<PAGE>
NICHOLAS-APPLEGATE-Registered Trademark-
MUTUAL FUNDS SEMI-ANNUAL REPORT
[PHOTO]
ADVISORY SHARES
SEPTEMBER 30, 1998
<PAGE>
LETTER TO SHAREHOLDERS
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DEAR FELLOW SHAREHOLDERS,
The past six months have been among the most eventful in market history.
Investors witnessed global equity markets soar to new highs before declining
amid fears of spreading economic woes from many of the world's emerging
countries. Demand among global investors for the perceived safety of US
Government bonds pushed their prices higher and their yields to record lows.
Market perceptions shifted significantly during the period and negatively
impacted short-term results for most asset classes. In many cases, however,
long-term fundamentals remained intact.
While we recognize daily fluctuations and changing perceptions can test
investors' mettle, they reinforce the merit of a long-term outlook. At
Nicholas-Applegate, we see a number of fundamental strengths in markets
worldwide and view recent developments as natural components of the ever-
changing financial horizon. As long-term investors, we understand that these
periods bring new investment opportunities. We've seen similar periods in the
past. And strict adherence to our investment philosophy has rewarded investors
with solid results. We encourage you to share our long-term perspective.
AT HOME
After attaining record highs in July, the US stock market experienced its most
difficult period in eight years. Overseas economic turmoil came home to the
United States with widespread declines in all sectors. At one point in August,
the average stock on the New York Stock Exchange had dropped 29% from its
highest point over the previous 12 months. Despite this difficult environment,
we remain optimistic.
In this environment, our stock-by-stock search for companies meeting our
strict investment criteria of sustainable, accelerating earnings growth should
reward our shareholders. We believe fund holdings will earn greater recognition
for their fundamental strength. And looking ahead, we are confident our holdings
will generate significant appreciation.
ABROAD
Developed international markets also fell sharply after attaining record highs
in July. August proved especially difficult. Developments in Russia, including
devaluation of the Russian ruble, triggered heavy, widespread selling in markets
around the world. The ruble's devaluation undermined investor confidence and
raised concerns about potential currency devaluations and economic slowing in
other countries. In addition to Russia's woes, Japan continued to be a drag on
global economic growth. The country remained mired in recession while its
leaders were ineffective in enacting fundamental economic reform to improve the
situation.
However, despite short-term international volatility, fundamental strengths
remain evident. The pending European Monetary Union is acting as a catalyst for
consolidation and reorganization throughout Europe. Companies are concentrating
on enhancing shareholder value and becoming more competitive. We're also seeing
governments changing regulations to promote increased international trade and
equity investing, particularly among pension plans. Many individual companies
are seizing the changing environment and capitalizing on its resulting
opportunities. International markets continue to offer some of the most exciting
long-term growth prospects. And we believe we have the resources to continue to
uncover them.
EMERGING COUNTRIES
By far the hardest hit sector during the period, emerging markets experienced
significant downturns. Economic and political turmoil exacerbated investor
uneasiness and prompted heavy selling. However, our
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<PAGE>
LETTER TO SHAREHOLDERS -- CONTINUED
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bottom-up stock selection helped us discover promising growth companies, even in
disappointing markets. We found companies exhibiting positive fundamental
changes and benefiting from factors such as privatization, consolidation, and
easing restrictions on foreign investment. As much as they declined during the
third quarter, emerging markets remain a valuable asset class. Allocations to
emerging countries can provide long-term investors with diversification benefits
and enhanced overall portfolio returns.
FIXED INCOME
While US stocks were negatively impacted by developments abroad, US Treasury
bonds benefited from overseas turbulence. An increasing number of investors
sought the safety of US-backed bonds. As more and more investors around the
world bought US Treasuries, their prices were driven higher and their yields
were pushed lower.
US bond market fundamentals remain strong. While the economy has shown signs
of slowing, inflation and interest rates are still low. We expect interest rates
to remain steady, and perhaps decline more. Nicholas-Applegate's interest-rate
position continues to reflect our moderately bullish stance on the US fixed
income market.
LOOKING AHEAD
Time eases the impact of everyday volatility. That's why Nicholas-Applegate
encourages you to take a long-term approach when it comes to your investment
goals. Short-term market fluctuations historically have little effect on
long-term results. Regardless of the market's direction, Nicholas-Applegate
remains focused on individual security selection. That's our hallmark. Investing
in the best opportunities we can find -- regardless of where they occur. This
discipline continues to lead us to attractive long-term opportunities, even in
difficult and challenging sectors. Our approach has proved successful through
all market cycles. That's why we stick with it. The world's markets will
continue to grow and change. And with an investment philosophy built around
identifying and capitalizing on change, we feel well prepared to deliver
superior results for long-term investors.
Thank you for your support of the Nicholas-Applegate Mutual Funds. We look
forward to continuing our work with you in the years to come.
Sincerely yours,
/s/ ART NICHOLAS
Art Nicholas
President, Nicholas-Applegate Mutual Funds
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<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
<S> <C>
The Funds' Review and Outlook, Performance and Schedules of Investments
Large Cap Growth...................................................... 1
Value................................................................. 4
Mid Cap Growth........................................................ 8
Small Cap Growth...................................................... 12
Mini Cap Growth....................................................... 19
Balanced Growth....................................................... 24
Convertible........................................................... 30
High Quality Bond..................................................... 35
High Yield Bond....................................................... 41
International Core Growth............................................. 46
International Small Cap Growth........................................ 51
Emerging Countries.................................................... 56
Worldwide Growth...................................................... 61
The Funds'
Financial Highlights.................................................. 66
Statements of Assets and Liabilities.................................. 68
Statements of Operations.............................................. 70
Statements of Changes in Net Assets................................... 72
Notes to the Financial Statements..................................... 76
</TABLE>
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This report is authorized for distribution to shareholders and to others only
when preceded or accompanied by a currently effective prospectus for
Nicholas-Applegate Mutual Funds Advisory Shares. Distributor: Nicholas-Applegate
Securities.
<PAGE>
LARGE CAP GROWTH FUND
ADVISORY SHARES
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MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer,
Global Equity Management
William H. Chenoweth, CFA
Partner, Portfolio Manager
Andrew Gallagher,
Partner, Portfolio Manager
Thomas J. Sullivan,
Portfolio Manager
Trisha C. Schuster, CFA
Portfolio Manager
GOAL: The Large Cap Growth Fund seeks to maximize long-term capital
appreciation by investing primarily in stocks from a universe of US companies
with market capitalizations corresponding to the upper 90% of the Russell 1000
Growth Index at time of purchase.
MARKET OVERVIEW: After climbing to record highs in mid-July, the US stock
market witnessed its most difficult period in eight years during the third
quarter. Investor uncertainty over unstable overseas markets impacted every
sector of the US market. At one point in August, the average stock traded on the
New York Stock Exchange had declined 29% from its highest point over the
preceding 12 months amid a variety of investor concerns including:
- expectations for weaker corporate profits
- increasing global economic and currency turmoil
- evidence of a slowing US economy
PERFORMANCE: For the six-month period ending Sept. 30, 1998, the Large Cap
Growth Fund was down 1.2% versus a 5.0% decline for its benchmark, the Russell
1000 Growth Index.
PORTFOLIO SPECIFICS: Despite a market environment changing from one of record
highs to one of increasing difficulty, we found promising long-term
opportunities. The top performers for the fund were in the technology sector.
Though this sector experienced significant volatility during the third quarter,
our bottom-up approach helped us identify companies delivering solid earnings
growth including Air Touch Communications, Comcast Cellular, America Online and
Cisco Systems. We increased our computer and office technology weightings
throughout the period.
Among factors negatively impacting returns, holdings in the retail sector
experienced increasing difficulty meeting earnings expectations after two years
of strong growth. Financial companies and banks were also hit hard because of
their exposure to overseas investments and an inverted yield curve. As a result,
we reduced our holdings in these areas.
MARKET OUTLOOK: While the large-cap segment has been marked by an increasing
scarcity of earnings growth, we continue to discover good opportunities on a
company-by-company basis. Current holdings demonstrate strong earnings growth
potential, low international exposure and control over pricing.
Even in a difficult market environment, key fundamentals remain evident and
reinforce our optimism:
- corporate profits, while weaker, are positive
- long-term interest rates are near 30-year lows
- inflation remains benign
In a market characterized by a scarcity of earnings growth, we expect
larger-cap growth stocks to continue to perform well. We believe our bottom-up,
growth-oriented approach will lead us to attractive opportunities.
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1
<PAGE>
LARGE CAP GROWTH FUND ADVISORY SHARES
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
LARGE CAP GROWTH FUND ADVISORY SHARES WITH THE RUSSELL 1000 GROWTH INDEX.
<TABLE>
<S> <C> <C>
TOTAL RETURN SINCE
1 YEAR SINCE INCEPTION INCEPTION
16.13% As of 09/30/98 33.73%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LARGE CAP GROWTH FUND ADVISORY SHARES RUSSELL 1000 GROWTH INDEX
<S> <C> <C>
27-Dec-96 $10,000.00 $10,000.00
31-Jan-97 $10,888.65 $10,538.08
28-Feb-97 $10,706.64 $10,466.42
31-Mar-97 $10,385.44 $9,899.98
30-Apr-97 $10,781.58 $10,557.34
31-May-97 $11,991.43 $11,319.26
30-Jun-97 $12,430.41 $11,772.03
31-Jul-97 $13,982.87 $12,812.68
31-Aug-97 $13,661.67 $12,063.14
30-Sep-97 $14,357.60 $12,656.77
31-Oct-97 $14,336.19 $12,188.47
30-Nov-97 $14,158.22 $12,706.11
31-Dec-97 $14,373.72 $12,848.42
31-Jan-98 $14,599.99 $13,232.59
28-Feb-98 $15,946.85 $14,227.94
31-Mar-98 $16,873.50 $14,795.07
30-Apr-98 $17,412.24 $14,999.83
31-May-98 $16,981.25 $14,574.14
30-Jun-98 $18,209.58 $15,466.80
31-Jul-98 $17,811.69 $15,364.41
31-Aug-98 $14,833.95 $13,058.21
30-Sep-98 $16,673.14 $14,061.35
</TABLE>
This graph compares a $10,000 investment in the Large Cap Growth Fund Advisory
Shares with the Russell 1000 Growth Index, on a cumulative and average annual
total return basis. The Advisory Shares calculate their performance based upon
the historical performance of their corresponding series ("Fund") of
Nicholas-Applegate Mutual Funds, adjusted to reflect sales charges and operating
expenses. The Fund's Advisory Shares were first available on 7/21/97. All return
calculations reflect the reinvestment of income dividends and capital gains
distributions, if any, as well as all fees and expenses.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The Russell 1000 Growth Index is an unmanaged index containing those companies
among the Russell 1000 Index securities with higher than average price-to-book
ratios and forecasted growth. The Russell 1000 Index contains the top 1,000
securities of the Russell 3000 Index, which comprises the 3,000 largest U.S.
securities as determined by total market capitalization. The Russell 1000 Growth
Index is considered generally representative of the U.S. market for large cap
stocks.
Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
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2
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998
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LARGE CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
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COMMON STOCKS -- 93.1%
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BIOTECHNOLOGY -- 3.4%
Amgen, Inc.*............................... 9,000 $ 680,062
-------------
BROADCASTING -- 5.2%
Comcast Corp............................... 13,000 610,187
Tele-Communications, Inc.*................. 11,400 446,025
-------------
1,056,212
-------------
BUILDING MATERIALS CHAINS -- 0.6%
The Home Depot, Inc........................ 3,200 126,400
-------------
COMPUTERS/OFFICE AUTOMATION -- 14.6%
Ceridian Corp.*............................ 10,900 625,387
Cisco Systems, Inc.*....................... 9,350 577,948
Compaq Computer Corp....................... 18,200 575,575
International Business Machines Corp....... 4,700 601,600
Seagate Technology, Inc.*.................. 23,700 593,981
-------------
2,974,491
-------------
DEPARTMENT/DISCOUNT STORES -- 3.8%
Dayton Hudson Corp......................... 8,500 303,875
Wal-Mart Stores, Inc.*..................... 8,700 475,237
-------------
779,112
-------------
DRUGS/PHARMACEUTICALS -- 7.8%
Eli Lilly and Co........................... 7,900 618,669
Forest Laboratories, Inc................... 9,800 336,874
Schering-Plough Corp....................... 6,000 621,375
-------------
1,576,918
-------------
ELECTRONIC INSTRUMENTS -- 2.1%
General Instruments Corp.*................. 19,500 421,687
-------------
ENTERTAINMENT -- 2.5%
Time Warner, Inc........................... 5,700 499,106
-------------
ENVIRONMENTAL SERVICES -- 6.2%
Republic Services, Inc. -- Cl. A*.......... 38,900 758,550
Waste Management, Inc...................... 10,500 504,656
-------------
1,263,206
-------------
FOOD CHAINS -- 3.1%
The Kroger Co.............................. 12,500 625,000
-------------
INTEGRATED OIL COMPANIES -- 2.5%
Texaco, Inc................................ 8,200 514,038
-------------
INVESTMENT COMPANIES -- 2.3%
Tele-Communications TCI Ventures Group..... 26,500 475,344
-------------
MACHINERY/EQUIPMENT -- 2.5%
American Tower Corp........................ 20,000 510,000
-------------
OILFIELD SERVICES/EQUIPMENT -- 2.9%
Schlumberger, Ltd.......................... 11,500 578,594
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------------
OTHER CONSUMER SERVICES -- 7.9%
Amercia Online, Inc.*...................... 5,400 $ 600,750
At Home Corp.*............................. 10,500 502,687
Service Corp. International................ 15,900 506,813
-------------
1,610,250
-------------
OTHER FINANCIAL SERVICES -- 3.0%
SunAmerica, Inc............................ 9,900 603,900
-------------
OTHER PRODUCERS/MANUFACTURING -- 0.8%
Tyco International, Ltd.................... 2,900 160,225
-------------
SEMI-CONDUCTORS/ELECTRONIC COMPONENTS -- 4.0%
Intel Corp................................. 7,500 643,125
Peak International, Ltd.*.................. 20,600 169,950
-------------
813,075
-------------
TELECOMMUNICATIONS EQUIPMENT -- 3.1%
Ascend Communications, Inc................. 13,900 632,450
-------------
TELECOMMUNICATIONS SERVICES -- 11.6%
Airtouch Communications, Inc.*............. 7,500 427,500
Global Crossing, Ltd.*..................... 27,900 582,413
Media One Group, Inc.*..................... 13,800 613,238
MCI Worldcom, Inc.*........................ 12,500 610,938
Nextel Communications, Inc. -- Cl. A*...... 6,400 129,200
-------------
2,363,289
-------------
TELEPHONE -- 3.2%
Alltel Corp................................ 13,800 653,775
-------------
TOTAL COMMON STOCKS
(Cost $17,966,673).................................... 18,917,134
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ------------------------------------------------------------------------
COMMERCIAL PAPER -- 7.7%
- ------------------------------------------------------------------------
Associates First Capital Corp.
5.74%, 10/01/98.......................... $1,030,000 1,030,000
Central Illinois Public
5.78%, 10/01/98.......................... 536,000 536,000
-------------
TOTAL COMMERCIAL PAPER
(Cost $1,566,000)..................................... 1,566,000
-------------
TOTAL INVESTMENTS -- 100.8%
(Cost $19,532,673) 20,483,134
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.8%)......... (161,756)
-------------
NET ASSETS -- 100.0%.................................... $ 20,321,378
-------------
</TABLE>
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* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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3
<PAGE>
VALUE FUND
ADVISORY SHARES
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MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer,
Global Equity Management
Lawrence S. Speidell, CFA
Partner, Director of Global/Systematic Portfolio
Management and Research
John J. Kane,
Partner, Portfolio Manager
Mark Stuckelman,
Portfolio Manager
GOAL: The Value Fund seeks to provide total return through long-term capital
appreciation plus dividend income. Holdings reflect a diversified portfolio
comprised predominantly of US companies with larger market capitalization.
MARKET OVERVIEW: A narrow advance among select large-cap stocks lifted indices
throughout the first half of the period. Yet in the third quarter, the market
experienced a broad-based decline. Reflecting the magnitude of the downturn,
most stocks on the S&P 500, NYSE, and Nasdaq Composite registered 30% declines.
While earnings for multinational US large caps are expected to contract as a
result of declining sales in overseas markets, the degree to which each company
will be impacted depends on a variety of factors, including the level of
international exposure and the industry in which they operate.
Despite the quarter's decline, key market fundamentals reinforce our optimism:
- corporate profits, while weaker, remain positive
- long-term interest rates are at 30-year lows
- inflation remains benign
PERFORMANCE: In a tumultuous environment for US stocks, the Value Fund
declined 10.6% in the period. Its benchmark, the S&P 500, fell 7.0%.
PORTFOLIO SPECIFICS: During the period, the fund's energy and utility stocks
performed well as investors sought the relative safety of these sectors.
Entergy, a major electric utility with global power production and distribution
operations, benefited from steps taken to reduce its debt and improve its
financial structure. In addition, Chevron and Exxon were both top performers for
the fund. Both companies exceeded analysts' estimates mainly due to stronger
than expected earnings from their refining and marketing operations.
Financial companies were hit hard during the period by their exposure to
overseas investments and a flattening to inverted yield curve. This created
major concerns of decreasing profits from lending and increasing probability of
defaults. Especially toward the end of the period when Russia defaulted on its
loan debt, many of our financial stocks suffered losses. As a result, we have
reduced our holdings in this area.
MARKET OUTLOOK: Even in a difficult environment, we continue to find promising
stocks poised to outperform. Current holdings demonstrate:
- attractive valuations
- underlying financial strength
- prospects for business improvement
We believe that today's market holds many high-quality, large-cap stocks with
attractive valuations that are opportunities for the fund. We remain confident
that strict adherence to our investment philosophy will reward shareholders with
solid long-term results.
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4
<PAGE>
VALUE FUND ADVISORY SHARES
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
VALUE FUND ADVISORY SHARES WITH THE S&P 500 INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
4.21% As of 09/30/98 26.95%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VALUE FUND S&P 500
ADVISORY SHARES
<S> <C> <C>
30-Apr-96 $10,000.00 $10,000.00
30-Jun-96 $10,543.13 $10,296.98
30-Sep-96 $11,150.16 $10,615.00
31-Dec-96 $12,412.14 $11,499.86
31-Mar-97 $12,651.76 $11,808.18
30-Jun-97 $14,744.41 $13,869.64
30-Sep-97 $17,092.65 $14,908.59
31-Dec-97 $17,396.17 $15,336.60
31-Mar-98 $19,920.13 $17,475.87
30-Jun-98 $20,367.41 $18,052.93
30-Sep-98 $17,811.50 $16,257.10
</TABLE>
This graph compares a $10,000 investment in the Value Fund Advisory Shares with
the S&P 500 Index, on a cumulative and average annual total return basis. All
return calculations reflect the reinvestment of income dividends and capital
gains distributions, if any, as well as all fees and expenses. The Advisory
shares calculate their performance based upon the historical performance of
their corresponding series ("Fund") of Nicholas-Applegate Mutual Funds, adjusted
to reflect sales charges and operating expenses. The Fund's Advisory shares were
first available on 8/3/98.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The S&P 500 Index is an unmanaged index containing 500 industrial,
transportation, utility and financial companies regarded as generally
representative of the U.S. stock market.
Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
5
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
VALUE FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS -- 96.8%
- -------------------------------------------------------------------------------
AEROSPACE -- 3.8%
Honeywell, Inc. ........................... 1,100 $ 70,469
United Technologies Corp. ................. 3,400 259,887
------------
330,356
------------
AIRLINES -- 2.8%
AMR Corp.*................................. 4,300 238,381
------------
ALCOHOLIC BEVERAGES -- 0.9%
Canandaigua Brands, Inc.*.................. 1,900 75,050
------------
AUTOMOBILES -- 4.2%
Ford Motor Corp. .......................... 6,200 291,012
General Motors Corp. ...................... 1,300 71,094
------------
362,106
------------
BEVERAGES/SOFTDRINKS -- 0.6%
PepsiCo, Inc. ............................. 1,900 55,931
------------
BUILDING MATERIALS -- 1.1%
Southdown, Inc. ........................... 1,400 63,000
Texas Industries, Inc. .................... 1,100 27,637
------------
90,637
------------
CHEMICALS -- 3.3%
Dow Chemical Co. .......................... 2,500 213,594
Lyondell Chemical Co. ..................... 3,100 68,975
------------
282,569
------------
COMPUTERS/OFFICE AUTOMATION -- 5.2%
CHS Electronics, Inc.*..................... 4,700 51,113
Dell Computer Corp.*....................... 4,400 289,300
EMC Corp.*................................. 1,800 102,938
------------
443,351
------------
DEPARTMENT/DISCOUNT STORES -- 4.9%
Dayton Hudson Corp. ....................... 3,100 110,825
Shopko Stores, Inc.*....................... 3,600 117,000
Wal-Mart Stores, Inc. ..................... 3,600 196,650
------------
424,475
------------
DRUGS/PHARMACEUTICALS -- 6.1%
Bindley Western Industries, Inc. .......... 3,400 112,200
Bristol-Myers Squibb Co. .................. 900 93,487
Pfizer, Inc. .............................. 2,200 233,062
Roberts Pharmaceutical Corp.*.............. 4,600 87,975
------------
526,724
------------
ELECTRIC UTILITIES -- 5.0%
Entergy Corp. ............................. 6,300 193,725
Public Service Enterprise Group, Inc. ..... 6,100 239,806
------------
433,531
------------
ENTERTAINMENT -- 0.9%
Viacom, Inc.*.............................. 1,400 81,200
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
FINANCE COMPANIES -- 3.2%
Fannie Mae................................. 4,300 $ 276,275
------------
HOMEBUILDING -- 1.4%
Lennar Corp. .............................. 5,300 118,256
------------
HOSPITALS -- 0.5%
Integrated Health Services, Inc. .......... 2,500 42,031
------------
INTEGRATED OIL COMPANIES -- 3.4%
Exxon Corp. ............................... 2,800 196,525
Phillips Petroleum Co...................... 2,200 99,275
------------
295,800
------------
INVESTMENT COMPANIES -- 1.6%
Bear Stearns Cos., Inc. ................... 4,300 133,031
------------
LIFE INSURERS -- 1.7%
Equitable Cos., Inc. ...................... 2,400 99,300
Liberty Financial Cos., Inc. .............. 1,900 50,112
------------
149,412
------------
MACHINERY/EQUIPMENT -- 4.1%
Caterpillar, Inc.*......................... 5,200 231,725
Ingersoll Rand Co. ........................ 3,100 117,606
------------
349,331
------------
MEDICAL SUPPLIES -- 1.6%
Allegiance Corp. .......................... 4,600 136,850
------------
METALS -- 2.9%
Asarco, Inc. .............................. 2,300 43,987
Cyprus Amax Minerals Co. .................. 3,400 45,050
Reynolds Metals Co......................... 1,000 50,812
RMI Titanium Co............................ 2,500 50,312
USX-U.S. Steel Group....................... 2,500 59,687
------------
249,848
------------
MONEY-CENTER BANKS -- 1.9%
BankAmerica Corp. ......................... 2,700 162,337
------------
MULTI-LINE INSURERS -- 1.0%
Reliance Group Holdings, Inc. ............. 6,300 88,594
------------
OIL REFINING/MARKETING -- 0.8%
Tesoro Petroleum Corp.*.................... 5,500 71,844
------------
OIL/GAS PRODUCTION -- 1.3%
Chevron Corp. ............................. 1,300 109,281
------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 1.5%
The Hertz Corp. ........................... 3,200 132,400
------------
OTHER FINANCIAL SERVICES -- 1.3%
Nationwide Financial Services, Inc. ....... 2,500 113,594
------------
OTHER HEALTH SERVICES -- 2.1%
McKesson Corp. ............................ 2,000 183,250
------------
OTHER TECHNOLOGY -- 0.5%
Anixter International, Inc.*............... 2,600 40,463
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
6
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
PIPELINES -- 1.1%
The Coastal Corp. ......................... 2,800 $ 94,500
------------
PROPERTY-CASULATY INSURERS -- 3.0%
Allstate Corp. ............................ 6,200 258,463
------------
REGIONAL/COMMERCIAL BANKS -- 3.9%
SouthTrust Corp. .......................... 2,550 89,091
Fleet Financial Group, Inc. ............... 3,300 242,344
------------
331,435
------------
SAVINGS & LOANS ASSOCIATION -- 2.3%
Bank United Corp. ......................... 2,300 82,369
Golden West Financial Corp. ............... 1,400 114,538
------------
196,907
------------
SOFTWARE -- 3.7%
Compuware Corp.*........................... 2,100 123,638
Microsoft Corp.*........................... 1,800 198,113
------------
321,751
------------
SPECIALTY INSURERS -- 1.0%
EXEL, Ltd. Cl. A........................... 1,300 81,900
------------
TELECOMMUNICATIONS EQUIPMENT -- 0.4%
Applied Signal Technology, Inc.*........... 2,600 32,013
------------
TELECOMMUNICATIONS SERVICES -- 2.3%
Ameritech Corp. ........................... 4,200 198,975
------------
TELEPHONE -- 2.7%
US WEST, Inc. ............................. 4,500 235,969
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
TEXTILES -- 2.5%
Burlington Industries, Inc.*............... 9,200 $ 87,400
Mohawk Industries, Inc.*................... 4,600 125,925
------------
213,325
------------
TOBACCO PRODUCTS -- 4.3%
Philip Morris Cos., Inc. .................. 2,400 110,550
RJR Nabisco Holdings Corp. ................ 6,600 166,238
Universal Corp. ........................... 2,600 92,950
------------
369,738
------------
TOTAL COMMON STOCKS
(Cost $7,524,451).......................................... 8,331,884
------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMERCIAL PAPER -- 1.3%
- -------------------------------------------------------------------------------
Associates First Capital Corp.
5.740%, 10/01/98 (Cost $114,000)......... $ 114,000 114,000
------------
TOTAL INVESTMENTS -- 98.1%
(Cost $7,638,451).......................................... 8,445,884
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.9%................ 159,710
------------
NET ASSETS -- 100.0%......................................... $ 8,605,594
------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
7
<PAGE>
MID CAP GROWTH FUND
ADVISORY SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer,
Global Equity Management
William H. Chenoweth, CFA
Partner, Portfolio Manager
Andrew Gallagher,
Partner, Portfolio Manager
Thomas J. Sullivan,
Portfolio Manager
Emmy Sobieski, CFA
Portfolio Manager
Trisha C. Schuster, CFA
Portfolio Manager
GOAL: The Mid Cap Growth Fund seeks to maximize long-term capital appreciation
by investing in the securities of US growth companies with market
capitalizations corresponding to the middle 90% of the Russell Midcap Growth
Index at time of purchase.
MARKET OVERVIEW: After climbing to record highs in mid-July, the US stock
market witnessed its most difficult period in eight years during the third
quarter. Investor uncertainty over unstable overseas markets impacted every
sector of the US market. Investors largely ignored the fundamental strengths
evident among mid caps in their haste to sell stocks and protect profits
accumulated during the market's unprecedented advance in recent years. During
the downturn, the liquidity and perceived safety of large-cap stocks helped them
fare better than mid-cap shares amid investor concerns including:
- expectations for weaker corporate profits
- increasing global economic and currency turmoil
- evidence of a slowing US economy
PERFORMANCE: For the six-month period ending Sept. 30, 1998, the Mid Cap
Growth Fund was down 18.6% versus a 16.8% decline for its benchmark, the Russell
Midcap Growth Index.
PORTFOLIO SPECIFICS: The top performers for the fund were in the technology
sector. Though this sector experienced significant volatility in the third
quarter, our bottom-up method of selecting stocks helped us identify companies
able to deliver solid earnings such as Veritas Software and America Online.
Holdings in the healthcare sector, such as Watson Pharmaceuticals, also fared
well.
Underperformance in the retail and financial services sectors negatively
impacted returns versus the benchmark. Following two years of strong growth, a
number of retail stocks experienced increasing difficulty meeting earnings
expectations. Financial companies were hit hard as a result of exposure to
overseas investments and an inverted yield curve. We reduced our holdings in
these areas.
MARKET OUTLOOK: Although prices for mid-cap stocks fell abruptly, especially
in August, they rebounded sharply in September. The outlook for stocks in this
segment remains encouraging:
- valuations, relative to large caps, have reached levels comparable to 1990
-- just prior to a multi-year period of outperformance
- earnings expectations are generally higher for mid-cap stocks than large
caps
- mid caps tend to have less overseas exposure than large caps and are less
susceptible to the uncertainties of non-US markets
Looking ahead, we believe those stocks able to deliver consistent profit
growth will be recognized and rewarded in a scarce-growth environment. We remain
confident that continued, disciplined adherence to our bottom-up investment
philosophy will deliver exceptional long-term returns.
- --------------------------------------------------------------------------------
8
<PAGE>
MID CAP GROWTH FUND ADVISORY SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE MID
CAP GROWTH FUND ADVISORY SHARES WITH THE RUSSELL MID CAP GROWTH INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 09/30/98
1 YEAR 5 YEARS 10 YEARS
-11.30% 8.23% 15.79%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MID CAP GROWTH RUSSELL MID CAP
FUND ADVISORY SHARES GROWTH INDEX
<S> <C> <C>
9/30/85 $10,000.00 $10,000.00
12/85 $12,466.54 $10,000.00
12/86 $16,521.83 $11,755.04
12/87 $17,072.51 $12,079.37
12/88 $19,187.60 $13,640.50
12/89 $25,633.99 $17,935.18
12/90 $25,756.56 $17,014.58
12/91 $39,960.61 $25,016.75
12/92 $45,263.92 $27,196.19
12/93 $54,328.19 $30,240.33
12/94 $48,410.76 $29,585.30
12/95 $66,921.22 $39,641.61
12/96 $77,673.77 $46,571.16
12/97 $90,250.08 $57,088.43
9/30/98 $82,384.22 $53,197.36
</TABLE>
This graph compares a $10,000 investment in Mid Cap Growth Fund Advisory Shares
with the Russell Mid Cap Growth Index, on a cumulative and average annual total
return basis. All return calculations reflect the reinvestment of income
dividends and capital gains distributions, if any, as well as all fees and
expenses. Performance results reflect the total returns of a predecessor limited
partnership managed by Nicholas-Applegate Capital Management prior to the
effective date of the Fund's registration statement on 4/19/93. Limited
partnership returns are restated to reflect all fees and expenses applicable to
the Fund. If the limited partnership had been registered as an investment
company under the federal securities laws, its performance might have been
adversely affected because of the additional restrictions applicable to
registered investment companies. The Advisory shares calculate their performance
based upon the historical performance of their corresponding series ("Fund") of
Nicholas-Applegate Mutual Funds, adjusted to reflect sales charges and operating
expenses. The Fund's Advisory shares were first available on 6/30/94.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The Russell Mid Cap Growth Index measures the performance of those companies
among the 800 smallest companies in the Russell 1000 Index with higher than
average price-to-book ratios and forecasted growth. The average market
capitalization is $4 billion. The Russell Mid Cap Growth Index is considered
generally representative of the U.S. market for mid cap stocks.
Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
9
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
MID CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
COMMON STOCKS -- 96.6%
- --------------------------------------------------------------------------
ADVERTISING -- 2.6%
Outdoor Systems, Inc.*..................... 171,600 $ 3,346,200
Snyder Communications, Inc.*............... 170,200 5,701,700
-------------
9,047,900
-------------
AEROSPACE -- 0.4%
Gulfstream Aerospace Corp.*................ 34,600 1,392,650
-------------
AIRLINES -- 1.9%
ASA Holdings, Inc.......................... 96,600 3,429,300
Comair Holdings, Inc....................... 107,100 3,079,125
-------------
6,508,425
-------------
BIOTECHNOLOGY -- 2.1%
Biogen, Inc.*.............................. 80,000 5,265,000
Quintiles Transnational Corp.*............. 46,700 2,043,125
-------------
7,308,125
-------------
BROADCASTING -- 9.6%
Adelphia Communications*................... 134,250 5,252,531
Chancellor Media Corp.*.................... 166,600 5,560,275
Clear Channel Communications, Inc.*........ 152,600 7,248,500
Cox Communications, Inc.*.................. 113,100 6,178,087
Jacor Commununications, Inc. --
A Shs.*.................................. 98,900 5,006,812
USA Networks, Inc.*........................ 207,800 4,039,112
-------------
33,285,317
-------------
BUILDING MATERIALS -- 0.4%
Lowes Companies, Inc....................... 44,000 1,399,750
-------------
CLOTHING CHAINS -- 1.7%
Abercrombie & Fitch Co. Cl. A*............. 98,800 4,347,200
The Men's Wearhouse, Inc.*................. 86,400 1,490,400
-------------
5,837,600
-------------
COMPUTERS/OFFICE AUTOMATION -- 4.8%
Apple Computer, Inc.*...................... 160,100 6,103,812
Ceridian Corp.*............................ 39,100 2,243,362
Network Appliance, Inc.*................... 87,400 4,424,625
Seagate Technology, Inc.*.................. 162,200 4,065,137
-------------
16,836,936
-------------
CONTRACT DRILLING -- 0.5%
Diamond Offshore Drilling.................. 71,900 1,869,400
-------------
DEPARTMENT/DISCOUNT STORES -- 6.8%
Costco Companies, Inc.*.................... 132,600 6,281,925
Dollar Tree Stores, Inc.*.................. 196,000 6,137,250
Family Dollar Stores, Inc.................. 234,800 3,698,100
Fred Meyer, Inc.*.......................... 93,200 3,623,150
Kohl's Corp.*.............................. 101,500 3,958,500
-------------
23,698,925
-------------
DRUG CHAINS -- 0.7%
Rite Aid Corp.............................. 70,000 2,485,000
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
DRUGS/PHARMACEUTICALS -- 9.0%
Allergan, Inc.*............................ 48,000 $ 2,802,000
Cardinal Health, Inc....................... 27,400 2,829,050
Elan Corp. PLC -- ADR*..................... 125,600 9,051,050
Genzyme Corp.*............................. 62,900 2,272,262
NBTY, Inc.................................. 71,100 559,912
Sepracor, Inc.*............................ 68,300 4,490,725
Watson Pharmaceuticals, Inc.*.............. 187,900 9,535,925
-------------
31,540,924
-------------
ELECTRONIC DATA PROCESSING -- 1.0%
Concord EFS, Inc.*......................... 94,900 2,449,606
SunGard Data Systems, Inc.*................ 31,100 979,650
-------------
3,429,256
-------------
ELECTRONIC INSTRUMENTS -- 1.1%
General Instruments Corp.*................. 185,000 4,000,625
-------------
ELECTRONICS/MUSIC CHAINS -- 1.0%
Tandy Corp................................. 65,000 3,477,500
-------------
ENVIRONMENTAL SERVICES -- 2.4%
Allied Waste Industries, Inc.*............. 254,800 5,955,950
American Disposal Services, Inc.*.......... 60,600 2,359,612
-------------
8,315,562
-------------
FINANCE COMPANIES -- 2.5%
Associates First Capital Corp.............. 40,900 2,668,725
The Finova Group, Inc...................... 122,700 6,127,331
-------------
8,796,056
-------------
FOOD CHAINS -- 1.7%
Safeway, Inc.*............................. 124,000 5,750,500
-------------
FUNERAL SERVICES -- 0.7%
Service Corp. International................ 74,200 2,365,125
-------------
HOME FURNISHINGS -- 0.6%
Shaw Industries, Inc....................... 134,000 2,177,500
-------------
HOMEBUILDING -- 0.8%
Champion Enterprises, Inc.*................ 114,400 2,659,800
-------------
HOSPITALS -- 1.8%
Health Management Associates, Inc --
A Shs.*.................................. 341,200 6,226,900
-------------
INVESTMENT COMPANIES--0.5%
Federated Investors, Inc................... 118,800 1,707,750
-------------
LEISURE/GAMING -- 1.7%
Carnival Corp.............................. 186,500 5,933,031
-------------
LIFE INSURERS -- 0.6%
Hartford Life, Inc......................... 52,800 2,230,800
-------------
MACHINERY/EQUIPMENT -- 0.4%
American Tower Corp.*...................... 52,100 1,328,550
-------------
MEDICAL SUPPLIES -- 4.7%
Allegiance Corp............................ 122,800 3,653,300
Guidant Corp............................... 82,000 6,088,500
Safeskin Corp.*............................ 113,800 3,591,813
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
10
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
MEDICAL SUPPLIES (CONTINUED)
<TABLE>
<S> <C> <C>
Sofamor Danek Group, Inc.*................. 32,800 $ 2,919,200
-------------
16,252,813
-------------
OILFIELD SERVICES/EQUIPMENT -- 2.0%
Global Industries, Ltd.*................... 254,000 2,936,875
Tuboscope, Inc.*........................... 134,700 1,565,888
Weatherford International, Inc.*........... 112,000 2,422,000
-------------
6,924,763
-------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 4.0%
Hyperion Telecommunications, Inc........... 44,400 260,850
Paychex, Inc............................... 79,350 4,091,484
Robert Half International, Inc.*........... 174,200 7,523,263
Romac International, Inc................... 121,600 2,188,800
-------------
14,064,397
-------------
OTHER CONSUMER SERVICES -- 1.7%
America Online, Inc.*...................... 42,200 4,694,750
At Home Corp.*............................. 26,200 1,254,325
-------------
5,949,075
-------------
OTHER FINANCIAL SERVICES -- 1.6%
Capital One Financial Corp................. 37,400 3,870,900
SunAmerica, Inc............................ 26,700 1,628,700
-------------
5,499,600
-------------
OTHER TECHNOLOGY -- 1.2%
Complete Business Solutions, Inc.*......... 149,700 4,303,875
-------------
RESTAURANTS -- 0.6%
Starbucks Corp.*........................... 53,300 1,928,794
-------------
SAVINGS & LOANS -- 1.2%
Greenpoint Financial Corp.................. 132,500 4,223,438
-------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 3.2%
Altera Corp................................ 78,900 2,771,363
Applied Materials, Inc..................... 97,300 2,456,825
Broadcom Corp.*............................ 39,700 2,818,700
Micron Technology, Inc.*................... 102,600 3,122,888
-------------
11,169,776
-------------
SOFTWARE -- 14.6%
Acxiom Corp.*.............................. 144,000 3,573,000
BMC Software, Inc.*........................ 124,100 7,453,756
Citrix Systems, Inc.*...................... 93,500 6,638,500
Compuware Corp.*........................... 129,400 7,618,425
Keane, Inc................................. 55,300 1,942,413
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
</TABLE>
SOFTWARE (CONTINUED)
<TABLE>
<S> <C> <C>
Legato Systems, Inc.*...................... 50,500 $ 2,594,438
Lycos, Inc.*............................... 111,800 3,780,238
The Learning Company, Inc.*................ 121,600 2,409,200
Veritas DGC, Inc.*......................... 111,900 1,867,331
VERITAS Software Corp.*.................... 169,350 9,356,588
Visio Corp................................. 47,400 1,140,563
Wind River Systems, Inc.*.................. 55,500 2,622,375
-------------
50,996,827
-------------
SPECIALTY CHAINS -- 1.7%
Bed Bath & Beyond, Inc.*................... 74,000 1,729,750
Micro Warehouse, Inc....................... 106,000 1,596,625
Staples, Inc.*............................. 84,700 2,488,063
-------------
5,814,438
-------------
TELECOMMUNICATIONS EQUIPMENT -- 0.3%
A D C Telecommunications, Inc.............. 42,200 891,475
-------------
TELECOMMUNICATIONS SERVICES -- 1.3%
Intermedia Communication, Inc.*............ 73,200 1,797,975
Qwest Communications International,
Inc.*.................................... 87,600 2,742,975
-------------
4,540,950
-------------
TEXTILES -- 1.2%
Westpoint Stevens, Inc.*................... 142,000 4,331,000
-------------
TOTAL COMMON STOCKS
(Cost $305,038,032)..................................... 336,501,128
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- --------------------------------------------------------------------------
COMMERCIAL PAPER -- 4.6%
- --------------------------------------------------------------------------
Cargill, Inc.
