NICHOLAS APPLEGATE MUTUAL FUNDS, 485APOS, 1998-02-19

NICHOLAS APPLEGATE MUTUAL FUNDS
485APOS, 1998-02-19

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<PAGE>

As filed with the Securities and Exchange Commission
on February 19, 1998

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. 53 [X]

AND/OR

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 55

(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 LLP
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,
1997 on May 30, 1997.

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

<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; Global Funds; U.S.
Funds; Fixed Income Funds

Item 3. Condensed Financial Information . . . Global Funds; U.S. Funds;
Fixed Income Funds

Item 4. General Description of Registrant . . Overview; Global Funds; U.S.
Funds; Fixed Income Funds

Item 5. Management of Fund. . . . . . . . . . Organization and Management;
Portfolio Teams

Item 6. Capital Stock and Other Securities. . Your Account

Item 7. Purchase of Securities Being Offered. Your Account

Item 8. Redemption or 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,
Policies and Risks; Investment
Restrictions

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

Item 15. Control Persons and Principal Holders
of Securities . . . . . . . . . . . . Not Applicable

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
Practices . . . . . . . . . . . . . . Portfolio Transactions and
Brokerage

Item 18. Capital Stock and Other Securities. . Miscellaneous

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

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

<PAGE>

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

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

Item 23. Financial Statements. . . . . . . . . Not Applicable

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>
1

NICHOLAS APPLEGATE-Registered Trademark-

MUTUAL FUNDS

PROSPECTUS

The prospectus contains vital information about the Class Q Shares of these
Funds. For your own benefit and protection, please read it before you invest,
and keep it on hand for future reference.

Please note that these Shares

- - 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 HIGH YIELD BOND FUND 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.

GLOBAL FUNDS

INTERNATIONAL CORE GROWTH

WORLDWIDE GROWTH

INTERNATIONAL SMALL CAP GROWTH

EMERGING COUNTRIES

U.S. FUNDS

LARGE CAP GROWTH

CORE GROWTH

VALUE

EMERGING GROWTH

MINI CAP

INCOME & GROWTH

BALANCED GROWTH

FIXED INCOME FUNDS

FULLY DISCRETIONARY

HIGH YIELD BOND

____, 1998

SUBJECT TO COMPLETION: DECEMBER 29, 1997. INFORMATION CONTAINED HEREIN IS
SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE PROSPECTUS IS DELIVERED IN FINAL FORM. UNDER NO CIRCUMSTANCES SHALL THIS
PRELIMINARY PROSPECTUS CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAW OF SUCH JURISDICTION.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
OVERVIEW 3
- --------------------------------------------------------------------------------
A FUND BY FUND LOOK AT GOALS, STRATEGIES, RISKS, AND FINANCIAL HISTORY.

GLOBAL FUNDS

INTERNATIONAL CORE GROWTH 4
WORLDWIDE GROWTH 6
INTERNATIONAL SMALL CAP GROWTH 8
EMERGING COUNTRIES 10

US FUNDS

LARGE CAP 12
CORE GROWTH 14
VALUE 16
EMERGING GROWTH 18
MINI CAP 20
INCOME & GROWTH 22
BALANCED GROWTH 24

FIXED INCOME FUNDS

FULLY DISCRETIONARY 26
HIGH YIELD BOND 28
- --------------------------------------------------------------------------------
POLICIES AND INSTRUCTIONS FOR OPENING, MAINTAINING AND CLOSING AN ACCOUNT IN ANY
FUND.

SIMPLIFIED ACCOUNT INFORMATION

Opening an Account 30
Buying Shares 30
Exchanging Shares 30
Selling and Redeeming Shares 31
Signature Guarantees 31

YOUR ACCOUNT

Transaction Policies 32
Features and Account Policies 33

ORGANIZATION AND MANAGEMENT

Investment Adviser Compensation 34
Administrator Compensation 34
Distributor 34
Portfolio Trades 34
Investment Objectives 34
Diversification 34
Portfolio Teams 35
- --------------------------------------------------------------------------------
DETAILS THAT APPLY TO THE FUNDS AS A GROUP.

RISK FACTORS AND SPECIAL CONSIDERATIONS 38
</TABLE>

<PAGE>

OVERVIEW

FUND INFORMATION

CONCISE FUND DESCRIPTIONS BEGIN ON THE NEXT PAGE. EACH DESCRIPTION PROVIDES THE
FOLLOWING INFORMATION:

[GRAPHIC] INVESTMENT OBJECTIVE
The Fund's particular investment goal.

[GRAPHIC] INVESTMENT STRATEGY
The strategy the Fund intends to use in pursuing the investment objective.

[GRAPHIC] PRINCIPAL INVESTMENTS
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.

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

[GRAPHIC] INVESTOR EXPENSES
The overall costs borne by an investor in the Class Q Shares, including sales
charges and annual expenses.

[GRAPHIC] FINANCIAL HIGHLIGHTS
A table showing the financial performance for each predecessor Portfolio since
inception.

GOAL OF THE NICHOLAS-APPLEGATE MUTUAL FUNDS

The Nicholas-Applegate Mutual Funds (the "Trust") are designed to provide
investors with a well-rounded investment program by offering investors various
portfolios each with different investment objectives and policies (each a
"Fund"). The Class Q Shares of each Fund represent interests in an open-end
diversified open-end management investment company (a mutual fund).

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

WHO MAY WANT TO INVEST IN THE EQUITY FUNDS

- - those who are investing for retirement or other long-term goals
- - those who want higher potential for gain but who are willing to accept
higher risks associated with investing in foreign companies
- - those who want professional portfolio management

WHO MAY NOT WANT TO INVEST IN THE EQUITY FUNDS

- - those who are investing with a shorter time 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

WHO MAY WANT TO INVEST IN THE FIXED INCOME FUNDS

- - those who are investing for retirement or other long term goals
- - those who desire current income
- - those who want a high level of liquidity
- - those who want professional portfolio management

WHO MAY NOT WANT TO INVEST IN THE FIXED INCOME FUNDS

- - those who are investing with a shorter time frame
- - those who are uncomfortable with an investment that will go up and down in
value

- --------------------------------------------------------------------------------
THE INVESTMENT ADVISER

Nicholas-Applegate Capital Management (the "Investment Adviser") serves as
investment adviser to the Funds. Arthur E. Nicholas and 23 other partners with a
staff of approximately 400 employees currently manage over $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>

INTERNATIONAL CORE GROWTH FUND

[GRAPHIC] INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.

[GRAPHIC] INVESTMENT STRATEGY
The Fund's 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 over 50 countries, and
searches for successful, growing companies managing change advantageously and
poised to exceed growth expectations.

[GRAPHIC] PRINCIPAL INVESTMENTS
The Fund invests in 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 capitalizations 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 35% of its total assets in U.S. issuers.

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

[GRAPHIC] 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 35.

- --------------------------------------------------------------------------------
[GRAPHIC] INVESTOR EXPENSES
Investors pay various expenses, either directly or indirectly. Actual expenses
may be more or less than those shown.

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: ----------
<S> <C>
Maximum sales charge on purchases None
Sales charge on reinvested dividends None
Deferred sales charge None
Redemption fee None
Exchange fee None

ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)

Management fees 1.00%
12b-1 expenses None
Other expenses (after expense deferral)(1) 0.65%
-----------
Total operating expenses (after expense deferral)(1) 1.65%
</TABLE>

1. The Investment Adviser has agreed to defers its management fees and to
absorb other operating expenses. Total operating expenses would have been
2,667% and Other expenses would have been 2,567% absent the 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 REINVEST ALL DIVIDENDS AND THE AVERAGE ANNUAL RETURN IS
5%.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-----------------------------------------
<S> <C> <C> <C>
$17 $52 $90 $195
</TABLE>

This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.

- --------------------------------------------------------------------------------
[GRAPHIC] FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital stock of
the predecessor Qualified Portfolio outstanding throughout each period
indicated. The figures for the period ending September 30, 1997 are unaudited.
The other figures have been audited by Ernst & Young L.L.P., with respect to the
fiscal year ended March 31, 1997. Please read in conjunction with the Trust's
1997 Annual Report and 1997-1998 Semi-Annual Report.

<TABLE>
<CAPTION>
-------------------------
2/28/97 4/1/97
TO 3/31/97 TO 9/30/97
<S> <C> <C>
PER SHARE DATA:

Net asset value, beginning of period $12.50 $12.75

Income from investment operations:
Net investment income (deficit) -- (0.01)
Net realized and unrealized gains (losses)
on securities and foreign currency (0.25) 3.43
Total from investment operations (0.25) 3.42

Less distributions:
Dividends from net investment income -- --
Distributions from capital gains -- --
Net asset value, end of period $12.75 $16.17
- --------------------------------------------------------------------------------
TOTAL RETURN: (2.00%) 26.82%

RATIOS/SUPPLEMENTAL DATA:

Net Assets, end of period $1,020 $1,135,428

Ratio of expenses to average net assets,
after expense reimbursement+ 2.667%* 6.16%*

Ratio of expenses to average net assets,
before expense reimbursement+

Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement+ -- (0.37%)*

Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement+ (2,666%)* (4.88%)*

Portfolio turnover** 75.53% 89.81%

Average commission rate paid** $0.0106 $0.0111
</TABLE>

* Annualized
** For the corresponding Series of the Master Trust
+ Includes expenses allocated from Master Trust
<PAGE>

WORLDWIDE GROWTH FUND

[GRAPHIC] INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.

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 any maturity issued by foreign
companies and foreign governments and their agencies and instrumentalities. The
Fund may also use options and futures contracts as hedging techniques.

[GRAPHIC] PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize it's overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 35.

[GRAPHIC] 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, 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 38.

Exchange fee None

ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)

Management fees 1.00%
12b-1 expenses None
Other expenses (after expense deferral)(1) 0.60%
- -----------------------------------------------------------------

Total operating expenses (after expense deferral)(1) 1.60%
</TABLE>

1. The Investment Adviser has agreed to defer its management fees and to
absorb other operating expenses. Total operating expenses would have been
34.99% and Other expenses would have been 33.99% absent the 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 REINVEST ALL DIVIDENDS AND THE AVERAGE ANNUAL RETURN IS
5%.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-----------------------------------------
<S> <C> <C> <C>
$16 $50 $87 $190
</TABLE>

This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.

<TABLE>
<CAPTION>
8/31/95 4/1/96 4/1/97
TO 3/31/96 TO 3/31/97 TO 9/30/97
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $12.50 $13.27 $15.00
Income from investment operations:
Net investment income (deficit)) (0.04) 0.01 (0.02)
Net realized and unrealized
gains (losses) on securities and
foreign currency 0.81 1.72 3.96
------ ------ ------
Total from investment operations 0.77 1.73 3.94

Less distributions:
Dividends from net investment income -- -- --

Distributions from capital gains -- -- --
------ ------ ------
Net asset value, end of period $13.27 $15.00 $18.94
- --------------------------------------------------------------------------------
TOTAL RETURN: 6.32% 12.87% 26.27%

RATIOS/SUPPLEMENTAL DATA:

Net Assets ($000), end of period $1,115 $641,965 $889,973

Ratio of expenses to average net assets,
after expense reimbursement+ 1.60% 1.61% 1.66%*

Ratio of expenses to average net assets,
before expense reimbursement+ 3.233%* 34.99% 6.16%*

Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement+ (0.50%)* (0.91%)* (0.37%)*

Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement+ (3,231%)* 34.23% (4.88%)*

Portfolio turnover** 132.20% 181.81% 90.09%

Average commission rate paid** $0.0187 $0.0078 $0.0111
</TABLE>

* Annualized
** For the corresponding Series of the Master Trust
+ Includes expenses allocated from Master Trust

<PAGE>

INTERNATIONAL SMALL CAP GROWTH FUND

[GRAPHIC] INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.

[GRAPHIC] INVESTMENT STRATEGY
The Fund's 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 gather financial data on 20,000 companies in over 50 countries, and
searches for successful, growing companies managing change advantageously and
poised to exceed growth expectations.

The Fund emphasizes companies in the bottom 75% of publicly traded companies as
measured by market capitalizations in each country ("small cap securities"). The
Fund may have less U.S. exposure (up to 35% of its total assets in U.S. issuers)
than the Worldwide Growth Fund.

[GRAPHIC] PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests 65% of its total assets in small-cap
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 stock, warrants and convertible securities. It invests
the remainder primarily in investment grade debt securities of any maturity
issued by foreign companies and foreign governments and their agencies and
instrumentalities. The Fund may also use options and futures contracts as
hedging techniques.

[GRAPHIC] 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 35.

[GRAPHIC] 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.
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. In
addition to the risks posed by foreign investing, the securities of smaller,
less well-known companies may be more volatile than larger companies and may
trade less frequently. The 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 further explanation, see "Risk Factors and Special
Considerations" starting on page 38.

