<PAGE>
NICHOLAS-APPLEGATE-Registered
Trademark-
MUTUAL FUNDS INSTITUTIONAL SHARES
Annual Report
March 31, 1999
Nicholas-Applegate Mutual Funds renamed to Pilgrim Mutual Funds
<PAGE>
LETTER TO SHAREHOLDERS
- ------------------------------------------------------------------------
DEAR FELLOW SHAREHOLDER,
The recently ended fiscal year brought about exciting developments -- and new
challenges -- in global financial markets. Investor optimism over the long-term
growth for many of the world's economies overpowered concerns of economic and
currency troubles.
In the United States, a potent mix of robust economic expansion, subdued
inflation and sustained earnings growth propelled large-cap stocks to uncharted
heights while small- and mid-caps remained out of favor during much of the
period.
Stock markets in Europe rallied on the back of favorable trends which
cushioned the impact of an economic slowdown in the region. A key development
was the advent of European Monetary Union (EMU). For many countries in Europe,
the creation of a single currency brought significant benefits, such as a drop
in interest rates and increased competition among companies.
In crisis-battered emerging countries, the first signs of improvement have
started to surface. Following a turbulent period that saw steep declines in many
emerging markets, prospects for the asset class have become more promising.
A common theme during the fiscal year was the strong performance of technology
companies around the world. We believe the prospects for technology stocks are
compelling. In August of 1998, we launched the Nicholas-Applegate Global
Technology Fund to capture the long-term growth potential inherent within the
sector.
In our constant search for the world's most promising investments, we have
successfully identified winners during the period. Strict adherence to our
investment philosophy led us to invest in companies displaying strong earnings
growth and the potential to exceed expectations.
Fixed-income instruments have displayed resiliency in the face of global
developments. The Federal Reserve Board's decision to lower short-term interest
rates three times in 1998, which triggered an easing of monetary policies
worldwide, helped alleviate concerns over liquidity and mitigated a crisis of
confidence.
To better serve our core institutional clients, we sold our US retail mutual
funds business in the first quarter of 1999. We also announced the sale of our
Houston-based fixed income management business in April. Our goal is to sharpen
the firm's strategic focus on our institutional and high net worth clients while
maintaining our competitive edge as a key player in the global investment arena.
As we look back on the last four quarters and share our insights in this
Annual Report, we thank you for choosing Nicholas-Applegate as a partner in
pursuit of your investment objectives. We look forward to serving you through
the Nicholas-Applegate Institutional Funds, the successor organization to the
Nicholas-Applegate Mutual Funds Institutional Shares. We are confident that the
consistent application of our investment philosophy and process will reward
shareholders in the years to come.
Sincerely Yours,
/S/ ART NICHOLAS
Art Nicholas
Managing Partner
Nicholas-Applegate Capital Management
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<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
<S> <C>
The Funds' Review and Outlook, Performance and Schedules of Investments
Large Cap Growth...................................................... 1
Value................................................................. 4
Mid Cap Growth........................................................ 8
Small Cap Growth...................................................... 12
Mini Cap Growth....................................................... 19
Convertible........................................................... 24
High Quality Bond..................................................... 29
High Yield Bond....................................................... 36
Short-Intermediate.................................................... 41
International Core Growth............................................. 46
International Small Cap Growth........................................ 51
Emerging Countries.................................................... 56
Greater China......................................................... 61
Latin America......................................................... 65
Pacific Rim........................................................... 69
Worldwide Growth...................................................... 73
Global Blue Chip...................................................... 79
Global Growth & Income................................................ 84
Global Technology..................................................... 89
The Funds'
Financial Highlights.................................................. 94
Statements of Assets and Liabilities.................................. 96
Statements of Operations.............................................. 100
Statements of Changes in Net Assets................................... 104
Notes to the Financial Statements..................................... 110
Report of Independent Auditors.......................................... 123
</TABLE>
- ------------------------
This report is authorized for distribution to shareholders and to others only
when preceded or accompanied by a currently effective prospectus. Distributor:
Nicholas-Applegate Securities.
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<PAGE>
LARGE CAP GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; WILLIAM H. CHENOWETH, CFA, Partner, Portfolio Manager; ANDREW
B. GALLAGHER, Partner, Portfolio Manager; EMMY SOBIESKI, CFA, Portfolio Manager;
THOMAS J. SULLIVAN, Portfolio Manager.
GOAL: The Large Cap Growth Fund seeks to maximize long-term capital
appreciation by investing primarily in stocks from a universe of US companies
with market capitalizations corresponding to the upper 90% of the Russell 1000
Growth Index at time of purchase.
MARKET OVERVIEW: During the 12-month period ending March 31, 1999, the US
market was characterized by:
- a narrow advance among large-cap stocks
- outperformance of growth stocks versus value stocks
- outperformance of large caps versus mid and small caps
In the third quarter of 1998, many US indices reached new highs. However,
those stellar returns quickly eroded as investors grew fearful of wage
pressures, inflation and slower-than-expected economic growth in the United
States. Large caps declined but not as severely as small-cap stocks which were
among the hardest hit. Technology stocks suffered the most severe losses among
all sectors.
Late in the third quarter, cautious investors turned to the greater liquidity
and perceived safety of larger-cap stocks, accounting for their superior
performance. In an effort to thwart a US economic crisis, the Federal Reserve
Board lowered short-term interest rates three times in a six-week period ending
in mid-November. Confidence and liquidity returned to the markets and technology
stocks, particularly Internet-related issues, led a rally.
Reflecting investors' preference for large caps, the Dow Jones Industrial
Average closed above 10,000 for the first time on March 29.
PERFORMANCE: For the 12-month period ending March 31, 1999, the fund's I
shares gained 64.3% versus 28.1% for the Russell 1000 Growth Index.
PORTFOLIO SPECIFICS: Superior stock selection resulted in the fund's
outperformance. Among the top-performing holdings were consumer services stocks
America Online, At Home and Time Warner and technology companies Cisco Systems,
Sun Microsystems and Ascend Communications. At the end of March 1999, 21% of the
fund's stocks were in the consumer services sector, up from 8% last March.
Due to eroding earnings projections, we reduced our exposure on a
stock-specific basis among retail, drug/pharmaceutical and finance/investment
stocks.
MARKET OUTLOOK: We continue to find promising opportunities with exceptional
earnings growth in the large-cap segment. We expect stocks with the strongest
earnings growth rates will continue to attract investor attention. These are
precisely the stocks in which we invest.
- --------------------------------------------------------------------------------
1
<PAGE>
LARGE CAP GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN LARGE CAP GROWTH FUND
INSTITUTIONAL SHARES WITH THE RUSSELL 1000 GROWTH INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
64.28% As of 03/31/99 57.55%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Large Cap Growth Fund Institutional Shares Russell 1000 Growth Index
<S> <C> <C>
12/27/1996 $250,000.00 $250,000.00
1/97 $272,400.00 $263,452.07
2/97 $267,800.00 $261,660.59
3/97 $260,000.00 $247,499.52
4/97 $270,000.00 $263,933.49
5/97 $300,200.00 $282,981.57
6/97 $311,400.00 $294,300.83
7/97 $350,200.00 $320,317.03
8/97 $342,200.00 $301,578.48
9/97 $359,600.00 $316,419.16
10/97 $359,200.00 $304,711.65
11/97 $354,896.62 $317,652.75
12/97 $361,073.21 $321,210.46
1/98 $366,477.73 $330,814.66
2/98 $400,191.62 $355,698.54
3/98 $424,640.63 $369,876.68
4/98 $438,280.60 $374,995.77
5/98 $427,214.20 $364,353.39
6/98 $458,097.16 $386,670.04
7/98 $448,284.00 $384,110.28
8/98 $373,570.00 $326,455.33
9/98 $420,006.82 $351,533.63
10/98 $451,656.50 $379,796.93
11/98 $494,720.82 $408,699.48
12/98 $580,590.04 $445,564.17
1/99 $645,964.79 $471,718.79
2/99 $632,474.76 $450,161.24
3/31/1999 $697,590.09 $473,884.74
</TABLE>
This graph compares a $250,000 investment in the Large Cap Growth Fund
Institutional Shares with the Russell 1000 Growth Index, on a cumulative and
average annual total return basis. All return calculations reflect the
reinvestment of income dividends and capital gains distributions, if any, as
well as all fees and expenses applicable to the Fund.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The Russell 1000 Growth Index is an unmanaged index containing those companies
among the Russell 1000 Index securities with higher than average price-to-book
ratios and forecasted growth. The Russell 1000 Index contains the top 1,000
securities of the Russell 3000 Index, which comprises the 3,000 largest U.S.
securities as determined by total market capitalization. The Russell 1000 Growth
Index is considered generally representative of the U.S. market for large cap
stocks.
The Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
2
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
LARGE CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------
COMMON STOCK -- 96.1%
- -----------------------------------------------------------------
AIRLINES -- 1.6%
Southwest Airlines.................... 27,800 $ 840,950
-----------
APPAREL -- 3.0%
Nike, Inc. Cl. B...................... 26,200 1,511,412
-----------
BEVERAGES-NON-ALCOHOLIC -- 3.2%
Pepsi Bottling Group, Inc............. 75,600 1,639,575
-----------
BIOTECHNOLOGY -- 2.7%
Amgen, Inc.*.......................... 18,200 1,362,725
-----------
BROADCASTING -- 10.9%
AT&T Corp. - Liberty Media Group Cl.