5.700%, 10/01/98
(Cost $15,995,000)......................... $15,995,000 15,995,000
-------------
TOTAL INVESTMENTS -- 101.2%
(Cost $321,033,032)..................................... 352,496,128
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (1.2%)........................................ (4,118,432)
-------------
NET ASSETS -- 100.0%...................................... $ 348,377,696
-------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
11
<PAGE>
SMALL CAP GROWTH FUND
ADVISORY SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer,
Global Equity Management
Thomas E. Bleakley,
Partner, Portfolio Manager
Aaron M. Harris,
Portfolio Manager
John C. McCraw,
Portfolio Manager
Paul E. Cluskey,
Investment Analyst
GOAL: The Small Cap Growth Fund seeks to maximize long-term capital
appreciation through investments primarily in US companies with market
capitalizations corresponding to the middle 90% of the Russell 2000 Growth Index
at time of purchase.
MARKET OVERVIEW: After climbing to record highs in mid-July, a variety of
factors contributed to a difficult environment for US stocks in the third-
quarter including:
- expectations for declining corporate profits
- increasing global economic and currency turmoil
- evidence of a slowing US economy
Unstable overseas markets impacted investor confidence in the United States.
During the third-quarter downturn, small-cap stocks were vulnerable as investors
preferred the liquidity and perceived safety of larger caps. The Russell 2000
Growth Index fell 33.6% between April and August.
Expectations that earnings growth for many larger-cap stocks would slow failed
to benefit small caps for most of the period. However, after trailing
larger-capitalization issues for most of the period, the small-cap segment of
the market outperformed in September.
PERFORMANCE: For the six-month period ending Sept. 30, 1998, fund returns were
nearly identical to its benchmark. The fund declined 26.9% versus a 26.8% fall
for the Russell 2000 Growth Index.
PORTFOLIO SPECIFICS: Among the reasons the fund underperformed the benchmark
were an overweighting in the disappointing consumer services, consumer durables
and retail trade sectors as well as eroding economic conditions that impacted
holdings in the financial services and energy sectors.
Concurrently, the following factors helped returns:
- our stock selection in the technology and commercial/industrial sectors
- our underweighting in health technology
MARKET OUTLOOK: The outlook for earnings growth among small-cap stocks is
outstanding. In addition, valuations are attractive versus larger caps. Relative
to the S&P 500, stocks in the Russell 2000 Index are more attractively valued
than at any time during the past 20 years. The median earnings growth rate for
the fund's holdings as of Sept. 30 was 32.6% vs. 19.2% for the Russell 2000
Growth Index.
Further, the relative attractiveness of small-cap stocks is enhanced by their
limited exposure to uncertain overseas markets as well as swollen cash levels
among small-cap portfolio managers that represent significant buying power.
Looking ahead, we believe those stocks able to deliver consistent profit
growth will be recognized and rewarded in a scarce-growth environment.
- --------------------------------------------------------------------------------
12
<PAGE>
SMALL CAP GROWTH FUND ADVISORY SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
SMALL CAP GROWTH FUND ADVISORY SHARES WITH THE RUSSELL 2000 GROWTH INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 09/30/98 SINCE
1 YEAR 3 YEARS INCEPTION
-26.48% 3.88% 7.32%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SMALL CAP GROWTH FUND ADVISORY SHARES RUSSELL 2000 GROWTH INDEX
<S> <C> <C>
10/1/93 $10,000.00 $10,000.00
12/31/93 $9,988.55 $10,262.59
3/31/94 $9,378.52 $9,845.06
6/30/94 $8,678.90 $9,227.27
9/30/94 $9,593.48 $10,087.60
12/31/94 $9,606.03 $10,013.02
3/31/95 $10,159.76 $10,562.09
6/30/95 $11,317.62 $11,609.85
9/30/95 $12,700.77 $12,930.01
12/31/95 $13,019.28 $13,123.11
3/31/96 $14,094.27 $13,876.94
6/30/96 $15,477.82 $14,687.74
9/30/96 $15,885.92 $14,562.15
12/31/96 $15,553.45 $14,601.18
3/31/97 $13,244.03 $13,059.68
6/30/97 $16,216.15 $15,351.64
9/30/97 $19,369.02 $17,948.19
12/31/97 $17,348.28 $16,476.56
3/31/98 $19,470.08 $18,435.00
6/30/98 $18,591.05 $17,376.29
9/30/98 $14,239.19 $13,491.92
</TABLE>
This graph compares a $10,000 investment in the Small Cap Growth Fund Advisory
Shares with the Russell 2000 Growth Index, on a cumulative and average annual
total return basis. All return calculations reflect the reinvestment of income
dividends and capital gains distributions, if any, as well as all fees and
expenses. The Advisory Shares calculate their performance based upon the
historical performance of their corresponding series ("Fund") of
Nicholas-Applegate Mutual Funds, adjusted to reflect sales charges and operating
expenses. The Fund's Advisory Shares were first available on 8/31/95.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The Russell 2000 Growth Index contains those securities in the Russell 2000
Index with a greater-than-average growth orientation. Companies in this index
generally have higher price-to-book and price-earnings ratios. The Russell 2000
Index is a widely regarded small-cap index of the 2,000 smaller securities in
the Russell 3000 Index which comprises the 3,000 largest U.S. securities as
determined by total market capitalization.
The Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
13
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
COMMON STOCKS -- 94.6%
- ----------------------------------------------------------------------------
ADVERTISING -- 1.4%
Abacus Direct Corp.*....................... 45,700 $ 2,330,700
CMG Information Services, Inc.*............ 56,600 3,013,950
Getty Images, Inc.*........................ 37,900 658,512
------------
6,003,162
------------
AEROSPACE -- 0.1%
AAR Corp................................... 11,400 223,725
------------
AIR FREIGHT/SHIPPING -- 0.8%
Expeditors International, Inc.*............ 118,900 3,299,475
------------
AIRLINES -- 1.4%
Atlantic Coast Airlines Holdings*.......... 76,300 1,783,512
Mesaba Holdings, Inc.*..................... 18,600 269,700
Midwest Express Holdings, Inc.*............ 57,900 1,939,650
Ryanair Holdings PLC -- ADR*............... 26,800 917,900
Skywest, Inc............................... 51,600 986,850
------------
5,897,612
------------
ALCOHOLIC BEVERAGES -- 0.2%
Canandaigua Brands, Inc.*.................. 22,800 900,600
------------
APPAREL -- 0.2%
Columbia Sportswear Co.*................... 43,600 713,950
Cutter & Buck, Inc.*....................... 2,200 50,600
------------
764,550
------------
AUTOMOTIVE EQUIPMENT -- 0.5%
O'Reilly Automotive, Inc.*................. 57,100 2,069,875
------------
BIOTECHNOLOGY -- 1.5%
Biomatrix, Inc.*........................... 71,300 2,780,700
Coulter Pharmaceutical, Inc.*.............. 53,800 1,338,275
ICOS Corp.*................................ 72,400 1,285,100
MedImmune, Inc.*........................... 19,400 1,256,150
------------
6,660,225
------------
BROADCASTING -- 1.9%
Chancellor Media Corp...................... 93,000 3,103,875
Emmis Communications Corp. -- Cl. A*....... 63,000 2,378,250
Saga Communications, Inc. -- Cl. A*........ 69,096 1,088,262
Scandinavian Broadcasting*................. 78,200 1,661,750
------------
8,232,137
------------
BUILDING MATERIALS -- 0.1%
Comfort Systems USA, Inc.*................. 24,900 501,112
------------
BUILDING MATERIALS CHAINS -- 0.6%
Eagle Hardware & Garden, Inc.*............. 102,700 2,227,306
White Cap Industries, Inc.*................ 35,700 365,925
------------
2,593,231
------------
CATALOG/OUTLET STORES -- 1.5%
CDW Computer Centers, Inc.*................ 51,700 2,753,025
Genesis Direct, Inc.*...................... 44,000 148,500
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
</TABLE>
CATALOG/OUTLET STORES (CONTINUED)
<TABLE>
<S> <C> <C>
Insight Enterprises, Inc.*................. 123,750 $ 3,495,937
------------
6,397,462
------------
CHEMICALS -- 0.6%
Spartech Corp.............................. 26,700 458,906
The Scotts Co. -- Cl. A*................... 73,700 2,257,062
------------
2,715,968
------------
CLOTHING CHAINS -- 2.6%
99 Cents Only Stores*...................... 76,625 3,031,477
AnnTaylor Stores Corp.*.................... 79,700 1,618,906
Bebe Stores, Inc.*......................... 59,700 958,931
Burlington Coat Factory Warehouse Co....... 82,700 1,219,825
Pacific Sunwear Of California, Inc.*....... 53,475 1,189,819
Stage Stores, Inc.*........................ 78,900 961,594
The Men's Wearhouse, Inc.*................. 140,700 2,427,075
------------
11,407,627
------------
COMPUTERS/OFFICE AUTOMATION -- 3.9%
Apex PC Solutions, Inc.*................... 65,900 1,293,287
CHS Electronics, Inc.*..................... 5,900 64,162
Computer Horizons Corp.*................... 62,300 1,553,606
Micron Electronics, Inc.*.................. 94,000 1,645,000
MICROS System, Inc.*....................... 49,800 1,494,000
MMC Networks, Inc.*........................ 67,700 1,108,587
Network Appliance, Inc.*................... 132,900 6,728,062
Optimal Robotics Corp.*.................... 10,100 70,700
QLogic Corp.*.............................. 13,200 861,300
The Reynolds & Reynolds Co. -- Cl. A*...... 14,800 263,625
Visual Networks*........................... 11,100 302,475
Xircom, Inc.*.............................. 60,900 1,492,050
------------
16,876,854
------------
CONTRACT DRILLING -- 0.0%
Unit Corp.*................................ 34,300 167,212
------------
DEPARTMENT/DISCOUNT STORES -- 0.6%
Ames Department Stores, Inc.*.............. 124,000 1,573,250
The Elder-Beerman Stores Corp.*............ 57,100 992,112
------------
2,565,362
------------
DRUGS/PHARMACEUTICALS -- 3.8%
Boron LePore & Associates, Inc.*........... 97,200 3,681,450
Inhale Therapeutic Systems*................ 65,900 1,845,200
NBTY, Inc.*................................ 189,900 1,495,462
PAREXEL International Corp.*............... 52,600 2,051,400
SangStat Medical Corp.*.................... 32,200 684,250
Sepracor, Inc.*............................ 95,500 6,279,125
Zonagen, Inc.*............................. 14,000 217,000
------------
16,253,887
------------
ELECTRONIC DATA PROCESSING -- 0.7%
Deltek Systems, Inc.*...................... 27,400 505,187
E*Trade Group, Inc.*....................... 49,700 928,769
Factset Research Systems, Inc.*............ 14,400 456,300
Transaction Network Services, Inc.*........ 19,000 484,500
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
14
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
ELECTRONIC DATA PROCESSING (CONTINUED)
<TABLE>
<S> <C> <C>
TSI International Software, Ltd.*.......... 14,000 $ 484,750
------------
2,859,506
------------
ELECTRONIC INSTRUMENTS/DIVERSIFIED -- 0.3%
Triumph Group, Inc.*....................... 38,700 1,151,325
------------
ELECTRONICS/MUSIC CHAINS -- 0.9%
Musicland Stores Corp.*.................... 75,400 933,075
Trans World Entertainment Corp.*........... 173,700 3,170,025
------------
4,103,100
------------
ENTERTAINMENT -- 1.6%
American Classic Voyages Co.*.............. 50,200 740,450
Championship Auto Racing Teams, Inc.*...... 17,000 415,437
Cinar Films, Inc.*......................... 49,600 889,700
Family Golf Centers, Inc.*................. 93,000 1,650,750
SFX Entertainment, Inc.*................... 105,400 3,280,575
------------
6,976,912
------------
ENVIRONMENTAL SERVICES -- 2.3%
American Disposal Services, Inc.*.......... 46,500 1,810,594
Casella Waste System, Inc.*................ 69,000 2,346,000
Eastern Environmental Service, Inc.*....... 101,800 3,079,450
Superior Services, Inc.*................... 71,300 2,009,769
Tetra Tech, Inc.*.......................... 30,156 678,510
------------
9,924,323
------------
FINANCE COMPANIES -- 0.1%
American Captial Strategies, Ltd........... 33,900 548,756
Rock Financial Corp.*...................... 10,000 68,750
------------
617,506
------------
FOOD CHAINS -- 0.3%
Wild Oats Markets, Inc.*................... 50,300 1,364,387
------------
GROCERY PRODUCTS -- 0.4%
Michael Foods, Inc.*....................... 49,500 1,175,625
Omega Protein Corp.*....................... 47,000 261,437
The Hain Food Group, Inc.*................. 31,000 465,000
------------
1,902,062
------------
HOME BUILDING -- 1.3%
American Homestar Corp.*................... 60,900 1,339,800
Crossmann Communities, Inc.*............... 35,400 712,425
M D C Holdings, Inc.*...................... 41,400 763,312
M/I Schottenstein Homes, Inc.*............. 46,700 863,950
The Ryland Group, Inc...................... 83,900 2,045,062
------------
5,724,549
------------
HOME FURNISHINGS -- 0.2%
Restoration Hardware, Inc.................. 27,900 575,437
Windmere-Durable Holdings, Inc............. 48,600 273,375
------------
848,812
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
HOSPITALS -- 0.3%
Province Health Care Co.*.................. 40,500 $ 1,379,531
------------
INDUSTRIAL ENGINEERING/CONSTRUCTION -- 1.3%
Dycom Industries, Inc.*.................... 75,600 2,353,050
Exodus Communication, Inc.*................ 58,700 1,430,812
Modtech, Inc.*............................. 52,700 922,250
Standard-Pacific Corp...................... 66,900 944,962
------------
5,651,074
------------
INVESTMENT COMPANIES -- 1.1%
Affiliated Managers Group*................. 28,200 507,600
Ameritrade Holding Corp.*.................. 162,000 2,916,000
SEI Investments Co.*....................... 16,600 1,153,700
------------
4,577,300
------------
LIFE INSURERS -- 0.1%
ARM Financial Group, Inc.*................. 20,700 367,425
------------
LODGING -- 0.3%
Cavanaughs Hospitality Corp................ 4,000 31,750
Meristar Hospitality Corp.*................ 67,175 1,146,173
------------
1,177,923
------------
MACHINERY/EQUIPMENT -- 1.7%
Kuhlman Corp.*............................. 60,700 1,968,956
MotivePower Industries, Inc.*.............. 98,377 2,299,562
OmniQuip International, Inc................ 36,300 340,312
Terex Corp.*............................... 91,100 1,360,806
Varlen Corp................................ 53,750 1,505,000
------------
7,474,636
------------
MEDICAL SPECIALTIES -- 0.3%
Hanger Orthopedic Group, Inc.*............. 31,600 588,550
Osteotech, Inc.*........................... 27,600 731,400
------------
1,319,950
------------
MEDICAL SUPPLIES -- 2.7%
MiniMed, Inc.*............................. 31,600 2,085,600
Molecular Devices Corp.*................... 59,800 1,024,075
Ocular Sciences, Inc.*..................... 46,100 968,100
Sabratek Corp.*............................ 76,600 1,733,075
Safeskin Corp.*............................ 80,000 2,525,000
Serologicals Corp.*........................ 44,175 1,109,897
VISX, Inc.................................. 26,200 1,755,400
Young Innovations, Inc.*................... 38,700 541,800
------------
11,742,947
------------
MEDICAL/NURSING/HEALTH SERVICES -- 0.9%
ABR Information Services, Inc.............. 10,800 147,825
Assisted Living Concepts, Inc.*............ 43,800 621,412
Carematrix Corp.*.......................... 28,300 643,825
Dental Care Alliance, Inc.*................ 25,100 254,137
Diagnostic Health Services, Inc.*.......... 33,100 146,881
Hooper Holmes, Inc......................... 32,500 647,969
Sunrise Assisted Living, Inc.*............. 37,700 1,293,581
------------
3,755,630
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
15
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
METALS -- 0.9%
Mueller Industries, Inc.*.................. 154,600 $ 3,932,637
------------
MILITARY/DEFENSE TECHNOLOGY -- 0.0%
Aeroflex, Inc.*............................ 20,300 200,462
------------
MULTI-LINE INSURERS -- 0.2%
Delphi Financial Group, Inc.*.............. 26,981 1,062,377
------------
OIL REFINING/MARKETING -- 0.1%
Tesoro Petroleum Corp.*.................... 27,900 364,444
------------
OIL/GAS PRODUCTION -- 0.3%
Harken Energy Corp.*....................... 175,700 603,969
Petsec Energy, Ltd. -- ADR*................ 83,800 489,706
------------
1,093,675
------------
OILFIELD SERVICES/EQUIPMENT -- 1.2%
Cal Dive International, Inc.*.............. 47,800 860,400
Dril-Quip, Inc.*........................... 21,200 371,000
Global Industries, Ltd.*................... 67,900 785,094
Pride International, Inc.*................. 106,100 848,800
Seitel, Inc................................ 8,400 90,825
Tuboscope, Inc.*........................... 198,400 2,306,400
------------
5,262,519
------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 11.9%
Affiliated Computer Services*.............. 90,100 2,748,050
Cognizant Technology Solutions Corp.*...... 50,000 775,000
Computer Task Group, Inc................... 72,500 2,125,156
Cotelligent, Inc.*......................... 15,000 263,437
Data Processing Resources Corp.*........... 71,100 2,079,675
Diamond Technology Partners, Inc.*......... 32,200 531,300
Ecsoft Group PLC*.......................... 8,500 175,312
First Consulting Group*.................... 8,000 137,000
Forrester Research, Inc.*.................. 57,100 2,084,150
G&K Services, Inc.*........................ 22,950 1,075,781
Host Marriott Services Corp.*.............. 46,800 427,050
Information Management Resources, Inc.*.... 94,400 2,336,400
International Integration, Inc.*........... 11,300 176,562
International Telecommunication Data
Systems, Inc.*........................... 107,400 3,114,600
Kellstrom Industries, Inc.*................ 52,300 725,663
Lason, Inc.*............................... 61,700 3,162,125
Metro Information Services*................ 43,700 1,392,938
NCO Group, Inc.*........................... 52,350 1,455,984
NOVA Corp.*................................ 96,810 2,970,865
NovaCare Employee Services, Inc.*.......... 80,000 240,000
On Assignment, Inc.*....................... 63,200 2,338,400
Personnel Group Of America, Inc.*.......... 15,800 194,538
Pilot Network Services, Inc.*.............. 20,000 132,500
Preview Travel, Inc.*...................... 39,400 719,050
ProBusiness Services, Inc.*................ 13,700 465,800
Provant, Inc.*............................. 15,000 223,125
RemedyTemp, Inc.*.......................... 24,300 516,375
Romac International, Inc.*................. 171,800 3,092,400
RWD Technologies, Inc.*.................... 23,600 531,000
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
</TABLE>
OTHER COMMERCIAL/INDUSTRIAL SERVICES (CONTINUED)
<TABLE>
<S> <C> <C>
S.O.S. Staffing Services, Inc.*............ 40,100 $ 586,463
SM & A Corp.*.............................. 34,600 596,850
SPR, Inc.*................................. 60,600 1,393,800
Staff Leasing, Inc.*....................... 42,200 743,775
Staffmark, Inc.*........................... 33,400 609,550
Steiner Leisure, Ltd....................... 12,150 189,844
Technology Solutions Co.*.................. 121,750 1,369,688
The Metzler Group, Inc.*................... 116,250 3,981,563
United Road Services, Inc.*................ 41,500 495,406
Whittman-Hart, Inc.*....................... 273,800 5,031,075
------------
51,208,250
------------
OTHER CONSUMER DURABLES -- 0.7%
Action Performance Companies, Inc.*........ 85,900 2,319,300
Movado Group, Inc.......................... 36,212 760,452
------------
3,079,752
------------
OTHER CONSUMER NON-DURABLES -- 0.3%
Helen Of Troy, Ltd.*....................... 75,200 1,457,000
------------
OTHER CONSUMER SERVICES -- 0.4%
Career Education Corp.*.................... 4,000 87,500
Equity Corp. International*................ 22,800 513,000
Global Vacation Group, Inc.*............... 20,000 143,750
Strayer Education, Inc..................... 27,650 722,356
Travel Services International, Inc.*....... 30,000 406,875
------------
1,873,481
------------
OTHER FINANCIAL SERVICES -- 0.8%
Franchise Mortgage Acceptance Co.*......... 70,000 463,750
Healthcare Financial Partners, Inc.*....... 75,200 3,158,400
------------
3,622,150
------------
OTHER HEALTH TECHNOLOGY/SERVICES -- 1.4%
Advance Paradigm Inc.*..................... 40,700 1,231,175
ICON, PLC -- ADR*.......................... 18,000 587,250
Kendle International, Inc.*................ 40,000 1,310,000
MedQuist, Inc.*............................ 87,600 2,770,350
------------
5,898,775
------------
OTHER PRODUCERS/MANUFACTURING -- 1.1%
BE Aerospace, Inc.*........................ 44,600 981,200
CompX International, Inc.*................. 31,100 536,475
Encore Wire Corp.*......................... 83,850 775,613
Interface, Inc............................. 100,600 1,207,200
SLI, Inc.*................................. 93,750 1,447,266
------------
4,947,754
------------
OTHER RETAIL TRADE -- 0.6%
Cyberian Outpost, Inc.*.................... 19,400 202,488
Fred's, Inc................................ 34,500 457,125
Renters Choice, Inc.*...................... 67,100 1,778,150
------------
2,437,763
------------
OTHER TECHNOLOGY -- 1.3%
Complete Business Solutions, Inc.*......... 43,600 1,253,500
Jack Henry & Associates, Inc............... 88,650 4,233,038
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
16
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
OTHER TECHNOLOGY (CONTINUED)
<TABLE>
<S> <C> <C>
Pegasus Systems, Inc.*..................... 21,200 $ 271,625
------------
5,758,163
------------
OTHER TRANSPORTATION -- 0.3%
Coach USA, Inc.*........................... 47,400 1,170,188
------------
PRINTING/FORMS -- 1.4%
Applied Graphics Technologies*............. 56,800 710,000
Consolidated Graphics, Inc.*............... 95,400 3,625,200
Mail-Well, Inc.*........................... 197,800 1,693,663
------------
6,028,863
------------
REAL ESTATE BROKERS/SERVICES -- 0.4%
LaSalle Partners, Inc.*.................... 57,600 1,882,800
------------
RECREATION PRODUCTS -- 0.3%
National R.V. Holdings, Inc.*.............. 23,050 484,050
The North Face, Inc.*...................... 60,600 787,800
------------
1,271,850
------------
RECREATIONAL CENTERS -- 0.5%
Bally Total Fitness Holding Corp.*......... 113,100 1,965,113
------------
REGIONAL BANKS -- 1.0%
Peoples Heritage Financial Group, Inc...... 72,100 1,293,294
Provident Bankshares Corp.................. 126,675 3,214,378
------------
4,507,672
------------
REITS -- 1.7%
Golf Trust Of America, Inc................. 48,600 1,445,850
Health Care REIT, Inc...................... 43,500 1,158,188
Kilroy Realty Corp.*....................... 107,825 2,479,975
MeriStar Hotels & Resorts, Inc.*........... 36,750 101,062
Storage USA, Inc........................... 34,700 1,201,488
Walden Residential Properties, Inc......... 43,600 1,002,800
------------
7,389,363
------------
RENTAL/LEASING COMPANIES -- 0.1%
Linc Capital, Inc.*........................ 15,000 144,375
National Equipment Services, Inc.*......... 25,000 153,125
T & W Financial Corp.*..................... 10,800 157,275
------------
454,775
------------
RESTAURANTS -- 1.7%
Buffets, Inc............................... 91,400 988,263
CKE Restaurants, Inc.*..................... 72,315 2,151,371
Dave & Busters, Inc.*...................... 57,700 858,288
Foodmaker, Inc.*........................... 66,800 1,047,925
Sonic Corp.*............................... 131,250 2,296,875
------------
7,342,722
------------
SAVINGS & LOANS ASSOCIATIONS -- 0.4%
First Washington Bancorp, Inc.*............ 33,550 759,069
MAF Bancorp, Inc........................... 45,825 1,076,888
------------
1,835,957
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 3.0%
Applied Micro Circuits Corp.*.............. 37,404 $ 556,385
C&D Technologies, Inc...................... 37,600 897,700
MIPS Technologies, Inc.*................... 39,900 793,013
Moog, Inc.*................................ 24,700 714,756
Rambus, Inc.*.............................. 48,700 3,116,800
SIPEX Corp.*............................... 45,900 1,164,713
Smart Modular Technologies, Inc.*.......... 101,200 2,080,925
Transwitch Corp.*.......................... 39,200 585,550
Uniphase Corp.*............................ 78,500 3,218,500
------------
13,128,342
------------
SOAPS COSMETICS -- 0.1%
Chattem, Inc.*............................. 19,000 518,938
------------
SOFTWARE -- 14.0%
Advantage LearningSystems, Inc.*........... 35,100 1,333,800
Aspen Technology, Inc.*.................... 41,800 1,118,150
AXENT Technologies, Inc.*.................. 87,200 1,624,100
Business Objects S.A. -- ADR*.............. 80,400 1,005,000
CNET, Inc.*................................ 57,000 2,607,750
Concord Communications, Inc.*.............. 61,500 2,444,625
Datastream Systems, Inc.*.................. 60,000 1,046,250
Documentum, Inc.*.......................... 21,100 836,088
DSET Corp.*................................ 4,000 34,000
Engineering Animation, Inc.*............... 75,650 3,612,288
Excite, Inc.*.............................. 49,000 1,999,813
Geotel Communications Corp.*............... 194,200 5,219,125
Infinium Software, Inc..................... 69,700 653,438
InterVU, Inc.*............................. 10,000 90,000
Legato Systems, Inc.*...................... 92,500 4,752,188
Lycos, Inc.*............................... 170,800 5,775,175
MEMCO Software, Ltd.*...................... 42,300 592,200
Mercury Interactive Corp.*................. 109,200 4,333,875
Micromuse, Inc............................. 20,000 357,500
MindSpring Enterprises*.................... 15,600 647,400
Netscape Communications Corp.*............. 63,600 1,391,250
New Era Of Networks, Inc.*................. 65,400 2,665,050
Peregrine Systems, Inc.*................... 76,600 3,083,150
Software Systems, Inc. A.G.*............... 82,000 1,394,000
SportsLine USA, Inc........................ 19,500 340,031
Summit Design, Inc.*....................... 55,400 394,725
Verio, Inc.*............................... 25,000 618,750
VERITAS Software Corp.*.................... 122,525 6,769,506
Visio Corp.*............................... 137,300 3,303,781
------------
60,043,008
------------
SPECIALTY CHAINS -- 2.6%
Guitar Center, Inc.*....................... 36,100 676,875
Hollywood Entertainment Corp.*............. 200,100 2,726,363
Linens N' Things, Inc.*.................... 68,100 1,872,750
Marks Brothers Jewelers, Inc.*............. 30,900 413,288
Micro Warehouse, Inc.*..................... 196,500 2,959,781
Party City Corp.*.......................... 44,350 582,094
Rental Services Corp.*..................... 71,200 1,281,600
Sonic Automotive, Inc.*.................... 20,700 410,119
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
17
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
SPECIALTY CHAINS (CONTINUED)
<TABLE>
<S> <C> <C>
Sunglass Hut International, Inc.*.......... 75,700 $ 435,275
------------
11,358,145
------------
SPECIALTY INSURERS -- 0.6%
Century Business Services, Inc.*........... 125,200 2,550,950
------------
TELECOMMUNICATIONS EQUIPMENT -- 5.0%
AVT Corp.*................................. 96,400 2,181,050
Carrier Access Corp.*...................... 23,700 423,638
Com21, Inc.*............................... 30,200 539,825
Comverse Technology, Inc.*................. 24,400 997,350
Gilat Satellite Networks, Ltd.*............ 43,300 1,948,500
GST Telecommunications, Inc.*.............. 99,100 619,375
International Network Services*............ 75,200 3,120,800
L-3 Communications Holdings*............... 32,200 1,277,938
Metromedia Fiber Network, Inc.*............ 67,600 2,213,900
Quanta Services, Inc.*..................... 39,100 481,419
Stanford Telecommunications, Inc.*......... 47,300 437,525
Superior Telecom, Inc...................... 67,775 3,278,616
Tekelec*................................... 174,500 2,661,125
World Access, Inc.*........................ 81,100 1,642,275
------------
21,823,336
------------
TELECOMMUNICATIONS SERVICES -- 0.7%
IDT Corp.*................................. 105,100 2,417,300
SCC Communications Corp.................... 17,600 52,800
US LEC Corp.*.............................. 39,600 509,850
------------
2,979,950
------------
TEXTILES -- 0.4%
Novel Denim Holdings, Ltd.*................ 45,200 531,100
Pillowtex Corp............................. 48,200 1,415,875
------------
1,946,975
------------
TRUCKING -- 0.4%
Jevic Transportation, Inc.*................ 10,500 74,813
Johnstown America Industries, Inc.*........ 74,400 1,060,200
Knight Transportation, Inc.*............... 16,350 275,906
Swift Transportation Co., Inc.*............ 29,800 517,775
------------
1,928,694
------------
WHOLESALE DISTRIBUTION -- 0.3%
Anicom, Inc.*.............................. 85,800 579,150
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
</TABLE>
WHOLESALE DISTRIBUTION (CONTINUED)
<TABLE>
<S> <C> <C>
Aviall, Inc.*.............................. 83,800 $ 874,664
------------
1,453,814
------------
TOTAL COMMON STOCKS
(Cost $360,715,991)...................................... 410,229,631
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
WARRANTS
<S> <C> <C>
- -------------------------------------------------------------------------------
WARRANTS -- 0.0%
- -------------------------------------------------------------------------------
Iwerks Entertainment 07/99*
(Cost $0)................................ 2,787 0
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.1%
- -------------------------------------------------------------------------------
Associates First Capital Corp.
5.740%, 10/01/98......................... $ 2,558,000 2,558,000
Central Illinois Public
5.78%, 10/01/98.......................... 6,413,000 6,413,000
------------
TOTAL COMMERCIAL PAPER
(Cost $8,971,000).......................................... 8,971,000
------------
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 3.6%
- -------------------------------------------------------------------------------
J.P. Morgan & Co., Inc. $15,613,000 at
5.50%, (Agreement dated 9/30/98; to be
repurchased at $15,615,385 on 10/01/98;
collaterlized by $14,850,000 FNMA Notes,
5.75% due 06/15/05 (Value $16,176,708))
(Cost $15,613,000)....................... 15,613,000 15,613,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS -- 100.3%
(Cost $385,299,991)........................................ 434,813,631
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.3%).............. (1,414,365)
------------
NET ASSETS -- 100.0%......................................... $433,399,266
------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
18
<PAGE>
MINI CAP GROWTH FUND
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer,
Global Equity Management
Thomas E. Bleakley,
Partner, Portfolio Manager
Aaron M. Harris,
Portfolio Manager
John C. McCraw,
Portfolio Manager
Paul E. Cluskey,
Investment Analyst
GOAL: The Mini Cap Growth Fund seeks to maximize long-term capital
appreciation by investing primarily in US companies with market capitalizations
corresponding to the bottom 5% of the Russell 2000 Growth Index at time of
purchase.
MARKET OVERVIEW: After climbing to record highs in mid-July, a variety of
factors contributed to a difficult environment for US stocks in the third
quarter including:
- expectations for declining corporate profits
- increasing global economic and currency turmoil
- evidence of a slowing US economy
Unstable overseas markets impacted investor confidence in the United States.
During the third-quarter downturn, mini-cap stocks were vulnerable as investors
preferred the liquidity and perceived safety of larger caps. The smaller-cap
Russell 2000 Growth Index fell 33.6% between April and August.
After trailing larger-capitalization issues for most of the period, the
mini-cap segment enjoyed a period of outperformance in September. This was
attributed to:
- compelling valuations relative to large caps
- recognition of superior earnings growth rates versus large caps
- mini caps' limited exposure to volatile international markets
PERFORMANCE: For the six-month period ending Sept. 30, 1998, the fund and the
Russell 2000 Growth Index declined 27.6% and 26.8%, respectively.
PORTFOLIO SPECIFICS: During the six-month period, exposure to the
disappointing consumer services, financial services and technology sectors hurt
performance relative to the Index. At the same time, as a result of our stock
selection in the consumer durables and commercial/industrial sectors, negative
returns were minimized relative to the Index.
Despite a volatile market, we continued to uncover companies adapting
successfully to a changing economic environment and delivering exceptional
earnings growth. One example was Chico's FAS Inc. The firm designs and sells its
own adult line of clothing for women. Chico's boutiques target middle-to
high-income women in the 35 to 60 age group. It operates more than 150 stores in
35 states and Washington, DC.
MARKET OUTLOOK: We remain optimistic about the prospects for mini-cap stocks
as they continue to offer a source of attractive investment opportunities.As of
Sept. 30, the median earnings growth rate for fund holdings was 35.1% versus
17.8% for the Russell 2000 Growth Index. Going forward, we believe those stocks
able to deliver consistent profit growth will be recognized and rewarded in a
scarce-growth environment.
- --------------------------------------------------------------------------------
19
<PAGE>
MINI CAP GROWTH FUND
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE MINI
CAP GROWTH FUND WITH THE RUSSELL 2000 GROWTH INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 09/30/98 SINCE
1 YEAR 3 YEARS INCEPTION
-22.92% 13.50% 15.98%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MINI CAP GROWTH
FUND INSTITUTIONAL SHARES RUSSELL 2000 GROWTH INDEX
<S> <C> <C>
7/12/95 $10,000.00 $10,000.00
9/95 $11,024.00 $10,729.62
12/95 $11,480.00 $10,889.86
3/96 $12,680.00 $11,515.40
6/96 $14,864.00 $12,188.22
9/96 $14,384.00 $12,084.01
12/96 $14,778.33 $12,116.39
3/97 $13,174.86 $10,837.22
6/97 $16,356.99 $12,739.14
9/97 $20,911.16 $14,893.82
12/97 $19,239.91 $13,672.62
3/98 $22,251.14 $15,297.78
6/98 $21,682.65 $14,419.24
9/30/98 $16,117.63 $11,195.80
</TABLE>
This graph compares a $10,000 investment in the Mini Cap Growth Fund with the
Russell 2000 Growth Index, on a cumulative and average annual total return
basis. All return calculations reflect the reinvestment of income dividends and
capital gains distributions, if any, as well as all fees and expenses.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The Russell 2000 Growth Index is an unmanaged index containing those securities
in the Russell 2000 Index with a greater-than-average growth orientation.
Companies in this index generally have higher price-to-book and price-earnings
ratios. The Russell 2000 Index is an unmanaged index and is a widely regarded
small-cap index of the 2,000 smallest securities in the Russell 3000 Index which
comprises the 3,000 largest U.S. securities as determined by total market
capitalization.
Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
20
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
MINI CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
COMMON STOCKS -- 95.2%
- ----------------------------------------------------------------------------
AIRLINES -- 3.0%
Atlantic Coast Airlines Holdings*.......... 42,800 $ 1,000,450
Mesaba Holdings, Inc.*..................... 40,000 580,000
------------
1,580,450
------------
ALCOHOLIC BEVERAGES -- 0.7%
Boston Beer Co............................. 50,800 368,300
------------
APPAREL -- 4.7%
Ashworth, Inc.*............................ 35,100 236,925
Columbia Sportswear Co.*................... 15,500 253,812
Cutter & Buck, Inc.*....................... 35,800 823,400
Maxwell Shoe Co., Inc.*.................... 19,000 225,625
Quiksilver, Inc.*.......................... 26,600 483,787
Tropical Sportswear International*......... 24,900 463,762
------------
2,487,311
------------
BROADCASTING -- 0.3%
VDI Media*................................. 18,900 167,737
------------
BUILDING MATERIALS CHAINS -- 1.1%
Tractor Supply Co.*........................ 24,900 491,775
White Cap Industries, Inc.*................ 9,700 99,425
------------
591,200
------------
CATALOG/OUTLET STORES -- 0.8%
DM Management Co.*......................... 53,400 430,537
------------
CHEMICALS -- 0.9%
Eco Soil Systems, Inc.*.................... 75,300 475,331
------------
CLOTHING CHAINS -- 1.9%
Catherines Stores Corp.*................... 35,400 274,350
Chico's Fas, Inc.*......................... 45,300 730,462
------------
1,004,812
------------
COMPUTERS/OFFICE AUTOMATION -- 4.2%
Apex PC Solutions, Inc.*................... 20,700 406,237
Cybex Computer Products Corp.*............. 23,900 600,487
Extended Systems, Inc.*.................... 13,900 92,087
Fundtech, Ltd.*............................ 17,200 184,900
Optimal Robotics Corp.*.................... 32,400 226,800
QLogic Corp.*.............................. 7,500 489,375
TAVA Technologies, Inc.*................... 42,100 192,081
------------
2,191,967
------------
CONTRACT DRILLING -- 0.5%
Unit Corp.*................................ 53,100 258,862
------------
DRUGS/PHARMACEUTICALS -- 0.1%
CombiChem, Inc.*........................... 9,400 37,600
------------
ELECTRONIC DATA PROCESSING 1.3%
Transaction Network Services, Inc.......... 26,600 678,300
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
ELECTRONIC INSTRUMENTS -- 0.7%
OYO Geospace Corp.*........................ 23,800 $ 374,850
------------
ELECTRONICS MUSIC CHAINS -- 2.6%
Musicland Stores Corp.*.................... 61,500 761,062
Trans World Entertainment Corp.*........... 34,200 624,150
------------
1,385,212
------------
ENTERTAINMENT -- 0.9%
Cinar Films, Inc.*......................... 25,600 459,200
------------
ENVIRONMENTAL SERVICES -- 2.4%
Casella Waste System, Inc.*................ 8,500 289,000
KTI, Inc.*................................. 43,100 786,575
Waste Connections, Inc.*................... 10,000 197,500
------------
1,273,075
------------
GROCERY PRODUCTS -- 1.2%
Hain Food Group, Inc....................... 23,600 354,000
Horizon Organic Holding Corp............... 17,200 262,300
------------
616,300
------------
HOME FURNISHINGS -- 2.6%
American Woodmark Corp..................... 18,800 477,050
Craftmade International, Inc............... 22,600 340,412
Winsloew Furniture, Inc.*.................. 28,800 547,200
------------
1,364,662
------------
HOMEBUILDING -- 1.1%
Engle Homes, Inc........................... 21,300 302,859
M/I Schottenstein Homes, Inc............... 15,200 281,200
------------
584,059
------------
INDUSTRIAL ENGINEERING/CONSTRUCTION -- 0.8%
GP Strategies Corp.*....................... 39,900 399,000
------------
MEDICAL SPECIALTIES -- 3.4%
Hanger Orthopedic Group, Inc.*............. 52,700 981,538
Osteotech, Inc.*........................... 31,000 821,500
------------
1,803,038
------------
MEDICAL SUPPLIES -- 1.2%
Xomed Surgical Products, Inc.*............. 15,500 637,438
------------
MEDICAL/NURSING/HEALTH SERVICES -- 1.3%
Diagnostic Health Services, Inc.*.......... 41,900 185,931
Hooper Holmes, Inc......................... 26,200 522,363
------------
708,294
------------
MILITARY/DEFENSE TECHNOLOGY -- 0.9%
Aeroflex, Inc.*............................ 46,400 458,200
------------
OIL/GAS PRODUCTION 0.9%
Basin Exploration, Inc.*................... 27,300 452,156
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
21
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
MINI CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OTHER COMMERCIAL/INDUSTRIAL SERVICES 16.0%
Automobile Protection Corp.*............... 62,100 $ 438,581
D A Consulting Group, Inc.*................ 16,700 254,675
Data Processing Resources Corp.*........... 28,200 824,850
Ecsoft Group PLC*.......................... 30,700 633,188
Headway Corporate Resourses, Inc.*......... 38,000 190,000
Healthworld Corp.*......................... 21,900 339,450
Kellstrom Industries, Inc.................. 37,100 514,763
Kroll O'Gara Co............................ 26,200 612,425
Lamalie Associates, Inc.*.................. 43,200 253,800
NCO Group, Inc.*........................... 39,750 1,105,547
Preview Travel, Inc.*...................... 18,900 344,925
RemedyTemp, Inc.*.......................... 29,700 631,125
S.O.S. Staffing Services, Inc.............. 62,800 918,450
SPR, Inc.*................................. 34,050 783,150
Tier Technologies, Inc. Cl. B*............. 35,500 585,750
------------
8,430,679
------------
OTHER CONSUMER DURABLES -- 1.7%
Movado Group, Inc.......................... 42,825 899,325
------------
OTHER CONSUMER SERVICES -- 1.6%
Bright Horizons Family Solutions, Inc.*.... 17,138 364,183
Children's Comprehensive Services, Inc.*... 23,000 227,125
Zomax Optical Media, Inc................... 22,500 257,344
------------
848,652
------------
OTHER FINANCIAL SERVICES -- 1.1%
Gilman & Ciocia, Inc.*..................... 27,500 172,734
Healthcare Financial Partners, Inc.*....... 10,100 424,200
------------
596,934
------------
OTHER HEALTH TECHNOLOGY/SERVICES -- 3.3%
Balanced Care Corp......................... 14,100 86,363
Heska Corp.*............................... 37,900 213,188
ICON, PLC -- ADR*.......................... 8,500 277,313
MedQuist, Inc.*............................ 21,200 670,450
OrthAlliance, Inc.*........................ 28,800 234,000
Sterigenics International, Inc.*........... 11,700 255,938
------------
1,737,252
------------
OTHER PRODUCERS/MANUFACTURING -- 1.2%
American Bank Note Holographics, Inc....... 25,700 202,388
Denali, Inc.*.............................. 33,800 456,300
------------
658,688
------------
OTHER RETAIL TRADE -- 1.5%
Blue Rhino Corp.*.......................... 24,900 252,113
Fred's, Inc................................ 38,875 515,094
------------
767,207
------------
OTHER TECHNOLOGY -- 2.1%
Macrovision Corp.*......................... 38,600 1,129,050
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
PUBLISHING -- 0.3%
On Health Network Co.*..................... 37,400 $ 144,925
------------
RECREATION PRODUCTS/SERVICES -- 2.9%
Monaco Coach Corp.*........................ 29,700 749,925
The First Years, Inc....................... 30,600 436,050
Travis Boats & Motors, Inc.*............... 22,200 344,100
------------
1,530,075
------------
REGIONAL/COMMERCIAL BANKS -- 1.3%
Sterling Bancorp........................... 33,000 664,125
------------
RENTAL/LEASING -- 2.9%
Rent-Way, Inc.*............................ 49,600 1,221,400
T & W Financial Corp.*..................... 22,500 327,656
------------
1,549,056
------------
SAVINGS & LOAN ASSOCIATIONS -- 0.7%
Netbank, Inc.*............................. 18,300 347,700
------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 0.2%
Transwitch Corp.*.......................... 8,500 126,969
------------
SOAPS/COSMETICS -- 1.2%
Chattem, Inc.*............................. 20,000 546,250
Styling Technology Corp.*.................. 5,300 98,050
------------
644,300
------------
SOFTWARE -- 10.2%
Actuate Software Corp.*.................... 9,300 98,813
Best Software, Inc.*....................... 41,600 998,400
Brio Technology, Inc.*..................... 36,100 361,000
Catalyst International, Inc.*.............. 42,000 273,000
Information Advantage, Inc.*............... 28,100 129,963
Information Management Associates, Inc.*... 47,400 349,575
Intelligroup, Inc.*........................ 24,900 423,300
InterVU, Inc.*............................. 13,900 125,100
Peerless Systems Corp.*.................... 6,700 24,916
Segue Software, Inc.*...................... 32,800 541,200
Spyglass, Inc.*............................ 24,900 317,475
SS&C Technologies, Inc.*................... 48,000 588,000
Symix Systems, Inc.*....................... 36,300 662,475
Timberline Software Corp................... 24,800 471,200
------------
5,364,417
------------
SPECIALTY CHAINS -- 2.2%
Party City Corp.*.......................... 14,350 188,344
Shoe Carnival, Inc.*....................... 23,900 221,075
Sonic Automotive, Inc.*.................... 36,900 731,081
------------
1,140,500
------------
TELECOMMUNICATIONS EQUIPMENT -- 4.0%
AVT Corp.*................................. 62,200 1,407,275
Com21, Inc.*............................... 14,800 264,550
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
22
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT (CONTINUED)
<TABLE>
<S> <C> <C>
Ortel Corp.*............................... 25,800 $ 412,800
------------
2,084,625
------------
TRUCKING -- 0.6%
Johnstown America Industries, Inc.*........ 24,000 342,000
------------
WHOLESALE DISTRIBUTION -- 0.7%
Anicom, Inc.*.............................. 57,700 389,475
------------
TOTAL COMMON STOCKS
($47,807,769)............................................ 50,183,845
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMERCIAL PAPER -- 3.5%
- -------------------------------------------------------------------------------
Associates First Capital Corp.
5.740%, 10/01/98
(Cost $1,851,000)........................ $ 1,851,000 1,851,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS -- 98.7%
(Cost $49,658,769)......................................... 52,034,845
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.3%................ 673,454
------------
NET ASSETS -- 100.0% $ 52,708,299
------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
23
<PAGE>
BALANCED GROWTH FUND
ADVISORY SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer,
Global Equity Management
Fred S. Robertson,
Partner, Chief Investment Officer, Fixed Income
Lawrence S. Speidell, CFA,
Partner, Director of Global/Systematic Portfolio
Management and Research
John J. Kane,
Partner, Portfolio Manager
Susan Malone,
Portfolio Manager
GOAL: The Balanced Growth Fund seeks to provide capital appreciation and
current income by investing approximately 60% of total assets in equity
securities of primarily US companies and 40% of total assets in debt securities
issued by US corporations, the US Government and its agencies.
MARKET OVERVIEW: The US bond and equity markets delivered diverse returns in
the period. For bonds, conflicting economic signals held yields in a tight
range, especially in the second quarter.
During August, however, the environment changed significantly. The Russian
currency crisis and concerns that devaluations and defaults would spread
prompted investors worldwide to seek safety. US Treasury bonds were the primary
beneficiaries. Other sectors of the fixed income market such as high-quality,
AAA-rated corporates and mortgage-backed securities were overlooked and
underperformed Treasuries.
Among equities, after climbing to record highs in mid-July, the US stock
market witnessed its most difficult period in eight years during the third
quarter. Declines were widespread amid a variety of investor concerns including:
- expectations for weaker corporate profits
- increasing global economic and currency turmoil
- evidence of a slowing US economy
PERFORMANCE: For the six-month period ending Sept. 30, 1998, the fund declined
1.6% versus a 1.0% decline for a balanced index comprised of 60% of the S&P 500
Index and 40% of the Lehman Government/Corporate Index.
PORTFOLIO SPECIFICS: Among positive factors contributing to the fund's
performance were our stock selection in the technology, utilities and health
technology sectors and our overweighting in the utilities sector. Among the
factors negatively impacting returns were our underweighting in consumer
services stocks and our overweighting in mortgage-backed and corporate bonds.
MARKET OUTLOOK: Looking ahead, we expect inflation to remain benign,
especially given global excess capacity. Overall, we see a positive environment
for bonds due to:
- deflationary influences of emerging market currency devaluations
- continued slow growth in government spending and declining Federal borrowing
reducing the supply of debt obligations
- the Federal Reserve Board's continued commitment to price stability
With respect to equities, we believe those stocks able to deliver consistent
profit growth will be recognized and rewarded in a scarce-growth environment.
These are precisely the types of stocks we seek.
- --------------------------------------------------------------------------------
24
<PAGE>
BALANCED GROWTH FUND ADVISORY SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
BALANCED GROWTH FUND ADVISORY SHARES WITH A MODEL INDEX CONSISTING OF 60% S&P
500 INDEX/40% LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 09/30/98 SINCE
1 YEAR 5 YEARS INCEPTION
6.26% 11.63% 13.84%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BALANCED GROWTH BALANCED 60/40
FUND ADVISORY SHARES INDEX
<S> <C> <C>
19-Apr-93 $10,000.00 $10,000.00
30-Jun-93 $11,052.00 $10,167.89
30-Sep-93 $11,690.00 $10,460.54
31-Dec-93 $11,360.00 $10,593.91
31-Mar-94 $10,978.00 $10,220.09
30-Jun-94 $10,329.00 $10,196.47
30-Sep-94 $10,871.00 $10,516.10
31-Dec-94 $10,680.00 $10,533.05
31-Mar-95 $11,371.00 $11,358.01
30-Jun-95 $12,423.00 $12,302.76
30-Sep-95 $13,418.00 $12,982.35
31-Dec-95 $13,229.00 $13,694.89
31-Mar-96 $13,695.00 $14,001.13
30-Jun-96 $14,508.00 $14,403.65
30-Sep-96 $15,058.00 $14,779.90
31-Dec-96 $15,460.00 $15,701.27
31-Mar-97 $14,690.00 $15,904.46
30-Jun-97 $16,693.00 $17,775.90
30-Sep-97 $19,072.00 $18,834.70
31-Dec-97 $18,781.21 $19,411.09
31-Mar-98 $20,596.14 $21,139.22
30-Jun-98 $21,119.96 $21,782.89
30-Sep-98 $20,265.56 $20,935.35
</TABLE>
This graph compares a $10,000 investment in the Balanced Growth Fund Advisory
Shares with a model index consisting of 60% Standard & Poor's ("S&P") 500 Index
and 40% Lehman Brothers Government/Corporate Bond Index, on a cumulative and
average annual total return basis. The Advisory Shares calculate their
performance based upon the historical performance of their corresponding series
("Fund") of Nicholas-Applegate Mutual Funds, adjusted to reflect sales charges
and operating expenses. The Fund's Advisory Shares were first available on
8/31/95. All return calculations reflect the reinvestment of income dividends
and capital gains distributions, if any, as well as all fees and expenses.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The S&P 500 Index is an unmanaged index containing 500 industrial,
transportation, utility and financial companies regarded as generally
representative of the U.S. stock market.
The Lehman Brothers Government/Corporate Bond Index is an unmanaged
market-weighted index consisting of all public obligations of the U.S.
Government, its agencies and instrumentalities and all corporation issuers of
fixed rate, non-convertible, investment grade U.S. dollar denominated bonds
having maturities of greater than one year. It is generally regarded as
representative of the market for domestic bonds.
Each index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
25
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
BALANCED GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
COMMON STOCKS -- 58.5%
- ----------------------------------------------------------------------------
AEROSPACE -- 1.3%
United Technologies Corp................... 5,700 $ 435,694
------------
AIRLINES -- 0.2%
AMR Corp.*................................. 1,400 77,612
------------
ALCOHOLIC BEVERAGES -- 0.6%
Canandaigua Brands, Inc.*.................. 4,800 189,600
------------
APPAREL -- 0.4%
Jones Apparel Group, Inc................... 5,400 123,862
------------
AUTOMOBILES -- 0.4%
Ford Motor Corp............................ 2,600 122,037
------------
AUTOMOTIVE EQUIPMENT -- 0.5%
SPX Corp................................... 4,000 165,251
------------
BEVERAGES/SOFTDRINKS -- 1.3%
PepsiCo, Inc............................... 14,100 415,069
------------
BIOTECHNOLOGY -- 1.3%
Amgen, Inc.*............................... 5,700 430,707
------------
BUILDING MATERIALS CHAINS -- 0.7%
Centex Construction Products, Inc.......... 6,600 225,225
------------
CHEMICALS -- 1.8%
Dow Chemical Co............................ 5,100 435,732
Lyondell Chemical Co....................... 7,500 166,875
------------
602,607
------------
CLOTHING CHAINS -- 1.3%
Ross Stores, Inc........................... 3,700 105,912
TJX Companies, Inc......................... 18,400 327,750
------------
433,662
------------
COMPUTERS/OFFICE AUTOMATION -- 5.1%
Apple Computer, Inc.*...................... 3,400 129,625
Dell Computer Corp.*....................... 12,400 815,300
EMC Corp.*................................. 2,200 125,812
Pitney Bowes, Inc.......................... 8,800 480,150
Xerox Corp................................. 1,200 101,700
------------
1,652,587
------------
DEPARTMENT/DISCOUNT STORES -- 1.1%
Federated Department Stores, Inc........... 2,200 80,025
Wal-Mart Stores, Inc....................... 5,000 273,125
------------
353,150
------------
DRUGS/PHARMACEUTICALS -- 4.3%
Abbott Laboratories........................ 4,000 173,750
Pfizer, Inc................................ 3,000 317,812
Schering-Plough Corp....................... 7,200 745,650
Warner-Lambert Co.......................... 2,000 151,000
------------
1,388,212
------------
ELECTRIC UTILITIES -- 1.1%
FPL Group, Inc............................. 5,100 355,406
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
ENTERTAINMENT -- 0.4%
The Walt Disney Co......................... 5,100 $ 129,094
------------
FINANCE COMPANIES -- 2.2%
Federal National Mortgage Association...... 8,000 514,000
SLM Holding Corp........................... 6,300 204,356
------------
718,356
------------
GROCERY PRODUCTS -- 1.3%
Dean Foods Co.............................. 4,000 176,000
Interstate Bakeries Corp................... 7,600 235,600
------------
411,600
------------
INTEGRATED OIL COMPANIES -- 4.8%
Exxon Corp................................. 10,600 743,987
Mobil Corp................................. 7,300 554,344
Phillips Petroleum Co...................... 6,000 270,750
------------
1,569,081
------------
INTERNET CONTENT -- 1.8%
America Online, Inc.*...................... 5,200 578,500
------------
INVESTMENT COMPANIES -- 0.3%
Morgan Stanley Dean Witter & Co............ 1,800 77,512
------------
MACHINERY/EQUIPMENT -- 1.1%
Caterpillar, Inc........................... 3,700 164,881
Illinois Tool Works, Inc................... 1,700 92,650
Ingersoll Rand Co.......................... 2,200 83,462
------------
340,993
------------
METALS -- 0.7%
Bethlehem Steel Corp....................... 15,500 127,875
Hecla Mining Co............................ 19,100 96,694
------------
224,569
------------
MONEY-CENTER BANKS -- 0.7%
Comerica, Inc.............................. 2,700 147,994
SunTrust Banks, Inc........................ 1,500 93,000
------------
240,994
------------
MULTI-LINE INSURERS -- 0.3%
Travelers Group, Inc....................... 2,700 101,250
------------
OTHER CONSUMER NON-DURABLES -- 1.5%
The Procter & Gamble Co.................... 6,700 475,281
------------
OTHER FINANCIAL SERVICES -- 1.3%
SunAmerica, Inc............................ 6,800 414,800
------------
OTHER PRODUCERS/MANUFACTURING -- 1.1%
Crane Co................................... 6,450 151,575
Eastman Kodak Co........................... 1,100 85,044
Tyco International, Ltd.*.................. 2,200 121,550
------------
358,169
------------
PAPER -- 0.7%
Fort James Corp............................ 7,300 239,531
------------
PROPERTY-CASUALTY INSURERS -- 2.0%
Orion Capital Corp......................... 5,400 192,712
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
26
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
PROPERTY-CASUALTY INSURERS (CONTINUED)
<TABLE>
<S> <C> <C>
Allstate Corp.............................. 11,000 $ 458,562
------------
651,274
------------
RAILROADS -- 1.0%
Burlington Northern Santa Fe Corp.......... 9,800 313,600
------------
REGIONAL/COMMERCIAL BANKS -- 2.4%
Amsouth Bancorporation..................... 8,700 296,887
Fleet Financial Group, Inc................. 1,200 88,125
Mellon Bank Corp........................... 7,400 407,462
------------
792,474
------------
RESTAURANTS -- 0.7%
Foodmaker, Inc............................. 8,100 127,069
McDonald's Corp............................ 1,700 101,469
------------
228,538
------------
SAVINGS & LOANS ASSOCIATIONS -- 0.7%
Greenpoint Financial Corp.................. 7,000 223,125
------------
SEMI-CONDUCTORS/ELECTRONIC COMPONENTS -- 1.4%
Intel Corp................................. 5,100 437,325
------------
SOAPS/COSMETICS -- 0.6%
Colgate-Palmolive Co....................... 1,100 75,350
Gillette Co................................ 2,800 107,100
------------
182,450
------------
SOFTWARE -- 1.1%
Microsoft Corp.*........................... 3,200 352,200
------------
TELECOMMUNICATIONS EQUIPMENT -- 4.1%
Airtouch Communications, Inc.*............. 4,200 239,401
Ameritech Corp............................. 11,100 525,862
Lucent Technologies, Inc................... 3,000 207,187
Northern Telecom, Ltd...................... 11,400 364,800
------------
1,337,250
------------
TELEPHONE -- 3.6%
AT&T Corp.................................. 7,400 432,437
BellSouth Corp............................. 9,900 744,975
------------
1,177,412
------------
TEXTILES -- 0.5%
Carlisle Cos., Inc......................... 4,500 175,219
------------
TOBACCO PRODUCTS -- 0.8%
Philip Morris Cos., Inc.................... 5,800 267,163
------------
TOTAL COMMON STOCKS
(Cost $16,592,334)....................................... 18,988,441
------------
- ----------------------------------------------------------------------------
PREFERRED STOCK -- 0.4%
- ----------------------------------------------------------------------------
TELECOMMUNICATIONS
IXC Communications, Inc. 12.5%
(Cost $114,857).......................... 1,127 120,324
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
CORPORATE BONDS -- 19.2%
- ----------------------------------------------------------------------------
AIR FREIGHT -- 0.5%
Federal Express
6.720%, 01/15/22......................... $ 140,000 $ 151,231
------------
AIRLINES -- 0.1%
Trans World Airlines
11.375%, 03/01/06........................ 50,000 48,438
------------
APPAREL -- 0.6%
Jones Apparel
6.250%, 10/01/01......................... 200,000 200,300
------------
AUTOMOTIVE EQUIPMENT -- 0.3%
Interlake Corp.
12.125%, 03/01/02........................ 100,000 100,000
------------
BANKS -- 1.1%
Amsouth Bank of Alabama
6.450%, 02/01/18......................... 200,000 208,946
Bank Of Scotland
0.000% (until 11/20/07; thereafter 7.000%
to maturity) 11/29/49*................... 125,000 134,063
------------
343,009
------------
BROADCASTING -- 1.2%
Echostar Communications
0.000% (until 06/01/99; thereafter
12.875% to maturity) 06/01/04*........... 100,000 97,250
Cox Communications
6.400%, 08/01/08......................... 210,000 222,327
Source Media, Inc.
12.000%, 11/1/04......................... 75,000 56,250
------------
375,827
------------
COMPUTER SERVICES -- 0.5%
Unisys Corp. Series B
12.000%, 04/15/03........................ 150,000 166,500
------------
ELECTRONICS -- 1.1%
Motorola, Inc.
5.220%, 10/01/47......................... 250,000 199,200
Rockwell International Corp.
5.200%, 01/15/49......................... 200,000 164,100
------------
363,300
------------
ENTERTAINMENT -- 1.2%
IMAX Corp.
10.000%, 03/01/01........................ 100,000 102,875
News America Holdings
8.875%, 04/26/23......................... 195,000 233,757
Viacom, Inc.
8.000%, 07/04/06......................... 50,000 50,375
------------
387,007
------------
ENVIRONMENTAL SERVICES -- 0.7%
U.S. Filter Corp.
6.500%, 05/15/03......................... 150,000 151,232
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
27
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
BALANCED GROWTH FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
ENVIRONMENTAL SERVICES (CONTINUED)
<TABLE>
<S> <C> <C>
WMX Technologies, Inc.
7.100%, 08/01/03......................... $ 90,000 $ 96,750
------------
247,982
------------
FINANCIAL -- 0.2%
CRIIMI Mae, Inc.
9.125%, 12/01/02......................... 75,000 73,406
------------
FINANCIAL SERVICES -- 4.2%
Abbey National PLC
6.700%, 06/29/49(1)...................... 150,000 140,207
Amresco, Inc.
9.875%, 03/15/05......................... 25,000 20,500
Amvescap, PLC.
6.375%, 05/15/03......................... 160,000 164,310
Cerro Negro Financial, Ltd.
7.330%, 12/01/09......................... 100,000 92,066
Dryden Investor Trust
7.157%, 07/23/08......................... 215,000 220,762
Fertinitro Financial
8.290%, 04/01/20......................... 170,000 166,991
GS Escrow Corp.
7.000%, 08/01/03......................... 125,000 130,313
Hutchinson Whampoa, Inc.
7.500%, 08/01/27......................... 100,000 66,640
Inversiones CMPC S.A.
7.375%, 06/15/05......................... 125,000 109,413
MCII Holdings
0.000% (until 11/15/98, accreting to
12.000% by to 11/15/99; thereafter
15.000% if not rated BB-/Ba3 or better)
11/15/02*................................ 50,000 47,500
Ocwen Financial
11.875%, 10/01/03........................ 75,000 73,875
Resource America, Inc.
12.000%, 08/01/04........................ 150,000 126,750
------------
1,359,327
------------
GAS & ELECTRIC UTILITIES -- 1.2%
KN Energy, Inc.
6.450%, 03/01/03......................... 170,000 174,733
United Utilities, PLC
6.875%, 08/15/28......................... 200,000 202,672
------------
377,405
------------
INDUSTRIAL ENGINEERING/CONSTRUCTION -- 0.2%
Standard Pacific Corp.
10.500%, 03/01/00........................ 49,000 51,389
------------
INSURANCE -- 0.4%
Jackson National Life Insurance Co.
8.150%, 03/15/27......................... 100,000 115,339
------------
INTEGRATED OIL COMPANIES -- 0.6%
Occidental Petroleum
6.400%, 04/01/03(1)...................... 185,000 188,269
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
INTERNET SERVICES -- 0.2%
PSInet, Inc. Cl. B
10.000%, 02/15/05........................ $ 75,000 $ 75,188
------------
MACHINERY -- 0.4%
Specialty Equipment Cos., Inc.
11.375%, 12/01/03........................ 150,000 157,500
------------
MULTI-LINE INSURERS -- 1.0%
Farmers Insurance Exchange
8.625%, 05/01/24......................... 100,000 123,875
Liberty Mutual Insurance
7.697%, 10/15/49......................... 195,000 199,844
------------
323,719
------------
OTHER PRODUCERS/MANUFACTURING -- 0.8%
Tyco International Group S.A.
6.250%, 06/15/03......................... 150,000 155,329
Tyco International Group S.A.
7.000%, 06/15/28......................... 85,000 88,762
------------
244,091
------------
RECREATIONAL CENTERS -- 0.2%
Bally Total Fitness Holding Corp.
9.875%, 10/15/07......................... 75,000 70,125
------------
REGIONAL LONG DISTANCE -- 0.1%
Northeast Optic Network
12.750%, 08/15/08........................ 25,000 24,719
------------
RENTAL/LEASING -- 0.2%
United Rentals, Inc.
9.500%, 06/01/08......................... 50,000 49,000
------------
RETAIL/FOOD DISTRIBUTION -- 0.4%
Archer-Daniels Midland
6.950%, 12/15/97......................... 135,000 144,112
------------
SPECIALTY RETAILING -- 0.4%
Musicland Stores Corp.
9.000%, 06/15/03......................... 150,000 142,500
------------
TELECOMMUNICATIONS -- 1.2%
GTE Corp.
6.940%, 04/15/28......................... 150,000 159,849
U.S. West Capital Funding, Inc.
6.875%, 07/15/28......................... 210,000 225,817
------------
385,666
------------
TRANSPORTATION NON-RAIL -- 0.2%
Continental Airlines Series 982B
6.465%, 04/15/04......................... 70,000 71,624
------------
TOTAL CORPORATE BONDS
(Cost $6,571,083)........................................ 6,236,973
------------
- ----------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 5.2%
- ----------------------------------------------------------------------------
U.S. TREASURY BONDS
8.500%, 02/15/20
(Cost $1,629,343)........................ 1,175,000 1,671,250
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
28
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
FOREIGN GOVERNMENT BONDS -- 4.6%
- ----------------------------------------------------------------------------
AUSTRALIA -- 0.8%
Australian Government...................... $ 207,288 $ 265,950
------------
DENMARK -- 1.3%
Denmark-Bullet
6.000%, 11/15/02......................... 283,241 299,556
Denmark-Bullet
7.000%, 11/10/24......................... 110,149 133,909
------------
433,465
------------
GERMANY -- 1.1%
German Unity Fund
8.000%, 1/21/02.......................... 308,134 349,917
------------
SWEDEN -- 0.4%
Swedish Government
5.500%, 4/12/02.......................... 127,640 132,110
------------
VENEZUELA -- 1.0%
PDVSA Finance, Ltd.
7.500%, 11/15/28......................... 110,000 90,316
PDVSA Finance, Ltd. 1998-1
6.800%, 11/15/08......................... 245,000 218,932
------------
309,248
------------
TOTAL FOREIGN GOVERNMENT BONDS
(Cost $1,108,781)........................................ 1,490,690
------------
<CAPTION>
NUMBER
OF SHARES
<S> <C> <C>
- ----------------------------------------------------------------------------
MUTUAL FUNDS -- 3.5%
- ----------------------------------------------------------------------------
Blackrock 2001 Term Trust.................. 60,000 540,000
Blackrock Strategic Term Trust, Inc........ 65,800 604,536
------------
TOTAL MUTUAL FUNDS
(Cost $1,054,526)........................................ 1,144,536
------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ----------------------------------------------------------------------------
AGENCY OBLIGATIONS -- 2.8%
- ----------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 2.4%
Pool #1994-27 PJ
6.500%, 06/25/23......................... $ 350,000 372,313
Pool #1996-59K
6.500%, 07/25/23......................... 400,000 406,500
------------
778,813
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 0.4%
Pool #348872
7.000%, 07/15/08......................... $ 137,460 $ 141,927
------------
TOTAL AGENCY OBLIGATIONS
(Cost $827,054).......................................... 920,740
------------
- ----------------------------------------------------------------------------
CMO'S AND ASSET-BACKED SECURITIES -- 3.9%
- ----------------------------------------------------------------------------
FINANCIAL SERVICES -- 0.4%
Sunlife Commercial Mortgage Trust 1997-C1
6.875%, 07/25/04......................... 140,455 146,907
------------
INVESTMENT COMPANIES -- 0.5%
Morgan Stanley Capital 1998-3 A4
6.540%, 05/15/08......................... 150,000 156,656
------------
MORTGAGE-COMMERCIAL -- 0.7%
First Union Corp. 1998-C2 A2
6.560%, 11/18/08......................... 215,000 226,691
------------
MORTGAGE HOME EQUITY -- 0.9%
IMC Home Equity Loan Trust 1998-3 A4
6.230%, 12/20/17......................... 285,000 288,830
------------
REAL ESTATE/MORTGAGE -- 1.4%
CRIIMI Mae Commercial Mortgage Trust 1998-1
A1
5.697%, 10/20/01......................... 276,760 276,933
CRIIMI Mae Commercial Mortgage Trust
1998-C1
7.000%, 03/02/11......................... 168,534 166,427
------------
443,360
------------
TOTAL CMO'S AND ASSET-BACKED SECURITIES
(Cost $1,235,176)........................................ 1,262,444
------------
- ----------------------------------------------------------------------------
COMMERCIAL PAPER -- 1.8%
- ----------------------------------------------------------------------------
Associates First Capital Corp.
5.740%, 10/01/98
(Cost $582,000).......................... 582,000 582,000
------------
TOTAL INVESTMENTS -- 99.9%
(Cost $29,715,154)....................................... 32,417,398
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.1%.............. 46,506
------------
NET ASSETS -- 100.0%....................................... $ 32,463,904
------------
</TABLE>
- ---------------
* Non-Income Producing Security.
(1) Variable Rate Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
29
<PAGE>
CONVERTIBLE FUND
ADVISORY SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer,
Global Equity Management
Sandra K. Durn,
Portfolio Manager
GOAL: The Convertible Fund seeks to maximize total return by investing
primarily in convertible and equity securities of US companies.
MARKET OVERVIEW: Rising yield spreads, falling stock prices and mass
liquidations by broker/dealers and convertible arbitrage funds caused extreme
volatility in the convertibles market during the six-month period ending Sept.
30, 1998. August 1998 was the second-worst performing month ever experienced by
the convertibles market behind October 1987. After climbing to record highs in
mid-July, US stocks and convertible securities alike fell sharply over the next
several weeks amid a variety of investor concerns:
- expectations for weaker corporate profits
- the spread of global economic and currency turmoil
- evidence of a slowing US economy
The small-cap segment of the market, where the majority of convertible issues
lie, suffered some of the worst losses in the US market. Despite the downturn,
key market fundamentals remain evident:
- corporate profits, while weaker, remain positive
- long-term interest rates remain near 30-year lows
- inflation remains benign
- swollen cash holdings in aggressive growth mutual funds and rising assets in
money market accounts suggest considerable buying power
PERFORMANCE: True to its objective of providing 60-90% of the market's
upswings with only 50% of the market's downside, the Convertible Fund was down
6.6% for the period, while the Russell 2000 Index was down 23.9%. The fund's
benchmark, the First Boston Convertible Index, was down 14.2%.
PORTFOLIO SPECIFICS: Concerns over acquisitions and market volatility caused
the convertible securities of broadcast companies to negatively affect the
fund's performance. Holdings such as broadcaster Chancellor Media did not do
well during the period.
Healthcare holdings fared well amid the volatile environment because of lower
sensitivity to economic fluctuations and world events. Companies such as
McKesson, a pharmaceutical company, were positive contributors during the
period.
MARKET OUTLOOK: Our optimism for the convertibles market is based in part on
our outlook for a rebound in the small-cap segment of the market. Most issuers
of convertibles are smaller-cap companies. The following factors make a strong
case for a bounceback among small caps:
- relative valuations at historical lows
- strong earnings growth potential
- limited exposure to uncertain overseas markets
The inherent nature of convertibles to participate in most of the market's
upside with less downside exposure also supports our optimism. We expect
convertibles to benefit from the rebound we anticipate for smaller-cap stocks,
while continuing to provide a cushion during potential downswings.
- --------------------------------------------------------------------------------
30
<PAGE>
CONVERTIBLE FUND ADVISORY SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
CONVERTIBLE FUND ADVISORY SHARES WITH THE CS FIRST BOSTON CONVERTIBLE INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 09/30/98
1 YEAR 5 YEARS 10 YEARS
1.13% 11.78% 16.02%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CONVERTIBLE FIRST BOSTON
FUND ADVISORY SHARES CONVERTIBLE INDEX
<S> <C> <C>
31-Dec-86 $10,000.00 $10,000.00
31-Dec-87 $9,663.34 $9,977.54
31-Dec-88 $11,555.85 $11,315.70
31-Dec-89 $14,800.60 $12,872.89
31-Dec-90 $15,035.29 $11,986.43
31-Dec-91 $20,751.93 $15,476.19
31-Dec-92 $22,736.71 $18,196.62
31-Dec-93 $28,832.09 $21,571.50
31-Dec-94 $26,576.57 $20,554.30
31-Dec-95 $32,416.83 $25,429.45
31-Dec-96 $39,126.14 $28,949.79
31-Dec-97 $48,155.46 $33,848.68
30-Sep-98 $48,763.80 $31,434.76
</TABLE>
This graph compares a $10,000 investment in the Convertible Fund Advisory Shares
with a similar investment in the CS First Boston Convertible ("First Boston
Convertible") Index, on a cumulative and average annual total return basis. All
return calculations reflect the reinvestment of income dividends and capital
gains distributions, if any, as well as all fees and expenses. Performance
results reflect the total returns of a predecessor limited partnership managed
by Nicholas-Applegate Capital Management prior to the effective date of the
Fund's registration statement on 4/19/93. Limited partnership returns are
restated to reflect all fees and expenses applicable to the Fund. If the limited
partnership had been registered as an investment company under the federal
securities laws, its performance might have been adversely affected because of
the additional restrictions applicable to registered investment companies. The
Advisory shares calculate their performance based upon the historical
performance of their corresponding series ("Fund") of Nicholas-Applegate Mutual
Funds, adjusted to reflect sales charges and operating expenses. The Fund's
Advisory shares were first available on 8/31/95.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The First Boston Convertible Index is an unmanaged market weighted index
representing the universe of convertible securities whether they are convertible
preferred stocks or convertible bonds.
The Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
31
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
CONVERTIBLE FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
COMMON STOCKS -- 6.0%
- ----------------------------------------------------------------------------
DEPARTMENT/DISCOUNT STORES -- 0.8%
Federated Department Stores, Inc.*......... 54,442 $ 1,980,328
------------
MACHINERY/EQUIPMENT -- 0.6%
American Tower Corp.*...................... 52,900 1,348,950
------------
REIT'S -- 0.8%
Reckson Associates Realty Corp............. 78,000 1,833,000
------------
SOFTWARE -- 0.4%
Tribune Co. TLC (DECS)*.................... 48,200 1,042,325
------------
TELECOMMUNICATIONS SERVICES -- 3.4%
MCI Worldcom, Inc.*........................ 94,950 4,640,681
MediaOne Group, Inc. "ATI" PIES*........... 65,000 3,631,875
------------
8,272,556
------------
TOTAL COMMON STOCKS
(Cost $14,386,253)....................................... 14,477,159
------------
- ----------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 33.6%
- ----------------------------------------------------------------------------
ADVERTISING -- 1.0%
Snyder Strypes Trust, 6.500%............... 77,400 2,341,350
------------
AUTOMOTIVE EQUIPMENT -- 0.2%
Federal Mogul Finance Trust, 7.000%........ 9,900 548,212
------------
BROADCASTING -- 4.4%
CBS Radio, Inc., 7.000%.................... 31,100 2,557,975
Chancellor Media Corp., $3.01.............. 17,300 1,252,087
CSC Holdings, Inc., Series I, 8.500%....... 60,000 3,960,000
Evergreen Media Corp., $3.01............... 41,310 2,989,811
------------
10,759,873
------------
DEPARTMENT/DISCOUNT STORES -- 0.9%
Kmart Financing Corp., 7.750%.............. 44,790 2,239,500
------------
DRUGS/PHARMACEUTICALS--2.9%
Mckesson Financing Trust, 5.000%........... 56,500 7,069,562
------------
ELECTRIC UTILITIES--2.0%
Texas Utilities Co., 9.250%................ 86,700 4,876,875
------------
ELECTRONIC INSTRUMENTS--0.7%
Lernout & Haus, 4.750%..................... 33,600 1,591,800
------------
ENTERTAINMENT -- 0.3%
Royal Caribbean Cruises, Series A,
7.250%................................... 9,600 816,600
------------
FINANCE COMPANIES -- 1.3%
Finova Finance Trust, 5.500%............... 46,920 3,260,940
------------
HOME FURNISHINGS -- 1.5%
Newell Financial Trust, 5.250%............. 63,900 3,602,362
------------
HOMEBUILDING -- 0.5%
Kaufman & Broad Homes, 8.250%.............. 154,300 1,292,262
------------
INDUSTRIAL BONDS -- 0.9%
ICG Communications, Inc., 6.750%........... 48,100 2,128,425
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
INVESTMENT COMPANIES -- 3.7%
Merrill Lynch & Co.,
Series COX, 6.000% (Strypes)............. 94,700 $ 4,249,662
Merrill Lynch & Co.,
CBR, 7.870% (Strypes).................... 36,800 1,692,800
Morgan Stanley Dean Witter & Co., 6.000%... 34,165 3,181,616
------------
9,124,078
------------
LIFE INSURERS -- 3.3%
Conseco Finance Trust IV, Series F, 7.000%
(Prides)................................. 49,600 1,956,100
Lincoln National Corp., 7.750% (Prides).... 123,850 3,049,806
Protective Life Corp. Cap Trust II, 6.500%
(Prides)................................. 48,100 2,928,088
------------
7,933,994
------------
OIL/GAS PRODUCTION -- 0.6%
Devon Financing Trust, $3.24............... 24,576 1,469,952
------------
PIPELINES -- 1.7%
Williams Companies, Inc., $3.49............ 30,300 4,045,050
------------
PUBLISHING -- 2.0%
Houston Industries, Inc., 7.000% (ACES).... 63,900 4,876,369
------------
RECREATIONAL PRODUCTS -- 1.1%
Fleetwood Capital Trust, 6.000%............ 62,600 2,770,050
------------
RENTAL/LEASING COMPANIES -- 0.5%
United Rentals Trust I, 6.000%............. 31,100 1,111,825
------------
TELECOMMUNICATIONS EQUIPMENT -- 3.1%
LM Ericcson Telephone Co., 4.250%.......... 476,370 2,560,489
MediaOne Group, Inc., Series D, 4.250%..... 52,900 4,965,988
------------
7,526,477
------------
TELECOMMUNICATIONS SERVICES -- 1.0%
Airtouch Communications,
Series C, 4.250%......................... 30,592 2,493,248
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $72,290,762)....................................... 81,878,804
------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ----------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 56.1%
- ----------------------------------------------------------------------------
ADVERTISING -- 2.4%
Getty Images, Inc.
4.750%, 06/01/20......................... $ 784,000 649,740
Omnicom Group
4.250%, 01/03/07......................... 3,441,000 5,294,839
------------
5,944,579
------------
AEROSPACE -- 0.6%
Kellstrom Industries, Inc.
5.500%, 06/15/03......................... 1,570,000 1,361,975
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
32
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CONVERTIBLE CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
BROADCASTING -- 2.0%
Clear Channel Communications
2.625%, 04/01/03......................... $4,829,000 $ 4,804,855
------------
BUILDING MATERIALS CHAINS -- 2.5%
The Home Depot, Inc.
3.250%, 10/01/01......................... 3,406,000 6,007,333
------------
COMPUTERS/OFFICE AUTOMATION -- 7.4%
Apple Computer, Inc.
6.500%, 06/01/01......................... 3,351,000 4,670,456
Comverse Technology, Inc.
4.500%, 07/01/05......................... 4,415,000 3,890,719
EMC Corp.
3.250%, 03/15/02......................... 1,864,000 4,771,840
Safeguard Scientifics
6.000%, 02/01/06......................... 1,245,000 1,232,550
Xerox Credit Corp.
2.875%, 07/01/02......................... 3,123,000 3,353,321
------------
17,918,886
------------
CONTRACT DRILLING -- 1.6%
Diamond Offshore Drilling
3.750%, 02/15/07......................... 3,522,000 3,297,473
Loews Corp.
3.125%, 09/15/07......................... 766,000 610,885
------------
3,908,358
------------
DEPARTMENT/DISCOUNT STORES -- 1.7%
Costco Companies, Inc.*
0.000%, 08/19/17......................... 6,664,000 4,081,700
------------
DRUG CHAINS -- 2.0%
Rite Aid Corp.
5.250%, 09/15/02......................... 4,083,000 4,874,081
------------
DRUGS/PHARMACEUTICALS -- 5.5%
Alpharma, Inc.
5.750%, 04/01/05......................... 2,200,000 2,334,750
Athena Neurosciences, Inc.
4.750%, 11/15/04......................... 4,508,000 5,485,672
Sepracor, Inc.
6.250%, 02/15/05......................... 3,682,000 5,785,342
------------
13,605,764
------------
ELECTRIC UTILITIES -- 1.0%
Quintiles Transnational
4.250%, 05/31/00......................... 1,982,000 2,467,590
------------
ELECTRONIC DATA PROCESSING -- 2.8%
Affiliated Computer Services
4.000%, 03/15/05......................... 2,288,000 2,153,580
Automatic Data Processing*
0.000%, 02/20/12......................... 5,177,000 4,963,449
------------
7,117,029
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
ELECTRONIC INSTRUMENTS -- 3.1%
ADT Operations, Inc.*
0.000%, 07/06/10......................... $3,358,000 $ 4,986,630
SCI Systems, Inc.
5.000%, 05/01/06......................... 2,056,000 2,505,750
------------
7,492,380
------------
ENTERTAINMENT -- 0.8%
Family Golf Centers, Inc.
5.750%, 10/15/04......................... 2,106,000 1,984,905
------------
ENVIRONMENTAL SERVICES -- 2.3%
Waste Management, Inc.
4.000%, 02/01/02......................... 4,553,000 5,600,190
------------
FINANCE BONDS--1.1%
Swiss Life Finance, Ltd.
2.000%, 05/20/03......................... 2,527,000 2,703,890
------------
FINANCE COMPANIES -- 0.7%
Financial Federal Corp.
4.500%, 05/01/05......................... 1,988,000 1,801,625
------------
HOMEBUILDING -- 0.9%
Lennar Corp.*
0.000%, 07/29/03......................... 4,992,000 2,121,600
------------
MEDICAL/HEALTH SERVICES -- 1.5%
Total Renal Care Holdings
5.625%, 07/15/06......................... 3,376,000 3,768,460
------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 1.7%
Data Processing Resource
5.250%, 04/01/05......................... 1,755,000 1,812,038
Metamor Worldwide, Inc.
2.940%, 08/15/04......................... 2,712,000 2,328,930
------------
4,140,968
------------
OTHER CONSUMER SERVICES -- 2.4%
America Online, Inc.
4.000%, 11/15/02......................... 2,579,000 5,729,411
------------
OTHER HEALTH SERVICES -- 1.8%
Carematrix Corp.
6.250%, 08/15/04......................... 1,914,000 1,794,376
Sunrise Assisted Living, Inc.
5.50%, 06/15/02.......................... 2,289,000 2,472,120
------------
4,266,496
------------
PRINTING/FORMS -- 1.6%
Mail-Well, Inc.
5.000%, 11/01/02......................... 1,982,000 1,536,050
World Color Press, Inc.
6.000%, 10/01/07......................... 2,222,000 2,294,215
------------
3,830,265
------------
PROPERTY CASUALTY INSURANCE -- 1.4%
Mutual Risk Management, Inc.*
0.000%, 10/30/15......................... 4,591,000 3,437,511
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
33
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
CONVERTIBLE FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CONVERTIBLE CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
RESTAURANTS -- 0.5%
CKE Restaurants, Inc.
4.250%, 03/15/04......................... $1,527,000 $ 1,282,680
------------
SOFTWARE -- 2.8%
HNC Software, Inc.
4.750%, 03/01/03......................... 2,197,000 2,455,148
VERITAS Software Corp.
5.250%, 11/01/04......................... 2,268,000 3,107,160
Wind River System, Inc.
5.000%, 08/01/02......................... 1,000,000 1,143,750
------------
6,706,058
------------
SPECIALTY CHAINS -- 2.0%
Staples, Inc.
4.500%, 10/01/00......................... 2,394,000 4,811,940
------------
WHOLESALE DISTRIBUTION -- 2.0%
Ingram Micro, Inc.*
0.000%, 06/09/18......................... 12,705,000 4,970,831
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $119,329,163)...................................... 136,741,360
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
COMMERCIAL PAPER -- 5.1%
- ----------------------------------------------------------------------------
Associates First Capital Corp.
5.740%, 10/01/98......................... $ 897,000 $ 897,000
Cargill, Inc.
5.700%, 10/01/98......................... 4,764,000 4,764,000
Central Illinois Public
5.780%, 10/01/98......................... 6,780,000 6,780,000
------------
TOTAL COMMERCIAL PAPER
(Cost $12,441,000)....................................... 12,441,000
------------
TOTAL INVESTMENTS -- 100.8%
(Cost $218,447,178)...................................... 245,538,323
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.8%)............ (1,828,495)
------------
NET ASSETS -- 100.0%....................................... $243,709,828
------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
34
<PAGE>
HIGH QUALITY BOND FUND
ADVISORY SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Fred S. Robertson,
Partner, Chief Investment Officer, Fixed Income
James E. Kellerman,
Partner, Portfolio Manager
Malcom S. Day, CFA
Portfolio Manager
Richard J. King, CFA
Portfolio Manager
GOAL: The High Quality Bond Fund seeks to maximize long-term total return from
a portfolio utilizing multiple sectors of the bond market including a broad
range of investment-grade issues, as well as, on an opportunistic basis,
developed international bonds and below-investment grade corporate issues.
MARKET OVERVIEW: For much of the six-month period ending Sept. 30, 1998, the
US bond market remained stretched between conflicting economic signals. For
example, although building wage pressure triggered fears of rising prices,
inflation remained low. Amid such contradictory signs, yields were mired in a
narrow trading range.
During August, however, the environment changed significantly. The Russian
currency crisis and concerns that devaluations and defaults would spread
prompted investors worldwide to seek safety. US Treasury bonds were the primary
beneficiary. Other sectors of the fixed income market, such as high-quality
corporates and mortgage-backed securities, were overlooked and underperformed
Treasuries.
PERFORMANCE: During the period, the High Quality Bond Fund was up 4.5%. The
Lipper General Bond Fund Index gained 3.2% and the Lehman Aggregate Bond Index
was up 6.7%.
PORTFOLIO SPECIFICS: During the period, we anticipated an easing of monetary
policy and extended the duration of the portfolio in August to benefit from
further declines in interest rates. Our changes proved beneficial as the Federal
Reserve Board did indeed lower interest rates late in the quarter. Our
interest-rate position, along with our modest allocation to international
developed bond markets, were positive contributors to returns.
The fund's returns were negatively impacted by our overweight position in
corporate bonds, mortgages and asset-backed securities relative to Treasuries.
During the period, mortgages were affected by declining interest rates and
heightened prepayment risk. Corporates were affected by concerns over corporate
profitability amid global economic malaise.
We continue to overweight holdings in the mortgage, asset-backed and corporate
sectors. We also maintain modest positions among attractive international
developed markets which are largely fully hedged and among below-investment
grade US corporate bonds.
MARKET OUTLOOK: We expect inflation to remain benign, especially given global
excess capacity. Other long-term positive factors we see for bonds:
- deflationary influences of emerging market currency devaluations
- the prospects for continued slow growth in government spending and declining
Federal borrowing reducing the supply of debt obligations
- the Federal Reserve Board's continued commitment to price stability
- --------------------------------------------------------------------------------
35
<PAGE>
HIGH QUALITY BOND FUND ADVISORY SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE HIGH
QUALITY BOND FUND ADVISORY SHARES WITH THE LEHMAN AGGREGATE BOND INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 09/30/98 SINCE
1 YEAR 3 YEARS INCEPTION
9.44% 7.66% 8.49%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH QUALITY LEHMAN AGGREGATE
BOND FUND ADVISORY SHARES BOND INDEX
<S> <C> <C>
31-Aug-95 $10,000.00 $10,000.00
30-Sep-95 $10,303.03 $10,097.00
31-Dec-95 $10,858.59 $10,527.03
31-Mar-96 $10,515.15 $10,339.24
30-Jun-96 $10,555.56 $10,398.27
30-Sep-96 $10,737.37 $10,589.74
31-Dec-96 $11,050.51 $10,907.54
31-Mar-97 $10,979.80 $10,846.95
30-Jun-97 $11,383.84 $11,246.51
30-Sep-97 $11,747.47 $11,621.48
31-Dec-97 $12,040.40 $11,963.85
31-Mar-98 $12,303.03 $12,148.46
30-Jun-98 $12,505.05 $12,432.43
30-Sep-98 $12,856.19 $12,957.89
</TABLE>
This graph compares a $10,000 investment in the High Quality Bond Fund Advisory
Shares with the Lehman Aggregate Bond Index, on a cumulative and average annual
total return basis. All return calculations reflect the reinvestment of income
dividends and capital gains distributions, if any, as well as all fees and
expenses.
The Fund's Advisory Shares calculate their performance based on the historical
performance of their corresponding series ("Fund") of Nicholas-Applegate Mutual
Funds, adjusted to reflect sales charges and operating expenses. The Fund's
Advisory Shares were first available on 7/27/98.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The Lehman Brothers Aggregate Bond Index is composed of securities from Lehman
Brothers Government/Corporate Bond Index. Mortgage-Backed Securities Index, and
Asset-Backed Securities Index.
Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
36
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
HIGH QUALITY BOND FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
PREFERRED STOCK--0.3%
- --------------------------------------------------------------------------
TELECOMMUNICATIONS -- 0.3%
IXC Communications*
(Cost $85,434)........................... 839 $ 89,610
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- --------------------------------------------------------------------------
CORPORATE BONDS--29.3%
- --------------------------------------------------------------------------
AIR FREIGHT -- 0.5%
Federal Express
7.600%, 07/01/97......................... $ 150,000 151,614
-------------
AIRLINES -- 0.2%
Trans World Airlines
11.375%, 03/01/06........................ 50,000 48,438
-------------
APPAREL -- 1.5%
Jones Apparel
6.250%, 10/01/01......................... 460,000 460,690
-------------
AUTOMOTIVE EQUIPMENT -- 0.3%
Interlake Corp.
12.125%, 03/01/02........................ 100,000 100,000
-------------
BROADCASTING -- 2.4%
CD Radio
0.000% (until 12/01/02; thereafter
15.000% to maturity), 12/01/07*.......... 100,000 46,875
Cox Communications
6.400%, 08/01/08......................... 380,000 402,306
Echostar Communications
0.000% (until 06/01/99; thereafter
12.875% to maturity), 06/01/04*.......... 250,000 243,125
Source Media, Inc.
12.000%, 11/01/04........................ 75,000 56,250
-------------
748,556
-------------
COMMUNICATIONS - WIRELESS -- 0.9%
360 Communications Co.
6.650%, 01/15/08......................... 275,000 296,505
-------------
COMPUTER SERVICES -- 0.5%
Unisys Corp.
12.000%, 04/15/03........................ 150,000 166,500
-------------
COMPUTERS/OFFICE AUTOMATION -- 1.0%
Dell Computer Corp.
6.550%, 04/15/08......................... 300,000 308,285
-------------
ENTERTAINMENT -- 2.2%
IMAX Corp.
10.000%, 03/01/01........................ 350,000 360,063
News America Holdings
8.875%, 04/26/23......................... 210,000 251,737
Viacom, Inc.
8.000%, 07/07/06......................... 75,000 75,563
-------------
687,363
-------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.6%
U.S. Filter Corp.
6.500%, 05/15/03(1)...................... $ 195,000 $ 196,601
-------------
FINANCE -- 2.2%
PX Escrow Corp.
0.000% (until 02/01/02; thereafter 9.625%
to maturity), 02/01/06*.................. 150,000 86,437
U.S. West Capital Funding, Inc.
6.375%, 07/15/08......................... 350,000 374,062
U.S. West Capital Funding, Inc.
6.875%, 07/15/28......................... 220,000 236,570
-------------
697,069
-------------
FINANCIAL SERVICES -- 6.7%
Amresco, Inc.
9.875%, 03/15/05......................... 25,000 20,500
AON Capital
8.205%, 01/01/27......................... 750,000 837,098
Countrywide Capital III
8.050%, 06/15/27......................... 100,000 108,819
CRIIMI Mae
9.125%, 12/01/02......................... 100,000 97,875
Donaldson, Lufkin & Jenrette, Inc.
6.280%, 05/15/03......................... 100,000 99,750
Dryden Investor Trust
7.157%, 07/23/08......................... 190,000 195,092
GS Escrow Corp.
6.750%, 08/01/01......................... 250,000 256,250
GS Escrow Corp.
7.000%, 08/01/03......................... 250,000 260,625
Lehman Brothers, Inc.
6.625%, 02/15/08......................... 180,000 167,123
MCII Holdings, Inc.
0.000% (until 11/15/98; accreting to
12.000% by 11/15/99; thereafter 15.000%
if not rated BB-/Ba3 or better),
11/15/02*................................ 50,000 47,500
United Cos. Financial
9.350%, 11/01/99......................... 50,000 50,472
-------------
2,141,104
-------------
FORESTRY & WOOD PRODUCTS TOTAL -- 1.3%
Scotia Pacific Co., LLC
6.550%, 01/20/07......................... 400,000 409,712
-------------
GAS & ELECTRIC UTILITIES -- 0.4%
KN Energy, Inc.
6.450%, 03/01/03......................... 120,000 123,341
-------------
INTERNET SERVICES -- 0.2%
PSInet, Inc.
10.000%, 02/15/05........................ 75,000 75,187
-------------
MACHINERY -- 0.7%
Specialty Equip Cos., Inc.
11.375%, 12/01/03........................ 200,000 210,000
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
37
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
HIGH QUALITY BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
MULTI-LINE INSURANCE -- 0.9%
Jackson National Life Insurance Co.
8.150%, 03/15/27......................... $ 110,000 $ 126,873
Lumbermans Mutual Casualty
8.300%, 12/01/37......................... 135,000 150,984
-------------
277,857
-------------
OTHER PRODUCERS/MANUFACTURING -- 0.8%
Tyco International Group S.A.
7.000%, 06/15/28......................... 230,000 240,180
-------------
PUBLISHING -- 0.3%
American Lawyer Media
9.750%, 12/15/07......................... 100,000 99,750
-------------
RECREATIONAL CENTERS -- 0.2%
Bally Total Fitness Holding Corp.
9.875%, 10/15/07......................... 75,000 70,125
-------------
RENTAL & LEASING -- 0.2%
United Rentals (North America), Inc.
9.500%, 06/01/08......................... 50,000 49,000
-------------
RETAIL -- INTERNET -- 0.4%
Amazon.Com, Inc.
0.000% (until 05/01/03; thereafter
10.000% to maturity), 05/01/08*.......... 200,000 110,500
-------------
SPECIALTY RETAILING -- 0.8%
CompUSA
9.500%, 06/15/00......................... 187,000 188,636
Musicland Stores Corp.
9.000%, 06/15/03......................... 75,000 71,250
-------------
259,886
-------------
TELECOMMUNICATIONS -- 2.0%
Crown Castle International
0.000% (until 11/15/02; thereafter
10.625% to maturity), 11/15/07*.......... 200,000 122,250
Global Telesystems Group, Inc.
9.875%, 02/15/05......................... 200,000 176,000
GTE Corp.
6.940%, 04/15/28......................... 300,000 319,698
-------------
617,948
-------------
TELEPHONE -- 1.7%
CB IDT Corp.
8.750%, 02/15/06......................... 50,000 44,000
ICG Holdings, Inc.
0.000% (until 09/15/00; therafter 13.500%
to maturity), 09/15/05*.................. 200,000 159,000
MCI Worldcom, Inc.
6.400%, 08/15/05......................... 300,000 316,794
Northeast Optic Network
12.750%, 08/15/08........................ 25,000 24,719
-------------
544,513
-------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
WASTE MANAGEMENT -- 0.4%
WMX Technologies, Inc.
7.100%, 08/01/26......................... $ 110,000 $ 118,250
-------------
TOTAL CORPORATE BONDS
(Cost $9,173,173).......................... 9,208,974
-------------
- --------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--13.0%
- --------------------------------------------------------------------------
TREASURY BONDS -- 11.1%
8.500%, 02/15/20........................... 2,460,000 3,498,956
-------------
TREASURY NOTES -- 1.9%
6.375%, 05/15/99........................... 165,000 166,650
6.125, 08/15/07............................ 375,000 419,764
-------------
586,414
-------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $3,821,317).......................... 4,085,370
-------------
- --------------------------------------------------------------------------
FOREIGN CORPORATE BONDS--4.9%
- --------------------------------------------------------------------------
CANADA -- 0.6%
Russel Metals
10.250%, 06/15/00........................ 170,000 174,675
-------------
CHILE -- 0.3%
Empresa Nacional de Electricidad (Endesa)
8.125%, 02/01/97......................... 140,000 102,718
-------------
HONG KONG -- 0.4%
Hutchinson Whampoa Financial, Inc.
7.500%, 08/01/27......................... 200,000 133,280
-------------
UNITED KINGDOM -- 1.3%
Abbey National PLC
6.700%, 06/29/49(1)...................... 240,000 224,330
United Utilities PLC
6.875%, 08/15/28......................... 180,000 182,405
-------------
406,735
-------------
VENEZUELA -- 2.3%
Cerro Negro Financial, Ltd.
7.330%, 12/01/09......................... 110,000 101,273
Fertinitro Financial
8.290%, 04/01/20......................... 185,000 181,726
PDVSA Finance, Ltd.
6.800%, 11/15/08......................... 365,000 326,164
PDVSA Finance, Ltd.
7.500%, 11/15/28......................... 145,000 119,051
-------------
728,214
-------------
TOTAL FOREIGN CORPORATE BONDS
(Cost $1,699,061).......................... 1,545,622
-------------
- --------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS--8.8%
- --------------------------------------------------------------------------
AUSTRALIA -- 1.7%
Australian Government
8.750%, 08/15/08......................... 414,575 531,900
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
38
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
FOREIGN GOVERNMENT BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
DENMARK -- 3.0%
Denmark-Bullet
6.000%, 11/15/02......................... $ 597,953 $ 632,396
Denmark-Bullet
7.000%, 11/10/24......................... 251,770 306,077
-------------
938,473
-------------
GERMANY -- 1.7%
German Unity Fund
8.000%, 01/21/02......................... 472,672 536,766
-------------
SWEDEN -- 2.4%
Swedish Government
5.500%, 04/12/02......................... 421,212 435,963
Swedish Government
6.500%, 05/05/08......................... 280,808 318,204
-------------
754,167
-------------
TOTAL FOREIGN GOVERNMENT BONDS
(Cost $2,625,806).......................... 2,761,306
-------------
<CAPTION>
NUMBER
OF SHARES
<S> <C> <C>
- --------------------------------------------------------------------------
MUTUAL FUNDS--8.3%
- --------------------------------------------------------------------------
Blackrock 2001 Term Trust.................. 142,200 1,279,800
Blackrock Strategic........................ 143,900 1,322,081
-------------
TOTAL MUTUAL FUNDS
(Cost $2,409,687)....................................... 2,601,881
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- --------------------------------------------------------------------------
AGENCY OBLIGATIONS--14.3%
- --------------------------------------------------------------------------
FEDERAL HOME LOAN BANK DISCOUNT NOTE -- 8.1%
4.950%, 10/01/98........................... $ 2,529,000 2,529,000
-------------
FEDERAL HOME LOAN MORTGAGE CORP. -- 1.5%
Pool #380032
10.000%, 10/01/03........................ 65,365 69,002
Pool #200112
9.500%, 11/01/05......................... 180,452 188,459
Pool #B00623
9.000%, 06/01/06......................... 70,590 73,525
Pool #43 PG
6.500%, 12/17/22......................... 145,000 153,971
-------------
484,957
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 3.2%
Pool #363503
9.500%, 06/01/05......................... 97,679 101,176
Pool #303481
10.000%, 10/01/05........................ 81,542 87,079
Pool #303758
9.500%, 07/01/06......................... 82,904 88,012
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
</TABLE>
FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
<TABLE>
<S> <C> <C>
Pool #303262
9.500%, 05/01/07......................... $ 97,857 $ 102,597
Pool #273114
6.500%, 02/01/09......................... 263,159 268,626
Pool #1994-27 PJ
6.500%, 06/25/23......................... 255,000 271,256
Pool #1996-59 K
6.500%, 07/25/23......................... 80,000 81,300
-------------
1,000,046
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 0.6%
Pool #357290
7.000%, 07/15/08......................... 99,946 103,363
Pool #780287
7.000%, 12/15/08......................... 26,813 27,655
Pool #50700
11.500%, 02/15/12........................ 2,720 3,054
Pool #64054
11.500%, 02/15/13........................ 3,715 4,147
Pool #68958
11.500%, 07/15/13........................ 5,669 6,364
Pool #141741
11.000%, 11/15/15........................ 4,170 4,660
Pool #299705
8.500%, 02/15/21......................... 10,754 11,398
Pool #368781
6.500%, 10/15/23......................... 29,706 30,421
-------------
191,062
-------------
TENNESSEE VALLEY AUTHORITY -- 0.9%
Tennessee Valley Authority -- Global A
6.375%, 06/15/05......................... 250,000 271,602
-------------
TOTAL AGENCY OBLIGATIONS
(Cost $4,370,224).......................... 4,476,667
-------------
- --------------------------------------------------------------------------
CMO'S AND ASSET-BACKED SECURITIES--16.4%
- --------------------------------------------------------------------------
FINANCIAL SERVICES -- 0.8%
Captiva CBO 1997-1, Ltd.
6.860%, 11/30/09......................... 250,000 255,312
-------------
MORTGAGE -- COMMERCIAL -- 14.6%
Allied Capital Commercial Mortgage Trust
1998-1 -- Cl. C
6.710%, 12/25/04......................... 400,000 408,000
Asset Securitization Corp. 1996-D2 -- Cl.
A1
6.920%, 02/14/29......................... 391,271 415,115
CRIIMI Mae Commercial Mortgage Trust
1998-C1 -- Cl. A2
7.000%, 03/02/11......................... 180,000 177,750
DLJ Mortgage Acceptance Corp. 1996 -- CF1
0.730%, 03/12/06(1)...................... 8,774,888 244,050
DLJ Mortgage Acceptance Corp. 1998-A -- Cl.
A2
7.296%, 05/28/28(1)...................... 272,081 285,686
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
39
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
HIGH QUALITY BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CMO'S AND ASSET-BACKED SECURITIES (Continued)
- ---------------------------------------------------------
MORTGAGE -- COMMERCIAL (CONTINUED)
<TABLE>
<S> <C> <C>
DLJ Mortgage Corp. 1998-CF1 -- Cl. A1B
6.410%, 02/15/08......................... $ 270,000 $ 281,475
DLJ Mortgage Corp. 1998-CG1 -- Cl. A1B
6.410%, 05/10/08(1)...................... 340,000 356,256
Fannie Mae-ACES 1996-M5 -- Cl. XS
0.538%, 01/25/13(1)...................... 8,406,225 226,324
First Union - Lehman Brothers -- Bank of
America Commercial Mortgage Trust Series
1998-C2 -- Cl. A2
6.560%, 11/18/08......................... 845,000 890,947
Global Financial Trust 1998-1 -- Cl. A1
6.349%, 04/10/04......................... 534,657 544,816
GMAC Commercial Mortgage Securities, Inc.
1998-C2 -- Cl. A2
6.420%, 08/15/08......................... 310,000 324,822
Merrill Lynch Mortgage, Inc. 1995-C2
1.150%, 06/15/21(1)...................... 8,244,984 231,890
Morgan Stanley Capital I 1998-WF2 -- Cl. A2
6.540%, 05/15/08......................... 160,000 167,100
-------------
4,554,231
-------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
MORTGAGE -- RESIDENTIAL -- 1.0%
Amresco Residential Securities Mortgage
Loan 1996-3 -- Cl. A5
7.550%, 02/25/23......................... $ 320,000 $ 327,100
-------------
TOTAL CMO'S AND ASSET-BACKED SECURITIES
(Cost $5,070,717).......................... 5,136,643
-------------
TOTAL INVESTMENTS--95.3%
(Cost $29,255,419)...................................... 29,906,073
OTHER ASSETS IN EXCESS OF LIABILITIES--4.7%............... 1,471,963
-------------
NET ASSETS--100.0%........................................ $ 31,378,036
-------------
</TABLE>
- ---------------
* Non-Income Producing Security.
(1) Variable Rate Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
40
<PAGE>
HIGH YIELD BOND FUND
ADVISORY SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Fred S. Robertson,
Partner, Chief Investment Officer, Fixed Income
James E. Kellerman,
Partner, Portfolio Manager
Sandra K. Durn,
Portfolio Manager
Douglas G. Forsyth, CFA,
Portfolio Manager
GOAL: The High Yield Bond Fund seeks to deliver total return via high current
income and long-term capital appreciation from a diversified portfolio
consisting primarily of US corporate fixed income securities.
MARKET OVERVIEW: For much of the six-month period ending Sept. 30, 1998, low
inflation, stable interest rates and solid corporate profits contributed to an
attractive environment for high yield bonds.
However, during the third quarter, the devaluation of the Russian ruble and
the Russian government's default on short-term debt triggered a chain of events
that changed the environment for high yield bonds significantly. The Russian
default and devaluation sparked concerns for additional devaluations and the
potential for worldwide recession.
Because foreign-issued debt, such as Russian bonds, was used as collateral by
a number of hedge funds, fears of default caused a wave of near failures among
hedge fund managers such as Long-Term Capital Management. The developments among
hedge funds created a financial crisis that impacted liquidity-sensitive sectors
such as high yield bonds.
Ultimately, concerns over the possibility of global recession, widespread
selling among hedge funds to raise capital and a lack of liquidity caused prices
for high yield bonds to drop and yields to widen to seven-year highs.
PERFORMANCE: The High Yield Bond Fund fell 5.5% in the period. The First
Boston High Yield Index fell 5.0% and the Lipper High Yield Index fell 6.5% over
the same period.
PORTFOLIO SPECIFICS: Fear and illiquidity from international events spread to
the US market with severe consequences for high yield bonds. Our holdings in the
financial sector, which were among the hardest hit, negatively impacted returns.
However, our lack of exposure to emerging markets debt issues, which generally
suffered greater losses than US bonds, helped returns for the fund. Another
factor contributing to the fund's resilience was the lack of downgrades among
holdings.
Late in the period, we sold the bonds of companies that failed to meet or
exceed our cash flow expectations. Using the downturn as a buying opportunity,
we invested in companies exhibiting solid cash flow and improving business
fundamentals including Apple Computer, Unisys and Echostar.
MARKET OUTLOOK: We believe forecasts of excessive defaults and global
recession are overly pessimistic. We anticipate the Federal Reserve Board will
lower short-term interest rates in the fourth quarter. Given the similarities to
1990, when high yield bonds reacted favorably to declining short-term rates and
exceptional returns paralleled those of smaller-cap growth stocks, we remain
optimistic regarding the prospects for high yield bonds.
- --------------------------------------------------------------------------------
41
<PAGE>
HIGH YIELD BOND FUND ADVISORY SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE HIGH
YIELD BOND FUND ADVISORY SHARES WITH THE FIRST BOSTON HIGH YIELD INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
2.52% As of 09/30/98 15.02%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH YIELD BOND FUND ADVISORY SHARES FIRST BOSTON HIGH YIELD INDEX
<S> <C> <C>
7/31/96 $10,000.00 $10,000.00
9/30/96 $10,619.37 $10,282.87
12/31/96 $11,114.86 $10,736.37
3/31/97 $11,362.61 $10,894.66
6/30/97 $12,195.95 $11,365.04
9/30/97 $13,209.46 $11,899.69
12/31/97 $13,457.21 $12,092.03
3/31/98 $14,324.32 $12,455.48
6/30/98 $14,565.88 $12,612.97
9/30/98 $13,542.69 $11,837.66
</TABLE>
This graph compares a $10,000 investment in the High Yield Bond Fund with the
First Boston High Yield Index, on a cumulative return basis. All return
calculations reflect the reinvestment of income dividends and capital gains
distributions, if any, as well as all fees and expenses. The Fund's Advisory
Shares calculate their performance based upon the historical performance of
their corresponding series ("Fund") of Nicholas-Applegate Mutual Funds, adjusted
to reflect sales charges and operating expenses. The Fund's Advisory Shares were
first available on 2/27/98.
Total returns reflect the fact that the Investment Adviser has agreed to waive
or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The First Boston High Yield Index includes over 180 U.S. domestic issues with an
average maturity range of seven to ten years and with a minimum issues size of
$100 million.
The Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
42
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
COMMON STOCK -- 0.2%
- --------------------------------------------------------------------------
BROADCASTING -- 0.2%
Source Media, Inc.
(Cost $182,434).......................... 20,000 $ 157,500
-------------
- --------------------------------------------------------------------------
PREFERRED STOCKS -- 4.0%
- --------------------------------------------------------------------------
BROADCASTING -- 1.9%
Capstar Broadcasting Corp., 12.00%......... 13,250 1,510,500
-------------
TELECOMMUNICATIONS -- 2.1%
Dobson Communication Corp., 12.25%......... 70 6,341
IXC Communciations, Inc., Series B,
12.50%................................... 15,548 1,659,546
Viatel, Inc., Series A, 10.00%............. 496 0
-------------
1,665,887
-------------
TOTAL PREFERRED STOCKS
(Cost $3,384,064)....................................... 3,176,387
-------------
<CAPTION>
NUMBER OF
WARRANTS
<S> <C> <C>
- --------------------------------------------------------------------------
WARRANTS -- 0.0%
- --------------------------------------------------------------------------
COMMUNICATIONS-WIRELESS -- 0.0%
AMSC Acquisition, Inc.
(Cost $0)................................ 500 0
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- --------------------------------------------------------------------------
CORPORATE BONDS -- 89.5%
- --------------------------------------------------------------------------
AIRLINES -- 4.4%
Trans World Airlines, Inc.
12.000%, 04/01/02........................ $ 1,500,000 1,455,000
Trans World Airlines, Inc.
11.500%, 12/15/04........................ 1,000,000 1,031,250
Trans World Airlines, Inc.
11.375%, 03/01/06........................ 1,000,000 968,750
-------------
3,455,000
-------------
AIR FREIGHT -- 2.1%
Atlas Air, Inc.
12.250%, 12/01/02........................ 1,500,000 1,640,625
-------------
APPAREL -- 3.3%
Phillips-Van Heusen Corp.
9.500%, 05/01/08......................... 1,250,000 1,203,125
Tuesday Morning Corp., Series B
11.000%, 05/01/08........................ 1,400,000 1,431,500
-------------
2,634,625
-------------
BROADCASTING -- 7.6%
CD Radio, Inc.
0.000% (until 12/01/02; thereafter
15.000% to maturity), 12/01/07*.......... 1,500,000 703,125
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
</TABLE>
BROADCASTING (CONTINUED)
<TABLE>
<S> <C> <C>
Echostar Communications Corp.
0.000% (until 06/01/99; thereafter
12.875% to maturity), 06/01/04*.......... $ 2,250,000 $ 2,188,125
Fox Liberty Networks LLC
8.875%, 08/15/07......................... 2,200,000 2,156,000
Source Media, Inc.
12.000%, 11/01/04........................ 1,300,000 975,000
-------------
6,022,250
-------------
CATALOG RETAILING -- 1.6%
Shop At Home, Inc.
11.000%, 04/01/05........................ 1,250,000 1,256,250
-------------
CHEMICALS -- 1.5%
Geo Speciality Chemicals
10.125%, 08/01/08........................ 1,250,000 1,215,625
-------------
COMMUNICATIONS-WIRELESS -- 1.8%
AMSC Acquisitions, Inc.
12.250%, 04/01/08........................ 500,000 308,750
Omnipoint Corp.
11.625%, 08/15/06........................ 1,200,000 861,000
Telesystem International Wireless, Series B
0.000% (until 6/30/02; thereafter 13.250%
to maturity), 06/30/07*.................. 400,000 231,500
-------------
1,401,250
-------------
COMPUTER SERVICES -- 3.6%
Apple Computer, Inc.
6.500%, 02/15/04......................... 2,000,000 1,840,000
-------------
COMPUTERS/OFFICE AUTOMATION -- 2.3%
Unisys Corp., Series B
12.000%, 04/15/03........................ 1,000,000 1,110,000
Unisys Corp.
11.750%, 10/15/04........................ 1,525,000 1,713,719
-------------
2,823,719
-------------
CONSTRUCTION-RESIDENTIAL -- 0.6%
K Hovnanian Enterprise, Inc.
