<PAGE>
As filed with the Securities and Exchange Commission
on FEBRUARY 19, 1998
Registration No. 33-56094
811-7428
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. __ [ ]
POST-EFFECTIVE AMENDMENT NO. 52 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 54
(Check appropriate box or boxes)
------------------
NICHOLAS-APPLEGATE MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
600 WEST BROADWAY, 30TH FLOOR
SAN DIEGO, CALIFORNIA 92101
(Address of Principal Executive Offices, including Zip Code)
ARTHUR E. NICHOLAS
C/O NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
600 WEST BROADWAY, 30TH FLOOR
SAN DIEGO, CALIFORNIA 92101
(Name and Address of Agent for Service)
COPY TO: ROBERT E. CARLSON
PAUL, HASTINGS, JANOFSKY & WALKER LLP
555 S. FLOWER STREET, TWENTIETH FLOOR
LOS ANGELES, CALIFORNIA 90071
------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE FOLLOWING EFFECTIVE DATE.
------------------
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on ______________ pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(i)
[ ] on ____________ pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii), of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has registered an indefinite number of shares by this Registration Statement.
Registrant filed a Notice under such Rule for its fiscal year ended March 31,
1997 on May 30, 1997.
------------------
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ------------- --------
PART A
<S> <C>
Item 1. Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Synopsis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overview; Global Funds; U.S. Funds; Fixed Income
Funds
Item 3. Condensed Financial Information . . . . . . . . . . . . . . . . . Global Funds; U.S. Funds; Fixed Income Funds
Item 4. General Description of Registrant . . . . . . . . . . . . . . . . Overview; Global Funds; U.S. Funds; Fixed Income
Funds
Item 5. Management of Fund. . . . . . . . . . . . . . . . . . . . . . . . Organization and Management; Portfolio Teams
Item 6. Capital Stock and Other Securities. . . . . . . . . . . . . . . . Your Account
Item 7. Purchase of Securities Being Offered. . . . . . . . . . . . . . . Your Account
Item 8. Redemption or Repurchase. . . . . . . . . . . . . . . . . . . . . Your Account
Item 9. Pending Legal Proceedings . . . . . . . . . . . . . . . . . . . . Not Applicable
PART B
Item 10. Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Item 11. Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . Table of Contents
Item 12. General Information and History . . . . . . . . . . . . . . . . . General Information
Item 13. Investment Objectives and Policies. . . . . . . . . . . . . . . . Investment Objectives, Policies and Risks;
Investment Restrictions
Item 14. Management of the Fund. . . . . . . . . . . . . . . . . . . . . . Trustees and Officers; Administrators; Distributor
Item 15. Control Persons and Principal Holders of Securities . . . . . . . Not Applicable
Item 16. Investment Advisory and Other Services. . . . . . . . . . . . . . Administrators; Investment Adviser; Distributor;
Custodian, Transfer and Dividend Disbursing Agent,
Independent Auditors and Legal Counsel
Item 17. Brokerage Allocation and Other Practices. . . . . . . . . . . . . Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities. . . . . . . . . . . . . . . . Miscellaneous
Item 19. Purchase, Redemption and Pricing of Securities Being Offered. . . Purchase and Redemption of Fund Shares;
Shareholder Services
Item 20. Tax Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends, Distributions and Taxes
<PAGE>
Item 21. Underwriters. . . . . . . . . . . . . . . . . . . . . . . . . . . Distributor
Item 22. Calculation of Performance Data . . . . . . . . . . . . . . . . . Performance Information
Item 23. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to the Registration Statement.
<PAGE>
NICHOLAS/APPLEGATE-REGISTERED TRADEMARK-
M U T U A L F U N D S
PRELIMINARY PROSPECTUS
The prospectus contains vital information about the Class A, B and C Shares
of these Funds. For your own benefit and protection, please read it before you
invest, and keep it on hand for future reference.
Please note that these Shares
- are not bank deposits
- are not federally insured
- are not endorsed by any bank or government agency
- are not guaranteed to achieve their investment objectives
THE HIGH YIELD BOND FUND MAY INVEST WITHOUT LIMITATION IN DEBT SECURITIES
RATED BELOW INVESTMENT GRADE, SOMETIMES REFERRED TO AS "JUNK BONDS." THESE LOWER
RATED SECURITIES ARE SPECULATIVE AND INVOLVE GREATER RISKS, INCLUDING RISK OF
DEFAULT, THAN HIGHER RATED SECURITIES. SEE "RISK FACTORS AND SPECIAL
CONSIDERATIONS."
LIKE ALL MUTUAL FUND SHARES, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
GLOBAL FUNDS
INTERNATIONAL CORE GROWTH
WORLDWIDE GROWTH
INTERNATIONAL SMALL CAP GROWTH
EMERGING COUNTRIES
US FUNDS
LARGE CAP GROWTH
CORE GROWTH
VALUE
EMERGING GROWTH
INCOME & GROWTH
BALANCED GROWTH
FIXED INCOME FUNDS
FULLY DISCRETIONARY
HIGH YIELD BOND
MONEY MARKET
- ------------------------, 1998
SUBJECT TO COMPLETION: DECEMBER 23, 1997. INFORMATION CONTAINED HEREIN IS
SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE PROSPECTUS IS DELIVERED IN FINAL FORM. UNDER NO CIRCUMSTANCES SHALL THIS
PRELIMINARY PROSPECTUS CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAW OF SUCH JURISDICTION.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
OVERVIEW......................... 3
A FUND BY FUND LOOK AT GLOBAL FUNDS
International Core Growth........ 4
GOALS, STRATEGIES, RISKS, Worldwide Growth................. 6
International Small Cap Growth... 8
AND FINANCIAL HISTORY. Emerging Countries............... 10
US FUNDS
Large Cap........................ 12
Core Growth...................... 14
Value............................ 16
Emerging Growth.................. 18
Income & Growth.................. 20
Balanced Growth.................. 22
FIXED INCOME FUNDS
Fully Discretionary.............. 24
High Yield Bond.................. 26
Money Market..................... 28
POLICIES AND INSTRUCTIONS DISTRIBUTION OF SHARES
Choosing a Portfolio............. 30
FOR OPENING, MAINTAINING How Sales Charges are
Calculated..................... 30
AND CLOSING AN ACCOUNT Contingent Deferred Sales
Charge......................... 30
IN ANY FUND. Sales Charge Reductions and
Waivers........................ 30
Distribution Plan
and Shareholder Services....... 31
The Distributor of the
Trust's Shares................. 31
SIMPLIFIED ACCOUNT
INFORMATION
Opening an Account............... 32
Buying Shares.................... 32
Selling and Redeeming Shares..... 33
Signature Guarantees............. 34
Exchanging Shares................ 34
YOUR ACCOUNT
Transaction Policies............. 35
Features and Account Policies.... 35
DETAILS THAT APPLY TO THE ORGANIZATION AND
MANAGEMENT
FUNDS AS A GROUP. Investment Adviser Compensation.. 37
Administrator Compensation....... 37
Portfolio Trades................. 37
Investment Objectives............ 37
Diversification.................. 37
Prior Master-Feeder Structure.... 37
Portfolio Teams.................. 38
RISK FACTORS AND
SPECIAL CONSIDERATIONS........... 41
</TABLE>
2
<PAGE>
OVERVIEW
FUND INFORMATION
Concise Fund descriptions begin on the next page. Each description provides
the following information:
INVESTMENT OBJECTIVE
The Fund's particular investment goal.
INVESTMENT STRATEGY
The strategy the Fund intends to use in pursuing the investment objective.
PRINCIPAL INVESTMENTS
The primary types of securities in which the Fund invests. Secondary
investments are described in "Risk Factors and Special Considerations" at the
end of the prospectus.
RISK FACTORS
The major risk factors associated with the Fund. Other risk factors are also
described in "Risk Factors and Special Considerations."
INVESTOR EXPENSES
The overall costs borne by an investor in the Class A, B, and C Shares,
including sales charges and annual expenses.
FINANCIAL HIGHLIGHTS
A table showing the financial performance for each predecessor Portfolio
since inception.
GOAL OF THE NICHOLAS-APPLEGATE MUTUAL FUNDS
The Nicholas-Applegate Mutual Funds (the "Trust") are designed to provide
investors with a well-rounded investment program by offering investors various
portfolios each with different investment objectives and policies (each a
"Fund"). The Class A, B and C Shares of each Fund represent interests in a
diversified, open-end management investment company (a mutual fund).
Each Fund employs its own strategy and has its own risk/reward profile.
Because you could lose money by investing in these Funds, be sure to read all
risk disclosures carefully before investing.
WHO MAY WANT TO INVEST IN THE
EQUITY FUNDS
- those who are investing for long-term goals
- those who want higher potential for gain but who are willing to accept
higher risks associated with investing in foreign companies
- those who want professional portfolio management
WHO MAY NOT WANT TO INVEST IN THE
EQUITY FUNDS
- those who are investing with a shorter time frame
- those who are uncomfortable with an investment that will go up and down in
value
- those who are unable to accept the special risks associated with foreign
investing
WHO MAY WANT TO INVEST IN THE
FIXED INCOME FUNDS
- those who are investing for retirement or other long-term goals
- those who desire current income
- those who want a high level of liquidity
- those who want professional portfolio management
WHO MAY NOT WANT TO INVEST IN THE
FIXED INCOME FUNDS
- those who are investing with a shorter time frame
- those who are uncomfortable with an investment that will go up and down in
value
- those who are unable to accept the special risks associated with foreign
investing
THE INVESTMENT ADVISER
Nicholas-Applegate Capital Management (the "Investment Adviser") serves as
investment adviser to the Funds. Arthur E. Nicholas and 23 other partners with a
staff of approximately 400 employees currently manage over $30 billion of
discretionary assets for numerous clients, including employee benefit plans of
corporations, public retirement systems and unions, university endowments,
foundations, and other institutional investors and individuals.
3
<PAGE>
INTERNATIONAL CORE GROWTH FUND
INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.
INVESTMENT STRATEGY
The Fund's Investment Adviser focuses on a "bottom-up" analysis that
evaluates the financial conditions and competitiveness of individual companies
worldwide. It uses a blend of both traditional fundamental research, calling on
the expertise of many external analysts in different countries throughout the
world, and systematic disciplines to uncover signs of "change at the margin"
- --positive business developments which are not yet fully reflected in a
company's stock price. It gathers financial data on 20,000 companies in over 50
countries, and searches for successful, growing companies managing change
advantageously and poised to exceed growth expectations.
PRINCIPAL INVESTMENTS
The Fund invests in the larger capitalized companies in each country.
Generally, this means issuers in each country whose market capitalizations are
in the top 75% of publicly traded companies as measured by capitalizations in
that country. Under normal conditions, the Fund invests at least 65% of its
total assets in securities of issuers located in at least three countries
outside the U.S. The Fund may invest up to 35% of its total assets in U.S.
issuers.
Under normal conditions, the Fund invests at least 75% of its total assets
in common and preferred stocks, warrants and convertible securities. It invests
the remainder primarily in investment grade debt securities of any maturity of
foreign companies and foreign governments and their agencies and
instrumentalities. The Fund may also use options and futures contracts as
hedging techniques.
PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete listing of the portfolio
team, see "Portfolio Teams" on page 38.
RISK FACTORS
The value of the Fund's investments varies from day to day in response to
the activities of individual companies and general market and economic
conditions. As with any international fund, performance also depends upon
changing values in foreign currencies, different political and regulatory
environments, and other overall economic factors in the countries where the Fund
invests. For further explanation, see "Risk Factors and Special Considerations"
starting on page 41.
INVESTOR EXPENSES--CLASS A, B AND C SHARES
Investors pay various expenses, either directly or indirectly. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Maximum sales charge on purchases (as a percentage of offering price)....... 5.25% None None
Sales charge on reinvested dividends........................................ None None None
Deferred sales charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower).................................. None(1) 5.00% 1.00%
Redemption fee.............................................................. None None None
Exchange fee................................................................ None None None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral) Management fees.................................. 1.00% 1.00% 1.00%
12b-1 expenses.............................................................. 0.25% 0.75% 0.75%
Other expenses (after expense deferral)(2).................................. 0.70% 0.85% 0.85%
Total operating expenses (after expense deferral)(2)........................ 1.95% 2.60% 2.60%
</TABLE>
- ----------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase. See "Contingent Deferred Sales Charge" in this
prospectus.
(2) The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Fund Class. For Portfolios
A, B & C, Total operating expenses would have been 4,580%, 16,000% and
25.55% respectively and Other expenses would have been 4,579%, 15,998% and
23.80% respectively, absent the deferral. See "Investment Adviser
Compensation."
Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
4
<PAGE>
EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS
TIME FRAMES INDICATED. THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE
AVERAGE ANNUAL RETURN IS 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
CLASS A......................................... $ 71 $111 $152 $268
CLASS B
Assuming redemption at end of time period(1).... $ 78 $113 $161 $270
Assuming no redemption.......................... $ 26 $ 81 $138 $293
CLASS C
Assuming redemption at end of time period(1).... $ 37 $ 81 $138 $293
Assuming no redemption.......................... $ 26 $ 81 $138 $293
</TABLE>
- ------------------------------------------------------------
This example is for comparison purposes only and is not a representation of
the Fund's actual expenses and returns, either past or future.
(1) Assumes deduction of a contingent deferred sales charge and automatic
exchange of Class B shares for Class A shares seven years after purchase.
FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital stock
of the predecessor A, B and C Portfolios outstanding throughout each period
indicated. The figures for the period ended September 30, 1997 areunaudited. The
other figures have been audited by Ernst & Young L.L.P. with respect to the
fiscal year ended March 31, 1997. Please read in conjunction with the Trust's
1997 Annual Report and 1997-98 Semi-Annual Report.
<TABLE>
<CAPTION>
PORTFOLIO A PORTFOLIO B PORTFOLIO C
------------------------ ------------------------ -------------------------
2/28/97 4/1/97 2/28/97 4/1/97 2/28/97 4/1/97
TO 3/31/97 TO 9/30/97 TO 3/31/97 TO 9/30/97 TO 3/31/97 TO 9/30/97
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................ $ 12.50 $ 12.73 $ 12.50 $ 12.68 $ 12.50 $ 12.68
Income from investment operations:
Net investment income (deficit)................... -- (0.02) -- (0.04) -- (0.75)
Net realized and unrealized gains (losses)
on securities and foreign currency................ 0.23 3.40 0.18 3.44 0.18 4.06
Total from investment operations.................... 0.23 3.38 0.18 3.40 0.18 3.31
Less distributions:
Dividends from net investment income.............. -- -- --
Distributions from capital gains.................. -- -- --
Net asset value, end of period...................... $ 12.73 $ 16.11 $ 12.68 $ 16.08 $ 12.68 $ 15.99
TOTAL RETURN+:...................................... 1.76% 26.65% 1.44% 26.22% 1.44% 26.10%
RATIOS/SUPPLEMENTAL DATA::
Net assets, end of period........................... $ 1,642 $ 3,020 $ 1,027 $ 4,987 $ 43,075 $1,128,037
Ratio of expenses to average net assets, after
expense reimbursement++........................... 1.95%* 1.96%* 2.59%* 2.61%* 2.41%* 2.61%*
Ratio of expenses to average net assets, before
expense reimbursement+............................ 4,580%* 4.94%* 16,000%* 6.85%* 25.55%* 8.63%*
Ratio of net investment income (deficit) to average
net assets, after expense reimbursement++......... -- (0.41%)* -- (1.08%)* (0.7%)* (1.03%)*
Ratio of net investment income (deficit) to average
net assets, before expense reimbursement++........ (4,577%)* (3.39%)* (15,998%)* (5.33%)* (291.20%)* (7.05%)*
Portfolio turnover**................................ 74.88% 75.53% 74.88%
Average commission rate paid**...................... $ 0.0106 $ 0.016 $ 0.016
</TABLE>
- ------------------------
* Annualized
** For corresponding Series of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated from Master Trust
5
<PAGE>
WORLDWIDE GROWTH FUND
INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.
INVESTMENT STRATEGY
The Fund's Investment Adviser focuses on a "bottom-up" analysis that
evaluates the financial conditions and competitiveness of individual companies
worldwide. It uses a blend of both traditional fundamental research, calling on
the expertise of many external analysts in different countries throughout the
world, and systematic disciplines to uncover signs of "change at the margin"
- --positive business developments which are not yet fully reflected in a
company's stock price. It gathers financial data on 20,000 companies in over 50
countries, and searches for successful, growing companies managing change
advantageously and poised to exceed growth expectations.
PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests at least 65% of its total assets
in securities of issuers located in at least three different countries, one of
which may be the U.S. The Fund may invest up to 50% of its total assets in U.S.
issuers.
Under normal conditions the Fund invests at least 75% of its total assets in
common and preferred stocks, warrants and convertible securities. It invests the
remainder in investment grade debt securities of any maturity issued by foreign
companies and foreign governments and their agencies and instrumentalities. The
Fund may also use options and futures contracts as hedging techniques.
PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 38.
RISK FACTORS
The value of the Fund's investments varies from day to day in response to
the activities of individual companies, and general market and economic
conditions. The securities of small, less well-known companies may be more
volatile than those of larger companies. As with any international fund,
performance also depends upon changing currency values, different political and
regulatory environments, and other overall economic factors in the countries
where the Fund invests. The risks are magnified in countries with emerging
markets, since these countries may have unstable governments and less
established markets. For a further explanation, see "Risk Factors and Special
Considerations" starting on page 41.
INVESTOR EXPENSES--CLASS A, B AND C SHARES
Investors pay various expenses, either directly or indirectly. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------- ---------- --------- ---------
<S> <C> <C> <C>
Maximum sales charge on purchases (as a percentage of offering price).......... 5.25% None None
Sales charge on reinvested dividends........................................... None None None
Deferred sales charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower)..................................... None(1) 5.00% 1.00%
Redemption fee................................................................. None None None
Exchange fee................................................................... None None None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)
Management fees................................................................ 1.00% 1.00% 1.00%
12b-1 expenses 0.25% 0.75% 0.75%
Other expenses (after expense deferral)(2)..................................... 0.60% 0.75% 0.75%
Total operating expenses (after expense deferral)(2)........................... 1.85% 2.50% 2.50%
</TABLE>
- ------------------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase. See "Contingent Deferred Sales Charge" in this
prospectus.
(2) The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Fund. For Class A, B & C,
Total operating expenses would have been 2.17%, 4.81% and 2.61% respectively
and Other expenses would have been .92%, 3.06% and .86% respectively, absent
the deferral. See "Investment Adviser Compensation."
Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
6
<PAGE>
EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS
TIME FRAMES INDICATED. THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE
AVERAGE ANNUAL RETURN IS 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A...................................................................... $ 70 $ 108 $ 147 $ 258
CLASS B
Assuming redemption at end of time period(1)................................. $ 77 $ 110 $ 156 $ 260
Assuming no redemption....................................................... $ 25 $ 78 $ 133 $ 284
CLASS C
Assuming redemption at end of time period(1)................................. $ 36 $ 78 $ 133 $ 284
Assuming no redemption....................................................... $ 25 $ 78 $ 133 $ 284
</TABLE>
- ------------------------
This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.
(1) Assumes deduction of a contingent deferred sales charge and automatic
exchange of Class B shares for Class A shares seven years after purchase.
FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital stock
of the predecessor A, B and C Portfolios outstanding throughout each period
indicated. The figures for the period ended September 30, 1997 are unaudited.
The other figures have been audited by Ernst & Young L.L.P. with respect to the
fiscal year ended March 31, 1997, and by another independent auditor with
respect to commencement of operation through March 31, 1995. Please read in
conjunction with the Trust's 1997 Annual Report and 1997-98 Semi-Annual Report.
<TABLE>
<CAPTION>
Portfolio A
--------------------------------------------------------------
4/19/93 4/1/94 4/1/95 4/1/96 4/1/97
to 3/31/94 to 3/31/95 to 3/31/96 to 3/31/97 to 9/30/97
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.... $ 12.50 $ 14.94 $ 14.29 $ 16.57 $ 16.88
Income from investment operations:
Net investment income (deficit)....... (0.07) (0.05) (0.07) (0.16) 0.01
Net realized and unrealized gains
(losses) on securities and foreign
currency............................ 2.51 (0.09) 2.86 2.20 4.38
Total from investment operations........ 2.44 (0.14) 2.79 2.04 4.39
Less distributions:
Dividends from net investment
income.............................. -- (0.02) (0.12) -- --
Distributions from capital gains...... -- (0.49) (0.39) (1.73) --
Net asset value, end of period.......... $ 14.94 $ 14.29 $ 16.57 $ 16.88 $ 21.27
TOTAL RETURN+:......................... 19.52% (0.90%) 19.79% 12.51% 26.01%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period............... $20,194 $22,208 $23,481 $24,022 $33,337
Ratio of expenses to average net assets,
after expense reimbursement++......... 1.85%* 1.85% 1.85% 1.85% 1.86%*
Ratio of expenses to average net assets,
before expense reimbursement+......... 2.23%* 2.18% 2.17% 2.17% 2.11%*
Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement++....................... (0.69%)* (0.42%) (0.35%) (0.93%) (0.35%)*
Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement++....................... (1.07%)* (0.75%) (0.61%) (1.18%) (0.60%)*
Portfolio turnover**.................... 95.09% 98.54% 132.20% 181.81% 132.20%
Average commission rate paid**.......... N/A N/A $0.0187 $0.0078
<CAPTION>
Portfolio B
------------------------------------
5/31/95 4/1/96 4/1/97
to 3/31/99 to 3/31/97 to 9/30/97
---------- ---------- ----------
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.... $12.50 $14.34 $16.02
Income from investment operations:
Net investment income (deficit)....... (0.05) (0.14) (0.05)
Net realized and unrealized gains
(losses) on securities and foreign
currency............................ 1.89 1.82 4.19
Total from investment operations........ 1.84 1.68 4.14
Less distributions:
Dividends from net investment
income.............................. -- -- --
Distributions from capital gains...... -- -- --
Net asset value, end of period.......... $14.34 $16.02 $20.16
TOTAL RETURN+:.......................... 14.72% 11.72% 25.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period............... $1,972 $5,942 $9,160
Ratio of expenses to average net assets,
after expense reimbursement++......... 2.50%* 2.50% 2.51%*
Ratio of expenses to average net assets,
before expense reimbursement+......... 9.50%* 4.81% 3.70%*
Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement++....................... (1.28%)* (1.62%) (1.03%)*
Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement++....................... (8.12%)* (3.87%) (2.22%)*
Portfolio turnover**.................... 132.20% 181.81%
Average commission rate paid**.......... $0.0187 $0.0078
<CAPTION>
Portfolio C
--------------------------------------------------------------
4/19/93 4/19/94 4/1/95 4/1/96 4/1/97
to 3/31/94 to 3/31/95 to 3/31/96 to 3/31/97 to 9/30/97
---------- ---------- ---------- ---------- ----------
PER SHARE DATA:
Net asset value, beginning of period.... $ 12.50 $ 14.86 $ 14.44 $ 16.76 $ 16.92
Income from investment operations:
Net investment income (deficit)....... (0.09) (0.15) (0.21) (0.28) (0.10)
Net realized and unrealized gains
(losses) on securities and foreign
currency............................ 2.45 (0.08) 2.92 2.23 4.43
Total from investment operations........ 2.36 (0.23) 2.71 1.95 4.33
Less distributions:
Dividends from net investment
income.............................. -- (0.01) -- -- --
Distributions from capital gains...... -- (0.19) (0.38) (1.79) --
Net asset value, end of period.......... $ 14.86 $ 14.44 $ 16.76 $ 16.92 $ 21.25
TOTAL RETURN+:.......................... 18.88% (1.49%) 18.95% 11.81% 25.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period............... $66,577 $71,201 $71,155 $70,345 $86,109
Ratio of expenses to average net assets,
after expense reimbursement++......... 2.44%* 2.50% 2.50% 2.50% 2.51%*
Ratio of expenses to average net assets,
before expense reimbursement+......... 2.44%* 2.57% 2.57% 2.61% 2.67%*
Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement++....................... (1.24%)* (1.06%) (0.99%) (1.57%) (1.01%*)
Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement++....................... (1.24%)* (1.13%) (1.00%) (1.62%) (1.17%)*
Portfolio turnover**.................... 95.09% 98.54% 132.20% 181.81%
Average commission rate paid**.......... N/A N/A $0.0187 $10.0078
</TABLE>
- ------------------------------------------------------------
* Annualized
** For corresponding Series of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated from Master Trust
7
<PAGE>
INTERNATIONAL SMALL CAP GROWTH FUND
INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.