A*.................................. 22,256 1,171,222
Comcast Corp. Cl. A................... 24,400 1,535,675
Infinity Broadcasting Corp. Cl. A*.... 60,800 1,565,600
Time Warner, Inc...................... 18,600 1,321,762
-----------
5,594,259
-----------
COMPUTERS -- 9.6%
Cisco Systems, Inc.*.................. 14,450 1,583,178
EMC Corp.*............................ 12,900 1,647,975
Sun Microsystems, Inc.*............... 13,600 1,699,150
-----------
4,930,303
-----------
DRUGS/PHARMACEUTICALS -- 3.1%
Forest Laboratories, Inc. Cl. A*...... 28,400 1,601,050
-----------
FOOD -- 1.9%
Kroger Co.*........................... 16,600 993,925
-----------
INSURANCE -- 5.2%
American International Group.......... 13,559 1,635,554
Cigna Corp............................ 12,600 1,056,038
-----------
2,691,592
-----------
INTERNET SOFTWARE -- 7.4%
America Online, Inc................... 13,300 1,941,800
At Home Corp. Series A*............... 11,900 1,874,250
-----------
3,816,050
-----------
LEISURE/GAMING -- 2.3%
MGM Grand, Inc.*...................... 35,300 1,186,962
-----------
MISCELLANEOUS MANUFACTURING -- 2.4%
Tyco International, Ltd............... 17,200 1,234,100
-----------
OIL & GAS SERVICES -- 3.1%
Halliburton Co........................ 41,500 1,597,750
-----------
PAPER & RELATED PRODUCTS -- 2.5%
International Paper Co................ 30,700 1,295,156
-----------
PIPELINES -- 3.0%
Williams Cos., Inc.................... 39,200 1,548,400
-----------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------
RETAIL-BUILDING PRODUCTS -- 2.3%
Home Depot, Inc....................... 18,600 $ 1,157,850
-----------
RETAIL-DISCOUNT -- 3.1%
Wal-Mart Stores, Inc.................. 17,300 1,594,844
-----------
SAVINGS & LOANS -- 2.7%
Washington Mutual, Inc................ 33,200 1,357,050
-----------
TELECOMMUNICATIONS -- 7.2%
Qwest Communications International,
Inc.*............................... 17,000 1,225,594
RSL Communications, Ltd. Cl. A*....... 28,200 1,013,437
Sprint Corp.- PCS Group*.............. 32,600 1,444,588
-----------
3,683,619
-----------
TELECOMMUNICATIONS EQUIPMENT -- 10.4%
Ascend Communications, Inc.*.......... 19,000 1,590,063
Motorola, Inc......................... 8,600 629,950
Nokia OYJ -- ADR...................... 10,200 1,588,650
Qualcomm, Inc.*....................... 12,400 1,542,250
-----------
5,350,913
-----------
TELEPHONE -- 8.5%
Alltel Corp........................... 24,200 1,509,475
AT&T Corp............................. 19,026 1,518,513
MCI Worldcom, Inc.*................... 15,000 1,328,438
-----------
4,356,426
-----------
TOTAL COMMON STOCK
(Cost: $38,196,071)............................... 49,344,911
-----------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------
COMMERCIAL PAPER -- 6.1%
- -----------------------------------------------------------------
Associates First Capital Corp.
5.000%, 04/01/99.................... $2,546,000 2,546,000
Central Illinois Public Utilities
5.030%, 04/01/99.................... 577,000 577,000
-----------
TOTAL COMMERCIAL PAPER
(Cost: $3,123,000)................................ 3,123,000
-----------
TOTAL INVESTMENTS -- 102.2%
(Cost: $41,319,071)............................. 52,467,911
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.2%)... (1,130,924)
--------------
NET ASSETS -- 100.0%.............................. $ 51,336,987
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
3
<PAGE>
VALUE FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; JOHN J. KANE, Partner, Portfolio Manager; LARRY SPEIDELL,
CFA, Partner, Director of Global/Systematic Portfolio Management and Research;
MARK STUCKELMAN, Portfolio Manager.
GOAL: The Value Fund seeks to provide total return through long-term capital
appreciation plus dividend income. Holdings reflect a diversified portfolio
comprised predominantly of US companies with larger market capitalizations.
MARKET OVERVIEW: During the 12-month period ending March 31, 1999, the US
market experienced a high level of volatility due to:
- economic weakness in emerging markets
- the devaluation of the Russian ruble
- a crisis of confidence exacerbated by losses at hedge fund Long-Term Capital
Management
Throughout the period, the US market was characterized by the following
themes:
- large-cap returns outpaced those of mid and small caps
- growth-oriented stocks outperformed value
- a narrow advance among select large caps masked broader market weakness
With a questionable outlook for corporate profits, investors focused on stocks
with the greatest earnings gains, especially within the large-cap segment. As a
result, growth stocks significantly outperformed value stocks in the period.
PERFORMANCE: For the 12-month period ending March 31, 1999, the fund's I
shares gained 4.4% versus 5.1% for the Russell 1000 Value Index and 18.5% for
the S&P 500.
PORTFOLIO SPECIFICS: Returns for the fund trailed the S&P 500 as the
benchmark's growth-oriented components delivered exceptional gains. We found few
stocks meeting our valuation criteria among technology and Internet-related
companies. As a result, we were underweighted in these strong-performing areas.
Among holdings that had the most adverse impact on returns were Bear Stearns
and BankAmerica, both of which suffered from exposure to the default on Russian
bonds. We sold those positions in the fourth quarter of 1998.
Among the best-performing holdings were Wal-Mart and United Technologies.
Also, stock selection in the health technology sector made a positive
contribution to fund gains.
LOOKING FORWARD: While they have been overlooked, value stocks could recapture
investor favor as a result of attractive relative valuations, accelerating
corporate profits in the second half of 1999 and a rebound in the global
economy.
While the appeal of growth stocks has been enhanced by an overall lackluster
profit environment, we believe value stocks will benefit from an anticipated
pick-up in the earnings growth trend. As improving earnings become more
prevalent, valuations will play a greater role in dictating investor preference.
- --------------------------------------------------------------------------------
4
<PAGE>
VALUE FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN VALUE FUND
INSTITUTIONAL SHARES WITH THE S&P 500 INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
4.43% As of 03/31/99 28.72%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VALUE FUND INSTITUTIONAL
SHARES S&P 500 INDEX
<S> <C> <C>
4/30/96 $250,000.00 $250,000
6/96 $263,800.00 $257,424.51
9/96 $278,800.00 $265,375.00
12/96 $310,622.05 $287,496.57
3/97 $316,935.51 $295,204.43
6/97 $369,758.09 $346,741.03
9/97 $428,683.68 $372,714.77
12/97 $436,586.20 $373,414.92
3/98 $500,064.74 $436,896.75
6/98 $511,938.43 $451,323.27
9/98 $448,322.65 $406,427.61
12/98 $524,486.61 $493,000.28
3/31/99 $522,237.74 $517,565.47
</TABLE>
This graph compares a $250,000 investment in the Value Fund Institutional Shares
with the S&P 500 Index, on a cumulative and average annual total return basis.
All return calculations reflect the reinvestment of income dividends and capital
gains distributions, if any, as well as all fees and expenses applicable to the
Fund.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The S&P 500 Index contains 500 industrial, transportation, utility and financial
companies and is considered to be generally representative of the U.S. stock
market.
Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
5
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
VALUE FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------
COMMON STOCK -- 96.7%
- -----------------------------------------------------------------
AEROSPACE/DEFENSE -- 4.6%
Boeing Co............................. 7,800 $ 266,175
United Technologies Corp.............. 3,300 446,944
-----------
713,119
-----------
AIRLINES -- 1.0%
AMR Corp.*............................ 2,600 152,262
-----------
AUTO MANUFACTURERS -- 4.2%
Ford Motor Co......................... 8,200 465,350
General Motors Corp................... 2,000 173,750
-----------
639,100
-----------
BEVERAGES -- ALCOHOLIC -- 1.1%
Anheuser-Busch Cos., Inc.............. 2,300 175,231
-----------
CHEMICALS -- 1.4%
DOW Chemical Co....................... 2,300 214,331
-----------
COMPUTER SOFTWARE -- 2.8%
Compuware Corp.*...................... 4,200 100,275
Microsoft Corp.*...................... 3,600 322,650
-----------
422,925
-----------
COMPUTERS -- 5.2%
Comverse Technology, Inc.*............ 1,900 161,500
EMC Corp.*............................ 1,800 229,950
International Business Machines
Corp................................ 1,300 230,425
NCR Corp.*............................ 3,400 170,000
-----------
791,875
-----------
DISTRIBUTION/WHOLESALE -- 0.1%
CHS Electronics, Inc.................. 4,700 14,981
-----------
DIVERSIFIED FINANCIAL SERVICES -- 9.7%
Citigroup, Inc........................ 6,100 389,637
Countrywide Credit IND, Inc........... 4,000 150,000
Federal Home Loan Mortgage Corp....... 2,800 159,950
Federal National Mortgage
Association......................... 3,600 249,300
Lehman Brothers Holdings, Inc......... 3,900 233,025
Morgan Stanley Dean Witter Discover &
Co.................................. 3,000 299,812
-----------
1,481,724
-----------
DRUGS/PHARMACEUTICALS -- 0.7%
Bristol-Myers Squibb Co............... 1,800 115,762
-----------
ELECTRIC -- 6.6%
Allegheny Energy, Inc................. 5,200 153,400
Entergy Corp.......................... 5,900 162,250
PECO Energy Co........................ 3,300 152,625
Public Service Enterprise Group....... 6,100 232,944
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------
</TABLE>
ELECTRIC (CONTINUED)
<TABLE>
<S> <C> <C>
Texas Utilities Co.................... 3,800 $ 158,413
Unicom Corp........................... 4,200 153,563
-----------
1,013,195
-----------
ENTERTAINMENT -- 1.5%
Viacom, Inc. Cl. B*................... 2,800 235,025
-----------
HEALTH CARE -- 1.0%
Wellpoint Health Networks............. 2,100 159,206
-----------
HOME BUILDING -- 0.7%
Lennar Corp........................... 4,700 105,162
-----------
HOME FURNISHINGS -- 1.3%
Maytag Corp........................... 3,300 199,238
-----------
HOUSEHOLD PRODUCTS/WARES -- 2.0%
Clorox Co............................. 2,600 304,687
-----------
INSURANCE -- 6.9%
Allstate Corp......................... 6,100 226,081
AMBAC Financial Group, Inc............ 3,000 162,000
Hartford Life, Inc. Cl. A............. 1,900 104,500
Jefferson-Pilot Corp.................. 3,400 230,350
Marsh & Mclennan Cos.................. 3,100 229,981
Nationwide Financial Services Cl. A... 2,500 105,000
-----------
1,057,912
-----------
MACHINERY -- DIVERSIFIED -- 1.5%
Ingersoll-Rand Co..................... 4,600 228,275
-----------
MINING -- 0.3%
Cyprus Amax Minerals Co............... 4,200 50,925
-----------
MONEY CENTER BANKS -- 4.0%
BankAmerica Corp...................... 2,200 155,375
Chase Manhattan Corp.................. 5,700 463,481
-----------
618,856
-----------
OIL & GAS PRODUCERS -- 8.3%
Chevron Corp.......................... 1,900 168,031
Coastal Corp.......................... 6,700 221,100
Diamond Offshore Drilling............. 2,400 75,900
Exxon Corp............................ 7,100 500,994
Phillips Petroleum Co................. 3,300 155,925
Tosco Corp............................ 3,100 76,919
Transocean Offshore, Inc.............. 2,300 66,269
-----------
1,265,138
-----------
OTHER COMMERCIAL SERVICES -- 0.7%
Hertz Corp. Cl. A..................... 2,100 112,350
-----------
PAPER & RELATED PRODUCTS -- 1.4%
Georgia-Pacific....................... 2,900 215,325
-----------
PIPELINES -- 1.0%
Enron Corp............................ 2,400 154,200
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
6
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- -----------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
REGIONAL/COMMERCIAL BANKS -- 8.0%
Bank One Corp......................... 8,400 $ 462,525
First Union Corp...................... 3,000 160,313
Fleet Financial Group, Inc............ 7,400 278,425
M&T Bank Corp......................... 300 143,700
Wells Fargo Co........................ 5,000 175,313
-----------
1,220,276
-----------
RETAIL -- DISCOUNT -- 3.4%
K Mart Corp.*......................... 11,200 188,300
Wal-Mart Stores, Inc.................. 3,600 331,875
-----------
520,175
-----------
SAVINGS & LOANS -- 2.7%
Bank United Corp. Cl. A............... 2,300 94,013
Charter One Financial, Inc............ 5,400 155,841
Golden West Financial Corp............ 1,700 162,350
-----------
412,204
-----------
TELEPHONE -- 13.9%
Ameritech Corp........................ 4,200 243,075
AT&T Corp............................. 6,700 534,744
Bellsouth Corp........................ 7,300 292,456
GTE Corp.............................. 5,900 356,950
SBC Communications, Inc............... 4,700 221,488
Sprint Corp.- FON Group............... 2,400 235,500
U.S. West, Inc........................ 4,500 247,781
-----------
2,131,994
-----------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------
TEXTILES -- 0.7%
Mohawk Industries, Inc.*.............. 3,400 $ 102,000
-----------
TOTAL COMMON STOCK
(Cost: $13,305,029)............................... 14,827,453
-----------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------
COMMERCIAL PAPER -- 32.6%
- -----------------------------------------------------------------
Associates First Capital Corp.