11.250%, 04/15/02........................ 495,000 495,000
-------------
COSMETICS-TOILETRIES -- 4.0%
Revlon Worldwide, Inc. Series B
0.000%, 03/15/01*........................ 2,250,000 1,726,875
Styling Technology Corp.
10.875, 07/01/08......................... 1,500,000 1,462,500
-------------
3,189,375
-------------
ELECTRONIC SERVICES -- 1.2%
Flextronics International, Ltd., Series B
8.750%, 10/15/07......................... 1,000,000 955,000
-------------
ENTERTAINMENT -- 4.4%
Ascent Entertainment Group
0.000% (until 12/15/02; thereafter
11.875% to maturity), 12/15/04*.......... 2,088,000 1,211,040
IMAX Corp.
10.000%, 03/01/01........................ 250,000 257,187
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
43
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
ENTERTAINMENT (CONTINUED)
<TABLE>
<S> <C> <C>
SFX Entertainment, Inc., Series B
9.125%, 02/01/08......................... $ 1,650,000 $ 1,563,375
United Artists Theatre, Series B
9.750%, 04/15/08......................... 500,000 466,250
-------------
3,497,852
-------------
FINANCIAL SERVICES -- 8.0%
AMRESCO, Inc.
9.875%, 03/15/05......................... 450,000 369,000
CRIIMI Mae, Inc.
9.125%, 12/01/02......................... 1,250,000 1,223,437
MCII Holdings (USA), Inc.
0.000% (until 11/15/98; accreting to
12.000% by 11/15/99; thereafter 15.000%,
if not rated BB-/Ba3 or better, to
maturity), 11/15/02*..................... 250,000 237,500
PX Escrow Corp.
0.000% (until 02/01/02; thereafter 9.625%
to maturity), 02/01/06*.................. 900,000 518,625
Resource America, Inc.
12.000%, 08/01/04........................ 2,850,000 2,408,250
United Companies Financial
8.375%, 07/01/05......................... 1,500,000 1,561,875
-------------
6,318,687
-------------
GAMING -- 2.4%
Hollywood Casino Corp.
12.750%, 11/01/03........................ 750,000 787,500
Rio Hotel & Casino, Inc.
9.500%, 04/15/07......................... 1,000,000 1,085,000
-------------
1,872,500
-------------
HEALTHCARE -- 1.8%
Insight Health Services Corp.
9.625%, 06/15/08......................... 1,500,000 1,440,000
-------------
INTERNET SERVICES -- 2.2%
PSInet, Inc., Series B
10.000%, 02/15/05........................ 1,750,000 1,754,375
-------------
MACHINERY -- 1.3%
Specialty Equipment Companies, Inc.
11.375%, 12/01/03........................ 1,000,000 1,050,000
-------------
PUBLISHING -- 0.6%
American Lawyer Media, Inc., Series B
9.750%, 12/15/07......................... 500,000 502,500
-------------
REAL ESTATE -- 1.5%
Bluegreen Corp.
10.500%, 04/01/08........................ 1,250,000 1,185,937
-------------
RECREATIONAL CENTERS -- 1.7%
Bally Total Fitness Holding Corp., Series B
9.875%, 10/15/07......................... 1,400,000 1,309,000
-------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
RENTAL AND LEASING -- 3.7%
Rental Services Corp.
9.000%, 05/15/08......................... $ 750,000 $ 734,062
United Rentals (North America), Inc.
9.500%, 06/01/08......................... 1,250,000 1,225,000
United Rentals (North America), Inc.
8.800%, 08/15/08......................... 1,000,000 933,750
-------------
2,892,812
-------------
RESTAURANTS -- 0.6%
Foodmaker, Inc.
8.375%, 04/15/08......................... 500,000 483,750
-------------
RETAIL-INTERNET -- 1.8%
Amazon.Com, Inc.
0.000% (until 05/01/03; thereafter
10.000% to maturity), 05/01/08*.......... 2,550,000 1,408,875
-------------
SPECIALTY RETAILING -- 6.1%
CompUSA, Inc.
9.500%, 06/15/00......................... 150,000 151,313
Michaels Stores, Inc.
10.875%, 06/15/06........................ 1,249,000 1,361,410
Musicland Group, Inc.
9.000%, 06/15/03......................... 1,750,000 1,662,500
Musicland Group, Inc.
9.875%, 03/15/08......................... 1,750,000 1,649,375
-------------
4,824,598
-------------
TELECOMMUNICATIONS -- 9.0%
Crown Castle International Corp.
0.000% (until 11/15/02; therafter 10.625%
to maturity), 11/15/07*.................. 2,000,000 1,240,000
Global Telesystems Group, Inc.
9.875%, 02/15/05......................... 1,725,000 1,518,000
ORBCOMM Global, LP, Series B
14.000%, 08/15/04........................ 2,000,000 1,837,500
Pinnacle Holdings, Inc.
0.000% (until 03/15/03; thereafter
10.000% to maturity), 03/15/08*.......... 500,000 265,000
SBA Communications Corp.
0.000% (until 03/01/04; thereafter
12.000% to maturity), 03/01/08*.......... 2,500,000 1,300,000
Spectrasite Holdings, Inc.
0.000% (until 07/15/03; thereafter
12.000% to maturity), 07/15/08*.......... 2,000,000 957,500
-------------
7,118,000
-------------
TELEPHONE -- 10.4%
ICG Holdings, Inc.
0.000% (until 9/15/00; thereafter 13.500%
to maturity), 09/15/05*.................. 2,000,000 1,590,000
IDT Corp.
8.750%, 02/15/06......................... 1,375,000 1,210,000
Northeast Optic Network, Inc.
12.750%, 08/15/08........................ 1,300,000 1,285,375
Teligent, Inc.
11.500%, 12/01/07........................ 1,100,000 874,500
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
44
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
TELEPHONE (CONTINUED)
<TABLE>
<S> <C> <C>
Viatel, Inc.
11.250%, 04/15/08........................ $ 1,000,000 $ 1,046,250
Winstar Commmunications, Inc.
0.000% (until 10/15/00; thereafter
14.000% to maturity), 10/15/05*.......... 300,000 197,625
Winstar Commmunications, Inc.
0.000%, 03/01/07*........................ 800,000 784,000
Winstar Commmunications, Inc.
10.000%, 03/15/08........................ 1,700,000 1,207,000
-------------
8,194,750
-------------
TOTAL CORPORATE BONDS
(Cost $76,063,616)...................................... 70,782,355
-------------
<CAPTION>
NUMBER
OF SHARES
<S> <C> <C>
- --------------------------------------------------------------------------
MUTUAL FUND -- 0.0%
- --------------------------------------------------------------------------
Nicholas Applegate High Yield Bond Fund
Trust
(Cost $1,000)............................ 55 1,000
-------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
COMMERCIAL PAPER -- 8.1%
- --------------------------------------------------------------------------
Associates First Capital Corp.
5.740%, 10/01/98......................... $ 3,925,000 $ 3,925,000
Central Illinois School District
5.780%, 10/01/98......................... 2,447,000 2,447,000
-------------
TOTAL COMMERCIAL PAPER
(Cost $6,372,000)....................................... 6,372,000
-------------
TOTAL INVESTMENTS -- 101.8%
(Cost $86,003,114)...................................... 80,489,242
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.8)%........... (1,415,469)
-------------
NET ASSETS -- 100.0%...................................... $ 79,073,773
-------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
45
<PAGE>
INTERNATIONAL CORE GROWTH FUND
ADVISORY SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM:
Catherine Somhegyi,
Partner, Chief Investment Officer,
Global Equity Management
Lawrence S. Speidell, CFA,
Partner, Director of Global/Systematic Portfolio
Management and Research
Loretta J. Morris,
Partner, Portfolio Manager
Melisa Grigolite,
Portfolio Manager
Alex Muromcew,
Portfolio Manager
John N. Tribolet,
Portfolio Manager
GOAL: The International Core Growth Fund seeks to maximize long-term capital
appreciation by investing in equity securities primarily of mid- to large-sized
non-US firms.
MARKET OVERVIEW: After climbing to record highs in mid-July, stocks in
international markets fell sharply over the next several weeks amid a variety of
investor concerns including:
- expectations for weaker corporate profits
- increasing global economic and currency turmoil
- evidence of a slowing global economy
PERFORMANCE: For the six-month period ending Sept. 30, 1998, the International
Core Growth Fund was down 9.2% versus a 13.3% decline for its benchmark, the
MSCI EAFE Index.
PORTFOLIO SPECIFICS: Nicholas-Applegate's international strategy concentrated
firmly on investing in growing companies able to deliver strong earnings in
spite of market volatility. Our focus on telecommunications stocks helped us
outperform the benchmark. These stocks included Colt Telecom and Orange, both
major telecommunications companies in the United Kingdom benefiting from
accelerating subscriber bases amid deregulation and privatization. Finnish
cellular phone manufacturer Nokia also did well. We continue to find numerous
opportunities throughout Europe.
As a result of our bottom-up approach, we increased our weightings in
pharmaceuticals and electric utilities worldwide. We reduced our holdings in
financial companies on a stock-specific basis, especially banks which were hard
hit due to their exposure to Russia, Latin America and Asia.
MARKET OUTLOOK: The changing landscape among international markets brings new
opportunities. Despite the third-quarter downturn, there are numerous
encouraging developments in markets around the world including:
- the pending European Monetary Union, which is catalyzing restructuring and
consolidation as companies focus more on shareholder value
- deregulation and privatization worldwide, which increases competitiveness
- increased international trade
Looking ahead, we believe international markets offer some of the best
investment opportunities. As a result of our bottom-up search, we continue to
uncover exciting companies for the International Core Growth Fund.
- --------------------------------------------------------------------------------
46
<PAGE>
INTERNATIONAL CORE GROWTH FUND ADVISORY SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
INTERNATIONAL CORE GROWTH FUND ADVISORY SHARES WITH THE MSCI EAFE INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
-2.21% As of 09/30/98 21.17%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL CORE GROWTH
FUND ADVISORY SHARES MSCI EAFE INDEX
<S> <C> <C>
12-27-96 $10,000.00 $10,000.00
01-31-97 $10,984.04 $9,629.74
02-28-97 $11,081.56 $9,787.66
03-31-97 $11,303.19 $9,822.90
04-30-97 $11,462.77 $9,874.96
05-31-97 $12,526.59 $10,517.82
06-30-97 $13,244.68 $11,097.35
07-31-97 $14,095.74 $11,277.13
08-31-97 $13,351.06 $10,434.73
09-30-97 $14,335.10 $11,019.07
10-31-97 $13,147.16 $10,171.71
11-30-97 $12,996.45 $10,067.95
12-31-97 $13,164.89 $10,155.54
01-31-98 $13,643.62 $10,619.65
02-28-98 $14,574.47 $11,301.12
03-31-98 $15,443.26 $11,649.19
04-30-98 $15,886.52 $11,741.45
05-31-98 $16,276.60 $11,684.51
06-30-98 $16,462.77 $11,773.31
07-31-98 $17,195.71 $11,892.22
08-31-98 $14,723.88 $10,418.77
09-30-98 $14,018.92 $10,099.35
</TABLE>
This graph compares a $10,000 investment in the International Core Growth Fund
Advisory Shares with the MSCI EAFE Index, on a cumulative and average annual
total return basis. All return calculations reflect the reinvestment of income
dividends and capital gains distributions, if any, as well as all fees and
expenses. The Fund's Advisory Shares calculate their performance based upon the
historical performance of their corresponding series ("Fund") of Nicholas-
Applegate Mutual Funds, adjusted to reflect sales charges and operating
expenses. The Fund's Advisory Shares were first available on 2/28/97.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The Morgan Stanley Capital International ("MSCI") Europe, Australia, Far East
("EAFE") Index is an unmanaged index that is a generally accepted benchmark for
major overseas markets included in the index on a U.S. dollar adjusted basis.
Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's Share price is expected to be
more volatile than that of a U.S. only fund.
- --------------------------------------------------------------------------------
47
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
INTERNATIONAL CORE GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
COMMON STOCKS -- 92.3%
- --------------------------------------------------------------------------
CANADA -- 1.1%
ATI Technologies, Inc.*.................... 117,300 $ 1,002,965
-------------
DENMARK -- 1.6%
Tele Danmark A/S -- Cl. B.................. 15,400 1,529,093
-------------
FINLAND -- 3.7%
Nokia Corp. -- ADR......................... 27,000 2,117,813
Raisio Group PLC........................... 94,000 1,366,972
-------------
3,484,785
-------------
FRANCE -- 16.1%
Axa S.A.................................... 6,500 594,936
Bouygues S.A............................... 6,800 1,231,444
Cap Gemini S.A............................. 8,300 1,270,590
Casino Guichard-Perrachon S.A.............. 19,000 1,915,323
Danone -- ADR.............................. 32,000 1,674,000
Dassault Systemes S.A...................... 23,600 892,663
Sanofi S.A.*............................... 13,100 1,925,921
STMicroelectronics N.V.*................... 18,400 826,850
Suez Lyonnaise des Eaux.................... 9,700 1,651,049
Synthelabo................................. 8,400 1,548,173
Television Francaise....................... 5,700 976,306
Valeo S.A.................................. 9,100 649,443
-------------
15,156,698
-------------
GERMANY -- 9.7%
Bayerische Hypo-Und Vereinsban............. 12,400 934,813
Deutsche Lufthansa AG...................... 41,400 839,716
Henkel KGaA................................ 10,400 756,036
LHS Group, Inc.*........................... 18,400 924,761
Mannesmann AG.............................. 14,600 1,340,892
Porsche AG*................................ 320 559,069
SAP AG..................................... 2,400 1,068,358
VIAG AG.................................... 2,155 1,408,644
Volkswagen AG.............................. 16,800 1,221,288
-------------
9,053,577
-------------
GREECE -- 0.1%
National Bank of Greece S.A................ 460 61,971
-------------
HONG KONG -- 0.7%
Dairy Farm International Holdings, Ltd..... 605,000 641,300
-------------
IRELAND -- 3.7%
Elan Corp. PLC -- ADR*..................... 25,400 1,830,388
Esat Telecom Group, PLC -- ADR*............ 22,600 757,100
Ryanair Holdings, PLC -- ADR*.............. 26,500 907,625
-------------
3,495,113
-------------
ISRAEL -- 0.8%
Gilat Satellite Networks, Ltd.*............ 16,300 733,500
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
ITALY -- 3.9%
Banca Di Roma*............................. 288,500 $ 515,038
Credito Italiano SpA....................... 106,500 443,414
La Rinascente SpA.......................... 101,500 889,419
Telecom Italia Mobile SpA.................. 175,300 1,020,537
Telecom Italia SpA......................... 112,100 771,665
-------------
3,640,073
-------------
JAPAN -- 13.5%
Aiwa Co., Ltd.............................. 30,000 830,884
Banyu Pharmaceutical Co., Ltd.............. 52,000 775,492
Bridgestone Corp........................... 35,000 707,096
Fuji Heavy Industries, Ltd................. 226,000 1,182,133
Homac Corp................................. 38,000 474,581
Kao Corp................................... 62,000 992,947
Mabuchi Motor Co., Ltd..................... 11,500 722,340
Nintendo Co., Ltd.......................... 10,000 943,285
Olympus Optical Co., Ltd................... 89,000 980,098
Orix Corp.................................. 14,200 985,821
Ryohin Keikaku Co., Ltd.................... 10,000 1,013,811
Softbank Corp.............................. 23,000 946,224
Sony Corp.................................. 14,400 1,003,937
Terumo Corp.*.............................. 55,000 1,133,375
-------------
12,692,024
-------------
MEXICO -- 0.2%
Corporacion Interamericana de
Entretenmiento S.A.*..................... 101,882 159,972
Corporacion Interamericana de
Entretenmiento S.A. -- L Shs.*........... 13,584 17,263
-------------
177,235
-------------
NETHERLANDS -- 5.5%
Benckiser N.V. -- B Shs.................... 21,800 1,087,063
CMG PLC.................................... 3,600 105,035
Koninklijke Ahold N.V...................... 39,500 1,179,711
VNU N.V.................................... 31,300 1,291,797
Wolters Kluwer Certific -- C.V............. 7,800 1,496,626
-------------
5,160,232
-------------
NORWAY -- 0.6%
Petroleum Geo-Services -- ADR*............. 36,100 573,088
-------------
PORTUGAL -- 0.6%
Banco Comercial Portugues S.A.*............ 19,200 517,984
-------------
SINGAPORE -- 2.0%
Natsteel Electronics, Ltd.................. 332,000 729,146
Singapore Technologies Engineering, Ltd.... 1,149,000 1,104,867
-------------
1,834,013
-------------
SOUTH AFRICA -- 0.3%
Dimension Data Holdings, Ltd.*............. 77,058 313,211
-------------
SPAIN -- 5.5%
Acciona S.A................................ 3,700 925,879
Argentaria S.A............................. 42,480 844,726
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
48
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
SPAIN (CONTINUED)
<TABLE>
<S> <C> <C>
Centros Comerciales Continente S.A......... 34,400 $ 874,135
Tabacalera S.A. -- A Shs................... 53,500 1,173,072
Telefonica S.A. -- ADR..................... 4,309 465,103
Telepizza S.A.*............................ 124,600 833,210
-------------
5,116,125
-------------
SWEDEN -- 2.1%
Electrolux AB -- B Shs..................... 60,000 788,816
Ortivus AB -- B Shs.*...................... 39,000 368,369
Volvo AB -- B Shs.......................... 34,000 833,234
-------------
1,990,419
-------------
SWITZERLAND -- 2.5%
Julius Baer Holdings -- B Shs.............. 200 469,548
Nestle S.A................................. 500 994,719
Swiss Reinsurance Corp..................... 100 198,294
Swiss Reinsurance Corp. -- Reg............. 340 674,199
-------------
2,336,760
-------------
UNITED KINGDOM -- 15.4%
Arm Holdings PLC*.......................... 59,900 895,793
Autonomy Corp. PLC*........................ 113,900 363,341
British Energy PLC......................... 172,700 1,691,959
Capita Group PLC........................... 119,200 1,227,572
CMG PLC.................................... 25,000 729,897
Colt Telecom Group PLC -- ADR*............. 83,100 699,750
Colt Telecom Group PLC*.................... 3,200 108,800
Dixons Group PLC........................... 94,100 961,886
Gallaher Group PLC......................... 68,800 502,169
Misys PLC.................................. 101,020 890,990
National Grid Group PLC.................... 134,500 1,001,139
Orange PLC*................................ 117,300 1,126,275
Pearson PLC................................ 74,496 1,386,262
Shire Pharmaceuticals Group, PLC -- ADR*... 51,400 1,124,375
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
Somerfield PLC............................. 106,500 $ 755,621
Vodafone Group PLC......................... 82,814 956,414
-------------
14,422,243
-------------
UNITED STATES OF AMERICA -- 2.7%
Cellular Communications International
Co.*..................................... 18,000 976,500
Global Crossing, Ltd.*..................... 32,600 680,525
Global Telesystems Group, Inc.*............ 27,100 914,625
-------------
2,571,650
-------------
TOTAL COMMON STOCKS
(Cost $85,134,974)...................................... 86,504,059
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMERCIAL PAPER -- 5.7%
- -------------------------------------------------------------------------------
Associates First Capital Corp.
5.74%, 10/01/98.......................... $ 4,776,000 4,776,000
Central Illinois Public
5.78%, 10/01/98.......................... 576,000 576,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL COMMERCIAL PAPER
(Cost $5,352,000).......................................... 5,352,000
------------
TOTAL INVESTMENTS -- 98.0%
(Cost $90,486,974)......................................... 91,856,059
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.0%................ 1,896,117
------------
NET ASSETS -- 100.0%......................................... $ 93,752,176
------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
49
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
INTERNATIONAL CORE GROWTH FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Airlines.................................... 1.9%
Appliances.................................. 0.8
Automobiles................................. 4.0
Automotive Equipment........................ 1.4
Cellular Telecommunication.................. 4.4
Chemicals................................... 0.8
Computers/Office Automation................. 4.6
Consumer Electronics........................ 3.0
Cosmetics................................... 1.1
Data Processing............................. 1.0
Departments/Discount Stores................. 0.9
Distribution -- Wholesale................... 1.0
Drugs/Pharmaceuticals....................... 7.7
Electric Utilities.......................... 3.5
Engineering/R&D............................. 1.2
Entertainment............................... 0.2
Finance Companies........................... 6.1
Food -- Miscellaneous....................... 10.3
Human Resources............................. 1.3
Industrial Engineering/Construction......... 4.1
Machinery................................... 1.4
Managed Health Care......................... 0.5
Manufacturing (Diversified)................. 1.5
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Medical Products............................ 1.6%
Money-Center Banks.......................... 0.5
Multi-Line Insurers......................... 0.6
Multi-Media................................. 1.5
Oil......................................... 0.6
Photo -- Equipment/Supplies................. 1.0
Publishing.................................. 3.0
Regional/Commercial Banks................... 3.5
Reinsurance................................. 0.9
Retail...................................... 2.3
Satellite Telecommunications................ 0.8
Semiconductors/Electronic Components........ 3.4
Soap/Cleaners............................... 1.2
Software.................................... 2.5
Telecommunication Services.................. 5.5
Telephone................................... 3.1
Television.................................. 1.0
Tobacco..................................... 1.3
Toys........................................ 1.0
Other Assets in Excess of Liabilities....... 2.0
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
50
<PAGE>
INTERNATIONAL SMALL CAP GROWTH FUND
ADVISORY SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM:
Catherine Somhegyi,
Partner, Chief Investment Officer,
Global Equity Management
Lawrence S. Speidell, CFA,
Partner, Director of Global/Systematic Portfolio
Management and Research
Loretta J. Morris,
Partner, Portfolio Manager
Melisa Grigolite,
Portfolio Manager
Alex Muromcew,
Portfolio Manager
John N. Tribolet,
Portfolio Manager
GOAL: The International Small Cap Growth Fund seeks to maximize long-term
capital appreciation by investing in equity securities primarily of small, non-
US companies.
MARKET OVERVIEW: After climbing to record highs in mid-July, stocks in
international markets fell sharply over the next several weeks amid a variety of
investor concerns including:
- expectations for weaker corporate profits
- increasing global economic and currency turmoil
- evidence of a slowing global economy
PERFORMANCE: For the six-month period ending Sept. 30, 1998, the International
Small Cap Growth Fund was down 8.3% versus a 14.4% decline for its benchmark,
the Salomon EPAC/EMI Index.
PORTFOLIO SPECIFICS: Nicholas-Applegate's international strategy concentrated
firmly on investing in growing companies able to deliver strong earnings in
spite of market volatility. This helped the fund outperform the benchmark in an
extremely difficult environment. An example of a stock meeting our investment
criteria was Telepizza in Spain.
Though instability heightened investor uncertainty about overseas investing,
we continue to find promising companies internationally, especially in Europe.
Our bottom-up approach led us to increase our weightings in pharmaceuticals and
electric utilities worldwide. We reduced our holdings in financial companies,
especially banks which were hard hit due to their exposure to Russia, Latin
America and Asia.
MARKET OUTLOOK: The changing landscape among international markets brings new
opportunities. Despite the third-quarter downturn, there are numerous
encouraging developments in markets around the world including:
- the pending European Monetary Union, which is acting as a catalyst for
restructuring and consolidation throughout Europe as companies concentrate
on enhancing shareholder value and improving efficiency
- deregulation and privatization worldwide, which increase competitiveness
- governments, particularly in Europe, changing regulations to promote equity
investing, especially in pension plans
- new agreements promoting increased international trade
- non-US markets relaxing restrictions on foreign investing
Looking ahead, we believe international markets offer some of the best
opportunities. As a result of our bottom-up search, we continue to uncover
exciting companies for the International Small Cap Growth Fund. We believe a
disciplined, company-by-company approach overseas can enhance long-term returns.
- --------------------------------------------------------------------------------
51
<PAGE>
INTERNATIONAL SMALL CAP GROWTH FUND ADVISORY SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
INTERNATIONAL SMALL CAP GROWTH FUND ADVISORY SHARES WITH THE SALOMON EPAC EMI
INDEX
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 09/30/98 SINCE
1 YEAR 5 YEARS INCEPTION
3.74% 11.26% 7.20%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP SALOMON
GROWTH FUND ADVISORY SHARES EPAC/EMI INDEX
<S> <C> <C>
6-07-90 $10,000.00 $10,000.00
6-30-90 $10,138.25 $10,135.00
12-31-90 $8,239.99 $8,303.82
6-30-91 $8,489.88 $8,511.83
12-31-91 $9,188.08 $8,857.15
6-30-92 $8,702.67 $8,329.44
12-31-92 $8,031.98 $7,557.32
6-30-93 $10,010.99 $9,479.41
12-31-93 $10,097.69 $9,764.47
6-30-94 $11,279.40 $11,128.80
12-31-94 $10,940.09 $11,685.83
6-30-95 $10,836.70 $10,573.78
12-31-95 $11,565.33 $11,197.92
6-30-96 $13,127.47 $12,376.53
12-31-96 $13,649.10 $11,922.57
6-30-97 $16,092.96 $12,529.00
12-31-97 $15,545.36 $10,697.60
6-30-98 $21,041.51 $12,620.75
9-30-98 $17,830.98 $10,613.58
</TABLE>
This graph compares a $10,000 investment in the International Small Cap Growth
Fund Advisory Shares with the Salomon EPAC EMI Index, on a cumulative and
average annual total return basis. All return calculations reflect the
reinvestment of income dividends and capital gains distributions, if any, as
well as all fees and expenses. Performance results reflect the total returns of
a predecessor limited partnership managed by Nicholas-Applegate Capital
Management prior to the effective date of the Fund's registration statement on
12/31/93. Limited partnership returns are restated to reflect all fees and
expenses applicable to the Fund. If the limited partnership had been registered
as an investment company under the federal securities laws, its performance
might have been adversely affected because of the additional restrictions
applicable to registered investment companies. The Advisory shares calculate
their performance based upon the historical performance of their corresponding
series ("Fund") of Nicholas-Applegate Mutual Funds, adjusted to reflect sales
charges and operating expenses. The Fund's Advisory shares were first available
on 8/31/95.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The Salomon EPAC Extended Market Index ("EMI") is an unmanaged index. It is a
top-down, float capitalization-weighted index that includes shares of about
2,821 companies in 22 countries excluding Canada and the United States.
Companies within the Index are smaller capitalization companies with available
float market capitalizations greater than U.S. $100 million. Only issues that
are legally and practically available to outside investors are included in the
Index.
The Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's Share price is expected to be
more volatile than that of a U.S. only fund.
- --------------------------------------------------------------------------------
52
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
INTERNATIONAL SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
COMMON STOCKS -- 92.0%
- ---------------------------------------------------------------------------------
BELGIUM -- 0.9%
Barco N.V.................................. 4,065 $ 954,668
-------------
CANADA -- 2.0%
ATI Technologies, Inc.*.................... 111,300 951,662
Sierra Systems Group, Inc.*................ 62,600 1,086,920
-------------
2,038,582
-------------
DENMARK -- 1.2%
Neurosearch A/S*........................... 16,000 1,195,907
-------------
FINLAND -- 2.4%
Raisio Group PLC........................... 95,900 1,394,602
Sponda Oyj*................................ 150,000 1,002,236
-------------
2,396,838
-------------
FRANCE -- 10.2%
Altran Technologies S.A.................... 10,200 1,854,446
Bouygues S.A............................... 7,400 1,340,101
Business Objects S.A. -- ADR*.............. 63,300 791,250
Cie des Signaux S.A........................ 17,700 948,981
Coflexip S.A............................... 15,000 594,375
Dassault Systemes S.A...................... 31,000 1,172,566
Havas Advertising S.A...................... 8,984 1,378,504
Infogrames*................................ 28,100 1,509,082
Transgene S.A. -- ADR*..................... 74,700 803,025
-------------
10,392,330
-------------
GERMANY -- 11.4%
Aixtron AG................................. 6,600 1,058,306
EM TV & Merchandising...................... 7,300 2,428,456
Fielmann AG................................ 56,400 2,176,564
Kiekert AG................................. 35,000 1,403,057
LHS Group, Inc.*........................... 20,400 1,025,279
MobilCom AG*............................... 7,282 1,847,350
Pfeiffer Vacuum Tech AG -- ADR*............ 23,071 994,937
Porsche AG*................................ 350 611,482
-------------
11,545,431
-------------
HONG KONG -- 1.9%
Johnson Electric Holdings, Ltd............. 419,000 794,902
Vtech Holdings, Ltd........................ 287,000 1,144,518
-------------
1,939,420
-------------
INDIA -- 0.5%
Infosys Technologies, Ltd.................. 8,000 473,459
-------------
IRELAND -- 2.0%
Esat Telecom Group, PLC -- ADR............. 25,600 857,600
Ryanair Holdings, PLC -- ADR*.............. 33,800 1,157,650
-------------
2,015,250
-------------
ISRAEL -- 0.7%
Gilat Satellite Networks, Ltd.*............ 15,200 684,000
-------------
ITALY -- 1.8%
Banca di Roma SpA*......................... 307,100 548,244
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
</TABLE>
ITALY (CONTINUED)
<TABLE>
<S> <C> <C>
La Rinascente SpA.......................... 141,400 $ 1,239,052
-------------
1,787,296
-------------
JAPAN -- 12.3%
Bellsystem 24, Inc......................... 5,200 821,334
Cresco, Ltd................................ 58,000 809,580
Fuji Heavy Industries, Ltd................. 247,000 1,291,977
Fuji Soft ABC, Inc......................... 40,900 1,412,209
Jamco Corp................................. 7,000 49,882
Kawasumi Laboratories, Inc................. 38,300 633,081
Kojima Co., Ltd............................ 100,100 963,348
Meitec Corp................................ 21,200 459,447
Nidec Corp................................. 10,400 832,794
Orix Corp.................................. 9,400 652,586
Ryohin Keikaku Co., Ltd.................... 15,000 1,520,717
Sony Chemicals Corp........................ 52,000 1,547,164
Suzuken Co., Ltd........................... 48,200 860,461
Yamazaki Baking Co., Ltd.*................. 65,000 619,343
-------------
12,473,923
-------------
MEXICO -- 0.6%
Corporacion Interamericana de
Entretenmiento S.A.*..................... 359,138 563,906
Corporacion Interamericana de
Entretenmiento S.A. -- L Shs.*........... 28,685 36,454
-------------
600,360
-------------
NETHERLANDS -- 4.0%
Benckiser N.V. -- B Shs.................... 22,800 1,136,928
Benckiser N.V. -- B Shs. -- ADR............ 2,800 139,475
CMG PLC.................................... 5,200 151,718
Cap Gemini N.V............................. 6,100 410,640
Nutreco Holding N.V........................ 32,509 1,202,006
Prolion Holding N.V.*...................... 11,000 1,136,716
-------------
4,177,483
-------------
NORWAY -- 2.8%
Elkjop Norge ASA........................... 22,300 843,566
Merkantildata ASA.......................... 85,000 648,819
Petroleum Geo Services*.................... 8,200 134,047
Petroleum Geo-Services -- ADR.............. 22,600 358,775
Tomra Systems ASA.......................... 38,900 817,215
-------------
2,802,422
-------------
PORTUGAL -- 1.4%
Ibersol SGPS S.A........................... 8,200 721,793
Siva SGPS S.A.*............................ 61,000 684,514
-------------
1,406,307
-------------
SINGAPORE -- 3.8%
Avimo Group, Ltd........................... 501,000 707,766
Datacraft Asia, Ltd.*...................... 351,000 947,700
Elec & Eltek International Co., Ltd........ 165,000 818,400
Natsteel Electronics, Ltd.................. 629,000 1,381,425
-------------
3,855,291
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
53
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
SOUTH AFRICA -- 0.4%
Dimension Data Holdings, Ltd.*............. 88,125 $ 358,194
-------------
SPAIN -- 4.6%
Acciona S.A................................ 4,810 1,203,643
Azkoyen S.A................................ 7,400 984,479
Corp Financiera Reunida S.A.*.............. 101,700 1,231,295
Telepizza S.A.*............................ 191,900 1,283,250
-------------
4,702,667
-------------
SWEDEN -- 1.3%
Modern Times Group -- Cl. B*............... 70,000 786,263
Ortivus AB -- B Shs.*...................... 61,800 583,724
-------------
1,369,987
-------------
SWITZERLAND -- 2.3%
Julius Baer Holdings -- B Shs.............. 210 493,025
Mettler-Toledo International, Inc.*........ 87,800 1,887,700
-------------
2,380,725
-------------
UNITED KINGDOM -- 19.6%
Admiral PLC................................ 51,700 1,087,261
Arm Holdings PLC*.......................... 38,700 578,751
Arm Holdings PLC -- ADR*................... 8,600 387,000
Autonomy Corp PLC -- ADR*.................. 172,000 548,680
Capita Group PLC........................... 168,200 1,732,195
CMG PLC.................................... 27,600 805,806
Colt Telecom Group PLC*.................... 103,600 872,372
Dixons Group PLC........................... 107,200 1,095,793
Ecsoft Group PLC -- ADR*................... 43,500 897,188
F. I. Group PLC............................ 194,400 883,727
ICON, PLC -- ADR*.......................... 58,900 1,921,613
Misys PLC.................................. 99,875 880,891
National Express Group PLC................. 122,500 2,279,546
Nestor Healthcare Group PLC................ 244,400 1,530,512
Shire Pharmaceuticals Group, PLC -- ADR*... 123,700 2,705,938
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
Somerfield PLC............................. 244,100 $ 1,731,898
-------------
19,939,171
-------------
UNITED STATES -- 3.9%
Cellular Communications International
Co.*..................................... 29,900 1,622,075
Getty Images, Inc.*........................ 51,900 901,763
Global Telesystems Group, Inc.*............ 32,200 1,086,750
Optimal Robotics Corp.*.................... 49,300 345,100
-------------
3,955,688
-------------
TOTAL COMMON STOCKS
(Cost $86,686,424).......................................... 93,445,399
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ---------------------------------------------------------------------------------
COMMERCIAL PAPER -- 8.4%
- ---------------------------------------------------------------------------------
Associates First Capital Corp.
5.740%, 10/01/98......................... $ 3,439,000 3,439,000
Central Illinois Public
5.78%, 10/01/98 5,129,000 5,129,000
-------------
TOTAL COMMERCIAL PAPER
(Cost $8,568,000)........................................... 8,568,000
-------------
TOTAL INVESTMENTS -- 100.4%
(Cost $95,254,424).......................................... 102,013,399
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.4%)............... (382,191)
-------------
NET ASSETS -- 100.0%.......................................... $ 101,631,208
-------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
54
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
INTERNATIONAL SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Advertising................................. 3.7%
Agriculture................................. 1.2
Airlines.................................... 1.2
Automobiles................................. 1.9
Automotive Equipment........................ 1.4
Biotechnology............................... 1.0
Broadcasting................................ 3.3
Chemicals................................... 1.3
Computers/Office Automation................. 1.6
Data Processing............................. 1.0
Drugs/Pharmaceuticals....................... 4.7
Electric Utilities.......................... 5.1
Electronic Instruments...................... 1.0
Electronics/Music Chains.................... 2.0
Entertainment............................... 2.1
Financial Products/Services................. 3.4
Food Chains................................. 1.8
Grocery Products............................ 2.0
Industrial Engineering/Construction......... 4.8
Investment Companies........................ 1.2
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Machinery/Equipment......................... 5.5%
Medical Supplies............................ 1.2
Money-Center Banks.......................... 1.1
Oilfield Services/Equipment................. 1.1
Other Commercial/Industrial Services........ 6.8
Other Health Services....................... 3.4
Other Producers/Manufacturing............... 3.5
Other Retail Trade.......................... 2.7
Other Transportation........................ 2.2
Real Estate Development..................... 1.1
Rental/Leasing Companies.................... 0.6
Restaurants................................. 2.0
Semiconductors/Electronic Components........ 5.9
Software.................................... 7.0
Specialty Chains............................ 2.1
Telecommunications Equipment................ 0.7
Telecommunications Services................. 5.1
Telephone................................... 1.1
Wholesale Distribution...................... 0.7
Liabilities in Excess of Other Assets....... (0.4)
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
55
<PAGE>
EMERGING COUNTRIES FUND
ADVISORY SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer,
Global Equity Management
Lawrence S. Speidell, CFA,
Partner, Director of Global/Systematic Portfolio
Management and Research
Pedro V. Marcal,
Partner, Portfolio Manager
Jon Borchardt,
Portfolio Manager
Eswar Menon,
Portfolio Manager
Ernesto Ramos, Ph.D.,
Portfolio Manager
Jessica Hilinski,
Portfolio Manager
Aylin Uckunkaya,
Investment Analyst
GOAL: The Emerging Countries Fund seeks to provide long-term capital
appreciation through investing in companies of developing countries around the
world.
MARKET ENVIRONMENT: During the six-month period ending Sept. 30, 1998, the
currency crisis that began a year ago in Southeast Asia spread to Russia and
threatened Latin America. Reflecting the extremely difficult environment among
emerging markets, out of the 10 largest countries that make up the MSCI Emerging
Markets Index, only Greece posted positive gains in 1998. Among the factors
negatively impacting emerging countries:
- Russia's currency devaluation and the Russian government's decision to
reschedule payment on most of its short-term domestic debt, a move widely
viewed as a default
- heightened investor concerns regarding possible currency devaluations in
other countries and the potential for economic malaise to spread worldwide
- political turmoil in select countries exacerbated investor uneasiness
- declining prices for commodities such as oil and copper impacted revenues
for many export-dependent emerging countries
PERFORMANCE: In a period characterized by political and economic turmoil in
the world's emerging markets, the Emerging Countries Fund returned -36.3% versus
- -40.4% for its benchmark, the MSCI Emerging Markets Free Index.
PORTFOLIO SPECIFICS: Our exposure to regions affected by currency crises
throughout Asia, Russia and Latin America negatively impacted results for the
period. We have significantly decreased our exposure in these areas and, on a
stock-by-stock basis, added to companies whose potential for growth going
forward remains strong.