INVESTMENT STRATEGY
The Fund's Investment Adviser focuses on a "bottom-up" analysis that
evaluates the financial conditions and competitiveness of individual companies
worldwide. It uses a blend of both traditional fundamental research, calling on
the expertise of many external analysts in different countries throughout the
world, and systematic disciplines to uncover signs of "change at the margin"
- --positive business developments which are not yet fully reflected in a
company's stock price. It gathers financial data on 20,000 companies in over 50
countries, and searches for successful, growing companies managing change
advantageously and poised to exceed growth expectations.
The Fund emphasizes companies in the bottom 75% of publicly traded companies
as measured by market capitalizations in each country ("small cap securities").
The Fund may have less U.S. exposure (up to 35% of its total assets in U.S.
issuers) than the Worldwide Growth Fund.
PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests 65% of its total assets in small
cap securities of issuers located in at least three different countries outside
the U.S. Under normal conditions, the Fund invests at least 75% of its total
assets in common and preferred stock, warrants and convertible securities. It
invests the remainder primarily in investment grade debt securities of any
maturity issued by foreign companies and foreign governments and their agencies
and instrumentalities. The Fund may also use options and futures contracts as
hedging techniques.
PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 38.
RISK FACTORS
The value of the Fund's investments varies from day to day in response to
the activities of individual companies, and general market and economic
conditions. As with any international fund, the Fund's performance also depends
upon changing currency values, different political and regulatory environments,
and other overall economic factors in the countries where the Fund invests. In
addition to the risks posed by foreign investing, the securities of smaller,
less well known companies may be more volatile than larger companies and may
trade less frequently. The information regarding these smaller companies may
also be less available, incomplete or inaccurate. Accordingly, the securities of
the companies in which the Fund invests may be more volatile and speculative
than those of larger companies. The risks are magnified in countries with
emerging markets since these countries may have unstable governments and less
established markets. For further explanation, see "Risk Factors and Special
Considerations" starting on page 41.
- -------------------------------------------------------------------------------
INVESTOR EXPENSES--CLASS A, B AND C SHARES
Investors pay various expenses, either directly or indirectly. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B CLASS C
- --------------------------------- ----------- ----------- ----------
<S> <C> <C> <C>
Maximum sales charge on purchases
(as a percentage of offering price)................................... 5.25% None None
Sales charge on reinvested dividends................................... None None None
Deferred sales charge (as a percentage of original
purchase price or redemption proceeds, whichever is lower)............ None(1) 5.00% 1.00%
Redemption fee......................................................... None None None
Exchange fee........................................................... None None None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)
Management fees........................................................ 1.00% 1.00% 1.00%
12b-1 expenses......................................................... 0.25% 0.75% 0.75%
Other expenses (after expense deferral)(2)............................. 0.70% 0.85% 0.85%
Total operating expenses (after expense deferral)(2)................... 1.95% 2.60% 2.60%
</TABLE>
- ------------------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase. See "Contingent Deferred Sales Charge" in this
prospectus.
(2) The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Fund. For Class A, B & C,
Total operating expenses would have been 3.76%, 4.89% and 3.95% respectively
and Other expenses would have been 2.51%, 3.14% and 2.20% respectively,
absent the deferral. See "Investment Adviser Compensation."
Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
8
<PAGE>
EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS
TIME FRAMES INDICATED. THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE
AVERAGE ANNUAL RETURN IS 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A.......................................................... $71 $111 $152 $268
CLASS B
Assuming redemption at end of time period(1)..................... $78 $113 $161 $270
Assuming no redemption........................................... $26 $ 81 $138 $293
CLASS C
Assuming redemption at end of time period(1)..................... $37 $ 81 $183 $293
Assuming no redemption........................................... $26 $ 81 $183 $293
</TABLE>
This example is for comparison purposes only and is not a representation of
the Fund's actual expenses and returns, either past or future.
- ------------------------
(1) Assumes deduction of a contingent deferred sales charge and automatic
exchange of Class B shares for Class A shares seven years after purchase.
FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital stock
of the predecessor A, B and C Portfolios outstanding throughout each period
indicated. The figures for the period ended September 30, 1997 are unaudited.
The other figures have been audited by Ernst & Young L.L.P. with respect to the
fiscal year ended March 31, 1997, and by another independent auditor with
respect to commencement of operation through March 31, 1995. Please read in
conjunction with the Trust's 1997 Annual Report and 1997-98 Semi-Annual Report.
<TABLE>
<CAPTION>
PORTFOLIO A
-------------------------------------------------
8/31/94 4/1/95 4/1/96 4/1/97
TO 3/31/95 TO 3/31/96 TO /31/97 TO 9/30/97
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period...................... $12.50 $11.51 $ 13.15 $ 14.92
Income from investment
operations:
Net investment income
(deficit)................... -- (0.02) 0.04 (0.01)
Net realized and unrealized
gains (losses) on
securities and foreign
currency.................. (0.98) 1.79 1.88 3.09
Total from investment
operations.................. (0.98) 1.77 1.92 3.08
Less distributions:
Dividends from net investment
income...................... (0.01) (0.13) (0.01) --
Distributions from capital
gains....................... -- -- (0.14) --
Net asset value, end of
period...................... $11.51 $13.15 $ 14.92 $ 18.00
- ---------------------------------------------------------------------------------
TOTAL RETURN+:................ (7.85%) 15.46% 14.67% 20.64%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period..... $ 610 $1,056 $ 5,569 $11,212
Ratio of expenses to average
net assets, after expense
reimbursement++............. 1.95%* 1.95% 1.95% 1.96%*
Ratio of expenses to average
net assets, before expense
reimbursement+.............. 9.77%* 10.06% 3.76% 2.85%*
Ratio of net investment income
(deficit) to average net
assets, after expense
reimbursement++............. (0.07%)* (0.27%) (1.05%) (0.81%)*
Ratio of net investment income
(deficit) to average net
assets, before expense
reimbursement++............. (7.89%)* (7.75%) (2.82%) (1.70%)*
Portfolio turnover**.......... 74.88% 141.02% 206.07%
Average commission rate
paid**...................... N/A $0.128 $0.0098
<CAPTION>
PORTFOLIO B PORTFOLIO C
------------------------------------ -------------------------------------------------
5/31/95 4/1/96 4/1/97 8/31/94 4/1/95 4/1/96 4/1/97
TO 3/31/96 TO 3/31/97 TO 9/30/97 TO 3/31/95 TO 3/31/96 TO 3/31/97 TO 9/30/97
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period...................... $ 12.50 $ 13.96 $15.89 $12.50 $11.32 $ 13.05 $14.87
Income from investment
operations:
Net investment income
(deficit)................... (0.02) (0.15) (0.06) (0.04) 0.01 (0.16) (0.13)
Net realized and unrealized
gains (losses) on
securities and foreign
currency.................. 1.48 2.09 3.31 (1.12) 1.72 1.98 3.15
Total from investment
operations.................. 1.46 1.94 3.25 (1.16) 1.73 1.82 3.02
Less distributions:
Dividends from net investment
income...................... -- (0.01) -- (0.02) -- -- --
Distributions from capital
gains....................... -- -- -- -- -- -- --
Net asset value, end of
period...................... $ 13.96 $ 15.89 $19.14 $11.32 $13.05 $ 14.87 $17.89
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+:................ 11.68% 13.96% 20.45% (9.25%) 15.30% 13.98% 20.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period..... $ 1,487 $ 5,080 $8,780 $ 24 $ 933 $ 3,592 $5,135
Ratio of expenses to average
net assets, after expense
reimbursement++............. 2.60%* 2.60% 2.61%* 2.61%* 2.60% 2.60% 2.61%*
Ratio of expenses to average
net assets, before expense
reimbursement+.............. 16.15%* 4.89% 3.56%* 75.37%* 16.15% 3.95% 3.29%*
Ratio of net investment income
(deficit) to average net
assets, after expense
reimbursement++............. (0.64%) (1.66%) (1.94%)* (0.76%)* (1.02%) (1.67%) (1.46%)*
Ratio of net investment income
(deficit) to average net
assets, before expense
reimbursement++............. (13.26%)* (3.91%) (2.42%)* (73.52%)* (13.95%) (2.99%) (2.15%)*
Portfolio turnover**.......... 141.02% 206.07% 74.88% 141.02% 206.07%
Average commission rate
paid**...................... $0.0128 $0.0098 N/A $0.128 $0.0098
</TABLE>
- ------------------------
* Annualized
** For corresponding Series of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated from Master Trust
9
<PAGE>
EMERGING COUNTRIES FUND
INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.
INVESTMENT STRATEGY
The Fund invests primarily in equity securities of issuers located in
countries with emerging securities market-- that is, countries with securities
markets which are, in the opinion of the Investment Adviser, emerging as
investment markets but have yet to reach a level of maturity associated with
developed foreign stock markets, especially in terms of participation by foreign
investors. The Investment Adviser seeks issuers in the early stages of
development, growth companies, cyclical companies, or companies believed to be
undergoing a basic change in operations. The Investment Adviser currently
selects portfolio securities from an investment universe of approximately 6,000
foreign issuers in over 20 emerging markets.
PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests at least 65% of its total assets
in securities of issuers located in at least three different countries. These
countries include but are not limited to: Argentina, Brazil, Chile, China,
Colombia, the Czech Republic, Greece, Hungary, India, Indonesia, Israel, Jordan,
Malaysia, South Africa, South Korea, Taiwan, Thailand, Italy and Venezuela.
Under normal market conditions, the Fund invests at least 75% of its total
assets in corporate stock (common and preferred), warrants and convertible
securities. It invests the remainder primarily in investment grade bonds of
foreign companies and foreign governments and their agencies and
instrumentalities. The Fund may also use options and futures contracts as
hedging techniques.
PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 38.
RISK FACTORS
The value of the Fund's investments varies from day to day in response to
the activities of individual companies and general market and economic
conditions. As with any fund investing in foreign securities, the Fund's
performance also depends upon changing currency values, different political and
regulatory environments, and other overall economic factors in the countries
where the Fund invests. Emerging countries markets may present greater
opportunity for gain, but also involve greater risk than more developed markets.
These countries tend to have less stable governments and less established
markets. The markets tend to be less liquid and more volatile, and offer less
regulatory protection for investors. The economies of emerging countries may be
predominantly based on only a few industries or dependent on revenue from
particular commodities, international aid or other assistance. For further
explanation, see "Risk Factors and Special Considerations" starting on page 41.
- -------------------------------------------------------------------------------
INVESTOR EXPENSES--CLASS A, B AND C SHARES
Investors pay various expenses, either directly or indirectly. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B CLASS C
- --------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Maximum sales charge on purchases
(as a percentage of offering price).............................. 5.25% None None
Sales charge on reinvested dividends.............................. None None None
Deferred sales charge (as a percentage of original
purchase price or redemption proceeds, whichever is lower)....... None(1) 5.00% 1.00%
Redemption fee.................................................... None None None
Exchange fee...................................................... None None None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)
Management fees................................................... 1.25% 1.25% 1.25%
12b-1 expenses.................................................... 0.25% 0.75% 0.75%
Other expenses (after expense deferral)(2)........................ 0.75% 0.90% 0.90%
Total operating expenses (after expense deferral)(2).............. 2.25% 2.90% 2.90%
</TABLE>
- ------------------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase. See "Contingent Deferred Sales Charge" in this
prospectus.
(2) The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Fund. For Class A, B & C,
Total operating expenses would have been 3.08%, 3.66% and 3.12% respectively
and Other expenses would have been 1.58%, 1.66% and 1.12% respectively,
absent the deferral. See "Investment Adviser Compensation."
Because of the 12b-1 fee, long-term shareholders may indirectly pay more than
the equivalent of the maximum permitted front-end sales charge.
10
<PAGE>
EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS
TIME FRAMES INDICATED. THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE
AVERAGE ANNUAL RETURN IS 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
CLASS A..................................................... $ 74 $ 119 $ 167 $ 297
CLASS B
Assuming redemption at end of time period(1)................ $ 80 $ 122 $ 75 $ 299
Assuming no redemption...................................... $ 29 $ 90 $ 153 $ 322
CLASS C
Assuming redemption at end of time period(1)................ $ 40 $ 90 $ 153 $ 322
Assuming no redemption...................................... $ 29 $ 90 $ 153 $ 322
</TABLE>
- ------------------------
This example is for comparison purposes only and is not a representation of
the Fund's actual expenses and returns, either past or future.
(1) Assumes deduction of a contingent deferred sales charge and automatic
exchange of Class B shares for Class A shares seven years after purchase.
FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital stock
of the predecessor A, B and C Portfolios outstanding throughout each period
indicated. The figures for the period ended September 30, 1997 are unaudited.
The other figures have been audited by Ernst & Young L.L.P. with respect to the
fiscal year ended March 31, 1997, and by another independent auditor with
respect to commencement of operation through March 31, 1995. Please read in
conjunction with the Trust's 1997 Annual Report and 1997-98 Semi-Annual Report.
<TABLE>
<CAPTION>
PORTFOLIO A PORTFOLIO B
---------- ----------- ---------------------- -----------------------------------
11/28/94 4/1/95 4/1/96 4/1/97 5/31/95 4/1/96 4/1/97
TO 3/31/95 TO 3/31/96 TO 3/31/97 TO 9/30/97 TO 3/31/96 TO 3/31/97 TO 9/30/97
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period......... $12.50 $ 11.00 $ 14.03 $ 17.20 $ 12.50 $ 14.02 $ 17.29
Income from investment operations:
Net investment income (deficit)............ 0.04 (0.04) (0.06) 0.02 (0.04) (0.11) (0.01)
Net realized and unrealized gains (losses)
on securities and foreign currency....... (1.54) 3.15 3.51 3.23 1.56 3.47 3.23
Total from investment operations............. (1.50) 3.11 3.45 3.25 1.52 3.36 3.22
Less distributions:
Dividends from net investment income......... -- (0.02) -- -- -- -- --
Distributions from capital gains............. -- (0.06) (0.28) -- -- (0.09) --
Net asset value, end of period............... $11.00 $ 14.03 $ 17.20 $ 20.45 $ 14.02 $ 17.29 $ 20.51
- --------------------------------------------------------- ----------- ----------------------------------------------------------
TOTAL RETURN+:............................... (11.98%) 28.43% 24.79% 18.90% 12.16% 24.00% 18.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period.................... $1,197 $ 4,718 $38,688 $61,710 $ 3,557 $24,558 $41,847
Ratio of expenses to average net assets,
after expense reimbursement++................ 2.25%* 2.25% 2.25% 2.26%* 2.90%* 2.90% 2.91%*
Ratio of expenses to average net assets,
before expense reimbursement+................ 6.15%* 6.72% 3.08% 2.33%* 7.58%* 3.66% 3.18%*
Ratio of net investment income (deficit) to
average net assets, after expense
reimbursement++.............................. 1.09%* (0.35%) (1.14%) (0.05%)* (1.05%)* (1.77%) (0.71%)*
Ratio of net investment income (deficit) to
average net assets, before expense
reimbursement++.............................. (4.99%)* (3.61%) (2.00%) (0.12%)* (5.44%)* (2.55%) (0.98%)*
Portfolio turnover**......................... 60.79% 118.21% 176.20% 118.21% 176.20%
Average commission rate paid**............... N/A $0.0022 $0.0021 $0.0022 $0.0021
<CAPTION>
PORTFOLIO C
-------------------------------------------------
11/28/94 4/1/95 4/1/96 4/1/97
TO 3/31/95 TO 3/31/96 TO 3/31/97 TO 9/30/97
---------- ---------- ---------- ----------
PER SHARE DATA:
Net asset value, beginning of period......... $ 12.50 $ 10.79 $ 13.71 $ 16.81
Income from investment operations:
Net investment income (deficit)............ -- (0.05) (0.10) (0.08)
Net realized and unrealized gains (losses)
on securities and foreign currency....... (1.70) 2.97 3.37 3.22
Total from investment operations............. (1.70) 2.92 2.27 3.14
Less distributions:
Dividends from net investment income......... (0.01) -- -- --
Distributions from capital gains............. -- -- (0.17) --
Net asset value, end of period............... $ 10.79 $ 13.71 $ 16.81 $ 19.95
- ------------------------------------------------------------------------------------------------
TOTAL RETURN+:............................... (13.64%) 27.30% 23.94% 18.68%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period.................... $ 59 $ 4,345 $29,376 $47,051
Ratio of expenses to average net assets,
after expense reimbursement++................ 2.90%* 2.90% 2.90% 2.91%*
Ratio of expenses to average net assets,
before expense reimbursement+................ 242.59% 6.23% 3.12% 2.99%*
Ratio of net investment income (deficit) to
average net assets, after expense
reimbursement++.............................. (0.04%)* (1.06%) (1.75%) (0.70%)*
Ratio of net investment income (deficit) to
average net assets, before expense
reimbursement++.............................. (239.73%)* (4.15%) (1.99%) (0.78%)*
Portfolio turnover**......................... 60.79% 118.21% 176.20%
Average commission rate paid**............... N/A $0.0022 $0.0021
</TABLE>
- ------------------------
* Annualized
** For corresponding Series of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated from Master Trust
11
<PAGE>
LARGE CAP GROWTH FUND
INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.
INVESTMENT STRATEGY
The Fund's Investment Adviser focuses on a "bottom-up" analysis that
evaluates the financial condition and competitiveness of individual
companies. It uses a blend of both traditional fundamental research and
computer intensive systematic disciplines to uncover signs of "change at the
margin" -- positive business developments which are not yet fully reflected
in a company's stock price. It searches for successful, growing companies
that are managing change advantageously and poised to exceed growth
expectations.
The Fund emphasizes equity securities of U.S. companies with market
capitalizations generally above $3 billion and whose earnings and stock prices
are expected to grow faster than the S&P 500 ("large cap securities").
PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests at least 65% of its total assets
in large cap securities, including common and preferred stocks, warrants, and
convertible securities of U.S. companies. It invests the remainder of its assets
primarily in investment grade corporate debt securities of any maturity, U.S.
Government securities, and equity securities of foreign issuers. The Fund may
also use options and futures contracts as hedging techniques.
PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 37.
RISK FACTORS
As with any growth fund, the value of your investment will fluctuate from
day to day with movements in the stock markets as well as in response to the
activities of individual companies. To the extent the Fund is overweighted in
certain market sectors compared to the S&P 500, the Fund may be more volatile
than the S&P 500. Additionally, to the extent the Fund invests in foreign
issuers, the risks and volatility are magnified since the performance of foreign
stocks also depends on changes in foreign currency values, different regulatory
and political environments, and overall political and economic conditions in
countries where the Fund invests. For further explanation, see "Risk Factors and
Special Considerations" starting on page 41.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES--CLASS A, B AND C SHARES
Investors pay various expenses, either directly or indirectly. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B CLASS C
- --------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Maximum sales charge on purchases
(as a percentage of offering price)...................... 5.25% None None
Sales charge on reinvested dividends..................... None None None
Deferred sales charge (as a percentage
of original purchase price or
redemption proceeds, whichever is lower)................. None(1) 5.00% 1.00%
Redemption fee........................................... None None None
Exchange fee............................................. None None None
ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)
Management fees.......................................... 0.75% 0.75% 0.75%
12b-1 expenses........................................... 0.25% 0.75% 0.75%
Other expenses (after expense deferral)(2)............... 0.60% 0.75% 0.75%
Total operating expenses (after expense deferral)(2)..... 1.60% 2.25% 2.25%
</TABLE>
- ------------------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase. See "Contingent Deferred Sales Charge" in this
prospectus.
(2) The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Fund. For Class A, B & C,
Total operating expenses would have been 2.31%, 2.96% and 2.96% respectively
and Other expenses would have been 1.31%, 1.46% and 1.46% respectively,
absent the deferral. See "Investment Adviser Compensation."
Because of the 12b-1 fee, long-term shareholders may indirectly pay more than
the equivalent of the maximum permitted front-end sales charge.
12
<PAGE>
EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS
TIME FRAMES INDICATED. THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE
AVERAGE ANNUAL RETURN IS 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A...................................................... $ 68 $ 100 $ 135 $ 233
CLASS B
Assuming redemption at end of time period(1)................. $ 74 $ 103 $ 143 $ 234
Assuming no redemption....................................... $ 23 $ 70 $ 120 $ 258
CLASS C
Assuming redemption at end of time period(1)................. $ 33 $ 70 $ 116 $ 250
Assuming no redemption....................................... $ 23 $ 70 $ 116 $ 250
</TABLE>
- ------------------------
(1) Assumes deduction of a contingent deferred sales charge and automatic
exchange of Class B shares for Class A shares seven years after purchase.
FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital
stock of the predecessor A, B and C Portfolios outstanding throughout each
period indicated. The figures for the period ended September 30, 1997 are
unaudited. Please read in conjunction with the Trust's 1997 Annual Report and
1997- 98 Semi-Annual Report.
<TABLE>
<CAPTION>
PORTFOLIO A PORTFOLIO B PORTFOLIO C
----------- ------------ -----------
7/21/97 7/21/97 7/21/97
TO 9/30/97 TO 9/30/97 TO 9/30/97
----------- ------------ -----------
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................................... $ 12.50 $ 12.50 $ 12.50
Income from investment operations:
Net investment income (deficit)...................................................... (0.01) (0.02) 0.00
Net realized and unrealized gains (losses) on securities and foreign currency........ 0.92 0.90 0.90
Total from investment operations....................................................... $ 13.41 $ 13.38 $ 13.40
Less distributions:
Dividends from net investment income................................................. -- -- --
Distributions from capital gains..................................................... -- -- --
Net asset value, end of period......................................................... $ 13.41 $ 13.38 $ 13.40
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+:......................................................................... (38.11%) 37.51% 37.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period.............................................................. $ 331,199 $ 1,134,885 $ 160,692
Ratio of expenses to average net assets, after expense reimbursement++................. 1.60%* 2.24%* 2.24%*
Ratio of expenses to average net assets, before expense reimbursement+................. 4.89%* 5.09%* 6.26%*
Ratio of net investment income (deficit) to average net assets, after expense
reimbursement++........................................................................ (0.63%)* (1.25%)* (1.27%)*
Ratio of net investment income (deficit) to average net assets, before expense
reimbursement++........................................................................ (3.92%)* (4.10%)* (5.29%)*
Portfolio turnover**................................................................... 269.87% 269.87% 269.87%
Average commission rate paid**......................................................... $ 0.0599 $ 0.0599 $ 0.0599
</TABLE>
- ------------------------
* Annualized
** For corresponding Series of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated from Master Trust
13
<PAGE>
CORE GROWTH FUND
INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.