5.000%, 04/01/99.................... $ 770,000 770,000
Central Illinois Public Utilities
5.030%, 04/01/99.................... 4,221,000 4,221,000
-----------
TOTAL COMMERCIAL PAPER
(Cost: $4,991,000)................................ 4,991,000
-----------
TOTAL INVESTMENTS -- 129.3%
(Cost: $18,296,029)............................. 19,818,453
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (29.3%)................................. (4,496,094)
--------------
NET ASSETS -- 100.0%.............................. $ 15,322,359
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
7
<PAGE>
MID CAP GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; WILLIAM H. CHENOWETH, CFA, Partner, Portfolio Manager; ANDREW
GALLAGHER, Partner, Portfolio Manager; EMMY SOBIESKI, CFA, Portfolio Manager;
THOMAS J. SULLIVAN, Portfolio Manager.
GOAL: The Mid Cap Growth Fund seeks to maximize long-term capital appreciation
through investments in US securities corresponding to the middle 90% of the
Russell Midcap Growth Index at the time of purchase.
MARKET OVERVIEW: During the 12-month period ending March 31, 1999, the US
market was characterized by:
- a narrow advance among large-cap stocks
- outperformance of growth stocks versus value stocks
- outperformance of large caps versus mid and small caps
In the third quarter of 1998, many US indices reached new highs. However,
those stellar returns quickly eroded as investors grew fearful of wage
pressures, inflation and slower-than-expected economic growth in the United
States. Mid- and small-cap stocks suffered greater declines than large caps.
Late in the third quarter, cautious investors turned to the greater liquidity
and perceived safety of larger-cap stocks, accounting for their superior
performance. In an effort to thwart a US economic crisis, the Federal Reserve
Board lowered short-term interest rates three times in a six-week period ending
in mid-November. Confidence and liquidity returned to the markets and technology
stocks, particularly Internet-related issues, led a rally.
Reflecting investors' preference for large caps, the Dow Jones Industrial
Average closed above 10,000 for the first time on March 29. Despite its record-
setting performance, the Dow's climb masked broader market weakness.
PERFORMANCE: For the 12-month period ending March 31, 1999, the fund's I
shares gained 16.1% versus 8.9% for the Russell Midcap Growth Index.
PORTFOLIO SPECIFICS: Stock selection, especially in the consumer services and
technology sectors, was responsible for the fund's relative outperformance.
Among the best-performing holdings during the period were Amazon.com, At Home
and Ascend Communications.
During the period, we reduced our exposure on a company-by-company basis in
the following industries due to concerns over the sustainability of earnings
growth: software; department/discount stores; and drugs/pharmaceuticals.
MARKET OUTLOOK: The fundamental strengths evident within the mid-cap segment
of the market continue to inspire optimism. Earnings growth remains strong and
valuations, relative to large-cap stocks, reached historic lows. We expect
stocks with the strongest earnings growth rates will continue to attract
investor attention. These are precisely the stocks in which we invest.
- --------------------------------------------------------------------------------
8
<PAGE>
MID CAP GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN MID CAP GROWTH FUND
INSTITUTIONAL SHARES WITH THE RUSSELL MID CAP GROWTH INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/99
1 YEAR 5 YEARS 10 YEARS
16.09% 18.75% 19.51%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MID CAP GROWTH
FUND INSTITUTIONAL
SHARES RUSSELL MID CAP GROWTH INDEX
<S> <C> <C>
9/30/85 250,000.00 250,000.00
12/85 311,844.68 n/a
12/86 414,298.40 293,875.99
12/87 429,183.67 301,984.30
12/88 483,551.39 341,012.60
12/89 647,588.43 448,379.58
12/90 652,316.35 425,364.42
12/91 1,014,497.89 625,418.63
12/92 1,151,984.48 679,904.76
12/93 1,379,769.31 756,008.21
12/94 1,234,649.94 739,632.42
12/95 1,710,915.34 991,040.20
12/96 1,992,539.17 1,164,278.99
12/97 2,324,431.52 1,426,667.47
12/98 2,665,064.26 1,681,523.82
3/31/99 3,028,410.30 1,739,029.51
</TABLE>
This graph compares a $250,000 investment in Mid Cap Growth Fund Institutional
Shares with the Russell Mid Cap Growth Index, on a cumulative and average annual
total return basis. All return calculations reflect the reinvestment of income
dividends and capital gains distributions, if any, as well as all fees and
expenses. Performance results reflect the total returns of a predecessor limited
partnership managed by Nicholas-Applegate Capital Management prior to the
effective date of the Fund's registration statement which was 4/19/93. Limited
partnership returns are restated to reflect all fees and expenses applicable to
the Fund. If the limited partnership had been registered as an investment
company under the federal securities laws, its performance might have been
adversely affected because of the additional restrictions applicable to
registered investment companies.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The Russell Mid Cap Growth Index measures the performance of those companies
among the 800 smallest companies in the Russell 1000 Index with higher than
average price-to-book ratios and forecasted growth. The average market
capitalization is $4 billion. The Russell Mid Cap Growth Index is considered
generally representative of the U.S. market for mid cap stocks. The index
incepted on 12/31/85.
Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
9
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
MID CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
COMMON STOCK -- 99.3%
- ------------------------------------------------------------------
ADVERTISING -- 2.8%
Doubleclick, Inc.*.................... 18,800 $ 3,422,775
Lamar Advertising Co.*................ 94,100 3,193,519
Outdoor Systems, Inc.*................ 189,200 5,676,000
------------
12,292,294
------------
AEROSPACE/DEFENSE -- 0.8%
Gulfstream Aerospace Corp.*........... 82,500 3,578,437
------------
AIRLINES -- 0.7%
Southwest Airlines.................... 106,400 3,218,600
------------
APPLICATIONS SOFTWARE -- 0.9%
Citrix Systems, Inc.*................. 99,000 3,774,375
------------
BEVERAGES-NON-ALCOHOLIC -- 0.5%
Pepsi Bottling Group, Inc.*........... 106,600 2,311,887
------------
BIOTECHNOLOGY -- 2.1%
Biogen, Inc.*......................... 23,200 2,652,050
Genzyme Corp.-General Division*....... 62,900 3,172,519
Immunex Corp.*........................ 38,000 3,163,500
------------
8,988,069
------------
BROADCASTING -- 4.9%
Clear Channel Communications*......... 144,800 9,710,650
COX Communications, Inc. Cl. A*....... 64,600 4,885,375
Jacor Communications, Inc.*........... 28,800 2,188,800
USA Networks, Inc.*................... 127,500 4,566,094
------------
21,350,919
------------
COMPUTER SOFTWARE -- 2.3%
ISS Group, Inc.*...................... 51,100 4,062,450
Veritas Software Corp.*............... 75,450 6,092,588
------------
10,155,038
------------
COMPUTERS -- 5.6%
ASM Lithography Holding N.V.*......... 131,000 5,895,000
Network Appliance, Inc.*.............. 124,800 6,318,000
Rambus, Inc.*......................... 50,200 3,231,625
Safeguard Scientifics, Inc.*.......... 51,000 3,458,437
VeriSign, Inc.*....................... 36,400 5,605,600
------------
24,508,662
------------
DIVERSIFIED FINANCIAL SERVICES -- 6.6%
Capital One Financial Corp............ 24,100 3,639,100
Charles Schwab Corp................... 75,000 7,209,375
CIT Group, Inc. Cl. A................. 101,500 3,102,094
Donaldson, Lufkin & Jenrette.......... 94,300 6,577,425
E*trade Group, Inc.*.................. 60,000 3,498,750
Providian Financial Corp.............. 40,800 4,488,000
------------
28,514,744
------------
DRUGS/PHARMACEUTICALS -- 4.7%
Allergan, Inc......................... 44,300 3,892,862
Amerisource Health Corp. Cl. A*....... 81,800 2,796,537
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
</TABLE>
DRUGS/PHARMACEUTICALS (CONTINUED)
<TABLE>
<S> <C> <C>
Cardinal Health, Inc.................. 101,593 $ 6,705,138
Forest Laboratories, Inc. Cl. A*...... 72,100 4,064,637
Watson Pharmaceutical, Inc.*.......... 66,700 2,943,137
------------
20,402,311
------------
ELECTRIC -- 0.6%
Montana Power Co...................... 34,200 2,515,837
------------
ELECTRONIC COMPONENTS/SEMICONDUCTORS -- 7.0%
Applied Materials, Inc.*.............. 150,800 9,302,475
Conexant Systems, Inc.*............... 169,800 4,701,338
LSI Logic Corp.*...................... 122,600 3,823,588
Novellus Systems, Inc.*............... 84,600 4,663,575
Vitesse Semiconductor Corp.*.......... 64,200 3,250,125
Xilinx, Inc.*......................... 118,800 4,818,825
------------
30,559,926
------------
ELECTRONICS -- 3.9%
Cymer, Inc.*.......................... 219,900 4,370,513
Solectron Corp.*...................... 53,800 2,612,663
Teradyne, Inc.*....................... 100,300 5,472,619
Uniphase Corp.*....................... 37,100 4,271,138
------------
16,726,933
------------
FOOD -- 1.8%
Keebler Foods Co.*.................... 103,000 3,759,500
Safeway, Inc.*........................ 74,700 3,833,044
------------
7,592,544
------------
HEALTH CARE -- 0.9%
Wellpoint Health Networks*............ 48,700 3,692,069
------------
INSURANCE -- 1.3%
Hartford Life, Inc. Cl. A............. 52,800 2,904,000
Reliastar Financial Corp.............. 65,000 2,770,625
------------
5,674,625
------------
INTERNET SOFTWARE -- 10.5%
At Home Corp. Series A*............... 40,400 6,363,000
CMGI, Inc.*........................... 84,600 15,487,087
Earthlink Network, Inc.*.............. 31,000 1,860,000
Infoseek Corp.*....................... 70,000 5,180,000
Network Solutions, Inc.*.............. 62,800 6,641,100
Yahoo!, Inc.*......................... 59,000 9,934,125
------------
45,465,312
------------
LEISURE/GAMING -- 0.7%
Mirage Resorts, Inc.*................. 148,200 3,149,250
------------
MEDICAL SUPPLIES/EQUIPMENT -- 2.0%
Guidant Corp.......................... 109,100 6,600,550
Visx, Inc.*........................... 21,300 2,291,081
------------
8,891,631
------------
NETWORK SOFTWARE -- 1.3%
Novell, Inc.*......................... 219,700 5,533,694
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
10
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OIL & GAS PRODUCERS -- 2.4%
Burlington Resources, Inc............. 95,300 $ 3,806,044
Diamond Offshore Drilling............. 103,400 3,270,025
Transocean Offshore, Inc.............. 123,400 3,555,462
------------
10,631,531
------------
OIL & GAS SERVICES -- 2.5%
Global Industries, Ltd.*.............. 254,000 2,571,750
Smith International, Inc.*............ 132,300 5,292,000
Weatherford International, Inc.*...... 112,000 2,926,000
------------
10,789,750
------------
OPTICAL SUPPLIES -- 1.5%
Bausch & Lomb, Inc.................... 100,600 6,539,000
------------
OTHER COMMERCIAL SERVICES -- 2.1%
Concord EFS, Inc.*.................... 94,900 2,615,681
Paychex, Inc.......................... 89,150 4,229,053
USWeb Corp.*.......................... 57,000 2,351,250
------------
9,195,984
------------
OTHER FINANCIAL SERVICES -- 1.5%
Fiserv, Inc........................... 122,900 6,590,512
------------
PACKAGING & CONTAINERS -- 0.9%
Smurfit-Stone Container Corp.*........ 196,700 3,798,769
------------
PAPER & RELATED PRODUCTS -- 0.6%
Georgia-Pacific....................... 37,500 2,784,375
------------
RECREATIONAL PRODUCTS -- 1.1%
Harley-Davidson, Inc.................. 81,800 4,703,500
------------
REGIONAL/COMMERCIAL BANKS -- 0.6%
Firstar Corp.......................... 27,500 2,461,250
------------
RENTAL AUTO/EQUIPMENT -- 0.6%
United Rentals, Inc.*................. 90,500 2,579,250
------------
RETAIL-APPAREL -- 2.8%
Abercrombie & Fitch Co. Cl. A*........ 53,400 4,912,800
American Eagle Outfitters*............ 44,700 3,204,431
Intimate Brands, Inc.................. 85,700 4,124,312
------------
12,241,543
------------
RETAIL-BEDDING -- 1.0%
Bed Bath & Beyond, Inc.*.............. 123,300 4,500,450
------------
RETAIL-CONSUMER ELECTRONICS -- 0.9%
Circuit City Stores................... 48,700 3,731,638
------------
RETAIL-DEPARTMENT STORES -- 1.0%
Kohls Corp............................ 60,900 4,316,287
------------
RETAIL-HYPERMARKETS -- 2.0%
Costco Cos., Inc.*.................... 94,900 8,689,281
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
RETAIL-INTERNET -- 2.0%
Amazon.Com, Inc.*..................... 38,300 $ 6,594,781
Priceline.com, Inc.*.................. 27,100 2,245,912
------------
8,840,693
------------
RETAIL-MAIL ORDER -- 0.4%
Micro Warehouse, Inc.*................ 116,100 1,872,113
------------
RETAIL-OFFICE SUPPLIES -- 3.0%
Office Depot, Inc.*................... 117,700 4,332,831
Staples, Inc.*........................ 261,650 8,601,744
------------
12,934,575
------------
RETAIL-RESTAURANTS -- 1.1%
Starbucks Corp.*...................... 163,400 4,585,413
------------
TELECOMMUNICATIONS -- 5.5%
Crown Castle International Corp.*..... 101,200 1,821,600
Qwest Communications International,
Inc.*............................... 87,600 6,315,413
Sprint Corp.- PCS Group*.............. 96,300 4,267,294
Western Wireless Corp. Cl. A*......... 104,600 3,791,750
Winstar Communications, Inc.*......... 209,000 7,595,844
------------
23,791,901
------------
TELECOMMUNICATIONS EQUIPMENT -- 3.2%
American Tower Corp. Cl. A*........... 97,000 2,376,500
Ascend Communications, Inc.*.......... 90,200 7,548,613
RF Micro Devices, Inc.*............... 42,600 4,076,288
------------
14,001,401
------------
TRANSPORTATION-AIR FREIGHT -- 0.7%
FDX Corp.*............................ 30,500 2,830,781
------------
TOTAL COMMON STOCK
(Cost: $310,508,478).............................. 431,307,154
------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ------------------------------------------------------------------
COMMERCIAL PAPER -- 3.2%
- ------------------------------------------------------------------
Central Illinois Public Utilities
5.030%, 04/01/99.................... $5,965,000 5,965,000
Smithkline Beecham PLC
5.000%, 04/01/99.................... 8,085,000 8,085,000
------------
TOTAL COMMERCIAL PAPER
(Cost: $14,050,000)............................... 14,050,000
------------
TOTAL INVESTMENTS -- 102.5%
(Cost: $324,558,478)............................ 445,357,154
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.5%)... (10,882,671)
--------------
NET ASSETS -- 100.0%.............................. $ 434,474,483
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
11
<PAGE>
SMALL CAP GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; THOMAS BLEAKLEY, Partner, Portfolio Manager; JOHN C. MCCRAW,
Portfolio Manager; PAUL E. CLUSKEY, Investment Analyst; AARON HARRIS, Portfolio
Manager.
GOAL: The Small Cap Growth Fund seeks to maximize long-term capital
appreciation through investments primarily in US companies with market
capitalizations corresponding to the middle 90% of the Russell 2000 Growth Index
at time of purchase.
MARKET OVERVIEW: During the 12-month period ending March 31, 1999, the market
environment was characterized by extreme volatility. After climbing to record
highs in mid-July, US stocks tumbled in late summer and the fund lost nearly 25%
in August. However, over the following seven months, small-cap stocks rebounded.
In that period, the fund gained more than 54%--despite a 10.6% decline in
February amid rising interest rates that spooked investors.
A variety of factors triggered stocks' decline in late July including:
- expectations for dwindling corporate profits
- increasing global economic and currency turmoil
- evidence of a slowing US economy
In this environment, small-cap stocks were especially vulnerable as investors
preferred the liquidity and perceived safety of larger caps.
PERFORMANCE: For the 12-month period ending March 31, 1999, the fund's I
shares gained 1.0% versus an 11.0% decline for the Russell 2000 Growth Index.
PORTFOLIO SPECIFICS: Despite an extremely difficult period, stock selection,
especially within the technology sector, helped the fund outperform its
benchmark by a wide margin. Among the strongest performers, especially late in
the period, were Internet-related stocks and semiconductor capital equipment
issues such as Lycos, Real Networks and Mindspring Enterprises.
Appreciation among technology holdings contributed to the fund's increased
weighting in this sector. Technology stocks comprised 38% of the portfolio on
March 31, up from 23.1% a year ago.
Strong returns among financial services holdings also contributed to gains.
Exposure to brokerage stocks, both traditional and on-line firms, was a positive
contributor. CMGI, Ameritrade and Hambrecht & Quist all delivered strong gains
early in 1999.
MARKET OUTLOOK: The fundamental strengths evident within the small-cap segment
of the market continue to inspire optimism. Earnings growth remains strong and
valuations, relative to large-cap stocks, reached their lowest point since the
inception of the Russell 2000 Index in 1979.
Reflecting the fund's strengths, the median earnings growth rate for holdings
as of March 31 was 23.6% versus 15.5% for the Russell 2000 Growth Index.