Exchange fee None

ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)

Management fees 1.00%
12b-1 expenses None
Total other expenses 0.65%
- -----------------------------------------------------------------

Total operating expenses (after expense deferral)(1) 1.65%
</TABLE>

1. The Investment Adviser has agreed to defer its management fees and to
absorb other operating expenses. Total operating expenses would have been
151.33% and Other expenses would have been 150.33% absent the 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 REINVEST ALL DIVIDENDS AND THAT AVERAGE ANNUAL RETURN IS
5%.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-----------------------------------------
<S> <C> <C> <C>
$17 $52 $90 $195
</TABLE>

This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital stock of
the predecessor Qualified Portfolio outstanding throughout each period
indicated. The figures for the period ending September 30, 1997 are unaudited.
The other figures have been audited by Ernst & Young L.L.P., with respect to the
fiscal year ended March 31, 1997. Please read in conjunction with the Trust's
1997 Annual Report and 1997-1998 Semi-Annual Report.

<TABLE>
<CAPTION>
--------------------------------------
8/31/95 4/1/96 4/1/97
TO 3/31/96 TO 3/31/97 TO 9/30/97
<S> <C> <C> <C>
PER SHARE DATA:

Net asset value, beginning of period $12.50 $13.52 $14.01
Income from investment operations:
Net investment income (deficit)) 0.01 (0.06) 0.01
Net realized and unrealized gains
(losses) on securities and
foreign currency 1.01 2.01 2.93
- --------------------------------------------------------------------------------

Total from investment operations 1.02 1.95 2.94
Less distributions:
Dividends from net investment income -- -- --

Distributions from capital gains -- (1.46) --
Net asset value, end of period $13.52 $14.01 $16.95
- --------------------------------------------------------------------------------
TOTAL RETURN: 8.16% 15.03% 20.99%

RATIOS/SUPPLEMENTAL DATA:
Net Assets ($000), end of period $19,082 $42,150 $183,119

Ratio of expenses to average net assets,
after expense reimbursement+ 1.65%* 1.66% 1.66%*

Ratio of expenses to average net assets,
before expense reimbursement+ 531.72%* 151.33% 22.61%*

Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement+ 0.33%* (64%) (0.74%)*

Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement+ 529.11%* (150.28%) (21.69%)*

Portfolio turnover** 141.02% 206.07% 103.72%

Average commission rate paid** $0.0128 $0.0098 $0.0091
</TABLE>

* Annualized
** For the corresponding Series of the Master Trust
+ Includes expenses allocated from Master Trust

<PAGE>

EMERGING COUNTRIES FUND

[GRAPHIC] INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.

[GRAPHIC] 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.

[GRAPHIC] 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,
Colombia, the Czech Republic, Greece, Hungary, India, Indonesia, Israel, Jordan,
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 debt
securities of any maturity issued by foreign companies and foreign governments
and their agencies and instrumentalities. The Fund may also use options and
futures contracts as hedging techniques.

[GRAPHIC] 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.
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 further explanation, see "Risk
Factors and Special Considerations" starting on page 38.

Exchange fee None

ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)

Management fees 1.25%
12b-1 expenses None
Other expenses (after expense deferral)(1) 0.65%
- -----------------------------------------------------------------

Total operating expenses (after expense deferral)(1) 1.90%
</TABLE>

1. The Investment Adviser has agreed to defer its management fees and to
absorb other operating expenses. Total operating expenses would have been
4.20% and Other expenses would have been 2.95% absent the 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 REINVEST ALL DIVIDENDS AND THE AVERAGE ANNUAL RETURN IS
5%.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-----------------------------------------
<S> <C> <C> <C>
$19 $60 $103 $222
</TABLE>

This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.

<TABLE>
<CAPTION>
---------------------------------------------
8/31/95 4/1/96 4/1/97
TO 3/31/96 TO 3/31/97 TO 9/30/97
<S> <C> <C> <C>
PER SHARE DATA:

Net asset value, beginning of period $12.50 $13.18 $16.47

Income from investment operations:

Net investment income (deficit)) 0.01 (0.04) 0.03

Net realized and unrealized gains
(losses) on securities and
foreign currency 0.67 3.37 3.14
- ---------------------------------------------------------------------------------------
Total from investment operations 0.68 3.33 3.17

Less distributions:

Dividends from net investment income -- -- --

Distributions from capital gains -- (0.04) --
- ---------------------------------------------------------------------------------------
Net asset value, end of period $13.18 $16.47 $19.64
- ---------------------------------------------------------------------------------------
TOTAL RETURN: 5.44% 25.29% 19.25%

RATIOS/SUPPLEMENTAL DATA:

Net Assets ($000), end of period $350,058 $8,660,367 $26,971,216

Ratio of expenses to average net assets,
after expense reimbursement+ 1.90%* 1.91% 1.91%*

Ratio of expenses to average net assets,
before expense reimbursement+ 44.24%* 4.20% 2.26%*

Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement+ 0.47% (0.87%)* 0.25%*

Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement+ (35.33%) (3.20%) (0.11%)*

Portfolio turnover** 118.21% 176.20%% 119.86%

Average commission rate paid** $0.0022 $0.0021 $0.0022
</TABLE>

* Annualized

** For the corresponding Series of the Master Trust
+ Includes expenses allocated from Master Trust

<PAGE>

LARGE CAP GROWTH FUND

[GRAPHIC] INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.

[GRAPHIC] INVESTMENT STRATEGY
The Fund's 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 ("large cap securities").

[GRAPHIC] PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests at least 65% of its total assets in
large cap securities, including 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 of any maturity, U.S.
Government securities, and equity securities of foreign issuers. The Fund may
also use options and futures contracts as hedging techniques.

[GRAPHIC] RISK FACTORS
As with any growth fund, the value of your investment will fluctuate from 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 overweighted 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 also
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 further explanation, see "Risk Factors and
Special Considerations" starting on page 38.

ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)

Management fees 0.75%
12b-1 expenses None
Other expenses (after expense deferral)(1) 0.50%

Total operating expenses (after expense deferral)(1) 1.25%
</TABLE>

(1) The Investment Adviser has agreed to defer its management fees and to-
absorb other operating expenses. For the fiscal year ending March 31,1998
Total operating expenses would have been 2.00% and Other expenses are
expected to be 1.25% absent the 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 REINVEST ALL DIVIDENDS AND THE AVERAGE ANNUAL RETURN IS
5%.

<TABLE>
<CAPTION>
1 Year 3 Years
-------------------
<S> <C>
$13 $40
</TABLE>

This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.

- --------------------------------------------------------------------------------
[GRAPHIC] FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital stock of
the predecessor Qualified Portfolio outstanding throughout the period indicated.
The figures for the period ending September 30, 1997 are unaudited. Please read
in conjunction with the Trust's 1997-1998 Semi-Annual Report.

<TABLE>
<CAPTION>
------------
7/21/97
TO 9/30/97
<S> <C>
PER SHARE DATA:

Net asset value, beginning of period $12.50

Income from investment operations:

Net investment income (deficit) --

Net realized and unrealized gains (losses)
on securities and foreign currency 0.91
------
Total from investment operations 0.91

Less distributions:

Dividends from net investment income --

Distributions from capital gains --

Net asset value, end of period $13.41
- ------------------------------------------------------------------
TOTAL RETURN: 38.25%

RATIOS/SUPPLEMENTAL DATA:

Net Assets, end of period $24,283

Ratio of expenses to average net assets,
after expense reimbursement+ 1.23%*

Ratio of expenses to average net assets,
before expense reimbursement+ 17.22%*

Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement+ (0.28)%

Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement+ (16.27%)

Portfolio turnover** 269.87%

Average commission rate paid** $0.0599
</TABLE>

* Annualized
** For the corresponding Series of the Master Trust
+ Includes expenses allocated from Master Trust

<PAGE>

CORE GROWTH FUND

[GRAPHIC] INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.

[GRAPHIC] INVESTMENT STRATEGY
The Fund's 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 capitalizations above $500 million.

[GRAPHIC] PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests at least 75% of its total assets in
common stocks. It invests the remainder of its assets primarily in preferred and
convertible securities, investment grade debt securities of any maturity, 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.

[GRAPHIC] RISK FACTORS
As with any growth fund, the value of your investment will fluctuate from 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 also
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 further explanation, see "Risk Factors and
Special Considerations" starting on page 38.

ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)

Management fees 0.75%
12b-1 expenses None
Other expenses (after expense deferral)(1) 0.50%

Total operating expenses (after expense deferral)(1) 1.25%
</TABLE>

(1) The Investment Advisor has agreed to defer its management fees and to
absorb other operating expenses. Total operating expenses would have been
1.84% and Other expenses would have been 1.09% absent the 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 REINVEST ALL DIVIDENDS AND THE AVERAGE ANNUAL RETURN IS
5%.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-----------------------------------------
<S> <C> <C> <C>
$13 $40 $69 $151
</TABLE>

This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.

<TABLE>
<CAPTION>
-----------------------------------------------------------
6/30/94 4/1/95 4/1/96 4/1/97
3/31/95 3/31/96 3/31/97 9/30/97
<S> <C> <C> <C> <C>
PER SHARE DATA:

Net asset value, beginning of period $12.50 $13.66 $17.99 $18.01

Income from investment operations:

Net investment income (deficit) (0.02) (0.07) (0.04) (0.08)

Net realized and unrealized gains
(losses) on securities and
foreign currency 1.18 4.86 0.32 5.53
--------------------------------------------------------
Total from investment operations 1.16 4.79 0.28 5.45

Less distributions:

Dividends from net investment income -- -- -- --

Distributions from capital gains -- (0.46) (0.26) --
--------------------------------------------------------
Net asset value, end of period $13.66 $17.99 $18.01 $23.46
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN: (9.28%) 35.37% 1.39% 30.26%

RATIOS/SUPPLEMENTAL DATA:

Net Assets ($000), end of period $2,121 $4,724 $13,115 $13,836,183

Ratio of expenses to average net assets,
after expense reimbursement+ 1.24%* 1.23% 1.25% 1.24%

Ratio of expenses to average net assets,
before expense reimbursement+ 3.52%* 2.84% 1.84% 2.04%*

Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement+ (0.33%)* (0.57%) (0.69%) (0.47%)*

Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement+ (1.61%)* (2.18%) (1.28%) (1.27%)*

Portfolio turnover** 98.09% 114.48% 153.20% 99.41%

Average commission rate paid** N/A $0.0593 $0.0582 $0.0581
</TABLE>

* Annualized
** For the corresponding Series of the Master Trust
+ Includes expenses allocated from Master Trust

<PAGE>

VALUE FUND

[GRAPHIC] INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.

[GRAPHIC] INVESTMENT STRATEGY
The Fund's 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 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 companies with market capitalizations generally above $5
billion.

[GRAPHIC] PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests at least 80% of its total assets in
equity securities. It invests the remainder primarily in preferred and
convertible securities, investment grade debt securities of any maturity, 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.

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

[GRAPHIC] 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 35.

[GRAPHIC] RISK FACTORS

As with any equity fund, the value of your investment will fluctuate from 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 further explanation, see
"Risk Factors and Special Considerations" starting on page 38.

Exchange fee None

ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)

Management fees 0.75%
12b-1 expenses None
Other expenses (after expense deferral)(1) 0.50%
- ---------------------------------------------------------------------

Total operating expenses (after expense deferral)(1) 1.25%
</TABLE>

1. The Investment Adviser has agreed to defer its management fees and to
absorb other operating expenses. Total operating expenses for fiscal year
ending March 31, 1998 are estimated to be 3.34% and Other expenses are
estimated to be 2.69% absent the deferral. See "Investment Adviser
Compensation".

<PAGE>
17

EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS TIME
FRAMES INDICATED.

THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE AVERAGE ANNUAL RETURN IS
5%.

<TABLE>
<CAPTION>
1 Year 3 Years
-------------------
<S> <C>
$13 $40
</TABLE>

This example is for comparison purposes only and is not a
representation of the Fund's actual expenses and returns,
either past or future.

<PAGE>
18

EMERGING GROWTH FUND

[GRAPHIC] INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.

[GRAPHIC] INVESTMENT STRATEGY
The Fund's 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 capitalizations below $500 million at
the time of purchase.

[GRAPHIC] 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 of any maturity, 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.

[GRAPHIC] RISK FACTORS
As with any growth fund, the value of your investment will fluctuate from 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 further
explanation, see "Risk Factors and Special Considerations" starting on page 38.

Exchange fee None

ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)

Management fees 1.00%
12b-1 expenses None
Other expenses (after expense deferral)(1) 0.50%
- --------------------------------------------------------------------

Total operating expenses (after expense deferral)(1) 1.50%
</TABLE>

1. The Investment Adviser has agreed to defer its management fees and to
absorb other operating expenses. Total operating expenses would have been
10.79% and Other expenses would have been 9.79% absent the deferral. See
"Investment Adviser Compensation".
<PAGE>
19

EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS TIME
FRAMES INDICATED.

THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE AVERAGE ANNUAL RETURN IS
5%.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-----------------------------------------
<S> <C> <C> <C>
$15 $47 $82 $179
</TABLE>

This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.

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

[GRAPHIC] FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital stock of
the predecessor Qualified Portfolio outstanding throughout each period
indicated. The figures for the period ending September 30, 1997 are unaudited.
The other figures have been audited by Ernst & Young L.L.P., with respect to the
fiscal year ended March 31, 1997. Please read in conjunction with the Trust's
1997 Annual Report and 1997-1998 Semi-Annual Report.

<TABLE>
<CAPTION>
---------------------------------------
8/1/95 4/1/96 4/1/97
TO 3/31/96 TO 3/31/97 TO 9/30/97
<S> <C> <C> <C>
PER SHARE DATA:

Net asset value, beginning of period $12.50 $14.16 $13.19

Income from investment operations:
Net investment income (deficit)) (0.03) (0.07) 0.06
Net realized and unrealized gains
(losses) on securities and
foreign currency 1.69 (0.77) 6.04
- --------------------------------------------------------------------------------
Total from investment operations 1.66 (0.84) 6.10

Less distributions:

Dividends from net investment income -- -- --

Distributions from capital gains -- (1.13) --
- --------------------------------------------------------------------------------
Net asset value, end of period $14.16 $13.19 $19.29
- --------------------------------------------------------------------------------
TOTAL RETURN: 13.28% (6.03%) 46.25%

RATIOS/SUPPLEMENTAL DATA:

Net Assets ($000), end of period $314 $1,013 $10,481,099

Ratio of expenses to average net assets,
after expense reimbursement+ 1.49%* 1.51% 1.17%*

Ratio of expenses to average net assets,
before expense reimbursement+ 37.86%* 10.79% 2.92%*

Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement+ (1.05%)* (1.02%) (1.02%)*

Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement+ (32.41%)* (10.31%) (2.44%)*

Portfolio turnover** 129.59% 112.90% 46.99%

Average commission rate paid** $0.0523 $0.0520 $0.0531
</TABLE>

* Annualized

** For the corresponding Series of the Master Trust
+ Includes expenses allocated from Master Trust

<PAGE>

MINI CAP FUND

[GRAPHIC] INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.

[GRAPHIC] INVESTMENT STRATEGY
The Fund's 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 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 companies with market capitalizations generally up to $100
million.

[GRAPHIC] PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize it overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 35.

[GRAPHIC] RISK FACTORS
As with any growth fund, the value of your investment will fluctuate from 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 further explanation, see
"Risk Factors and Special Considerations" starting on page 38.

Exchange fee None

ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)

Management fees 1.25%
12b-1 expenses None
Other expenses (after expense deferral)(1) 0.31%
- ---------------------------------------------------------------------

Total operating expenses (after expense deferral)(1) 1.56%
</TABLE>

1. The Investment Adviser has agreed to defer its management fees and to
absorb other operating expenses. Total operating expenses would have been
1.99% and Other expenses would have been 0.74% absent the deferral. See
"Investment Adviser Compensation".
<PAGE>
21

EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS TIME
FRAMES INDICATED.

THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE AVERAGE ANNUAL RETURN IS
5%.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-----------------------------------------
<S> <C> <C> <C>
$16 $49 $85 $185
</TABLE>

This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.

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

[GRAPHIC] FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital stock of
the predecessor Institutional Portfolio outstanding throughout each period
indicated. The figures for the period ending September 30, 1997 are unaudited.
The other figures have been audited by Ernst & Young L.L.P., with respect to the
fiscal year ended March 31, 1997. Please read in conjunction with the Trust's
1997 Annual Report and 1997-1998 Semi-Annual Report.

<TABLE>
<CAPTION>
---------------------------------------
4/1/95 4/1/96 4/1/97
TO 3/31/96 TO 3/31/97 TO 9/30/97
<S> <C> <C> <C>
PER SHARE DATA:

Net asset value, beginning of period $12.50 $15.85 $15.94

Income from investment operations:
Net investment income (deficit) (0.05) (0.17) (0.04)
Net realized and unrealized gains
(losses) on securities and
foreign currency 3.40 0.84 9.32
- --------------------------------------------------------------------------------
Total from investment operations 3.35 0.67 9.36

Less distributions:

Dividends from net investment income -- -- --

Distributions from capital gains -- (0.58) --
- --------------------------------------------------------------------------------
Net asset value, end of period $14.16 $13.19 $19.29

TOTAL RETURN: 26.80% 3.90% 58.72%

RATIOS/SUPPLEMENTAL DATA:

Net Assets ($000), end of period $25,237 $28,712 $102,223

Ratio of expenses to average net assets,
after expense reimbursement+ 1.55%* 1.56% 1.57%*

Ratio of expenses to average net assets,
before expense reimbursement+ 2.46%* 1.99% 1.88%*

Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement+ (0.98%)* (1.08%) (1.17%)*

Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement+ (1.36%)* (1.30%) (1.48%)*

Portfolio turnover** 106.99% 164.01% 46.43%

Average commission rate paid** $0.0529 $0.0455 $0.0504
</TABLE>

* Annualized
** For the corresponding Series of the Master Trust
+ Includes expenses allocated from Master Trust
<PAGE>

INCOME & GROWTH FUND

[GRAPHIC] INVESTMENT OBJECTIVE
Maximum total return, consisting of long-term capital appreciation and current
income.

[GRAPHIC] 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 "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 seeks to capture approximately 70-80% of the upside performance of the
underlying equities with 50% or less of the downside exposure.

[GRAPHIC] 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 of any maturity, 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 net assets in debt
securities rated below investment grade by a nationally recognized statistical
rating agency, or of comparable quality if unrated.

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

[GRAPHIC] 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 value of debt securities go down;
if rates go down, the value 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 further explanation, see "Risk Factors and Special Considerations"
starting on page 38.

[GRAPHIC] INVESTOR EXPENSES
Investors pay various expenses, either directly or indirectly. Actual expenses
may be more or less than those shown.

SHAREHOLDER TRANSACTION EXPENSES: ----------
<S> <C>
Maximum sales charge on purchases None
Sales charge on reinvested dividends None
Deferred sales charge None
Redemption fee None
- -----------------------------------------------------------------

Exchange fee None

ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)

Management fees 0.75%
12b-1 expenses None
Other expenses (after expense deferral)(1) 0.50%
- -----------------------------------------------------------------

Total operating expenses (after expense deferral)(1) 1.25%

</TABLE>

1. The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses. Total operating expenses would have been
2.90%, and Other expenses would have been 2.15% absent the 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 REINVEST ALL DIVIDENDS AND THE AVERAGE ANNUAL RETURN IS
5%.

--------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------
<S> <C> <C> <C>
$13 $40 $69 $151

</TABLE>

This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.

8/1/95 4/1/96 4/1/97
TO 3/31/96 TO 3/31/97 TO 9/30/97
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $12.50 $13.72 $15.19
Income from investment operations:
Net investment income (deficit) 0.17 0.42 0.47
Net realized and unrealized
gains (losses) on securities and
foreign currency 1.22 1.50 2.86
- ----------------------------------------------------------------------------------
Total from investment operations 1.39 1.92 3.25

Less distributions:
Dividends from net investment income 0.17 (0.42) (0.24)

Distributions from capital gains -- (0.03) --
- ----------------------------------------------------------------------------------
Net asset value, end of period $13.72 $15.19 $18.20
- ----------------------------------------------------------------------------------
TOTAL RETURN: 11.13% 14.13% 21.47%

RATIOS/SUPPLEMENTAL DATA:

Net Assets ($000), end of period $1,085 $4,599 $6,293

Ratio of expenses to average net assets,
after expense reimbursement+ 1.25%* 1.25% 1.24%

Ratio of expenses to average net assets,
before expense reimbursement+ 9.21%* 2.90% 1.84%*

Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement+ 3.59%* 3.29% 2.92%*

Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement+ (4.22%)* 1.61% 2.32%*

Portfolio turnover** 144.97% 166.84% 136.75%

Average commission rate paid** $0.0597 $0.0154 $0.0600

</TABLE>

* Annualized

** For the corresponding Series of the Master Trust

+ Includes expenses allocated from Master Trust

<PAGE>

BALANCED GROWTH FUND

[GRAPHIC] INVESTMENT OBJECTIVE
A balance of long-term capital appreciation and current income.

[GRAPHIC] INVESTMENT STRATEGY
The Fund's 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.

[GRAPHIC] 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 of any maturity issued by corporations
and the U.S. Government and its agencies and instrumentalities. A portion of the
Fund's net assets (less than 35%) may be invested in debt securities rated below
investment grade by a nationally recognized statistical rating agency, or of
comparable quality if unrated. The Fund may invest up to 20% of its total assets
in securities of foreign issuers. The Fund may also use options as a hedging
technique.

[GRAPHIC] RISK FACTORS
As with any fund that invests in common stocks and debt obligations, the value
of your investment will fluctuate with movements in the stock and bond markets.
Equity securities 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 goes down; if rates go down, the value of debt securities goes up.
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 further
explanation, see "Risk Factors and Special Considerations" starting on page 38.

[GRAPHIC] INVESTOR EXPENSES
Investors pay various expenses, either directly or indirectly. Actual expenses
may be more or less than those shown.

Exchange fee None

ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)

Management fees 0.75%
12b-1 expenses None
Other expenses (after expense deferral)(1) 0.50%
- -----------------------------------------------------------------

Total operating expenses (after expense deferral)(1) 1.25%

</TABLE>

1. The Investment Adviser has agreed to defer its management fees and to
absorb other operating expenses. Total operating expenses would have
been 126.75%, and Other expenses would have been 126% absent the
deferral. See "Investment Adviser Compensation."

<PAGE>

25
EXAMPLE:

THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS TIME
FRAMES INDICATED.

THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE AVERAGE ANNUAL RETURN IS
5%.

</TABLE>

This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.

8/1/95 4/1/96 4/1/97
TO 3/31/96 TO 3/31/97 TO 9/30/97

<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $12.50 $12.69 $13.42
Income from investment operations:
Net investment income (deficit) 0.15 0.24 0.24
Net realized and unrealized
gains (losses) on securities and
foreign currency 0.19 0.73 3.76
- -------------------------------------------------------------------------------
Total from investment operations 0.34 0.97 4.00
Less distributions:
Dividends from net investment income (0.15) (0.24) (0.12)

Distributions from capital gains -- -- --
- -------------------------------------------------------------------------------
Net asset value, end of period $12.69 $13.42 $17.29
- -------------------------------------------------------------------------------
TOTAL RETURN: 2.77% 7.60% 29.83%

RATIOS/SUPPLEMENTAL DATA:

Net Assets ($000), end of period $1,231 $72,627 $107,626

Ratio of expenses to average net assets,
after expense reimbursement+ 1.25%* 1.26% 1.26%

Ratio of expenses to average net assets,
before expense reimbursement+ 3,094%* 126.75% 19.37%

Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement+ 2.16%* 2.15% 1.59%

Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement+ (3,090.46%)* (123.09%) (16.52%)*

Portfolio turnover** 197.19% 212.95% 136.75%

Average commission rate paid** $0.0594 $0.0586 $0.0600

</TABLE>

* Annualized

** For the corresponding Series of the Master Trust

+ Includes expenses allocated from Master Trust

<PAGE>

FULLY DISCRETIONARY FIXED INCOME FUND

[GRAPHIC] INVESTMENT OBJECTIVE
Maximum total return.

[GRAPHIC] INVESTMENT STRATEGY
The Fund's Investment Adviser seeks to outperform the total return of an index
of either government/corporate investment grade debt or government/corporate/
mortgage investment grade debt over a full market cycle through an actively
managed diversified portfolio of debt securities. When evaluating any bond, the
Investment Adviser selects bonds based upon a "top down" analysis of economic
trends. Its investment philosophy emphasizes interest rate decisions and shifts
among sectors of the bond market. It also analyzes credit quality, the yield to
maturity of the security, and the effect the security will have on the Fund.

[GRAPHIC] PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests at least 65% of its total assets in
investment grade debt securities issued by U.S. and foreign corporations, U.S.
and foreign governments, and their agencies and instrumentalities. These
securities include bonds, notes, mortgage-backed and asset-backed securities
with rates that are fixed, variable or floating. The Fund may invest up to 20%
of its total assets in debt securities rated below investment grade by a
nationally recognized statistical rating agency, or of comparable quality if
unrated. For a description of these ratings, see "Corporate Bond Ratings"
beginning on page 43. The Fund may also use options, futures contracts and
interest rate and currency swaps as hedging techniques. The average portfolio
duration of the Fund will range from two to eight years. The Fund may invest up
to 30% of its total assets in securities payable in foreign currencies.