INVESTMENT STRATEGY
The Fund's Investment Adviser focuses on a "bottom-up" analysis that
evaluates the financial condition and competitiveness of individual
companies. It uses a blend of both traditional fundamental research and
computer intensive systematic disciplines to uncover what it calls "change at
the margin" --positive business developments which are not yet fully
reflected in the company's stock price. It searches for successful, growing
companies that are managing change advantageously and poised to exceed growth
expectations.
The Fund emphasizes companies with market capitalizations above $500
million.
PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests at least 75% of its total
assets in common stocks. It invests the remainder of its assets primarily in
preferred and convertible securities, investment grade debt securities of any
maturity, and securities issued by the U.S. Government and its agencies and
instrumentalities. The Fund may invest up to 20% of its total assets in
foreign securities. The Fund may also use options and futures contracts as
hedging techniques.
PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 37.
RISK FACTORS
As with any growth fund, the value of your investment will fluctuate from
day to day with movements in the stock markets. The companies in which the Fund
invests may be more subject to volatile market movements than securities of
larger, more established companies. To the extent the Fund invests in foreign
securities, the risks and volatility are magnified since the performance of
foreign stocks also depends upon changes in foreign currency values, different
political and regulatory environments, and the overall political and economic
conditions in countries where the Fund invests. For further explanation, see
"Risk Factors and Special Considerations" starting on page 41.
INVESTOR EXPENSES--CLASS A, B AND C SHARES
Investors pay various expenses, either directly or indirectly. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B CLASS C
- --------------------------------- ----------- ----------- ---------
<S> <C> <C> <C>
Maximum sales charge on purchases
(as a percentage of offering price)...................... 5.25% None None
Sales charge on reinvested dividends..................... None None None
Deferred sales charge (as a percentage of original
purchase price or redemption proceeds,
whichever is lower)...................................... None(1) 5.00% 1.00%
Redemption fee........................................... None None None
Exchange fee............................................. None None None
ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)
Management fees.......................................... 0.75% 0.75% 0.75%
12b-1 expenses........................................... 0.25% 0.75% 0.75%
Other expenses (after expense deferral)(2)............... 0.60% 0.75% 0.64%
Total operating expenses (after expense deferral)(2)..... 1.60% 2.25% 2.14%
</TABLE>
- ------------------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase. See "Contingent Deferred Sales Charge" in this
prospectus.
(2) The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Fund. For Class B, Total
operating expenses would have been 2.66%, and Other expenses would have been
1.16%, absent the deferral. See "Investment Adviser Compensation."
Because of the 12b-1 fee, long-term shareholders may indirectly pay more than
the equivalent of the maximum permitted front-end sales charge.
14
<PAGE>
EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS
TIME FRAMES INDICATED. THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE
AVERAGE ANNUAL RETURN IS 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A..................................................... $ 68 $ 100 $ 135 $ 233
CLASS B
Assuming redemption at end of time period(1)................ $ 74 $ 103 $ 143 $ 234
Assuming no redemption...................................... $ 23 $ 70 $ 120 $ 258
CLASS C
Assuming redemption at end of time period(1)................ $ 32 $ 68 $ 116 $ 250
Assuming no redemption...................................... $ 22 $ 68 $ 116 $ 250
</TABLE>
This example is for comparison purposes only and is not a representation of
the Fund's actual expenses and returns, either past or future.
- ------------------------
(1) Assumes deduction of a contingent deferred sales charge and automatic
exchange of Class B shares for Class A shares seven years after purchase.
FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital stock
of the predecessor A, B and C Portfolio outstanding throughout each period
indicated. The figures for the period ended September 30, 1997 are unaudited.
The other figures have been audited by Ernst & Young L.L.P. with respect to the
fiscal year ended March 31, 1997. Please read in conjunction with the Trust's
1997 Annual Report and 1997-98 Semi-Annual Report.
<TABLE>
<CAPTION>
PORTFOLIO A
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4/19/93 4/1/94 4/1/95 4/1/96 4/1/97
TO 3/31/94 TO 3/31/95 TO 3/31/96 TO 3/31/97 TO 9/30/97
---------- ---------- ---------- ---------- ----------
PER SHARE DATA:
Net asset value, beginning of period......... $ 12.50 $ 13.25 $ 13.61 $ 18.37 $ 16.80
Income from investment operations:
Net investment income (deficit)............ (0.07) (0.10) (0.18) (0.17) (0.10)
Net realized and unrealized gains (losses)
on securities and foreign currency....... 0.86 0.46 4.94 0.57 5.16
Total from investment operations............. 0.79 (0.36) 4.76 0.40 5.06
Less distributions:
Dividends from net investment income....... -- -- -- -- --
Distributions from capital gains........... (0.04) -- -- (1.97) --
Net asset value, end of period............... $ 13.25 $ 13.61 $ 18.37 $ 16.80 $ 21.86
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN+:............................... 6.27% 2.72% 35.07% 1.09% 30.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period.................... $70,512 $65,292 $77,275 $76,108 $94,794
Ratio of expenses to average net assets,
after expense reimbursement++.............. 1.57%* 1.59% 1.58% 1.60% 1.59%*
Ratio of expenses to average net assets,
before expense reimbursement+................ 1.71%* 1.63% 1.56% 1.56% 1.72%*
Ratio of net investment income (deficit) to
average net assets, after expense
reimbursement++............................ (0.68%)* (0.66%) (0.0.91%) (1.05%) (0.83%)*
Ratio of net investment income (deficit) to
average net assets, before expense
reimbursement++............................ (0.82%)* (0.70%) (0.89%) (1.01%) (0.95%)*
Portfolio turnover**......................... 84.84% 98.09% 114.48% 153.20% --
Average commission rate paid**............... N/A N/A $0.0593 $0.0582 --
<CAPTION>
PORTFOLIO B
------------------------------------
<S> <C> <C>
5/31/95 4/1/96 4/1/97
TO 3/31/96 TO 3/31/97 TO 9/30/97
---------- ---------- ----------
PER SHARE DATA:
Net asset value, beginning of period......... $ 12.50 $ 16.25 $ 16.33
Income from investment operations:
Net investment income (deficit)............ (0.09) (0.17) (0.11)
Net realized and unrealized gains (losses)
on securities and foreign currency....... 3.84 0.25 4.97
Total from investment operations............. 3.75 0.08 4.86
Less distributions:
Dividends from net investment income....... -- -- --
Distributions from capital gains........... -- -- --
Net asset value, end of period............... $ 16.25 $ 16.33 $ 21.19
- ----------------------------------------------------------------------------------
TOTAL RETURN+:............................... 30.00% (0.49%) 29.76%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period.................... $11,186 $29,002 $41,071
Ratio of expenses to average net assets,
after expense reimbursement++.............. 2.22%* 2.25% 2.24%*
Ratio of expenses to average net assets,
before expense reimbursement+................ 3.39%* 2.66% 2.28%*
Ratio of net investment income (deficit) to
average net assets, after expense
reimbursement++............................ (1.61%)* (1.69%) (1.48%)*
Ratio of net investment income (deficit) to
average net assets, before expense
reimbursement++............................ (2.77%)* (2.10%) 1.53%)*
Portfolio turnover**......................... 114.48% 153.20% --
Average commission rate paid**............... $0.0593 $0.0582 --
<CAPTION>
PORTFOLIO C
-------------------------------------------------------------
4/19/93 4/1/94 4/1/95 4/1/96 4/1/97
TO 3/31/94 TO 3/31/95 TO 3/31/96 TO 3/31/97 TO 9/30/97
---------- ---------- ---------- ---------- ----------
PER SHARE DATA:
Net asset value, beginning of period......... $ 12.50 $ 13.18 $ 13.45 $ 18.06 $ 1.48
Income from investment operations:
Net investment income (deficit)............ (0.11) (0.17) (0.27) (0.32) (0.13)
Net realized and unrealized gains (losses)
on securities and foreign currency....... 0.80 0.44 4.88 0.62 5.03
Total from investment operations............. 0.69 0.27 4.61 0.30 4.90
Less distributions:
Dividends from net investment income....... -- -- -- -- --
Distributions from capital gains........... (0.01) -- -- (1.88) --
Net asset value, end of period............... $ 13.18 $ 13.45 $ 18.06 $ 16.48 $ 21.38
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN+:............................... 5.54% 2.05% 34.28% 0.56% 29.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period.................... $141,489 $143,390 $177,461 $157,501 $183,697
Ratio of expenses to average net assets,
after expense reimbursement++.............. 2.17%* 2.24% 2.14% 2.14% 2.26%*
Ratio of expenses to average net assets,
before expense reimbursement+.............. 2.17%* 2.24% 2.14% 2.17% (1.49%)*
Ratio of net investment income (deficit) to
average net assets, after expense
reimbursement++............................ (1.30%)* (1.30%) (1.47) (1.59%) (1.58%)*
Ratio of net investment income (deficit) to
average net assets, before expense
reimbursement++............................ (1.30%)* (1.30%) (1.47%) (1.62%)
Portfolio turnover**......................... 84.84% 98.09% 114.48% 153.20%
Average commission rate paid**............... N/A N/A $ 0.0593 $ 0.0582
</TABLE>
- ------------------------
* Annualized
** For corresponding Series of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated from Master Trust
15
<PAGE>
VALUE FUND
INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.
INVESTMENT STRATEGY
The Fund's Investment Adviser focuses on a "bottom-up" analysis that
evaluates the financial condition and competitiveness of individual companies.
It uses a blend of traditional fundamental research and computer intensive
systematic disciplines to uncover signs of "change at the margin" -- positive
business developments which are not yet fully reflected in a company's stock
price. It searches for successful, growing companies that are managing change
advantageously and poised to exceed growth expectations.
The Fund emphasizes companies with market capitalizations generally above $5
billion.
PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests at least 80% of its total assets
in equity securities. It invests the remainder primarily in preferred and
convertible securities, investment grade debt securities of any maturity, and
securities issued by the U.S. Government and its agencies and instrumentalities.
The Fund may also use options and futures contracts as hedging techniques.
The Fund's portfolio is designed to have risk, capitalization and industry
characteristics similar to those of the S&P 500 index.
PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 37.
RISK FACTORS
As with any equity fund, the value of your investment will fluctuate from
day to day with movements in the stock markets. To the extent the Fund invests
in foreign securities, the risks and volatility are magnified since the
performance of foreign stocks depends upon changes in foreign currency values,
different political and regulatory environments, and the overall political and
economic conditions in countries where the Fund invests. For further
explanation, see "Risk Factors and Special Considerations" starting on page 41.
INVESTOR EXPENSES--CLASS A, B AND C SHARES
Investors pay various expenses, either directly or indirectly. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B
----------------- -----------
<S> <C> <C>
Maximum sales charge on purchases (as a percentage of offering price)................... 5.25% None
Sales charge on reinvested dividends.................................................... None None
Deferred sales charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower)......................................................... None(1) 5.00%
Redemption fee.......................................................................... None None
Exchange fee............................................................................ None None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)
Management fees......................................................................... 0.75% 0.75%
12b-1 expenses 0.25% 0.75%
Other expenses (after expense deferral)(2).............................................. 0.60% 0.75%
Total operating expenses (after expense deferral)(2).................................... 1.60% 2.25%
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS C
-----------------
<S> <C>
Maximum sales charge on purchases (as a percentage of offering price)................... None
Sales charge on reinvested dividends.................................................... None
Deferred sales charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower)......................................................... 1.00%
Redemption fee.......................................................................... None
Exchange fee............................................................................ None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)
Management fees......................................................................... 0.75%
12b-1 expenses 0.75%
Other expenses (after expense deferral)(2).............................................. 0.75%
Total operating expenses (after expense deferral)(2).................................... 2.25%
</TABLE>
- ------------------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase. See "Contingent Deferred Sales Charge" in this
prospectus.
(2) The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Fund. For Class A, B & C,
Total operating expenses are expected to be 2.25%, 2.85% and 2.85%
respectively, and Other expenses are expected to be 1.50%, 2.10% and 2.10%
respectively, absent the deferral. See "Investment Adviser Compensation."
Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
16
<PAGE>
EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS
TIME FRAMES INDICATED. THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE
AVERAGE ANNUAL RETURN IS 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
----------- -----------
<S> <C> <C>
CLASS A.............................................................. $ 68 $ 100
CLASS B
Assuming redemption at end of time period(1)......................... $ 74 $ 103
Assuming no redemption............................................... $ 23 $ 70
CLASS C
Assuming redemption at end of time period(1)......................... $ 32 $ 70
Assuming no redemption............................................... $ 23 $ 70
</TABLE>
- ------------------------
This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.
(1) Assumes deduction of a contingent deferred sales charge.
17
<PAGE>
EMERGING GROWTH FUND
INVESTMENT OBJECTIVE
Maximum long-term capital appreciation.
INVESTMENT STRATEGY
The Fund's Investment Adviser focuses on a "bottom-up" analysis that
evaluates the financial condition and competitiveness of individual companies.
It uses a blend of both traditional fundamental research and computer intensive
systematic disciplines to uncover what it calls "change at the margin" --
positive business developments which are not yet fully reflected in the
company's stock price. It searches for successful, growing companies that are
managing change advantageously and poised to exceed growth expectations.
The Fund emphasizes companies with market capitalizations below $500 million
at the time of purchase.
PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests at least 75% of its total assets
in common stocks. It invests the remainder primarily in preferred and
convertible securities, investment grade debt securities of any maturity, and
securities issued by the U.S. Government and its agencies and instrumentalities.
The Fund may invest up to 20% of its total assets in foreign securities. The
Fund may also use options and futures contracts as hedging techniques.
PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 37.
RISK FACTORS
As with any growth fund, the value of your investment will fluctuate from
day to day with movements in the stock markets. Although small-cap stocks have a
history of long-term growth, they tend to be more volatile and speculative than
stocks of larger, more established companies. To the extent the Fund invests in
foreign issuers, the investment risks and volatility are magnified since the
performance of foreign stocks depends on changes in foreign currency values,
different political and regulatory environments, and the overall political and
economic conditions in the foreign countries where the Fund invests. For further
explanation, see "Risk Factors and Special Considerations" starting on page 41.
INVESTOR EXPENSES--CLASS A, B AND C SHARES
Investors pay various expenses, either directly or indirectly. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B
----------------- -----------
<S> <C> <C>
Maximum sales charge on purchases (as a percentage of offering price)................... 5.25% None
Sales charge on reinvested dividends.................................................... None None
Deferred sales charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower)......................................................... None(1) 5.00%
Redemption fee.......................................................................... None None
Exchange fee............................................................................ None None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)
Management fees......................................................................... 1.00% 1.00%
12b-1 expenses 0.25% 0.75%
Other expenses (after expense deferral)(2).............................................. 0.47% 0.85%
Total operating expenses (after expense deferral)(2).................................... 1.72% 2.60%
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS C
-------------
<S> <C>
Maximum sales charge on purchases (as a percentage of offering price)................... None
Sales charge on reinvested dividends.................................................... None
Deferred sales charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower)......................................................... 1.00%
Redemption fee.......................................................................... None
Exchange fee............................................................................ None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)
Management fees......................................................................... 1.00%
12b-1 expenses 0.75%
Other expenses (after expense deferral)(2).............................................. 0.60%
Total operating expenses (after expense deferral)(2).................................... 2.35%
</TABLE>
- ------------------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase. See "Contingent Deferred Sales Charge" in this
prospectus.
(2) The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Fund. For Class B Total
operating expenses would have been 2.73%, and Other expenses would have been
.98%, absent the deferral. See "Investment Adviser Compensation."
Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
18
<PAGE>
EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS
TIME FRAMES INDICATED. THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE
AVERAGE ANNUAL RETURN IS 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A................................................. $ 69 $ 104 $ 142 $ 247
CLASS B
Assuming redemption at end of time period(1)............ $ 78 $ 113 $ 161 $ 261
Assuming no redemption.................................. $ 26 $ 81 $ 138 $ 293
CLASS C
Assuming redemption at end of time period(1)............ $ 36 $ 79 $ 136 $ 289
Assuming no redemption.................................. $ 26 $ 79 $ 136 $ 289
<CAPTION>
<S>
CLASS A.................................................................................
CLASS B
Assuming redemption at end of time period1..............................................
Assuming no redemption..................................................................
CLASS C
Assuming redemption at end of time period1..............................................
Assuming no redemption..................................................................
</TABLE>
- ------------------------
This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.
(1) Assumes deduction of a contingent deferred sales charge and automatic
exchange of Class B shares for Class A shares seven years after purchase.
FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital stock
of the predecessor A, B and C Portfolios outstanding throughout each period
indicated. The figures for the period ended September 30, 1997 are unaudited.
The other figures have been audited by Ernst & Young L.L.P. with respect to the
fiscal year ended March 31, 1997, and by another independent auditor with
respect to commencement of operation through March 31, 1995. Please read in
conjunction with the Trust's 1997 Annual Report and 1997-98 Semi-Annual Report.
<TABLE>
<CAPTION>
PORTFOLIO
PORTFOLIO A B
-------------------------------------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
12/27/93 4/1/94 4/1/95 4/1/96 4/1/97 5/31/95
TO 3/31/94 TO 3/31/95 TO 3/31/96 TO 3/31/97 TO 9/30/97 TO 3/31/96
---------- ---------- ---------- ---------- ---------- ----------
PER SHARE DATA:
Net asset value, beginning of period...... $ 12.50 $ 12.10 $ 13.06 $ 17.93 $ 15.15 $ 12.50
Income from investment operations:
Net investment income (deficit)......... (0.04) (0.16) (0.20) (0.22) (0.02) (0.14)
Net realized and unrealized gains (losses)
on securities and foreign currency.... (0.36) 1.12 5.09 (0.66) 6.95 4.33
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations.......... (0.40) 0.96 4.89 (0.88) 6.93 4.19
Less distributions:
Dividends from net investment income.... -- -- -- -- -- --
Distributions from capital gains........ -- -- (0.02) (1.90) -- --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 12.10 $ 13.06 $ 17.93 $ 15.15 $ 22.08 $ 16.69
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN+:........................... (3.20%) 7.93% 37.48% (6.26%) 45.74% 33.52%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period................. $104,838 $106,725 $138,155 $121,742 $211,071 $13,626
Ratio of expenses to average net assets,
after expense reimbursement++........... 1.73%* 1.86% 1.74% 1.72% 1.96%* 2.58%*
Ratio of expenses to average net assets,
before expense reimbursement+........... 1.80%* 1.84% 1.74% 1.72% 1.90%* 3.26%*
Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement++......................... (1.44%)* (1.27%) (1.20%) (1.26%) (1.42%)* (2.09%)*
Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement++......................... (1.51%)* (1.25%) (1.20%) (1.26%) (1.36%)* (2.76%)*
Portfolio turnover**...................... 50.51% 100.46% 129.59% 112.90% 129.59%
Average commission rate paid**............ N/A N/A $ 0.0523 $ 0.0520 $ 0.0520
<CAPTION>
PORTFOLIO B PORTFOLIO C
--------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
4/1/96 4/1/97 12/27/93 4/1/94 4/1/95 4/1/96 4/1/97
TO 3/31/97 TO 9/30/97 TO 3/31/94 TO 3/31/95 TO 3/31/96 TO 3/31/97 TO 9/30/97
---------- ---------- ---------- ---------- ---------- ---------- ----------
PER SHARE DATA:
Net asset value, beginning of period..... $ 16.69 $ 15.51 $ 12.50 $ 12.07 $ 12.96 $ 17.62 $ 14.69
Income from investment operations:
Net investment income (deficit)........ (0.21) (0.11) (0.06) (0.22) (0.29) (0.31) (0.17)
Net realized and unrealized gains (losses)
on securities and foreign currency... (0.97) 7.14 (0.37) 1.11 5.03 (0.63) 6.83
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations......... (1.18) 7.03 (0.43) 0.89 4.74 (0.94) 6.21
Less distributions:
Dividends from net investment income... -- -- -- -- -- -- --
Distributions from capital gains....... -- -- -- -- (0.08) (1.99) (1.99)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period........... $ 15.51 $ 2.54 $ 12.07 $ 12.96 $ 17.62 $ 14.69 $ 21.35
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN+:.......................... (7.07%) 45.33% (3.44%) 7.37% 37.18% (6.81%) 45.34%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period................ $28,030 $49,917 $142,874 $157,292 $207,332 $182,907 $249,108
Ratio of expenses to average net assets,
after expense reimbursement++.......... 2.61% 2.60%* 2.34%* 2.44% 2.35% 2.35% 2.58%*
Ratio of expenses to average net assets,
before expense reimbursement+.......... 2.73% 2.58%* 2.34%* 2.44% 2.35% 2.35% 2.56%*
Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement++........................ (2.13%) (2.09%)* (2.04%)* (1.85%) (1.81%) (1.89%) (2.05%)*
Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement++........................ (2.25%) (2.06%)* (2.04%)* (1.85%) (1.81%) (1.89%) (2.03%)*
Portfolio turnover**.................... 112.90% 50.51% 100.46% 129.59% 112.90%
Average commission rate paid**........... $0.0582 N/A N/A $ 0.0523 $ 0.0520
</TABLE>
- ------------------------
* Annualized
** For corresponding Series of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated from Master Trust
19
<PAGE>
INCOME & GROWTH FUND
INVESTMENT OBJECTIVE
Maximum total return, consisting of long-term capital appreciation and
current income.
INVESTMENT STRATEGY
THE FUND INVESTS PRIMARILY IN CONVERTIBLE SECURITIES. The Investment
Adviser evaluates each security's investment characteristics as a fixed income
instrument as well as its potential for capital appreciation. In evaluating
convertibles, the Investment Adviser searches for what it calls "change at the
margin" -- positive business developments which are not yet fully reflected in
the company's stock price. It searches for successful growing companies that are
managing change advantageously and poised to exceed growth expectations.
The Fund seeks to capture approximately 70-80% of the upside performance of
the underlying equities with 50% or less of the downside exposure.
PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests at least 65% of its total assets
in convertible securities. It invests the remainder primarily in common and
preferred stocks, debt securities of any maturity, and securities issued by the
U.S. Government and its agencies and instrumentalities. The Fund may also use
options and futures contracts as hedging techniques.
At all times, the Fund invests a minimum of 25% of its total assets in
common and preferred stocks, and 25% in other income producing convertible and
debt securities. The Fund may also invest up to 35% of its net assets in debt
securities rated below investment grade by a nationally recognized statistical
rating agency, or of comparable quality if unrated.
The Fund emphasizes companies with market capitalizations above $500
million.
PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 37.
RISK FACTORS
Convertible securities have the investment characteristics of both equity
and debt securities. Accordingly, the value of your investment will fluctuate
with movements in the stock and bond markets. The companies in which the Fund
invests may be subject to more volatile market movements than securities of
larger, more established companies. The value of the Fund's debt securities will
change as interest rates fluctuate: if rates go up, the value of debt securities
goes down; if rates go down, the value of debt securities goes up. In addition,
the lower rated convertible securities in which the Fund may invest are
considered predominately speculative and are subject to greater volatility and
risk of loss than investment grade securities, particularly in deteriorating
economic periods. For further explanation, see "Risk Factors and Special
Considerations" starting on page 41.