- --------------------------------------------------------------------------------
12
<PAGE>
SMALL CAP GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN SMALL CAP GROWTH FUND
INSTITUTIONAL SHARES WITH THE RUSSELL 2000 GROWTH INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/99 SINCE
1 YEAR 5 YEARS INCEPTION
1.03% 16.12% 13.27%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SMALL CAP RUSSELL 2000
GROWTH FUND INSTITUTIONAL SHARES GROWTH INDEX
<S> <C> <C>
10/1/93 250,000.00 250,000.00
12/93 249,920.00 256,564.76
6/94 217,519.14 230,681.86
12/94 241,146.93 250,325.46
6/95 284,571.01 290,246.22
12/95 327,708.03 328,077.75
6/96 386,377.58 367,193.41
12/96 389,595.30 365,029.54
6/97 407,660.00 383,791.07
12/97 436,748.43 411,914.01
6/98 468,959.06 434,407.13
12/98 455,853.84 417,053.11
3/31/99 495,828.16 410,038.50
</TABLE>
This graph compares a $250,000 investment in the Small Cap Growth Fund
Institutional Shares with the Russell 2000 Growth Index, on a cumulative and
average annual total return basis. All return calculations reflect the
reinvestment of income dividends and capital gains distributions, if any, as
well as all fees and expenses.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The Russell 2000 Growth Index is an unmanaged index containing those securities
in the Russell 2000 Index with a greater-than-average growth orientation.
Companies in this index generally have higher price-to-book and price-earnings
ratios. The Russell 2000 Index is an unmanaged index and is a widely regarded
small-cap index of the 2,000 smallest securities in the Russell 3000 Index which
comprises the 3,000 largest U.S. securities as determined by total market
capitalization.
The Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
13
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------
COMMON STOCK -- 99.7%
- -------------------------------------------------------------------------
ADVERTISING -- 0.9%
Abacus Direct Corp.*.................. 47,200 $ 3,870,400
Getty Images, Inc.*................... 37,900 795,900
---------------
4,666,300
---------------
AEROSPACE/DEFENSE -- 0.8%
Aeroflex, Inc.*....................... 20,300 289,275
Kellstrom Industries, Inc.*........... 43,000 682,625
L-3 Communications Holdings, Inc.*.... 64,200 2,969,250
---------------
3,941,150
---------------
AIRLINES -- 1.2%
Alaska Airgroup, Inc.*................ 33,300 1,581,750
Atlantic Coast Airlines Holdings*..... 76,300 2,145,937
Mesaba Holdings, Inc.*................ 18,600 249,356
Midwest Express Holdings*............. 32,800 963,500
Skywest, Inc.......................... 44,100 1,273,387
---------------
6,213,930
---------------
APPAREL -- 0.7%
Cutter & Buck, Inc.*.................. 2,200 70,400
Novel Denim Holdings, Ltd.*........... 13,400 130,650
Quiksilver, Inc.*..................... 16,400 692,900
Timberland Co. Cl. A*................. 40,900 2,579,256
---------------
3,473,206
---------------
APPLICATIONS SOFTWARE -- 2.4%
Broadvision, Inc.*.................... 51,300 3,065,175
Clarify, Inc.*........................ 46,200 1,232,963
Exchange Applications, Inc.*.......... 5,000 125,625
New ERA Of Networks, Inc.*............ 60,300 4,085,325
Peregrine Systems, Inc.*.............. 68,000 2,286,500
Serena Software, Inc.*................ 14,800 207,200
Software AG Systems, Inc.*............ 47,000 393,625
Webtrends Corp.*...................... 11,000 534,875
---------------
11,931,288
---------------
BEVERAGES-ALCOHOLIC -- 0.2%
Canandaigua Brands, Inc. Cl. A*....... 22,800 1,148,550
---------------
BIOTECHNOLOGY -- 1.3%
ICOS Corp.*........................... 42,900 1,447,875
IDEC Pharmaceuticals Corp.*........... 41,600 2,137,200
Incyte Pharmaceuticals, Inc.*......... 36,900 740,306
Pharmaceutical Product Development*... 55,500 1,862,719
Serologicals Corp.*................... 44,175 599,123
---------------
6,787,223
---------------
BROADCASTING -- 1.6%
Emmis Communications Corp. Cl. A*..... 66,100 3,305,000
Entercom Communications Corp.*........ 25,000 884,375
Saga Communications, Inc. Cl. A*...... 69,096 1,235,091
SBS Broadcasting S.A.*................ 78,200 2,512,175
---------------
7,936,641
---------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------
CHEMICALS -- 0.4%
Spartech Corp......................... 26,700 $ 550,687
The Scotts Co. Cl. A*................. 38,800 1,450,150
---------------
2,000,837
---------------
COMMUNICATIONS SOFTWARE -- 0.3%
Avid Technology, Inc.*................ 12,300 215,189
AVT Corp.*............................ 52,500 1,253,438
DSET Corp.*........................... 1,500 17,538
---------------
1,486,165
---------------
COMPUTER SOFTWARE -- 3.4%
Axent Technologies, Inc.*............. 39,900 960,094
BindView Development Corp.*........... 36,200 1,126,725
Bottomline Technologies, Inc.*........ 4,500 287,156
Business Objects S.A.--ADR*........... 31,200 926,250
Harbinger Corp.*...................... 82,700 558,225
ISS Group, Inc.*...................... 20,600 1,637,700
Macromedia, Inc.*..................... 64,900 2,940,781
Mercury Interactive Corp.*............ 194,200 6,918,375
Onyx Software Corp.*.................. 8,500 326,188
Pinnacle Systems, Inc.*............... 16,700 759,850
Smith-Gardner & Associates, Inc.*..... 11,000 155,375
Verity, Inc.*......................... 22,300 747,050
---------------
17,343,769
---------------
COMPUTERS -- 8.8%
Affiliated Computer Services, Inc. Cl.
A*.................................. 56,400 2,580,300
Apex PC Solutions, Inc.*.............. 98,850 1,377,722
Comverse Technology, Inc.*............ 24,400 2,074,000
Digital River, Inc.*.................. 20,000 800,000
Ecsoft Group PLC--ADR*................ 8,500 270,938
Electronics For Imaging*.............. 74,300 2,897,700
Factset Research Systems, Inc......... 21,600 934,200
Globix Corp.*......................... 10,000 373,125
Henry (Jack) & Associates............. 50,950 1,872,413
International Integration, Inc.*...... 11,300 361,600
Mentor Graphics Corp.*................ 66,000 891,000
Network Appliance, Inc.*.............. 148,400 7,512,750
Rambus, Inc.*......................... 32,700 2,105,063
S3, Inc.*............................. 85,900 644,250
Safeguard Scientifics, Inc.*.......... 29,000 1,966,563
Sandisk Corp.*........................ 50,200 1,330,300
Sequent Computer Systems, Inc.*....... 74,000 670,625
Sykes Enterprises, Inc.*.............. 57,100 1,845,044
VeriSign, Inc.*....................... 54,600 8,408,400
Visual Networks, Inc.*................ 11,100 414,862
Whittman-Hart, Inc.*.................. 176,500 3,794,750
Xircom, Inc.*......................... 60,900 1,530,112
---------------
44,655,717
---------------
COSMETICS/PERSONAL CARE -- 0.2%
Chattem, Inc.*........................ 25,400 793,750
---------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
14
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
DATA PROCESSING/MANAGEMENT SOFTWARE -- 0.4%
Reynolds & Reynolds Cl. A............. 94,000 $ 1,786,000
TSI International Software, Ltd.*..... 6,000 292,875
---------------
2,078,875
---------------
DISTRIBUTION/WHOLESALE -- 1.0%
Brightpoint, Inc.*.................... 100,200 593,372
CDW Computer Centers, Inc.*........... 34,300 2,366,700
Cellstar Corp.*....................... 33,400 346,525
CHS Electronics, Inc.*................ 70,800 225,675
Insight Enterprises, Inc.*............ 60,225 1,490,569
---------------
5,022,841
---------------
DIVERSIFIED FINANCIAL SERVICES -- 1.4%
Affiliated Managers Group*............ 28,200 733,200
Ameritrade Holding Corp. Cl. A*....... 63,400 3,914,950
Hambrecht & Quist, Inc.*.............. 27,400 950,437
Metris Cos., Inc...................... 35,500 1,433,313
Rock Financial Corp................... 10,000 180,000
T & W Financial Corp.*................ 10,800 90,450
---------------
7,302,350
---------------
DRUGS/PHARMACEUTICALS -- 6.3%
Advance Paradigm, Inc.*............... 30,100 1,901,944
Alkermes, Inc.*....................... 50,100 1,365,225
Alpharma, Inc. Cl. A*................. 49,500 1,942,875
Bindley Western Industries, Inc....... 66,200 1,890,837
Biomatrix, Inc.*...................... 71,300 5,561,400
Gilead Sciences, Inc.*................ 49,200 2,238,600
Jones Medical Industries, Inc......... 103,500 3,596,625
Medicis Pharmaceutical Cl. A*......... 104,850 3,145,500
Medimmune, Inc.*...................... 68,900 4,078,019
NBTY, Inc.*........................... 55,800 272,025
Nexstar Pharmaceuticals, Inc.*........ 48,900 834,356
Parexel International Corp.*.......... 29,500 610,281
Priority Healthcare Corp.*............ 16,300 737,575
Sepracor, Inc.*....................... 25,800 2,896,050
Trimeris, Inc.*....................... 34,300 437,325
Zonagen, Inc.*........................ 14,000 301,000
---------------
31,809,637
---------------
EDUCATIONAL SOFTWARE -- 0.2%
Advantage Learning Systems, Inc.*..... 39,600 1,230,075
---------------
ELECTRICAL COMPONENTS & EQUIPMENT -- 0.5%
C-Cube Microsystems, Inc.*............ 29,300 580,506
SLI, Inc.*............................ 93,750 1,968,750
---------------
2,549,256
---------------
ELECTRONIC COMPONENTS/SEMICONDUCTORS -- 6.5%
Actel Corp.*.......................... 54,300 892,556
Alpha Industries, Inc.*............... 50,300 924,263
American Xtal Technology, Inc.*....... 74,200 1,669,500
Applied Micro Circuits Corp.*......... 68,400 2,924,100
Electro Scientific Industries,
Inc.*............................... 25,800 1,199,700
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------