[GRAPHIC] RISK FACTORS
As with any fund that invests in bonds, the value of your As with any fund that
invests in bonds, the value of the Fund's investments fluctuates in response to
movements in interest rates. If interest rates go up, the value of bonds fall;
if rates go down, the value of bonds rise. However, the Investment Adviser
expects the Fund's fluctuations to be more moderate than those of a fund with a
longer average duration. The lower-rated debt 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. To the extent the Fund invests in foreign securities,
performance also depends upon changing currency values, different political and
economic environments, and other overall economic conditions in countries where
the Fund invests. For further explanation, see "Risk Factors and Special
Considerations" starting on page 38.

[GRAPHIC] INVESTOR EXPENSES
Investors pay various expenses, either directly or indirectly. Actual expenses
may be more or less than those shown.

SHAREHOLDER TRANSACTION EXPENSES: ----------
<S> <C>

Maximum sales charge on purchases None
Sales charge on reinvested dividends None
Deferred sales charge None
Redemption fee None
- -----------------------------------------------------------------

Exchange fee None

ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)

Management fees 0.45%
12b-1 expenses None
Other expenses (after expense deferral)(1) 0.50%
- -----------------------------------------------------------------

Total operating expenses (after expense deferral)(1) 0.95%

</TABLE>

1. The Investment Adviser has agreed to defer its management fees and to
absorb other operating expenses. Total operating expenses would have been
3.74% and Other expenses would have been 3.29% absent the 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 REINVEST ALL DIVIDENDS AND THE AVERAGE ANNUAL RETURN IS
5%.

- --------------------------------------------------------------------------------
1 Year 3 Years
- --------------------------------------------------------------------------------
<S> <C>
$9 $27

</TABLE>

This example is for comparison purposes only and is not a
representation of the Fund's actual expenses and returns,
either past or future.

<PAGE>

HIGH YIELD BOND FUND

[GRAPHIC] INVESTMENT OBJECTIVE
High level of current income and capital growth.

[GRAPHIC] INVESTMENT STRATEGY
The Fund invests primarily in lower-rated debt securities commonly referred to
as "junk bonds." When evaluating any bond, the Investment Adviser selects bonds
based upon a combination of both "top-down" analysis of economic trends and
"bottom-up" analysis that evaluates the financial condition and competitiveness
of individual companies. It also analyzes credit quality, the yield to maturity
of the security, and the effect the security will have on the average yield to
maturity of the Fund. The Investment Adviser believes it can lower the risks of
investing in lower-rated debt through these professional management techniques
and through diversification.

[GRAPHIC] PRINCIPAL INVESTMENTS
Under normal conditions, the Fund allocates at least 65% of its total assets in
lower-rated debt securities and convertible securities rated below investment
grade. There is no limit on either the portfolio maturity or the acceptable
rating of securities bought by the Fund. For a description of these ratings, see
"Corporate Bond Ratings" beginning on page 43. Securities may bear rates that
are fixed, variable or floating. The Fund may invest up to 35% of its total
assets in equity securities of U.S. and foreign companies. The Fund is not
restricted to investments in companies of any particular size, but currently
intends to invest principally in companies with market capitalizations above
$100 million at the time of purchase. The Fund may also use options, futures
contracts and interest rate and currency swaps as hedging techniques.

[GRAPHIC] RISK FACTORS
As with any fund that invests primarily in bonds, the value of the Fund's
investments fluctuates in response to movements in interest rates. When rates go
up, debt security prices fall; when rates go down, debt security prices rise.
Lower-rated securities, while usually offering higher yields, generally have
more risk and volatility than higher-rated securities because of reduced
creditworthiness and greater chance of default. Periods of high interest rates
and recession may adversely affect the issuer's ability to pay interest and
principal. To the extent the Fund invests in stocks, the value of those
investments will fluctuate day to day with movements in the stock market as well
as in response to the activities of individual companies. The Fund which the
Fund invests may be more subject to volatile market movements than securities of
longer, more established companies. To the extent the Fund invests in foreign
securities, performance also depends on changes in foreign currency values,
different political and regulatory environments, and overall economic factors in
the countries where the Fund invests. For further explanation, see "Risk Factors
and Special Considerations" starting on page 38.

[GRAPHIC] INVESTOR EXPENSES
Investors pay various expenses, either directly or indirectly. Actual expenses
may be more or less than those shown.

SHAREHOLDER TRANSACTION EXPENSES:

<S> <C>
Maximum sales charge on purchases None

Sales charge on reinvested dividends None

Deferred sales charge None

Redemption fee None

Exchange fee None

ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)

Management fees 0.60%

12b-1 expenses None

Other expenses (after expense deferral)(1) 0.40%

Total operating expenses (after expense deferral)(1) 1.00%

</TABLE>

(1) The Investment Adviser has agreed to defer its management fees and to
absorb other operating expenses. Total operating expenses for the fiscal
year ending March 31, 1998 are estimated to be 1.95% and Other expenses are
estimated to be 1.35% absent the 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 REINVEST ALL DIVIDENDS AND THE AVERAGE ANNUAL RETURN IS
5%.

- ------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
$10 $32 $55 $122

</TABLE>

This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.

<PAGE>

SIMPLIFIED ACCOUNT INFORMATION

--------------------------------------------------------------------------------
OPENING AN ACCOUNT
--------------------------------------------------------------------------------
<S> <C> <C>
FOR THIS TYPE OF ACCOUNT REGULAR INVESTMENT PARTICIPANTS IN QUALIFIED RETIREMENT PLANS

This is the minimum $250,000 Contact your plan administration
initial investment or sponsor

Use this type of New Account Form (Non-Retirement)
application

Before completing Each Fund offers a variety of features, which are described in the
the application "Your Account" 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 us at (800) 551-8043.

If you are a participant in Make purchases through your plan administrator or sponsor,
a qualified retirement plan who is responsible for transmitting orders.

If you are sending money Mail application and check, payable to: NICHOLAS-APPLEGATE
by CHECK MUTUAL FUNDS, PO BOX 8326, BOSTON, MA 02266-8326.
The Trust WILL NOT accept third-party checks.

If you are sending money Please read the bank wire or ACH section under the
by BANK WIRE or ACH "Buying Shares" section below. You will need an account number
with the Trust by sending a completed application to:
NICHOLAS-APPLEGATE MUTUAL FUNDS, PO BOX 8326, BOSTON, MA 02266-8326.
To receive your account number, call either your financial
representative or us at (800) 551-8043.

--------------------------------------------------------------------------------
BUYING SHARES
--------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT REGULAR INVESTMENT PARTICIPANTS IN QUALIFIED RETIREMENT PLANS

This is the minimum $10,000 Contact your plan administrator or sponsor
subsequent investment

The price you will receive The Trust is open on days that the New York Stock Exchange is open.
All transactions received in good order before the market closes receive that
day's price.

If you are a participant in Make purchases through your plan administrator or sponsor,
a qualified retirement plan who is responsible for transmitting orders.

If you are sending money Instruct your bank to wire the amount you wish to invest to:
by BANK WIRE STATE STREET BANK & TRUST CO.--ABA #011000028
DDA #9904-645-0
STATE STREET BOS, ATTN: MUTUAL FUNDS
CREDIT: NICHOLAS-APPLEGATE [FUND NAME], [YOUR NAME], [ACCOUNT NAME OR NUMBER]

If you are sending money Call your bank to ensure (1) that your bank supports ACH, and (2) this feature
by BANK WIRE or ACH is active on your bank account. To establish this option, either complete the
appropriate sections when opening an account, or contact your financial
representative, or call us at (800) 551-8043 for further information.
To initiate an ACH purchase, call the Trust at (800)551-8043.

--------------------------------------------------------------------------------
EXCHANGING SHARES
--------------------------------------------------------------------------------

FOR THIS TYPE OF ACCOUNT REGULAR INVESTMENT PARTICIPANTS IN QUALIFIED RETIREMENT PLANS

This is the minimum exchange $250,000 Contact your plan administrator or sponsor
amount to open a new account

The price you will receive The Trust is generally open on days that the New York Stock Exchange is open.
All transactions received in good order before the market closes receive
that day's price.

The exchange must be to the Class Q Shares of another Fund
or the Money Market Fund and to an account with the same registration.
Things you should 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 Fund you are exchanging
from, make sure that you leave an amount equal to or greater than the
Fund's minimum account size (see the "Opening an Account" section)
To protect other investors, the Trust may limit the number of exchanges
you can make. Participants in qualified retirement plans may exchange through
the plan administrator or sponsor and only with
those Funds that are included in the plan.

Either contact your financial representative, or call the Trust at (800) 551-8043.
How to request an The Trust will accept a request by phone if this feature was previously
exchange by PHONE established on your account. See the
"Your Account" section for further information.

Please put your exchange request in writing, including: the name
How to request an on the account, the name of the fund and the account number
exchange by MAIL you are exchanging from, the shares or dollar amount you wish to
exchange, and the Fund you wish to exchange to. Mail this request to:
PO BOX 8326, BOSTON, MA 02266-8326.

<PAGE>

--------------------------------------------------------------------------------
SELLING OR REDEEMING SHARES
--------------------------------------------------------------------------------

IN WRITING BY PHONE

Selling shares by phone is a service
option which must be established on your
account prior to making a request. See the
"Your Account" section, or contact your
financial representative or call us
Certain requests may require a at (800) 551-8043 for further
SIGNATURE GUARANTEE. See that section information. The maximum amount which
below for further information. may be requested by phone, regardless
You may sell up to the full of account size, is $50,000.
account value. Amounts greater than that must be
Things you should know requested in writing. If you wish
to receive your monies by bank wire,
the minimum request is $5,000.

If you purchased shares through a financial representative,
or plan administrator/sponsor, you should call them regarding
the most efficient way to sell shares. If you bought shares
recently by check, 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, a plan administrator/sponsor
or us for further information.

The Trust is open on days that the New York Stock Exchange is open.
The price you will receive All transactions received in good order before the
market closes receives that day's price.

If you are a participant in Makes sales through your plan administrator or sponsor,
a qualified retirement plan who is responsible for transmitting orders.

Please put your request in writing,
including: the name of the account
owners, account number and the
Fund and share Class you are
redeeming from, the share or Either contact your financial
dollar amount you wish to sell, representative or call us
signed by all account owners. at (800) 551-8043.
Mail this request to: The proceeds will be sent to
If you want to receive NICHOLAS-APPLEGATE MUTUAL FUNDS, the existing bank wire
your monies by BANK WIRE PO BOX 8326, BOSTON, MA 02266-8326. address listed on the account.
The check will be sent to
the existing bank wire address
listed on the account.

Either contact your financial
representative or call us
If you want to receive at (800) 551-8043. The
your monies by ACH Please call us at (800) 551-8043. 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.

--------------------------------------------------------------------------------
SIGNATURE GUARANTEES
--------------------------------------------------------------------------------

A definition A signature guarantee is required of a financial institution to
verify the authenticity of an individual's signature.
It can usually be obtained from a broker, commercial or
savings bank, or credit union. When you need one.

A signature guarantee is needed when making a written request for the
following reasons:
1. When selling more than $50,000 worth of shares;
When you need one 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>

YOUR ACCOUNT

TRANSACTION POLICIES

PURCHASE OF SHARES. Class Q 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 is $10,000. The Distributor may waive these minimums from
time to time. Certain Funds also offer Class A, B, C and I Shares. You can
obtain more information about these other share Classes from Nicholas-Applegate
Securities at (800) 551-8643.

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

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

EXECUTION OF REQUESTS. Each Fund is open on the days the New York stock Exchange
is open, usually Monday-Friday. Buy and sell requests are executed at the NAV
next calculated after your request is received in good order by the transfer
agent or another agent designated by the Trust. Investments by participants of
qualified retirement plans are made through the plan sponsor or administrator.

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

In unusual circumstances, any Fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to 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 Fund 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 Fund 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).

<PAGE>

FEATURES AND ACCOUNT POLICIES

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

RETIREMENT PLANS. You may invest in each Fund 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 an applicable tax information statement, mailed
by January 31. Participants in qualified retirement plans will receive account
information from their plan sponsor or administrator.

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

Annually Quarterly Monthly
- --------------------------------------------------------------------------------
<S> <C> <C>
International Core Growth Balanced Growth High Yield Bond
Worldwide Growth Income & Growth Fully Discretionary
International Small Cap
Emerging Countries
Large Cap Growth
Core Growth
Value
Emerging Growth
Mini Cap
</TABLE>

Any net capital gains are distributed annually.

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

SHAREHOLDER SERVICES. The Investment Adviser may make payments from its own
resources to brokers, consultants, and financial institutions for performing
certain services for shareholders and for the maintenance of shareholder
accounts.

