58%) (0.62%)
net assets,
after expense
reimbursement++
- --------------------------------------------------------------------------------
Ratio of net
investment
deficit to average (0.84%)* (0.58%) (0.62%)
- --------------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
net assets,
before expense
reimbursement++
- --------------------------------------------------------------------------------
Portfolio 50.51% 100.46% 129.59%
Turnover**
- --------------------------------------------------------------------------------
Average N/A N/A $0.0523
commission
rate paid**
- --------------------------------------------------------------------------------

* Annualized
** For the corresponding Fund of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated form Master Trust Fund

<PAGE>

MINI CAP INSTITUTIONAL PORTFOLIO
- --------------------------------------------------------------------------------

[bullet point icon]
INVESTMENT OBJECTIVE: Maximum long-term capital appreciation.

[bullet point icon]
INVESTMENT STRATEGY The Investment Adviser focuses on a "bottom-up" analysis
that evaluates the financial condition and competitiveness of individual
companies. It uses a blend of traditional fundamental research and computer
intensive systematic disciplines to uncover what it calls "change at the
margin" - positive business developments which are not yet fully reflected in
the company's stock price. It searches for successful, growing companies that
are managing change advantageously and poised to exceed growth expectations.

The Fund emphasizes companies with market capitalizations generally up to $100
million.

[bullet point icon]
PRINCIPAL INVESTMENTS: Under normal conditions, the Fund invests at least 75%
of its total assets in common stocks. It invests the remainder primarily
in preferred and convertible securities, investment grade debt securities, and
securities issued by the U.S. government and its agencies and
instrumentalities. The Fund may invest up to 20% of its total assets in
foreign securities. The Fund may also use options and futures contracts as
hedging techniques.

[bullet point icon]
PORTFOLIO MANAGEMENT: The Investment Adviser emphasizes a team approach to
portfolio management to maximize its overall effectiveness. For a complete list
of the portfolio team, see "Portfolio Teams" on page ___

- --------------------------------------------------------------------------------
[bullet point icon]
INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below show the expenses of the Portfolio and
its corresponding Fund for the past year. Actual expenses may be more or less
than those shown.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
- ----------------------------------------------------------------------------------------------
<S> <C>
Maximum sales charge on purchases (as a percentage of offering price) None
- ----------------------------------------------------------------------------------------------
Sales charge on reinvested dividends None
- ----------------------------------------------------------------------------------------------
Deferred sales charge (as a percentage of original purchase price
or redemption proceeds, whichever is lower) None
- ----------------------------------------------------------------------------------------------
Redemption fee None
- ----------------------------------------------------------------------------------------------
Exchange fee None
- ----------------------------------------------------------------------------------------------

- ----------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(AFTER EXPENSE DEFERRAL)
- ----------------------------------------------------------------------------------------------
Management fees 1.25%
- ----------------------------------------------------------------------------------------------
12b-1 expenses None
- ----------------------------------------------------------------------------------------------
Total other expenses 0.31%
- ----------------------------------------------------------------------------------------------
Total operating expenses (after expense deferral)(1) 1.56%
- ----------------------------------------------------------------------------------------------
</TABLE>

1 The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Funds and the Portfolios.
Total operating expenses would have been _____% absent the waiver and
deferral. See "Investment Adviser Compensation".

<PAGE>

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

- ----------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------
$16 $49 - --
- ----------------------------------------------------------------

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

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

FINANCIAL HIGHLIGHTS: The figures below have been audited by Ernst & Young
L.L.P. with respect to the fiscal years ended March 31, 1996 and 1997. Ernst &
Young L.L.P. is an independent auditor whose reports were unqualified. This
information should be read in conjunction with the financial statements and the
notes thereto which appear in the Trust's 1997 Annual Report.

------------------------------
7/12/95 TO 4/1/96 TO
3/31/96 3/31/97
- -----------------------------------------------------------
PER SHARE DATA: $12.50
- -----------------------------------------------------------
Net asset value,
beginning of
period / Income
from investment
operations: (0.05)
Net investment
income (deficit) 3.40
Net realized and
unrealized gains
(losses) on
securities and
foreign currency
- -----------------------------------------------------------
Total from
investment
operations 3.35
Less
distributions: --
Dividends from --
net investment
income
Distributions
from capital
gains
- -----------------------------------------------------------
Net asset value, $15.85
end of period
- -----------------------------------------------------------
Total Return+: 26.80%
- -----------------------------------------------------------
Ratios/Supple-
mental Data: $25,237
Net Assets ($000),
end of period
- -----------------------------------------------------------
Ratio of expenses
to average net
assets, after 1.55%*
expense
reimbursement++
- -----------------------------------------------------------
Ratio of expenses
to average net
assets, before 2.46%*
expense
reimbursement++
- -----------------------------------------------------------
Ratio of net
investment
deficit to average (0.98%)*
net assets, after
expense
reimbursement++
- -----------------------------------------------------------
Ratio of net
investment
deficit to average (1.36%)*

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

<PAGE>

- -----------------------------------------------------------
net assets,
before expense
reimbursement++
- -----------------------------------------------------------
Portfolio 106.99%
Turnover**
- -----------------------------------------------------------
Average $0.0529
commission
rate paid**
- -----------------------------------------------------------

* Annualized
** For the corresponding Fund of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated form Master Trust Fund

<PAGE>

INCOME & GROWTH INSTITUTIONAL PORTFOLIO
- --------------------------------------------------------------------------------

[bullet point icon]
INVESTMENT OBJECTIVE: Maximum total return, consisting of long-term capital
appreciation and current income.

[bullet point icon]
INVESTMENT STRATEGY: The Fund invests primarily in convertible securities.
The Investment Adviser evaluates each security's investment characteristics as a
fixed income instrument as well as its potential for capital appreciation. In
evaluating convertibles, the Investment Adviser searches for what it calls
"changes at the margin" -- positive business developments which are not yet
fully reflected in the company's stock price. It searches for successful
growing companies that are managing change advantageously and poised to exceed
growth expectations.

[bullet point icon]
PRINCIPAL INVESTMENTS: Under normal conditions, the Fund invests at least 65%
of its total assets in convertible securities. It invests the remainder
primarily in common and preferred stocks, debt securities, and securities
issued by the U.S. government and its agencies and instrumentalities. The
Fund may also use options and futures contracts as hedging techniques.

At all times, the Fund invests a minimum of 25% of its total assets in common
and preferred stocks, and 25% in other income producing convertible and debt
securities. The Fund may also invest up to 35% of its assets in debt
securities rated below investment grade.

The Fund emphasizes companies with market capitalizations above $500 million.

[bullet point icon]
RISK FACTORS: Convertible securities have the investment characteristics of
both equity and debt securities. Accordingly, the value of your investment
will fluctuate with movements in the stock and bond markets. The companies in
which the Fund invests may be subject to more volatile market movements than
securities of larger more established companies. The value of the Fund's debt
securities will change as interest rates fluctuate: if rates go up, the values
of debt securities go down; if rates go down, the values of debt securities go
up. In addition, the lower rated convertible securities in which the Fund
may invest are considered predominately speculative and are subject to greater
volatility and risk of loss than investment grade securities, particularly in
deteriorating economic periods. For a further explanation, see "Risk Factors
and Special Considerations" starting on page ____.

- ----------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(AFTER EXPENSE DEFERRAL)
- ----------------------------------------------------------------------------------------------
Management Fees 0.75%
- ----------------------------------------------------------------------------------------------
12b-1 expenses None
- ----------------------------------------------------------------------------------------------
Total other expenses 0.25%
- ----------------------------------------------------------------------------------------------
Total operating expenses (after expense deferral)(1) 1.00%
- ----------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

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

<TABLE>
<CAPTION>
------------------------------------------------------------
4/19/93 4/1/94 4/1/95 4/1/96
TO TO TO TO
3/31/94 3/31/95 3/31/96 3/31/97
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE $12.50 $13.39 $11.86
DATA:
- ------------------------------------------------------------------------------------
Net asset
value,
beginning of
period /
Income from 0.42 0.54 0.53
investment
operations: 2.12 (0.85) 2.59
Net
investment
income
(deficit)
Net realized
and
unrealized
gains
(losses) on
securities
and foreign
currency
- ------------------------------------------------------------------------------------
Total from
investment
operations 2.54 (0.31) 3.12
Less
distributions: (0.42) (0.54) (0.53)
Dividends (1.23)* (0.68) --
from net
investment
income
Distributions
from capital
gains
- ------------------------------------------------------------------------------------
Net asset $13.39 $11.86 $14.45
value, end of
period
- ------------------------------------------------------------------------------------
TOTAL
RETURN+: 20.18% (2.02%) 26.69%
- ------------------------------------------------------------------------------------
RATIOS/SUPPL
EMENTAL $18,332 $12,506 $17,239
DATA: Net
Assets
($000), end
of period
- ------------------------------------------------------------------------------------
Ratio of
expenses to
average net .99% 1.00% 1.00%
assets, after
expense
reimbursement++
- ------------------------------------------------------------------------------------
Ratio of
expenses to
- ------------------------------------------------------------------------------------

<PAGE>

- ------------------------------------------------------------------------------------
average net 1.50% 1.48% 1.53%
assets,
before
expense
reimbursement++
- ------------------------------------------------------------------------------------
Ratio of net
investment
deficit to 3.36% 4.28% 3.88%
average net
assets, after
expense
reimbursement++
- ------------------------------------------------------------------------------------
Ratio of net
investment
deficit to 2.85% 3.80% 3.34%
average net
assets,
before
expense
reimbursement++
- ------------------------------------------------------------------------------------
Portfolio
Turnover** 117.52% 125.51% 144.97%
- ------------------------------------------------------------------------------------
Average N/A N/A
commission $0.0597
rate paid**
- ------------------------------------------------------------------------------------
</TABLE>

* Annualized
** For the corresponding Fund of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated form Master Trust Fund

<PAGE>

BALANCED GROWTH INSTITUTIONAL PORTFOLIO
- --------------------------------------------------------------------------------

[bullet point icon]
INVESTMENT OBJECTIVE: A balance of long-term capital appreciation and current
income.

[bullet point icon]
INVESTMENT STRATEGY: The Investment Adviser actively manages a blended
portfolio of equity and fixed income securities with an emphasis on the overall
total return. For the equity portion, the Investment Adviser focuses on a
"bottom-up" analysis that evaluates the financial condition and competitiveness
of individual companies. It primarily uses computer intensive systematic
disciplines to uncover "change at the margin" - positive business developments
that are not yet fully reflected in a company's stock price. The fixed income
portion is actively managed to take advantage of current interest rates and bond
market trends by varying the structure, duration and allocation of fixed income
investments from various business sectors.

[bullet point icon]
PRINCIPAL INVESTMENTS: Under normal conditions, the Fund allocates about 60%
of its total assets (but no more than 70% and no less than 50%) to equity
securities, with an emphasis on companies with market capitalizations in excess
of $500 million, and about 40% of its total assets to debt securities issued by
corporations and the U.S. government, and its agencies and instrumentalities. A
portion of the Fund's total assets (less than 35%) may be invested in debt
securities rated below investment grade. The Fund may invest up to 20% of its
total assets in securities of foreign issuers. The Fund may also use options
and futures contracts as hedging techniques.

[bullet point icon]
PORTFOLIO MANAGEMENT: The Investment Adviser emphasizes a team approach to
portfolio management to maximize its overall effectiveness. For a complete list
of the portfolio team, see "Portfolio Teams on page ____.

[bullet point icon]
RISK FACTORS: As with any fund that invests in common stocks and debt
obligations, the value of your investment will fluctuate in response to
movements in the stock and bond markets. Equity securities of companies in
which the Fund invests may be more volatile than securities of larger, more
established companies. The value of the Fund's debt securities will change as
interest rates fluctuate: if rates go up, the value of debt securities fall; if
rates go down, the value of debt securities go up. Debt securities with
longer maturities tend to be more sensitive to interest rate movements than
those with shorter maturities. Lower rated securities in which the Fund invests
are considered speculative and are subject to greater volatility and risk of
loss than investment grade securities, particularly in deteriorating economic
periods. For a further explanation, see "Risk Factors and Special
Considerations" starting on page ____.

- --------------------------------------------------------------------------------
[bullet point icon]
INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below show the expenses of the portfolio and
its corresponding Fund for the past year. Actual expenses may be more or less
than those shown.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
- ----------------------------------------------------------------------------------------------
<S> <C>
Maximum sales charge on purchases (as a percentage of offering price) None
- ----------------------------------------------------------------------------------------------
Sales charge on reinvested dividends None
- ----------------------------------------------------------------------------------------------
Deferred sales charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower) None
- ----------------------------------------------------------------------------------------------
Redemption fee None
- ----------------------------------------------------------------------------------------------
Exchange fee None
- ----------------------------------------------------------------------------------------------

1. The Investment Adviser has agreed to waive or defer its management fees
and to absorb other operating expenses payable by the Funds and the
Portfolios. Total operating expenses would have been _____% absent the
waiver and deferral. See "Investment Adviser Compensation".

<PAGE>

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

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

---------------------------------------------------------
10/1/93 4/1/94 4/1/95 4/1/96
TO TO TO TO
3/31/94 3/31/95 3/31/96 3/31/97
- ------------------------------------------------------------------------------
PER SHARE DATA: $12.50 $11.71 $12.01
- ------------------------------------------------------------------------------
Net asset
value,
beginning of
period/Income
from
investment 0.08 0.22 0.37
operations:
Net investment
income (deficit) (0.79) 0.30 2.19
Net realized
and unrealized
gains (losses)
on securities
and foreign
currency
- ------------------------------------------------------------------------------
Total from
investment
operations (0.71) 0.52 2.56
Less
distributions: (0.08) (0.22) (0.37)
Dividends from -- -- --
net investment
income
Distributions
from capital
gains
- ------------------------------------------------------------------------------
Net asset $11.71 $12.01 $14.20
value, end of
period
- ------------------------------------------------------------------------------
TOTAL RETURN+: (5.66%) 4.56% 21.45%
- ------------------------------------------------------------------------------
RATIOS/SUPPLE
MENTAL DATA: $143 $284 $625
Net Assets
($000), end of
period
- ------------------------------------------------------------------------------
Ratio of
expenses to
average net 0.99% 1.00% 1.00%
assets, after
expense
reimbursement++
- ------------------------------------------------------------------------------
Ratio of
expenses to
average net 43.16% 20.66% 9.90%
assets, before
expense
reimbursement++
- ------------------------------------------------------------------------------
Ratio of net
investment
deficit to 1.59% 2.06% 2.74%
average net
assets, after
expense
reimbursement++
- ------------------------------------------------------------------------------
Ratio of net
investment
- ------------------------------------------------------------------------------

<PAGE>

- ------------------------------------------------------------------------------
deficit to (40.58%) (17.60%) (5.74%)
average net
assets, before
expense
reimbursement++
- ------------------------------------------------------------------------------
Portfolio
Turnover** 85.43% 110.40% 197.19%
- ------------------------------------------------------------------------------
Average
commission
rate paid** N/A N/A $0.0594
- ------------------------------------------------------------------------------

* Annualized
** For the corresponding Fund of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated form Master Trust Fund

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

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

REINSTATEMENT PRIVILEGE If you sell shares of a Portfolio, you may invest some
or all of the proceeds in the same Portfolio within 90 days without a sales
charge. If you paid a CDSC when you sold your shares, you will be credited with
the amount of the CDSC. All accounts involved must have the same registration.