Despite a difficult environment, our bottom-up stock selection helped us
identify the stocks of promising growth companies. In Asia, PC component
assembler Natsteel Electronics benefited from the introduction of Apple
Computer's iMac and delivered earnings growth of 81% in the first half of the
year. In Poland, brewing company Zywiec has gained market share and has grown
its sales by 30%. In India, software maker Infosys benefited from the growing
trend toward outsourcing of software projects.
MARKET OUTLOOK: Over the long-term, we believe that shareholders will benefit
from the tremendous opportunities available in the world's emerging countries. A
variety of improving factors, including increased privatization and falling
trade barriers, continue to create solid investment opportunities for bottom-up
stock pickers. Despite recent volatility, we remain optimistic in our outlook
for the fund.
- --------------------------------------------------------------------------------
56
<PAGE>
EMERGING COUNTRIES FUND ADVISORY SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
EMERGING COUNTRIES FUND ADVISORY SHARES WITH THE MSCI EMERGING MARKETS FREE
INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURN
As of 09/30/98 SINCE
1 YEAR 3 YEARS INCEPTION
-41.97% -2.97% -0.46%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EMERGING COUNTRIES MSCI EMF
FUND ADVISORY SHARES INDEX
<S> <C> <C>
28-Nov-94 $10,000.00 $10,000.00
31-Dec-94 $9,552.88 $9,374.37
31-Mar-95 $8,804.82 $8,211.76
30-Jun-95 $10,128.98 $9,064.06
30-Sep-95 $10,756.66 $9,005.87
31-Dec-95 $10,206.36 $8,884.48
31-Mar-96 $11,332.76 $9,437.90
30-Jun-96 $12,493.55 $9,831.83
30-Sep-96 $12,760.11 $9,476.56
31-Dec-96 $13,035.12 $9,420.69
31-Mar-97 $14,198.97 $10,217.90
30-Jun-97 $16,337.01 $11,092.35
30-Sep-97 $16,931.86 $10,097.83
31-Dec-97 $14,342.61 $8,328.68
31-Mar-98 $15,419.39 $8,844.52
30-Jun-98 $13,274.91 $6,757.42
30-Sep-98 $9,825.17 $5,256.47
</TABLE>
This graph compares a $10,000 investment in the Emerging Countries Fund Advisory
Shares with the MSCI Emerging Markets Free Index ("EMF"), on a cumulative and
average annual total return basis. All return calculations reflect the
reinvestment of income dividends and capital gains distributions, if any, as
well as all fees and expenses. The Fund's Advisory Shares calculate their
performance based upon the historical performance of their corresponding series
("Fund") of Nicholas-Applegate Mutual Funds, adjusted to reflect sales charges
and operating expenses. The Fund's Advisory Shares were first available on
8/31/95.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The MSCI EMF is a market capitalization weighted index composed of companies
representative of the market structure of 22 Emerging Market countries in
Europe, Latin America, and the Pacific Basin. The Index excludes closed markets
and those shares in otherwise free markets which are not purchasable by
foreigners.
Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's share price is expected to be
more volatile than that of a U.S. only fund. These risks are generally
intensified for investments in emerging markets.
- --------------------------------------------------------------------------------
57
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
EMERGING COUNTRIES FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS -- 88.7%
- -------------------------------------------------------------------------------
ARGENTINA -- 6.3%
Banco de Galicia y Buenos Aires S.A. C.V.
-- ADR................................... 189,400 $ 3,006,725
Telecom Argentina Stet-France Telecom Ltd.
S.A. -- ADR.............................. 85,800 2,547,188
Telefonica de Argentina S.A. -- ADR........ 133,200 3,921,075
YPF Sociedad Anonima -- ADR................ 183,100 4,760,600
------------
14,235,588
------------
BRAZIL -- 7.5%
Companhia Brasileira de Distribuicao Grupo
Pao de Acucar -- ADR..................... 9,900 129,319
Companhia Energetica de Minas Gerais....... 241,498,812 5,256,885
Petroleo Brasileiro S.A.*.................. 36,210,000 3,726,889
Telec de Sao Paulo S.A..................... 15,870,000 2,303,027
Telecomunicacoes Brasileiras S.A. -- ADR... 79,900 5,513,100
------------
16,929,220
------------
CHILE -- 2.6%
CIA de Telecomunicas de Chile S.A.......... 146,000 2,792,250
Compania Cervecerias Unidas S.A. -- ADR.... 106,740 1,961,348
Sociedad Quimica Y Minera de Chile S.A..... 35,800 1,042,675
------------
5,796,273
------------
CHINA -- 1.9%
China Telecom, Ltd.*....................... 2,790,000 4,392,850
------------
CROATIA -- 1.8%
PLIVA D.D. -- GDR.......................... 305,100 4,088,340
------------
CZECHOSLAVAKIA -- 2.3%
Ceske Radiokomunickace*.................... 114,280 2,951,281
SPT Telecom A.S............................ 184,645 2,384,208
------------
5,335,489
------------
EGYPT -- 4.2%
Al-Ahram Beverages Co.*.................... 97,000 3,056,469
Arabian International Construction......... 29,500 1,232,760
EFG Hermes*................................ 88,000 1,056,000
Egypt Gas.................................. 15,500 1,399,988
Optd/Egypt*................................ 1,000 808,873
Orascom Hotel Holding*..................... 710,000 1,940,511
------------
9,494,601
------------
GREECE -- 4.2%
Chipita International S.A.................. 51,600 1,358,955
Intracom S.A............................... 68,020 2,505,832
Intrasoft S.A.............................. 54,900 998,857
National Bank of Greece S.A................ 25,240 3,400,329
Titan Cement Co............................ 23,000 1,373,986
------------
9,637,959
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
HONG KONG -- 1.1%
Peak International, Ltd.*.................. 157,900 $ 1,302,675
Shenzhen Fangda Co., Ltd................... 1,440,000 1,096,470
------------
2,399,145
------------
HUNGARY -- 5.3%
Matav RT -- ADR............................ 311,250 6,750,234
Mol Magyar Olaj es Gazipari Rt............. 272,100 5,277,693
Pannonplast Rt............................. 2,126 48,628
------------
12,076,555
------------
INDIA -- 9.9%
BSES, Ltd.................................. 30,000 401,400
Hindustan Lever, Ltd....................... 173,000 6,877,931
Hindustan Lever, Ltd. PAR IR............... 20,000 792,754
Housing Development Finance Corp., Ltd..... 9,300 530,438
Infosys Technologies, Ltd.................. 97,000 5,740,695
Mahanagar Telephone Nigam, Ltd............. 36,100 344,798
NIIT, Ltd.*................................ 210,700 6,792,640
Oriental Bank of Commerce.................. 200 210
Punjab Tractors, Ltd....................... 25,000 481,690
State Bank Of India........................ 125,000 590,173
------------
22,552,729
------------
ISRAEL -- 5.4%
Bank Hapoalin.............................. 1,048,800 2,561,109
Elbit Systems, Ltd......................... 43,800 552,975
Formula Systems (1985), Ltd.*.............. 85,906 1,822,986
ForSoft, Ltd.*............................. 148,000 1,702,000
Gilat Satellite Networks, Ltd.*............ 100,700 4,531,500
Koor Industries, Ltd....................... 13,900 1,160,352
------------
12,330,922
------------
MEXICO -- 10.8%
Coca-Cola Femsa S.A. -- ADR................ 236,700 2,884,781
Cifra S.A. de C.V. -- C Shs.*.............. 3,184,000 3,687,062
Corporacion Geo S.A. de C.V. -- B Shs...... 381,697 715,447
Corporacion Interamericana de
Entretenmiento S.A.*..................... 3,124,430 4,905,872
Corporacion Interamericana de
Entretenmiento S.A. -- L Shs.*........... 385,285 489,640
Fomento Economico Mexicano S.A. de C.V..... 2,253,000 4,399,868
Telefonos de Mexico S.A.................... 1,299,000 2,919,241
Telefonos de Mexico S.A. -- ADR............ 103,700 4,588,725
------------
24,590,636
------------
MOROCCO -- 1.0%
Banque Marocaine du Commerce Exterieur..... 15,100 1,165,717
ONA S.A.................................... 8,800 1,170,323
------------
2,336,040
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
58
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
PAKISTAN -- 0.0%
Pakistan State Oil......................... 10,994 $ 20,702
Sui Northern Gas*.......................... 69,962 15,281
------------
35,983
------------
PERU -- 2.5%
Cementos Lima S.A.......................... 164,229 2,420,281
Cementos Lima S.A. -- ADR.................. 27,954 411,964
Ferreyros S.A.............................. 2,840,146 2,892,708
------------
5,724,953
------------
POLAND -- 3.1%
Elektrim Spolka Akcyjna S.A................ 349,600 3,541,957
Exbud S.A. -- GDR*......................... 190,700 1,520,833
Mostostal-Warszawa S.A.*................... 121,700 587,203
Zaklady Piwowarskie........................ 10,207 1,285,506
------------
6,935,499
------------
PORTUGAL -- 5.1%
Banco Comercial Portugues S.A.*............ 96,300 2,598,014
Brisa-Auto Estradas de Portugal S.A........ 49,300 2,244,501
Electricidade de Portugal S.A.............. 97,000 2,229,566
Ibersol SGPS S.A........................... 19,200 1,690,052
Jeronimo Martins S.A....................... 81,300 2,751,152
------------
11,513,285
------------
SINGAPORE -- 5.4%
Datacraft Asia, Ltd.*...................... 994,400 2,684,880
Natsteel Electronics, Ltd.................. 1,686,000 3,702,833
Singapore Technologies Engineering, Ltd.... 3,290,600 3,164,207
Venture Manufacturing, Ltd................. 910,000 2,808,792
------------
12,360,712
------------
SOUTH AFRICA -- 5.1%
ABSA Group, Ltd............................ 542,700 1,975,126
Barlow, Ltd................................ 294,700 1,102,615
Dimension Data Holdings, Ltd.*............. 560,178 2,276,906
Investec Group, Ltd........................ 68,300 2,067,578
Pick N' Pay Stores, Ltd.................... 909,133 463,842
South African Breweries, Ltd............... 239,564 3,609,745
------------
11,495,812
------------
SRI LANKA -- 0.5%
Ceylon Brewery, Ltd........................ 125,700 79,533
John Keells Holdings, Ltd.................. 413,500 1,071,585
------------
1,151,118
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
TAIWAN -- 1.3%
Compal Electronics, Inc.................... 1,023,320 $ 3,036,510
------------
UNITED STATES OF AMERICA -- 1.4%
Central Asia Investment Co.*............... 48,567 242,835
Comverse Technology, Inc.*................. 53,800 2,199,075
Harken Energy Corp.*....................... 221,300 760,719
------------
3,202,629
------------
TOTAL COMMON STOCKS
(Cost $226,529,469)......................................... 201,652,848
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
WARRANTS
<S> <C> <C>
- ----------------------------------------------------------------------------
WARRANTS -- 0.6%
- ----------------------------------------------------------------------------
Jollibee Foods*
(Cost $3,039,487)........................ 6,282,900 1,335,562
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
<S> <C> <C>
- -------------------------------------------------------------------------------
MUTUAL FUND -- 0.0%
- -------------------------------------------------------------------------------
First NIS Regional Fund
(Cost $136,683).......................... 15,000 52,500
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMERCIAL PAPER -- 4.5%
- -------------------------------------------------------------------------------
Central Illinois Public
5.78%, 10/01/98
(Cost $10,252,000)....................... $10,252,000 10,252,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS -- 93.8%
(Cost $239,957,639)........................................ 213,292,910
OTHER ASSETS IN EXCESS OF LIABILITIES -- 6.2%................ 14,050,573
------------
NET ASSETS -- 100.0%......................................... $227,343,483
------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
59
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
EMERGING COUNTRIES FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Alcoholic Beverages......................... 4.5%
Beverages/Softdrinks........................ 1.3
Broadcasting................................ 1.3
Building Materials.......................... 2.3
Chemicals................................... 0.5
Computers/Office Automation................. 2.3
Department/Discount Stores.................. 1.6
Drugs/Pharmaceuticals....................... 1.8
Electric Utilities.......................... 8.0
Electronic Data Processing.................. 0.7
Entertainment............................... 2.4
Finance Companies........................... 0.2
Food Chains................................. 1.9
Gas Utilities............................... 0.6
Grocery Products............................ 2.5
Industrial Engineering/Construction......... 2.5
Integrated Oil Companies.................... 2.1
Investment Companies........................ 1.5
Machinery/Equipment......................... 3.0
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Military/Defense Technology................. 1.6%
Money-Center Banks.......................... 1.4
Oil/Gas Production.......................... 2.7
Oilfield Services/Equipment................. 1.6
Other Commercial/Industrial Services........ 1.2
Other Production/Manufacturing.............. 1.0
Real Estate Development/Investment.......... 1.5
Regional/Commercial Banks................... 5.3
Restaurants................................. 1.3
Semiconductors/Electronic Components........ 3.4
Soaps/Cosmetics............................. 3.4
Software.................................... 6.3
Telecommunication Equipment................. 5.1
Telecommunication Services.................. 2.1
Telephone................................... 14.9
Other Assets in Excess of Liabilities 6.2
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
60
<PAGE>
WORLDWIDE GROWTH FUND
ADVISORY SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer,
Global Equity Management
Lawrence S. Speidell, CFA,
Partner, Director of Global/Systematic Portfolio
Management and Research
Andrew Gallagher,
Partner, Portfolio Manager
Loretta J. Morris,
Partner, Portfolio Manager
Melisa Grigolite,
Portfolio Manager
Alex Muromcew,
Portfolio Manager
John N. Tribolet,
Portfolio Manager
GOAL: The Worldwide Growth Fund seeks to maximize long-term capital
appreciation by investing in a portfolio of growth stocks of US and
international companies.
MARKET OVERVIEW: After climbing to record highs in mid-July, stocks in
developed global markets fell sharply over the next several weeks amid a variety
of investor concerns including:
- expectations for weaker corporate profits
- increasing global economic and currency turmoil
- evidence of a slowing global economy
PERFORMANCE: For the six-month period ending Sept. 30, 1998, the Worldwide
Growth Fund was down 7.4% versus a 10.2% decline for its benchmark, the MSCI
World Index.
PORTFOLIO SPECIFICS: Amid a very difficult environment, Nicholas-Applegate's
global strategy concentrated firmly on investing in growing companies able to
deliver strong earnings in spite of market volatility. In the United States, the
fund benefited from holdings demonstrating solid earnings and pricing power such
as Air Touch Communications and America Online. We also found opportunities
throughout Europe, including Finnish cellular phone manufacturer Nokia and Colt
Telecommunications in the United Kingdom. Our bottom-up approach led us to
increase our weightings in telecommunications and electric utilities.
During the period, we reduced our holdings in financial companies, especially
banks which were hard hit due to their exposure to turmoil in Russia, Latin
America and Asia and impacted by long-term interest rates falling below the
level of short-term interest rates (an inverted yield curve) in the United
States.
MARKET OUTLOOK: The changing landscape among global markets brings new
opportunities. Despite the third-quarter downturn, there are numerous
encouraging developments in markets around the world including:
- the pending European Monetary Union, which is catalyzing restructuring and
consolidation as companies focus more on shareholder value
- deregulation and privatization worldwide, which increases competitiveness
- increased international trade
Looking ahead, we believe global markets continue to offer promising
investment opportunities. As a result of our bottom-up search, we continue to
uncover exciting companies for the Worldwide Growth Fund.
- --------------------------------------------------------------------------------
61
<PAGE>
WORLDWIDE GROWTH FUND ADVISORY SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
WORLDWIDE GROWTH FUND ADVISORY SHARES WITH THE MSCI WORLD INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 09/30/98 SINCE
1 YEAR 5 YEARS INCEPTION
-0.88% 12.17% 13.76%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
WORLDWIDE GROWTH MSCI WORLD
FUND ADVISORY SHARES INDEX
<S> <C> <C>
19-Apr-93 $10,000.00 $10,000.00
30-Jun-93 $10,532.26 $10,283.06
30-Sep-93 $11,365.59 $10,765.74
31-Dec-93 $11,430.11 $10,940.63
31-Mar-94 $11,978.49 $11,007.30
30-Jun-94 $11,774.19 $11,338.33
30-Sep-94 $12,376.34 $11,581.61
31-Dec-94 $11,741.94 $11,498.33
31-Mar-95 $11,903.23 $12,017.66
30-Jun-95 $12,591.40 $12,530.40
30-Sep-95 $13,774.19 $13,212.41
31-Dec-95 $13,494.62 $13,839.58
31-Mar-96 $14,301.08 $14,402.82
30-Jun-96 $15,290.32 $14,820.99
30-Sep-96 $15,301.08 $15,018.73
31-Dec-96 $15,967.74 $15,705.98
31-Mar-97 $16,129.03 $15,751.02
30-Jun-97 $18,537.64 $18,121.07
30-Sep-97 $20,365.59 $18,639.41
31-Dec-97 $18,783.49 $18,179.79
31-Mar-98 $21,791.96 $20,783.77
30-Jun-98 $23,290.64 $21,206.57
30-Sep-98 $20,186.93 $18,641.40
</TABLE>
This graph compares a $10,000 investment in the Worldwide Growth Fund Advisory
Shares with the Morgan Stanley Capital International ("MSCI") World Index, on a
cumulative and average annual total return basis. The Fund's Advisory Shares
calculate their performance based upon the historical performance of their
corresponding series ("Fund") of Nicholas-Applegate Mutual Funds, adjusted to
reflect sales charges and operating expenses. The Fund's Advisory Shares were
first available 8/31/95. All return calculations reflect the reinvestment of
income dividends and capital gains distributions, if any, as well as all fees
and expenses applicable to the Fund.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
MSCI World Index consists of more than 1,400 securities listed on exchanges in
the U.S., Europe, Canada, Australia, New Zealand, and the Far East. The Index is
a market-value weighted combination of countries and is unmanaged.
The Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's Share price is expected to be
more volatile than that of a U.S. only fund.
- --------------------------------------------------------------------------------
62
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
WORLDWIDE GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
COMMON STOCKS -- 99.2%
- ----------------------------------------------------------------------------
CANADA -- 0.5%
ATI Technologies, Inc.*.................... 76,400 $ 653,252
------------
DENMARK -- 1.0%
Tele Danmark A/S -- Cl. B.................. 12,000 1,191,501
------------
FINLAND -- 2.5%
Nokia Corp. -- ADR......................... 21,000 1,647,188
Raisio Group PLC........................... 90,000 1,308,803
------------
2,955,991
------------
FRANCE -- 9.6%
Axa S.A.................................... 6,700 613,242
Bouygues S.A............................... 3,400 615,722
Cap Gemini S.A............................. 6,100 933,807
Casino Guichard-Perrachon S.A.............. 15,000 1,512,097
Danone -- ADR.............................. 22,000 1,150,875
Dassault Systemes S.A...................... 17,800 673,280
Sanofi S.A................................. 9,800 1,440,765
STMicroelectronics N.V.*................... 16,000 719,000
Suez Lyonnaise des Eaux.................... 7,300 1,242,542
Synthelabo................................. 6,400 1,179,560
Television Francaise....................... 4,200 719,383
Valeo S.A.................................. 10,300 735,084
------------
11,535,357
------------
GERMANY -- 3.5%
Deutsche Lufthansa AG...................... 31,000 628,773
Henkel KGaA................................ 7,300 530,679
LHS Group, Inc.*........................... 8,200 412,122
Mannesmann AG.............................. 11,000 1,010,261
SAP AG..................................... 1,600 712,239
Volkswagen AG.............................. 12,700 923,236
------------
4,217,310
------------
GREECE -- 0.1%
National Bank of Greece S.A.*.............. 660 88,915
------------
HONG KONG -- 0.4%
Dairy Farm International Holdings, Ltd..... 441,000 467,460
------------
INDIA -- 0.0%
BSES, Ltd.................................. 1,250 4,675
HDFC Bank, Ltd............................. 100 153
------------
4,828
------------
IRELAND -- 1.4%
Elan Corp. PLC -- ADR*..................... 14,500 1,044,906
Ryanair Holdings PLC -- ADR*............... 19,000 650,750
------------
1,695,656
------------
ITALY -- 1.8%
Banca di Roma SpA*......................... 217,100 387,573
Credito Italiano SpA....................... 80,200 333,914
Telecom Italia Mobile SpA.................. 131,800 767,295
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
</TABLE>
ITALY (CONTINUED)
<TABLE>
<S> <C> <C>
Telecom Italia SpA......................... 90,400 $ 622,288
------------
2,111,070
------------
JAPAN -- 5.8%
Bridgestone Corp........................... 25,000 505,069
Fuji Heavy Industries, Ltd................. 154,000 805,524
Kao Corp................................... 30,000 480,458
Nintendo Co., Ltd.......................... 7,000 660,300
Olympus Optical Co., Ltd................... 52,000 572,642
Orix Corp.*................................ 11,100 770,607
Ryohin Keikaku Co., Ltd.................... 10,500 1,064,502
Softbank Corp.*............................ 17,600 724,067
Sony Corp.................................. 8,800 613,517
Terumo Corp................................ 41,000 844,879
------------
7,041,565
------------
MEXICO -- 0.2%
Corporacion Interamericana de
Entretenmiento S.A.*..................... 157,300 246,987
Corporacion Interamericana de
Entretenmiento S.A. -- L Shs.*........... 20,973 26,654
------------
273,641
------------
NETHERLANDS -- 4.2%
Benckiser N.V. -- B Shs.................... 17,000 847,709
Equant N.V.*............................... 20,000 920,000
Koninklijke Ahold N.V...................... 51,800 1,547,064
VNU N.V.................................... 18,700 771,776
Wolters Kluwer Certific C.V................ 4,800 921,001
------------
5,007,550
------------
NORWAY -- 1.1%
Petroleum Geo-Services -- ADR*............. 40,600 644,525
Tomra Systems ASA.......................... 30,500 640,747
------------
1,285,272
------------
PORTUGAL -- 0.4%
Banco Comercial Portugues S.A.*............ 17,300 466,725
------------
SOUTH AFRICA -- 0.5%
Dimension Data Holdings, Ltd.*............. 146,071 593,722
South African Breweries, Ltd............... 175 2,637
------------
596,359
------------
SPAIN -- 2.8%
Acciona S.A................................ 2,500 625,594
Centros Comerciales Continente S.A......... 25,300 642,896
Corporacion Bancaria de Espana S.A......... 31,420 624,795
Tabacalera S.A. -- A Shs................... 49,200 1,078,788
Telefonica S.A. -- ADR..................... 3,209 346,371
------------
3,318,444
------------
SWEDEN -- 1.1%
Electrolux AB -- B Shs..................... 48,000 631,053
Volvo AB -- B Shs.......................... 28,000 686,193
------------
1,317,246
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
63
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
WORLDWIDE GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
SWITZERLAND -- 1.4%
Julius Baer Holdings -- B Shs.............. 130 $ 305,206
Nestle S.A................................. 360 716,198
Swiss Reinsurance Corp..................... 350 694,028
------------
1,715,432
------------
UNITED KINGDOM -- 9.1%
Arm Holdings PLC*.......................... 13,100 589,500
British Energy PLC......................... 114,000 1,116,869
Capita Group PLC........................... 83,500 859,918
CMG PLC.................................... 6,800 198,400
CMG PLC.................................... 30,800 899,233
Colt Telecom Group PLC*.................... 62,800 528,812
Dixons Group PLC........................... 51,900 530,519
Gallaher Group PLC......................... 49,900 364,218
Glaxo Welcome PLC.......................... 22,700 670,076
Misys PLC.................................. 109,765 968,120
National Grid Group PLC.................... 95,100 707,869
Orange PLC*................................ 92,600 889,114
Pearson PLC................................ 48,706 906,348
Shire Pharmaceuticals Group PLC -- ADR*.... 20,000 437,500
Somerfield PLC............................. 48,900 346,947
Vodafone Group PLC......................... 84,808 984,364
------------
10,997,807
------------
UNITED STATES OF AMERICA -- 51.8%
Airtouch Communications, Inc.*............. 21,300 1,214,100
Alltel Corp................................ 46,600 2,207,675
America Online, Inc.*...................... 18,400 2,047,000
Amgen, Inc.*............................... 27,000 2,040,187
Ascend Communications, Inc.*............... 44,500 2,024,750
At Home Corp.*............................. 46,300 2,216,612
Cellular Communications International
Co.*..................................... 13,500 732,375
Ceridian Corp.*............................ 36,000 2,065,500
Cisco Systems, Inc.*....................... 32,500 2,008,906
Comcast Corp............................... 45,900 2,154,431
Compaq Computer Corp....................... 65,600 2,074,600
Dayton Hudson Corp......................... 24,400 872,300
Eli Lilly and Co........................... 27,000 2,114,437
General Instruments Corp.*................. 94,400 2,041,400
Global Crossing, Ltd.*..................... 93,100 1,943,462
Global Telesystems Group, Inc.*............ 17,200 580,500
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
</TABLE>
UNITED STATES OF AMERICA (CONTINUED)
<TABLE>
<S> <C> <C>
Intel Corp................................. 24,800 $ 2,126,600
International Business Machines Corp....... 16,100 2,060,800
MCI Worldcom, Inc.*........................ 43,200 2,111,400
MediaOne Group, Inc.*...................... 46,700 2,075,231
Republic Services, Inc. -- Cl. A*.......... 114,100 2,224,950
Schering-Plough Corp....................... 20,600 2,133,388
Schlumberger, Ltd.......................... 33,300 1,675,406
Seagate Technology, Inc.*.................. 88,600 2,220,538
Service Corp. International................ 62,700 1,998,563
SunAmerica, Inc.*.......................... 26,500 1,616,500
Tele-Communications, Inc.*................. 43,000 1,682,375
Tele-Communications TCI Ventures Group*.... 90,500 1,623,344
Texaco, Inc................................ 30,100 1,886,894
The Equitable Companies, Inc............... 12,200 504,775
The Kroger Co.*............................ 36,800 1,840,000
Time Warner, Inc........................... 23,400 2,048,963
Tyco International, Ltd.................... 14,200 784,550
Wal-Mart Stores, Inc....................... 26,000 1,420,250
Waste Management, Inc...................... 44,600 2,143,588
------------
62,516,350
------------
TOTAL COMMON STOCKS
(Cost $109,297,380)...................................... 119,457,731
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMERCIAL PAPER -- 3.7%
- -------------------------------------------------------------------------------
Associates First Capital Corp.
5.74%, 10/01/98 $ 1,540,000 1,540,000
Central Illinois Public
5.78%, 10/01/98 2,867,000 2,867,000
------------
TOTAL COMMERCIAL PAPER
(Cost $4,407,000) 4,407,000
------------
TOTAL INVESTMENTS -- 102.9%
(Cost $113,704,380) 123,864,731
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.9%) (3,492,804)
------------
NET ASSETS -- 100.0% $120,371,927
------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
64
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF SEPTEMBER 30, 1998
- ------------------------------------------------------------------------
WORLDWIDE GROWTH FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Airlines.................................... 1.1%
Alcoholic Beverages......................... 0.0
Automobiles................................. 2.6
Automotive Equipment........................ 0.4
Biotechnology............................... 1.7
Broadcasting................................ 0.6
Cable T.V................................... 4.9
Chemicals................................... 1.1
Computer Services........................... 0.8
Computers/Office Automation................. 9.7
Consumer Electricals........................ 0.5
Department/Discount Stores.................. 2.4
Drugs/Pharmaceuticals....................... 7.5
Electric Utilities.......................... 3.9
Electronic Data Processing.................. 1.1
Electronic Instruments...................... 1.7
Electronics/Music Chains.................... 0.4
Entertainment............................... 1.9
Environmental Services...................... 3.6
Food Chains................................. 4.4
Grocery Products............................ 3.0
Industrial Engineering/Construction......... 2.1
Integrated Oil Companies.................... 1.6
Investment Companies........................ 1.3
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Machinery/Equipment......................... 1.9%
Medical Supplies............................ 1.2
Money-Center Banks.......................... 0.9
Multi-line Insurers......................... 1.5
Oilfield Services/Equipment................. 1.9
Other Commercial/Industrial Services........ 1.6
Other Consumer Services..................... 5.2
Other Financial Services.................... 1.3
Other Producers/Manufacturing............... 0.7
Other Retail Trade.......................... 0.9
Publishing.................................. 2.2
Recreational Products....................... 0.5
Regional/Commercial Banks................... 1.0
Rental/Leasing Companies.................... 0.6
Semiconductors/Electronic Components........ 2.9
Soaps/Cosmetics............................. 0.4
Software.................................... 2.6
Telecommunications Equipment................ 3.1
Telecommunications Services................. 7.0
Telephone................................... 6.0
Tobacco..................................... 1.2
Liabilities in Excess of Other Assets....... (2.9)
------
NET ASSETS.................................. 100.0%
------
------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
65
<PAGE>
FINANCIAL HIGHLIGHTS
For an Advisory Capital Share Outstanding During the Period Indicated.
<TABLE>
<CAPTION>
DISTRIBUTIONS FROM:
----------------------------
NET ASSET NET NET REALIZED NET NET NET ASSET
VALUE, INVESTMENT AND UNREALIZED INVESTMENT REALIZED VALUE,
BEGINNING INCOME (LOSS) GAINS (LOSSES) INCOME CAPITAL GAINS ENDING
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
US EQUITY FUNDS
LARGE CAP GROWTH
For the period ended
9/30/98 $15.66 (0.02) (0.14) -- (0.27) $15.23
7/21/97 (commenced) to
3/31/98+ 12.50 (0.01) 3.26 (0.01) (0.08) 15.66
VALUE
7/31/98 (commenced) to
9/30/98++ $12.50 0.01 (1.36) -- -- $11.15
MID CAP GROWTH
For the period ended
9/30/98 $23.30 (0.03) (4.00) -- (1.60) $17.67
For the year ended
3/31/98 18.01 (0.21) 7.48 -- (1.98) 23.30
For the year ended
3/31/97 17.99 (0.04) 0.32 -- (0.26) 18.01
For the year ended
3/31/96 13.66 (0.07) 4.86 -- (0.46) 17.99
6/30/94 (commenced) to
3/31/95 12.50 (0.02) 1.18 -- -- 13.66
SMALL CAP GROWTH
For the period ended
9/30/98 $19.27 0.19 (5.29) -- (0.35) $13.82
For the year ended
3/31/98 13.19 0.03 6.16 -- (0.11) 19.27
For the year ended
3/31/97 14.16 (0.07) (0.77) -- (0.13) 13.19
8/31/95 (commenced) to
3/31/96 12.50 (0.03) 1.69 -- -- 14.16
MINI CAP GROWTH
(INSTITUTIONAL ONLY)
For the period ended
9/30/98 $25.05 (0.18) (6.62) -- (0.42) $17.83
For the year ended
3/31/98 15.94 (0.17) 10.93 -- (1.65) 25.05
For the year ended
3/31/97 15.85 (0.17) 0.84 -- (0.58) 15.94
7/12/95 (commenced) to
3/31/96 12.50 (0.05) 3.40 -- -- 15.85
BALANCED GROWTH
For the period ended
9/30/98 $18.48 0.20 (0.38) (0.25) (1.71) $16.34
For the year ended
3/31/98 13.42 0.30 5.07 (0.31) -- 18.48
For the year ended
3/31/97 12.69 0.24 0.73 (0.24) -- 13.42
8/31/95 (commenced) to
3/31/96 12.50 0.15 0.19 (0.15) -- 12.69
CONVERTIBLE
For the period ended
9/30/98 $18.47 0.22 (1.39) (0.24) (0.31) $16.75
For the year ended
3/31/98 15.19 0.48 4.19 (0.48) (0.91) 18.47
For the year ended
3/31/97 13.72 0.42 1.50 (0.42) (0.03) 15.19
8/31/95 (commenced) to
3/31/96 12.50 0.17 1.22 (0.17) -- 13.72
US FIXED INCOME FUNDS
HIGH QUALITY BOND
7/24/98 (commenced) to
9/30/98 $12.43 0.12 0.18 (0.14) -- $12.59
HIGH YIELD BOND
For the period ended
9/30/98 $12.72 0.56 (1.22) (0.61) -- $11.45
3/27/98 (commenced) to
3/31/98 12.70 0.01 0.01 -- -- 12.72
INTERNATIONAL EQUITY FUNDS
INTERNATIONAL CORE GROWTH
For the period ended
9/30/98 $17.43 0.07 (1.66) (0.13) -- $15.71
For the year ended
3/31/98 12.75 (0.04) 4.72 -- -- 17.43
2/28/97 (commenced) to
3/31/97 12.50 -- 0.25 -- -- 12.75
INTERNATIONAL SMALL CAP
GROWTH
For the period ended
9/30/98 $19.18 0.07 (1.65) (0.09) -- $17.51
For the year ended
3/31/98 14.01 0.05 5.12 -- -- 19.18
For the year ended
3/31/97 13.52 (0.06) 2.01 -- (1.46) 14.01
8/31/95 (commenced) to
3/31/96 12.50 0.01 1.01 -- -- 13.52
EMERGING COUNTRIES
For the period ended
9/30/98 $17.76 0.26 (6.65) (0.18) -- $11.19
For the year ended
3/31/98 16.47 0.07 1.33 -- (0.11) 17.76
For the year ended
3/31/97 13.18 (0.04) 3.37 -- (0.04) 16.47
8/31/95 (commenced) to
3/31/96 12.50 0.01 0.67 -- -- 13.18
GLOBAL EQUITY FUND
WORLDWIDE GROWTH
For the period ended
9/30/98 $19.63 0.04 (1.27) (0.15) (1.06) $17.19
For the year ended
3/31/98 15.00 (0.11) 5.29 -- (0.55) 19.63
For the year ended
3/31/97 13.27 0.01 1.72 -- -- 15.00
8/31/95 (commenced) to
3/31/96 12.50 (0.04) 0.81 -- -- 13.27
</TABLE>
- ----------------------------------------
(a) Ratios are annualized for periods of less than one year. Expense
reimbursements reflect voluntary reductions to total expenses, as discussed
in the notes to financial statements. Net investment income ratios would
have been lower had such reductions not occurred.
+ Total return has been linked to the inception of the Institutional Class
and adjusted to reflect the difference in expenses. Had the return not been
linked, Large Cap Growth's Advisory Shares' total return for the fiscal
year ended 3/31/98 would have been 26.07%.
++ Total return has been linked to the inception of the Institutional Class
and adjusted to reflect the difference in expenses. Had the return not been
linked, Value Fund's Advisory Shares' total return for the period ended
9/30/98 would have been (10.80%).
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
66
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS (A)
-------------------------------------------------
NET PORTFOLIO AVERAGE NET ASSETS,
TOTAL INVESTMENT TOTAL EXPENSE NET TURNOVER COMMISSION ENDING
RETURN INCOME EXPENSES REIMBURSEMENTS EXPENSES RATE RATE PAID (IN 000S)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
US EQUITY FUNDS
LARGE CAP GROWTH
For the period ended
9/30/98 (1.19%) (0.38%) 1.91% (0.65%) 1.26% 125% 0.0590 $ 1,446
7/21/97 (commenced) to
3/31/98+ 62.47% (0.62%) 10.45% (9.20%) 1.25% 306% 0.0584 799
VALUE
7/31/98 (commenced) to
9/30/98++ (10.59%) 1.06% 4.15% (2.80%) 1.35% 52% 0.0600 $ 664
MID CAP GROWTH
For the period ended
9/30/98 (18.63%) (0.67%) 1.33% (0.13%) 1.20% 67% 0.0589 $ 10,261
For the year ended
3/31/98 42.00% (0.97%) 1.95% (0.73%) 1.22% 200% 0.0552 12,204
For the year ended
3/31/97 1.39% (0.69%) 1.84% (0.59%) 1.25% 153% 0.0582 13,115
For the year ended
3/31/96 35.37% (0.57%) 2.84% (1.61%) 1.23% 114% 0.0593 4,274
6/30/94 (commenced) to
3/31/95 9.28% (0.33%) 3.52% (2.28%) 1.24% 98% n/a 2,121
SMALL CAP GROWTH
For the period ended
9/30/98 (26.87%) (0.86%) 1.58% (0.10%) 1.48% 42% 0.0467 $ 8,347
For the year ended
3/31/98 47.01% (1.52%) 2.39% (0.87%) 1.52% 92% 0.0528 12,508
For the year ended
3/31/97 (6.03%) (1.02%) 10.79% (9.28%) 1.51% 113% 0.0520 1,013
8/31/95 (commenced) to
3/31/96 13.28% (1.05%) 37.86% (36.37%) 1.49% 130% 0.0523 314
MINI CAP GROWTH
(INSTITUTIONAL ONLY)
For the period ended
9/30/98 (27.58%) (1.12%) 1.71% (0.16%) 1.55% 48% 0.0510 $ 52,708
For the year ended
3/31/98 68.89% (2.51%) 1.83% (0.26%) 1.57% 113% 0.0501 82,556
For the year ended
3/31/97 3.90% (1.08%) 1.99% (0.43%) 1.56% 164% 0.0455 28,712
7/12/95 (commenced) to
3/31/96 26.80% (0.98%) 2.46% (0.91%) 1.55% 107% 0.0529 25,237
BALANCED GROWTH
For the period ended
9/30/98 (1.61%) 2.20% 1.79% (0.27%) 1.52% 98% 0.0081 $ 139
For the year ended
3/31/98 40.21% 4.09% 11.28% (10.02%) 1.26% 260% 0.0600 166
For the year ended
3/31/97 7.60% 2.15% 126.75% (125.49%) 1.26% 213% 0.0586 73
8/31/95 (commenced) to
3/31/96 2.77% 2.16% 3094.48% (3093.23%) 1.25% 197% 0.0594 1
CONVERTIBLE
For the period ended
9/30/98 (6.62%) 2.46% 1.36% (0.15%) 1.21% 71% 0.0287 $ 6,990
For the year ended
3/31/98 31.54% 5.99% 2.35% (1.13%) 1.22% 160% 0.0595 7,080
For the year ended
3/31/97 14.13% 3.29% 2.90% (1.65%) 1.25% 167% 0.0154 4,599
8/31/95 (commenced) to
3/31/96 11.13% 3.59% 9.21% (7.96%) 1.25% 145% 0.0597 1,085
US FIXED INCOME FUNDS
HIGH QUALITY BOND
7/24/98 (commenced) to
9/30/98 4.50% 6.14% 2.16% (1.44%) 0.72% 170% n/a $ 301
HIGH YIELD BOND
For the period ended
9/30/98 (5.46%) 9.07% 1.63% (0.63%) 1.00% 133% n/a $ 1,534
3/27/98 (commenced) to
3/31/98 0.16% 7.53% 0.97% 0.00% 0.97% 484% n/a 567
INTERNATIONAL EQUITY FUNDS
INTERNATIONAL CORE GROWTH
For the period ended
9/30/98 (9.22%) 0.07% 1.80% (0.23%) 1.57% 101% 0.0240 $ 5,075
For the year ended
3/31/98 36.63% (0.47%) 3.18% (1.52%) 1.66% 274% 0.0128 1,719
2/28/97 (commenced) to
3/31/97 2.00% 0.00% 2667.07% (2667.07%) 0.00% 76% 0.0106 1
INTERNATIONAL SMALL CAP
GROWTH
For the period ended
9/30/98 (8.32%) (0.11%) 1.85% (0.19%) 1.66% 82% 0.0047 $ 15,054
For the year ended
3/31/98 36.90% (0.43%) 6.15% (4.49%) 1.66% 198% 0.0086 8,810
For the year ended
3/31/97 15.03% (0.64%) 151.33% (149.67%) 1.66% 206% 0.0098 42
8/31/95 (commenced) to
3/31/96 8.16% 0.33% 531.72% (530.07%) 1.65% 141% 0.0128 19
EMERGING COUNTRIES
For the period ended
9/30/98 (36.28%) 0.72% 2.14% (0.23%) 1.91% 117% 0.0010 $ 38,770
For the year ended
3/31/98 8.60% 1.06% 2.43% (0.52%) 1.91% 243% 0.0014 46,711
For the year ended
3/31/97 25.29% (0.87%) 4.20% (2.29%) 1.91% 176% 0.0021 8,660
8/31/95 (commenced) to
3/31/96 5.44% 0.47% 44.24% (42.34%) 1.90% 118% 0.0022 350
GLOBAL EQUITY FUND
WORLDWIDE GROWTH
For the period ended
9/30/98 (7.37%) (0.15%) 1.71% (0.10%) 1.61% 122% 0.0213 $ 1,032
For the year ended
3/31/98 35.11% (0.47%) 3.75% (2.14%) 1.61% 202% 0.0221 645
For the year ended
3/31/97 12.87% (0.91%) 34.99% (33.38%) 1.61% 182% 0.0078 642
8/31/95 (commenced) to
3/31/96 6.32% (0.50%) 3232.53% (3230.93%) 1.60% 132% 0.0187 1
</TABLE>
- ----------------------------------------
(a) Ratios are annualized for periods of less than one year. Expense
reimbursements reflect voluntary reductions to total expenses, as discussed
in the notes to financial statements. Net investment income ratios would
have been lower had such reductions not occurred.