TAXABILITY OF DIVIDENDS. As long as a Fund meets the requirements for being a
tax-qualified regulated investment company, which each Fund 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 Fund whether reinvested or taken as
cash, are generally considered taxable. Dividends from a Fund's long-term
capital gains are taxable as capital gains; dividends from other sources are
generally taxable as ordinary income.

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

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

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

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

AUTOMATIC WITHDRAWALS. You may make automatic withdrawals from a Fund of $250 or
more on a monthly or quarterly basis if you have an account of $15,000 or more
in the Fund. 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 Class Q Shares of each Fund through automatic withdrawals of specified
amounts from your bank account once an automatic investment plan is established.
See the account application for further details about this service or call the
Transfer Agent at 1-800-551-8043.

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

<PAGE>

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

INVESTMENT ADVISER COMPENSATION
Each Fund pays the Investment Adviser a monthly fee pursuant to an investment
advisory agreement. The Emerging Countries and Mini Cap Funds each pays at the
annual rate of 1.25% of the Fund's net assets. The Worldwide Growth,
International Core Growth and International Small Cap Funds each pays at the
annual rate of 1.00% on the first $500 million of the Fund's net assets, .90% on
the next 500 million of the Fund's net assets, and .85% on net assets on the
Fund in excess of $1 billion. The Fully Discretionary Fund pays at the annual
rate of 0.45% of the first $500 million of the Fund's average net assets, 0.40%
of the next $250 million of net assets, and 0.35% of net assets in excess of
$750 million. The High Yield Bond Fund pays at the annual rate of 0.60% of the
Fund's net assets. The Large Cap Growth, Core Growth, Value, Mini Cap, Income &
Growth, and Balanced Growth Funds each pays 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, so that the
expenses for the Class Q Shares of the Funds will not exceed the following
expense ratios on an annual basis through March 31, 1998: Worldwide Growth Fund
1.60%, International Core Growth and International Small Cap Growth Funds -
1.65%, Emerging Countries Fund - 1.90%, Fully Discretionary and High Yield
Bond Funds - 0.95%; Income & Growth, Balanced Growth, Large Cap, Value and Core
Growth Funds - 1.25%; Emerging Growth Fund - 1.50% and Mini-Cap - 1.56%. Each
Fund 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 Fund are less than the percentage limitation set forth above for any such
year.

ADMINISTRATOR COMPENSATION
The Funds pay administrative fees for administrative personnel and services
(including certain legal and financial reporting services). Each Fund pays
Nicholas-Applegate Capital Management an annual fee of .10% of net assets. Each
Fund pays Investment Company Administration Corporation (ICAC) an annual fee at
an annual rate ranging from .05% to .01% of average net assets, with a minimum
of $40,000 per Fund.

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 Fund or that provide research services to the 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 investment objective is fundamental and may only be changed with
shareholder approval. The other fundamental limitations are described in the
Statement of Additional Information. All other changes may be made by the Board
of Trustees without shareholder approval.

DIVERSIFICATION
All the Funds are diversified.

PRIOR MASTER-FEEDER STRUCTURE

Prior to Febuary 27, 1998, the various Classes of each of the Funds were
separate Portfolios of the Trust, and invested all of their assets in
corresponding portfolios of Nicholas-Applegate Investment Trust (the "Master
Trust"). In this "master-feeder" structure, the Investment Adviser served as the
adviser to the Master Trust, and the Trust had no separate adviser. The
master-feeder structure was terminated, with the approval of the shareholders of
the Trust, in order to achieve certain economies for the Trust.

<PAGE>

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

PORTFOLIO TEAMS

EQUITY MANAGEMENT - INTERNATIONAL/GLOBAL

CATHERINE SOMHEGYI, PARTNER
Chief Investment Officer -- Global Equity Management Joined firm in 1987; prior
investment management experience with Professional Asset Securities, Inc. and
Pacific Century Advisers
M.B.A. and B.S. -- University of Southern California
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP GROWTH,
EMERGING COUNTRIES,AND EMERGING GROWTH

LARRY SPEIDELL, PARTNER, CFA
Director of Global/Systematic Portfolio Management and Research
Joined firm in 1994; 23 years prior investment management experience with
Batterymarch Financial Management and Putnam Management Company
M.B.A. -- Harvard University; B.E. -- Yale University
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP GROWTH,
EMERGING COUNTRIES, AND VALUE

JOHN J. KANE, PARTNER
Portfolio Manager -- U.S. Systematic
Joined firm in 1994; 25 years prior investment management/economics experience
with ARCO Investment Management Company and General Electric Company
M.A. and B.A. -- Columbia University; M.B.A. -- University of California, Los
Angeles
WORLDWIDE GROWTH, AND VALUE

PEDRO V. MARCAL, PARTNER
Portfolio Manager -- Emerging Countries
Joined firm in 1994; 5 years prior investment management experience with A.B.
Laffer, V.A. Canto & Associates, and A-Mark Precious Metals
B.A. -- University of California, San Diego
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP, AND
EMERGING COUNTRIES

LORETTA J. MORRIS, PARTNER
Portfolio Manager -- International
Joined firm in 1990; 10 years prior investment management experience with
Collins Associates
Attended California State University, Long Beach;
CFA Level II candidate
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, AND INTERNATIONAL SMALL CAP GROWTH

AARON HARRIS
Portfolio Manager -- Emerging Countries
Joined firm in 1995; 1 year prior investment management experience at Chemical
Bank
B.A. -- Princeton University
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP, AND
EMERGING COUNTRIES

ESWAR MENON
Portfolio Manager -- Emerging Countries
Joined firm in 1995; 5 years prior investment management 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
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP, AND
EMERGING COUNTRIES

ALEX MUROMCEW
Portfolio Manager -- International
Joined firm in 1996; 6 years prior investment management experience with
Jardine Fleming Securities (Japan); Emerging Markets Investors Corporation;
Teton Partners LP
M.B.A. -- Stanford University; B.A. -- Dartmouth College
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, AND INTERNATIONAL SMALL CAP GROWTH

ERNESTO RAMOS, Ph.D.
Portfolio Manager -- International
Joined firm in 1994; 14 years prior investment management and quantitative
research experience with Batterymarch Financial Management; Bolt Beranek &
Newman Inc.; and Harvard University
Ph.D. -- Harvard University; B.S. -- Massachusetts Institute of Technology
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP GROWTH, AND
EMERGING COUNTRIES

JOHN TRIBOLET
Investment Analyst
Joined firm in 1997; 5 years prior experience with Kemper Securities, Inc. and
PaineWebber
M.B.A. -- University of Chicago; B.A. -- Columbia University
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, AND INTERNATIONAL SMALL CAP

<PAGE>

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

JESSICA HILINSKI
Assistant Portfolio Manager
Joined firm in 1996; 3 years prior experience in Eaton Vance Management and
Union Capital Advisors
Attended University of Pennsylvania
EMERGING COUNTRIES

AYLIN UCKUNKAYA
Investment Analyst
Joined firm in 1997; 4 years investment management experience with Global
Securities
B.A. -- Instanbul University
EMERGING COUNTRIES

JON BORCHARDT
Assistant Portfolio Manager
Joined firm in 1994; 5 years prior investment management experience with Union
Bank
B.S. -- University of San Francisco
EMERGING COUNTRIES, LATIN AMERICAN FUND

JULIA SZE
Portfolio Manager
Joined firm in 1997; 8 years prior experience with Credit Lyonnais International
Asset Management
M.A. and B.A. -- Stanford University
PACIFIC RIM FUND

EQUITY MANAGEMENT - U.S.

JOHN C. MARSHALL, JR., PARTNER
Chief Investment Officer -- Institutional Equity Management
Joined firm in 1989; 8 years prior investment management experience with Pacific
Century Advisers; San Diego Trust & Savings Bank; Howard, Weill, Labouisse,
Fredrichs Inc.
M.B.A. and B.B.A. -- Southern Methodist University
CORE GROWTH, AND LARGE CAP GROWTH

CATHERINE SOMHEGYI, PARTNER
Chief Investment Officer -- Global Equity Management
Joined firm in 1987; prior investment management experience
with Professional Asset Securities, Inc. and Pacific Century Advisers
M.B.A. and B.S. -- University of Southern California
EMERGING GROWTH, MINI CAP, BALANCED GROWTH ,AND INCOME & GROWTH

THOMAS BLEAKLEY, PARTNER
Portfolio Manager
Joined firm in 1995; 3 years prior investment management experience with
Twentieth Century Investors and Dell Computer Corporation
M.B.A. -- University of Texas -- Boston University
EMERGING GROWTH AND MINI CAP

ANDREW B. GALLAGHER, PARTNER
Portfolio Manager
Joined firm in 1992; 7 years prior investment management experience with Pacific
Century Advisors and Sentinel Asset Management
M.B.A. -- San Diego State University; B.A. -- University of California, Irvine
CORE GROWTH AND LARGE CAP GROWTH

SANDRA DURN
Portfolio Manager
Joined firm in 1994; prior experience at Science Solutions, Inc. and San Diego
State University Economics Department (instructor)
M.A. -- San Diego State University; B.A. -- University of Maryland
INCOME & GROWTH AND GLOBAL GROWTH & INCOME

RONALD J. KRYSTYNIAK CFA
Portfolio Manager
Joined firm in 1996; 7 years prior investment management experience with Pilgrim
Baxter & Associates and Peterson Consulting & Company
B.S. -- Syracuse University
EMERGING GROWTH AND MINI CAP

MAREN LINDSTROM
Portfolio Manager
Joined firm in 1994; 5 years prior investment management experience with Societe
Generale; Banque D'Orsay; and Prudential Asset Management
M.B.A. -- University of California, Los Angeles;
B.A. -- University of Michigan
CORE GROWTH AND INCOME & GROWTH

JOHN C. MCCRAW
Portfolio Manager
Joined firm in 1992; prior investment management experience with Nations Bank
M.B.A. -- University of California, Irvine;
B.A. -- Flagler College
EMERGING GROWTH AND MINI CAP

<PAGE>

MARK STUCKELMAN
Portfolio Manager, U.S. Systematic
Joined firm in 1995; 5 years experience with Wells Fargo Bank Investment
Management Group; Fidelity Management Trust Co.; and BARRA
M.B.A. -- University of Pennsylvania/Wharton School;
B.A. -- University of California, Berkeley
VALUE

STAN ROGERS
Portfolio Manager
Joined firm in 1997; 7 years prior investment management experience with
Tennessee Consolidated Retirement System
B.A. -- The University of the South
INCOME & GROWTH

THOMAS J. SULLIVAN
Assistant Portfolio Manager
Joined firm in 1994; 2 years prior investment experience with Donaldson, Lufkin
& Jenrette Securities Corp.
B.S. -- Rochester Institute of Technology
CORE GROWTH

FIXED INCOME

FRED S. ROBERTSON, III, PARTNER
Chief Investment Officer -- Fixed Income
Joined firm in 1995; 22 years prior investment management experience with
Criterion Investment Management Company and DuPont Chemical Pension Fund
M.B.A. -- College of William and Mary;
B.S. -- Cornell University
BALANCED GROWTH AND FULLY DISCRETIONARY

JAMES E. KELLERMAN, PARTNER
Portfolio Manager
Joined firm in 1995; 20 years prior investment management experience with
Criterion Investment Management Company and Brown Brothers Harriman and
Equitable Life Insurance Co.
M.B.A. -- St. John's University;
B.B.A. -- Susquehanna University
BALANCED GROWTH AND FULLY DISCRETIONARY

MALCOM S. DAY, CFA
Portfolio Manager
Joined firm in 1995; 3 years prior investment management experience with Payden
& Rygel
M.B.A. -- University of California, Los Angeles;
B.S. -- Northern University
BALANCED GROWTH AND FULLY DISCRETIONARY

DOUGLAS FORSYTH, CFA
Portfolio Manager
Joined firm in 1994; 3 years prior investment management experience with AEGON
USA
B.B.A. -- University of Iowa
HIGH YIELD BOND

JAN FRIEDLI
Portfolio Manager
Joined firm in 1997; 7 years prior investment management experience with Stone
Capital Management, PIMCO, and the Vanguard Group, Inc.
M.B.A. -- University of Chicago, B.S. Villanova University
HIGH YIELD BOND

SUSAN MALONE
Portfolio Manager
Joined firm in 1996; 7 years prior investment management experience with BEA
Associates
M.B.A. -- New York University; B.S. -- Carnegie Mellon University
BALANCED GROWTH AND HIGH YIELD BOND

<PAGE>

RISK FACTORS AND SPECIAL CONSIDERATIONS

MUTUAL FUND CONSIDERATIONS IN
GENERAL
Prospective investors should know that any mutual fund investment is subject to
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
Funds as a long-term investment.