TO UTILIZE: CONTACT YOUR FINANCIAL REPRESENTATIVE OR NICHOLAS-APPLEGATE MUTUAL
FUNDS..

NET ASSET VALUE PURCHASES Shares of a Series A Portfolio may be sold 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

YOUR ACCOUNT
- ------------
TRANSACTION POLICIES

PURCHASE OF SHARES. Shares are offered at net asset value without a sales
charge various institutions and certain asset allocation programs, and
employees and former partners of the Investment Adviser. The minimum initial
investment is $250,000, and the minimum subsequent investment to $10,000. The
Distributor may waive these minimums from time to time.

VALUATION OF SHARES The net asset value per share (NAV) for each Portfolio is
determined each business day at the close of regular trading on the New York
Stock Exchange (usually 4 p.m. Eastern Time) by dividing a Portfolio's net
assets by the number of its shares outstanding.

<PAGE>

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

EXECUTION OF REQUESTS Each Portfolio is open on those days when the New York
Stock Exchange is open, usually Monday - Friday. Buy and sell requests are
executed at the NAV next calculated after your request is received in good order
by the Transfer Agent.

At times of peak activity, it may be difficult to place requests by phone.
During these times, consider sending your request in writing or by facsimile.
Each Portfolio reserves the right to reject any purchase or to suspend or modify
the continuous offering of its shares. Your financial representative is
responsible for forwarding payment promptly to the Transfer Agent. The Trust
reserves the right to cancel any buy request if payment is not received within
three days.

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

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

CERTIFICATED SHARES Most shares are electronically recorded. If you wish to
have certificates for your shares, please write to the Transfer Agent.
Certificated shares can only be sold by returning the certificates to the
Transfer Agent, along with a letter of instruction or a stock power and a
signature guarantee.

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

SHAREHOLDER INQUIRIES Shareholder inquiries should be addressed to the Trust,
c/o the Trust's transfer agent,

State Street Bank and Trust Company,
Attention: Nicholas-Applegate Mutual Funds,
P.O. Box 8326,
Boston, MA 02266-8326.

Telephone inquiries can be made by calling 1-800-551-8043 or, from outside the
U.S. 1-617-774-5000 (collect).

The services referred to above 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.

DIVIDENDS AND ACCOUNT POLICIES

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. For further information about any of
the plans, agreements, applications and annual fees, contact the Distributor,
your financial representative or plan sponsor. To determine which retirement
plan is appropriate for you, consult your tax adviser.

ACCOUNT STATEMENTS In general, you will receive account statements as follows:
- - After every transaction that affects your account balance.
- - After any changes of name or address of the registered owner(s).
- - In all other circumstances, every quarter.

Every year you will also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.

DIVIDENDS The Portfolios generally distribute most or all of their net earnings
in the form of dividends. The Large Cap, Core Growth, Value and Emerging Growth
Portfolios declare and pay annual dividends of net investment income. The
Income & Growth and Balanced Growth Portfolios declare and pay quarterly
dividends of net investment income. Any net capital gains are distributed
annually.

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

TAXABILITY OF DIVIDENDS As long as a Portfolio meets the requirements for being
a tax-qualified regulated investment company, which each Portfolio has in the
past and intends to in the future, it pays no federal income tax on the earnings
it distributes to shareholders.

Consequently, dividends you receive from a Portfolio,

<PAGE>

whether reinvested or taken as cash, are generally considered taxable.
Dividends from a Portfolio's long-term capital gains are taxable as capital
gains; dividends from other sources are generally taxable as ordinary income.

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

The Form 1099 that is mailed to you details your dividends and their federal tax
category, although you should verify your tax liability with your tax
professional.

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

SMALL ACCOUNTS (NON-RETIREMENT ONLY) If you draw down a non-retirement account
so that its total value is less than $10,000, you may be asked to purchase more
shares within 60 days. If you do not take action, the Portfolio may close out
your account and mail you the proceeds. Your account will not be closed if its
drop in value is due to Fund performance.

AUTOMATIC WITHDRAWALS You may make automatic withdrawals from a Portfolio of
$250 or more on a monthly or quarterly basis if you have an account of $15,000
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.

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 1-800-551-8043.

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

<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
This is the minimum $250,000
initial investment
- ---------------------------------------------------------------------------------------------------------------------------------

Use this type of New Account Form
application (Non-Retirement)
- ---------------------------------------------------------------------------------------------------------------------------------
Before completing Each Portfolio offers a variety of features, which are described in the "Your Account" section of this
the application prospectus. Please read this section before completing the application.
- ---------------------------------------------------------------------------------------------------------------------------------
Completing the If you need assistance, contact your financial representative,
application or call the Trust.
- ---------------------------------------------------------------------------------------------------------------------------------
If you are sending Mail application and check, payable to: NICHOLAS-APPLEGATE MUTUAL FUNDS,
money by CHECK PO BOX 8326, BOSTON, MA 02266- 8326. The Trust cannot accept third-party checks.
- ---------------------------------------------------------------------------------------------------------------------------------
If you are sending Please read the bank wire or ACH section under the "Buying Shares" section below.
money by BANK WIRE You will need an account number with the Trust by sending a completed application to:
or ACH NICHOLAS-APPLEGATE MUTUAL FUNDS, PO BOX 8326, BOSTON, MA 02266 8326.
To receive your account number, call either your financial representative or the Trust at
(800)551-8043.
- ---------------------------------------------------------------------------------------------------------------------------------

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BUYING SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
This is the minimum $10,000
additional investment
- ---------------------------------------------------------------------------------------------------------------------------------
The price you will The Trust is open on days that the New York Stock Exchange is open.
receive All transactions received in good order before the market closes receive that day's price.
- ---------------------------------------------------------------------------------------------------------------------------------
If you are sending Instruct your bank to wire the amount you wish to invest to:
money by BANK WIRE STATE STREET BANK & TRUST CO. - ABA #011000028
DDA #9904-645-0
STATE STREET BOS, ATTN: MUTUAL FUNDS
CREDIT: NICHOLAS-APPLEGATE [PORTFOLIO NAME], [YOUR NAME],[ACCOUNT NAME]
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If you are sending Call your bank to ensure (1) that your bank supports ACH, and (2) this feature is active on your bank
money by ACH account. To establish this option, either complete the appropriate sections when opening an
account, or contact your financial representative or the Trust at (800) 551-8043 for further
information.
To initiate an ACH purchase, call the Trust at (800)551-8043.
- ---------------------------------------------------------------------------------------------------------------------------------

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EXCHANGING SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
This is the minimum $250,000
exchange amount to
open a new account
- ---------------------------------------------------------------------------------------------------------------------------------
The price you The Trust is open on days that the New York Stock Exchange is open.
will receive All transactions received in good order before the market closes receive that day's price.
- ---------------------------------------------------------------------------------------------------------------------------------
Things you should The exchange must be to an Institutional Portfolio and in an account with the same registration.
know If opening an account as part of an exchange, you must obtain and read the prospectus.
If you intend to keep money in the Portfolio you are exchanging from, make sure that you leave an
amount equal or greater that the Portfolio's minimum account size (see the "Opening an Account"
section).
To protect other investors, the Trust may limit the number of exchanges you can make.
- ---------------------------------------------------------------------------------------------------------------------------------
How to request an Either contact your financial representative, or call the Trust at (800) 551-8043.
exchange by PHONE The Trust will accept a request by phone if this feature was previously established on your account.
See the "Your Account" section for further information.
- ---------------------------------------------------------------------------------------------------------------------------------
How to request an Please put your exchange request in writing, including: the name on the account, the name of the
exchange by MAIL portfolio and the account number you are exchanging from, the shares or dollar amount you wish to
exchange, and the portfolio you wish to exchange to. Mail this request to: PO BOX 8326, BOSTON, MA
02266 8326.
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</TABLE>
<PAGE>

<TABLE>
<CAPTION>
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SELLING OR REDEEMING SHARES
<S> <C> <C>
IN WRITING BY PHONE
- ---------------------------------------------------------------------------------------------------------------------------------
Certain requests may require a SIGNATURE Selling shares by phone is a service option which
GUARANTEE. See that section below for further must be established on your account prior to
Things you information. You may sell up to the full account making a request. See the "Your Account"
should know value. section, or contact your financial representative
or the Trust at (800) 551-8043 for further
information.
The maximum amount which may be requested
by phone, regardless of account size, is $50,000.
Amounts greater than that must be requested in
writing. I you wish to receive your monies by
bank wire, the minimum request is $5,000.
------------------------------------------------------------------------------------------------------
If you purchased shares through a financial representative or a plan administrator/sponsor,
you should call them regarding the most efficient way to sell shares.
If you bought shares recently by check, they may not be available to be sold for up to
15 calendar days from the date of purchase.
Sales by a corporation, trust or fiduciary may have special requirements.
Please call your financial representative or the Trust for further information.
- ---------------------------------------------------------------------------------------------------------------------------------
The price you The Trust is open on days that the New York Stock Exchange is open.
will receive All transactions received in good order before the market closes receive that day's price.
- ---------------------------------------------------------------------------------------------------------------------------------
If you want to receive Please put your request in writing, including: the Either contact your financial representative or
your monies by BANK name of the account owners, account number call the Trust at (800) 551-8043.
WIRE and Portfolio you are redeeming from, the share The proceeds will be sent to the existing bank
or dollar amount you wish to sell, signed by all wire address listed on the account.
account owners. Mail this request to:
NICHOLAS-APPLEGATE MUTUAL FUNDS,
PO BOX 8326, BOSTON, MA 02266-8326.
The check will be sent to the existing bank wire
address listed on the account.
- ---------------------------------------------------------------------------------------------------------------------------------
If you want to receive Please call the Trust at (800) 551-8043. Either contact your financial representative or
your monies by ACH call the Trust at (800) 551-8043.
The proceeds will be sent to the existing ACH
instructions on the account and will generally be
received at your bank two business days after
your request is received.
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SIGNATURE GUARANTEES
- ---------------------------------------------------------------------------------------------------------------------------------
A definition A signature guarantee is required of a financial institution to verify individual's authenticity of an
individual's signature. It can usually be obtained from a broker, commercial or savings bank or credit
union.
- ---------------------------------------------------------------------------------------------------------------------------------
When do you need one A signature guarantee is needed when making a written request for the following reasons:
1. When selling more than $50,000 work of shares;
2. When you want a check or bank wire sent to a name or address that is not currently listed
on the account;
3. To sell shares from an account controlled by a corporation, partnership, trust or fiduciary; or
4. If your address was changed within the last 60 days.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

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

MASTER/FEEDER STRUCTURE
- -----------------------

The Portfolios are series of shares of the Nicholas-Applegate Mutual Funds (the
"Trust"). Unlike other mutual funds that acquire their securities directly, the
Portfolios invest their assets in the Funds, which are series of
Nicholas-Applegate Investment Trust (the "Master Trust"). This two-tier
structure is known as a "master/ feeder" structure. One to five Portfolios, or
feeder funds, each designated A, B, C, I or Q invest in each Fund. (For
example a Portfolio seeking capital appreciation by investing in securities of
issuers located in countries with emerging securities markets invests in the
Emerging Countries Fund.) The major variations among the Portfolios that
invest in the same Master Fund are sales charges, expenses, and investment
minimums. The Board of Trustees believes that the aggregate per share expenses
of each Portfolio are no greater than the expenses that a Portfolio would incur
if it retained the services of an investment adviser and invested assets
directly into the types of securities held by the Fund. You can obtain more
information about the A, B, C and I Portfolios from your Investment
Representative, or from Nicholas-Applegate Securities at telephone (800)
551-8643.

A Board of Trustees supervises the overall activities of each Master Trust. The
Board selects an investment adviser, an administrator, and a custodian for the
Fund. The Board has the right to terminate these relationships and retain a
different company if it believes it is in the best interests of the Master
Trust.

A separate Board of Trustees supervises the overall activities of the Trust.
It selects the master fund in which to invest, a distributor to market its
shares to investors, a transfer agent, administrators, and others to provide
services. Individual investors purchase shares of the Portfolios through
financial intermediaries or directly from the Trust.

Each Portfolio may withdraw its investment from the corresponding Fund at any
time if the Board determines that it is in the best interests of the
shareholders and only with approval of the Portfolio's shareholders. In that
event, the Board of Trustees would consider alternative arrangements such as
investing a Portfolio's assets in another investment company with the same
investment objectives as the Portfolio or hiring an investment manager to invest
the assets in accordance with the Portfolio's investment policies.

A Portfolio may also be liquidated at any time by the shareholders. The net
proceeds of any liquidation will be distribute to all shareholders in proportion
to their respective holdings.

Whenever a Portfolio is requested to vote, as shareholder, on a matter
pertaining to the corresponding Fund, the Portfolio will hold a meeting of its
shareholders so that shareholders can provide instructions. The Portfolio will
in turn vote in the same proportion as directed by the shareholders. Approval
of changes in a Fund's investment objective, policies, and limitations by a
majority of the Portfolios may require a non-assenting Portfolio to withdraw
its investment in the Fund.

<PAGE>

MASTER FEEDER STRUCTURE
-----------------------

----------------------------------------
SHAREHOLDERS
----------------------------------------
\/
\/
\/ BUY SHARES IN
\/
----------------------------------------
PORTFOLIOS
OF
NICHOLAS-APPLEGATE MUTUAL FUNDS
----------------------------------------
INVEST IN
\/
\/
\/
----------------------------------------
MASTER FUNDS
OF
NICHOLAS-APPLEGATE INVESTMENT TRUST
----------------------------------------
INVEST IN
\/
\/
----------------------------------------
STOCKS, BONDS & OTHER SECURITIES
----------------------------------------

<PAGE>

INVESTMENT ADVISER COMPENSATION. Each Master Fund pays the Investment Adviser a
fee pursuant to an investment advisory agreement. The Emerging Growth Fund pays
at the annual rate of 1.00% of the Fund's net assets. The Large Cap Growth,
Core Growth, Value, Mini Cap, Income & Growth, and Balanced Growth Funds each
pay at the annual rate of 0.75% of the first $500 million of the Fund's net
assets, 0.675% of the next $500 million of net assets, and 0.65% of net assets
in excess of $1 billion.