INVESTOR EXPENSES--CLASS A, B AND C SHARES
Investors pay various expenses, either directly or indirectly. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B CLASS C
----------------- ----------- ---------
<S> <C> <C> <C>
Maximum sales charge on purchases (as a percentage of offering price).................. 5.25% None None
Sales charge on reinvested dividends................................................... None None None
Deferred sales charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower)........................................................ None(1) 5.00% 1.00%
Redemption fee......................................................................... None None None
Exchange fee........................................................................... None None None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)
Management fees........................................................................ 0.75% 0.75% 0.75%
12b-1 expenses 0.25% 0.75% 0.75%
Other expenses (after expense deferral)(2)............................................. 0.60% 0.75% 0.75%
Total operating expenses (after expense deferral)(2)................................... 1.60% 2.25% 2.25%
</TABLE>
- ------------------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase. See "Contingent Deferred Sales Charge" in this
prospectus.
(2) The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Fund. For Class A, B & C,
Total operating expenses would have been 1.75%, 3.19% and 2.29%,
respectively, and Other expenses would have been .75%, 1.69% and .79%
respectively, absent the deferral. See "Investment Adviser Compensation."
Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
20
<PAGE>
EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS
TIME FRAMES INDICATED. THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE
AVERAGE ANNUAL RETURN IS 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- ------------
<S> <C> <C> <C>
CLASS A.............................................................. $ 68 $ 100 $ 135 $ 233
CLASS B
Assuming redemption at end of time period(1)......................... $ 74 $ 103 $ 143 $ 234
Assuming no redemption............................................... $ 23 $ 70 $ 120 $ 258
CLASS C
Assuming redemption at end of time period(1)......................... $ 33 $ 70 $ 120 $ 258
Assuming no redemption............................................... $ 23 $ 70 $ 120 $ 258
<CAPTION>
</TABLE>
- ------------------------
This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.
(1) Assumes deduction of a contingent deferred sales charge and automatic
exchange of Class B shares for Class A shares seven years after purchase.
FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital stock
of the predecessor A, B and C Portfolios outstanding throughout each period
indicated. The figures for the period ended September 30, 1997 are unaudited.
The other figures have been audited by Ernst & Young L.L.P. with respect to the
fiscal year ended March 31, 1997, and by another independent auditor with
respect to commencement of operation through March 31, 1995. Please read in
conjunction with the Trust's 1997 Annual Report and 1997-98 Semi-Annual Report.
<TABLE>
<CAPTION>
PORTFOLIO
PORTFOLIO A B
-------------------------------------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
4/19/93 4/1/94 4/1/95 4/1/96 4/1/97 5/31/95
TO 3/31/94 TO 3/31/95 TO 3/31/96 TO 3/31/97 TO 9/30/97 TO 3/31/96
---------- ---------- ---------- ---------- ---------- ----------
PER SHARE DATA:
Net asset value, beginning of period...... $ 12.50 $ 14.16 $ 12.86 $ 15.68 $ 16.59 $ 12.50
Income from investment operations:
Net investment income (deficit).......... 0.32 0.49 0.48 0.47 0.46 0.24
Net realized and unrealized gains (losses)
on securities and foreign currency..... 2.15 (0.89) 2.82 1.64 3.04 2.46
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations.......... 2.47 (0.40) 3.30 2.11 2.58 2.70
Less distributions:
Dividends from net investment income..... (0.32) (0.49) (0.48) (0.48) (0.23) (0.24)
Distributions from capital gains......... (0.49) (0.41) -- (0.72) -- --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period............ $ 14.16 $ 12.86 $ 15.68 $ 16.59 $ 19.86 $ 14.96
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN+:............................ 19.65% (2.64%) 26.00% 13.73% 21.18% 21.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period................. $ 30,447 $ 31,150 $ 31,712 $ 32,082 $ 38,880 $ 2,125
Ratio of expenses to average net assets,
after expense reimbursement++........... 1.59%* 1.60% 1.60% 1.60% 1.59%* 2.25%
Ratio of expenses to average net assets,
before expense reimbursement+........... 1.83%* 1.76% 1.76% 1.75% 1.72%* 7.08%*
Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement++......................... 2.83%* 3.71% 3.29% 2.83% 2.56%* 2.59%*
Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement++......................... 2.59%* 3.55% 3.12% 2.66% 2.43%* (2.22%)*
Portfolio turnover**...................... 177.52% 125.51% 144.97% 166.84% 144.97%
Average commission rate paid**............ N/A N/A $ 0.0597 $ 0.0154 $ 0.0520
<CAPTION>
PORTFOLIO C
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
4/1/96 4/1/97 4/19/93 4/1/94 4/1/95 4/1/96 4/1/97
TO 3/31/97 TO 9/30/97 TO 3/31/94 TO 3/31/95 TO 3/31/96 TO 3/31/97 TO 9/30/97
---------- ---------- ---------- ---------- ---------- ---------- ----------
PER SHARE DATA:
Net asset value, beginning of period..... $ 14.96 $ 16.60 $ 12.50 $ 14.28 $ 13.03 $ 15.89 $ 17.05
Income from investment operations:
Net investment income (deficit)......... 0.31 0.32 0.24 0.41 0.40 0.37 0.36
Net realized and unrealized gains (losses)
on securities and foreign currency.... 1.64 3.17 2.11 (0.89) 2.86 1.66 3.19
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations......... 1.95 2.85 2.35 (0.48) 3.26 2.03 2.83
Less distributions:
Dividends from net investment income.... (0.31) (0.17) (0.24) (0.41) (0.40) (0.37) (0.18)
Distributions from capital gains........ -- -- (0.33) (0.36) -- (0.50) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period........... $ 16.60 $ 19.92 $ 14.28 $ 13.03 $ 15.89 $ 17.05 $ 20.42
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN+:........................... 13.01% 21.06% 18.76% (3.26%) 25.24% 12.91% 20.87%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period................ $12,740 $21,147 $ 69,265 $ 61,792 $ 58,997 $ 62,143 $ 73,059
Ratio of expenses to average net assets,
after expense reimbursement++.......... 2.25% 2.24%* 2.22%* 2.25% 2.25% 2.25% 2.24%*
Ratio of expenses to average net assets,
before expense reimbursement+.......... 3.19% 2.75%* 2.23%* 2.29% 2.28% 2.29% 2.32%*
Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement++........................ 2.29% 1.96%* 2.28%* 3.05% 2.64% 2.18% 1.92%*
Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement++........................ 1.32% 1.45%* 2.27%* 3.01% 2.61% 2.11% 1.83%*
Portfolio turnover**..................... 166.84% 177.52% 125.51% 144.97% 166.84%
Average commission rate paid**........... $0.0154 N/A N/A $ 0.0154 $ 0.0520
</TABLE>
- ------------------------
* Annualized
** For corresponding Series of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated from Master Trust
21
<PAGE>
BALANCED GROWTH FUND
INVESTMENT OBJECTIVE
A balance of long-term capital appreciation and current income.
INVESTMENT STRATEGY
The Fund's Investment Adviser actively manages a blended portfolio of equity
and fixed income securities with an emphasis on the overall total return. For
the equity portion, the Investment Adviser focuses on a "bottom-up" analysis
that evaluates the financial condition and competitiveness of individual
companies. It primarily uses computer intensive systematic disciplines to
uncover "change at the margin" -- positive business developments that are not
yet fully reflected in a company's stock price. The fixed income portion is
actively managed to take advantage of current interest rates and bond market
trends by varying the structure, duration and allocation of fixed income
investments from various business sectors.
PRINCIPAL INVESTMENTS
Under normal conditions, the Fund allocates about 60% of its total assets
(but no more than 70% and no less than 50%) to equity securities, with an
emphasis on companies with market capitalizations in excess of $500 million, and
about 40% of its total assets to debt securities of any maturity issued by
corporations and the U.S.
Government and its agencies and instrumentalities. A portion of the Fund's
net assets (less than 35%) may be invested in debt securities rated below
investment grade by a nationally recognized statistical rating agency, or of
comparable quality if unrated. The Fund may invest up to 20% of its total assets
in securities of foreign issuers. The Fund may also use options as a hedging
technique.
PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 37.
RISK FACTORS
As with any fund that invests in common stocks and debt obligations, the
value of your investment will fluctuate with movements in the stock and bond
markets. Equity securities in which the Fund invests may be more volatile than
securities of larger, more established companies. The value of the Fund's debt
securities will change as interest rates fluctuate: if rates go up, the value of
debt securities goes down; if rates go down, the value of debt securities goes
up. Lower rated securities in which the Fund invests are considered speculative
and are subject to greater volatility and risk of loss than investment grade
securities, particularly in deteriorating economic periods. For further
explanation, see "Risk Factors and Special Considerations" starting on page 41.
INVESTOR EXPENSES--CLASS A, B AND C SHARES
Investors pay various expenses, either directly or indirectly. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B
----------------- -----------
<S> <C> <C>
Maximum sales charge on purchases (as a percentage of offering price)................... 5.25% None
Sales charge on reinvested dividends.................................................... None None
Deferred sales charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower)......................................................... None(1) 5.00%
Redemption fee.......................................................................... None None
Exchange fee............................................................................ None None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)
Management fees......................................................................... 0.75% 0.75%
12b-1 expenses.......................................................................... 0.25% 0.75%
Other expenses (after expense deferral)(2).............................................. 0.60% 0.75%
Total operating expenses (after expense deferral)(2).................................... 1.60% 2.25%
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: CLASS C
-----------
<S> <C>
Maximum sales charge on purchases (as a percentage of offering price)................... None
Sales charge on reinvested dividends.................................................... None
Deferred sales charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower)......................................................... 1.00%
Redemption fee.......................................................................... None
Exchange fee............................................................................ None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)
Management fees......................................................................... 0.75%
12b-1 expenses.......................................................................... 0.75%
Other expenses (after expense deferral)(2).............................................. 0.75%
Total operating expenses (after expense deferral)(2).................................... 2.25%
</TABLE>
- ------------------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase. See "Contingent Deferred Sales Charge" in this
prospectus.
(2) The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Fund. For Class A, B & C,
Total operating expenses would have been 3.00%, 6.44% and 2.83%
respectively, and Other expenses would have been 2.00%, 4.94% and 1.33%
respectively, absent the deferral. See "Investment Adviser Compensation."
Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge. #
22
<PAGE>
EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS
TIME FRAMES INDICATED. THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE
AVERAGE ANNUAL RETURN IS 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -------------
<S> <C> <C> <C>
CLASS A....................................................... $ 68 $ 100 $ 135 $ 283
CLASS B
Assuming redemption at end of time period(1).................. $ 74 $ 103 $ 143 $ 234
Assuming no redemption........................................ $ 23 $ 70 $ 120 $ 258
CLASS C
Assuming redemption at end of time period(1).................. $ 33 $ 70 $ 120 $ 258
Assuming no redemption........................................ $ 23 $ 70 $ 120 $ 258
<CAPTION>
</TABLE>
- ------------------------
This example is for comparison purposes only and is not a representation of
the Fund's actual expenses and returns, either past or future.
(1) Assumes deduction of a contingent deferred sales charge and automatic
exchange of Class B shares for Class A shares seven years after purchase.
FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital stock
of the predecessor A, B and C Portfolios outstanding throughout each period
indicated. The figures for the period ended September 30, 1997 are unaudited.
The other figures have been audited by Ernst & Young L.L.P. with respect to the
fiscal year ended March 31, 1997, and by another independent auditor with
respect to commencement of operation through March 31, 1995. Please read in
conjunction with the Trust's 1997 Annual Report and 1997-98 Semi-Annual Report.
<TABLE>
<CAPTION>
PORTFOLIO
PORTFOLIO A B
-------------------------------------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
4/19/93 4/1/94 4/1/95 4/1/96 4/1/97 5/31/95
TO 3/31/94 TO 3/31/95 TO 3/31/96 TO 3/31/97 TO 9/30/97 TO 3/31/96
---------- ---------- ---------- ---------- ---------- ----------
PER SHARE DATA:
Net asset value, beginning of period...... $ 12.50 $ 13.52 $ 13.74 $ 16.16 $ 15.54 $ 12.50
Income from investment operations:
Net investment income (deficit).......... 0.15 0.21 0.34 0.32 0.23 0.12
Net realized and unrealized gains (losses)
on securities and foreign currency..... 1.02 0.22 2.42 0.84 4.27 1.68
Total from investment operations.......... 1.17 0.43 2.76 1.16 4.50 1.80
Less distributions:
Dividends from net investment income..... (0.15) (0.21) (0.34) (0.32) (0.11) (0.12)
Distributions from capital gains......... -- -- -- (1.46) -- --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period............ $ 13.52 $ 13.74 $ 16.16 $ 15.54 $ 19.92 $ 14.18
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN+:............................ (9.35%) 3.22% 20.16% 6.74% 28.98% 14.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period................. $ 6,446 $ 4,980 $ 5,902 $ 4,898 $ 6,230 $ 673
Ratio of expenses to average net assets,
after expense reimbursement++........... 1.59%* 1.60% 1.60% 1.60% 1.61%* 2.25%*
Ratio of expenses to average net assets,
before expense reimbursement+........... 3.28%* 2.78% 3.30% 3.00% 2.64%* 13.05%*
Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement++......................... 1.30%* 1.44% 2.16% 1.87% 1.26%* 1.38%*
Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement++......................... (0.39%)* 0.26% 0.88% 0.73% 0.22%* (8.86%)*
Portfolio turnover**...................... 85.43% 110.40% 197.19% 212.95% 197.19%
Average commission rate paid**............ n/a N/A $ 0.0594 $ 0.0586 $ 0.0594
<CAPTION>
PORTFOLIO C
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
4/1/96 4/1/97 4/19/93 4/1/94 4/1/95 4/1/96 4/1/97
TO 3/31/97 TO 9/30/97 TO 3/31/94 TO 3/31/95 TO 3/31/96 TO 3/31/97 TO 9/30/97
---------- ---------- ---------- ---------- ---------- ---------- ----------
PER SHARE DATA:
Net asset value, beginning of period..... $ 14.18 $ 14.88 $ 12.50 $ 13.54 $ 13.76 $ 16.20 $ 15.59
Income from investment operations:
Net investment income (deficit).......... 0.17 0.10 0.08 0.11 0.24 0.21 0.11
Net realized and unrealized gains (losses)
on securities and foreign currency..... 0.70 4.20 1.04 0.22 2.44 0.85 4.34
Total from investment operations......... 0.87 4.30 1.12 0.33 2.68 1.06 4.45
Less distributions:
Dividends from net investment income..... (0.17) (0.05) (0.08) (0.11) (0.24) (0.21) (0.60)
Distributions from capital gains......... -- -- -- -- -- (1.46) --
Net asset value, end of period........... $ 14.88 $ 19.13 $ 13.54 $ 13.76 $ 16.20 $ 15.59 $ 19.98
---------- ---------- ---------- ---------- ---------- ---------- ---------
TOTAL RETURN+:........................... 6.10% 28.96% 8.91% 2.47% 19.58% 6.05% $ 28.55%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period................ $ 2,133 $ 3,062 $ 16,248 $ 16,470 $ 16,586 $ 16,990 $20,259
Ratio of expenses to average net assets,
after expense reimbursement++.......... 2.25% 2.26%* 2.24%* 2.25% 2.25% 2.25% 2.26%*
Ratio of expenses to average net assets,
before expense reimbursement+.......... 6.44% 4.63%* 2.73% 2.60% 3.01% 2.83% 2.77%*
Ratio of net investment income (deficit)
to average net assets, after expense
reimbursement++........................ 1.25% 0.63%* 0.61%* 0.83% 1.53% 1.23% 0.10%*
Ratio of net investment income (deficit)
to average net assets, before expense
reimbursement++........................ (2.67%) (1.75%)* 0.12%* 0.48% 1.19% 0.91%
Portfolio turnover**..................... 212.95% 85.43% 110.40% 197.19% 212.95%
Average commission rate paid**........... $0.0586 N/A N/A $ 0.0594 $ 0.0586
</TABLE>
- ------------------------
* Annualized
** For corresponding Series of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated from Master Trust
23
<PAGE>
FULLY DISCRETIONARY FUND
INVESTMENT OBJECTIVE
Seeks maximum total return.
INVESTMENT STRATEGY
The Fund's Investment Adviser seeks to outperform the total return of an
index of either government/ corporate investment grade debt or
government/corporate/ mortgage investment grade debt over a full market cycle
through an actively managed diversified portfolio of debt securities. When
evaluating any bond, the Investment Adviser selects bonds based upon a "top
down" analysis of economic trends. Investment philosophy emphasizes interest
rate decisions and shifts among sectors of the bond market. It also analyzes
credit quality, the yield to maturity of the security, and the effect the
security will have on the Fund.
PRINCIPAL INVESTMENTS
Under normal conditions, the Fund invests at least 65% of its total assets
in investment grade debt securities issued by U.S. and foreign corporations,
U.S. and foreign governments, and their agencies and instrumentalities. These
securities include bonds, notes, mortgage backed and asset backed securities
with rates that are fixed, variable or floating. The Fund may invest up to 20%
of its assets in debt securities rated below investment grade by a nationally
recognized statistical rating agency, or of comparable quality if unrated. For a
description of these ratings, see "corporate bond ratings" beginning on page 45.
The Fund may also use options, futures contracts and interest rate and currency
swaps as hedging techniques. The average portfolio duration of the Fund will
range from two to eight years. The Fund may invest up to 30% of its total assets
in securities payable in foreign currencies.
PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 37.
RISK FACTORS
As with any fund that invests in bonds, the value of the Fund's investments
fluctuates in response to movements in interest rates. If interest rates go up,
the value of bonds fall; if rates go down, the value of bonds rise. However, the
Investment Adviser expects the Fund's fluctuations to be more moderate than
those of a fund with a longer average duration. The lower rated debt securities
in which the Fund invests are considered speculative and are subject to greater
volatility and risk of loss than investment grade securities, particularly in
deteriorating economic periods. To the extent the Fund invests in foreign
securities, performance also depends upon changing currency values, different
political and economic environments, and other overall economic conditions in
countries where the Fund invests. For further explanation, see "Risk Factors and
Special Considerations" starting on page 41.
INVESTOR EXPENSES--CLASS A, B AND C SHARES
Investors pay various expenses, either directly or indirectly. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------- ----------- -----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a percentage of offering price)................ 4.75% None None
Sales charge on reinvested dividends................................................. None None None
Deferred sales charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower)...................................................... None(1) 5.00% 1.00%
Redemption fee....................................................................... None None None
Exchange fee......................................................................... None None None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS: (after expense
deferral)
Management fees...................................................................... 0.45% 0.45% 0.45%
12b-1 expenses....................................................................... 0.25% 0.50% 0.50%
Other expenses (after expense deferral) (2).......................................... 0.25% 0.40% 0.40%
Total operating expenses (after expense deferral)(2)................................. 0.95% 1.35% 1.35%
</TABLE>
- ------------------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase. See "Contingent Deferred Sales Charge" in this
prospectus.
(2) The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Fund. For Class A, B & C,
Total operating expenses are expected to be 7.73%, 8.38% and 5.03%,
respectively, and Other expenses are expected to be 7.38%, 7.93% and 4.58%
respectively, absent the deferral. See "Investment Adviser Compensation."
Because of the 12b-1 fee, long-term shareholders may indirectly pay more than
the equivalent of the maximum permitted front-end sales charge.
24
<PAGE>
EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS
TIME FRAMES INDICATED. THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE
AVERAGE ANNUAL RETURN IS 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A...................................................................... $ 60 $ 87 $ 115 $ 197
CLASS B
Assuming redemption at end of time period(1)................................. $ 69 $ 87 $ 116 $ 185
Assuming no redemption....................................................... $ 17 $ 54 $ 92 $ 201
CLASS C
Assuming redemption at end of time period(1)................................. $ 28 $ 54 $ 92 $ 201
Assuming no redemption....................................................... $ 17 $ 54 $ 92 $ 201
</TABLE>
- ------------------------
This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.
(1) Assumes deduction of a contingent deferred sales charge and automatic
exchange of Class B shares for Class A shares seven years after purchase.
25
<PAGE>
HIGH YIELD BOND FUND
INVESTMENT OBJECTIVE
High level of current income and capital growth.
INVESTMENT STRATEGY
The Fund invests primarily in lower rated debt securities commonly referred
to as "junk bonds." When evaluating any bond, the Investment Adviser selects
bonds based upon a combination of both "top down" analysis of economic trends
and "bottom-up" analysis that evaluates the financial condition and
competitiveness of individual companies. It also analyzes credit quality, the
yield to maturity of the security, and the effect the security will have on the
average yield to maturity of the Fund. The Investment Adviser believes it can
lower the risks of investing in lower rated debt through these professional
management techniques and through diversification.
PRINCIPAL INVESTMENTS
Under normal conditions, the Fund allocates at least 65% of its total assets
in lower rated debt securities and convertible securities rated below investment
grade by a nationally recognized statistical rating agency, or of comparable
quality if unrated. There is no limit on either the portfolio maturity or the
acceptable rating of securities bought by the Fund. For a description of these
ratings, see "Corporate Bond Ratings" beginning on page 45. Securities may bear
rates that are fixed, variable or floating. The Fund may invest up to 35% of its
total assets in equity securities of U.S. and foreign companies. The Fund is not
restricted to investments in companies of any particular size, but currently
intends to invest principally in companies with market capitalization above $100
million at the time of purchase. The Fund may also use options, futures
contracts and interest rate and currency swaps as hedging techniques.
PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 37.
RISK FACTORS
As with any fund that invests primarily in bonds, the value of the Fund's
investments fluctuates in response to movements in interest rates. When rates go
up, debt security prices fall; when rates go down, debt security prices rise.
Lower rated securities, while usually offering higher yields, generally have
more risk and volatility than higher rated securities because of reduced
creditworthiness and greater chance of default. Periods of high interest rates
and recession may adversely affect the issuer's ability to pay interest and
principal. To the extent the Fund invests in stocks, the value of those
investments will fluctuate day to day with movements in the stock market as well
as in response to the activities of individual companies. The companies in which
the Fund invests may be more subject to volatile market movements than
securities of larger, more established companies. To the extent the Fund invests
in foreign securities, performance also depends on changes in foreign currency
values, different political and regulatory environments, and overall economic
factors in the countries where the Fund invests. For further explanation, see
"Risk Factors and Special Considerations" starting on page 41.
INVESTOR EXPENSES--CLASS A, B AND C SHARES
Investors pay various expenses, either directly or indirectly. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------- ----------- -----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge on purchases (as a percentage of offering price)................ 5.25% None None
Sales charge on reinvested dividends................................................. None None None
Deferred sales charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower)...................................................... None(1) 5.00% 1.00%
Redemption fee....................................................................... None None None
Exchange fee......................................................................... None None None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS: (after expense
deferral)
Management fees...................................................................... 0.75% 0.75% 0.75%
12b-1 expenses....................................................................... 0.25% 0.75% 0.75%
Other expenses (after expense deferral)(2)........................................... 0.60% 0.75% 0.75%
Total operating expenses (after expense deferral)(2)................................. 1.60% 2.25% 2.25%
</TABLE>
- ------------------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase. See "Contingent Deferred Sales Charge" in this
prospectus.