DERIVATIVE CONTRACTS AND
SECURITIES CONSIDERATIONS
The term "derivative" traditionally applies to certain contracts that "derive"
their value from changes in the value of underlying securities, currencies,
commodities or indices. Investors refer to certain types of securities that
incorporate the performance characteristics of these contracts as derivatives.
Derivatives are sophisticated instruments that typically involve a small
investment of cash relative to the magnitude of risks assumed. These include
swap agreements, options, futures, and convertible securities. The Funds seek to
use derivative contracts and securities to reduce volatility and increase total
performance. While the price reaction of certain derivatives to market changes
may differ from traditional investments such as stocks and bonds, derivatives do
not necessarily present greater market risks than traditional investments.
Derivatives are also subject to credit risks related to the counterparty's
ability to perform, and any deterioration in the counterparty's creditworthiness
could adversely affect the instrument. The Funds will only use derivatives in a
manner consistent with their investment objectives, policies and limitations.

GLOBAL INVESTING CONSIDERATIONS
CURRENCY FLUCTUATIONS. Because the assets of certain Funds 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: authoritarian governments; popular unrest associated with demands
for improved political, economic and social conditions;internal insurgencies and
terrorist activities; hostile relations with neighboring countries; and drug
trafficking. This instability might impair the financial conditions of issuers
or disrupt the financial markets in which the Funds invest.

Hong Kong transferred its sovereignty from Great Britain to the People's
Republic of China in 1997. China has espoused policies antagonistic to free
enterprise capitalism and democracy. There can be no assurance that China will
continue to protect property rights in Hong Kong after 1997, although China has
moved toward free enterprise, and has established stock exchanges of its own.

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.

<PAGE>

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 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 could result in the a Fund being unable to sell a
security in a falling market.

CUSTODIAL AND REGISTRATION PROCEDURES. Systems for the registration and transfer
of securities in foreign markets can be less developed than similar systems in
the United States. There may be no standardized process for registration of
securities or a central registration system to track share ownership. The
process for transferring shares may be cumbersome, costly, time-consuming and
uncertain. For example, the share registrar may require a shareholder to travel
to that country to present required documentation before buying or selling
securities. In some instances, there may be no requirements to maintain back-up
shareholder records. Failure by the share registrar to properly maintain
shareholder records, protect the same against fire or computer virus, or carry
adequate insurance against such occurrences, potentially could result in a loss
of a Fund's investment in those securities.

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.

LOWER RATED SECURITIES CONSIDERATIONS
The Balanced Growth, Income & Growth, Fully Discretionary & High Yield Bond
Funds each invest in debt and convertible securities below investment grade.
These securities usually offer higher yields than higher rated securities but
are also subject to more risk than higher rated securities.

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

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

The average percentages of assets invested by the Funds listed below in bonds of
each permissible rating, on a monthly dollar-weighted basis, were as follows for
the nine month period ended December 31, 1997: Income & Growth--AA-__%; A-__%;
BBB-__%; BB-__%; B-__%; CCC-__%; non-rated-__%; Balanced Growth--AA-__%; A-__%;
BBB-__%; BB-__%; B-__%; CCC-__%; non-rated-__%; Fully

<PAGE>

RISK FACTORS AND SPECIAL CONSIDERATIONS

Discrectionary--AA-__%; A-__%; BBB-__%; BB-__%; B-__%; CCC-__%; non-rated-__%;
and High Yield Bond--AA-__%; A-__%; BBB-__%; BB-__%; B-__%; CCC-__%;
non-rated-__%; A description of the rating categories is contained in this
prospectus.

THE FUNDS' INVESTMENTS
EQUITY SECURITIES. Equity securities include common stocks, convertible
securities and warrants. 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. 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. 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. 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.
Debt Securities with longer maturities tend to be more sensitive to interest
rate movements than those with shorter maturities.

Debt obligations that carry a rating of at least BAA from Moody's or BBB from
Standard and Poor's, or a 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. For a further
explanation of these ratings, see the Statement of Additional Information.

U.S. GOVERNMENT SECURITIES. U.S. Government securities are obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. Some U.S.
Government securities such as U.S. Treasury bills, notes, bonds, and
certificates issued by the Government National Mortgage Association (GNMA) are
supported by the full faith and credit of the United States. Other U.S.
Government securities, such as securities issued by the Federal National
Mortgage Association (FNMA) and the Federal Home Loan Bank Board, are supported
by the right of the issuer to borrow from the U.S. Treasury. Still others, such
as the Student Loan Marketing Association, are supported only by the credit of
the issuer. U.S. Government securities may include zero coupon securities that
are issued or purchased at a significant discount from face value.

ZERO COUPON SECURITIES. The Income & Growth and Balanced Growth Funds may invest
up to 35% of their net assets in zero coupon securities issued or guaranteed by
the U.S. Government and its agencies and instrumentalities. These securities are
sold at a substantial discount from face value and redeemed at face value at
their maturity date without interim payments of principal and interest. They may
be subject to greater volatility than other securities. In addition, because
income is accrued on a current basis, a Fund may have to sell other portfolio
securities to make necessary income distributions.

MORTGAGE-RELATED SECURITIES. Collateralized Mortgage Obligations(CMOs) are debt
obligations collateralized by a pool of or mortgage passes-through securities.
Typically CMOs are collateralized by certificates issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, such as GNMA. GNMA
certificates are mortgaged-backed securities representing part ownership of a
pool of mortgage loans, which are issued by lenders such as mortgage bankers,
commercial banks, and savings associations, and are either insured by the
Federal Housing Administration or the Veterans Administration.

ASSET BACKED SECURITIES. The non-mortgage-related asset-backed securities in
which the Funds invest include, but are not limited to, interests in pools of
receivables, such as credit card and accounts receivables and motor vehicle and
other installment purchase obligations and leases. Interests in these pools are
not backed by the U.S. Government and may or may not be secured.

The credit characteristic of asset-backed securities differs in a number of
respects from that of traditional debt securities. Asset-backed securities
generally do not have

<PAGE>

the benefit of a security interest in collateral that is comparable to other
debt obligations, and there is a possibility that recoveries on repossessed
collateral may not be available to support payment on these securities

SOVEREIGN DEBT SECURITIES. Certain Funds may invest in sovereign debt securities
issued by governments of foreign countries. The sovereign debt in which the
Funds may invest may be rated below investment grade. These securities usually
offer higher yields than higher rated securities but are also subject to
greater risk than higher rated securities.

BRADY BONDS. Brady bonds represent a type of sovereign debt. These obligations
were created under a debt restructuring plan introduced by former U.S. Secretary
of the Treasury, Nicholas F. Brady, in which foreign entities issued these
obligations in exchange for their existing commercial bank loans. Brady Bonds
have been issued by Argentina, Brazil, Costa Rica, Dominican Republic, Mexico,
Philippines, Uruguay and Venezuela, and may be issued by other emerging
countries.

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, 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, that is,
the purchase by the Fund of 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.

SECURITIES SWAPS. Securities swaps represent a technique primarily used to
indirectly participate in the securities market of a country from which a Fund
would otherwise be precluded for lack of an established securities custody and
safekeeping system. The Fund deposits an amount of cash with its custodian (or
the broker, if legally permitted) in an amount equal to the selling price of the
underlying security. Thereafter, the Fund pays or receives cash from the broker
equal to the change in the value of the underlying security.

SHORT SALES. 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

<PAGE>

RISK FACTORS AND SPECIAL CONSIDERATIONS

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. Each Fund investing in Foreign Securities 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 such 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. Each Fund 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. Each Fund 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 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.

NON-HEDGING STRATEGIC TRANSACTIONS. Each Fund's options, futures and swap
transactions will generally be entered into for hedging purposes - to protect
against possible changes in the market values of securities held in or to be
purchased for the Fund's portfolio resulting from securities markets, currency,
or interest rate fluctuations, to protect the Fund's unrealized gains in the
values of its portfolio securities, to facilitate the sale of such securities
for investment purposes, to manage the effective maturity or duration of the
Fund's portfolio, or to establish a position in the derivatives markets as a
temporary substitute for purchase or sale of particular securities. However, in
addition to the hedging transactions referred to above, the Fully Discretionary
Fund may enter into options, futures and swap transactions to enhance potential
gain in circumstances where hedging is not involved. The Fund's net loss
exposure resulting from transactions entered into for such purposes will not
exceed 5% of the Fund's net assets at any one time and, to the extent necessary,
the Fund will close out transactions in order to comply with this limitation.
Such transactions are subject to the limitations described above under "Options"
and "Futures and Options on Futures."

<PAGE>

CORPORATE BOND RATINGS

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS

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

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

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

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

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

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

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

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

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

DESCRIPTION OF S&P'S CORPORATE BOND RATINGS

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

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

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

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

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

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

<PAGE>

RISK FACTORS AND SPECIAL CONSIDERATIONS

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

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

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

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

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

<PAGE>

NICHOLAS-APPLEGATE MUTUAL FUNDS

FORM N-1A

PART B: STATEMENT OF ADDITIONAL INFORMATION

The Statement of Additional Information of Nicholas-Applegate Mutual Funds
Class Q Shares filed on December 29, 1997 with the Securities and Exchange
Commission as part of Post-Effective Amendment No. 50 to Registrant's Form N-1A
Registration Statement is incorporated herein by reference.

<PAGE>

NICHOLAS-APPLEGATE MUTUAL FUNDS

FORM N-1A

PART C: OTHER INFORMATION

Item 24. FINANCIAL STATEMENTS AND EXHIBITS.

a. Financial Statements

The Schedules of Investments as of March 31, 1997, Statements of
Assets and Liabilities as of March 31, 1997, Statements of Changes in
Net Assets for the period ended March 31, 1997, and related Notes and
Report of Independent Auditors with respect to Registrant's Qualified
Portfolios, the predecessors to the Class Q shares of Registrant's
corresponding Funds which are the subject of this Amendment to
Registration Statement, are incorporated by reference in Part B.

The Schedules of Investments as of September 30, 1997, Statements of
Assets and Liabilities as of September 30, 1997, and related Notes
with respect to Registrant's Qualified Portfolios, the predecessors
to the Class Q shares of Registrant's corresponding Funds which are
the subject of this Amendment to Registration Statement, are
incorporated by reference in Part B.

b. Exhibits:

(1.1) Certificate of Trust of Registrant (f).

(1.2) Certificate of Amendment to Certificate of Trust of
Registrant (f).

(1.3) Amended and Restated Declaration of Trust of Registrant (f).

(1.4) Certificate of Trustees dated August 6, 1993, establishing
Emerging Growth Portfolio series (f).

(1.5) Certificate of Trustees dated December 15, 1993,
establishing International Growth Portfolio series (f).

(1.6) Amendment No. 2 to Amended and Restated Declaration of Trust
(f).

(1.7) Amendment No. 3 to Amended and Restated Declaration of Trust
(f).

(1.8) Amendment No. 4 to Amended and Restated Declaration of Trust
(f).

(1.9) Amendment No. 5 to Amended and Restated Declaration of Trust
(f).

(1.10) Amendment No. 6 to Amended and Restated Declaration of Trust
(f).

(1.11) Amendment No. 7 to Amended and Restated Declaration of Trust
(f).

(1.12) Form of Amendment No. 8 to Amended and Restated Declaration
of Trust (f).

(1.13) Amendment No. 9 to Amended and Restated Declaration of Trust
(f).

(1.14) Form of Amendment No. 10 to Amended and Restated Declaration
of Trust (b).

(1.15) Amendment No. 11 to Amended and Restated Declaration of
Trust (i).

C-1
<PAGE>

(1.16) Form of Amendment No. 12 to Amended and Restated Declaration
of Trust (i).

(1.17) Amendment No. 13 to Amended and Restated Declaration of
Trust (j).

(1.18) Form of Amendment No. 14 to Amended and Restated Declaration
of Trust (j).

(1.19) Form of Amendment No. 15 to Amended and Restated Declaration
of Trust (m).

(1.20) Form of Amendment No. 16 to Amended and Restated Declaration
of Trust (r).

(1.21) Form of Amendment No. 17 to Amended and Restated Declaration
of Trust (r).

(1.22) Form of Amendment No. 18 to Amended and Restated Declaration
of Trust (r).

(2.1) Amended Bylaws of Registrant (f).

(2.2) Amendment to Section 2.5 of Bylaws of Registrant (f).

(3) None.

(4) None.

(5.1) Form of Investment Advisory Agreement between Registrant and
Nicholas-Applegate Capital Management, with respect to
Global Blue Chip Fund, Emerging Markets Bond Fund, Pacific
Rim Fund, Greater China Fund and Latin America Fund (n).

(5.2) Form of Sub-Advisory Agreement between Registrant and
Nicholas-Applegate Capital Management-Hong Kong, with
respect to the Pacific Rim Fund and Greater China Fund (n).

(5.3) Form of Sub-Advisory Agreement between Registrant and
Nicholas-Applegate Capital Management-Asia, with respect to
the Pacific Rim Fund and Greater China Fund (n).