The Investment Adviser has agreed to waive or defer its management fees payable
by the Funds, and to absorb other operating expenses of the Funds and the
Portfolios, so that the expenses for each Portfolio will not exceed the
following expense ratios on an annual basis through March 31, 1998: Income &
Growth, Balanced Growth, Large Cap, Value and Core Growth Portfolios - 1.00%,
Emerging Growth Portfolio - 1.17%, and Mini-Cap Portfolio - 1.56%. Each
Portfolio will reimburse the Investment Adviser for fees deferred or other
expenses paid pursuant to this Agreement in later years in which operating
expenses for the Portfolio are less than the percentage limitation set forth
above for any such year.

ADMINISTRATOR COMPENSATION. The Funds and the Portfolios pay administrative
fees for administrative personnel and services (including certain legal and
financial reporting services). Each Portfolio pays Nicholas-Applegate Capital
Management an annual fee of .10% of net assets. Each Portfolio pays Investment
Company Administration Corporation (ICAC) an annual fee of $5,000 - $35,000. In
addition, each Fund pays ICAC a fee at an annual rate equal to 0.15% of average
net assets.

DISTRIBUTOR:
Nicholas-Applegate Securities
600 West Broadway, 30th Floor
San Diego, California 92101
(800) 551-8045

PORTFOLIO TRADES. The Investment Adviser is responsible for the Funds'
portfolio transactions. In placing portfolio trades, the Investment Adviser may
use brokerage firms that sell shares of the Portfolios or that provide research
services to the Funds, but only when the Investment Adviser believes no other
firm offers a better combination of quality execution (i.e. timeliness and
completeness) and favorable price. The Investment Adviser expects high annual
portfolio turnover up to 200%. This is generally higher than other funds and
will result in the Funds incurring higher brokerage costs.

INVESTMENT OBJECTIVE. Each Fund's and each Portfolio's investment objective is
fundamental and may only be changed with shareholder approval.

DIVERSIFICATION. All the Funds are diversified.

<PAGE>

PORTFOLIO TEAMS
- ---------------

EQUITY MANAGEMENT
- -----------------

<TABLE>
<S> <C>
John C. Marshall, Jr., Partner Core Growth
Chief Investment Officer - Institutional Equity Management
Joined firm in 1989; 8 years prior investment experience with
Pacific Century Advisers; San Diego Trust & Savings Bank; Howard,
Weil, Labouisse, Friedrichs Inc.
M.B.A. and B.B.A. - Southern Methodist University

Andrew B. Gallagher Core Growth
Portfolio Manager
Joined firm in 1992; 7 years prior investment experience with
Pacific Century Advisors and Sentinel Asset Management, Inc.
M.B.A. - San Diego State University; B.A. -
University of California, Irvine

Thomas J. Sullivan Core Growth
Portfolio Manager
Joined firm in 1994; 2 years prior investment experience with
Donaldson, Lufkin & Jenrette Securities Corp.
B.S. - Rochester Institute of Technology

Maren Lindstrom Core Growth
Portfolio Manager Income and Growth
Joined firm in 1994; 5 years prior investment experience with
Societe Generale; Banque D'Orsay; and Prudential Asset Management
M.B.A. - University of California, Los Angeles; B.A. -
University of Michigan

Catherine Somhegyi, Partner Emerging Growth
Chief Investment Officer Mini Cap
Joined firm 1987.
M.B.A. and B.S. - University of Southern California

Thomas E. Bleakley Mini Cap
Portfolio Manager Emerging Growth
Joined firm in 1995; 3 years prior investment experience with
Twentieth Century Investors and Dell Computer Corporation
M.B.A. - University of Texas; B.S. - Boston University

Ronald J. Krystyniak CFA Mini Cap
Portfolio Manager Emerging Growth
Joined firm in 1996; 7 years prior experience with Pilgrim
Baxter & Associates and Peterson Consulting & Company
B.S. - Syracuse University

John C. McCraw Mini Cap
Portfolio Manager Emerging Growth
Joined firm in 1992; prior experience with Nations Bank
M.B.A. - University of California, Irvine; B.A. -
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Sandra K. Durn Income and Growth
Portfolio Manager
Joined firm in 1994; prior experience
at Science Solutions, Inc. and San Diego State
University, economics department
M.A. - San Diego State University; B.A.
- University of Maryland

FIXED INCOME
- ------------

Fred S. Robertson, III, Partner, Balanced Growth
Chief Investment Officer - Fixed Income
Joined firm in 1995; 7 years prior investment experience
with Criterion Investment Management Company;
5 years prior investment experience with DuPont
Chemical Pension Fund
M.B.A. - College of William and
Mary; B.S. - Cornell University
</TABLE>

<PAGE>

RISK FACTORS AND SPECIAL CONSIDERATIONS
- --------------------------------------------------------------------------------

MUTUAL FUND CONSIDERATIONS IN GENERAL

Prospective investors should know that any mutual fund investment is subject to
normal market fluctuations and other risks inherent in investing in securities.
There can be no assurance that your investment will increase in value. The
value of your investment will go up and down depending upon market forces and
you may not recoup your original investment. You should consider an investment
in any of the Portfolios a long-term investment.

THE FUNDS' INVESTMENTS

EQUITY SECURITIES.
Each of the Funds may buy equity securities, including common stocks,
convertible securities, and warrants. Equity securities represent an ownership
in a company. The Funds may invest in growth companies, cyclical companies,
companies with smaller market capitalizations, or companies believed to be
undergoing a basic change in operations or markets. Although equity securities
have a history of long-term growth in value, their prices rise and fall as a
result of changes in the company's financial condition as well as movements in
the overall securities markets.

SMALLER ISSUERS.
Each Fund may invest in small to medium sized companies. Smaller and medium
sized issuers may be less seasoned, have more limited product lines, markets,
financial resources and management depth, and be more susceptible to adverse
market conditions than larger issuers. As a result, the securities of such
smaller issuers may be less actively traded than those of larger issuers and
may also experience greater market volatility.

CONVERTIBLE SECURITIES.
Each Fund may invest in convertible securities. A convertible security is a
fixed income equity security that may be converted into a prescribed amount of
common stock at a specified formula. A convertible security entitles the owner
to receive interest until the security matures or is converted. Convertibles
have several unique investment characteristics such as: (a) higher yields than
common stocks but lower yields than straight debt securities; (b) lesser degree
of fluctuation in value than the underlying stock since they have fixed income
characteristics; and (c) potential for capital appreciation if the market price
of the underlying security increases.

CORPORATE DEBT SECURITIES.
Each Fund may invest in corporate debt securities. Corporate debt securities
are subject to the risk of an issuer's inability to meet principal and interest
payments on the obligation (credit risk) and may also be subject to price
volatility due to such factors as interest rate sensitivity, market perception
of the credit-worthiness of the issuer and general market liquidity (market
risk). When interest rates decline, the value of the Funds' debt securities can
be expected to rise, and when interest rates rise, the value of those securities
can be expected to decline.

Each Fund, except Balanced Growth and Income & Growth, will purchase debt
obligations only if they are deemed investment grade -- that is, they carry
a rating of at least BAA from Moody's or BBB from Standard and Poor's, or
comparable rating from another rating agency or, if not rated by an agency,
determined by the Investment Adviser to be of comparable quality. Bonds
rated BBB or Baa may have speculative characteristics and changes in economic
circumstances are more likely to lead to a weakened capacity to make interest
and principal payments than higher rated bonds. The Funds (except Balanced
Growth and Income & Growth) intend to dispose, in an orderly manner, of any
security which is downgraded below investment grade.

LOWER RATED SECURITIES CONSIDERATIONS.
The Balanced Growth Fund and the Income & Growth Fund may invest in debt and
convertible securities that are not in the four highest rating categories but
will in no event purchase securities rated below "C" or equivalent. A
description of these rating categories is contained in the Statement of
Additional Information.

Lower rated debt securities, commonly referred to as "junk bonds", and
convertible securities will usually offer higher yields than higher rated
securities because of reduced creditworthiness and increased risk of default.
Lower rated or unrated debt obligations are more likely to react to
developments affecting market and credit risks than are the more highly rated
securities, which reach primarily to movements in the general level of
interest rates. In the past, economic downturns or

<PAGE>

increases in interest rates have caused a higher incidence of default by the
issuers of lower rated securities.

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

In purchasing such securities, the Investment Adviser will rely on its analysis,
judgment and experience in evaluating the creditworthiness of the issuer. The
Investment Adviser will consider, among other things, the issuer's financial
resources, its operating history, its sensitivity to economic conditions and
trends, the quality of issuer's management and regulatory matters.

As of the fiscal years ended March 31, 1997, the Balanced Growth Fund owned as a
percentage of its total value lower rated debt securities in the following
amounts: BB - 11.68%; B -10.37%; CCC - 1.83%. The Income & Growth Fund owned
no debt securities rated below investment grade.

FOREIGN SECURITIES.
Foreign securities generally will not be registered with the SEC and subject to
its reporting requirements. Accordingly, information about the issuer will not
be as publicly available as it may be for U.S. issuers. Additionally, these
companies are not subject to the same accounting standards or to practices and
requirements comparable to those in the U.S. The Funds will not invest in
securities denominated in a foreign currency unless, at the time of investment,
the Investment Adviser considers such currency to be fully exchangeable into
U.S. dollars without significant legal restrictions.

INVESTMENT COMPANY SECURITIES.
Each Fund may invest up to 10% of its total assets in the shares of other
investment companies. The Funds may invest in money market mutual funds in
connection with the management of their daily cash positions. The Funds may
also make indirect foreign investments through other investment companies that
have comparable investment objectives and policies as the Funds. In addition to
the advisory and operational fees each Fund bears directly in connection with
its own operation, the Funds would also bear their pro rata portions of each
other investment company's advisory and operational expenses.

ILLIQUID SECURITIES.
Each Fund may invest up to 15% of its net assets in securities that are
considered illiquid. An illiquid investment is generally an investment that is
not registered in the under U.S. securities laws, cannot be offered for public
sale in the U.S. without first being registered under U.S. securities laws, or
cannot be disposed of within seven days in the normal course of business at
approximately the amount at which the Fund values it. Limitations on resale may
adversely affect the marketability of illiquid securities and the Fund may not
be able to dispose of these securities at the desired time and price. A Fund
may bear additional expenses if it has to register these securities under U.S.
securities laws before being resold.

TEMPORARY INVESTMENTS.
The Funds may from time to time on a temporary basis to maintain liquidity or
when the Investment Adviser determines that the market conditions call for a
temporary defensive posture, invest all of their assets in short-term
instruments. These temporary investments include: notes issued or guaranteed
by the U.S. government, its agencies or instrumentalities; commercial paper
rated in the highest two rating categories; certificates of deposit; repurchase
agreements; and other high grade corporate debt securities.

THE FUNDS' INVESTMENT TECHNIQUES

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

SHORT SALES.
The Core Growth, Value, Emerging Growth and Mini Cap Funds may maintain short
positions in securities. A "short sale" is the sale by the Fund of a security
which has been borrowed from a third party on

<PAGE>

the expectation that the market price will drop. If the price of the
security drops, the Fund will make a profit by purchasing the security in the
open market at lower price than at which it sold the security. If the price
of the security rises, the Fund may have to cover its short position at a
higher price than the short sale price, resulting in a loss. A short sale
can be covered or uncovered. In a covered short sale, the Fund either (1)
borrows and sells securities it already owns (also known as a short sale
"against the box"), or (2) deposits in a segregated account cash, U.S.
government securities, or other liquid securities in an amount equal to the
difference between the market value of the securities and the short sale
price. Use of uncovered short sales is a speculative investment technique and
has potentially unlimited risk. Accordingly, a Fund will not make uncovered
short sales in an amount exceeding the lesser of 2% of the Fund's net assets
or 2% of the securities of such class of the issuer. The Board of Trustees
has determined that no Fund will make short sales if to do so would create
liabilities or require collateral deposits of more than 25% of the Fund's
total assets.

WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS.
Each Fund may purchase or sell securities for delivery at a future date,
generally 15 to 45 days after the commitment is made. The other party's failure
to complete the transaction may cause the Fund to miss a price or yield
considered to be advantageous. 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 securities.

BORROWING.
Each Fund may borrow up to 20% of its total assets for temporary, extraordinary
or emergency purposes, such as to provide cash for redemption requests without
having to sell portfolio securities at an inopportune time. Each Fund may also
borrow money through reverse repurchase agreements, uncovered short sales, and
other techniques. All borrowings by a Fund cannot exceed one-third of a Fund's
total assets. As a consequence of borrowing, a Fund will incur obligations to
pay interest, resulting in an increase in expenses.

SECURITIES LENDING.
Each Fund may lend securities to financial institutions such as banks,
broker/dealers and other recognized institutional investors in amounts up to 30%
of the Fund's total assets. These loans earn income for the Fund and are
collateralized by cash, securities, letters of credit or any combination
thereof. The Fund might experience loss if the financial institution defaults
on the loan.

FOREIGN CURRENCY TRANSACTIONS
To the extent a Fund invests in foreign securities, it may enter into foreign
currency transactions either on a spot or cash basis at prevailing rates or
through forward foreign currency exchange contracts in order to have the
necessary currencies to settle transactions. Each Fund may also enter into
foreign currency transactions to protect Fund assets against adverse changes
in foreign currency exchange rates. Such efforts could limit potential gains
that might result from a relative increase in the value of such currencies,
and might, in certain cases, result in losses to a Fund.

OPTIONS
The Funds may deal in options on securities, securities indices and foreign
currencies. The Funds may use options to manage stock prices, interest rate and
currency risks. A Fund may not purchase or sell options if more than 25% of its
net assets would be hedged. The Funds may also write covered call options and
secured put options to seek to generate income or lock in gains on up to 25% of
their net assets.

FUTURES AND OPTIONS ON FUTURES
The Funds may enter into futures contracts, or options thereon, involving
foreign currency, interest rates, securities, and securities indices, for
hedging purposes only. 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.