(2) The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Fund. For Class A, B & C,
Total operating expenses are expected to be 2.25%, 2.85% and 2.85%,
respectively, and Other expenses are expected to be 1.50%, 2.10% and 2.10%
respectively, absent the deferral. See "Investment Adviser Compensation."
Because of the 12b-1 fee, long-term shareholders may indirectly pay more than
the equivalent of the maximum permitted front-end sales charge.
26
<PAGE>
EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS
TIME FRAMES INDICATED. THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE
AVERAGE ANNUAL RETURN IS 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
----------- -----------
<S> <C> <C>
CLASS A.......................................................................................... $ 68 $ 100
CLASS B
Assuming redemption at end of time period(1)..................................................... $ 74 $ 103
Assuming no redemption........................................................................... $ 23 $ 70
CLASS C
Assuming redemption at end of time period(1)..................................................... $ 33 $ 70
Assuming no redemption........................................................................... $ 23 $ 70
</TABLE>
- ------------------------
This example is for comparison purposes only and is not a representation of the
Fund's actual expenses and returns, either past or future.
(1) Assumes deduction of a contingent deferred sales charge.
27
<PAGE>
MONEY MARKET FUND
INVESTMENT OBJECTIVE
High current income consistent with preservation of capital and maintenance
of liquidity.
INVESTMENT STRATEGY
The Fund's Investment Adviser invests only in securities that mature in 397
days or less, and are rated in one of the two highest short term rating
categories by one or more nationally recognized statistical rating organization,
or in comparable unrated securities. The Fund maintains a dollar weighted
portfolio average maturity of 90 days or less.
PRINCIPAL INVESTMENTS
The Fund invests in high-quality, short-term U.S. dollar denominated money
market instruments that comply with the credit quality and diversification
requirements of Rule 2a7 under the Investment Company Act, which regulates money
market funds. These include obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; certificates of deposit, time
deposits and bankers' acceptances of certain domestic and foreign banks and
domestic savings and loan associations; commercial paper and other short term
corporate obligations; and repurchase agreements. Certain of the acceptable debt
instruments may be credit enhanced by a guaranty, letter of credit, or
insurance.
PORTFOLIO MANAGEMENT
The Investment Adviser emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete list of the portfolio team,
see "Portfolio Teams" on page 37.
RISK FACTORS
Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund. As with any
money market fund, there is the risk that the issuers or guarantors of
securities owned by the Fund will default on the payment of principal or
interest or the obligation to repurchase securities from the Fund. Neither the
Fund nor the portfolio is insured or guaranteed by the U.S. Government. For
further explanation, see "Risk Factors and Special Considerations" starting on
page 41.
INVESTOR EXPENSES--CLASS A, B AND C SHARES
Investors pay various expenses, either directly or indirectly. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES: PORTFOLIO
-----------
<S> <C>
Maximum sales charge on purchases None
(as a percentage of offering price)...................................................................
Sales charge on reinvested dividends.................................................................... None
Deferred sales charge (as a percentage of original purchase price or redemption proceeds, whichever is None(1)
lower)................................................................................................
Redemption fee.......................................................................................... None
Exchange fee............................................................................................ None
ANNUAL FUND OPERATING EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS:
(after expense deferral)
Management fees......................................................................................... 0.00%
12b-1 expenses.......................................................................................... 0.15%
Other expenses (after expense deferral) (3)............................................................. 0.30%
Total operating expenses (after expense deferral) (3)................................................... 0.45%
</TABLE>
- ------------------------
(1) Shareholders who buy $1 million in shares without paying a sales charge may
be charged a contingent deferred sales charge of 1% on redemptions made
within one year of purchase. See "Contingent Deferred Sales Charge" in this
prospectus.
(2) The management fee has been reduced to reflect waivers of the management
fee. The maximum management fee is .25%.
(3) The Investment Adviser has agreed to waive or defer its management fees and
to absorb other operating expenses payable by the Fund. Total operating
expenses would have been 1.73%, and Other expenses would have been 1.58%,
absent the deferral. See "Investment Adviser Compensation."
28
<PAGE>
EXAMPLE:
THE TABLE SHOWS WHAT YOU WOULD PAY IF YOU INVESTED $1,000 OVER THE VARIOUS
TIME FRAMES INDICATED. THE EXAMPLE ASSUMES YOU REINVEST ALL DIVIDENDS AND THE
AVERAGE ANNUAL RETURN IS 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PORTFOLIO.................................................................... $ 3 $ 10 $ 17 $ 39
</TABLE>
This example is for comparison purposes only and is not a representation of
the Fund's actual expenses and returns, either past or future.
FINANCIAL HIGHLIGHTS
The following schedule provides selected data for a share of capital
stock of the predecessor Money Market Portfolio outstanding throughout each
period indicated. The figures for the period ended September 30, 1997 are
unaudited. The other figures have been audited by Ernst & Young L.L.P. with
respect to the fiscal year ended March 31, 1997, and by another independent
auditor with respect to commencement of operation through March 31, 1995.
Please read in conjunction with the Trust's 1997 Annual Report and 1997-98
Semi-Annual Report.
<TABLE>
<CAPTION>
PORTFOLIO
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4/19/93 4/1/94 4/1/95 4/1/96 4/1/97
TO 3/31/94 TO 3/31/95 TO 3/31/96 TO 3/31/97 TO 9/30/97
----------- ----------- ----------- ----------- -----------
PER SHARE DATA:
Net asset value, beginning of period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income (deficit)........................ 0.01 0.05 0.05 0.05 0.06
Net realized and unrealized gains (losses)
On securities and foreign currency..................... -- -- -- -- (0.03)
Total from investment operations......................... 0.01 0.05 0.05 0.05 0.03
Less distributions:
Dividends from net investment income................... (0.01) (0.05) (0.05) (0.05) (0.03)
Distributions from capital gains....................... -- -- -- -- --
Net asset value, end of period........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN+:........................................... 1.72% 4.58% 5.47% 5.09% 2.61%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period................................ $ 48 $ 2,996 $ 3,129 $ 36,259 $ 39,504
Ratio of expenses to average net assets,
After expense reimbursement++............................ 0.54%* 0.31% 0.45% 0.45% 0.45%
Ratio of expenses to average net assets, before expense
reimbursement+......................................... 323.54%* 2.49% 5.78% 1.73% 1.18%*
Ratio of net investment income (deficit) to average net
assets, after expense reimbursement++.................. 1.85%* 4.60% 5.35% 4.97% 5.15%*
Ratio of net investment income (deficit) to average net
assets, before expense reimbursement++................. (320.85%)* 2.42% 2.77% 4.12% 4.42%*
Portfolio turnover**..................................... N/A N/A N/A N/A
Average commission rate paid**........................... N/A N/A N/A N/A
</TABLE>
- ------------------------
* Annualized
** For corresponding Series of the Master Trust
+ Computations do not reflect the Portfolio's sales charges
++ Includes expenses allocated from Master Trust
29
<PAGE>
DISTRIBUTION OF SHARES
CHOOSING A PORTFOLIO
This prospectus offers A, B & C Classes. Each Class has its own cost
structure, allowing you to choose the one that best meets your requirements.
Your financial representative can help you decide. For actual past expenses of
A, B & C Classes, see the Fund Information earlier in this prospectus.
HOW SALES CHARGES ARE CALCULATED
CLASS A SHARES. Sales charges are as follows:
ALL CLASS A SHARES EXCEPT FULLY DISCRETIONARY
<TABLE>
<CAPTION>
DEALER
COMMISSION
AS A % OF AS A % OF AS % OF
OFFERING YOUR OFFERING
YOUR INVESTMENT PRICE INVESTMENT PRICE
- -------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Up to $49,999....................................................... 5.25% 5.54% 4.50%
$50,000 - $99,999................................................... 4.50% 4.71% 3.75%
$100,000 - $249,999................................................. 3.50% 3.63% 2.75%
$250,000 - $499,999................................................. 2.50% 2.56% 2.00%
$500,000 - $999,999................................................. 2.00% 2.04% 1.60%
$1,000,000 and over................................................. (see below) (see below) (see below)
</TABLE>
FULLY DISCRETIONARY
<TABLE>
<CAPTION>
DEALER
COMMISSION
AS A % OF AS A % OF AS % OF
OFFERING YOUR OFFERING
YOUR INVESTMENT PRICE INVESTMENT PRICE
- -------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Up to $49,999....................................................... 4.75% 4.99% 4.00%
$50,000 - $99,999................................................... 4.00% 4.17% 3.25%
$100,000 - $249,999................................................. 3.50% 3.63% 2.75%
$250,000 - $499,999................................................. 2.50% 2.56% 2.00%
$500,000 - $999,999................................................. 2.00% 2.04% 1.60%
$1,000,000 and over................................................. (see below) (see below) (see below)
</TABLE>
Investments of $1 million or more of Class A Shares have no front-end sales
charge. The Distributor pays a commission of 1% to financial institutions that
initiate purchases of $1 million and more.
CLASS B SHARES
Class B Shares are offered at their net asset value per share, without
any initial sales charge. The Distributor pays a commission of 4% (3% for the
Fully Discretionary Fund) to financial institutions who initiate purchases.
There is a contingent deferred sales charge (CDSC) on shares you sell within
six years of buying them.
CLASS C SHARES
Class C Shares are offered at their net asset value per share without any
initial sales charge. The Distributor pays a 1% commission to financial
institutions that initiate purchases.
MONEY MARKET FUND
Shares of the Money Market Fund are offered at their net asset value per
share without any initial sales charge.
CONTINGENT DEFERRED SALES CHARGE
Shareholders may be subject to a CDSC upon redemption of their shares under
the following conditions:
CLASS A SHARES
Shareholders who buy $1 million in shares without a sales charge and redeem
within one full year of purchase may be charged a CDSC of 1% on shares redeemed.
CLASS B SHARES
<TABLE>
<CAPTION>
CDSC ON SHARES
YEARS AFTER PURCHASE BEING SOLD
- ------------------------------------------------------------------------------------------------- -----------------
<S> <C>
1st year......................................................................................... 5.00%
2nd year......................................................................................... 4.00%
3rd or 4th years................................................................................. 3.00%
5th year......................................................................................... 2.00%
6th year......................................................................................... 1.00%
After 6 years.................................................................................... none
</TABLE>
CLASS C SHARES
Shareholders who redeem Class C Shares within one full year of the purchase
date may be charged a CDSC of 1%.
MONEY MARKET FUND
A CDSC may be charged on redemptions of shares purchased through an
exchange of Class B or C Shares of an investor who did not own the Class B
Shares for six full years or the Class C Shares for one full year, whichever
is applicable.
There is no CDSC imposed on shares acquired through reinvestment of
dividends or capital gains.
The CDSC will be imposed on the lesser of the original purchase price or
the net asset value of the redeemed shares at the time of redemption. CDSC
calculations are based on the numbers of shares involved, not the value of
your account. To keep your CDSC as low as possible, each time you place a
request to sell shares we will first sell any shares in your account that
represent reinvested dividends/capital gains and then shares that satisfy the
holding period. If there are not enough of these to meet your request, we
will sell your shares on a first in, first out basis. Your financial
institution may elect to waive some or all of the payment thereby reducing
the otherwise applicable CDSC.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES.
There are several ways you can combine multiple purchases of shares of Class
A Shares to take advantage of the breakpoints in the sales charge schedule.
These can be combined in any manner:
- - ACCUMULATION PRIVILEGE -- lets you add the value of Class A Shares you and
your immediate family already own to the amount of your next investment for
purposes of calculating the sales charge.
30
<PAGE>
- - LETTER OF INTENT -- lets you purchase Class A Shares over a 13 month period
and receive the same sales charge as if all shares had been purchased at
once.
- - COMBINATION PRIVILEGE -- lets you combine Class A Shares for purposes of
reducing the sales charge.
TO UTILIZE: COMPLETE THE APPROPRIATE SECTION ON YOUR APPLICATION, OR CONTACT
YOUR FINANCIAL REPRESENTATIVE OR NICHOLAS-APPLEGATE MUTUAL FUNDS TO ADD THESE
OPTIONS TO AN EXISTING ACCOUNT.
CDSC WAIVERS. In general, the CDSC may be waived on shares you sell for the
following reasons:
- - make payments through certain systematic withdrawal plans
- - qualifying distributions from qualified retirement plans and other employee
benefit plans
- - distributions from custodial accounts under section 403(b)(7) of the Internal
Revenue Code as well as IRAs due to death, disability or attainment of age
59 1/2
TO UTILIZE: CONTACT YOUR FINANCIAL REPRESENTATIVE OR NICHOLAS-APPLEGATE
MUTUAL FUNDS, OR CONSULT THE SAI (SEE THE BACK COVER OF THIS PROSPECTUS).
REINSTATEMENT PRIVILEGE. If you sell Class A Shares, you may invest some or
all of the proceeds in the same class within 90 days without a sales charge. If
you paid a CDSC when you sold your shares, you will be credited with the amount
of the CDSC. All accounts involved must have the same registration.
TO UTILIZE: CONTACT YOUR FINANCIAL REPRESENTATIVE OR NICHOLAS-APPLEGATE
MUTUAL FUNDS.
NET ASSET VALUE PURCHASES. Class A Shares may be sold at net asset value
to:
(1) current or retired directors, trustees, partners, officers and employees
of the Trust, the Distributor, the Investment Adviser and its general partner,
certain family members of the above persons, and trusts or plans primarily for
such persons;
(2) current or retired registered representatives or full time employees and
their spouses and minor children and plans of such persons;
(3) former limited partners and participants of certain investment
partnerships and pooled trusts previously managed by the Investment Adviser;
(4) investors who exchange their shares from an unaffiliated investment
company which has a sales charge, so long as shares are purchased within 60 days
of the redemption;
(5) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with 50 or more eligible employees;
(6) Investment Advisers and financial planners who place trades for their
own accounts or the accounts of their clients either individually or through a
master account and who charge a management, consulting or other fee for their
services;
(7) employee sponsored benefit plans in connection with purchases of Class A
Shares made as a result of participant directed exchanges between options in
such a plan;
(8) "wrap accounts" for the benefit of clients of broker dealers, financial
institutions or financial planners having sales or service agreements with the
distributor or another broker-dealer or financial institution with respect to
sales of Class A Shares; and
(9) such other persons as are determined by the Board of Trustees (or by the
distributor pursuant to guidelines established by the board) to have acquired
shares under circumstances not involving any sales expense to the trust or the
distributor.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES
Each Fund has adopted a distribution plan in accordance with Rule 12b-1
under the Investment Company Act. Class B and C Shares may pay a fee to the
Distributor in an amount computed at an annual rate of .75% of the average daily
net assets to finance any activity which is principally intended to result in
the sale of shares. Class A Shares may pay the Distributor a fee equal to .25%
of the average daily net assets, and the Money Market Fund may pay up to .15% of
the average daily net assets. The schedule of such fees and the basis upon which
such fees will be paid will be determined from time to time by the distributor.
Each of the Funds has entered into a Shareholder Services Agreement with the
Distributor under which each Fund will reimburse the Distributor up to .25% of
the average daily assets of each of the Portfolios to pay financial institutions
for certain personal services for shareholders and for the maintenance of
shareholder accounts.
In addition to the payments described above, the distributor may also pay
additional compensation to financial institutions in connection with selling
shares of the Funds. Compensation may include financial assistance for
conferences, shareholder services, computer software, training programs or
promotional activities. The distributor offers additional compensation to
financial institutions that the distributor expects will sell a significant
amount of shares. Financial institutions may obtain more information by calling
(800) 551-8045.
THE DISTRIBUTOR OF THE TRUST'S SHARES
Nicholas-Applegate Securities
600 West Broadway, 30th Floor
San Diego, California 92101
31
<PAGE>
SIMPLIFIED ACCOUNT INFORMATION
OPENING AN ACCOUNT
<TABLE>
<CAPTION>
REGULAR INVESTMENT RETIREMENT
FOR THIS TYPE OF FOR A MINOR AUTOMATIC IRA, ROLLOVER,
ACCOUNT REGULAR (UGMA/UTMA) INVESTMENT SEP, ETC.
- --------------------- --------------------- --------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
This is the minimum $2,000 $250 $50 $250
subsequent investment
Use this type of New Account Form (Non-Retirement) IRA Application
application
Before completing the Each Fund offers a variety of features, which are described in the "Your Account"
application section of this prospectus. Please read this section before completing the application.
Completing the If you need assistance, contact your financial representative, or call us at (800)
application 551-8043.
If you are sending Mail application and check, payable to: NICHOLAS-APPLEGATE MUTUAL FUNDS, PO BOX 8326,
money by CHECK BOSTON, MA 02266-8326. The Trust WILL NOT accept third-party checks.
If you are sending Please read the bank wire or ACH section under the "Buying Shares" section below. You
money by BANK WIRE or will need an account number with the Trust by sending a completed application to:
ACH NICHOLAS-APPLEGATE MUTUAL FUNDS, PO BOX 8326, BOSTON, MA 02266-8326. To receive your
account number, call either your financial representative or us at (800) 551-8043.
</TABLE>
BUYING SHARES
<TABLE>
<CAPTION>
REGULAR INVESTMENT RETIREMENT
FOR THIS TYPE OF FOR A MINOR AUTOMATIC IRA, ROLLOVER,
ACCOUNT REGULAR (UGMA/UTMA) INVESTMENT SEP, ETC.
- --------------------- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
This is the minimum $100 $100 $50 $100
subsequent investment
The price you will The Trust is open on days that the New York Stock Exchange is open. All transactions
receive received in good order before the market closes receive that day's price.
If you are sending Mail application and check, payable to: NICHOLAS-APPLEGATE MUTUAL FUNDS, PO BOX 8326,
money by CHECK BOSTON, MA 02266-8326. The Trust WILL NOT accept third-party checks.
If you are sending Instruct your bank to wire the amount you wish to invest to:
money by BANK WIRE STATE STREET BANK & TRUST CO.--ABA #011000028
DDA #9904-645-0
STATE STREET BOS, ATTN: MUTUAL FUNDS
CREDIT: NICHOLAS-APPLEGATE [FUND NAME], [SHARE CLASS], [YOUR NAME], [ACCOUNT NAME OR NUMBER]
If you are sending Call your bank to ensure (1) that your bank supports ACH, and (2) this feature is active
money by ACH on your bank account. To establish this option, either complete the appropriate sections
when opening an account, or contact your financial representative, or call us at (800)
551-8043 for further information. To initiate an ACH purchase, call the Trust at
(800)551-8043.
</TABLE>
32
<PAGE>
SELLING OR REDEEMING SHARES
<TABLE>
<CAPTION>
IN WRITING BY PHONE
------------------------------------ ------------------------------------
<S> <C> <C>
Selling shares by phone is a service
option which must be established on
your account prior to making a
Certain requests may require a request. See the "Your Account"
SIGNATURE GUARANTEE. See that section, or contact your financial
section below for further representative or call us at (800)
information. You may sell up to the 551-8043 for further information.
Things you should know full account value, less any The maximum amount which may be
applicable sales charge. The Trust requested by phone, regardless of
may have additional requirements for account size, is $50,000. Amounts
redeeming shares. Please call us for greater than that must be requested
more information. in writing. If you wish to receive
your monies by bank wire, the
minimum request is $5,000.
If you purchased shares through a financial representative, or plan
administrator/sponsor, you should call them regarding the most efficient
way to sell shares. If you bought shares recently by check, they may not
be available to be sold for up to 15 calendar days from the date of
purchase. Sales by a corporation, trust or fiduciary may have special
requirements. Please call your financial representative, a plan
administrator/sponsor or us for further information.
The Trust is open on days that the New York Stock Exchange is open. All
The price you will receive transactions received in good order before the market closes receive that
day's price.
Please put your request in writing,
including: the name of the account
owners, account number and the Fund
and share Class you are redeeming Either contact your financial
from, the share or dollar amount you representative or call us at (800)
If you want to receive your monies wish to sell, signed by all account 551-8043. The proceeds will be sent
by CHECK owners. Mail this request to: to the existing bank wire address
NICHOLAS-APPLEGATE MUTUAL FUNDS, listed on the account.
PO BOX 8326, BOSTON, MA 02266-8326.
The check will be sent to the existing
check address listed on the account.
Please put your request in writing,
including: the name of the account
owners, account number and the Fund
and share Class you are redeeming
from, the share or dollar amount you Either contact your financial
If you want to receive your monies wish to sell, signed by all account representative or call us at (800)
by BANK WIRE owners. Mail this request to: 551-8043. The proceeds will be sent
NICHOLAS-APPLEGATE MUTUAL FUNDS, to the existing bank wire address
PO BOX 8326, BOSTON, MA 02266-8326. listed on the account.
The check will be sent to the existing
bank wire address listed on the
account.
Either contact your financial
representative or call us at (800)
551-8043. The proceeds will be sent
If you want to receive your monies Please call us at (800) 551-8043. to the existing ACH instructions on
by ACH the account and will generally be
received at your bank two business
days after your request is received.
</TABLE>
33
<PAGE>
SIMPLIFIED ACCOUNT INFORMATION
<TABLE>
SIGNATURE GUARANTEES
-------------------------------------------------------------------------------------------
<S> <C>
A definition A signature guarantee is required of a financial institution to verify the authenticity
of an individual's signature. It can usually be obtained from
a broker, commercial or savings bank, or credit union.
When you need one A signature guarantee is needed when making a written request for the following reasons:
1. When selling more than $50,000 worth of shares;
2. When you want a check or bank wire sent to a name or address that is not
currently listed on the account;
3. To sell shares from an account controlled by a corporation, partnership, trust
or fiduciary; or
4. If your address was changed within the last 60 days.
</TABLE>
EXCHANGING SHARES
<TABLE>
<CAPTION>
REGULAR INVESTMENT RETIREMENT
FOR A MINOR AUTOMATIC IRA, ROLLOVER,
FOR THIS TYPE OF ACCOUNT REGULAR (UGMA/UTMA) INVESTMENT SEP, ETC.
- -------------------------- -------------------------- --------------------------- ------------- -------------------
<S> <C> <C> <C> <C>
This is the minimum $2,000 $250 $50 $250
exchange amount to open
a new account
The price you will receive The Trust is generally open on days that the New York Stock Exchange is open.
All transactions received in good order before the market closes
receive that day's price.
Things you should know The exchange must be to the Class A, B or C Shares of another Fund (depending upon whether
the shares being exchanged are Class A, B or C Shares) or the Money Market Fund and to an
account with the same registration.
If opening an account as part of an exchange, you must obtain and read the prospectus. If
you intend to keep money in the Fund you are exchanging from, make sure that you leave an
amount equal to or greater than the Fund's minimum account size (see the "Opening an
Account" section).
To protect other investors, the Trust may limit the number of exchanges you can make.
How to request an exchange Either contact your financial representative, or call the Trust at (800) 551-8043.
by PHONE The Trust will accept a request by phone if this feature was previously established on your
account.
See the "Your Account" section for further information.
How to request an exchange Please put your exchange request in writing, including: the name on the account, the name
by MAIL of the Fund and the account number you are exchanging from, the shares or dollar amount you
wish to exchange, and the Fund you wish to exchange to. Mail this request to: PO BOX 8326,
BOSTON, MA 02266-8326.
</TABLE>
34
<PAGE>
YOUR ACCOUNT
TRANSACTION POLICIES
VALUATION OF SHARES. The net asset value per share (NAV) for the Fund is
determined each business day at the close of regular trading on the New York
Stock Exchange (usually 4 p.m. Eastern Time) by dividing the Class' net assets
by the number of its shares outstanding.