(5.4) Amended form of letter agreement between Registrant and
Nicholas-Applegate Capital Management adding the Class A, B,
C, Q and I shares of Registrant's additional Funds to the
Investment Advisory Agreement (s).

(6.1) Distribution Agreement between Registrant and
Nicholas-Applegate Securities dated as of April 19, 1993
(f).

(6.2) Letter agreement between Registrant and Nicholas-Applegate
Securities dated May 17, 1993, adding certain Institutional
(formerly Qualified) Portfolio series and Emerging Growth
Portfolio series to Distribution Agreement (f).

(6.3) Letter agreement between Registrant and Nicholas-Applegate
Securities dated December 15, 1993, adding International
Growth Portfolio series to Distribution Agreement (f).

(6.4) Letter agreement between Registrant and Nicholas-Applegate
Securities dated April 22, 1994, adding Qualified Portfolio
series to Distribution Agreement (f).

(6.5) Letter agreement between Registrant and Nicholas-Applegate
Securities, adding Emerging Countries Growth Portfolio
series, Global Growth & Income Portfolio series and Mini-Cap
Growth Portfolio series to Distribution Agreement (f).

(6.6) Letter agreement between Registrant and Nicholas-Applegate
Securities, adding Series B Portfolios to Distribution
Agreement (f).

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<PAGE>

(6.7) Letter agreement between Registrant and Nicholas-Applegate
Securities, adding Fixed Income and Qualified Portfolio
series to Distribution Agreement (f).

(6.8) Form of letter agreement between Registrant and
Nicholas-Applegate Securities, adding Value Institutional
Portfolio series to Distribution Agreement (a).

(6.9) Form of letter agreement between Registrant and
Nicholas-Applegate Securities, adding High Yield Bond and
Strategic Income Institutional Portfolio series to
Distribution Agreement (b).

(6.10) Form of letter agreement between Registrant and
Nicholas-Applegate Securities adding Large Cap Growth and
Core Growth International Portfolio series to Distribution
Agreement (i).

(6.11) Form of letter agreement between Registrant and
Nicholas-Applegate Securities adding Core Growth
International Portfolio C series to Distribution Agreement
(i).

(6.12) Form of letter agreement between Registrant and
Nicholas-Applegate Securities adding Large Cap Growth
Portfolio A, B, C and Q series to Distribution Agreement
(j).

(6.13) Form of letter agreement between Registrant and
Nicholas-Applegate Securities, adding Global Blue Chip Fund,
Emerging Markets Bond Fund, Pacific Rim Fund, Greater China
Fund and Latin America Fund to Distribution Agreement (n).

(6.14) Amended form of letter agreement between Registrant and
Nicholas-Applegate Securities adding the Class A, B, C, Q
and I shares of Registrant's additional Funds to the
Distribution Agreement (s).

(7) None.

(8.1) Custodian Services Agreement between Registrant and PNC Bank
dated as of April 1, 1993 (f).

(8.2) Letter agreement between Registrant and PNC Bank dated July
19, 1993, adding certain Institutional (formerly Qualified)
Portfolio series to Custodian Services Agreement (f).

(8.3) Letter agreement between Registrant and PNC Bank dated
August 20, 1993, adding Emerging Growth Portfolio series to
Custodian Services Agreement (f).

(8.4) Letter agreement between Registrant and PNC Bank dated
December 15, 1993, adding International Growth Portfolio
series to Custodian Services Agreement (f).

(8.5) Letter agreement between Registrant and PNC Bank dated April
22, 1994, adding Core Growth Qualified Portfolio series to
Custodian Services Agreement (f).

(8.6) Letter agreement between Registrant and PNC Bank, adding
Emerging Countries Growth Portfolio series, Global Growth &
Income Portfolio series and Mini-Cap Growth Portfolio series
to Custodian Services Agreement (f).

(8.7) Letter agreement between Registrant and PNC Bank, adding
Series B Portfolios to Custodian Services Agreement (f).

(8.8) Letter agreement between Registrant and PNC Bank, adding
Fixed Income Portfolio series to Custodian Services
Agreement (f).

(8.9) Form of letter agreement between Registrant and PNC Bank
adding Value Institutional Portfolio series to Custodian
Services Agreement (a).

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<PAGE>

(8.10) Form of letter agreement between Registrant and PNC Bank
adding High Yield Bond and Strategic Income Institutional
Portfolio series to Custodian Services Agreement (b).

(8.11) Form of letter agreement between Registrant and PNC Bank
adding Large Cap Growth and Core Growth International
Portfolio series to Custodian Services Agreement (i).

(8.12) Form of letter agreement between Registrant and PNC Bank
adding Core Growth International Portfolio C series to
Custodian Services Agreement (i).

(8.13) Form of letter agreement between Registrant and PNC Bank
adding Large Cap Growth Portfolio A, B, C and Q series to
Custodian Services Agreement (j).

(8.14) Form of letter agreement between Registrant and PNC Bank,
adding Global Blue Chip Fund and Emerging Markets Bond Fund
to Custodian Services Agreement (l).

(8.15) Form of letter agreement between Registrant and PNC Bank
with respect to custodian services fees related to the
Global Blue Chip Fund and the Emerging Markets Bond Fund
(m).

(8.16) Form of letter agreement between Registrant and PNC Bank,
adding Pacific Rim Fund, Greater China Fund and Latin
America Fund to Custodian Services Agreement (n).

(8.17) Form of letter agreement between Registrant and PNC Bank,
adding the Class A, B, C, Q and I shares of Registrant's
additional Funds to Custodian Services Agreement (o).

(8.18) Form of Sub-Custodian Agreement among Registrant, PNC Bank
and Chase Manhattan Bank, with respect to Global Blue Chip
Fund, Emerging Markets Bond Fund, Greater China Fund,
Pacific Rim Fund and Latin America Fund (o).

(8.19) Amended form of letter agreement among Registrant, PNC Bank
and Chase Manhattan Bank, adding the Class A, B, C, Q and I
shares of Registrant's additional Funds to Sub-Custodian
Agreement (s).

(9.1) Form of amended Administration Agreement between Registrant
and Investment Company Administration Corporation (o).

(9.2) Administrative Services Agreement between Registrant and
Nicholas-Applegate Capital Management dated as of November
18, 1996 (i).

(9.3) Transfer Agency and Service Agreement between Registrant and
State Street Bank and Trust Company dated as of April 1,
1993 (f).

(9.4) Letter agreement between Registrant and State Street Bank
and Trust Company dated July 19, 1993, adding certain
Institutional (formerly Qualified) Portfolio series to
Transfer Agency and Service Agreement (f).

(9.5) Letter agreement between Registrant and State Street Bank
and Trust Company dated August 20, 1993, adding Emerging
Growth Portfolio Series to Transfer Agency and Service
Agreement (f).

(9.6) Letter agreement between Registrant and State Street Bank
and Trust Company dated December 15, 1993, adding
International Growth Portfolio series to Transfer Agency and
Service Agreement (f).

(9.7) Letter agreement between Registrant and State Street Bank
and Trust Company dated April 22, 1994, adding Core Growth
Qualified Portfolio series to Transfer Agency and Service
Agreement (f).

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<PAGE>

(9.8) Letter agreement between Registrant and State Street Bank
and Trust Company, adding Emerging Countries Growth
Portfolio series, Global Growth & Income Portfolio series
and Mini-Cap Growth Portfolio series to Transfer Agency and
Service Agreement (f).

(9.9) Letter agreement between Registrant and State Street Bank
and Trust Company, adding Series B Portfolios to Transfer
Agency and Service Agreement (f).

(9.10) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Fixed Income Portfolio series
to Transfer Agency and Service Agreement (f).

(9.11) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Value Institutional Portfolio
series to Transfer Agency and Service Agreement (a).

(9.12) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding High Yield Bond and Strategic
Income Institutional Portfolio series to Transfer Agency and
Service Agreement (b).

(9.13) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Large Cap Growth and Core
Growth International Portfolio series to Transfer Agency and
Service Agreement (i).

(9.14) Form of letter agreement between Registrant and State Street
Bank and Trust Company adding Core Growth International
Portfolio C series to Transfer Agency and Service Agreement
(i).

(9.15) Form of letter agreement between Registrant and State Street
Bank and Trust Company adding Large Cap Growth Portfolio A,
B, C and Q series to Transfer Agency and Service Agreement
(j).

(9.16) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Global Blue Chip Fund and
Emerging Markets Bond Fund to Transfer Agency and Service
Agreement (l).

(9.17) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Pacific Rim Fund, Greater
China Fund and Latin America Fund to Transfer Agency and
Service Agreement (n).

(9.18) Amended form of letter agreement between Registrant and
State Street Bank and Trust Company, adding the Class A, B,
C, Q and I shares of Registrant's additional Funds to
Transfer Agency and Service Agreement (s).

(9.19) Form of amended Shareholder Service Plan between Registrant
and Nicholas-Applegate Securities (o).

(9.20) License Agreement dated as of December 17, 1992, between
Registrant and Nicholas-Applegate Capital Management (f).

(9.21) Accounting Services Agreement between Registrant and PFPC
Inc. dated as of April 1, 1993 (f).

(9.22) Letter agreement between Registrant and PFPC Inc. dated July
19, 1993, adding certain Institutional (formerly Qualified)
Portfolio series to Accounting Services Agreement (f).

(9.23) Letter agreement between Registrant and PFPC Inc. dated
August 20, 1993, adding Emerging Growth Portfolio series to
Accounting Services Agreement (f).

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<PAGE>

(9.24) Letter agreement between Registrant and PFPC Inc. dated
December 15, 1993, adding International Growth Portfolio
series to Accounting Services Agreement (f).

(9.25) Letter agreement between Registrant and PFPC Inc. dated
April 22, 1994, adding Core Growth Qualified Portfolio
series to Accounting Services Agreement (f).

(9.26) Letter agreement between Registrant and PFPC Inc., adding
Emerging Countries Growth Portfolio series, Global Growth &
Income Portfolio series and Mini-Cap Growth Portfolio series
to Accounting Services Agreement (f).

(9.27) Letter agreement between Registrant and PFPC Inc., adding
Series B Portfolios to Accounting Services Agreement (f).

(9.28) Letter agreement between Registrant and PFPC Inc., adding
Fixed Income Portfolio series to Accounting Services
Agreement (f).

(9.29) Form of letter agreement between Registrant and PFPC Inc.
adding Value Institutional Portfolio series to Accounting
Services Agreement (a).

(9.30) Form of letter agreement between Registrant and PFPC Inc.
adding High Yield Bond and Strategic Income Institutional
Portfolio series to Accounting Services Agreement (b).

(9.31) Form of letter agreement between Registrant and PFPC Inc.
adding Large Cap Growth and Core Growth International
Portfolio series to Accounting Services Agreement (i).

(9.32) Form of letter agreement between Registrant and PFPC Inc.
adding Core Growth International Portfolio C series to
Accounting Services Agreement (i).

(9.33) Form of letter agreement between Registrant and PFPC Inc.
adding Large Cap Growth Portfolio A, B, C and Q series to
Accounting Services Agreement (j).

(9.34) Form of letter agreement between Registrant and PFPC Inc.,
adding Global Blue Chip Fund and Emerging Markets Bond Fund
to Accounting Services Agreement (l).

(9.35) Form of letter agreement between Registrant and PFPC Inc.
with respect to accounting services fees related to the
Global Blue Chip Fund and the Emerging Markets Bond Fund
(m).

(9.36) Form of letter agreement between Registrant and PFPC Inc.
adding the Pacific Rim Fund, Greater China Fund and Latin
America Fund (n).

(9.37) Form of letter agreement between Registrant and PFPC Inc.
regarding fees for additional Funds under Accounting
Services Agreement (o).

(9.38) Amended form of letter agreement between Registrant and PFPC
Inc., adding the Class A, B, C, Q and I shares of
Registrant's additional Funds to Accounting Service
Agreement (s).

(9.39) Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated September 27, 1993 regarding
expense reimbursements (f).

(9.40) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding Global Blue
Chip Fund, Emerging Markets Bond Fund, Pacific Rim Fund,
Greater China Fund and Latin America Fund to agreement
regarding expense reimbursement (n).

(9.41) Amended form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding the Class A,
B, C, Q and I shares of Registrant's additional Funds to
agreement regarding expense reimbursement (s).

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<PAGE>

(9.42) Credit Agreement among Registrant, Chemical Bank and certain
other banks dated April 10, 1996 (f).

(9.43) First Amendment Agreement to Credit Agreement dated as of
April 9, 1997 among Registrant, The Chase Manhattan Bank,
and certain other banks (l).

(9.44) Form of Second Amendment Agreement to Credit Agreement among
Registrant, The Chase Manhattan Bank, and certain other
banks (n).

(10) Opinion of Counsel (c).

(11) Consent of independent auditors.

(12) Not Applicable.