As a general rule, no Fund will purchase or sell futures if, immediately
thereafter, more than 25% of its net assets would be hedged.

RISKS OF FUTURES AND OPTIONS TRANSACTIONS
When a Fund uses options, futures and options on futures as hedging devices,
there is a risk that the prices of the hedging vehicles may not correlate
perfectly with the prices of the securities in the portfolio. This may cause
the futures contract and any related options to react differently than the
Fund's portfolio securities to market changes. In addition, the Investment
Adviser could be incorrect in its expectations about the direction or the extent
of market movements. In these events, a Fund could lose money

<PAGE>

on the futures contracts or option.

It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the Investment Adviser will
consider liquidity before entering into these transactions, there is no
assurance that a liquid secondary market will exist for these instruments.

<PAGE>

NEW ACCOUNT FORM
INSTITUTIONAL PORTFOLIOS

MAIL TO:
Nicholas|Applegate Mutual Funds
PO Box 8326
Boston, MA 02266-8326

1. YOUR ACCOUNT REGISTRATION

PLEASE PRINT. COMPLETE ONE SECTION ONLY. JOINT ACCOUNT OWNERS WILL BE
REGISTERED JOINT TENANTS WITH THE RIGHT OF SURVIVORSHIP UNLESS OTHERWISE
INDICATED. IT IS THE SHAREHOLDER(S) RESPONSIBILITY TO SPECIFY OWNERSHIP
DESIGNATIONS WHICH COMPLY WITH APPLICABLE STATE LAW.

/ / INDIVIDUAL OR JOINT ACCOUNT

- --------------------------------------------------------------------------------
First Name Middle Initial Last Name

- -
- ----- -------- -------
Social Security Number

- --------------------------------------------------------------------------------
Joint Tenant (if any) Middle Initial Last Name

- -
- ----- -------- -------
Social Security Number

/ / GIFT OR TRANSFER TO MINOR

- --------------------------------------------------------------------------------
Name of Custodian (one only)

As Custodian For
----------------------------------------------------------------
Minor's Name (only one)

Under Uniform Gifts/Transfers to Minors Act
(select one)

- --------------------------------------------------------------------------------
(Minor's State of Residence) Minor's S.S.# Birth Date

/ / CORPORATION, PARTNERSHIP, OR OTHER ENTITY (CORPORATE RESOLUTION REQUIRED)

- --------------------------------------------------------------------------------
Registration

- --------------------------------------------------------------------------------
Officers, Trustees or Partners if Part of Registration

-
- ------ ---------------
Taxpayer Identification Number

2. YOUR ADDRESS
DO YOU HAVE ANY OTHER IDENTICALLY REGISTERED NICHOLAS|APPLEGATE ACCOUNTS?
/ / YES / / NO

CITIZENSHIP:
/ / U.S. / / RESIDENT ALIEN / / NON-RESIDENT ALIEN ____________________
SPECIFY COUNTRY

- --------------------------------------------------------------------------------
STREET ADDRESS OR PO BOX NUMBER APARTMENT NUMBER

- --------------------------------------------------------------------------------
CITY STATE ZIP CODE

(_____)___________________________________________
AREA CODE DAYTIME PHONE

(_____)___________________________________________
AREA CODE EVENING PHONE

3. YOUR INVESTMENT
PLEASE SELECT YOUR FUND CHOICES.
SEE PROSPECTUS FOR INVESTMENT MINIMUMS.

CLASS AMOUNT

MINI-CAP GROWTH I(753) / / $

EMERGING GROWTH I(359) / / $

CORE GROWTH I(371) / / $

LARGE CAP GROWTH I(181) / / $

VALUE I(378) / / $

INCOME & GROWTH I(372) / / $

BALANCED GROWTH I(373) / / $

FULLY DISCRETIONARY FIXED INCOME I(183) / / $

HIGH YIELD BOND I(377) / / $

SHORT-INTERMEDIATE FIXED INCOME I(182) / / $

STRATEGIC INCOME I(752) / / $

WORLDWIDE GROWTH I(374) / / $

INTERNATIONAL SMALL CAP I(356) / / $

INTERNATIONAL CORE GRTH I(180) / / $

EMERGING COUNTRIES I(179) / / $

MONEY MARKET* A(365) / / $

TOTAL $

*Please see A,B,C prospectus for Money Market Portfolio

4. YOUR METHOD OF PAYMENT

By Check: Payable to Nicholas|Applegate Mutual Funds

By Wire: Please call 1-800-551-8043 for your account number

By Exchange: Portfolio from which you are exchanging

<PAGE>

- --------------------------------------------------------------------------------
By Confirm Trade Order: Trade Order #_______________________

5. YOUR DIVIDEND AND CAPITAL GAIN PAYMENT OPTIONS

All dividends and capital gains will be reinvested unless you indicate
otherwise.

- - ALL CASH OPTION: Pay all dividends and capital gains to me by check.

- - CASH DIVIDEND OPTION: Pay all dividends by check and reinvest all capital
gains.

- - CASH CAPITAL GAINS OPTION: Reinvest all dividends and pay all capital gains
by check.

- - *CROSS REINVESTMENT: Please call 1-800-551-8043 for instructions.

SERVICE OPTIONS

6. TELEPHONE REDEMPTIONS AND EXCHANGES

/ / I authorize redemption of Portfolio shares upon telephone instructions.
Please see prospectus for more information.

If box is not checked, the telephone redemption privilege WILL NOT be provided.

/ / I authorize Nicholas|Applegate Mutual Funds to allow exchanges between or
among the Portfolios upon telephone instructions from me (must be same series
and same registration on account).

If box is not checked, the telephone exchange privilege will not be provided.

7. SYSTEMATIC INVESTMENT/WITHDRAWAL PROGRAM

Telephone Investment/Withdrawal Program

/ / I authorize Nicholas-Applegate Mutual Funds to act upon telephone
instructions for investments into or withdrawals from my mutual fund account via
ACH (Automated Clearing House).

COMPLETE CHECKING/SAVINGS ACCOUNT INFORMATION SECTION.*

Systematic Investment - to my mutual fund account

/ / I authorize Nicholas-Applegate Mutual Funds to process investments into my
mutual fund (via ACH) account on the following:

PURCHASES SHOULD BE MADE ON THE __________ (PROVIDE DATE) OF EVERY

______MONTH OR ___QUARTER (JAN/APRIL/JULY/OCT)

NAME OF PORTFOLIO(S)____________________________________________
AMOUNT__________________
($50 MINIMUM)

PURCHASES SHOULD BE MADE ON THE __________ (PROVIDE DATE) OF EVERY

______MONTH OR ___QUARTER (JAN/APRIL/JULY/OCT)

NAME OF PORTFOLIO(S)____________________________________________
AMOUNT__________________
($50 MINIMUM)

Systematic Withdrawal - from my mutual fund account via ACH (if by check, go to
next section)

/ / I AUTHORIZE NICHOLAS-APPLEGATE MUTUAL FUNDS TO PROCESS WITHDRAWALS FROM MY
MUTUAL FUND ACCOUNT IN EACH OF THE FOLLOWING MONTHS:

REDEMPTIONS SHOULD BE MADE ON THE _______ (PROVIDE DATE) OF EVERY

______MONTH OR ___QUARTER (JAN/APRIL/JULY/OCT)

NAME OF PORTFOLIO(S)__________________________________________
AMOUNT___________________
($50 MINIMUM, $5,000 MINIMUM BALANCE REQUIRED)

Systematic Withdrawal - from my mutual fund account by check

/ / I AUTHORIZE NICHOLAS-APPLEGATE MUTUAL FUNDS TO PROCESS WITHDRAWALS FROM MY
MUTUAL FUND ACCOUNT IN EACH OF THE FOLLOWING MONTHS:

REDEMPTIONS WILL BE MADE ON THE 15TH (OR NEXT BUSINESS DAY) OF EVERY

______MONTH OR ___QUARTER (JAN/APRIL/JULY/OCT)

NAME OF PORTFOLIO(S)__________________________________________
AMOUNT___________________
($50 MINIMUM, $5,000 MINIMUM BALANCE REQUIRED)

SEND PROCEEDS TO: ________ADDRESS OF MY MUTUAL FUND ACCOUNT
________SPECIAL PAYEE (AS LISTED BELOW)

- --------------------------------------------------------------------------------
SPECIAL PAYEE

- --------------------------------------------------------------------------------
STREET ADDRESS, BOX NUMBER APT #

- --------------------------------------------------------------------------------
CITY STATE ZIP CODE

CHECKING/SAVINGS ACCOUNT INFORMATION
PLEASE COMPLETE SECTION BELOW OR ATTACH A VOIDED CHECK OR DEPOSIT TICKET FOR
ACH, SYSTEMATIC INVESTMENT/WITHDRAWAL OR TELEPHONE REDEMPTION PRIVILEGES.

INDICATE SERVICES REQUESTED
/ / ACH / / TELEPHONE REDEMPTION BY WIRE

INSTITUTION NAME (PLEASE PRINT)_____________________________________
INSTITUTION ADDRESS______________________________________________
CITY___________________STATE_______ ZIP CODE____________________
ACCOUNT TYPE: CHECKING___________ SAVINGS_______________________
ABA ROUTING NUMBER___________________________________________
ACCOUNT NUMBER________________________________________________
NAME(S) ON ACCOUNT_____________________________________________

8. SIGNATURES

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

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

- --------------------------------------------------------------------------------
Shareowner, custodian, trustee or authorized officer Date

- --------------------------------------------------------------------------------
Joint owner, custodian, trustee or authorized officer Date

<PAGE>

FOR MORE INFORMATION

Two documents are available
that offer further information
on the Nicholas/Applegate
Mutual Funds:

ANNUAL/SEMI-ANNUAL
REPORTS TO SHAREHOLDERS
Includes financial statements,
detailed performance information,
portfolio holdings, a statement
from portfolio management, and
the auditor's report.

STATEMENT OF ADDITIONAL
INFORMATION (SAI)

The SAI contains more detailed
information on all aspects of
the Portfolios.

A current SAI has been filed with
the Securities and Exchange Commission
and is incorporated by reference into
this prospectus.

To request a free copy of the current
annual/semi-annual report or SAI,
please call or write:

Nicholas Applegate Mutual Funds
P.O. Box 82169
San Diego, CA 92138-2169
Telephone: (800) 551-8643
<PAGE>

NICHOLAS | APPLEGATE-Registered Trademark-

MUTUAL FUNDS

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

PROSPECTUS

This prospectus contains vital information about these Portfolios. For your own
benefit and protection, please read it before you invest, and keep it on hand
for future reference.

Please note that these Portfolios:

- - are not bank deposits
- - are not federally insured
- - are not endorsed by any bank or government agency
- - are not guaranteed to achieve their investment objectives

GLOBAL INSTITUTIONAL PORTFOLIOS
INTERNATIONAL CORE GROWTH
WORLDWIDE GROWTH
INTERNATIONAL SMALL CAP GROWTH
GLOBAL GROWTH & INCOME
EMERGING COUNTRIES

July __, 1997

<PAGE>

[Left side: visual of marbles]
TABLE OF CONTENTS

OVERVIEW

GLOBAL PORTFOLIOS
International Core Growth
Worldwide Growth
International Small Cap
Global Growth and Income
Emerging Countries

YOUR ACCOUNT
Transaction Policies
Dividends and Account Policies
Opening an Account
Adding to an Account
Exchanging Shares
Selling or Redeeming Shares
Signature Guarantees

ORGANIZATION AND MANAGEMENT
Master/Feeder Structure
Investment Adviser Compensation
Administrator Compensation
Distributor
Portfolio Trades
Investment Objectives
Diversification
Portfolio Teams

RISK FACTORS AND SPECIAL CONSIDERATIONS

<PAGE>

OVERVIEW
- --------------------------------------------------------------------------------

FUND INFORMATION
Concise Portfolio descriptions begin on the next page. Each description
provides the following information:

- - GOAL AND STRATEGY. The Fund's particular investment goals and the strategies
it intends to use in pursuing those goals.

- - PORTFOLIO SECURITIES. The primary types of securities in which the Fund
invests. Secondary investments are described in "Risk Factors and Special
Considerations" at the end of the prospectus.

- - RISK FACTORS. The major risk factors associated with the Fund. Other risk
factors are also described in "Risk Factors and Special Considerations."

- - PORTFOLIO MANAGEMENT. The individuals who manage the Fund.

- - EXPENSES. The overall costs borne by an investor in the Portfolio, including
sales charges and annual expenses.

- - FINANCIAL HIGHLIGHTS. A table showing the financial performance for the
Portfolio since inception.

GOAL OF THE NICHOLAS-APPLEGATE MUTUAL FUNDS

Each Fund employs its own strategy and has its own risk/reward profile.
Because you could lose money by investing in these Portfolios, be sure to
read all risk disclosures carefully before investing.

WHO MAY WANT TO INVEST IN THE GLOBAL
PORTFOLIOS
- - those who are investing for retirement or other long-term goals
- - those who are willing to accept higher short-term risks associated with
investing in foreign companies along with higher potential long-term results
- - those who want professional portfolio management
- - those who are seeking funds for the international growth portion of an asset
allocation portfolio

WHO MAY NOT WANT TO INVEST IN THE GLOBAL
PORTFOLIOS
- - those who are investing with a shorter frame
- - those who are uncomfortable with an investment that will go up and down in
value
- - those who are unable to accept the special risks associated with foreign
investing

**********************************************************************

<PAGE>

INTERNATIONAL CORE GROWTH INSTITUTIONAL PORTFOLIO
- --------------------------------------------------------------------------------

[bullet point icon]
INVESTMENT OBJECTIVE: Maximum long-term capital appreciation.

[bullet point icon]
INVESTMENT STRATEGY: The Investment Adviser focuses on a "bottom-up" analysis
that evaluates the financial conditions and competitiveness of individual
companies worldwide. It uses a blend of both traditional fundamental research,
calling on the expertise of many external analysts in different countries
throughout the world, and systematic disciplines to uncover signs of "change at
the margin" - positive business developments which are not yet fully reflected
in a company's stock price. It gathers financial data on 20,000 companies in 52
countries, and searches for successful, growing companies managing change
advantageously and poised to exceed growth expectations.

[bullet point icon]
PRINCIPAL INVESTMENTS: The Fund emphasizes the larger capitalized companies in
each country. Generally, this means issuers in each country whose market
capitalizations are in the top 75% of publicly traded companies as measured by
capitalization in that country. Under normal conditions, the Fund invests at
least 65% of its total assets in securities of issuers located in at least three
countries outside the U.S. The Fund may invest up to a third of its total
assets in U.S. issuers.