</TABLE>
ELECTRONIC COMPONENTS/SEMICONDUCTORS (CONTINUED)
<TABLE>
<S> <C> <C>
Kulicke & Soffa Industries*........... 48,400 $ 1,222,100
LAM Research Corp.*................... 33,300 965,700
Lattice Semiconductor Corp.*.......... 25,300 1,152,731
Level One Communications, Inc.*....... 36,100 1,755,363
Micrel, Inc.*......................... 35,200 1,762,200
Microchip Technology, Inc.*........... 45,200 1,565,050
MIPS Technologies, Inc.*.............. 39,900 2,433,900
Moog, Inc. Cl. A...................... 24,700 753,350
Novellus Systems, Inc.*............... 33,700 1,857,712
PMC - Sierra, Inc.*................... 36,100 2,569,869
Qlogic Corp.*......................... 51,400 3,450,225
SDL, Inc.*............................ 35,700 3,239,775
Transwitch Corp.*..................... 39,200 1,773,800
Triumph Group, Inc.*.................. 38,700 909,450
---------------
33,021,344
---------------
ELECTRONICS -- 2.2%
Cymer, Inc.*.......................... 50,400 1,001,700
DII Group, Inc.*...................... 16,600 485,550
Flextronics International, Ltd.*...... 87,600 4,467,600
Genesis Microchip, Inc.*.............. 20,800 494,000
Uniphase Corp.*....................... 41,000 4,720,125
---------------
11,168,975
---------------
ENGINEERING & CONSTRUCTION -- 0.8%
Dycom Industries, Inc.*............... 86,850 3,777,975
---------------
ENTERTAINMENT -- 1.2%
Championship Auto Racing Teams*....... 17,000 495,125
Cinar Corp. Cl. B*.................... 49,600 1,140,800
Image Entertainment, Inc.*............ 22,900 134,537
Macrovision Corp.*.................... 29,900 1,106,300
SFX Entertainment, Inc. Cl. A*........ 41,200 2,659,975
Sunterra Corp.*....................... 74,200 723,450
---------------
6,260,187
---------------
ENTERTAINMENT SOFTWARE -- 0.1%
Acclaim Entertainment, Inc.*.......... 68,700 614,006
---------------
ENVIRONMENTAL CONTROL -- 0.8%
Casella Waste Systems, Inc. Cl. A*.... 69,000 1,556,812
Superior Services, Inc.*.............. 71,300 1,412,631
Tetra Tech, Inc.*..................... 47,156 993,223
---------------
3,962,666
---------------
FOOD -- 0.4%
Hain Food Group, Inc.*................ 47,800 788,700
Merkert America Corp.*................ 41,700 453,488
Michael Foods, Inc.................... 49,500 943,594
---------------
2,185,782
---------------
HEALTH CARE -- 1.2%
Apria Healthcare Group*............... 171,100 2,037,159
Covance, Inc.*........................ 55,500 1,390,969
Novoste Corp.*........................ 11,000 264,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
15
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999 -- CONTINUED
- --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
HEALTH CARE (CONTINUED)
<TABLE>
<S> <C> <C>
Oxford Health Plans*.................. 80,000 $ 1,250,000
Perclose, Inc.*....................... 31,900 988,900
---------------
5,931,028
---------------
HOME BUILDING -- 0.8%
Crossmann Communities, Inc.*.......... 35,400 705,787
M/I Schottenstein Homes, Inc.......... 46,700 828,925
MDC Holdings, Inc..................... 41,400 595,125
National RV Holdings, Inc.*........... 41,550 919,294
Ryland Group, Inc..................... 32,500 822,656
---------------
3,871,787
---------------
HOME FURNISHINGS -- 0.0%
Select Comfort Corp.*................. 7,500 209,062
---------------
HOSPITALS -- 0.2%
Province Healthcare Co.*.............. 49,700 919,450
---------------
INTERNET SOFTWARE -- 15.9%
AboveNet Communications, Inc.*........ 49,300 6,452,138
Broadcast.com, Inc.*.................. 6,800 803,675
CMGI, Inc.*........................... 39,900 7,304,194
CNET, Inc.*........................... 70,000 6,448,750
Concentric Network Corp.*............. 49,400 3,692,650
Critical Path, Inc.*.................. 11,000 847,000
Excite, Inc.*......................... 29,900 4,186,000
Exodus Communications, Inc.*.......... 77,300 10,396,850
Go2net, Inc.*......................... 52,800 7,002,600
Infoseek Corp.*....................... 64,300 4,758,200
Infospace.com, Inc.*.................. 61,300 5,428,881
InterVU, Inc.*........................ 26,600 1,180,375
iVillage, Inc.*....................... 12,800 1,286,400
Lycos, Inc.*.......................... 19,600 1,686,825
Mindspring Enterprises, Inc.*......... 43,400 3,735,113
OneMain.com, Inc.*.................... 7,000 253,750
PCOrder.com, Inc.*.................... 5,500 311,438
Prodigy Communications Corp.*......... 31,300 1,201,138
RealNetworks, Inc.*................... 36,000 4,398,750
Security First Technologies Co.*...... 32,700 2,403,450
Sportsline USA, Inc.*................. 32,700 1,491,938
Verio, Inc.*.......................... 33,400 1,540,575
VerticalNet, Inc.*.................... 4,500 467,437
XOOM.com, Inc.*....................... 47,000 3,151,938
---------------
80,430,065
---------------
INVESTMENT COMPANIES -- 0.4%
American Capital Strategies........... 33,900 580,537
SEI Investments Co.................... 16,600 1,535,500
---------------
2,116,037
---------------
LEISURE/GAMING -- 0.3%
American Classic Voyages Co.*......... 36,100 582,156
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------
</TABLE>
LEISURE/GAMING (CONTINUED)
<TABLE>
<S> <C> <C>
Family Golf Centers, Inc.*............ 93,000 $ 691,687
Travel Services International,
Inc.*............................... 30,000 315,000
---------------
1,588,843
---------------
MACHINERY-CONSTRUCTION & MINING -- 0.4%
Terex Corp.*.......................... 91,100 2,197,787
---------------
MACHINERY-DIVERSIFIED -- 0.7%
Motivepower Industries, Inc.*......... 98,377 2,471,722
PRI Automation, Inc.*................. 52,400 1,093,793
---------------
3,565,515
---------------
MEDICAL PRODUCTS -- 0.1%
Hanger Orthopedic Group, Inc.*........ 31,600 426,600
---------------
MEDICAL SUPPLIES/EQUIPMENT -- 1.9%
Laser Vision Centers, Inc.*........... 25,000 953,125
Minimed, Inc.*........................ 50,100 5,091,412
Molecular Devices Corp.*.............. 59,800 1,614,600
Osteotech, Inc.*...................... 41,400 1,423,125
Xomed Surgical Products, Inc.*........ 16,800 659,400
---------------
9,741,662
---------------
METAL FABRICATION/HARDWARE -- 0.4%
Johnstown America Industries, Inc.*... 74,400 1,106,700
Mueller Industries, Inc.*............. 46,800 1,047,150
---------------
2,153,850
---------------
NETWORK SOFTWARE -- 1.2%
Concord Communications, Inc.*......... 61,500 3,505,500
Legato Systems, Inc.*................. 49,500 2,555,438
---------------
6,060,938
---------------
OFFICE FURNISHINGS -- 0.0%
Compx International, Inc.*............ 14,700 187,622
---------------
OIL & GAS PRODUCERS -- 0.6%
Barrett Resources Corp.*.............. 46,400 1,162,900
Pride International, Inc.*............ 106,100 875,325
Stone Energy Corp.*................... 18,500 592,000
Unit Corp.*........................... 34,300 175,787
---------------
2,806,012
---------------
OIL & GAS SERVICES -- 1.0%
CAL Dive International, Inc.*......... 47,800 997,825
Dril-Quip*............................ 21,200 467,725
Global Industries, Ltd.*.............. 86,400 874,800
Smith International, Inc.*............ 36,900 1,476,000
Tuboscope, Inc.*...................... 87,100 783,900
Varco International, Inc.*............ 37,000 411,625
---------------
5,011,875
---------------
OPTICAL RECOGNITION SOFTWARE -- 0.0%
Optimal Robotics Corp.*............... 10,100 74,487
---------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
16
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OPTICAL SUPPLIES -- 0.3%
Ocular Sciences, Inc.*................ 46,100 $ 1,322,494
---------------
OTHER COMMERCIAL SERVICES -- 5.0%
Career Education Corp.*............... 4,000 138,500
Century Business Services, Inc.*...... 125,200 1,369,375
Forrester Research, Inc.*............. 20,800 631,800
Hooper Holmes, Inc.................... 27,300 426,563
International Telecommunications Data
Systems*............................ 33,000 408,375
ITT Educational Services, Inc.*....... 10,000 375,625
Kendle International, Inc.*........... 40,000 805,000
Korn-Ferry International*............. 70,000 918,750
Lason, Inc.*.......................... 61,700 3,470,625
National Equipment Services*.......... 25,000 231,250
NCO Group, Inc.*...................... 60,800 2,249,600
NOVA Corp.*........................... 132,510 3,478,388
Novacare Employee Services*........... 80,000 625,000
On Assignment, Inc.*.................. 63,200 1,619,500
Personnel Group Of America, Inc.*..... 11,100 79,781
Prepaid Legal Services, Inc.*......... 46,100 1,129,450
Probusiness Services, Inc.*........... 32,300 1,356,600
Profit Recovery Group International*.. 23,200 916,400
Quanta Services, Inc.*................ 39,100 994,606
S M & A Corp.*........................ 34,600 397,900
Select Appointments Holdings--ADR..... 16,900 451,019
Service Corp. International........... 16,200 230,850
United Road Services, Inc.*........... 41,500 215,281
USWeb Corp.*.......................... 68,400 2,821,500
---------------
25,341,738
---------------
OTHER CONSUMER SERVICES -- 0.1%
Global Vacation Group, Inc.*.......... 20,000 237,500
MiningCo.com, Inc.*................... 4,000 358,000
---------------
595,500
---------------
OTHER HEALTH SERVICES -- 0.0%
Mede America Corp.*................... 7,000 139,125
---------------
PRINTING-COMMERCIAL -- 1.3%
Consolidated Graphics, Inc.*.......... 71,400 4,123,350
Mail-Well, Inc.*...................... 197,800 2,645,575
---------------
6,768,925
---------------
PUBLISHING -- 0.2%
Big Flower Holdings, Inc.*............ 32,900 1,024,012