+ Total return has been linked to the inception of the Institutional Class
and adjusted to reflect the difference in expenses. Had the return not been
linked, Large Cap Growth's Advisory Shares' total return for the fiscal
year ended 3/31/98 would have been 26.07%.
++ Total return has been linked to the inception of the Institutional Class
and adjusted to reflect the difference in expenses. Had the return not been
linked, Value Fund's Advisory Shares' total return for the period ended
9/30/98 would have been (10.80%).
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
67
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
LARGE CAP MID CAP SMALL CAP MINI CAP
GROWTH VALUE GROWTH GROWTH GROWTH (1)
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at value* $20,483,134 $8,445,884 $352,496,128 $434,813,631 $52,034,845
Foreign currencies, at
value** -- -- -- -- --
Cash 565 103 3,257 2,260 298
Receivables:
Investments sold 471,896 -- 2,829,698 3,567,416 859,187
Capital shares sold 88,481 162,390 318,461 503,750 23,296
Dividends 4,968 11,148 48,924 110,134 1,212
Interest -- -- -- 2,385 --
Securities lending 3,450 203 72,561 91,962 6,733
From investment advisor 4,929 7,149 18,890 14,934 --
Unrealized gain on
forward currency
contracts -- -- -- -- --
Other assets 36,799 209 4,846 14,893 1,717
----------- ---------- ------------ ------------ -----------
Total assets 21,094,222 8,627,086 355,792,765 439,121,365 52,927,288
----------- ---------- ------------ ------------ -----------
LIABILITIES
Payables:
Bank overdraft -- -- -- -- --
Investments purchased 769,916 -- 6,229,182 4,385,305 108,853
Capital shares
purchased 2,928 21,021 633,654 848,353 11,091
Dividends and
distributions -- -- -- -- --
To investment advisor -- -- -- -- --
Accrued expenses -- 471 552,233 488,441 99,045
----------- ---------- ------------ ------------ -----------
Total liabilities 772,844 21,492 7,415,069 5,722,099 218,989
----------- ---------- ------------ ------------ -----------
NET ASSETS $20,321,378 $8,605,594 $348,377,696 $433,399,266 $52,708,299
----------- ---------- ------------ ------------ -----------
* Investments, at cost $19,532,673 $7,638,451 $321,033,032 $385,299,991 $49,658,769
----------- ---------- ------------ ------------ -----------
** Foreign currencies,
at cost $ -- $ -- $ -- $ -- $ --
----------- ---------- ------------ ------------ -----------
NET ASSETS CONSIST OF:
Paid-in capital $19,467,243 $7,193,857 $345,311,595 $423,994,086 $46,621,557
Undistributed net
investment income
(loss) (94,924) 64,053 (19,643,647) (33,126,410) (1,689,812)
Accumulated net realized
gain (loss) on
investments and foreign
currencies (1,402) 540,251 (8,753,348) (6,982,050) 5,400,478
Net unrealized
appreciation
(depreciation) of
investments and of
other assets and
liabilities denominated
in foreign currencies 950,461 807,433 31,463,096 49,513,640 2,376,076
----------- ---------- ------------ ------------ -----------
Net Assets applicable to
all shares outstanding $20,321,378 $8,605,594 $348,377,696 $433,399,266 $52,708,299
----------- ---------- ------------ ------------ -----------
Net Assets of Advisory
Shares $ 1,445,951 $ 663,861 $ 10,260,663 $ 8,347,491 $52,708,299
----------- ---------- ------------ ------------ -----------
Advisory Shares
outstanding 94,925 59,514 580,615 604,033 2,956,074
----------- ---------- ------------ ------------ -----------
NET ASSET VALUE --
ADVISORY SHARE $ 15.23 $ 11.15 $ 17.67 $ 13.82 $ 17.83
----------- ---------- ------------ ------------ -----------
</TABLE>
(1) Institutional Shares only
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
68
<PAGE>
<TABLE>
<CAPTION>
BALANCED HIGH QUALITY HIGH YIELD INTERNATIONAL INTERNATIONAL
GROWTH CONVERTIBLE BOND BOND CORE GROWTH SMALL CAP GROWTH
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value* $32,417,398 $245,538,323 $29,906,073 $ 80,489,242 $91,856,059 $102,013,399
Foreign currencies, at
value** 235 -- 42 -- -- 336
Cash -- -- 631 -- -- 2,222
Receivables:
Investments sold 1,678,185 1,196,118 2,642,185 1,408,672 3,362,829 1,358,716
Capital shares sold 106,895 306,501 2,242 639,545 206,989 149,899
Dividends 19,795 91,457 10,434 -- 72,220 115,019
Interest 205,577 1,189,939 383,909 1,696,353 -- --
Securities lending 1,234 9,582 -- -- -- 3,418
From investment advisor -- 18,633 14,719 3,426 9,892 9,897
Unrealized gain on
forward currency
contracts 3,555 -- 33,561 -- -- --
Other assets 11,882 5,182 9,977 18,975 10,470 87,965
----------- ------------ ------------- ------------ ------------ -----------------
Total assets 34,444,756 248,355,735 33,003,773 84,256,213 95,518,459 103,740,871
----------- ------------ ------------- ------------ ------------ -----------------
LIABILITIES
Payables:
Bank overdraft 551 6,769 -- 689 198,425 --
Investments purchased 1,766,655 3,164,406 1,407,944 4,259,986 1,425,731 1,912,713
Capital shares
purchased 22,754 58,027 -- 4,820 109,943 37,473
Dividends and
distributions 187,564 1,084,669 170,242 619,155 -- --
To investment advisor 3,328 -- -- -- -- --
Accrued expenses -- 332,036 47,551 297,790 32,184 159,477
----------- ------------ ------------- ------------ ------------ -----------------
Total liabilities 1,980,852 4,645,907 1,625,737 5,182,440 1,766,283 2,109,663
----------- ------------ ------------- ------------ ------------ -----------------
NET ASSETS $32,463,904 $243,709,828 $31,378,036 $ 79,073,773 $93,752,176 $101,631,208
----------- ------------ ------------- ------------ ------------ -----------------
* Investments, at cost $29,715,154 $218,447,178 $29,255,419 $ 86,003,114 $90,486,974 $ 95,254,424
----------- ------------ ------------- ------------ ------------ -----------------
** Foreign currencies,
at cost $ 235 $ -- $ 46 $ -- $ -- $ 333
----------- ------------ ------------- ------------ ------------ -----------------
NET ASSETS CONSIST OF:
Paid-in capital $29,266,828 $220,754,924 $30,639,778 $ 86,661,970 $95,905,094 $ 92,650,367
Undistributed net
investment income
(loss) (41,840) (17,191) 46,085 (208,124) (306,569) (1,305,083)
Accumulated net realized
gain (loss) on
investments and foreign
currencies 531,701 (4,119,050) 4,292 (1,866,201) (3,291,119) 3,513,509
Net unrealized
appreciation
(depreciation) of
investments and of
other assets and
liabilities denominated
in foreign currencies 2,707,215 27,091,145 687,881 (5,513,872) 1,444,770 6,772,415
----------- ------------ ------------- ------------ ------------ -----------------
Net Assets applicable to
all shares outstanding $32,463,904 $243,709,828 $31,378,036 $ 79,073,773 $93,752,176 $101,631,208
----------- ------------ ------------- ------------ ------------ -----------------
Net Assets of Advisory
Shares $ 139,066 $ 6,989,451 $ 301,231 $ 1,533,589 $ 5,074,902 $ 15,054,086
----------- ------------ ------------- ------------ ------------ -----------------
Advisory Shares
outstanding 8,509 417,194 23,919 133,961 323,060 859,931
----------- ------------ ------------- ------------ ------------ -----------------
NET ASSET VALUE --
ADVISORY SHARE $ 16.34 $ 16.75 $ 12.59 $ 11.45 $ 15.71 $ 17.51
----------- ------------ ------------- ------------ ------------ -----------------
<CAPTION>
EMERGING WORLDWIDE
COUNTRIES GROWTH
<S> <C> <C>
ASSETS
Investments, at value* $ 213,292,910 $ 123,864,731
Foreign currencies, at
value** 4,136,996 336
Cash -- 1,185
Receivables:
Investments sold 12,904,219 7,158,778
Capital shares sold 202,162 108,735
Dividends 226,998 166,503
Interest -- 3,425
Securities lending 25,401 12,248
From investment advisor 18,592 --
Unrealized gain on
forward currency
contracts -- --
Other assets 13,919 25,592
-------------- --------------
Total assets 230,821,197 131,341,533
-------------- --------------
LIABILITIES
Payables:
Bank overdraft 7,901 --
Investments purchased 2,724,379 10,685,209
Capital shares
purchased 342,649 134,400
Dividends and
distributions -- --
To investment advisor -- --
Accrued expenses 402,785 149,997
-------------- --------------
Total liabilities 3,477,714 10,969,606
-------------- --------------
NET ASSETS $ 227,343,483 $ 120,371,927
-------------- --------------
* Investments, at cost $ 239,957,639 $ 113,704,380
-------------- --------------
** Foreign currencies,
at cost $ 4,097,708 $ 335
-------------- --------------
NET ASSETS CONSIST OF:
Paid-in capital $ 344,345,573 $ 111,510,583
Undistributed net
investment income
(loss) (1,008,377) (6,277,186)
Accumulated net realized
gain (loss) on
investments and foreign
currencies (89,498,206) 4,933,658
Net unrealized
appreciation
(depreciation) of
investments and of
other assets and
liabilities denominated
in foreign currencies (26,495,507) 10,204,872
-------------- --------------
Net Assets applicable to
all shares outstanding $ 227,343,483 $ 120,371,927
-------------- --------------
Net Assets of Advisory
Shares $ 38,770,361 $ 1,031,898
-------------- --------------
Advisory Shares
outstanding 3,464,993 60,033
-------------- --------------
NET ASSET VALUE --
ADVISORY SHARE $ 11.19 $ 17.19
-------------- --------------
</TABLE>
(1) Institutional Shares only
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
69
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF OPERATIONS
PERIOD ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
LARGE CAP MID CAP SMALL CAP MINI CAP
GROWTH VALUE GROWTH GROWTH GROWTH (1)
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends, net of foreign
taxes $ 21,206 $ 76,625 $ 303,815 $ 809,757 $ 30,968
Interest 36,267 3,298 292,297 404,380 64,377
Securities lending 13,002 887 526,539 590,070 60,182
----------- ------------- -------------- --------------- --------------
Total Income 70,475 80,810 1,122,651 1,804,207 155,527
----------- ------------- -------------- --------------- --------------
EXPENSES
Advisory fee 60,576 32,983 1,613,537 2,972,639 445,222
Accounting and
administration fees 45,907 32,673 315,738 390,976 67,405
Custodian fees 9,501 7,927 31,302 45,955 11,984
Transfer agent fees and
expenses 6,991 2,886 172,419 285,632 23,691
Distribution and
shareholder servicing
fees 44,635 844 1,107,093 1,437,464 --
Administrative services 7,403 2,988 188,863 265,725 25,049
Professional fees 3,922 2,171 106,711 150,076 18,101
Shareholder reporting 2,249 1,249 61,439 86,396 10,420
Registration fees 2,424 1,307 54,156 67,102 8,172
Trustees' fees and
expenses 4,307 2,556 9,114 10,403 3,245
Credit facility fee 209 145 7,747 11,634 1,400
Miscellaneous 543 288 14,035 19,433 2,360
----------- ------------- -------------- --------------- --------------
Total Expenses 188,667 88,017 3,682,154 5,743,435 617,049
Expenses reimbursed (51,905) (43,288) (264,140) (304,858) (59,065)
----------- ------------- -------------- --------------- --------------
Net Expenses 136,762 44,729 3,418,014 5,438,577 557,984
----------- ------------- -------------- --------------- --------------
NET INVESTMENT INCOME
(LOSS) (66,287) 36,081 (2,295,363) (3,634,370) (402,457)
----------- ------------- -------------- --------------- --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain (loss)
from:
Securities 200,020 730,836 (615,392) 46,464,908 4,278,360
Foreign currency
transactions -- -- -- -- --
----------- ------------- -------------- --------------- --------------
Net realized gain
(loss) 200,020 730,836 (615,392) 46,464,908 4,278,360
----------- ------------- -------------- --------------- --------------
Change in unrealized
appreciation
(depreciation) of:
Investments (704,243) (1,562,324) (80,799,283) (208,065,698) (25,057,312)
Other assets and
liabilities
denominated in
foreign currencies -- -- -- -- --
----------- ------------- -------------- --------------- --------------
Net unrealized
appreciation
(depreciation) (704,243) (1,562,324) (80,799,283) (208,065,698) (25,057,312)
----------- ------------- -------------- --------------- --------------
NET GAIN (LOSS) ON
INVESTMENTS (504,223) (831,488) (81,414,675) (161,600,790) (20,778,952)
----------- ------------- -------------- --------------- --------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $ (570,510) $ (795,407) $ (83,710,038) $ (165,235,160) $ (21,181,409)
----------- ------------- -------------- --------------- --------------
</TABLE>
(1) Institutional Shares only
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
70
<PAGE>
<TABLE>
<CAPTION>
BALANCED HIGH QUALITY HIGH YIELD INTERNATIONAL INTERNATIONAL
GROWTH CONVERTIBLE BOND BOND CORE GROWTH SMALL CAP GROWTH
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends, net of foreign
taxes $ 174,838 $ 1,865,076 $ 49,913 $ 157,148 $ 457,212 $ 460,682
Interest 449,618 2,800,753 649,273 3,012,350 191,284 267,202
Securities lending 3,413 48,103 -- -- 12,991 34,726
------------- -------------- ------------- ------------ ------------- -----------------
Total Income 627,869 4,713,932 699,186 3,169,498 661,487 762,610
------------- -------------- ------------- ------------ ------------- -----------------
EXPENSES
Advisory fee 126,445 977,046 46,745 191,726 383,305 502,022
Accounting and
administration fees 55,379 196,948 38,085 46,097 78,233 92,012
Custodian fees 9,217 15,975 8,752 7,130 41,706 93,998
Transfer agent fees and
expenses 15,330 105,864 7,655 -- 28,553 37,157
Distribution and
shareholder servicing
fees 136,720 716,008 16,336 220,090 108,755 150,245
Administrative services 16,070 145,101 7,085 15,070 29,020 39,352
Professional fees 8,287 63,769 4,690 162,481 18,794 24,855
Shareholder reporting 4,768 36,701 2,706 8,657 10,813 14,306
Registration fees 4,410 32,961 4,476 7,670 11,073 16,324
Trustees' fees and
expenses 4,492 7,431 2,833 937 5,230 5,450
Credit facility fee 540 4,246 167 1,074 983 1,557
Miscellaneous 1,110 8,532 683 346 2,585 3,356
------------- -------------- ------------- ------------ ------------- -----------------
Total Expenses 382,768 2,310,582 140,213 661,278 719,050 980,634
Expenses reimbursed (45,362) (198,180) (75,361) (201,801) (88,348) (95,425)
------------- -------------- ------------- ------------ ------------- -----------------
Net Expenses 337,406 2,112,402 64,852 459,477 630,702 885,209
------------- -------------- ------------- ------------ ------------- -----------------
NET INVESTMENT INCOME
(LOSS) 290,463 2,601,530 634,334 2,710,021 30,785 (122,599)
------------- -------------- ------------- ------------ ------------- -----------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain (loss)
from:
Securities 1,542,495 (1,052,080) 297,045 (2,116,280) (934,015) 5,055,177
Foreign currency
transactions (97,043) (847) (280,848) -- (364,907) (179,698)
------------- -------------- ------------- ------------ ------------- -----------------
Net realized gain
(loss) 1,445,452 (1,052,927) 16,197 (2,116,280) (1,298,922) 4,875,479
------------- -------------- ------------- ------------ ------------- -----------------
Change in unrealized
appreciation
(depreciation) of:
Investments (2,430,356) (19,289,277) 321,543 (5,871,015) (7,612,036) (14,038,426)
Other assets and
liabilities
denominated in
foreign currencies 24,377 -- 63,182 -- 58,578 (8,762)
------------- -------------- ------------- ------------ ------------- -----------------
Net unrealized
appreciation
(depreciation) (2,405,979) (19,289,277) 384,725 (5,871,015) (7,553,458) (14,047,188)
------------- -------------- ------------- ------------ ------------- -----------------
NET GAIN (LOSS) ON
INVESTMENTS (960,527) (20,342,204) 400,922 (7,987,295) (8,852,380) (9,171,709)
------------- -------------- ------------- ------------ ------------- -----------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $ (670,064) $ (17,740,674) $1,035,256 $ (5,277,274) $ (8,821,595) $ (9,294,308)
------------- -------------- ------------- ------------ ------------- -----------------
<CAPTION>
EMERGING WORLDWIDE
COUNTRIES GROWTH
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of foreign
taxes $ 2,816,230 $ 857,546
Interest 655,621 126,661
Securities lending 177,187 65,999
---------------- ---------------
Total Income 3,649,038 1,050,206
---------------- ---------------
EXPENSES
Advisory fee 1,722,396 708,244
Accounting and
administration fees 219,710 121,094
Custodian fees 423,013 73,082
Transfer agent fees and
expenses 105,780 62,981
Distribution and
shareholder servicing
fees 499,114 544,067
Administrative services 115,192 69,590
Professional fees 69,157 35,534
Shareholder reporting 39,894 20,445
Registration fees 45,767 17,432
Trustees' fees and
expenses 7,572 5,847
Credit facility fee 5,027 2,489
Miscellaneous 9,214 4,717
---------------- ---------------
Total Expenses 3,261,836 1,665,522
Expenses reimbursed (324,579) (66,616)
---------------- ---------------
Net Expenses 2,937,257 1,598,906
---------------- ---------------
NET INVESTMENT INCOME
(LOSS) 711,781 (548,700)
---------------- ---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain (loss)
from:
Securities (66,699,279) 10,723,288
Foreign currency
transactions (784,349) (73,487)
---------------- ---------------
Net realized gain
(loss) (67,483,628) 10,649,801
---------------- ---------------
Change in unrealized
appreciation
(depreciation) of:
Investments (62,044,956) (19,074,967)
Other assets and
liabilities
denominated in
foreign currencies 169,804 37,371
---------------- ---------------
Net unrealized
appreciation
(depreciation) (61,875,152) (19,037,596)
---------------- ---------------
NET GAIN (LOSS) ON
INVESTMENTS (129,358,780) (8,387,795)
---------------- ---------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $ (128,646,999) $ (8,936,495)
---------------- ---------------
</TABLE>
(1) Institutional Shares only
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
71
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
PERIODS ENDED SEPTEMBER 30, AND MARCH 31, 1998
<TABLE>
<CAPTION>
LARGE CAP GROWTH VALUE
----------------------------------------------------
SEPTEMBER MARCH SEPTEMBER MARCH
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment income $ (66,287) $ (27,991) $ 36,081 $ 79,194
Net realized gain (loss) 200,020 459,203 730,836 594,275
Net unrealized appreciation (depreciation) (704,243) 1,684,560 (1,562,324) 2,129,260
----------- ----------- ------------ -----------
Net increase (decrease) from investment operations (570,510) 2,115,772 (795,407) 2,802,729
----------- ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Advisory Class -- (15) -- n/a
Retail and Institutional Classes -- (428) -- (63,521)
From net realized gains
Advisory Class (19,728) (203) -- n/a
Retail and Institutional Classes (284,787) (436,906) (342,264) (619,777)
----------- ----------- ------------ -----------
Total distributions (304,515) (437,552) (342,264) (683,298)
----------- ----------- ------------ -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
Advisory Class 986,269 714,785 667,250 n/a
Retail and Institutional Classes 10,059,184 10,800,103 2,396,600 5,455,630
Distributions reinvested
Advisory Class 19,517 153 -- n/a
Retail and Institutional Classes 273,331 113,575 342,264 683,297
Cost of shares redeemed
Advisory Class (269,412) (2,705) -- n/a
Retail and Institutional Classes (2,115,850) (2,353,732) (3,966,488) (1,045,434)
----------- ----------- ------------ -----------
Net Increase (decrease) from share transactions 8,953,039 9,272,179 (560,374) 5,093,493
----------- ----------- ------------ -----------
Net Increase (Decrease) in Net Assets 8,078,014 10,950,399 (1,698,045) 7,212,924
NET ASSETS
Beginning 12,243,364 1,292,965 10,303,639 3,090,715
----------- ----------- ------------ -----------
ENDING $20,321,378 $12,243,364 $ 8,605,594 $10,303,639
----------- ----------- ------------ -----------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS), ENDING $ (94,924) $ (28,637) $ 64,053 $ 27,972
----------- ----------- ------------ -----------
ADVISORY CLASS -- CAPITAL SHARE ACTIVITY
Shares sold 60,829 51,175 59,514 n/a
Distributions reinvested 1,139 11 -- n/a
Shares redeemed (18,048) (181) -- n/a
----------- ----------- ------------ -----------
Net Advisory Share Activity 43,920 51,005 59,514 n/a
----------- ----------- ------------ -----------
</TABLE>
- ----------------------------------
(1) Institutional Shares only
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
72
<PAGE>
<TABLE>
<CAPTION>
MID CAP GROWTH SMALL CAP GROWTH MINI CAP GROWTH (1)
-------------------------------------------------------------------------------------------
SEPTEMBER MARCH SEPTEMBER MARCH SEPTEMBER MARCH
------------ ------------ ---------------- ---------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income $ (2,295,363) $ (5,007,955) $ (3,634,370) $ (8,756,479) $ (402,457) $ (885,171)
Net realized gain (loss) (615,392) 71,334,950 46,464,908 52,691,131 4,278,360 5,745,984
Net unrealized appreciation
(depreciation) (80,799,283) 91,335,002 (208,065,698) 211,279,518 (25,057,312) 25,973,258
------------ ------------ ---------------- ---------------- ------------ -----------
Net increase (decrease) from
investment operations (83,710,038) 157,661,997 (165,235,160) 255,214,170 (21,181,409) 30,834,071
------------ ------------ ---------------- ---------------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Advisory Class -- -- -- -- -- --
Retail and Institutional
Classes -- -- -- -- -- --
From net realized gains
Advisory Class (833,271) (1,145,207) (132,798) (17,729) (1,298,811) (5,282,913)
Retail and Institutional
Classes (22,939,290) (98,869,095) (38,982,140) (82,925,260) -- --
------------ ------------ ---------------- ---------------- ------------ -----------
Total distributions (23,772,561) (100,014,302) (39,114,938) (82,942,989) (1,298,811) (5,282,913)
------------ ------------ ---------------- ---------------- ------------ -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
Advisory Class 1,860,194 3,584,125 4,917,780 20,108,210 9,692,164 69,138,576
Retail and Institutional
Classes 139,474,963 327,547,958 924,443,830 2,224,250,938 -- --
Distributions reinvested
Advisory Class 828,224 1,134,102 129,282 17,715 1,268,198 4,472,132
Retail and Institutional
Classes 11,478,202 90,780,865 33,676,645 70,949,803 -- --
Cost of shares redeemed
Advisory Class (1,496,653) (8,868,353) (7,067,162) (9,776,365) (18,327,449) (45,574,203)
Retail and Institutional
Classes (182,175,233) (418,105,952) (1,070,641,811) (2,226,451,991) -- --
------------ ------------ ---------------- ---------------- ------------ -----------
Net Increase (decrease) from
share transactions (30,030,303) (3,927,255) (114,541,436) 79,098,310 (7,367,087) 28,036,505
------------ ------------ ---------------- ---------------- ------------ -----------
Net Increase (Decrease) in Net
Assets (137,512,902) 53,720,440 (318,891,534) 251,369,491 (29,847,307) 53,587,663
NET ASSETS
Beginning 485,890,598 432,170,158 752,290,800 500,921,309 82,555,606 28,967,943
------------ ------------ ---------------- ---------------- ------------ -----------
ENDING $348,377,696 $485,890,598 $ 433,399,266 $ 752,290,800 $ 52,708,299 $82,555,606
------------ ------------ ---------------- ---------------- ------------ -----------
UNDISTRIBUTED NET INVESTMENT INCOME
(LOSS), ENDING $(19,643,647) $(17,348,284) $ (33,126,410) $ (29,492,040) $ (1,689,812) $(1,287,355)
------------ ------------ ---------------- ---------------- ------------ -----------
ADVISORY CLASS -- CAPITAL SHARE
ACTIVITY
Shares sold 89,791 170,070 320,889 1,102,868 423,573 3,242,406
Distributions reinvested 37,715 55,785 7,194 997 53,041 202,450
Shares redeemed (70,598) (430,179) (373,204) (531,507) (799,474) (1,966,971)
------------ ------------ ---------------- ---------------- ------------ -----------
Net Advisory Share Activity 56,908 (204,324) (45,121) 572,358 (322,860) 1,477,885
------------ ------------ ---------------- ---------------- ------------ -----------
<CAPTION>
BALANCED GROWTH CONVERTIBLE
SEPTEMBER MARCH SEPTEMBER MARCH
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income $ 290,463 $ 289,199 $ 2,601,530 $ 4,493,508
Net realized gain (loss) 1,445,452 5,874,160 (1,052,927) 8,251,684
Net unrealized appreciation
(depreciation) (2,405,979) 3,137,422 (19,289,277) 35,936,585
----------- ----------- ------------ -------------
Net increase (decrease) from
investment operations (670,064) 9,300,781 (17,740,674) 48,681,777
----------- ----------- ------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Advisory Class (2,023) (2,188) (97,536) (168,740)
Retail and Institutional
Classes (329,653) (290,065) (2,510,174) (4,317,037)
From net realized gains
Advisory Class (13,216) -- (125,141) (321,839)
Retail and Institutional
Classes (5,370,502) (2,064,995) (3,949,402) (14,460,080)
----------- ----------- ------------ -------------
Total distributions (5,715,394) (2,357,248) (6,682,253) (19,267,696)
----------- ----------- ------------ -------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
Advisory Class 10,298 67,581 1,817,396 1,905,912
Retail and Institutional
Classes 5,998,240 10,233,886 35,451,980 109,971,636
Distributions reinvested
Advisory Class 14,199 3,310 176,646 490,423
Retail and Institutional
Classes 4,917,189 2,112,084 4,313,410 14,678,666
Cost of shares redeemed
Advisory Class (33,711) (9,440) (1,352,908) (1,019,145)
Retail and Institutional
Classes (4,927,787) (11,283,310) (25,013,243) (32,609,396)
----------- ----------- ------------ -------------
Net Increase (decrease) from
share transactions 5,978,428 1,124,111 15,393,281 93,418,096
----------- ----------- ------------ -------------
Net Increase (Decrease) in Net
Assets (407,030) 8,067,644 (9,029,646) 122,832,177
NET ASSETS
Beginning 32,870,934 24,803,290 252,739,474 129,907,297
----------- ----------- ------------ -------------
ENDING $32,463,904 $32,870,934 $243,709,828 $252,739,474
----------- ----------- ------------ -------------
UNDISTRIBUTED NET INVESTMENT INCOME
(LOSS), ENDING $ (41,840) $ (627) $ (17,191) $ (11,011)
----------- ----------- ------------ -------------
ADVISORY CLASS -- CAPITAL SHARE
ACTIVITY
Shares sold 569 3,525 100,386 111,297
Distributions reinvested 802 128 9,145 28,400
Shares redeemed (1,822) (106) (75,681) (59,172)
----------- ----------- ------------ -------------
Net Advisory Share Activity (451) 3,547 33,850 80,525
----------- ----------- ------------ -------------
</TABLE>
- ----------------------------------
(1) Institutional Shares only
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
73
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS -- CONTINUED
PERIODS ENDED SEPTEMBER 30, AND MARCH 31, 1998
<TABLE>
<CAPTION>
HIGH QUALITY BOND HIGH YIELD BOND
------------------------------------------------------
SEPTEMBER MARCH SEPTEMBER MARCH
----------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment income $ 634,334 $ 901,985 $ 2,710,021 $ 499,478
Net realized gain (loss) 16,197 523,524 (2,116,280) 551,791
Net unrealized appreciation (depreciation) 384,725 246,235 (5,871,015) 310,375
----------- ----------- ------------- ------------
Net increase (decrease) from investment operations 1,035,256 1,671,744 (5,277,274) 1,361,644
----------- ----------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Advisory Class (3,252) -- (64,605) --
Retail and Institutional Classes (576,058) (892,591) (2,866,245) (516,768)
From net realized gains
Advisory Class -- -- -- --
Retail and Institutional Classes (308,814) (156,503) -- (551,174)
----------- ----------- ------------- ------------
Total distributions (888,124) (1,049,094) (2,930,850) (1,067,942)
----------- ----------- ------------- ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
Advisory Class 7,641 -- 1,613,036 28,000
Retail and Institutional Classes 11,437,477 4,978,031 70,370,886 10,703,762
Proceeds from shares issued in merger 10,272,379 -- -- 16,364,513
Distributions reinvested
Advisory Class 1,570 -- 38,199 --
Retail and Institutional Classes 682,922 1,048,960 1,057,835 237,690
Cost of shares redeemed
Advisory Class -- -- (518,212) --
Retail and Institutional Classes (6,986,719) (6,745,829) (15,014,625) (2,500,448)
----------- ----------- ------------- ------------
Net Increase (decrease) from share transactions 15,415,270 (718,838) 57,547,119 24,833,517
----------- ----------- ------------- ------------
Net Increase (Decrease) in Net Assets 15,562,402 (96,188) 49,338,995 25,127,219
NET ASSETS
Beginning 15,815,634 15,911,822 29,734,778 4,607,559
----------- ----------- ------------- ------------
ENDING $31,378,036 $15,815,634 $ 79,073,773 $29,734,778
----------- ----------- ------------- ------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS), ENDING $ 46,085 $ 3,841 $ (208,124) $ 12,705
----------- ----------- ------------- ------------
ADVISORY CLASS -- CAPITAL SHARE ACTIVITY
Shares sold 402 n/a 128,395 2,205
Shares issued in merger 23,390 n/a -- 42,382
Distributions reinvested 127 n/a 3,076 --
Shares redeemed -- n/a (42,097) --
----------- ----------- ------------- ------------
Net Advisory Share Activity 23,919 n/a 89,374 44,587
----------- ----------- ------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
74
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL CORE GROWTH INTERNATIONAL SMALL
CAP GROWTH
-----------------------------------------------------------
SEPTEMBER MARCH SEPTEMBER MARCH
------------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income $ 30,785 $ (105,124) $ (122,599) $ (535,283)
Net realized gain (loss) (1,298,922) (798,230) 4,875,479 8,493,580
Net unrealized appreciation
(depreciation) (7,553,458) 8,937,191 (14,047,188) 14,373,569
------------- ----------- -------------- -------------
Net increase (decrease) from
investment operations (8,821,595) 8,033,837 (9,294,308) 22,331,866
------------- ----------- -------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Advisory Class (29,623) -- (2,471) --
Retail and Institutional
Classes (205,129) -- -- --
From net realized gains
Advisory Class -- -- (76,552) --
Retail and Institutional
Classes (149,764) (1,176,979) (2,796,894) (9,196,919)
------------- ----------- -------------- -------------
Total distributions (384,516) (1,176,979) (2,875,917) (9,196,919)
------------- ----------- -------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
Advisory Class 4,427,545 1,808,824 13,931,599 8,543,873
Retail and Institutional
Classes 109,278,794 80,839,087 123,464,419 135,384,314
Proceeds from shares issued in
merger -- -- -- --
Distributions reinvested
Advisory Class 27,541 -- 78,815 --
Retail and Institutional
Classes 181,897 1,116,210 2,608,621 8,031,905
Cost of shares redeemed
Advisory Class (410,689) (265,176) (5,747,091) (34,256)
Retail and Institutional
Classes (68,693,850) (36,849,000) (103,425,387) (144,958,423)
------------- ----------- -------------- -------------
Net Increase (decrease) from
share transactions 44,811,238 46,649,945 30,910,976 6,967,413
------------- ----------- -------------- -------------
Net Increase (Decrease) in Net
Assets 35,605,127 53,506,803 18,740,751 20,102,360
NET ASSETS
Beginning 58,147,049 4,640,246 82,890,457 62,788,097
------------- ----------- -------------- -------------
ENDING $ 93,752,176 $58,147,049 $ 101,631,208 $ 82,890,457
------------- ----------- -------------- -------------
UNDISTRIBUTED NET INVESTMENT INCOME
(LOSS), ENDING $ (306,569) $ (102,602) $ (1,305,083) $ (1,180,013)
------------- ----------- -------------- -------------
ADVISORY CLASS -- CAPITAL SHARE
ACTIVITY
Shares sold 246,472 115,512 687,508 458,377
-- -- -- --
Distributions reinvested 1,407 -- 3,699 --
Shares redeemed (23,445) (16,966) (290,538) (2,123)
------------- ----------- -------------- -------------
Net Advisory Share Activity 224,434 98,546 400,669 456,254
------------- ----------- -------------- -------------
<CAPTION>
EMERGING COUNTRIES WORLDWIDE GROWTH
SEPTEMBER MARCH SEPTEMBER MARCH
-------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income $ 711,781 $ (106,300) $ (548,700) $ (1,375,278)
Net realized gain (loss) (67,483,628) (17,633,714) 10,649,801 21,743,157
Net unrealized appreciation
(depreciation) (61,875,152) 30,115,298 (19,037,596) 16,567,799
-------------- ------------ -------------- --------------
Net increase (decrease) from
investment operations (128,646,999) 12,375,284 (8,936,495) 36,935,678
-------------- ------------ -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Advisory Class (676,244) -- (9,654) --
Retail and Institutional
Classes (105,494) -- (464,138) --
From net realized gains
Advisory Class -- (187,543) (67,918) (23,268)
Retail and Institutional
Classes (1,111,734) (13,795,403) (19,591,484) (17,865,793)
-------------- ------------ -------------- --------------
Total distributions (1,893,472) (13,982,946) (20,133,194) (17,889,061)
-------------- ------------ -------------- --------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
Advisory Class 36,879,646 51,065,387 1,416,411 1,508,613
Retail and Institutional
Classes 102,225,417 136,369,928 135,909,315 170,807,568
Proceeds from shares issued in
merger -- -- -- --
Distributions reinvested
Advisory Class 593,577 151,971 77,572 23,268
Retail and Institutional
Classes 905,860 11,820,714 4,930,050 15,484,831
Cost of shares redeemed
Advisory Class (21,347,493) (13,654,662) (904,312) (1,693,395)
Retail and Institutional
Classes (42,943,573) (60,774,804) (137,341,002) (163,430,204)
-------------- ------------ -------------- --------------
Net Increase (decrease) from
share transactions 76,313,434 124,978,534 4,088,034 22,700,681
-------------- ------------ -------------- --------------
Net Increase (Decrease) in Net
Assets (54,227,037) 123,370,872 (24,981,655) 41,747,298
NET ASSETS
Beginning 281,570,520 158,199,648 145,353,582 103,606,284
-------------- ------------ -------------- --------------
ENDING $ 227,343,483 $281,570,520 $ 120,371,927 $ 145,353,582
-------------- ------------ -------------- --------------
UNDISTRIBUTED NET INVESTMENT INCOME
(LOSS), ENDING $ (1,008,377) $ (938,420) $ (6,277,186) $ (5,254,694)
-------------- ------------ -------------- --------------
ADVISORY CLASS -- CAPITAL SHARE
ACTIVITY
Shares sold 2,356,454 2,910,075 69,659 88,591
-- -- -- --
Distributions reinvested 36,438 9,663 3,722 1,377
Shares redeemed (1,558,661) (814,722) (46,197) (99,927)
-------------- ------------ -------------- --------------
Net Advisory Share Activity 834,231 2,105,016 27,184 (9,959)
-------------- ------------ -------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
75
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS
- ------------------------------------------------------------------------
NOTE A -- ORGANIZATION
Nicholas-Applegate Mutual Funds (the "Trust"), is an open end management
investment company is organized as a Delaware business trust with a number of
separate series (Funds), including the thirteen Funds covered by this report.