Under normal conditions, the Fund invests at least 75% of its total assets in
common and preferred stocks, warrants and convertible securities. It invests
the remainder primarily in investment grade debt securities of foreign companies
and foreign governments, and their agencies and instrumentalities. The Fund may
also use options and futures contracts as hedging techniques.

[bullet point icon]
PORTFOLIO MANAGEMENT: The Investment Adviser emphasizes a team approach to
portfolio management to maximize its overall effectiveness. For a complete
listing of the portfolio team, see "Portfolio Teams" on page __ .

[bullet point icon]
RISK FACTORS. The value of the Fund's investments varies day to day in response
to the activities of individual companies and general market and economic
conditions. As with any international fund, performance also depends upon
changing values in foreign currencies, different political and regulatory
environments, and other overall economic factors in the countries where the
Fund invests. For a further explanation, see "Risk Factors and Special
Considerations" starting on page _____.

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

[bullet point icon]
INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below show the expenses for the Portfolio
and its corresponding Fund for the past year. Actual expenses may be more or
less than those shown.

- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
- --------------------------------------------------------------------------------
Maximum sales charge on purchases (as a percentage of offering price) None
- --------------------------------------------------------------------------------
Sales charge on reinvested dividends None
- --------------------------------------------------------------------------------
Deferred sales charge (as a percentage of original purchase price
or redemption proceeds, whichever is lower) None
- --------------------------------------------------------------------------------
Redemption fee None
- --------------------------------------------------------------------------------
Exchange fee None
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(AFTER EXPENSE DEFERRAL)
- --------------------------------------------------------------------------------
Management fees 1.00%
- --------------------------------------------------------------------------------
12b-1 expenses None
- --------------------------------------------------------------------------------
Total other expenses 0.40%
- --------------------------------------------------------------------------------
Total operating expenses (after expense deferral)(1) 1.40%
- --------------------------------------------------------------------------------

1. The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Funds and the Portfolios.
Total operating expenses would have been ______% absent the waiver and
deferral. See "Investment Adviser Compensation".

<PAGE>

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

- ---------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------
$14 $44 $77 $168
- ---------------------------------------

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

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

The figures below have been audited by Ernst & Young L.L.P. with respect to the
fiscal year ended March 31, 1997. Ernst & Young L.L.P. are independent auditors
whose reports were unqualified. This information should be read in conjunction
with the financial statements and the notes thereto which appear in the Trust's
1997 Annual Report.

------------
4/1/96 TO
3/31/97
- -----------------------------------------------
PER SHARE DATA:
- -----------------------------------------------
Net asset value, beginning of
period / Income from investment
operations:
Net investment income (deficit)
Net realized and unrealized gains
(losses) on securities and foreign
currency
- -----------------------------------------------
Total from investment operations
Less distributions:
Dividends from net investment
income
Distributions from capital gains
- -----------------------------------------------
Net asset value, end of period
- -----------------------------------------------
TOTAL RETURN+:
- -----------------------------------------------
RATIOS/SUPPLEMENTAL DATA: Net
Assets ($000), end of period
- -----------------------------------------------
Ratio of expenses to average net
assets, after expense
reimbursement++
- -----------------------------------------------
Ratio of expenses to average net
assets, before expense
reimbursement++
- -----------------------------------------------
Ratio of net investment deficit to
average net assets, after expense
reimbursement++
- -----------------------------------------------
Ratio of net investment deficit to
average net assets, before expense
reimbursement++
- -----------------------------------------------
Portfolio Turnover**
- -----------------------------------------------
Average commission rate paid**
- -----------------------------------------------

* Annualized
** For the corresponding Fund of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated form Master Trust Fund

<PAGE>

WORLDWIDE GROWTH INSTITUTIONAL PORTFOLIO
- --------------------------------------------------------------------------------

[bullet point icon]
INVESTMENT OBJECTIVE: Maximum long-term capital appreciation.

[bullet point icon]
INVESTMENT STRATEGY: The Investment Adviser focuses on a "bottom-up" analysis
that evaluates the financial conditions and competitiveness of individual
companies worldwide. It uses a blend of both traditional fundamental research,
calling on the expertise of many external analysts in different countries
throughout the world, and systematic disciplines to uncover signs of "change at
the margin" - positive business developments which are not yet fully reflected
in a company's stock price. It gathers financial data on 20,000 countries in 52
countries, and searches for successful, growing companies managing change
advantageously and poised to exceed growth expectations.

The Fund emphasizes companies with market capitalizations above $100 million.
It may also seek out opportunities in emerging countries.

Under normal conditions the Fund invests at least 75% of its total assets in
common and preferred stocks, warrants and convertible securities. It invests
the remainder in investment grade debt securities of foreign companies and
foreign governments and their agencies and instrumentalities. The Fund may also
use options and futures contracts as hedging techniques.

[bullet point icon]
PORTFOLIO MANAGEMENT: The Investment Adviser emphasizes a team approach to
portfolio management to maximize its overall effectiveness. For a complete
list of the portfolio team, see "Portfolio Teams" on page ___.

[bullet point icon]
RISK FACTORS: The value of the Fund's investments varies from day to day in
response to the activities of individual companies, and general market and
economic conditions. The securities of small, less well-known companies may be
more volatile than those of larger companies. As with any international fund,
the Fund's performance also depends upon changing currency values, different
political and regulatory environments, and other overall economic factors in the
countries where the Fund invests. The risks are magnified in countries with
emerging markets, since these countries may have unstable governments and less
established markets. For a further explanation, see "Risk Factors and Special
Considerations" starting on page ____.

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

[bullet point icon]
INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below are expenses of the Portfolio for its past year.
Actual expenses may be more or less than those shown.

- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
- --------------------------------------------------------------------------------
Maximum sales charge on purchases (as a percentage of offering price) None
- --------------------------------------------------------------------------------
Sales charge on reinvested dividends None
- --------------------------------------------------------------------------------
Deferred sales charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower) None
- --------------------------------------------------------------------------------
Redemption fee None
- --------------------------------------------------------------------------------
Exchange fee None
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(AFTER EXPENSE DEFERRAL)
- --------------------------------------------------------------------------------
Management fees 1.00%
- --------------------------------------------------------------------------------
12b-1 expenses None
- --------------------------------------------------------------------------------
Total other expenses 0.35%
- --------------------------------------------------------------------------------
Total operating expenses (after expense deferral)(1) 1.35%
- --------------------------------------------------------------------------------

1. The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Funds and the Portfolios.
Total operating expenses would have been _____% absent the waiver and
deferral. See "Investment Adviser Compensation".

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

- ---------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------
$14 $43 $74 $162
- ---------------------------------------

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

<PAGE>

[bullet point icon]
FINANCIAL HIGHLIGHTS: The figures below have been audited by Ernst & Young
L.L.P. with respect to the fiscal years ended March 31, 1996 and 1997, and by
another independent accounting firm with respect to the commencement of
operations through March 31, 1995. Both firms are independent auditors whose
reports were unqualified. This information should be read in conjunction with
the financial statements and the notes thereto which appear in the Trust's
1997 Annual Report.

--------------------------------------------------------
10/1/93 TO 4/1/94 TO 4/1/95 TO 4/1/96 TO
3/31/94 3/31/95 3/31/96 3/31/97
- --------------------------------------------------------------------------
PER SHARE DATA: $12.50 $13.15 $13.06
- --------------------------------------------------------------------------
Net asset value,
beginning of
period
Income from
investment
operations: -- (0.01) 0.06
Net investment
income (deficit)
Net realized and
unrealized gains 0.65 (0.04) 2.58
(losses) on
securities and
foreign currency
- --------------------------------------------------------------------------
Total from
investment
operations
Less
distributions: 0.65 (0.05) 2.64
Dividends from
net investment -- (0.04) (0.28)
income -- -- --
Distributions
from capital
gains
- --------------------------------------------------------------------------
Net asset value,
end of period $13.15 $13.06 $15.42
- --------------------------------------------------------------------------
TOTAL RETURN+: 5.20% (0.34%) 20.37%
- --------------------------------------------------------------------------
RATIOS/SUPPLEM
ENTAL DATA:
Net Assets
($000), end of
period $2,982 $4,087 $3,613
- --------------------------------------------------------------------------
Ratio of
expenses to
average net
assets, after
expense 1.34%* 1.35% 1.35%
reimbursement++
- --------------------------------------------------------------------------
Ratio of
expenses to
average net
assets, before
expense 3.58%* 2.50% 2.60%
reimbursement++
- --------------------------------------------------------------------------
Ratio of net
investment
deficit to average
net assets, after
expense 0.05%* 0.05% 0.20%
reimbursement++
- --------------------------------------------------------------------------
Ratio of net
investment
deficit to average
net assets,
before expense (2.19%)* (1.10%) (0.99%)
reimbursement++
- --------------------------------------------------------------------------
Portfolio 95.09% 98.54% 132.20%
Turnover**
- --------------------------------------------------------------------------
Average
commission rate N/A N/A $0.0187
paid**
- --------------------------------------------------------------------------

* Annualized
** For the corresponding Fund of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated form Master Trust Fund

<PAGE>

INTERNATIONAL SMALL CAP INSTITUTIONAL PORTFOLIO
- --------------------------------------------------------------------------------
(FORMERLY INTERNATIONAL GROWTH INSTITUTIONAL PORTFOLIO)

[bullet point icon]
INVESTMENT OBJECTIVE: Maximum long-term capital appreciation.

[bullet point icon]
INVESTMENT STRATEGY: The Investment Adviser focuses on a "bottom-up" analysis
that evaluates the financial condition and competitiveness of individual
companies worldwide. It uses a blend of both traditional fundamental research,
calling on the expertise of many external analysts in different countries, and
systematic disciplines to uncover signs of "change at the margin" - positive
business developments which are not yet fully reflected in a company's stock
price. It gathers financial data on 20,000 companies in 52 countries, and
searches for successful, growing companies managing change advantageously and
poised to exceed growth expectations.

The Fund emphasizes companies in the lower 75% of publicly traded companies as
measured by market capitalizations in that country. The Fund may have less U.S.
exposure (up to 35% of its assets in U.S. issuers) than the Worldwide Fund.

[bullet point icon]
PRINCIPAL INVESTMENTS: Under normal conditions, the Fund invests 65% of its
total assets in securities of issuers located in at least three different
countries outside the U.S. Under normal conditions, the Fund invests at least
75% of its total assets in common and preferred stocks, warrants and
convertible securities. It invests the remainder primarily in investment grade
debt securities of foreign companies and foreign governments and their agencies
and instrument-alities. The Fund may also use options and futures contracts as
hedging techniques.

[bullet point icon]
PORTFOLIO MANAGEMENT: The Investment Adviser emphasizes a team approach to
portfolio management to maximize its overall effectiveness. For a complete
listing of the portfolio team, see "Portfolio Teams" on page ___.

[bullet point icon]
RISK FACTORS: The value of the Fund's investments varies day to day in response
to the activities of individual companies and general market and economic
conditions. As with any international fund, the Fund's performance also depends
upon changing currency values, different political and regulatory environments,
and other overall economic factors in countries where the Fund invests. In
addition to the risks posed by foreign investing, smaller companies may be more
volatile than those of larger companies and may trade less frequently. The
available information regarding these smaller companies may also be less
available, incomplete or inaccurate. Accordingly, the securities of the
companies in which the Fund invests may be more volatile and speculative than
those of larger companies. The risks are magnified in countries with emerging
markets since these countries may have unstable governments and less established
markets. For a further explanation see "Risk Factors and Special
Considerations" starting on page ____.

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

[bullet point icon]
INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below are the expenses of the Portfolio and its
corresponding Fund for the past year. Actual expenses may be more or less than
those shown.

- --------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(AFTER EXPENSE DEFERRAL)
- --------------------------------------------------------------------------------
Management fees 1.00%
- --------------------------------------------------------------------------------
12b-1 expenses None
- --------------------------------------------------------------------------------
Total other expenses 0.40%
- --------------------------------------------------------------------------------
Total operating expenses (after expense deferral)1 1.40%
- --------------------------------------------------------------------------------

1. The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Funds and the Portfolios.
Total operating expenses would have been _____% absent the waiver and
deferral. See "Investment Adviser Compensation".

<PAGE>

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

- ---------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------
$14 $44 $77 $168
- ---------------------------------------

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

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

-------------------------------------------------------
1/3/94 TO 4/1/94 TO 4/1/95 TO 4/1/96 TO
3/31/94 3/31/95 3/31/96 3/31/97
- --------------------------------------------------------------------------------
PER SHARE DATA: $12.50 $13.47 $13.09
- --------------------------------------------------------------------------------
Net asset value,
beginning of
period / Income from
investment operations:
Net investment income
(deficit) 0.01 0.02 0.06
Net realized and
unrealized
gains (losses) on
securities 0.96 (0.22) 2.02
and foreign currency
- --------------------------------------------------------------------------------
Total from investment
operations
Less distributions: 0.97 (0.20) 2.08
Dividends from net
investment income -- (0.06) (0.12)
Distributions from -- (0.12) --
capital gains
- --------------------------------------------------------------------------------
Net asset value, end
of period $13.47 $13.09 $15.05
- --------------------------------------------------------------------------------
TOTAL RETURN+: 7.60% (1.54%) 15.99%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets ($000), end
of period $3,668 $16,924 $20,245
- --------------------------------------------------------------------------------
Ratio of expenses to
average net assets,
after expense
reimbursement++ 1.40%* 1.40% 1.40%
- --------------------------------------------------------------------------------
Ratio of expenses to
average net assets,
before expense
reimbursement++ 2.35%* 1.92% 2.44%
- --------------------------------------------------------------------------------
Ratio of net investment
deficit to average net
assets, after expense
reimbursement++ 0.36%* 0.19% 0.34%
- --------------------------------------------------------------------------------
Ratio of net investment
deficit to average net
assets, before expense
reimbursement++ (0.59%)* (0.33%) (0.07%)
- --------------------------------------------------------------------------------
Portfolio Turnover** 23.71% 74.85% 141.02%
- --------------------------------------------------------------------------------
Average commission rate
paid** N/A $0.128 $0.128
- --------------------------------------------------------------------------------
* Annualized
** For the corresponding Fund of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated form Master Trust Fund

<PAGE>

GLOBAL GROWTH & INCOME INSTITUTIONAL PORTFOLIO
- --------------------------------------------------------------------------------

[bullet point icon]
INVESTMENT OBJECTIVE: Long-term capital appreciation while providing current
income.