BUY AND SELL PRICES. When you buy shares, you pay the NAV, as described
earlier. When you sell shares, you receive the NAV. Your financial institution
may charge you a fee to execute orders on your behalf.
EXECUTION OF REQUESTS. Each Fund is open on the days the New York Stock
Exchange is open, usually Monday-Friday. Buy and sell requests are executed at
the NAV next calculated after your request is received in good order by the
transfer agent or another agent designated by the trust.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider sending your request in writing. Each Fund reserves
the right to reject any purchase or to suspend or modify the continuous offering
of its shares. Your financial representative is responsible for forwarding
payment promptly to the transfer agent. The Trust reserves the right to cancel
any buy request if payment is not received within three days.
In unusual circumstances, any Fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.
TELEPHONE TRANSACTIONS. For your protection, telephone requests may be
recorded in order to verify their accuracy. In addition, the Trust will take
measures to verify the identity of the caller, such as asking for name, account
number, Social Security or taxpayer ID number and other relevant information. If
these measures are not taken, your Fund may be responsible for any losses that
may occur in your account due to an unauthorized telephone call.
EXCHANGES. You may exchange shares of any Class for shares of the same
Class (A, B, or C) of any other Fund, generally without paying any additional
sales charges. You may also exchange shares of any Fund for shares of the Money
Market Portfolio. Class C shares purchased through an exchange from a like Class
will continue to age from the original date and will retain the same CDSC rate
as they had before the exchange. The holding period of Money Market Fund shares
purchased through an exchange from Class B or C shares is excluded from the
calculation of the holding period on Class B and C shares.
To protect the interests of other investors in a Fund, the trust may cancel
the exchange privileges of any parties that, in the opinion of the Investment
Adviser, are using market timing strategies that adversely affect the Fund.
Guidelines for exchanges are available from the distributor upon request. A Fund
may also refuse any exchange order.
CERTIFICATED SHARES. Most shares are electronically recorded. If you wish
to have certificates for your shares, please write to the transfer agent.
Certificated shares can only be sold by returning the certificates to the
transfer agent, along with a letter of instruction or a stock power and a
signature guarantee.
SALES IN ADVANCE OF PURCHASE PAYMENTS. When you place a request to sell
shares for which the purchase money has not yet been collected, the request will
be executed in a timely fashion, but the Fund will not release the proceeds to
you until your purchase payment clears. This may take up to fifteen calendar
days after the purchase.
SHAREHOLDER INQUIRIES. Shareholder inquiries should be addressed to the
Trust, c/o the Trust's transfer agent,
State Street Bank and Trust Company
Attention: Nicholas-Applegate Mutual Funds
P.O. Box 8326
Boston, Ma 02266-8326
Telephone inquiries can be made by calling 1-800-551-8043 or, from outside
the U.S., 1-617-774-5000 (collect).
FEATURES AND ACCOUNT POLICIES
The services referred to in this section may be terminated or modified at
any time upon 60 days' written notice to shareholders. Shareholders seeking to
add to, change or cancel their selection of available services should contact
the transfer agent at the address and telephone number provided above.
RETIREMENT PLANS. You may invest in each Fund through various retirement
plans, including IRAs, Simplified Employee Plan (SEP) IRAs, 403(b) plans, 457
plans, and all qualified retirement plans. For further information about any of
the plans, agreements, applications and annual fees, contact the Distributor,
your financial representative or plan sponsor. To determine which retirement
plan is appropriate for you, consult your tax adviser.
ACCOUNT STATEMENTS. In general, you will receive account statements as
follows:
- After every transaction that affects your account balance.
- After any changes of name or address of the registered owner(s).
- In all other circumstances, every quarter.
Every year you will also receive an applicable tax information statement,
mailed by January 31.
35
<PAGE>
YOUR ACCOUNT
DIVIDENDS. The Funds generally distribute most or all of their net earnings
in the form of dividends. Each Fund pays dividends as follows:
<TABLE>
<CAPTION>
ANNUALLY QUARTERLY MONTHLY
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
INTERNATIONAL CORE GROWTH BALANCED GROWTH FULLY DISCRETIONARY
WORLDWIDE GROWTH INCOME & GROWTH HIGH YIELD BOND
INTERNATIONAL SMALL CAP MONEY MARKET
EMERGING COUNTRIES
LARGE CAP GROWTH
CORE GROWTH
VALUE
EMERGING GROWTH
</TABLE>
DIVIDEND REINVESTMENTS. If you choose this option, or if you do not
indicate any choice, your dividends will be reinvested on the ex-dividend date.
Alternatively, you can choose to have a check for your dividends mailed to you.
Interest will not accrue or be paid on uncashed dividend checks.
SHAREHOLDER SERVICES. The Investment Adviser may make payments from its own
resources to brokers, consultants and financial institutions for performing
certain services for shareholders and for the maintenance of shareholder
accounts.
TAXABILITY OF DIVIDENDS. As long as a Fund meets the requirements for being
a tax-qualified regulated investment company, which each Fund has in the past
and intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.
Consequently, dividends you receive from a Fund whether reinvested or taken
as cash, are generally considered taxable. Dividends from a Fund's long-term
capital gains are taxable as capital gains; dividends from other sources are
generally taxable as ordinary income.
Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends received
deduction for a portion of certain dividends they receive.
The tax information statement that is mailed to you details your dividends
and their federal tax category, although you should verify your tax liability
with your tax professional.
TAXABILITY OF TRANSACTIONS. Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
SMALL ACCOUNTS (NON-RETIREMENT ONLY). If you draw down a non-retirement
account so that its total value is less than the Fund minimum, you may be asked
to purchase more shares within 60 days. If you do not take action, the Fund may
close out your account and mail you the proceeds. Your account will not be
closed if its drop in value is due to Fund performance.
AUTOMATIC WITHDRAWALS. You may make automatic withdrawals from a Fund of
$50 or more on a monthly or quarterly basis if you have an account of $5,000 or
more in the Fund. Withdrawal proceeds will normally be received prior to the end
of the month or quarter. See the account application for further information.
AUTOMATIC INVESTMENT PLAN. You may make regular monthly or quarterly
investments in Class A, B and C Shares of each Fund through automatic
withdrawals of specified amounts from your bank account once an automatic
investment plan is established. See the account application for further details
about this service or call the Transfer Agent at 1-800-551-8043.
CROSS-REINVESTMENT. You may cross-reinvest dividends or dividends and
capital gains distributions paid by one Fund into Class A, B and C Shares of
another Fund, subject to conditions outlined in the Statement of Additional
Information and the applicable provisions of the qualified retirement plan.
CONVERSION OF CLASS B FUND SHARES. Class B shares in a Fund will
automatically be exchanged for Class A shares of such Fund seven years after
purchase. Exchanges will be made at relative net asset value free of any charges
and will not constitute a taxable event for income tax purposes. The amount of
time shares are held in the Money Market Fund will be excluded from the
calculation of the holding period.
36
<PAGE>
ORGANIZATION AND MANAGEMENT
INVESTMENT ADVISER COMPENSATION
Each Fund pays the Investment Adviser a fee pursuant to an investment
advisory agreement. The Emerging Countries Fund pays an advisory fee at the
annual rate of 1.25% of the Fund's net assets. The Worldwide, International Core
Growth and International Small Cap Funds each pay an advisory fee at the annual
rate of 1.00% on the first $500 million of each Fund's net assets, .90% on the
next 500 million of each Fund's net assets, and .85% on net assets on each Fund
in excess of $1 billion. The Fully Discretionary Fund pays at the annual rate of
0.45% of the first $500 million of the Fund's average net assets, 0.40% of the
next $250 million of net assets, and 0.35% of net assets in excess of $750
million. The High Yield Bond Fund pays at the annual rate of 0.60% of the Fund's
net assets. The Emerging Growth Fund pays at the annual rate of 1.00% of the
Fund's net assets. The Large Cap Growth, Core Growth, Value, Income & Growth,
and Balanced Growth Funds each pay at the annual rate of 0.75% of the first $500
million of the Fund's net assets, 0.675% of the next $500 million of net assets,
and 0.65% of net assets in excess of $1 billion.
The Investment Adviser has agreed to waive or defer its management fees
payable by the Funds, and to absorb other operating expenses of the Funds and
the Portfolios, so that the expenses for the Portfolio will not exceed the
following expense ratios on an annual basis through March 31, 1998: Worldwide
Growth Class A, B & C--1.85%, 2.50%, and 2.50%; International Small Cap Growth
Class A, B & C-- 1.95%, 2.60% and 2.60%; Emerging Countries--Class A, B &
C--2.25%, 2.90% and 2.90%; International Core Growth Class A, B & C--1.95%,
2.60% and 2.60%; Income & Growth, Balanced Growth, Large Cap, Value, Core Growth
and High Yield Bond Class A, B & C--1.60%, 2.25% and 2.25%; Emerging Growth
Class A, B & C -1.95%, 2.60% and 2.60%; Fully Discretionary Class A, B &
C--0.95%, 1.35% and 1.35%; and Money Market Fund--1.10%. Each Portfolio will
reimburse the Investment Adviser for fees deferred or other expenses paid
pursuant to this Agreement in later years in which operating expenses for the
Fund are less than the percentage limitation set forth above for any such year.
ADMINISTRATOR COMPENSATION
The Funds pay administrative fees for administrative personnel and services
(including certain legal and financial reporting services). Each Fund pays
Nicholas-Applegate Capital Management an annual fee of .10% of net assets. Each
Fund pays Investment Company Administration Corporation (ICAC) an annual fee at
an annual rate ranging from .05% to .01% of average net assets, with a minimum
of $40,000 per Fund.
DISTRIBUTOR:
Nicholas-Applegate Securities
600 West Broadway, 30th Floor
San Diego, California 92101
(800) 551-8045
PORTFOLIO TRADES
The Investment Adviser is responsible for the Funds' portfolio transactions.
In placing portfolio trades, the Investment Adviser may use brokerage firms that
sell shares of the Fund or that provide research services to the Fund, but only
when the Investment Adviser believes no other firm offers a better combination
of quality execution (i.e. timeliness and completeness) and favorable price. The
Investment Adviser expects high annual portfolio turnover up to 200%. This is
generally higher than other Funds and will result in the Funds incurring higher
brokerage costs.
INVESTMENT OBJECTIVE
Each Fund's investment objective is fundamental and may only be changed with
shareholder approval. The other fundamental limitations are described in the
Statement of Additional Information. All other changes may be made by the Board
of Trustees without shareholder approval.
DIVERSIFICATION
All the Funds are diversified.
PRIOR MASTER-FEEDER STRUCTURE
Prior to Febuary 27, 1998, the various classes of each of the Funds were
separate Portfolios of the Trust, and invested all of their assets in
corresponding portfolios of Nicholas-Applegate Investment Trust (the "Master
Trust"). In this "master-feeder" structure, the Investment Adviser served as the
adviser to the Master Trust, and the Trust had no separate adviser. The
"master-feeder" structure was terminated, with the approval of the shareholders
of the Trust, in order to achieve certain economies for the Trust.
37
<PAGE>
ORGANIZATION AND MANAGEMENT
PORTFOLIO TEAMS
EQUITY MANAGEMENT--INTERNATIONAL/GLOBAL
CATHERINE SOMHEGYI, PARTNER
Chief Investment Officer--Global Equity Management
Joined firm in 1987; prior investment management experience with Professional
Asset Securities, Inc. and Pacific Century Advisers
M.B.A. and B.S.--University of Southern California
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH,
INTERNATIONAL SMALL CAP GROWTH, EMERGING COUNTRIES,
AND EMERGING GROWTH
LARRY SPEIDELL, PARTNER, CFA
Director of Global/Systematic Portfolio Management and Research
Joined firm in 1994; 23 years prior investment management experience with
Batterymarch Financial Management and Putnam Management Company
M.B.A.--Harvard University; B.E.--Yale University
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP GROWTH,
EMERGING COUNTRIES, AND VALUE
JOHN J. KANE, PARTNER
Portfolio Manager--U.S. Systematic
Joined firm in 1994; 25 years prior investment management/economics
experience with ARCO Investment Management Company and General Electric
Company
M.A. and B.A.--Columbia University; M.B.A.--University of California,
Los Angeles
WORLDWIDE GROWTH AND VALUE
PEDRO V. MARCAL, PARTNER
Portfolio Manager--Emerging Countries
Joined firm in 1994; 5 years prior investment management experience with A.B.
Laffer, V.A. Canto & Associates, and A-Mark Precious Metals
B.A.--University of California, San Diego
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP, AND
EMERGING COUNTRIES
LORETTA J. MORRIS, PARTNER
Portfolio Manager--International
Joined firm in 1990; 10 years prior investment manage ment experience with
Collins Associates
Attended California State University, Long Beach; CFA Level II candidate
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, AND INTERNATIONAL SMALL CAP GROWTH
AARON HARRIS
Portfolio Manager--Emerging Countries
Joined firm in 1995; 1 year prior investment management experience at
Chemical Bank
B.A.--Princeton University
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP, AND
EMERGING COUNTRIES
ESWAR MENON
Portfolio Manager--Emerging Countries
Joined firm in 1995; 5 years prior investment management experience with
Koeneman Capital Management and Integrated Device Technology
M.B.A., summa cum laude--University of Chicago; M.S.--University of California,
Santa Barbara; B.S.--Indian Institute of Technology, Madras
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP, AND
EMERGING COUNTRIES
ALEX MUROMCEW
Portfolio Manager--International
Joined firm in 1996; 6 years prior investment management experience with
Jardine Fleming Securities (Japan); Emerging Markets Investors Corporation;
Teton Partners LP
M.B.A.--Stanford University; B.A.--Dartmouth College
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, AND INTERNATIONAL SMALL CAP
GROWTH
ERNESTO RAMOS, PH.D.
Portfolio Manager--International
Joined firm in 1994; 14 years prior investment management and quantitative
research experience with Batterymarch Financial Management; Bolt Beranek &
Newman Inc.; and Harvard University
Ph.D.--Harvard University; B.S.--Massachusetts Institute of Technology
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP GROWTH,
AND EMERGING COUNTRIES
MELISA A. GRIGOLITE
Portfolio Manager
Joined firm in 1991; prior experience with SGPA Architecture and Planning
M.S.--San Diego State University; B.S. Southwest Missouri State University
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, AND INTERNATIONAL SMALL CAP
38
<PAGE>
JOHN TRIBOLET
Investment Analyst
Joined firm in 1997; 5 years prior experience with Kemper Securities, Inc.
and PaineWebber
M.B.A.--University of Chicago; B.A.--Columbia University
WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, AND INTERNATIONAL SMALL CAP
JESSICA HILINSKI
Assistant Portfolio Manager
Joined firm in 1996; 3 years prior experience in Eaton Vance Management and
Union Capital Advisors
Attended University of Pennsylvania
EMERGING COUNTRIES
AYLIN UCKUNKAYA
Investment Analyst
Joined firm in 1997; 4 years investment management experience with Global
Securities
B.A. Istanbul University
EMERGING COUNTRIES
JON BORCHARDT
Portfolio Manager
Joined firm in 1994; 5 years prior investment management experience with
Union Bank
B.S. University of San Francisco
EMERGING COUNTRIES
EQUITY MANAGEMENT--U.S.
JOHN C. MARSHALL, JR., PARTNER
Chief Investment Officer--Institutional Equity Management
Joined firm in 1989; 8 years prior investment management experience with
Pacific Century Advisers; San Diego Trust & Savings Bank; Howard, Weill,
Labouisse, Fredrichs Inc.
M.B.A. and B.B.A.--Southern Methodist University
CORE GROWTH AND LARGE CAP GROWTH
CATHERINE SOMHEGYI, PARTNER
Chief Investment Officer--Global Equity Management
Joined firm in 1987; prior investment management experience with Professional
Asset Securities, Inc. and Pacific Century Advisers
M.B.A. and B.S.--University of Southern California
EMERGING GROWTH, BALANCED GROWTH, AND INCOME & GROWTH
THOMAS BLEAKLEY, PARTNER
Portfolio Manager
Joined firm in 1995; 3 years prior investment management experience with
Twentieth Century Investors and Dell Computer Corporation
M.B.A.-- University of Texas--Boston University
EMERGING GROWTH
ANDREW B. GALLAGHER, PARTNER
Portfolio Manager
Joined firm in 1992; 7 years prior investment management experience with
Pacific Century Advisors and Sentinel Asset Management
M.B.A.--San Diego State University; B.A.--University of California, Irvine
CORE GROWTH AND LARGE CAP GROWTH
SANDRA DURN
Portfolio Manager
Joined firm in 1994; prior experience at Science Solutions, Inc. and San
Diego State University Economics Department (instructor)
M.A.--San Diego State University; B.A.--University of Maryland
INCOME & GROWTH
RONALD J. KRYSTYNIAK CFA
Portfolio Manager
Joined firm in 1996; 7 years prior investment management experience with
Pilgrim Baxter & Associates and Peterson Consulting & Company
B.S.-- Syracuse University
EMERGING GROWTH
MAREN LINDSTROM
Portfolio Manager
Joined firm in 1994; 5 years prior investment management experience with
Societe Generale; Banque D'Orsay; and Prudential Asset Management
M.B.A.-- University of California, Los Angeles; B.A.--University of Michigan
CORE GROWTH AND INCOME & GROWTH
JOHN C. MCCRAW
Portfolio Manager
Joined firm in 1992; prior investment management experience with Nations Bank
M.B.A.--University of California, Irvine; B.A.--Flagler College
EMERGING GROWTH
39
<PAGE>
ORGANIZATION AND MANAGEMENT
STAN ROGERS
Portfolio Manager
Joined firm in 1997; 7 years prior investment management experience with
Tennessee Consolidated Retirement System
B.A.--The University of the South
INCOME & GROWTH
THOMAS J. SULLIVAN
Portfolio Manager
Joined firm in 1994; 2 years prior investment experience with Donaldson, Lufkin
& Jenrette Securities Corp.
B.S.--Rochester Institute of Technology
CORE GROWTH
FIXED INCOME
FRED S. ROBERTSON, III, PARTNER
Chief Investment Officer--Fixed Income
Joined firm in 1995; 22 years prior investment management experience with
Criterion Investment Management Company and DuPont Chemical Pension Fund
M.B.A.--College of William and Mary; B.S.--Cornell University
BALANCED GROWTH AND FULLY DISCRETIONARY
JAMES E. KELLERMAN, PARTNER
Portfolio Manager
Joined firm in 1995; 20 years prior investment management experience with
Criterion Investment Management Company and Brown Brothers Harriman and
Equitable Life Insurance
M.B.A.--St. John's University; B.B.A.--Susquehanna University
BALANCED GROWTH AND FULLY DISCRETIONARY
CLAUDIA BENGSTON
Portfolio Manager
Joined firm in 1995; 18 years prior investment experience with Criterion
Investment Management Company and Gibralter Savings
B.S.--University of Oklahoma
MONEY MARKET
MALCOM S. DAY, CFA
Portfolio Manager
Joined firm in 1995; 3 years prior investment management experience with Payden
& Rygel
M.B.A.--University of California, Los Angeles;
B.S.--Northern University
BALANCED GROWTH AND FULLY DISCRETIONARY
DOUGLAS FORSYTH, CFA
Portfolio Manager
Joined firm in 1994; 3 years prior investment management experience with AEGON
USA
B.B.A.--University of Iowa
HIGH YIELD BOND
JAN FRIEDLI
Portfolio Manager
Joined firm in 1997; 7 years prior investment management experience with Stone
Capital Management, PIMCO, and the Vanguard Group, Inc.
M.B.A.--University of Chicago, B.S.--Villanova University
HIGH YIELD BOND
SUSAN MALONE
Portfolio Manager
Joined firm in 1996; 7 years prior investment management experience with BEA
Associates
M.B.A.--New York University; B.S.--Carnegie Mellon University
BALANCED GROWTH
40
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
MUTUAL FUND CONSIDERATIONS IN GENERAL
Prospective investors should know that any mutual fund investment is
subject to market fluctuations and other risks inherent in investing in
securities. There can be no assurance that your investment will increase in
value. The value of your investment will go up and down depending upon market
forces and you may not recoup your original investment. You should consider
an investment in any of the Funds a long-term investment.
DERIVATIVE CONTRACTS AND SECURITIES CONSIDERATIONS
The term "derivative" traditionally applies to certain contracts that
"derive" their value from changes in the value of underlying securities,
currencies, commodities or indices. Investors refer to certain types of
securities that incorporate the performance characteristics of these
contracts as derivatives. Derivatives are sophisticated instruments that
typically involve a small investment of cash relative to the magnitude of
risks assumed. These include swap agreements, options, futures, and
convertible securities. The Funds seek to use derivative contracts and
securities to reduce volatility and increase total performance. While the
price reaction of certain derivatives to market changes may differ from
traditional investments such as stocks and bonds, derivatives do not
necessarily present greater market risks than traditional investments.
Derivatives are also subject to credit risks related to the counterparty's
ability to perform, and any deterioration in the counterparty's
creditworthiness could adversely affect the instrument. The Funds will only
use derivatives in a manner consistent with their investment objectives,
policies and limitations.
GLOBAL INVESTING CONSIDERATIONS
CURRENCY FLUCTUATIONS. Because the assets in each Fund may be invested in
instruments issued by foreign companies, the principal, income and sales
proceeds may be paid to the Funds in local foreign currencies. A reduction in
the value of local currencies relative to the U.S. dollar could mean a
corresponding reduction in the value of the Funds. The value of a foreign
security generally tends to decrease when the value of the U.S. dollar rises
against the foreign currency in which the security is denominated and tends
to increase when the value of the dollar falls against such currency. The
Funds may incur costs in connection with conversions between currencies.
SOCIAL, POLITICAL AND ECONOMIC FACTORS. The economies of many of the
countries where the Funds may invest may be subject to a substantially
greater degree of social, political and economic instability than the United
States. Such instability may result from, among other things, the following:
authoritarian governments; popular unrest associated with demands for
improved political, economic and social conditions; internal insurgencies and
terrorist activities; hostile relations with neighboring countries; and drug
trafficking. This instability might impair the financial conditions of
issuers or disrupt the financial markets in which the Funds invest.
The economies of foreign countries may differ favorably or unfavorably
and significantly from the economy of the United States in such respects as
the rate of growth of gross domestic product, rate of inflation, currency
depreciation, savings rates, fiscal balances, and balance of payments
positions. Governments of many foreign countries continue to exercise
substantial control over private enterprise and own or control many
companies. Government actions could have a significant impact on economic
conditions in certain countries which could affect the value of the
securities of the Funds. For example, a foreign country could nationalize an
entire industry. In such a case, the Funds may not be fairly compensated for
their losses and might lose their entire investment in the country involved.
The economies of certain foreign countries are heavily dependent upon
international trade and accordingly are affected by protective trade barriers
and the economic conditions of their trading partners. The enactment by the
United States or other principal trading partners of protectionist
legislation could have a significant adverse effect on the securities markets
of these countries. Some foreign countries (mostly in Africa and Latin
America) are large debtors of commercial banks, foreign governments, and
supranational organizations. These obligations, as well as future
restructurings of debt, may affect the economic performance and political and
social stability of these countries.
Hong Kong transferred its sovereignty from Great Britain to the People's
Republic of China in 1997. China has espoused policies antagonistic to free
enterprise capitalism and democracy. There can be no assurance that China
will continue to protect property rights in Hong Kong after 1997, although
China has moved toward free enterprise, and has established stock exchanges
of its own.