Each Fund is a registered, diversified, open-end management investment company
with their operations accounted for separately. The Trust offers Advisory shares
(Class Q), Institutional shares (Class I) and retail shares (Class A, B and C).
The Advisory shares have a distribution fee, the retail shares may have front-
end or deferred sales charges and have distribution or shareholder servicing
fees, and the Institutional shares have no sales charge, distribution or
servicing fees. Mini Cap Growth offers Institutional shares only.
REORGANIZATION
Before a shareholder approved reorganization effective July 24, 1998, the
series of the Trust invested all of their assets in corresponding portfolios of
Nicholas-Applegate Investment Trust, an arrangement known as a "master/feeder"
structure. Upon the reorganization, the Institutional Portfolio series of the
Trust were renamed Funds and were authorized to issue multiple classes of
shares, and their outstanding shares were reclassified as Class I shares. At the
same time, the A, B, C and Qualified Portfolios of the Trust (other than the
Government Income Portfolios) transferred their assets to the corresponding
Funds, and their shareholders received Class A, B, C and Q shares of the Funds
on a tax-free basis. The A, B, C and Qualified Government Income Portfolios
transferred their assets to the Fully Discretionary Fixed Income Fund, and their
shareholders received Class A, B, C and Q shares of that Fund. Note F describes
the net assets received by each Fund in the reorganization.
As part of the reorganization, the following Funds changed to more descriptive
names:
<TABLE>
<CAPTION>
NEW NAME FORMERLY
- ---------------------------- ----------------------------
<S> <C>
Mid Cap Growth Core Growth
Small Cap Growth Emerging Growth
Convertible Income & Growth
High Quality Bond Fully Discretionary Fixed
Income
</TABLE>
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies consistently followed by the Funds in
preparing their financial statements are described below. The policies are in
conformity with generally accepted accounting principles.
SECURITY VALUATIONS
The Funds value equity securities traded on national or international
exchanges and market systems at the last sales price reported by the security's
primary market at the time of daily valuation. If a last sales price is not
available these securities are valued at the mean between last reported bid and
ask prices. Debt securities are valued at bid prices obtained from independent
pricing services or from one or more dealers making markets in the securities.
Security prices quoted in foreign currency are translated using the current U.S.
dollar exchange rate. Short-term securities maturing within 60 days are valued
at amortized costs, which approximates market value. When market quotations are
not available, a fair value for the securities is determined under the direction
of the Board of Trustees.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. Realized gains and
losses from security transactions are determined on an identified-cost basis.
Dividend income is recorded on the ex-dividend date or, for certain foreign
securities, when the information becomes available to the Funds. Interest income
is recorded on an accrual basis. Discounts and premiums on debt securities are
accreted and amortized on the same basis as used for federal tax reporting.
- --------------------------------------------------------------------------------
76
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSACTIONS
At each net asset valuation date, the values of assets and liabilities
denominated in foreign currencies are translated into U.S. dollars using the
current exchange rate. Security transactions, income and expenses are converted
at the prevailing exchange rate on the day of the event. The effect of changes
in foreign exchange rates on foreign denominated securities is included with the
net realized and unrealized gain or loss on the associated security. Other
foreign currency gains or losses are reported separately.
Certain Funds may use forward foreign currency contracts to reduce their
exposure to currency fluctuations of its foreign securities. These contracts are
commitments to purchase or sell a foreign currency at a specified rate on a
future date. When the contract is fulfilled or closed, gains or losses are
realized. Until then, the gain or loss is included in unrealized appreciation or
depreciation of investments. The contract commitment is fully collateralized by
cash or securities of the Fund.
Foreign denominated assets and forward currency contracts may involve more
risks than domestic transactions, including currency risk, political and
economic risk, regulatory and market risk. Evaluating and monitoring such risk
exposure is a part of the Funds' management strategy.
FUTURES CONTRACTS
Each Fund may enter into futures contracts involving foreign currency,
interest rates, securities, and securities indices, for hedging purposes only. A
futures contract obligates the seller of the contract to deliver and the
purchaser of the contract to take delivery of the type of foreign currency,
financial instrument or security called for in the contract at a specified
future time for a specified price. Upon entering into such a contract, a Fund is
required to deposit and maintain as collateral such initial margin as required
by the exchange on which the contract is traded. Pursuant to the contract, a
Fund agrees to receive from or pay to the broker an amount equal to the daily
fluctuations in the value of the contract. Such receipts or payments are known
as variation margin and are recorded as unrealized gains or losses by the Fund.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
FUND EXPENSES AND MULTI-CLASS ALLOCATIONS
Arrangements have been made with the Funds' custodians so the custodian fees
may be paid indirectly by credits earned on the Funds' cash balances. Such
deposit arrangements are an alternative to overnight investments.
Each Fund bears expenses incurred specifically on its behalf plus an
allocation of its share of Trust level expenses. Each share offered by a Fund
has equal rights to assets but incurs certain Class specific expenses. The Fund
allocates income, gains and losses, both realized and unrealized, and Fund level
expenses based on relative net assets of each Class.
SECURITIES LENDING
Each Fund may temporarily loan securities up to 30% of its total assets to
brokers, dealers or other financial institutions in exchange for a negotiated
lender's fee. The lender's fees are applied as a reduction of custodian fees.
The borrower fully collateralizes the loans with cash, letters of credit or U.S.
Government securities.
The market value of securities on loan and collateral received at September
30, 1998 were:
<TABLE>
<CAPTION>
MARKET
VALUE COLLATERAL
(IN (IN
FUND 000'S) 000'S)
- --------------------------------------- --------- ---------
<S> <C> <C>
LARGE CAP GROWTH....................... $ 3,989 $ 4,207
VALUE.................................. 248 272
MID CAP GROWTH......................... 91,459 97,268
SMALL CAP GROWTH....................... 118,684 125,139
MINI CAP GROWTH........................ 7,949 8,582
BALANCED GROWTH........................ 1,435 1,533
CONVERTIBLE............................ 13,087 13,637
INTERNATIONAL CORE GROWTH.............. 4,178 4,389
INTERNATIONAL SMALL CAP GROWTH......... 5,418 5,645
EMERGING COUNTRIES..................... 40,882 43,712
WORLDWIDE GROWTH....................... 14,998 15,859
</TABLE>
- --------------------------------------------------------------------------------
77
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES
Since the Funds intend to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of their taxable income to shareholders, no provision for
federal income taxes is required. A Fund investing in foreign securities records
any foreign taxes on income and gains on such investments in accordance with the
applicable tax rules. The Funds' tax accounting treatment of loss deferrals,
passive foreign investment companies and expiration of capital loss
carryforwards are different from the financial statement recognition of income
and gains.
Capital loss carryforwards may be used to offset current or future capital
gains until expiration. Post-October 31, 1997 losses are treated as having
occurred on April 1, 1998. The capital loss carryforwards for Nicholas-Applegate
Portfolios A, B, C & Q under the master/feeder structure may be used by the
newly restructured Funds subject to certain limitations. The following table
reflects the capital loss carryforwards as of July 24, 1998, as well as the
expiration dates and Post-October losses as of April 1, 1998.
<TABLE>
<CAPTION>
CAPITAL LOSS POST-OCTOBER
CARRYFORWARDS EXPIRATION LOSSES
FUND (IN 000'S) DATE (IN 000'S)
- ------------------ ------------- ------------- -------------
<S> <C> <C> <C>
Mid Cap Growth.... n/a n/a $ 236
Convertible....... $ 421 2006 1,165
High Quality
Bond............. 3 2006 n/a
International Core
Growth........... 66 2006 619
International
Small Cap
Growth........... 119 2006 54
Emerging
Countries........ 3,219 2006 4,195
</TABLE>
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
The Funds record dividends and distributions to shareholders on the
ex-dividend date. Distributions are determined in accordance with income tax
regulations that may differ from generally accepted accounting principles.
Accordingly, the Funds' capital accounts are periodically reclassified to
reflect income and gains available for distribution under income tax
regulations. The Funds make income and capital gain distributions at least
annually. Funds with income objectives make dividend distributions either
quarterly, monthly or daily in accordance with their respective prospectuses.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.
NOTE C -- TRANSACTIONS WITH AFFILIATES
Nicholas-Applegate Capital Management, as the Investment Adviser of the Funds,
receives the following annual fees payable monthly based on the average daily
net assets of each Fund.
<TABLE>
<S> <C>
Mini Cap Growth and Emerging
Countries............................. 1.25%
Small Cap Growth, International Core
Growth, International Small Cap Growth
and Worldwide Growth.................. 1.00%
Large Cap Growth, Value, Mid Cap
Growth, Balanced Growth and
Convertible........................... 0.75%
High Yield Bond........................ 0.60%
High Quality Bond...................... 0.45%
</TABLE>
The fees are reduced on Mid Cap Growth, Balanced Growth, Convertible, High
Quality Bond, International Core Growth, International Small Cap Growth and
Worldwide Growth when the average net assets exceed $500 million.
Under an Administrative Services agreement the Investment Adviser provides
operational support services for certain Classes of the Funds at an annual fee
on average daily net assets of 0.10% for the
- --------------------------------------------------------------------------------
78
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
retail and 0.05% for the Advisory Classes. Beginning on November 10, 1998, the
Advisory Class was no longer charged this fee.
The Investment Adviser has volunteered to limit the Funds' expenses to certain
levels through March 31, 1999. Expenses reimbursed by the Investment Adviser as
of March 31, 1998 may be recouped from the Funds through March 31, 2003. Any
expenses reimbursed after March 31, 1998 may be recouped within five years after
the year in which they were reimbursed. The Investment Adviser will recover such
reimbursements to the extent of the difference between a Fund's actual expenses,
when they fall below the limit, and the voluntary limit.
<TABLE>
<CAPTION>
EXPENSE LIMITS BY CLASS
- --------------------------------------------------------------------------------
RETAIL
CLASSES
INSTITUTIONAL CLASS A/ ADVISORY UNREIMBURSED
FUND CLASS CLASSES B&C CLASS AMOUNTS
- -------------------- --------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Large Cap Growth.... 1.00% 1.60%/2.25% 1.25% $ 197,923
Value............... 1.00% 1.60%/2.25% 1.25% 199,187
Mid Cap Growth...... 1.00% 1.60%/2.25% 1.25% 1,509,756
Small Cap Growth.... 1.17% 1.72%/2.60% 1.50% 1,440,078
Mini Cap Growth..... 1.56% n/a / n/a n/a 435,282
Balanced Growth..... 1.00% 1.60%/2.25% 1.25% 1,351,095
Convertible......... 1.00% 1.60%/2.25% 1.25% 1,294,129
High Quality Bond... 0.45% 0.95%/1.35% 0.85% 1,746,621
High Yield Bond..... 0.75% 1.10%/1.75% 1.00% 332,462
International Core
Growth............. 1.40% 1.95%/2.60% 1.65% 286,830
International Small
Cap Growth......... 1.40% 1.95%/2.60% 1.65% 1,336,154
Emerging
Countries.......... 1.65% 2.25%/2.90% 1.90% 1,763,980
Worldwide Growth.... 1.35% 1.85%/2.50% 1.60% 1,429,017
</TABLE>
The Trust has a distribution plan (12b-1) under which Nicholas-Applegate
Securities, the Distributor and an affiliate of the Investment Adviser is paid
for certain activities related to the sale of shares. Both the retail and
Advisory Classes have a shareholder servicing agreement with the Distributor
which allows the Distributor to pay other financial institutions for shareholder
account maintenance and servicing. Each Class pays an annual fee on its average
daily net assets of up to 0.25% on Class A and 0.75% on Classes B and C under
the distribution plan, and up to 0.10% on Class A and 0.25% on Classes B, C and
Q under the shareholder servicing agreement.
The Distributor also receives a portion of the front-end sales charge and all
of the deferred sales charges on the retail Classes. During the period ended
September 30, 1998 the Distributor received the following sales charges:
<TABLE>
<S> <C>
Large Cap Growth.................... $ 24,209
Value............................... 7,273
Mid Cap Growth...................... 141,286
Small Cap Growth.................... 152,682
Balanced Growth..................... 39,351
Convertible......................... 180,014
High Quality Bond................... 17,852
High Yield Bond..................... 278,248
International Core Growth........... 68,431
International Small Cap Growth...... 153,103
Emerging Countries.................. 180,809
Worldwide Growth.................... 52,156
</TABLE>
Certain officers of the Trust are also officers of the Investment Adviser and
Distributor. The Trustees who are not affiliated with the Investment Adviser
receive annual compensation of approximately $18,000 from the Trust.
NOTE D -- INVESTMENT TRANSACTIONS
The following table presents purchases and sales of securities, excluding
short-term investments, during the period ended September 30, 1998 to indicate
the volume of transactions in each Fund. The tax cost of securities held at
September 30, 1998 and the related gross and net unrealized appreciation and
depreciation, provides aggregate information on the
- --------------------------------------------------------------------------------
79
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
tax basis against which future gains and losses on these investments are
measured for distribution purposes.
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
TAX UNREALIZED UNREALIZED APPRECIATION
PURCHASES SALES COST APPRECIATION DEPRECIATION (DEPRECIATION)
FUND (IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S)
- ---------- ---------- ---------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap
Growth... $ 25,615 $ 18,044 $ 19,533 $ 1,306 $ 356 $ 950
Value..... 3,675 4,460 7,638 1,298 491 807
Mid Cap
Growth... 275,856 343,557 321,033 59,627 28,164 31,463
Small Cap
Growth... 245,797 421,290 385,300 90,460 40,946 49,514
Mini Cap
Growth... 27,193 37,492 49,659 10,241 7,865 2,376
Balanced
Growth... 28,496 26,134 29,715 3,885 1,183 2,702
Convertible.. 177,308 175,130 218,447 38,491 11,400 27,091
High
Quality
Bond..... 38,324 32,173 29,255 799 148 651
High Yield
Bond..... 145,535 88,664 86,003 420 5,934 (5,514)
International
Core
Growth... 109,504 69,342 90,487 7,119 5,750 1,369
International
Small Cap
Growth... 94,395 73,279 95,254 12,439 5,680 6,759
Emerging
Countries.. 356,801 292,213 239,958 9,603 36,268 (26,665)
Worldwide
Growth... 162,132 167,847 113,704 14,326 4,166 10,160
</TABLE>
NOTE E -- CREDIT FACILITY
The Trust has a $75 million credit facility available to fund temporary or
emergency borrowing. Each Fund pays its pro-rata share of an annual commitment
fee plus interest on its specific borrowings. The credit facility was not used
during the period.
NOTE F -- CAPITAL ACTIVITY
The Trust has unlimited shares of no par value beneficial interest authorized.
The following table shows the net assets of the Funds immediately before and
after the reorganization described in Note A. The reorganization, which
represented a change in corporate form, is accounted for by pooling the net
assets and results of operations of the combined Funds.
<TABLE>
<CAPTION>
NET ASSETS
--------------------------
BEFORE AFTER
FUND (IN 000'S) (IN 000'S)
- ----------------------------------------------- ------------ ------------
<S> <C> <C>
Large Cap Growth............................... $ 17,322 $ 17,322
Mid Cap Growth................................. 432,710 432,710
Small Cap Growth............................... 571,169 571,169
Mini Cap Growth................................ 71,430 71,430
Balanced Growth................................ 34,452 34,452
Convertible.................................... 277,161 277,161
International Core Growth...................... 84,885 84,885
International Small Cap Growth................. 111,445 111,445
Emerging Countries............................. 336,147 336,147
Worldwide Growth............................... 146,797 146,797
</TABLE>
The combination of High Quality Bond (formerly Fully Discretionary Fixed
Income) and Government Income, which represented a change in ownership of
separate portfolios, was accounted for as a merger of net assets. The results of
operations of High Quality Bond reflect the full period of High Quality Bond
Class I and the combined Fund, Classes A, B, C, and Q, since the merger date.
High Yield Bond underwent a similar merger of separate portfolios on March 27,
1998 of the prior fiscal period. The net assets merged and the components of the
net assets contributed are shown below.
<TABLE>
<CAPTION>
COMPONENTS OF NET ASSETS
NET ASSETS ----------------------------------------
---------------------- PAID IN UNREALIZED CAPITAL LOSS
BEFORE AFTER CAPITAL APPRECIATION CARRYFORWARD
FUND (IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S)
- -------------------------- ---------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Date of Merger -- July 24,
1998
Fully Discretionary --
Portfolio I.............. $ 14,805 $ 25,251 -- -- --
Government Income --
Portfolio A, B, C, & Q... 10,446 n/a $ 10,272 $ 174 $ 3,375
Date of Merger -- March
27, 1998
High Yield Bond --
Portfolio I.............. 10,692 $ 27,056 -- -- --
High Yield Bond -- Classes
A, B, C & Q.............. 16,364 n/a 16,258 71 --
</TABLE>
- --------------------------------------------------------------------------------
80
<PAGE>
(This page intentionally left blank)
- --------------------------------------------------------------------------------
81
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
NOTE G -- INSTITUTIONAL AND RETAIL CLASS SUMMARIES
The following provides detail of the Retail and Institutional Class activity
which are shown in the aggregate in the related financial statements (in
thousands except NAVs).
<TABLE>
<CAPTION>
PERIOD ENDED SEPTEMBER 30, 1998
--------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM DISTRIBUTIONS
SHARES SOLD REINVESTED
NET SHARES ---------------------- --------------------- --------------------
ASSETS OUTSTANDING NAV INCOME GAINS SHARES VALUE SHARES VALUE
-------- ----------- -------- --------- ---------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LARGE CAP GROWTH
Class A $ 6,604 438 $ 15.08 $ -- $ (162) 167 $ 2,632 9 $ 160
Class B 7,693 507 15.18 -- (78) 334 5,306 4 71
Class C 2,089 138 15.15 -- (23) 89 1,412 1 21
Class I 2,490 154 16.19 -- (22) 42 709 1 22
--------- ---------- -------- ---------- -------- ---------
Total $ -- $ (285) 632 $ 10,059 15 $ 274
--------- ---------- -------- ---------- -------- ---------
VALUE
Class A+ $ 269 24 $ 11.16 $ -- $ -- 25 $ 283 -- $ --
Class B+ 545 49 11.15 -- -- 49 574 -- --
Class C+ 281 25 11.15 -- -- 25 288 -- --
Class I 6,847 364 18.84 -- (342) 63 1,251 15 342
--------- ---------- -------- ---------- -------- ---------
Total $ -- $ (342) 162 $ 2,396 15 $ 342
--------- ---------- -------- ---------- -------- ---------
MID CAP GROWTH
Class A $ 59,531 4,242 $ 14.03 $ -- $ (5,648) 4,964 $ 88,772 130 $ 2,272
Class B 36,389 2,188 16.63 -- (2,217) 425 8,649 70 1,445
Class C 119,375 9,136 13.07 -- (9,292) 965 15,700 122 1,981
Class I 122,822 9,127 13.46 -- (5,782) 1,590 26,354 346 5,781
--------- ---------- -------- ---------- -------- ---------
Total $ -- $ (22,939) 7,944 $ 139,475 668 $ 11,479
--------- ---------- -------- ---------- -------- ---------
SMALL CAP GROWTH
Class A $ 87,880 7,022 $ 12.51 $ -- $ (16,775) 43,240 $ 801,736 855 $ 13,948
Class B 37,596 2,386 15.76 -- (1,963) 517 10,792 88 1,810
Class C 137,419 11,076 12.41 -- (16,188) 1,283 22,048 861 13,946
Class I 162,157 15,948 10.17 -- (4,056) 6,777 89,867 300 3,972
--------- ---------- -------- ---------- -------- ---------
Total $ -- $ (38,982) 51,817 $ 924,443 2,104 $ 33,676
--------- ---------- -------- ---------- -------- ---------
BALANCED GROWTH
Class A $ 8,125 492 $ 16.51 $ (109) $ (1,118) 189 $ 3,711 57 $ 1,009
Class B 4,304 244 17.66 (37) (458) 41 783 23 441
Class C 18,907 1,187 15.92 (166) (3,701) 76 1,409 197 3,367
Class I 989 63 15.66 (18) (94) 5 95 6 101
--------- ---------- -------- ---------- -------- ---------
Total $ (330) $ (5,371) 311 $ 5,998 283 $ 4,918
--------- ---------- -------- ---------- -------- ---------
CONVERTIBLE
Class A $ 46,709 2,698 $ 17.31 $ (553) $ (932) 635 $ 11,364 51 $ 1,009
Class B 42,154 2,238 18.84 (267) (394) 582 11,866 21 439
Class C 77,541 4,382 17.70 (487) (1,833) 561 10,795 84 1,714
Class I 70,316 4,136 17.00 (1,203) (791) 78 1,427 59 1,151
--------- ---------- -------- ---------- -------- ---------
Total $(2,510) $ (3,950) 1,856 $ 35,452 215 $ 4,313
--------- ---------- -------- ---------- -------- ---------
HIGH QUALITY BOND
Class A++ $ 2,018 152 $ 13.25 $ (23) $ -- 68 $ 932 1 $ 9
Class B++ 5,807 449 12.95 (54) -- 211 2,749 1 13
Class C++ 7,838 583 13.44 (64) -- 281 3,809 1 6
Class I 15,413 1,181 13.05 (435) (309) 303 3,948 51 655
--------- ---------- -------- ---------- -------- ---------
Total $ (576) $ (309) 863 $ 11,438 54 $ 683
--------- ---------- -------- ---------- -------- ---------
<CAPTION>
SHARES REDEEMED
-------------------------
SHARES VALUE
--------- -------------
<S> <C> <C>
LARGE CAP GROWTH
Class A (40) $ (651)
Class B (35) (530)
Class C (13) (208)
Class I (45) (728)
--------- -------------
Total (133) $ (2,117)
--------- -------------
VALUE
Class A+ (1) $ (9)
Class B+ -- (1)
Class C+ -- --
Class I (183) (3,957)
--------- -------------
Total (184) $ (3,967)
--------- -------------
MID CAP GROWTH
Class A (5,717) $ (102,121)
Class B (479) (9,493)
Class C (1,678) (26,541)
Class I (2,680) (44,020)
--------- -------------
Total (10,554) $ (182,175)
--------- -------------
SMALL CAP GROWTH
Class A (47,299) $ (881,827)
Class B (670) (13,524)
Class C (3,154) (51,807)
Class I (9,309) (123,485)
--------- -------------
Total (60,432) $ (1,070,643)
--------- -------------
BALANCED GROWTH
Class A (95) $ (1,831)
Class B (33) (579)
Class C (130) (2,443)
Class I (4) (74)
--------- -------------
Total (262) $ (4,927)
--------- -------------
CONVERTIBLE
Class A (462) $ (8,158)
Class B (151) (2,981)
Class C (434) (8,271)
Class I (296) (5,603)
--------- -------------
Total (1,343) $ (25,013)
--------- -------------
HIGH QUALITY BOND
Class A++ (92) $ (1,204)
Class B++ (23) (295)
Class C++ (41) (544)
Class I (374) (4,944)
--------- -------------
Total (530) $ (6,987)
--------- -------------
</TABLE>
- ----------------------------------
+ Commenced operations on July 31, 1998.
++ Commenced operations on July 24, 1998.
- --------------------------------------------------------------------------------
82
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1998
-----------------------------------------------------------------------------------------------------
DISTRIBUTIONS
DISTRIBUTIONS FROM SHARES SOLD REINVESTED SHARES REDEEMED
---------------------- ------------------------ -------------------- --------------------------
INCOME GAINS SHARES VALUE SHARES VALUE SHARES VALUE
--------- ---------- --------- ------------ -------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LARGE CAP GROWTH
Class A $ -- $ (1) 315 $ 4,335 -- $ 1 (13) $ (178)
Class B -- (3) 239 3,275 -- 3 (36) (494)
Class C -- (1) 65 890 -- 1 (4) (54)
Class I -- (432) 152 2,300 8 109 (104) (1,629)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
Total $ -- $ (437) 771 $ 10,800 8 $ 114 (157) $ (2,355)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
VALUE
Class A+ n/a n/a n/a n/a n/a n/a n/a n/a
Class B+ n/a n/a n/a n/a n/a n/a n/a n/a
Class C+ n/a n/a n/a n/a n/a n/a n/a n/a
Class I $ (64) $ (620) 284 $ 5,456 37 $ 683 (56) $ (1,045)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
Total $ (64) $ (620) 284 $ 5,456 37 $ 683 (56) $ (1,045)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
MID CAP GROWTH
Class A $ -- $ (19,865) 12,406 $ 224,326 1,013 $ 16,459 (13,083) $ (237,097)
Class B -- (2,515) 1,073 20,188 123 2,327 (799) (15,026)
Class C -- (43,762) 1,750 29,917 2,641 39,590 (4,221) (72,774)
Class I -- (32,727) 3,263 53,116 2,168 32,405 (5,722) (93,209)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
Total $ -- $ (98,869) 18,492 $ 327,547 5,945 $ 90,781 (23,825) $ (418,106)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
SMALL CAP GROWTH
Class A $ -- $ (21,481) 104,821 $ 1,931,765 831 $ 15,132 (103,464) $ (1,921,658)
Class B -- -- 1,553 30,441 -- -- (910) (17,600)
Class C -- (29,183) 4,137 72,645 1,443 24,837 (5,946) (104,108)
Class I -- (32,261) 14,212 189,401 2,376 30,980 (13,529) (183,086)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
Total $ -- $ (82,925) 124,723 $ 2,224,252 4,650 $ 70,949 (123,849) $ (2,226,452)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
BALANCED GROWTH
Class A $ (87) $ (527) 305 $ 5,583 29 $ 527 (310) $ (5,616)
Class B (27) (69) 101 1,866 5 86 (37) (681)
Class C (157) (1,399) 146 2,672 77 1,411 (268) (4,877)
Class I (19) (70) 7 113 5 89 (7) (110)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
Total $ (290) $ (2,065) 559 $ 10,234 116 $ 2,113 (622) $ (11,284)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
CONVERTIBLE
Class A $ (947) $ (3,864) 709 $ 12,820 154 $ 2,762 (323) $ (5,890)
Class B (401) (788) 1,126 21,635 51 973 (159) (3,026)
Class C (1,290) (7,550) 792 14,822 408 7,387 (672) (12,485)
Class I (1,679) (2,258) 3,503 60,694 205 3,556 (638) (11,208)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
Total $(4,317) $ (14,460) 6,130 $ 109,971 818 $ 14,678 (1,792) $ (32,609)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
HIGH QUALITY BOND
Class A++ n/a n/a n/a n/a n/a n/a n/a n/a
Class B++ n/a n/a n/a n/a n/a n/a n/a n/a
Class C++ n/a n/a n/a n/a n/a n/a n/a n/a
Class I $ (893) $ (157) 386 $ 5,024 81 $ 1,049 (529) $ (6,746)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
Total $ (893) $ (157) 386 $ 5,024 81 $ 1,049 (529) $ (6,746)
--------- ---------- --------- ------------ -------- --------- ---------- -------------
</TABLE>
- ----------------------------------
+ Commenced operations on July 31, 1998.
++ Commenced operations on July 24, 1998.
- --------------------------------------------------------------------------------
83
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED SEPTEMBER 30, 1998
--------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM DISTRIBUTIONS
SHARES SOLD REINVESTED
NET SHARES ------------------------ ----------------------- ----------------
ASSETS OUTSTANDING NAV INCOME GAINS SHARES VALUE SHARES VALUE
------- ----------- --------- ---------- ----------- --------- ----------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HIGH YIELD BOND
Class A $15,012 1,313 $ 11.43 $ (581) $ -- 1,692 $ 21,062 21 $ 262
Class B 34,276 2,997 11.44 (1,088) -- 2,381 29,759 22 278
Class C 18,873 1,651 11.43 (660) -- 1,401 17,645 19 235
Class I 9,380 774 12.12 (537) -- 141 1,905 21 283
---------- ----------- --------- ----------- ------ -------
Total $(2,866) $ -- 5,615 $ 70,371 83 $ 1,058
---------- ----------- --------- ----------- ------ -------
INTERNATIONAL CORE GROWTH
Class A $15,306 1,009 $ 15.17 $ (151) $ (111) 3,771 $ 67,428 6 $ 109
Class B 9,795 637 15.38 (17) (39) 219 3,897 2 46
Class C 7,015 455 15.42 (37) -- 295 5,229 1 27
Class I 56,561 3,355 16.86 -- -- 1,803 32,725 -- --
---------- ----------- --------- ----------- ------ -------
Total $ (205) $ (150) 6,088 $ 109,279 9 $ 182
---------- ----------- --------- ----------- ------ -------
INTERNATIONAL SMALL CAP
GROWTH
Class A $13,825 833 $ 16.59 $ -- $ (984) 4,190 $ 86,295 42 $ 851
Class B 11,101 626 17.74 -- (462) 401 8,557 20 425
Class C 8,005 491 16.31 -- (330) 434 8,518 16 315
Class I 53,646 3,229 16.61 -- (1,020) 1,119 20,095 50 1,018
---------- ----------- --------- ----------- ------ -------
Total $ -- $ (2,796) 6,144 $ 123,465 128 $ 2,609
---------- ----------- --------- ----------- ------ -------
EMERGING COUNTRIES
Class A $49,329 4,517 $ 10.92 $ (105) $ (326) 1,826 $ 27,636 17 $ 278
Class B 22,315 2,006 11.13 -- (183) 262 4,190 7 118
Class C 20,221 1,888 10.71 -- (171) 327 4,990 5 82
Class I 96,708 8,881 10.89 -- (432) 4,099 65,410 27 428
---------- ----------- --------- ----------- ------ -------
Total $ (105) $ (1,112) 6,514 $ 102,226 56 $ 906
---------- ----------- --------- ----------- ------ -------
WORLDWIDE GROWTH
Class A $29,693 1,981 $ 14.99 $ (93) $ (5,594) 4,351 $ 86,405 89 $ 1,612
Class B 10,763 633 17.00 (4) (1,047) 349 7,400 34 709
Class C 72,457 4,789 15.13 (40) (12,636) 945 17,906 107 1,974
Class I 6,427 413 15.56 (327) (315) 1,306 24,198 34 635
---------- ----------- --------- ----------- ------ -------
Total $ (464) $ (19,592) 6,951 $ 135,909 264 $ 4,930
---------- ----------- --------- ----------- ------ -------
<CAPTION>
SHARES REDEEMED
--------------------
SHARES VALUE
------- ----------
<S> <C> <C>
HIGH YIELD BOND
Class A (769) $ (9,451)
Class B (106) (1,289)
Class C (148) (1,794)
Class I (188) (2,481)
------- ----------
Total (1,211) $ (15,015)
------- ----------
INTERNATIONAL CORE GROWTH
Class A (3,512) $ (63,389)
Class B (49) (847)
Class C (47) (801)
Class I (190) (3,657)
------- ----------
Total (3,798) $ (68,694)
------- ----------
INTERNATIONAL SMALL CAP
GROWTH
Class A (3,979) $ (82,531)
Class B (391) (8,333)
Class C (391) (7,692)
Class I (263) (4,869)
------- ----------
Total (5,024) $ (103,425)
------- ----------
EMERGING COUNTRIES
Class A (1,411) $ (21,577)
Class B (463) (6,635)
Class C (622) (8,873)
Class I (381) (5,858)
------- ----------
Total (2,877) $ (42,943)
------- ----------
WORLDWIDE GROWTH
Class A (4,459) $ (89,478)
Class B (252) (5,438)
Class C (688) (13,112)
Class I 1,579 (29,313)
------- ----------
Total (3,820) $ (137,341)
------- ----------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED SEPTEMBER 30, 1998:
SHARES ISSUED IN
MERGER
----------------------
SHARES VALUE
----------- ---------
<S> <C> <C>
HIGH QUALITY BOND
Class A 175 $ 2,254
Class B 260 3,269
Class C 342 4,461
Class Q 23 288
--- ---------
Total 800 $ 10,272
--- ---------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1998:
SHARES ISSUED IN
MERGER
----------------------
SHARES VALUE
----------- ---------
<S> <C> <C>
HIGH YIELD BOND
Class A 327 $ 4,153
Class B 613 7,773
Class C 307 3,901
Class Q 42 538
----- ---------
Total 1,289 $ 16,365
----- ---------
</TABLE>
- --------------------------------------------------------------------------------
84
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1998
------------------------------------------------------------------------------------
DISTRIBUTIONS
DISTRIBUTIONS FROM SHARES SOLD REINVESTED SHARES REDEEMED
------------------- ------------------- ----------------- --------------------
INCOME GAINS SHARES VALUE SHARES VALUE SHARES VALUE
------- --------- ------- --------- ------ -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HIGH YIELD BOND
Class A $ -- $ -- 174 $ 2,189 -- $ -- (132) $ (1,659)
Class B -- -- 89 1,136 -- -- (2) (30)
Class C -- -- 71 908 -- -- -- --
Class I (517) (551) 492 6,471 18 238 (59) (811)
------- --------- ------- --------- ------ -------- ------- ----------
Total $(517) $ (551) 826 $ 10,704 18 $ 238 (193) $ (2,500)
------- --------- ------- --------- ------ -------- ------- ----------
INTERNATIONAL CORE GROWTH
Class A $ -- $ (53) 2,435 $ 38,637 3 $ 48 (1,694) $ (27,350)
Class B -- (42) 501 7,550 3 40 (39) (594)
Class C -- -- 225 3,489 -- -- (23) (348)
Class I -- (1,082) 1,878 31,163 66 1,028 (528) (8,558)
------- --------- ------- --------- ------ -------- ------- ----------
Total $ -- $ (1,177) 5,039 $ 80,839 72 $ 1,116 (2,284) $ (36,850)
------- --------- ------- --------- ------ -------- ------- ----------
INTERNATIONAL SMALL CAP
GROWTH
Class A $ -- $ (624) 6,609 $ 109,494 25 $ 383 (6,427) $ (107,700)
Class B -- (558) 463 8,304 32 517 (218) (3,839)
Class C -- (396) 441 7,326 24 353 (273) (4,516)
Class I -- (7,619) 562 10,260 456 6,779 (1,545) (28,903)
------- --------- ------- --------- ------ -------- ------- ----------
Total $ -- $ (9,197) 8,075 $ 135,384 537 $ 8,032 (8,463) $ (144,958)
------- --------- ------- --------- ------ -------- ------- ----------
EMERGING COUNTRIES
Class A $ -- $ (3,292) 3,250 $ 56,509 149 $ 2,308 (1,564) $ (27,276)
Class B -- (1,711) 1,214 22,259 102 1,591 (536) (9,195)
Class C -- (2,230) 1,150 20,756 139 2,109 (859) (13,968)
Class I -- (6,563) 2,099 36,846 382 5,812 (608) (10,336)
------- --------- ------- --------- ------ -------- ------- ----------
Total $ -- $ (13,796) 7,713 $ 136,370 772 $ 11,820 (3,567) $ (60,775)
------- --------- ------- --------- ------ -------- ------- ----------
WORLDWIDE GROWTH
Class A $ -- $ (4,404) 5,938 $ 108,062 214 $ 3,565 (5,576) $ (102,392)
Class B -- (549) 293 5,360 26 449 (188) (3,334)
Class C -- (12,371) 436 7,995 664 10,935 (834) (15,192)
Class I -- (542) 3,023 49,390 35 536 (2,592) (42,512)
------- --------- ------- --------- ------ -------- ------- ----------
Total $ -- $ (17,866) 9,690 $ 170,807 939 $ 15,485 (9,190) $ (163,430)
------- --------- ------- --------- ------ -------- ------- ----------
</TABLE>
- --------------------------------------------------------------------------------
85
<PAGE>
TRUSTEES OF NICHOLAS-APPLEGATE MUTUAL FUNDS
-------------------------------------------
Fred C. Applegate, CHAIRMAN
Dr. Arthur B. Laffer
Charles E. Young
Dann V. Angeloff
Walter A. Auch
Theodore J. Coburn
Darlene T. DeRemer
George F. Keane
OFFICERS
--------
Arthur E. Nicholas, PRESIDENT
Peter J. Johnson, VICE PRESIDENT
E. Blake Moore, Jr, SECRETARY AND CHIEF FINANCIAL OFFICER
INVESTMENT MANAGER
------------------
Nicholas-Applegate Capital Management
DISTRIBUTOR
-----------
Nicholas-Applegate Securities
CUSTODIAN
---------
PNC Bank
TRANSFER AGENT
--------------
State Street Bank & Trust Company
<PAGE>
NICHOLAS APPLEGATE-Trademark-
MUTUAL FUNDS
600 West Broadway
San Diego, California 92101
800-551-8146
Nicholas-Applegate Securities Distributor
www.nacm.com
MFSEMIQ998