[bullet point icon]
INVESTMENT STRATEGY: The Investment Adviser actively manages a blended
portfolio of equity and fixed income securities. For the equity portion, the
Investment Adviser focuses on a "bottom-up" analysis that evaluates the
financial condition and competitiveness of individual companies. It uses a
blend of both traditional fundamental research, calling on the expertise of many
external analysts in different countries throughout the world, and systematic
disciplines to uncover signs of "change at the margin" - positive business
developments which are not yet fully reflected in a company's stock price. It
gathers financial data on 20,000 companies in 52 countries searching for
successful growing companies managing change advantageously and poised to exceed
growth expectations. The Investment Adviser actively manages the fixed income
portion to take advantage of current interest rates and bond market trends by
varying the structure, duration and allocation of fixed income vehicles from all
sectors of the market.

[bullet point icon]
PRINCIPAL INVESTMENTS: Under normal conditions, the Fund invests at least 65% of
its total assets in securities of issuers located in at least three different
countries, one of which may be the U.S. The Fund invests at least 60% of its
total assets in equity securities and warrants. It invests the remainder in
debt securities of foreign corporations and foreign governments and their
agencies and instrumentalities. The debt securities in which the Fund invests
will be rated investment grade by a nationally recognized statistical rating
agency, or of comparable quality if unrated. The Fund may also use options and
futures contracts as hedging techniques.

[bullet point icon]
PORTFOLIO MANAGEMENT: The Investment Adviser emphasizes a team approach to
portfolio management to maximize its overall effectiveness. For a complete
listing of the portfolio team, see "Portfolio Teams" on page .

[bullet point icon]
RISK FACTORS: As with any fund that invests in both stocks and bonds, the value
of your investment will fluctuate in response to movements in the stock and bond
markets. Stock values fluctuate in response to the activities of individual
companies and general market and economic conditions. The value of the Fund's
debt securities will change as interest rates fluctuate: if rates rise, bond
price fall; if rates fall, bond prices rise. The lower rated investment grade
bonds in which the Fund invests may be considered speculative and subject to
greater volatility and risk of loss than higher and highest rated bonds. As with
any international fund, the Fund's performance also depends upon changing
foreign currency values, different political and regulatory environments, and
other overall economic factors in the countries where the Fund invests. To the
extent the Fund invests in emerging countries, the risks are magnified since
these countries may have unstable governments and less established markets. For
a further explanation, see "Risk Factors and Special Considerations" starting on
page ___.

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

[bullet point icon]
INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below show expenses for the Portfolio and its
corresponding Fund for the past year.

Actual expenses may be more or less than those shown.

<PAGE>

- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
- --------------------------------------------------------------------------------
Maximum sales charge on purchases (as a percentage of offering price) None
- --------------------------------------------------------------------------------
Sales charge on reinvested dividends None
- --------------------------------------------------------------------------------
Deferred sales charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower) None
- --------------------------------------------------------------------------------
Redemption fee None
- --------------------------------------------------------------------------------
Exchange fee None
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(AFTER EXPENSE DEFERRAL)
- --------------------------------------------------------------------------------
Management fees 1.00%
- --------------------------------------------------------------------------------
12b-1 expenses None
- --------------------------------------------------------------------------------
Total other expenses 0.40%
- --------------------------------------------------------------------------------
Total operating expenses (after expense deferral)1 1.40%
- --------------------------------------------------------------------------------

1. The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Funds and the Portfolios.
Total operating expenses would have been _____% absent the waiver and
deferral. See "Investment Adviser Compensation".

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

- ---------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------
$ $ $ $
- ---------------------------------------

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

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

---------
4/1/96
TO
3/31/97
- ------------------------------------------
PER SHARE DATA:
- ------------------------------------------
Net asset value, beginning of
period / Income from
investment operations:
Net investment income
(deficit)
Net realized and unrealized
gains (losses) on securities
and foreign currency
- ------------------------------------------
Total from investment
operations
Less distributions:
Dividends from net
investment income
Distributions from capital
gains
- ------------------------------------------
Net asset value, end of period
- ------------------------------------------
TOTAL RETURN+:
- ------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets ($000), end of
period
- ------------------------------------------
Ratio of expenses to average
net assets, after expense
reimbursement++
- ------------------------------------------
Ratio of expenses to average
net assets, before expense
reimbursement++
- ------------------------------------------
Ratio of net investment deficit
to average net assets, after
expense reimbursement++
- ------------------------------------------
Ratio of net investment deficit
to average net assets, before
expense reimbursement++
- ------------------------------------------
Portfolio Turnover**
- ------------------------------------------
Average commission rate
paid**
- ------------------------------------------

* Annualized
** For the corresponding Fund of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated form Master Trust Fund

<PAGE>

EMERGING COUNTRIES INSTITUTIONAL PORTFOLIO
- --------------------------------------------------------------------------------

[bullet point icon]
INVESTMENT OBJECTIVE: Maximum long-term capital appreciation.

[bullet point icon]
INVESTMENT STRATEGY: The Fund invests 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 Investment Adviser seeks issuers in the early stages of
development, growth companies, cyclical companies, or companies believed to be
undergoing a basic change in operations. The Investment Adviser currently
selects portfolio securities from an investment universe of approximately 6,000
foreign issuers in over 20 emerging markets.

[bullet point icon]
PRINCIPAL INVESTMENTS: Under normal conditions, the Fund invests at least 65% of
its total assets in securities of issuers located in at least three different
countries. These countries include but are not limited to: Argentina, Brazil,
Chile, China, Columbia, the Czech Republic, Greece, Hungary, India, Indonesia,
Israel, Jordon, Malaysia, South Africa, South Korea, Taiwan, Thailand, Italy,
and Venezuela.

Under normal market conditions, the Fund invests at least 75% of its total
assets in corporate stock (common and preferred), warrants and convertible
securities. It invests the remainder primarily in investment grade bonds of
foreign companies and foreign governments and their agencies and
instrumentalities. The Fund may also use options and futures contracts as
hedging techniques.

[bullet point icon]
PORTFOLIO MANAGEMENT: The Investment Adviser emphasizes a team approach to
portfolio management to maximize its overall effectiveness. For a complete
listing of the portfolio team, see "Portfolio Teams" on page ____.

[bullet point icon]
RISK FACTORS: The value of the Fund's investments varies day to day in response
to the activities of individual companies and general market and economic
conditions. As with any fund investing in foreign securities, the Fund's
performance also depends upon changing currency values, different political and
regulatory environments, and other overall economic factors in the countries
where the Fund invests. Emerging countries markets may present greater
opportunity for gain, but also involve greater risk than more developed markets.
These countries tend to have less stable governments and less established
markets. The markets tend to be less liquid and more volatile, and offer less
regulatory protection for investors. The economies of emerging countries may be
predominantly based on only a few industries or dependent on revenue from
particular commodities, international aid or other assistance. For a further
explanation, see "Risk Factors and Special Considerations" starting on
page ____.

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

[bullet point icon]
INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below show expenses for the Portfolio and its
corresponding Fund for the past year.

Actual expenses may be more or less than those shown.

<PAGE>

- ----------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(AFTER EXPENSE DEFERRAL)
- ----------------------------------------------------------------------------------------------
Management fees 1.25%
- ----------------------------------------------------------------------------------------------
12b-1 expenses None
- ----------------------------------------------------------------------------------------------
Total other expenses 0.40%
- ----------------------------------------------------------------------------------------------
Total operating expenses (after expense deferral)1 1.65%
- ----------------------------------------------------------------------------------------------
</TABLE>

1. The Investment Adviser has agreed to waive or defer its management fees
and to absorb other operating expenses payable by the Funds and the
Portfolios. Total operating expenses would have been _____% absent the
waiver and deferral. See "Investment Adviser Compensation".

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

- --------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------
$17 $52 $90 $195
- --------------------------------------

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

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

-------------------------------------------
11/28/94 4/1/95 TO 4/1/96
TO 3/31/95 3/31/96 TO
3/31/97
- --------------------------------------------------------------------------------
PER SHARE DATA: $12.50 $10.91
- --------------------------------------------------------------------------------
Net asset value, beginning of
period / Income from
investment operations:
Net investment income
(deficit) 0.08 --
Net realized and unrealized
gains (losses) on securities
and foreign currency (1.66) 3.16
- --------------------------------------------------------------------------------
Total from investment
operations
Less distributions: (1.58) 3.16
Dividends from net
investment income (0.01) (0.05)
Distributions from capital -- --
gains
- --------------------------------------------------------------------------------
Net asset value, end of period $10.91 $14.02
- --------------------------------------------------------------------------------
TOTAL RETURN+: (12.64%) 29.06%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets ($000), end of $2,021 $6,878
period
- --------------------------------------------------------------------------------
Ratio of expenses to average
net assets, after expense
reimbursement++ 1.65%* 1.65%
- --------------------------------------------------------------------------------
Ratio of expenses to average
net assets, before expense
reimbursement++ 2.14%* 3.59%
- --------------------------------------------------------------------------------
Ratio of net investment deficit
to average net assets, after
expense reimbursement++ 1.73%* 0.29%
- --------------------------------------------------------------------------------
Ratio of net investment deficit
to average net assets, before
expense reimbursement++ 1.24%* (1.41%)
- --------------------------------------------------------------------------------
Portfolio Turnover** 60.79% 118.21%
- --------------------------------------------------------------------------------
Average commission rate paid** N/A $0.0022
- --------------------------------------------------------------------------------

* Annualized
** For the corresponding Fund of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated form Master Trust Fund

<PAGE>

YOUR ACCOUNT
TRANSACTION POLICIES

PURCHASE OF SHARES. Shares are offered at net asset value without a sales
charge to qualified retirement plans, financial and other institutions and
"wrap accounts." The minimum initial investment is $250,000, and the minimum
subsequent investment to $10,000. The Distributor may waive these minimums from
time to time.

VALUATION OF SHARES The net asset value per share (NAV) for the Portfolio is
determined each business day at the close of regular trading on the New York
Stock Exchange (usually 4 p.m. Eastern Time) by dividing a Portfolio's net
assets by the number of its shares outstanding.

SHAREHOLDER INQUIRIES Shareholder inquiries should be addressed to the Trust,
c/o the Trust's transfer agent,

State Street Bank and Trust Company,
Attention: Nicholas-Applegate Mutual Funds,
P.O. Box 8326,
Boston, MA 02266-8326.

Telephone inquiries can be made by calling 1-800-551-8043 or, from outside the
U.S. 1-617-774-5000 (collect).

The services referred to alone 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.

DIVIDENDS AND ACCOUNT POLICIES

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. For further information about any
of the plans, agreements, applications and annual fees, contact the
Distributor, your financial representative or plan sponsor. To determine
which retirement plan is appropriate for you, consult your tax adviser.

Every year you will also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.

<PAGE>

DIVIDENDS The Portfolios generally distribute most or all of their net
earnings in the form of dividends. Each Portfolio pays dividends and capital
gains annually.

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

TAXABILITY OF DIVIDENDS As long as a Portfolio meets the requirements for
being a tax-qualified regulated investment company, which each Portfolio has in
the past and intends to in the future, it pays no federal income tax on the
earnings it distributes to shareholders.

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

The Form 1099 that is mailed to you details your dividends and their federal
tax category, although you should verify your tax liability with your tax
professional.

<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
This is the minimum $250,000
initial investment
- ---------------------------------------------------------------------------------------------------------------------------
Use this type of New Account Form
application (Non-Retirement)
- ---------------------------------------------------------------------------------------------------------------------------
Before completing the Each Portfolio offers a variety of features, which are described in the "Your Account"
application section of this prospectus. Please read this section before completing the application.
- ---------------------------------------------------------------------------------------------------------------------------
Completing the If you need assistance, contact your financial representative,
application or call the Trust.
- ---------------------------------------------------------------------------------------------------------------------------
If you are sending Mail application and check, payable to: NICHOLAS-APPLEGATE MUTUAL FUNDS,
money by CHECK PO BOX 8326, BOSTON, MA 02266 8326. The Trust cannot accept third-party checks.
- ---------------------------------------------------------------------------------------------------------------------------
If you are sending Please read the bank wire or ACH section under the "Buying Shares" section below.
money by BANK WIRE or You will need an account number with the Trust by sending a completed application to:
ACH NICHOLAS-APPLEGATE MUTUAL FUNDS, PO BOX 8326, BOSTON, MA 02266 8326.
To receive your account number, call either your financial representative or the Trust at
(800)551-8043.
- ---------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------
BUYING SHARES
- ---------------------------------------------------------------------------------------------------------------------------
This is the minimum $10,000
additional investment
- ---------------------------------------------------------------------------------------------------------------------------
The price you will The Trust is open on days that the New York Stock Exchange is open.
receive All transactions received in good order before the market closes receives that day's price.
- ---------------------------------------------------------------------------------------------------------------------------
If you are sending Instruct your bank to wire the amount you wish to invest to:
money by BANK WIRE STATE STREET BANK & TRUST CO. - ABA #011000028
DDA #9904-645-0
STATE STREET BOS, ATTN: MUTUAL FUNDS
CREDIT: NICHOLAS-APPLEGATE [PORTFOLIO NAME], [YOUR NAME],[ACCOUNT NAME]
- ---------------------------------------------------------------------------------------------------------------------------
If you are sending Call your bank to ensure (1) that your bank supports ACH, and (2) this feature is active on
money by ACH your bank account. To establish this option, either complete the appropriate sections when
opening an account, or contact your financial representative or the Trust at (800) 551-8043
for further information.
To initiate an ACH purchase, call the Trust at (800)551-8043.
- ---------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------
EXCHANGING SHARES
- ---------------------------------------------------------------------------------------------------------------------------
This is the minimum $250,000
exchange amount to
open a new account
- ---------------------------------------------------------------------------------------------------------------------------
The price you The Trust is open on days that the New York Stock Exchange is open.
will receive All transactions received in good order before the market closes receives that day's price.
- ---------------------------------------------------------------------------------------------------------------------------
Things you should The exchange must be to a Portfolio in the same series as an account with the same registration.
know If opening an account as part of an exchange, you must obtain and read the prospectus.
If you intend to keep money in the portfolio you are exchanging from, make sure that you leave an
amount equal or greater that the portfolio's minimum account size (see the "Opening an Account"
section).
To protect other investors, the Trust may limit the number of exchanges you can make.
- ---------------------------------------------------------------------------------------------------------------------------
How to request an Either contact your financial representative, or call the Trust at (800) 551-8043.
exchange by PHONE The Trust will accept a request by phone if this feature was previously established on your account.
See the "Your Account" section for further information.
- ---------------------------------------------------------------------------------------------------------------------------
How to request an Please put your exchange request in writing, including: the name on the account, the name of the
exchange by MAIL portfolio and the account number you are exchanging from, the shares or dollar amount you wish to
exchange, and the portfolio you wish to exchange to. Mail this request to: PO BOX 8326, BOSTON, MA
02266 8326.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
SELLING OR REDEEMING SHARES
-------------------------------------------------------------------------------------------------------------------
IN WRITING BY PHONE

- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Certain requests may require a SIGNATURE Selling shares by phone is a service option which
GUARANTEE. See that section below for further must be established on your account prior to
Things you information. You may sell up to the full account making a request. See the "Your Account"
should know value. section, or contact your financial representative
or the Trust at (800) 551-8043 for further
information.
The maximum amount which may be requested
by phone, regardless of account size, is $50,000.
Amount greater than that must be requested in
writing. I you wish to receive your monies by
bank wire, the minimum request is $5,000.
-------------------------------------------------------------------------------------------------------------------
If you purchased shares through a financial representative, a plan administrator/sponsor,
you should call them regarding the most efficient way to sell shares.
If you bought shares recently by check, they may not be available to be sold for up to
15 calendar days from the date of purchase.
Sales by a corporation, trust or fiduciary may have special requirements.
Please call your financial representative or the Trust for further information.
- ---------------------------------------------------------------------------------------------------------------------------------
The price you The Trust is open on days that the New York Stock Exchange is open.
will receive All transactions received in good order before the market closes receive that day's price.
- ---------------------------------------------------------------------------------------------------------------------------------
If you want to Please put your request in writing, including: the Either contact your financial representative or
receive your name of the account owners, account number call the Trust at (800) 551-8043.
monies by and Portfolio you are redeeming from, the share The proceeds will be sent to the existing bank
BANK WIRE or dollar amount you wish to sell, signed by all wire address listed on the account.
account owners. Mail this request to:
NICHOLAS-APPLEGATE MUTUAL FUNDS,
PO BOX 8326, BOSTON, MA 02266 8326.
The check will be sent to the existing bank wire
address listed on the account.
- ---------------------------------------------------------------------------------------------------------------------------------
If you want to Please call the Trust at (800) 551-8043. Either contact your financial representative
receive your or call the Trust at (800) 551-8043.
monies by The proceeds will be sent to the existing ACH
ACH instructions on the account and will generally be
received at your bank two business days after
your request is received.
- ---------------------------------------------------------------------------------------------------------------------------------

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

<PAGE>

ORGANIZATION AND MANAGEMENT

MASTER/FEEDER STRUCTURE

The Portfolios are series of shares of the Nicholas-Applegate Mutual Funds
(the "Trust"). Unlike other mutual funds that acquire their securities
directly, the Portfolios invest their assets in the Funds, which are series
of Nicholas-Applegate Investment Trust (the "Master Trust"). This two-tier
structure is known as a "master/ feeder" structure. One to five Portfolios,
or feeder funds, each designated A, B, C, I or Q invest in each Fund. (For
example a Portfolio seeking capital appreciation by investing in securities
of issuers located in countries with emerging securities markets invests in
the Emerging Countries Fund.) The major variations among the Portfolios
that invest in the same Master Fund are sales charges, expenses, and
investment minimums. The Board of Trustees believes that the aggregate per
share expenses of each Portfolio are no greater than the expenses that a
Portfolio would incur if it retained the services of an investment adviser
and invested assets directly into the types of securities held by the Fund.
You can obtain more information about the A, B, C and I Portfolios from your
Investment Representative, or from Nicholas-Applegate Securities at telephone
(800) 551-8643.

A Board of Trustees supervises the overall activities of the Master Trust. The
Board selects an investment adviser, an administrator, and a custodian for
the Fund. The Board has the right to terminate these relationships and retain
a different company if it believes it is in the best interests of the Master
Trust.

A separate Board of Trustees supervise the overall activities of the Trust .
It selects the master fund in which to invest, a distributor to market its
shares to investors, a transfer agent, administrators, and others to provide
services. Individual investors purchase shares of the Portfolios through
financial intermediaries or directly from the Trust.

Each Portfolio may withdraw its investment from the corresponding Fund at any
time if the Board determines that it is in the best interests of the
shareholders and only with approval of the Portfolio's shareholders. In that
event, the Board of Trustees would consider alternative arrangements such as
investing a Portfolio's assets in another investment company with the same
investment objectives as the Portfolio or hiring an investment manager to
invest the assets in accordance with the Portfolio's investment policies.

A Portfolio may also be liquidated at any time by the shareholders. The net
proceeds of any liquidation will be distribute to all shareholders in
proportion to their respective holdings.

<PAGE>

MASTER FEEDER STRUCTURE

----------------------------
SHAREHOLDERS
----------------------------
\/
\/
BUY SHARES IN
\/
----------------------------
PORTFOLIOS
of
Nicholas-Applegate Mutual
Funds
----------------------------
\/ INVEST IN
\/
\/
----------------------------
MASTER FUNDS
of
Nicholas-Applegate
Investment Trust
----------------------------
\/ INVEST IN
\/
\/
----------------------------
STOCKS, BONDS &
OTHER SECURITIES
----------------------------

<PAGE>

INVESTMENT ADVISER COMPENSATION. Each Master Fund pays the Investment Adviser
a fee pursuant to an investment advisory agreement. The Emerging Countries
Fund pays a monthly fee at the annual rate of 1.25% of the Fund's net assets.
The Worldwide, International Growth and International Small Cap Funds each pay
a monthly fee at the annual rate of 1.00% on the first $500 million of each
Fund's net assets, .90% on the next 500 million of each Fund's net assets, and
.85% on net assets on each Fund in excess of $1 billion. The Global Growth &
Income Fund pays at the annual rate of .85% of the Fund's net assets.

The Investment Adviser has agreed to waive or defer its management fees payable
by the Funds, and to absorb other operating expenses of the Funds and the
Portfolios, so that the expenses for the Portfolio will not exceed the
following expense ratios on an annual basis through March 31, 1998; Worldwide
Growth and Global Growth & Income Portfolios 1.35%, International Core Growth
and International Small Cap Growth Portfolios - 1.40%, Emerging Countries
Portfolio - 1.65%. Each Portfolio will reimburse the Investment Adviser for
fees deferred or other expenses paid pursuant to this Agreement in later years
in which operating expenses for the Portfolio are less than the percentage
limitation set forth above for any such year.

ADMINISTRATOR COMPENSATION. The Funds and the Portfolios pay administrative
fees for administrative personnel and services (including certain legal and
financial reporting services). Each Portfolio pays Nicholas-Applegate Capital
Management an annual fee of .10% of net assets. Each Portfolio pays Investment
Company Administration Corporation (ICAC) an annual fee of $5,000 - $35,000.
In addition, each Fund pays ICAC a fee at an annual rate equal to 0.15% of
average net assets.

DISTRIBUTOR:
Nicholas-Applegate Securities
600 West Broadway, 30th Floor
San Diego, California 92101
(800) 551-8045

PORTFOLIO TRADES. The Investment Adviser is responsible for the Funds'
portfolio transactions. In placing portfolio trades, the Investment Adviser may
use brokerage firms that sell shares of the Portfolio or that provide research
services to the Master Fund, but only when the Investment Adviser believes no
other firm offers a better combination of quality execution (i.e. timeliness
and completeness) and favorable price. The Investment Adviser expects high
annual portfolio turnover up to 200%. This is generally higher than other
funds and will result in the Funds incurring higher brokerage costs.

INVESTMENT OBJECTIVE. Each Fund's and each Portfolio's investment objective is
fundamental and may only be changed with shareholder approval.

DIVERSIFICATION. All the Funds are diversified.

<PAGE>

PORTFOLIO TEAMS
- -------------------------------------------------------------------------------
EQUITY MANAGEMENT - INTERNATIONAL/GLOBAL

<TABLE>
<CAPTION>
NAME FUND
<S> <C>
Catherine Somhegyi, Partner Worldwide Growth
Chief Investment Officer - Global Equity Management International Core Growth
Joined firm in 1987; prior investment International Small Cap
experience with Professional Asset Securities, Inc. Emerging Countries
and Pacific Century Advisers Emerging Growth
M.B.A. and B.S. - University of Southern California Global Growth and Income

Larry Speidell, Partner, CFA Worldwide Growth
Director of Global/Systematic Portfolio Global Growth and Income
Management and Research
Joined firm in 1994; 23 years prior investment
experience with Batterymarch Financial
Management and Putnam Management Company
M.B.A. - Harvard University; B.E. - Yale University

John J. Kane, Partner Worldwide Growth
Portfolio Manager - U.S. Systematic International Core Growth
Joined firm in 1994; 25 years prior International Small Cap
investment/economics experience with ARCO Emerging Countries
Investment Management Company and General
Electric Company
M.A. and B.A. - Columbia University; M.B.A. -
University of California, Los Angeles

Ernesto Ramos, Ph.D. Worldwide Growth
Portfolio Manager - International International Core Growth
Joined firm in 1994; 14 years prior investment and International Small Cap
quantitative research experience with Batterymarch
Financial Management; Bolt Beranek & Newman
Inc.; and Harvard University
Ph.D. - Harvard University; B.S. - Massachusetts
Institute of Technology

Loretta J. Morris Worldwide Growth
Portfolio Manager - International; International Core Growth
Joined firm in 1990; 10 years prior investment International Small Cap
experience with Collins Associates
Attended California State University, Long Beach;
CFA Level II candidate

Alex Muromcew Worldwide Growth
Portfolio Manager - International International Core Growth
Joined firm in 1996; 6 years prior investment International Small Cap
experience with Jardine Fleming Securities (Japan);
Emerging Markets Investors Corporation; Teton Partners LP
M.B.A. - Stanford University, B.A. - Dartmouth College

<PAGE>

Pedro V. Marcal Worldwide Growth
Portfolio Manager - Emerging Countries Emerging Countries
Joined firm in 1994; 5 years prior investment
experience with A. B. Laffer, V. A. Canto &
Associates; and A-Mark Precious Metals
B.A. - University of California, San Diego

Aaron Harris Emerging Countries
Portfolio Manager - Emerging Countries
Joined the firm in 1995; prior experience
at Chemical Bank
B.A. - Princeton University

Eswar Menon Emerging Countries
Portfolio Manager - Emerging Countries
Joined firm in 1995; 5 years prior experience
with Koeneman Capital Management and
Integrated Device Technology
M.B.A., summa cum laude - University of
Chicago; M.S. - University of California,
Santa Barbara; B.S. - Indian Institute of
Technology, Madras.
</TABLE>

<PAGE>

RISK FACTORS AND SPECIAL CONSIDERATIONS
- --------------------------------------------------------------------------------

MUTUAL FUND CONSIDERATIONS IN GENERAL

GLOBAL INVESTING CONSIDERATIONS

CURRENCY FLUCTUATIONS
Because the assets of each Fund may be invested in instruments issued by
foreign companies, the principal, income and sales proceeds may be paid to the
Funds in local foreign currencies. A reduction in the value of local currencies
relative to the U.S. dollar could mean a corresponding reduction in the value
of the Funds. The value of a foreign security generally tends to decrease when
the value of the U.S. dollar rises against the foreign currency in which the
security is denominated and tends to increase when the value of the dollar
falls against such currency. The Funds may incur costs in connection with
conversions between currencies.

SOCIAL, POLITICAL AND ECONOMIC FACTORS
The economies of many of the countries where the Funds may invest may be
subject to a substantially greater degree of social, political and economic
instability than the United States. Such instability may result from, among
other things, the following: (1) authoritarian governments; (2) popular
unrest associated with demands for improved political, economic and social
conditions; (3) internal insurgencies and terrorist activities; (4) hostile
relations with neighboring countries; and (5) drug trafficking. This
instability might impair the financial conditions of issuers or disrupt the
financial markets in which the Funds invest.

The economies of foreign countries may differ favorably or unfavorably and
significantly from the economy of the United States in such respects as the
rate of growth of gross domestic product, rate of inflation, currency
depreciation, savings rates, fiscal balances, and balance of payments
positions. Governments of many foreign countries continue to exercise
substantial control over private enterprise and own or control many companies.
Government actions could have a significant impact on economic conditions in
certain countries which could affect the value of the securities of the Funds.
For example, a foreign country could nationalize an entire industry. In such a
case, the Funds may not be fairly compensated for their losses and might lose
their entire investment in the country involved.

The economies of certain foreign countries are heavily dependent upon
international trade and accordingly are affected by protective trade barriers
and the economic conditions of their trading partners. The enactment by the
United States or other principal trading partners of protectionist
legislation could have a significant adverse effect on the securities markets
of these countries. Some foreign countries (mostly in Africa and Latin
America) are large debtors of commercial banks, foreign governments, and
supranational organizations. These obligations, as well as future
restructurings of debt, may affect the economic performance and political and
social stability of these countries.

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

MARKET CHARACTERISTICS

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

<PAGE>

and time. In addition, the securities markets of some foreign countries are
susceptible to being influenced by large investors trading significant blocks
of stocks. Trading practices in certain foreign countries are also
significantly different from those in the United States. Local commercial,
corporation and securities laws govern the sale and resale of securities, and
certain restrictions may apply. Although brokerage commissions are generally
higher than those in the U.S., the Investment Adviser will seek to achieve
the most favorable net results. In addition, securities settlements and
clearance procedures may be less developed and less reliable than those in
the United States. Delays in settlement could result in temporary periods in
which the assets of the Funds are not fully invested, or it could result in
the Fund being unable to sell a security in a falling market.

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

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

THE FUNDS' INVESTMENTS

CORPORATE DEBT SECURITIES.
Each Fund may invest in corporate debt securities. Corporate debt securities
are subject to the risk of an issuer's inability to meet principal and interest
payments on the obligation (credit risk) and may also be subject to price
volatility due to such factors as interest rate sensitivity, market perception
of the credit-worthiness of the issuer and general market liquidity (market
risk). When interest rates decline, the value of the Funds' debt securities
can be expected to rise, and when interest rates rise, the value of those
securities can be expected to decline.

Each Fund will purchase debt obligations only if they are deemed investment
grade -- that is, they carry a rating of at least BAA from Moody's or BBB from
Standard and Poor's, or comparable rating from another rating agency or, if not
rated by an agency, determined by the Investment Adviser to be of comparable
quality. Bonds rated BBB or Baa may have speculative characteristics and
changes in economic circumstances are more likely to lead to a weakened
capacity to make interest and principal payments than higher rated bonds.
The Funds intend to dispose, in an orderly manner, of any security which is
downgraded below investment grade. For a further explanation of these ratings,
see the Statement of Additional Information.