41
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
INFLATION. Certain foreign countries, especially many emerging countries,
have experienced substantial, and in some periods extremely high and
volatile, rates of inflation. Rapid fluctuations in inflation rates and wage
and price controls may continue to have unpredictable effects on the
economies, companies and securities markets of these countries.
MARKET CHARACTERISTICS
DIFFERENCES IN SECURITIES MARKETS. The securities markets in foreign
countries have substantially less trading volume than the markets in the
United States and debt and equity securities of many companies listed on such
markets may be less liquid and more volatile than comparable securities in
the United States. Some of the stock exchanges in foreign countries, to the
extent that established markets exist, are in the earlier stages of their
development. The limited liquidity of certain securities markets may affect
the ability of each Fund to buy and sell securities at the desired price and
time. In addition, the securities markets of some foreign countries are
susceptible to being influenced by large investors trading significant blocks
of stocks.
Trading practices in certain foreign countries are also significantly
different from those in the United States. Local commercial, corporation and
securities laws govern the sale and resale of securities, and certain
restrictions may apply. Although brokerage commissions are generally higher
than those in the U.S., the Investment Adviser will seek to achieve the most
favorable net results. In addition, securities settlements and clearance
procedures may be less developed and less reliable than those in the United
States. Delays in settlement could result in temporary periods in which the
assets of the Funds are not fully invested, or could result in a Fund being
unable to sell a security in a falling market.
CUSTODIAL AND REGISTRATION PROCEDURES. Systems for the registration and
transfer of securities in foreign markets can be less developed than similar
systems in the United States. There may be no standardized process for
registration of securities or a central registration system to track share
ownership. The process for transferring shares may be cumbersome, costly,
time-consuming and uncertain. For example, the share registrar may require a
shareholder to travel to that country to present required documentation
before buying or selling securities. In some instances, there may be no
requirements to maintain back-up shareholder records. Failure by the share
registrar to properly maintain shareholder records, protect the same against
fire or computer virus, or carry adequate insurance against such occurrences,
potentially could result in a loss of a Fund's investment in those securities.
GOVERNMENT SUPERVISION OF SECURITIES MARKETS. Disclosure and regulatory
standards in many foreign countries are in many respects less stringent than
those in the United States. There may be less government supervision and
regulation of securities exchanges, listed companies, investors, and brokers
in foreign countries than in the United States, and enforcement of existing
regulations may be extremely limited.
FINANCIAL INFORMATION AND REPORTING STANDARDS. Issuers in foreign
countries are generally subject to accounting, auditing, and financial
standards and requirements that differ, in some cases materially, from those
in the United States. In particular, the assets and profits appearing in
financial statements may not reflect their financial position or results in
the way they would be reflected had the statements been prepared in
accordance with U.S. generally accepted accounting principles. Consequently,
financial data may not reflect the true condition of those issuers and
securities markets.
LOWER RATED SECURITIES CONSIDERATIONS. The Balanced Growth, Income &
Growth, Fully Discretionary and High Yield Bond Funds each invest in debt and
convertible securities below investment grade. These securities usually offer
higher yields than higher rated securities but are also subject to more risk
than higher rated securities. Lower rated or unrated debt obligations are
more likely to react to developments affecting market and credit risks that
are more high rated securities, which react primarily to movements in the
past level of interest rates. In the past, economic downturns or increases in
interest rates caused a higher incidence of default by issuers of lower-rated
securities.
In some cases, such obligations may be highly speculative, and may have
poor prospects for reaching investment grade. To the extent the issuer
defaults, the Fund may incur additional expenses in order to enforce its
rights or to participate in a restructuring of the obligation. In addition,
the prices of lower-rated securities generally tend to be more volatile and
the market less liquid than those of higher-rated securities. Consequently,
the Funds may at times experience difficulty in liquidating their investments
at the desired times and prices.
The average percentages of assets invested by the Funds listed below in
bonds of each permissible rating, on a monthly dollar-weighted basis, were as
follows for the nine month period ended December 31, 1997: Income &
Growth--AA- %; A- %; BBB- %; BB- %; B- %; CCC-
%; non-rated- %; Balanced Growth--AA- %; A- %; BBB- %;
BB- %; B- %; CCC- %; non-rated- %; Fully
Discretionary--AA- %; A- %; BBB- %; BB- %; B- %; CCC-
%; non-rated- %; and High Yield Bond-- AA- %; A- %; BBB-
%; BB- %; B- %; CCC- %; non-rated- %. A description of
the rating categories is contained in this prospectus.
42
<PAGE>
THE FUNDS' INVESTMENTS
EQUITY SECURITIES. Equity securities include common stocks, convertible
securities and warrants. The Funds may invest in growth companies, cyclical
companies, companies with smaller market capitalizations, or companies
believed to be undergoing a basic change in operations or markets. Although
equity securities have a history of long-term growth in value, their prices
rise and fall as a result of changes in the company's financial condition as
well as movements in the overall securities markets.
SMALLER ISSUERS. Smaller and medium sized issuers may be less seasoned,
have more limited product lines, markets, financial resources and management
depth, and be more susceptible to adverse market conditions than larger
issuers. As a result, the securities of such smaller issuers may be less
actively traded than those of larger issuers and may also experience greater
market volatility. CONVERTIBLE SECURITIES. A convertible security is a fixed
income equity security that may be converted into a prescribed amount of
common stock at a specified formula. A convertible security entitles the
owner to receive interest until the security matures or is converted.
Convertibles have several unique investment characteristics such as: (a)
higher yields than common stocks but lower yields than straight debt
securities; (b) lesser degree of fluctuation in value than the underlying
stock since they have fixed income characteristics; and (c) potential for
capital appreciation if the market price of the underlying security increases.
CORPORATE DEBT SECURITIES. Corporate debt securities are subject to the
risk of an issuer's inability to meet principal and interest payments on the
obligation (credit risk) and may also be subject to price volatility due to
such factors as interest rate sensitivity, market perception of the
credit-worthiness of the issuer and general market liquidity (market risk).
When interest rates decline, the value of the Funds' debt securities can be
expected to rise, and when interest rates rise, the value of those securities
can be expected to decline. Debt securities with longer maturities tend to be
more sensitive to interest rate movements than those with shorter maturities.
Debt obligations carry a rating of at least Baa from Moody's or BBB from
Standard and Poor's, or a comparable rating from another rating agency or, if
not rated by an agency, determined by the Investment Adviser to be of
comparable quality. Bonds rated BBB or Baa may have speculative
characteristics and changes in economic circumstances are more likely to lead
to a weakened capacity to make interest and principal payments than higher
rated bonds. For a further explanation of these ratings, see the Statement of
Additional Information.
U.S. GOVERNMENT SECURITIES. U.S. Government securities are obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Some U.S. Government securities such as U.S. Treasury
bills, notes, bonds, and certificates issued by the Government National
Mortgage Association (GNMA) are supported by the full faith and credit of the
United States. Other U.S. Government securities, such as securities issued by
the Federal National Mortgage Association (FNMA) and the Federal Home Loan
Bank Board, are supported by the right of the issuer to borrow from the U.S.
Treasury. Still others, such as the Student Loan Marketing Association, are
supported only by the credit of the issuer. U.S. Government securities may
include zero coupon securities that are issued or purchased at a significant
discount from face value.
ZERO COUPON SECURITIES. The Income & Growth and Balanced Growth Funds may
invest up to 35% of their net assets in zero coupon securities issued or
guaranteed by the U.S. Government and its agencies and instrumentalities.
These securities are sold at a substantial discount from face value and
redeemed at face value at their maturity date without interim payments of
principal and interest. They may be subject to greater volatility than other
securities. In addition, because income is accrued on a current basis, a Fund
may have to sell other portfolio securities to make necessary income
distributions.
MORTGAGE-RELATED SECURITIES. Collateralized Mortgage Obligations (CMO's)
are debt obligations collateralized by a pool of mortgage loans or mortgage
passes-through securities. Typically CMOs are collateralized by certificates
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, such as GNMA. GNMA certificates are mortgaged-backed
securities representing part ownership of a pool of mortgage loans, which are
issued by lenders such as mortgage bankers, commercial banks, and savings
associations, and are either insured by the federal housing administration or
the veterans administration.
ASSET BACKED SECURITIES. The non-mortgage-related asset-backed securities
in which the High Yield Bond and Fully Discretionary Funds invest include,
but are not limited to, interests in pools of receivables, such as credit
card and accounts receivables and motor vehicle and other installment
purchase obligations and leases. Interests in these pools are not backed by
the U.S. Government and may or may not be secured.
The credit characteristic of asset -backed securities differs in a number
of respects from that of traditional debt securities. Asset-backed securities
generally do not have the benefit of a security interest in collateral that
is comparable to other debt obligations, and there is a possibility that
recoveries on repossessed collateral may not be available to support payment
on these securities.
43
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
SOVEREIGN DEBT SECURITIES. Certain Funds may invest in sovereign debt
securities issued by governments of foreign countries. The sovereign debt in
which the Funds may invest may be rated below investment grade. These
securities usually offer higher yields than higher rated securities but are
also subject to greater risk than higher rated securities.
BRADY BONDS. Brady bonds represent a type of sovereign debt. These
obligations were created under a debt restructuring plan introduced by former
U.S. Secretary of the Treasury, Nicholas F. Brady, in which foreign entities
issued these obligations in exchange for their existing commercial bank
loans. Brady Bonds have been issued by Argentina, Brazil, Costa Rica,
Dominican Republic, Mexico, Philippines, Uruguay and Venezuela, and may be
issued by other emerging countries.
INVESTMENT COMPANY SECURITIES. Each Fund may invest up to 10% of its
total assets in the shares of other investment companies. The Funds may
invest in money market mutual Funds in connection with the management of
their daily cash positions. The Funds may also make indirect foreign
investments through other investment companies that have comparable
investment objectives and policies as the Funds. In addition to the advisory
and operational fees each Fund bears directly in connection with its own
operation, the Funds would also bear their pro rata portions of each other
investment company's advisory and operational expenses.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
securities that are considered illiquid. An illiquid investment is generally
an investment that is not registered in the under U.S. securities laws, or
cannot be disposed of within seven days in the normal course of business at
approximately the amount at which the Fund values it. Limitations on resale
may adversely affect the marketability of illiquid securities and the Fund
may not be able to dispose of these securities at the desired time and price.
A Fund may bear additional expenses if it has to register these securities
under U.S. securities laws before being resold.
TEMPORARY INVESTMENTS. The Funds may from time to time on a temporary
basis to maintain liquidity or when the Investment Adviser determines that
the market conditions call for a temporary defensive posture, invest all of
their assets in short-term instruments. These temporary investments include:
notes issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; commercial paper rated in the highest two rating
categories; certificates of deposit; repurchase agreements and other high
grade corporate debt securities.
THE FUNDS' INVESTMENT TECHNIQUES
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements,
that is the purchase by the Fund of a security that seller has agreed to buy
back, usually within one to seven days. The seller's promise to repurchase
the security is fully collateralized by securities equal in value to 102% of
the purchase price, including accrued interest. If the seller defaults and
the collateral value declines, the Fund might incur a loss. If the seller
declares bankruptcy, the Fund may not be able to sell the collateral at the
desired time. The Funds enter into these agreements only with brokers,
dealers, or banks that meet credit quality standards established by the Board
of Trustees.
SECURITIES SWAPS. Securities swaps represent a technique primarily used
to indirectly participate in the securities market of a country from which a
Fund would otherwise be precluded for lack of an established securities
custody and safekeeping system. The Fund deposits an amount of cash with its
custodian (or the broker, if legally permitted) in an amount equal to the
selling price of the underlying security. Thereafter, the Fund pays or
receives cash from the broker equal to the change in the value of the
underlying security.
SHORT SALES. A "short sale" is the sale by the Fund of a security which
has been borrowed from a third party on the expectation that the market price
will drop. If the price of the security drops, the Fund will make a profit by
purchasing the security in the open market at lower price than at which it
sold the security. If the price of the security rises, the Fund may have to
cover its short position at a higher price than the short sale price,
resulting in a loss. A short sale can be covered or uncovered. In a covered
short sale, the Fund either (1) borrows and sells securities it already owns
(also known as a short sale "against the box"), or (2) deposits in a
segregated account cash, U.S. Government securities, or other liquid
securities in an amount equal to the difference between the market value of
the securities and the short sale price. Use of uncovered short sales is a
speculative investment technique and has potentially unlimited risk.
Accordingly, a Fund will not make uncovered short sales in an amount
exceeding the lesser of 2% of the Fund's net assets or 2% of the securities
of such class of the issuer. The Board of Trustees has determined that no
Fund will make short sales if to do so would create liabilities or require
collateral deposits of more than 25% of the Fund's total assets.
WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS. Each Fund may purchase or
sell securities for delivery at a future date, generally 15 to 45 days after
the commitment is made. The other party's failure to complete the transaction
may cause the Fund to miss a price or yield
44
<PAGE>
considered to be advantageous. A Fund may not purchase when issued securities
or enter into firm commitments if, as a result, more than 15% of the Fund's
net assets would be segregated to cover such securities.
BORROWING. Each Fund may borrow up to 20% of its total assets for
temporary, extraordinary or emergency purposes. Each Fund may also borrow
money through reverse repurchase agreements, uncovered short sales, and other
techniques. All borrowings by a Fund cannot exceed one-third of a Fund's
total assets. As a consequence of borrowing, a Fund will incur obligations to
pay interest, resulting in an increase in expenses.
SECURITIES LENDING. Each Fund may lend securities to financial
institutions such as banks, broker/ dealers and other recognized
institutional investors in amounts up to 30% of the Fund's total assets.
These loans earn income for the Fund and are collateralized by cash,
securities, letters of credit or any combination thereof. The Fund might
experience loss if the financial institution defaults on the loan.
FOREIGN CURRENCY TRANSACTIONS. Each Fund investing in foreign securities
may enter in to foreign currency transactions either on a spot or cash basis
at prevailing rates or through forward foreign currency exchange contracts in
order to have the necessary currencies to settle transactions. Each such Fund
may also enter into foreign currency transactions to protect Fund assets
against adverse changes in foreign currency exchange rates. Such efforts
could limit potential gains that might result from a relative increase in the
value of such currencies, and might, in certain cases, result in losses to a
Fund.
OPTIONS. Each Fund may deal in options on securities, securities indices
and foreign currencies. The Funds may use options to manage stock prices,
interest rate and currency risks. A Fund may not purchase or sell options if
more than 25% of its net assets would be hedged. The Funds may also write
covered call options and secured put options to seek to generate income or
lock in gains on up to 25% of their net assets.
FUTURES AND OPTIONS ON FUTURES. Each Fund may enter into futures
contracts, or options thereon, involving foreign currency, interest rates,
securities, and securities indices, for hedging purposes only. A stock index
futures contract is a bilateral agreement pursuant to which two parties agree
to take or make delivery of an amount of cash equal to a specified dollar
amount times the difference between the stock index value at the close of the
last trading day of the contract and the price at which the futures contract
is originally struck. No physical delivery of the underlying stocks in the
index is made. As a general rule, no Fund will purchase or sell futures if,
immediately thereafter, more than 25% of its net assets would be hedged.
RISKS OF FUTURES AND OPTIONS TRANSACTIONS. When a Fund uses options,
futures and options on futures as hedging devices, there is a risk that the
prices of the hedging vehicles may not correlate perfectly with the prices of
the securities in the portfolio. This may cause the futures contract and any
related options to react differently than the Fund's portfolio securities to
market changes. In addition, the Investment Adviser could be incorrect in its
expectations about the direction or the extent of market movements. In these
events, a Fund could lose money on the futures contracts or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the Investment
Adviser will consider liquidity before entering into these transactions,
there is no assurance that a liquid secondary market will exist for these
instruments.
NON-HEDGING STRATEGIC TRANSACTIONS. Each Fund's options, futures and swap
transactions will generally be entered into for hedging purposes--to protect
against possible changes in the market values of securities held in or to be
purchased for the Fund's Portfolio resulting from securities markets,
currency, or interest rate fluctuations, to protect the Fund's unrealized
gains in the values of its portfolio securities, to facilitate the sale of
such securities for investment purposes, to manage the effective maturity or
duration of the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchase or sale of
particular securities. However, in addition to the hedging transactions
referred to above, the Fully Discretionary Fund may enter into options,
futures and swap transactions to enhance potential gain in circumstances
where hedging is not involved. The Fund's net loss exposure resulting from
transactions entered into for such purposes will not exceed 5% of the Fund's
net assets at any one time and , to the extent necessary, the Fund will close
out transactions in order to comply with this limitation. Such transactions
are subject to the limitations described above under "Options" and "Futures
and Options on Futures."
CORPORATE BOND RATINGS
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS
Aaa--Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes are most unlikely to impair the
fundamentally strong position of such issues.
45
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
Aa--Bonds rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds rated Baa are considered medium-grade obligations (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
B--Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked short-comings.
C--Bonds rated C are the lowest-rated class of bonds, and such issues can
be regarding as having extremely poor prospects of ever attaining any real
investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modified 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS
AAA--Debt rated aaa has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse
Effects of changes in circumstances and economic conditions than debt in
higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher-rated categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
46
<PAGE>
B--Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB--rating.
CCC--Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The CCC
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied B or B -rating.
CC--Debt rated CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC debt rating.
C--The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC-debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI--The rating CI is reserved for income bonds on which no interest is
being paid.
D--Debt rated D is in payment default. The d rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating will also be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
47
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
FORM N-1A
PART B: STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information of Nicholas-Applegate Mutual Funds
Class A, B, C Shares filed on December 23, 1997 with the Securities and Exchange
Commission as part of Post-Effective Amendment No. 49 to Registrant's Form N-1A
Registration Statement is incorporated herein by reference.
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
FORM N-1A
PART C: OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
a. Financial Statements
The Schedules of Investments as of March 31, 1997, Statements of
Assets and Liabilities as of March 31, 1997, Statements of Changes in
Net Assets for the period ended March 31, 1997, and related Notes and
Report of Independent Auditors with respect to Registrant's SERIES A,
B AND C Portfolios, the predecessors to the Class A, B AND C shares of
Registrant's corresponding Funds which are the subject of this
Amendment to Registration Statement, are incorporated by reference in
Part B.
The Schedules of Investments as of September 30, 1997, Statements of
Assets and Liabilities as of September 30, 1997, and related Notes
with respect to Registrant's SERIES A, B AND C Portfolios, the
predecessors to the Class A, B AND C shares of Registrant's
corresponding Funds which are the subject of this Amendment to
Registration Statement, are incorporated by reference in Part B.
b. Exhibits:
(1.1) Certificate of Trust of Registrant (f).
(1.2) Certificate of Amendment to Certificate of Trust of
Registrant (f).
(1.3) Amended and Restated Declaration of Trust of Registrant (f).
(1.4) Certificate of Trustees dated August 6, 1993, establishing
Emerging Growth Portfolio series (f).
(1.5) Certificate of Trustees dated December 15, 1993,
establishing International Growth Portfolio series (f).
(1.6) Amendment No. 2 to Amended and Restated Declaration of Trust
(f).
(1.7) Amendment No. 3 to Amended and Restated Declaration of Trust
(f).
(1.8) Amendment No. 4 to Amended and Restated Declaration of Trust
(f).
(1.9) Amendment No. 5 to Amended and Restated Declaration of Trust
(f).
(1.10) Amendment No. 6 to Amended and Restated Declaration of Trust
(f).
(1.11) Amendment No. 7 to Amended and Restated Declaration of Trust
(f).
(1.12) Form of Amendment No. 8 to Amended and Restated Declaration
of Trust (f).
(1.13) Amendment No. 9 to Amended and Restated Declaration of Trust
(f).
(1.14) Form of Amendment No. 10 to Amended and Restated Declaration
of Trust (b).
(1.15) Amendment No. 11 to Amended and Restated Declaration of
Trust (i).
C-1
<PAGE>
(1.16) Form of Amendment No. 12 to Amended and Restated Declaration
of Trust (i).
(1.17) Amendment No. 13 to Amended and Restated Declaration of
Trust (j).
(1.18) Form of Amendment No. 14 to Amended and Restated Declaration
of Trust (j).
(1.19) Form of Amendment No. 15 to Amended and Restated Declaration
of Trust (m).
(1.20) Form of Amendment No. 16 to Amended and Restated Declaration
of Trust (r).
(1.21) Form of Amendment No. 17 to Amended and Restated Declaration
of Trust (r).
(1.22) Form of Amendment No. 18 to Amended and Restated Declaration
of Trust (r).
(2.1) Amended Bylaws of Registrant (f).
(2.2) Amendment to Section 2.5 of Bylaws of Registrant (f).
(3) None.
(4) None.
(5.1) Form of Investment Advisory Agreement between Registrant and
Nicholas-Applegate Capital Management, with respect to
Global Blue Chip Fund, Emerging Markets Bond Fund, Pacific
Rim Fund, Greater China Fund and Latin America Fund (n).
(5.2) Form of Sub-Advisory Agreement between Registrant and
Nicholas-Applegate Capital Management-Hong Kong, with
respect to the Pacific Rim Fund and Greater China Fund (n).
(5.3) Form of Sub-Advisory Agreement between Registrant and
Nicholas-Applegate Capital Management-Asia, with respect to
the Pacific Rim Fund and Greater China Fund (n).
(5.4) Amended form of letter agreement between Registrant and
Nicholas-Applegate Capital Management adding the Class A, B,
C, Q and I shares of Registrant's additional Funds to the
Investment Advisory Agreement (s).
(6.1) Distribution Agreement between Registrant and
Nicholas-Applegate Securities dated as of April 19, 1993
(f).
(6.2) Letter agreement between Registrant and Nicholas-Applegate
Securities dated May 17, 1993, adding certain Institutional
(formerly Qualified) Portfolio series and Emerging Growth
Portfolio series to Distribution Agreement (f).
(6.3) Letter agreement between Registrant and Nicholas-Applegate
Securities dated December 15, 1993, adding International
Growth Portfolio series to Distribution Agreement (f).
(6.4) Letter agreement between Registrant and Nicholas-Applegate
Securities dated April 22, 1994, adding Qualified Portfolio
series to Distribution Agreement (f).
(6.5) Letter agreement between Registrant and Nicholas-Applegate
Securities, adding Emerging Countries Growth Portfolio
series, Global Growth & Income Portfolio series and Mini-Cap
Growth Portfolio series to Distribution Agreement (f).
(6.6) Letter agreement between Registrant and Nicholas-Applegate
Securities, adding Series B Portfolios to Distribution
Agreement (f).
C-2
<PAGE>
(6.7) Letter agreement between Registrant and Nicholas-Applegate
Securities, adding Fixed Income and Qualified Portfolio
series to Distribution Agreement (f).
(6.8) Form of letter agreement between Registrant and
Nicholas-Applegate Securities, adding Value Institutional
Portfolio series to Distribution Agreement (a).
(6.9) Form of letter agreement between Registrant and
Nicholas-Applegate Securities, adding High Yield Bond and
Strategic Income Institutional Portfolio series to
Distribution Agreement (b).
(6.10) Form of letter agreement between Registrant and
Nicholas-Applegate Securities adding Large Cap Growth and
Core Growth International Portfolio series to Distribution
Agreement (i).
(6.11) Form of letter agreement between Registrant and
Nicholas-Applegate Securities adding Core Growth
International Portfolio C series to Distribution Agreement
(i).
(6.12) Form of letter agreement between Registrant and
Nicholas-Applegate Securities adding Large Cap Growth
Portfolio A, B, C and Q series to Distribution Agreement
(j).