---------------
REAL ESTATE -- 0.3%
Jones Lang LaSalle, Inc.*............. 57,600 1,728,000
---------------
RECREATIONAL CENTERS -- 0.3%
Bally Total Fitness Holdings*......... 61,700 1,473,088
---------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------
REGIONAL/COMMERCIAL BANKS -- 0.6%
Peoples Heritage Financial Group...... 72,100 $ 1,297,800
Provident Bankshares Corp............. 73,175 1,911,697
---------------
3,209,497
---------------
REITS -- 0.5%
Golf Trust Of America, Inc............ 48,600 1,087,425
Kilroy Realty Corp.................... 75,525 1,548,263
---------------
2,635,688
---------------
RENTAL AUTO/EQUIPMENT -- 0.5%
Rental Services Corp.*................ 123,300 2,157,750
United Rentals, Inc.*................. 18,400 524,400
---------------
2,682,150
---------------
RETAIL-APPAREL -- 1.9%
AnnTaylor Stores Corp.*............... 79,700 3,521,744
Bebe Stores, Inc.*.................... 59,700 2,447,700
Men's Wearhouse, Inc.*................ 81,200 2,344,650
Pacific Sunwear Of California*........ 33,400 1,160,650
---------------
9,474,744
---------------
RETAIL-AUTOMOBILE -- 0.6%
O'Reilly Automotive, Inc.*............ 57,100 2,555,225
Sonic Automotive, Inc.*............... 41,400 641,700
---------------
3,196,925
---------------
RETAIL-BEDDING -- 0.4%
Linens 'N Things, Inc.*............... 44,900 2,037,338
---------------
RETAIL-BUILDING PRODUCTS -- 0.1%
White Cap Industries, Inc.*........... 35,700 392,700
---------------
RETAIL-CATALOG SHOPPING -- 0.1%
Genesis Direct, Inc.*................. 69,000 295,406
---------------
RETAIL-COMPUTER EQUIPMENT -- 0.4%
Creative Computers, Inc.*............. 69,500 2,093,687
---------------
RETAIL-DEPARTMENT STORES -- 0.1%
Elder-Beerman Stores Corp.*........... 57,100 492,487
---------------
RETAIL-DISCOUNT -- 0.7%
Ames Department Stores, Inc.*......... 99,100 3,679,087
---------------
RETAIL-DIVERSIFIED -- 0.0%
Cheap Tickets, Inc.*.................. 2,000 67,250
---------------
RETAIL-INTERNET -- 0.8%
Beyond.com Corp.*..................... 34,500 903,469
CDnow, Inc.*.......................... 34,200 551,475
Cyberian Outpost, Inc.*............... 19,400 383,150
Fatbrain.com, Inc.*................... 10,000 228,750
IMALL, Inc.*.......................... 28,500 459,563
Onsale, Inc.*......................... 33,700 1,131,056
Ubid, Inc.*........................... 1,900 117,650
---------------
3,775,113
---------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
17
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999 -- CONTINUED
- --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
RETAIL-JEWELRY -- 0.1%
Whitehall Jewellers, Inc.*............ 30,900 $ 475,087
---------------
RETAIL-MAIL ORDER -- 0.4%
Micro Warehouse, Inc.*................ 113,600 1,831,800
---------------
RETAIL-MUSIC STORE -- 0.4%
Musicland Stores Corp.*............... 75,400 664,462
Trans World Entertainment*............ 131,000 1,441,000
---------------
2,105,462
---------------
RETAIL-PET FOOD & SUPPLIES -- 0.1%
Petsmart, Inc.*....................... 85,900 689,884
---------------
RETAIL-RESTAURANTS -- 1.1%
Dave & Buster's, Inc.*................ 57,700 1,182,850
Foodmaker, Inc.*...................... 66,800 1,703,400
Sonic Corp.*.......................... 91,250 2,458,047
---------------
5,344,297
---------------
RETAIL-SUNGLASSES -- 0.2%
Sunglass Hut International, Inc.*..... 75,700 794,850
---------------
RETAIL-VARIETY STORES -- 0.6%
99 Cents Only Stores*................. 67,881 2,880,700
---------------
RETAIL-VIDEO RENTAL -- 0.4%
Hollywood Entertainment Corp.*........ 102,900 1,916,513
---------------
RETIREMENT/AGED CARE -- 0.5%
Carematric Corp.*..................... 46,500 883,500
Sunrise Assisted Living, Inc.*........ 31,200 1,421,550
---------------
2,305,050
---------------
SAVINGS & LOANS -- 0.7%
First Washington Bancorp, Inc......... 33,550 652,128
MAF Bancorp, Inc...................... 45,825 1,019,606
Net.B@nk, Inc.*....................... 28,000 1,904,000
---------------
3,575,734
---------------
TELECOMMUNICATIONS -- 3.4%
Echostar Communications Corp. Cl.
A*.................................. 82,900 6,766,713
Gilat Satellite Networks, Ltd.*....... 49,300 2,958,000
GST Telecommunications, Inc.*......... 99,100 1,083,906
Transaction Network Services, Inc.*... 10,500 171,937
US LEC Corp. Cl. A*................... 39,600 678,150
Western Wireless Corp. Cl. A*......... 51,300 1,859,625
Winstar Communications, Inc.*......... 97,200 3,532,613
---------------
17,050,944
---------------
TELECOMMUNICATIONS EQUIPMENT -- 6.9%
American Tower Corp. Cl. A*........... 82,900 2,031,050
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------
</TABLE>
TELECOMMUNICATIONS EQUIPMENT (CONTINUED)
<TABLE>
<S> <C> <C>
Antec Corp.*.......................... 26,400 $ 579,017
Aware, Inc.*.......................... 26,000 1,222,000
Carrier Access Corp.*................. 41,100 3,177,544
Com21, Inc.*.......................... 47,300 1,241,625
Geotel Communications Corp.*.......... 74,700 3,426,863
International Network Services*....... 63,100 4,413,056
Metromedia Fiber Network, Inc.*....... 135,200 7,005,050
Pinnacle Holdings, Inc.*.............. 61,300 927,163
Powerwave Technologies, Inc.*......... 68,900 1,955,038
Proxim, Inc.*......................... 27,700 796,375
RF Micro Devices, Inc.*............... 42,000 4,018,875
SkyTel Communications, Inc.*.......... 85,600 1,423,100
Stanford Telecommunications*.......... 47,300 733,150
Terayon Corp.*........................ 50,500 2,020,000
---------------
34,969,906
---------------
TEXTILES -- 0.2%
G & K Services, Inc. Cl. A............ 22,950 1,060,003
---------------
TOYS/GAMES/HOBBIES -- 0.5%
Action Performance Cos., Inc.*........ 85,900 2,587,738
---------------
TRANSPORTATION-AIR FREIGHT -- 0.4%
Expeditors International, Inc......... 33,500 1,809,000
---------------
TRANSPORTATION-OTHER -- 0.3%
Varlen Corp........................... 67,187 1,478,114
---------------
TRANSPORTATION-TRUCKS -- 0.2%
Knight Transportation, Inc.*.......... 16,350 316,781
Swift Transportation Co., Inc.*....... 29,800 771,075
---------------
1,087,856
---------------
TOTAL COMMON STOCK
(Cost: $341,234,228)................................. 505,043,007
---------------
<CAPTION>
NUMBER
OF WARRANTS
<S> <C> <C>
- -------------------------------------------------------------------------
WARRANTS -- 0.0%
- -------------------------------------------------------------------------
Iwerks Entertainment, Inc.*
(Cost: $0).......................... 2,787 0
---------------
TOTAL INVESTMENTS -- 99.7%
(Cost: $341,234,228)............................ 505,043,007
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3%..... 1,378,150
--------------
NET ASSETS -- 100.0%.............................. $ 506,421,157
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
18
<PAGE>
MINI CAP GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; THOMAS BLEAKLEY, Partner, Portfolio Manager; JOHN C. MCCRAW,
Portfolio Manager; PAUL E. CLUSKEY, Investment Analyst; AARON HARRIS, Portfolio
Manager.
GOAL: The Mini Cap Growth Fund seeks to maximize long-term capital
appreciation by investing primarily in US companies with market capitalizations
corresponding to the bottom 5% of the Russell 2000 Growth Index at time of
purchase.
MARKET OVERVIEW: During the 12-month period ending March 31, 1999, the market
environment was characterized by extreme volatility. After climbing to record
highs in mid-July, US stocks tumbled in late summer and the fund lost more than
25% in August. Following a rebound of more than 25% in November and December,
rising interest rates in the first quarter spooked investors and contributed to
a sharp sell-off that dragged the fund down 11.9% in February.
A variety of factors triggered stocks' decline in late July, including:
- expectations for dwindling corporate profits
- increasing global economic and currency turmoil
- evidence of a slowing US economy
In this environment, mini-cap stocks were especially vulnerable as investors
preferred the liquidity and perceived safety of larger caps.
PERFORMANCE: For the 12-month period ending March 31, 1999, the fund's I
shares and the Russell 2000 Growth Index declined 13.8% and 11.0%, respectively.
PORTFOLIO SPECIFICS: Stock-specific gains among holdings in the
commercial/industrial services and consumer durables sectors helped the fund
rebound in November and December. Among the best-performing holdings late in
1998 were DA Consulting and Cognizant Technology Solutions. Strong sales among
furniture companies we owned such as Craftmade International and WinsLoew
Furniture also helped returns.
In the first quarter of 1999, slumping demand for investment
technology-related services in the face of Y2K spending hurt returns for
holdings such as Tier Technologies. Technology stocks, which delivered strong
gains late in 1998, negatively affected returns in the first quarter of 1999.
MARKET OUTLOOK: While the crisis of confidence and the liquidity concerns that
gripped investors in the summer of 1998 adversely affected returns, evidence of
continued economic strength, low inflation and low interest rates have improved
investor mettle. We continue to find promising mini-cap stocks demonstrating
compelling traits that include:
- attractive valuations relative to large caps
- superior earnings growth rates versus large caps
- limited exposure to volatile overseas markets
As a result, we remain optimistic on the growth prospects for our Mini Cap
Growth Fund.