<PAGE>

INVESTMENT COMPANY SECURITIES.
Each Fund may invest up to 10% of its total assets in the shares of other
investment companies. The Funds may invest in money market mutual funds in
connection with the management of their daily cash positions. The Funds may
also make indirect foreign investments through other investment companies that
have comparable investment objectives and policies as the Funds. In addition
to the advisory and operational fees each Fund bears directly in connection
with its own operation, the Funds would also bear their pro rata portions of
each other investment company's advisory and operational expenses.

ILLIQUID SECURITIES.
Each Fund may invest up to 15% of its net assets in securities that are
considered illiquid. An illiquid investment is generally an investment that
is not registered in the under U.S. securities laws, cannot be offered for
public sale in the U.S. without first being registered under U.S. securities
laws, or cannot be disposed of within seven days in the normal course of
business at approximately the amount at which the Fund values it. Limitations
on resale may adversely affect the marketability of illiquid securities and the
Fund may not be able to dispose of these securities at the desired time and
price. A Fund may bear additional expenses if it has to register these
securities under U.S. securities laws before being resold.

THE FUNDS' INVESTMENT TECHNIQUES

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

SHORT SALES.
The Worldwide International Core Growth and International Small Cap Funds may
maintain short positions in securities. A "short sale" is the sale by the
Fund of a security which has been borrowed from a third party on the
expectation that the market price will drop. If the price of the security
drops, the Fund will make a profit by purchasing the security in the open
market at lower price than at which it sold the security. If the price of the
security rises, the Fund may have to cover its short position at a higher price
than the short sale price, resulting in a loss. A short sale can be covered or
uncovered. In a covered short sale, the Fund either (1) borrows and sells
securities it already owns (also known as a short sale "against the box"), or
(2) deposits in a segregated account cash, U.S. government securities, or other
liquid securities in an amount equal to the difference between the market value
of the securities and the short sale price. Use of uncovered short sales is a
speculative investment technique and has potentially unlimited risk.
Accordingly, a Fund will not make uncovered short sales in an amount exceeding
the lesser of 2% of the Fund's net assets or 2% of the securities of such class
of the issuer. The Board of Trustees has determined that no Fund will make
short sales if to do so would create liabilities or require collateral deposits
of more than 25% of the Fund's total assets.

WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS.
Each Fund may purchase or sell securities for delivery at a future date,
generally 15 to 45 days after the commitment is made. The other party's
failure to complete the transaction may cause the Fund to miss a price or yield
considered to be advantageous. 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 securities.

BORROWING.
Each Fund may borrow up to 20% of its total assets for temporary,
extraordinary or emergency purposes, such as to provide cash for redemption
requests without having to sell portfolio securities at an inopportune time.
Each Fund may also borrow money through reverse repurchase agreements,
uncovered short sales, and other techniques. All borrowings by a Fund cannot
exceed one-third of a Fund's total assets.

<PAGE>

As a consequence of borrowing, a Fund will incur obligations to pay interest,
resulting in an increase in expenses.

SECURITIES LENDING.
Each Fund may lend securities to financial institutions such as banks,
broker/dealers and other recognized institutional investors in amounts up to
30% of the Fund's total assets. These loans earn income for the Fund and are
collateralized by cash, securities, letters of credit or any combination
thereof. The Fund might experience loss if the financial institution defaults
on the loan.

FOREIGN CURRENCY TRANSACTIONS
Each Fund may enter into foreign currency transactions either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange
contracts in order to have the necessary currencies to settle transactions.
Each Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates. Such
efforts could limit potential gains that might result from a relative increase
in the value of such currencies, and might, in certain cases, result in losses
to a Fund.

OPTIONS
The Funds may deal in options on securities, securities indices and foreign
currencies. The Funds may use options to manage stock prices, interest rate
and currency risks. A Fund may not purchase or sell options if more than 25% of
its net assets would be hedged. The Funds may also write covered call options
and secured put options to seek to generate income or lock in gains on up to
25% of their net assets.

As a general rule, no Fund will purchase or sell futures if, immediately
thereafter, more than 25% of its net assets would be hedged.

RISKS OF FUTURES AND OPTIONS TRANSACTIONS
When a Fund uses options, futures and options on futures as hedging devices,
there is a risk that the prices of the hedging vehicles may not correlate
perfectly with the prices of the securities in the portfolio. This may cause
the futures contract and any related options to react differently than the
Fund's portfolio securities to market changes. In addition, the Investment
Adviser could be incorrect in its expectations about the direction or the
extent of market movements. In these events, a Fund could lose money on the
futures contracts or option.

<PAGE>

NEW ACCOUNT FORM
INSTITUTIONAL PORTFOLIOS

MAIL TO:
Nicholas|Applegate Mutual Funds
PO Box 8326
Boston, MA 02266-8326

1. YOUR ACCOUNT REGISTRATION

/ / INDIVIDUAL OR JOINT ACCOUNT

- --------------------------------------------------------------------------------
First Name Middle Initial Last Name

- -
- ----- -------- -------
Social Security Number

- --------------------------------------------------------------------------------
Joint Tenant (if any) Middle Initial Last Name

- -
- ----- -------- -------
Social Security Number

/ / GIFT OR TRANSFER TO MINOR

- --------------------------------------------------------------------------------
Name of Custodian (one only)

As Custodian For
----------------------------------------------------------------
Minor's Name (only one)

Under Uniform Gifts/Transfers to Minors Act
(select one)

- --------------------------------------------------------------------------------
(Minor's State of Residence) Minor's S.S.# Birth Date

/ / CORPORATION, PARTNERSHIP, OR OTHER ENTITY (CORPORATE RESOLUTION REQUIRED)

- --------------------------------------------------------------------------------
Registration

- --------------------------------------------------------------------------------
Officers, Trustees or Partners if Part of Registration

-
- ------ ---------------
Taxpayer Identification Number

2. YOUR ADDRESS
DO YOU HAVE ANY OTHER IDENTICALLY REGISTERED NICHOLAS|APPLEGATE ACCOUNTS?
/ / YES / / NO

CITIZENSHIP:
/ / U.S. / / RESIDENT ALIEN / / NON-RESIDENT ALIEN ____________________
SPECIFY COUNTRY

- --------------------------------------------------------------------------------
STREET ADDRESS OR PO BOX NUMBER APARTMENT NUMBER

- --------------------------------------------------------------------------------
CITY STATE ZIP CODE

(_____)___________________________________________
AREA CODE DAYTIME PHONE

(_____)___________________________________________
AREA CODE EVENING PHONE

3. YOUR INVESTMENT
PLEASE SELECT YOUR FUND CHOICES.
SEE PROSPECTUS FOR INVESTMENT MINIMUMS.

CLASS AMOUNT

MINI-CAP GROWTH I(753) / / $

EMERGING GROWTH I(359) / / $

CORE GROWTH I(371) / / $

LARGE CAP GROWTH I(181) / / $

VALUE I(378) / / $

INCOME & GROWTH I(372) / / $

BALANCED GROWTH I(373) / / $

FULLY DISCRETIONARY FIXED INCOME I(183) / / $

HIGH YIELD BOND I(377) / / $

SHORT-INTERMEDIATE FIXED INCOME I(182) / / $

STRATEGIC INCOME I(752) / / $

WORLDWIDE GROWTH I(374) / / $

INTERNATIONAL SMALL CAP I(356) / / $

INTERNATIONAL CORE GRTH I(180) / / $

EMERGING COUNTRIES I(179) / / $

MONEY MARKET* A(365) / / $

TOTAL $

*Please see A,B,C prospectus for Money Market Portfolio

4. YOUR METHOD OF PAYMENT

By Check: Payable to Nicholas|Applegate Mutual Funds

By Wire: Please call 1-800-551-8043 for your account number

By Exchange: Portfolio from which you are exchanging

<PAGE>

- --------------------------------------------------------------------------------
By Confirm Trade Order: Trade Order #_______________________

5. YOUR DIVIDEND AND CAPITAL GAIN PAYMENT OPTIONS

All dividends and capital gains will be reinvested unless you indicate
otherwise.

- - ALL CASH OPTION: Pay all dividends and capital gains to me by check.

- - CASH DIVIDEND OPTION: Pay all dividends by check and reinvest all capital
gains.

- - CASH CAPITAL GAINS OPTION: Reinvest all dividends and pay all capital gains
by check.

- - *CROSS REINVESTMENT: Please call 1-800-551-8043 for instructions.

SERVICE OPTIONS

6. TELEPHONE REDEMPTIONS AND EXCHANGES

/ / I authorize redemption of Portfolio shares upon telephone instructions.
Please see prospectus for more information.

If box is not checked, the telephone redemption privilege WILL NOT be provided.

/ / I authorize Nicholas|Applegate Mutual Funds to allow exchanges between or
among the Portfolios upon telephone instructions from me (must be same series
and same registration on account).

If box is not checked, the telephone exchange privilege will not be provided.

7. SYSTEMATIC INVESTMENT/WITHDRAWAL PROGRAM

Telephone Investment/Withdrawal Program

/ / I authorize Nicholas-Applegate Mutual Funds to act upon telephone
instructions for investments into or withdrawals from my mutual fund account via
ACH (Automated Clearing House).

COMPLETE CHECKING/SAVINGS ACCOUNT INFORMATION SECTION.*

Systematic Investment - to my mutual fund account

/ / I authorize Nicholas-Applegate Mutual Funds to process investments into my
mutual fund (via ACH) account on the following:

PURCHASES SHOULD BE MADE ON THE __________ (PROVIDE DATE) OF EVERY

______MONTH OR ___QUARTER (JAN/APRIL/JULY/OCT)

NAME OF PORTFOLIO(S)____________________________________________
AMOUNT__________________
($50 MINIMUM)

PURCHASES SHOULD BE MADE ON THE __________ (PROVIDE DATE) OF EVERY

______MONTH OR ___QUARTER (JAN/APRIL/JULY/OCT)

NAME OF PORTFOLIO(S)____________________________________________
AMOUNT__________________
($50 MINIMUM)

Systematic Withdrawal - from my mutual fund account via ACH (if by check, go to
next section)

/ / I AUTHORIZE NICHOLAS-APPLEGATE MUTUAL FUNDS TO PROCESS WITHDRAWALS FROM MY
MUTUAL FUND ACCOUNT IN EACH OF THE FOLLOWING MONTHS:

REDEMPTIONS SHOULD BE MADE ON THE _______ (PROVIDE DATE) OF EVERY

______MONTH OR ___QUARTER (JAN/APRIL/JULY/OCT)

NAME OF PORTFOLIO(S)__________________________________________
AMOUNT___________________
($50 MINIMUM, $5,000 MINIMUM BALANCE REQUIRED)

Systematic Withdrawal - from my mutual fund account by check

/ / I AUTHORIZE NICHOLAS-APPLEGATE MUTUAL FUNDS TO PROCESS WITHDRAWALS FROM MY
MUTUAL FUND ACCOUNT IN EACH OF THE FOLLOWING MONTHS:

REDEMPTIONS WILL BE MADE ON THE 15TH (OR NEXT BUSINESS DAY) OF EVERY

______MONTH OR ___QUARTER (JAN/APRIL/JULY/OCT)

NAME OF PORTFOLIO(S)__________________________________________
AMOUNT___________________
($50 MINIMUM, $5,000 MINIMUM BALANCE REQUIRED)

SEND PROCEEDS TO: ________ADDRESS OF MY MUTUAL FUND ACCOUNT
________SPECIAL PAYEE (AS LISTED BELOW)

- --------------------------------------------------------------------------------
SPECIAL PAYEE

- --------------------------------------------------------------------------------
STREET ADDRESS, BOX NUMBER APT #

- --------------------------------------------------------------------------------
CITY STATE ZIP CODE

CHECKING/SAVINGS ACCOUNT INFORMATION
PLEASE COMPLETE SECTION BELOW OR ATTACH A VOIDED CHECK OR DEPOSIT TICKET FOR
ACH, SYSTEMATIC INVESTMENT/WITHDRAWAL OR TELEPHONE REDEMPTION PRIVILEGES.

INDICATE SERVICES REQUESTED
/ / ACH / / TELEPHONE REDEMPTION BY WIRE

8. SIGNATURES

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

- --------------------------------------------------------------------------------
Shareowner, custodian, trustee or authorized officer Date

- --------------------------------------------------------------------------------
Joint owner, custodian, trustee or authorized officer Date

<PAGE>

FOR MORE INFORMATION

Two documents are available that offer further information on the
Nicholas/Applegate Mutual Funds:

ANNUAL/SEMI-ANNUAL REPORTS TO SHAREHOLDERS
Includes financial statements, detailed performance information, portfolio
holdings, a statement from portfolio management, and the auditor's report.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI contains more detailed information on all aspects of the Portfolios.

A current SAI has been filed with the Securities and Exchange Commission and
is incorporated by reference into this prospectus.

To request a free copy of the current annual/semi-annual report or SAI, please
call or write:

Nicholas Applegate Mutual Funds
P.O. Box 82169
San Diego, CA 92138-2169
Telephone: (800) 551-8643

<PAGE>
NICHOLAS | APPLEGATE-Registered Trademark-
MUTUAL FUNDS

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

PROSPECTUS

This prospectus contains vital information about these Portfolios. For your own
benefit and protection, please read it before you invest, and keep it on hand
for future reference.

Please note that these Portfolios:

- - are not bank deposits
- - are not federally insured
- - are not endorsed by any bank or government agency
- - are not guaranteed to achieve their investment objectives

THE STRATEGIC INCOME AND HIGH YIELD PORTFOLIOS MAY INVEST WITHOUT LIMITATION IN
DEBT SECURITIES RATED BELOW INVESTMENT GRADE, SOMETIMES REFERRED TO AS "JUNK
BONDS." THESE LOWER RATED SECURITIES ARE SPECULATIVE AND INVOLVE GREATER RISKS,
INCLUDING DEFAULT, THAN HIGHER RATED SECURITIES. SEE "RISK FACTORS AND SPECIAL
CONSIDERATIONS."

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

FIXED INCOME INSTITUTIONAL PORTFOLIOS
SHORT-INTERMEDIATE
FULLY DISCRETIONARY
STRATEGIC INCOME
HIGH YIELD BOND

July __, 1997

<PAGE>

[Left side: visual of marbles]
TABLE OF CONTENTS

OVERVIEW

FIXED INCOME PORTFOLIOS
Short Intermediate
Fully Discretionary
Strategic Income
High Yield Bond