(6.13) Form of letter agreement between Registrant and
Nicholas-Applegate Securities, adding Global Blue Chip Fund,
Emerging Markets Bond Fund, Pacific Rim Fund, Greater China
Fund and Latin America Fund to Distribution Agreement (n).
(6.14) Amended form of letter agreement between Registrant and
Nicholas-Applegate Securities adding the Class A, B, C, Q
and I shares of Registrant's additional Funds to the
Distribution Agreement (s).
(7) None.
(8.1) Custodian Services Agreement between Registrant and PNC Bank
dated as of April 1, 1993 (f).
(8.2) Letter agreement between Registrant and PNC Bank dated July
19, 1993, adding certain Institutional (formerly Qualified)
Portfolio series to Custodian Services Agreement (f).
(8.3) Letter agreement between Registrant and PNC Bank dated
August 20, 1993, adding Emerging Growth Portfolio series to
Custodian Services Agreement (f).
(8.4) Letter agreement between Registrant and PNC Bank dated
December 15, 1993, adding International Growth Portfolio
series to Custodian Services Agreement (f).
(8.5) Letter agreement between Registrant and PNC Bank dated April
22, 1994, adding Core Growth Qualified Portfolio series to
Custodian Services Agreement (f).
(8.6) Letter agreement between Registrant and PNC Bank, adding
Emerging Countries Growth Portfolio series, Global Growth &
Income Portfolio series and Mini-Cap Growth Portfolio series
to Custodian Services Agreement (f).
(8.7) Letter agreement between Registrant and PNC Bank, adding
Series B Portfolios to Custodian Services Agreement (f).
(8.8) Letter agreement between Registrant and PNC Bank, adding
Fixed Income Portfolio series to Custodian Services
Agreement (f).
(8.9) Form of letter agreement between Registrant and PNC Bank
adding Value Institutional Portfolio series to Custodian
Services Agreement (a).
C-3
<PAGE>
(8.10) Form of letter agreement between Registrant and PNC Bank
adding High Yield Bond and Strategic Income Institutional
Portfolio series to Custodian Services Agreement (b).
(8.11) Form of letter agreement between Registrant and PNC Bank
adding Large Cap Growth and Core Growth International
Portfolio series to Custodian Services Agreement (i).
(8.12) Form of letter agreement between Registrant and PNC Bank
adding Core Growth International Portfolio C series to
Custodian Services Agreement (i).
(8.13) Form of letter agreement between Registrant and PNC Bank
adding Large Cap Growth Portfolio A, B, C and Q series to
Custodian Services Agreement (j).
(8.14) Form of letter agreement between Registrant and PNC Bank,
adding Global Blue Chip Fund and Emerging Markets Bond Fund
to Custodian Services Agreement (l).
(8.15) Form of letter agreement between Registrant and PNC Bank
with respect to custodian services fees related to the
Global Blue Chip Fund and the Emerging Markets Bond Fund
(m).
(8.16) Form of letter agreement between Registrant and PNC Bank,
adding Pacific Rim Fund, Greater China Fund and Latin
America Fund to Custodian Services Agreement (n).
(8.17) Form of letter agreement between Registrant and PNC Bank,
adding the Class A, B, C, Q and I shares of Registrant's
additional Funds to Custodian Services Agreement (o).
(8.18) Form of Sub-Custodian Agreement among Registrant, PNC Bank
and Chase Manhattan Bank, with respect to Global Blue Chip
Fund, Emerging Markets Bond Fund, Greater China Fund,
Pacific Rim Fund and Latin America Fund (o).
(8.19) Amended form of letter agreement among Registrant, PNC Bank
and Chase Manhattan Bank, adding the Class A, B, C, Q and I
shares of Registrant's additional Funds to Sub-Custodian
Agreement (s).
(9.1) Form of amended Administration Agreement between Registrant
and Investment Company Administration Corporation (o).
(9.2) Administrative Services Agreement between Registrant and
Nicholas-Applegate Capital Management dated as of November
18, 1996 (i).
(9.3) Transfer Agency and Service Agreement between Registrant and
State Street Bank and Trust Company dated as of April 1,
1993 (f).
(9.4) Letter agreement between Registrant and State Street Bank
and Trust Company dated July 19, 1993, adding certain
Institutional (formerly Qualified) Portfolio series to
Transfer Agency and Service Agreement (f).
(9.5) Letter agreement between Registrant and State Street Bank
and Trust Company dated August 20, 1993, adding Emerging
Growth Portfolio Series to Transfer Agency and Service
Agreement (f).
(9.6) Letter agreement between Registrant and State Street Bank
and Trust Company dated December 15, 1993, adding
International Growth Portfolio series to Transfer Agency and
Service Agreement (f).
(9.7) Letter agreement between Registrant and State Street Bank
and Trust Company dated April 22, 1994, adding Core Growth
Qualified Portfolio series to Transfer Agency and Service
Agreement (f).
C-4
<PAGE>
(9.8) Letter agreement between Registrant and State Street Bank
and Trust Company, adding Emerging Countries Growth
Portfolio series, Global Growth & Income Portfolio series
and Mini-Cap Growth Portfolio series to Transfer Agency and
Service Agreement (f).
(9.9) Letter agreement between Registrant and State Street Bank
and Trust Company, adding Series B Portfolios to Transfer
Agency and Service Agreement (f).
(9.10) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Fixed Income Portfolio series
to Transfer Agency and Service Agreement (f).
(9.11) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Value Institutional Portfolio
series to Transfer Agency and Service Agreement (a).
(9.12) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding High Yield Bond and Strategic
Income Institutional Portfolio series to Transfer Agency and
Service Agreement (b).
(9.13) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Large Cap Growth and Core
Growth International Portfolio series to Transfer Agency and
Service Agreement (i).
(9.14) Form of letter agreement between Registrant and State Street
Bank and Trust Company adding Core Growth International
Portfolio C series to Transfer Agency and Service Agreement
(i).
(9.15) Form of letter agreement between Registrant and State Street
Bank and Trust Company adding Large Cap Growth Portfolio A,
B, C and Q series to Transfer Agency and Service Agreement
(j).
(9.16) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Global Blue Chip Fund and
Emerging Markets Bond Fund to Transfer Agency and Service
Agreement (l).
(9.17) Form of letter agreement between Registrant and State Street
Bank and Trust Company, adding Pacific Rim Fund, Greater
China Fund and Latin America Fund to Transfer Agency and
Service Agreement (n).
(9.18) Amended form of letter agreement between Registrant and
State Street Bank and Trust Company, adding the Class A, B,
C, Q and I shares of Registrant's additional Funds to
Transfer Agency and Service Agreement (s)
(9.19) Form of amended Shareholder Service Plan between Registrant
and Nicholas-Applegate Securities (o).
(9.20) License Agreement dated as of December 17, 1992, between
Registrant and Nicholas-Applegate Capital Management (f).
(9.21) Accounting Services Agreement between Registrant and PFPC
Inc. dated as of April 1, 1993 (f).
(9.22) Letter agreement between Registrant and PFPC Inc. dated July
19, 1993, adding certain Institutional (formerly Qualified)
Portfolio series to Accounting Services Agreement (f).
(9.23) Letter agreement between Registrant and PFPC Inc. dated
August 20, 1993, adding Emerging Growth Portfolio series to
Accounting Services Agreement (f).
C-5
<PAGE>
(9.24) Letter agreement between Registrant and PFPC Inc. dated
December 15, 1993, adding International Growth Portfolio
series to Accounting Services Agreement (f).
(9.25) Letter agreement between Registrant and PFPC Inc. dated
April 22, 1994, adding Core Growth Qualified Portfolio
series to Accounting Services Agreement (f).
(9.26) Letter agreement between Registrant and PFPC Inc., adding
Emerging Countries Growth Portfolio series, Global Growth &
Income Portfolio series and Mini-Cap Growth Portfolio series
to Accounting Services Agreement (f).
(9.27) Letter agreement between Registrant and PFPC Inc., adding
Series B Portfolios to Accounting Services Agreement (f).
(9.28) Letter agreement between Registrant and PFPC Inc., adding
Fixed Income Portfolio series to Accounting Services
Agreement (f).
(9.29) Form of letter agreement between Registrant and PFPC Inc.
adding Value Institutional Portfolio series to Accounting
Services Agreement (a).
(9.30) Form of letter agreement between Registrant and PFPC Inc.
adding High Yield Bond and Strategic Income Institutional
Portfolio series to Accounting Services Agreement (b).
(9.31) Form of letter agreement between Registrant and PFPC Inc.
adding Large Cap Growth and Core Growth International
Portfolio series to Accounting Services Agreement (i).
(9.32) Form of letter agreement between Registrant and PFPC Inc.
adding Core Growth International Portfolio C series to
Accounting Services Agreement (i).
(9.33) Form of letter agreement between Registrant and PFPC Inc.
adding Large Cap Growth Portfolio A, B, C and Q series to
Accounting Services Agreement (j).
(9.34) Form of letter agreement between Registrant and PFPC Inc.,
adding Global Blue Chip Fund and Emerging Markets Bond Fund
to Accounting Services Agreement (l).
(9.35) Form of letter agreement between Registrant and PFPC Inc.
with respect to accounting services fees related to the
Global Blue Chip Fund and the Emerging Markets Bond Fund
(m).
(9.36) Form of letter agreement between Registrant and PFPC Inc.
adding the Pacific Rim Fund, Greater China Fund and Latin
America Fund (n).
(9.37) Form of letter agreement between Registrant and PFPC Inc.
regarding fees for additional Funds under Accounting
Services Agreement (o).
(9.38) Amended form of letter agreement between Registrant and PFPC
Inc., adding the Class A, B, C, Q and I shares of
Registrant's additional Funds to Accounting Service
Agreement (s).
(9.39) Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated September 27, 1993 regarding
expense reimbursements (f).
(9.40) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding Global Blue
Chip Fund, Emerging Markets Bond Fund, Pacific Rim Fund,
Greater China Fund and Latin America Fund to agreement
regarding expense reimbursement (n).
(9.41) Amended form of letter agreement between Registrant and
Nicholas-Applegate Capital Management, adding the Class A,
B, C, Q and I shares of Registrant's additional Funds to
agreement regarding expense reimbursement (S).
C-6
<PAGE>
(9.42) Credit Agreement among Registrant, Chemical Bank and certain
other banks dated April 10, 1996 (f).
(9.43) First Amendment Agreement to Credit Agreement dated as of
April 9, 1997 among Registrant, The Chase Manhattan Bank,
and certain other banks (l).
(9.44) Form of Second Amendment Agreement to Credit Agreement among
Registrant, The Chase Manhattan Bank, and certain other
banks (n).
(10) Opinion of Counsel (c).
(11) Consent of independent auditors.
(12) Not Applicable.
(13) Investment Letter of initial investor in Registrant dated
April 1, 1993 (f).
(14.1) IRA Plan Materials (d).
(14.2) 401(k) Profit-Sharing Plan Materials (d).
(15.1) Amended Distribution Plan of Registrant (f)
(15.2) Form of further Amendment to Distribution Plan of Registrant
(o).
(16) Schedule of Computation of Performance Quotations (c).
(17.1) Financial Data Schedule as of March 31, 1997 (p).
(17.2) Financial Data Schedule as of September 30, 1997 (q).
(18) Not Applicable.
(19.1) Limited Powers of Attorney of Trustees (d).
(19.2) Limited Power of Attorney of Walter E. Auch (e).
(19.3) Limited Power of Attorney of John D. Wylie (h).
(19.4) Certified Resolution of Board of Trustees of Registrant
regarding Limited Power of Attorney of John D. Wylie (h).
(19.5) Limited Power of Attorney of Thomas Pindelski (k).
(19.6) Certified Resolution of Board of Trustees regarding Limited
Power of Attorney of Thomas Pindelski (k).
- ------------------------------
(a) Filed as an Exhibit to Amendment No. 28 to Registrant's Form N-1A
Registration Statement on January 19, 1996 and incorporated herein by
reference.
(b) Filed as an Exhibit to Amendment No. 29 to Registrant's Form N-1A
Registration Statement on May 3, 1996 and incorporated herein by reference.
(c) Filed as an Exhibit to Amendment No. 1 to Registrant's Form N-1A
Registration Statement on March 15, 1993 and incorporated herein by
reference.
C-7
<PAGE>
(d) Filed as an Exhibit to Amendment No. 12 to Registrant's Form N-1A
Registration Statement on August 1, 1994 and incorporated herein by
reference.
(e) Filed as an Exhibit to Amendment No. 14 to Registrant's Form N-1A
Registration Statement on September 26, 1994 and incorporated herein by
reference.
(f) Filed as an Exhibit to Amendment No. 32 to Registrant's Form N-1A
Registration Statement on June 3, 1996 and incorporated herein by
reference.
(g) Filed as an Exhibit to Amendment No. 37 to Registrant's Form N-1A
Registration Statement on October 15, 1996 and incorporated herein by
reference.
(h) Filed as an Exhibit to Amendment No. 38 to Registrant's Form N-1A
Registration Statement on October 25, 1996 and incorporated herein by
reference.
(i) Filed as an Exhibit to Amendment No. 40 to Registrant's Form N-1A
Registration Statement on January 3, 1997 and incorporated herein by
reference.
(j) Filed as an Exhibit to Amendment No. 42 to Registrant's Form N-1A
Registration Statement on May 1, 1997 and incorporated herein by reference.
(k) Filed as an Exhibit to Amendment No. 44 to Registrant's Form N-1A
Registration Statement on May 22, 1997 and incorporated herein by
reference.
(l) Filed as an Exhibit to Amendment No. 45 to Registrant's Form N-1A
Registration Statement on July 14, 1997 and incorporated herein by
reference.
(m) Filed as an Exhibit to Amendment No. 47 to Registrant's Form N-1A
Registration Statement on July 28, 1997 and incorporated herein by
reference.
(n) Filed as an Exhibit to Amendment No. 49 to Registrant's Form N-1A
Registration Statement on September 2, 1997 and incorporated herein by
reference.
(o) Filed as an Exhibit to Registrant's Form N-14 Registration Statement on
December 5, 1997 and incorporated herein by reference.
(p) Filed as an Exhibit to Registrant's Form N-SAR on June 9, 1997 and
incorporated herein by reference.
(q) Filed as an Exhibit to Registrant's Form N-SAR on December 12, 1997 and
incorporated herein by reference.
(r) Filed as an Exhibit to Amendment No. 50 to Registrant's Form N-1A
Registration Statement on December 15, 1997 and incorporated herein by
reference.
(s) Filed as an Exhibit to Amendment No. 52 to Registrant's Form N-1A
Registration Statement on December 29, 1997 and incorporated herein by
reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
C-8
<PAGE>
Item 26. NUMBER OF HOLDERS OF SECURITIES.
As of November 30, 1997, the number of record holders of each series
of Registrant was as follows:
<TABLE>
<CAPTION>
Title of Series NUMBER OF RECORD HOLDERS
--------------- ------------------------
<S> <C>
Large Cap Growth Portfolio A 58
Core Growth Portfolio A 6,438
Emerging Growth Portfolio A 10,733
Income & Growth Portfolio A 2,496
Balanced Growth Portfolio A 930
Government Income Portfolio A 492
Money Market Portfolio 853
International Core Growth Portfolio A 315
Worldwide Growth Portfolio A 2,044
International Small Cap Growth Portfolio A 799
Emerging Countries Portfolio A 4,598
Large Cap Growth Portfolio B 116
Core Growth Portfolio B 3,351
Emerging Growth Portfolio B 4,273
Income & Growth Portfolio B 1,521
Balanced Growth Portfolio B 347
Government Income Portfolio B 240
International Core Growth Portfolio B 465
Worldwide Growth Portfolio B 810
International Small Cap Growth Portfolio B 688
Emerging Countries Portfolio B 3,713
Large Cap Growth Portfolio C 31
Core Growth Portfolio C 12,653
Emerging Growth Portfolio C 16,227
Income & Growth Portfolio C 5,208
Balanced Growth Portfolio C 1,278
Government Income Portfolio C 475
International Core Growth Portfolio C 186
Worldwide Growth Portfolio C 5,531
International Small Cap Growth Portfolio C 866
Emerging Countries Portfolio C 3,069
Large Cap Growth Institutional Portfolio 39
Core Growth Institutional Portfolio 183
Emerging Growth Institutional Portfolio 185
Income & Growth Institutional Portfolio 121
Balanced Growth Institutional Portfolio 28
International Core Growth Institutional Portfolio 71
Worldwide Growth Institutional Portfolio 79
International Small Cap Growth Institutional Portfolio 81
Emerging Countries Institutional Portfolio 204
Mini Cap Growth Institutional Portfolio 317
Fully Discretionary Institutional Fixed Income Portfolio 13
Short-Intermediate Institutional Fixed Income Portfolio 15
Value Institutional Portfolio 49
High Yield Bond Institutional Portfolio 25
Strategic Income Institutional Portfolio 20
Global Growth & Income Institutional Portfolio 50
Large Cap Growth Qualified Portfolio 12
Core Growth Qualified Portfolio 193
Emerging Growth Qualified Portfolio 75
Income & Growth Qualified Portfolio 10
C-9
<PAGE>
Balanced Growth Qualified Portfolio 9
Government Income Qualified Portfolio 9
International Core Growth Qualified Portfolio 25
Worldwide Growth Qualified Portfolio 9
International Small Cap Growth Qualified Portfolio 12
Emerging Countries Qualified Portfolio 1,678
Emerging Markets Bond Institutional Portfolio 16
Global Blue Chip Fund 80
</TABLE>
Item 27. INDEMNIFICATION.
Registrant's trustees, officers, employees and agents against
liabilities incurred by them in connection with the defense or disposition of
any action or proceeding in which they may be involved or with which they may be
threatened, while in office or thereafter, by reason of being or having been in
such office, except with respect to matters as to which it has been determined
that they acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of their office
("Disabling Conduct").
Section 8 of Registrant's Administration Agreement, filed herewith as
Exhibit 9.1, provides for the indemnification of Registrant's Administrator
against all liabilities incurred by it in performing its obligations under the
Agreement, except with respect to matters involving its Disabling Conduct.
Section 9 of Registrant's Distribution Agreement, filed herewith as Exhibit 6,
provides for the indemnification of Registrant's Distributor against all
liabilities incurred by it in performing its obligations under the Agreement,
except with respect to matters involving its Disabling Conduct. Section 4 of
the Shareholder Service Agreement, filed herewith as Exhibit 9.3, provides for
the indemnification of Registrant's Distributor against all liabilities incurred
by it in performing its obligations under the Agreement, except with respect to
matters involving its Disabling Conduct.
Registrant has obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and omissions.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Nicholas-Applegate Capital Management, the investment adviser to the
Master Trust, is a California limited partnership, the general partner of which
is Nicholas-Applegate Capital Management, Inc. (the "General Partner"). During
the two fiscal years ended December 31, 1996, Nicholas-Applegate Capital
Management has engaged principally in the business of providing investment
services to institutional and other clients. All of the additional information
required by this Item 28 with respect to the Investment Adviser is set forth in
the Form ADV, as amended, of Nicholas-Applegate Capital Management (File No.
801-21442), which is incorporated herein by reference.
Item 29. PRINCIPAL UNDERWRITERS.
(a) Nicholas-Applegate Securities does not act as a principal
underwriter, depositor or investment adviser to any investment company other
than Registrant.
(b) Nicholas-Applegate Securities, the Distributor of the shares of
Registrant's Portfolios, is a California limited partnership and its general
partner is Nicholas-Applegate Capital Management Holdings, L.P. (the "General
Partner"). Information is furnished below with respect to the officers,
partners and directors of the General Partner
C-10
<PAGE>
and Nicholas-Applegate Securities. The principal business address of such
persons is 600 West Broadway, 30th Floor, San Diego, California 92101, except as
otherwise indicated below.
Positions and Positions and
Name and Principal Offices with Principal Offices with
Business Address Underwriter Registrant
------------------ ----------- ----------
Arthur E. Nicholas Chairman None
John D. Wylie President President
Peter J. Johnson Vice President Vice President
Thomas Pindelski Chief Financial Officer Chief Financial
Officer
E. Blake Moore, Jr. Secretary Secretary
Todd Spillane Director of Compliance None
(c) Not Applicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder will be maintained either at the offices of the Registrant (600 West
Broadway, 30th Floor, San Diego, California 92101); the Investment Adviser to
the Trust and Master Trust, Nicholas-Applegate Capital Management (600 West
Broadway, 30th Floor, San Diego, California 92101); the primary administrator
for the Trust and Master Trust, Investment Company Administration Corporation
(4455 East Camelback Road, Suite 261-E, Phoenix, Arizona 85018); the Custodian,
PNC Bank (Airport Business Center, International Court 2, 200 Stevens Drive,
Lester, Pennsylvania 19113); or the Transfer and Dividend Disbursing Agent,
State Street Bank & Trust Company (2 Heritage Drive, 7th Floor, North Quincy,
Massachusetts 02171).
Item 31. MANAGEMENT SERVICES.
Not Applicable.
Item 32. UNDERTAKINGS.
Registrant undertakes to file a Post-Effective amendment containing
reasonably current financial statements with respect to its Global Technology
Fund, which need not be certified, within four to six months from the effective
date of this Amendment.
Registrant hereby undertakes that if it is requested by the holders of
at least 10% of its outstanding shares to call a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee, it will do so and
will assist in communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders, upon request and without charge.
C-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California, on the 17th day
of February, 1998.
NICHOLAS-APPLEGATE MUTUAL
FUNDS
By JOHN D. WYLIE*
-------------------------
John D. Wylie
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
John D. Wylie* Principal Executive Officer February 17, 1998
-------------------------
John D. Wylie
Principal Financial and
Thomas Pindelski* Accounting Officer February 17, 1998
-------------------------
Thomas Pindelski
Fred C. Applegate* Trustee February 17, 1998
-------------------------
Fred C. Applegate
Arthur B. Laffer* Trustee February 17, 1998
-------------------------
Arthur B. Laffer
Charles E. Young* Trustee February 17, 1998
-------------------------
Charles E. Young
* s/E. Blake Moore, Jr.
-------------------------
By: E. Blake Moore, Jr.
Attorney In Fact
C-12
<PAGE>
EXHIBIT INDEX
NICHOLAS-APPLEGATE MUTUAL FUNDS
AMENDMENT NO. 54 TO
FORM N-1A REGISTRATION STATEMENT
FILE NO. 811-7428
EXHIBIT NO. TITLE OF EXHIBIT
(11) Consent of Independent Auditors.
C-13
<PAGE>
Exhibit 11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights", "Custodian, Transfer and Dividend Disbursing Agent, Independent
Auditors and Legal Counsel" and "Financial Statements" and to the use of our
report dated May 13, 1997 by reference therein, in Post-Effective Amendment No.
49 under the Securities Act of 1933 and Amendment No. 51 under the Investment
Company Act of 1940 to the Registration Statement (Form N-1A, No. 33-56094) and
in the related Prospectus and the Statement of Additional Information of
Nicholas-Applegate Mutual Funds which is incorporated by reference in
Post-Effective Amendment No. 52 under the Securities Act of 1933 and Amendment
No. 54 under the Investment Company Act of 1940 to the Registration Statement
(Form N-1A, No. 33-56094) and related Prospectus and Statement of Additional
Information of Nicholas-Applegate Mutual Funds.
Los Angeles, California
February 19, 1998