(13) Investment Letter of initial investor in Registrant dated
April 1, 1993 (f).

(14.1) IRA Plan Materials (d).

(14.2) 401(k) Profit-Sharing Plan Materials (d).

(15.1) Amended Distribution Plan of Registrant (f)

(15.2) Form of further Amendment to Distribution Plan of Registrant
(o).

(16) Schedule of Computation of Performance Quotations (c).

(17.1) Financial Data Schedule as of March 31, 1997 (p).

(17.2) Financial Data Schedule as of September 30, 1997 (q).

(18) Not Applicable.

(19.1) Limited Powers of Attorney of Trustees (d).

(19.2) Limited Power of Attorney of Walter E. Auch (e).

(19.3) Limited Power of Attorney of John D. Wylie (h).

(19.4) Certified Resolution of Board of Trustees of Registrant
regarding Limited Power of Attorney of John D. Wylie (h).

(19.5) Limited Power of Attorney of Thomas Pindelski (k).

(19.6) Certified Resolution of Board of Trustees regarding Limited
Power of Attorney of Thomas Pindelski (k).

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

(a) Filed as an Exhibit to Amendment No. 28 to Registrant's Form N-1A
Registration Statement on January 19, 1996 and incorporated herein by
reference.

(b) Filed as an Exhibit to Amendment No. 29 to Registrant's Form N-1A
Registration Statement on May 3, 1996 and incorporated herein by reference.

(c) Filed as an Exhibit to Amendment No. 1 to Registrant's Form N-1A
Registration Statement on March 15, 1993 and incorporated herein by
reference.

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<PAGE>

(d) Filed as an Exhibit to Amendment No. 12 to Registrant's Form N-1A
Registration Statement on August 1, 1994 and incorporated herein by
reference.

(e) Filed as an Exhibit to Amendment No. 14 to Registrant's Form N-1A
Registration Statement on September 26, 1994 and incorporated herein by
reference.

(f) Filed as an Exhibit to Amendment No. 32 to Registrant's Form N-1A
Registration Statement on June 3, 1996 and incorporated herein by
reference.

(g) Filed as an Exhibit to Amendment No. 37 to Registrant's Form N-1A
Registration Statement on October 15, 1996 and incorporated herein by
reference.

(h) Filed as an Exhibit to Amendment No. 38 to Registrant's Form N-1A
Registration Statement on October 25, 1996 and incorporated herein by
reference.

(i) Filed as an Exhibit to Amendment No. 40 to Registrant's Form N-1A
Registration Statement on January 3, 1997 and incorporated herein by
reference.

(j) Filed as an Exhibit to Amendment No. 42 to Registrant's Form N-1A
Registration Statement on May 1, 1997 and incorporated herein by reference.

(k) Filed as an Exhibit to Amendment No. 44 to Registrant's Form N-1A
Registration Statement on May 22, 1997 and incorporated herein by
reference.

(l) Filed as an Exhibit to Amendment No. 45 to Registrant's Form N-1A
Registration Statement on July 14, 1997 and incorporated herein by
reference.

(m) Filed as an Exhibit to Amendment No. 47 to Registrant's Form N-1A
Registration Statement on July 28, 1997 and incorporated herein by
reference.

(n) Filed as an Exhibit to Amendment No. 49 to Registrant's Form N-1A
Registration Statement on September 2, 1997 and incorporated herein by
reference.

(o) Filed as an Exhibit to Registrant's Form N-14 Registration Statement on
December 5, 1997 and incorporated herein by reference.

(p) Filed as an Exhibit to Registrant's Form N-SAR on June 9, 1997 and
incorporated herein by reference.

(q) Filed as an Exhibit to Registrant's Form N-SAR on December 12, 1997 and
incorporated herein by reference.

(r) Filed as an Exhibit to Amendment No. 50 to Registrant's Form N-1A
Registration Statement on December 15, 1997 and incorporated herein by
reference.

(s) Filed as an Exhibit to Amendment No. 52 to Registrant's Form N-1A
Registration Statement on December 29, 1997 and incorporated herein by
reference.

Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

None.

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<PAGE>

Item 26. NUMBER OF HOLDERS OF SECURITIES.

As of November 30, 1997, the number of record holders of each series
of Registrant was as follows:

Title of Series Number of Record Holders
--------------- ------------------------
<S> <C>
Large Cap Growth Portfolio A 58
Core Growth Portfolio A 6,438
Emerging Growth Portfolio A 10,733
Income & Growth Portfolio A 2,496
Balanced Growth Portfolio A 930
Government Income Portfolio A 492
Money Market Portfolio 853
International Core Growth Portfolio A 315
Worldwide Growth Portfolio A 2,044
International Small Cap Growth Portfolio A 799
Emerging Countries Portfolio A 4,598
Large Cap Growth Portfolio B 116
Core Growth Portfolio B 3,351
Emerging Growth Portfolio B 4,273
Income & Growth Portfolio B 1,521
Balanced Growth Portfolio B 347
Government Income Portfolio B 240
International Core Growth Portfolio B 465
Worldwide Growth Portfolio B 810
International Small Cap Growth Portfolio B 688
Emerging Countries Portfolio B 3,713
Large Cap Growth Portfolio C 31
Core Growth Portfolio C 12,653
Emerging Growth Portfolio C 16,227
Income & Growth Portfolio C 5,208
Balanced Growth Portfolio C 1,278
Government Income Portfolio C 475
International Core Growth Portfolio C 186
Worldwide Growth Portfolio C 5,531
International Small Cap Growth Portfolio C 866
Emerging Countries Portfolio C 3,069
Large Cap Growth Institutional Portfolio 39
Core Growth Institutional Portfolio 183
Emerging Growth Institutional Portfolio 185
Income & Growth Institutional Portfolio 121
Balanced Growth Institutional Portfolio 28
International Core Growth Institutional Portfolio 71
Worldwide Growth Institutional Portfolio 79
International Small Cap Growth Institutional Portfolio 81
Emerging Countries Institutional Portfolio 204
Mini Cap Growth Institutional Portfolio 317
Fully Discretionary Institutional Fixed Income Portfolio 13
Short-Intermediate Institutional Fixed Income Portfolio 15
Value Institutional Portfolio 49
High Yield Bond Institutional Portfolio 25
Strategic Income Institutional Portfolio 20
Global Growth & Income Institutional Portfolio 50
Large Cap Growth Qualified Portfolio 12
Core Growth Qualified Portfolio 193
Emerging Growth Qualified Portfolio 75
</TABLE>

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<PAGE>

<TABLE>
<S> <C>
Income & Growth Qualified Portfolio 10
Balanced Growth Qualified Portfolio 9
Government Income Qualified Portfolio 9
International Core Growth Qualified Portfolio 25
Worldwide Growth Qualified Portfolio 9
International Small Cap Growth Qualified Portfolio 12
Emerging Countries Qualified Portfolio 1,678
Emerging Markets Bond Institutional Portfolio 16
Global Blue Chip Fund 80
</TABLE>

Item 27. INDEMNIFICATION.

Registrant's trustees, officers, employees and agents against
liabilities incurred by them in connection with the defense or disposition of
any action or proceeding in which they may be involved or with which they may be
threatened, while in office or thereafter, by reason of being or having been in
such office, except with respect to matters as to which it has been determined
that they acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of their office
("Disabling Conduct").

Section 8 of Registrant's Administration Agreement, filed herewith as
Exhibit 9.1, provides for the indemnification of Registrant's Administrator
against all liabilities incurred by it in performing its obligations under the
Agreement, except with respect to matters involving its Disabling Conduct.
Section 9 of Registrant's Distribution Agreement, filed herewith as Exhibit 6,
provides for the indemnification of Registrant's Distributor against all
liabilities incurred by it in performing its obligations under the Agreement,
except with respect to matters involving its Disabling Conduct. Section 4 of
the Shareholder Service Agreement, filed herewith as Exhibit 9.3, provides for
the indemnification of Registrant's Distributor against all liabilities incurred
by it in performing its obligations under the Agreement, except with respect to
matters involving its Disabling Conduct.

Registrant has obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and omissions.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

Nicholas-Applegate Capital Management, the investment adviser to the
Master Trust, is a California limited partnership, the general partner of which
is Nicholas-Applegate Capital Management, Inc. (the "General Partner"). During
the two fiscal years ended December 31, 1996, Nicholas-Applegate Capital
Management has engaged principally in the business of providing investment
services to institutional and other clients. All of the additional information
required by this Item 28 with respect to the Investment Adviser is set forth in
the Form ADV, as amended, of Nicholas-Applegate Capital Management (File No.
801-21442), which is incorporated herein by reference.

Item 29. PRINCIPAL UNDERWRITERS.

(a) Nicholas-Applegate Securities does not act as a principal
underwriter, depositor or investment adviser to any investment company other
than Registrant.

(b) Nicholas-Applegate Securities, the Distributor of the shares of
Registrant's Portfolios, is a California limited partnership and its general
partner is Nicholas-Applegate Capital Management Holdings, L.P. (the "General

C-10
<PAGE>

Partner"). Information is furnished below with respect to the officers,
partners and directors of the General Partner and Nicholas-Applegate
Securities. The principal business address of such persons is 600 West
Broadway, 30th Floor, San Diego, California 92101, except as otherwise indicated
below.

Positions and Positions and
Name and Principal Offices with Principal Offices with
Business Address Underwriter Registrant
- --------------------- ---------------------- -------------

Arthur E. Nicholas Chairman None

John D. Wylie President President

Peter J. Johnson Vice President Vice President

Thomas Pindelski Chief Financial Officer Chief Financial
Officer

E. Blake Moore, Jr. Secretary Secretary

Todd Spillane Director of Compliance None

Item 30. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder will be maintained either at the offices of the Registrant (600 West
Broadway, 30th Floor, San Diego, California 92101); the Investment Adviser to
the Trust and Master Trust, Nicholas-Applegate Capital Management (600 West
Broadway, 30th Floor, San Diego, California 92101); the primary administrator
for the Trust and Master Trust, Investment Company Administration Corporation
(4455 East Camelback Road, Suite 261-E, Phoenix, Arizona 85018); the Custodian,
PNC Bank (Airport Business Center, International Court 2, 200 Stevens Drive,
Lester, Pennsylvania 19113); or the Transfer and Dividend Disbursing Agent,
State Street Bank & Trust Company (2 Heritage Drive, 7th Floor, North Quincy,
Massachusetts 02171).

Item 31. MANAGEMENT SERVICES.

Not Applicable.

Item 32. UNDERTAKINGS.

Registrant undertakes to file a Post-Effective amendment containing
reasonably current financial statements with respect to its Global Technology
Fund, which need not be certified, within four to six months from the effective
date of this Amendment.

Registrant hereby undertakes that if it is requested by the holders of
at least 10% of its outstanding shares to call a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee, it will do so and
will assist in communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.

Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders, upon request and without charge.

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<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California, on the 17th day
of February 1998.

NICHOLAS-APPLEGATE MUTUAL FUNDS

By John D. Wylie*
-------------------------
John D. Wylie
President

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

John D. Wylie*
---------------------------- Principal Executive February 17, 1998
John D. Wylie Officer

Thomas Pindelski* Principal Financial and
---------------------------- Accounting Officer February 17, 1998
Thomas Pindelski

Fred C. Applegate*
---------------------------- Trustee February 17, 1998
Fred C. Applegate

Arthur B. Laffer*
---------------------------- Trustee February 17, 1998
Arthur B. Laffer

Charles E. Young*
---------------------------- Trustee February 17, 1998
Charles E. Young

* s/E. Blake Moore, Jr.
----------------------------
By: E. Blake Moore, Jr.
Attorney In Fact

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<PAGE>

EXHIBIT INDEX

NICHOLAS-APPLEGATE MUTUAL FUNDS
AMENDMENT NO. 55 TO
FORM N-1A REGISTRATION STATEMENT
FILE NO. 811-7428

Exhibit No. Title of Exhibit
- ----------- ----------------

(11) Consent of Independent Auditors.

C-13

<PAGE>

Exhibit 11

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Financial
Highlights", "Custodian, Transfer and Dividend Disbursing Agent, Independent
Auditors and Legal Counsel" and "Financial Statements" and to the use of our
report dated May 13, 1997 by reference therein, in Post-Effective Amendment No.
50 under the Securities Act of 1933 and Amendment No. 52 under the Investment
Company Act of 1940 to the Registration Statement (Form N-1A, No. 33-56094) and
in the related Prospectus and the Statement of Additional Information of
Nicholas-Applegate Mutual Funds which is incorporated by reference in
Post-Effective Amendment No. 53 under the Securities Act of 1933 and Amendment
No. 55 under the Investment Company Act of 1940 to the Registrant Statement
(Form N-1A, No. 33-56094) and related Prospectus and Statement of Additional
Information of Nicholas-Applegate Mutual Funds.

Los Angeles, California
February 19, 1998