- --------------------------------------------------------------------------------
19
<PAGE>
MINI CAP GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN MINI CAP GROWTH FUND
INSTITUTIONAL SHARES WITH THE RUSSELL 2000 GROWTH INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/99 SINCE
1 YEAR 3 YEARS INCEPTION
-13.78% 14.80% 19.14%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MINI CAP GROWTH RUSSELL 2000
FUND INSTITUTIONAL GROWTH
SHARES INDEX
<S> <C> <C>
7/12/95 $250,000.00 $250,000.00
9/95 $275,600.00 $268,240.42
12/95 $287,000.00 $272,246.38
3/96 $317,000.00 $287,884.97
6/96 $371,600.00 $304,705.45
9/96 $359,600.00 $302,100.16
12/96 $369,458.13 $302,909.82
3/97 $329,371.51 $270,930.45
6/97 $408,924.86 $318,478.57
9/97 $522,779.12 $372,345.50
12/97 $480,997.70 $341,815.62
3/98 $556,278.50 $382,444.62
6/98 $542,066.19 $360,580.92
9/98 $402,940.81 $279,895.01
12/98 $521,539.20 $346,080.17
3/31/99 $479,598.07 $340,259.28
</TABLE>
This graph compares a $250,000 investment in the Mini Cap Growth Fund
Institutional Shares with the Russell 2000 Growth Index, on a cumulative and
average annual total return basis. All return calculations reflect the
reinvestment of income dividends and capital gains distributions, if any, as
well as all fees and expenses.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The Russell 2000 Growth Index is an unmanaged index containing those securities
in the Russell 2000 Index with a greater-than-average growth orientation.
Companies in this index generally have higher price-to-book and price-earnings
ratios. The Russell 2000 Index is an unmanaged index and is a widely regarded
small-cap index of the 2,000 smallest securities in the Russell 3000 Index which
comprises the 3,000 largest U.S. securities as determined by total market
capitalization.
Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
20
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
MINI CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
COMMON STOCK -- 102.0%
- ------------------------------------------------------------------
ADVERTISING -- 0.5%
Valuevision International, Inc. Cl.
A*.................................. 24,000 $ 295,500
------------
AEROSPACE/DEFENSE -- 1.4%
Aeroflex, Inc.*....................... 32,000 456,000
Kellstrom Industries, Inc.*........... 19,000 301,625
------------
757,625
------------
AIRLINES -- 1.9%
Atlantic Coast Airlines Holdings*..... 26,200 736,875
Mesaba Holdings, Inc.*................ 19,800 265,444
------------
1,002,319
------------
APPAREL -- 4.4%
Cutter & Buck, Inc.*.................. 22,400 716,800
K-Swiss, Inc. Cl. A................... 22,200 560,550
Quiksilver, Inc.*..................... 26,000 1,098,500
------------
2,375,850
------------
APPLICATIONS SOFTWARE -- 7.1%
Ardent Software, Inc.*................ 17,800 285,913
Clarify, Inc.*........................ 30,400 811,300
Mysoftware Co.*....................... 25,700 449,750
Omega Research, Inc.*................. 44,600 476,663
SS&C Technologies, Inc.*.............. 43,300 535,838
Symix Systems, Inc.*.................. 26,500 404,125
Timberline Software Corp.............. 23,300 265,038
Webtrends Corp.*...................... 11,800 573,775
------------
3,802,402
------------
BIOTECHNOLOGY -- 0.3%
Invitrogen Corp.*..................... 11,100 142,912
------------
CHEMICALS -- 0.9%
Ecosoil Systems, Inc.*................ 68,100 472,444
------------
COMMUNICATIONS SOFTWARE -- 0.8%
AVT Corp.*............................ 17,400 415,425
------------
COMPUTER SOFTWARE -- 4.3%
Actuate Software Corp.*............... 8,400 277,200
Brio Technology, Inc.*................ 32,700 690,788
OnHealth Network Co.*................. 27,500 374,688
Peerless Systems Corp.*............... 5,900 50,150
Pervasive Software, Inc.*............. 25,200 450,450
Verity, Inc.*......................... 14,300 479,050
------------
2,322,326
------------
COMPUTERS -- 6.4%
Apex PC Solutions, Inc.*.............. 27,700 386,069
Cybex Computer Products Corp.*........ 32,350 580,278
Echelon Corp.*........................ 16,700 167,000
Ecsoft Group PLC -- ADR*.............. 22,800 726,750
Globix Corp.*......................... 28,100 1,048,481
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
</TABLE>
COMPUTERS (CONTINUED)
<TABLE>
<S> <C> <C>
Intelligroup, Inc.*................... 30,900 $ 198,919
Tier Technologies, Inc. Cl. B*........ 38,700 336,206
------------
3,443,703
------------
DATA PROCESSING/MANAGEMENT SOFTWARE -- 3.8%
Best Software, Inc.*.................. 27,500 371,250
Catalyst International, Inc.*......... 38,300 397,363
Fundtech, Ltd.*....................... 19,000 572,375
Information Advantage Software*....... 25,200 166,950
SOFTWORKS, Inc.*...................... 35,500 505,875
------------
2,013,813
------------
DISTRIBUTION/WHOLESALE -- 0.3%
Tech Squared, Inc.*................... 36,200 149,325
------------
DIVERSIFIED FINANCIAL SERVICES -- 0.6%
MicroFinancial, Inc................... 23,600 342,200
------------
DRUGS/PHARMACEUTICALS -- 2.2%
Abgenix, Inc.*........................ 11,000 166,375
Anesta Corp.*......................... 17,000 383,562
Chirex, Inc.*......................... 12,600 308,700
Trimeris, Inc.*....................... 25,900 330,225
------------
1,188,862
------------
ELECTRONIC COMPONENTS/SEMICONDUCTORS -- 4.4%
American Xtal Technology, Inc.*....... 30,700 690,750
HI/FN, Inc.*.......................... 23,200 870,000
Transwitch Corp.*..................... 7,600 343,900
Zoran Corp.*.......................... 27,800 455,225
------------
2,359,875
------------
ELECTRONICS -- 1.6%
Genesis Microchip, Inc.*.............. 27,900 662,625
OYO Geospace Corp.*................... 21,400 171,200
------------
833,825
------------
ENTERTAINMENT -- 2.1%
Cinar Corp. Cl. B*.................... 17,600 404,800
Image Entertainment, Inc.*............ 44,600 262,025
Macrovision Corp.*.................... 13,100 484,700
------------
1,151,525
------------
ENVIRONMENTAL CONTROL -- 1.3%
Casella Waste Systems, Inc. Cl. A*.... 7,600 171,475
Waste Connections, Inc.*.............. 21,500 513,312
------------
684,787
------------
FOOD -- 0.7%
Hain Food Group, Inc.*................ 21,400 353,100
------------
HEALTH CARE -- 2.8%
Eclipse Surgical Technologies,
Inc.*............................... 18,300 192,150
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
21
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999 -- CONTINUED
- --------------------------------------------------------------------------------
MINI CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
HEALTH CARE (CONTINUED)
<TABLE>
<S> <C> <C>
Novoste Corp.*........................ 32,900 $ 789,600
Perclose, Inc.*....................... 17,100 530,100
------------
1,511,850
------------
HOME FURNISHINGS -- 1.9%
American Woodmark Corp................ 17,000 537,625
Craftmade International, Inc.......... 30,500 457,500
------------
995,125
------------
INTERNET SOFTWARE -- 7.5%
AboveNet Communications, Inc.*........ 10,000 1,308,750
Autoweb.com, Inc.*.................... 17,500 623,437
Flashnet Communications, Inc.*........ 5,900 242,637
InterVU, Inc.*........................ 12,600 559,125
Netgravity, Inc.*..................... 31,100 1,286,762
------------
4,020,711
------------
LEISURE/GAMING -- 0.6%
Travis Boats & Motors, Inc.*.......... 17,900 322,200
------------
MACHINERY-DIVERSIFIED -- 1.5%
Brooks Automation, Inc.*.............. 36,400 814,450
------------
MEDICAL PRODUCTS -- 1.0%
Hanger Orthopedic Group, Inc.*........ 41,100 554,850
------------
MEDICAL SUPPLIES/EQUIPMENT -- 5.9%
Laser Vision Centers, Inc.*........... 14,200 541,375
Lifecore Biomedical, Inc.*............ 12,400 107,725
Osteotech, Inc.*...................... 37,950 1,304,531
Xomed Surgical Products, Inc.*........ 30,300 1,189,275
------------
3,142,906
------------
METAL FABRICATE/HARDWARE -- 0.4%
Johnstown America Industries, Inc.*... 16,000 238,000
------------
MISCELLANEOUS MANUFACTURING -- 0.4%
Denali, Inc.*......................... 22,300 197,913
------------
NETWORK SOFTWARE -- 1.2%
Concur Technologies, Inc.*............ 14,200 640,775
------------
OFFICE FURNISHINGS -- 1.5%
Winsloew Furniture, Inc.*............. 27,700 825,806
------------
OIL & GAS PRODUCERS -- 1.3%
Basin Exploration, Inc.*.............. 30,700 425,962
Unit Corp.*........................... 48,100 246,512
------------
672,474
------------
OPTICAL RECOGNITION SOFTWARE -- 0.3%
Optimal Robotics Corp.*............... 21,600 159,300
------------
OTHER COMMERCIAL SERVICES -- 6.3%
Albany Molecular Research, Inc.*...... 5,100 127,500
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
</TABLE>
OTHER COMMERCIAL SERVICES (CONTINUED)
<TABLE>
<S> <C> <C>
Automobile Protection Corp.*.......... 50,900 $ 407,200
Bright Horizons Family Solutions,
Inc.*............................... 15,338 335,519
Corporate Executive Board Co.*........ 12,200 321,775
Gilman & Ciocia, Inc.*................ 22,500 281,250
Headway Corporate Resources*.......... 34,300 150,062
Hooper Holmes, Inc.................... 47,400 740,625
Kroll-O'Gara Co.*..................... 23,500 637,438
Market Facts, Inc.*................... 16,200 356,400
------------
3,357,769
------------
OTHER CONSUMER SERVICES -- 1.2%
GP Strategies Corp.*.................. 36,200 642,550
------------
RECREATIONAL PRODUCTS -- 2.3%
Monaco Coach Corp.*................... 36,250 836,016
The First Years, Inc.................. 27,800 387,463
------------
1,223,479
------------
REGIONAL/COMMERCIAL BANKS -- 1.1%
Sterling Bancorp-NY................... 29,800 582,963
------------
RENTAL AUTO/EQUIPMENT -- 1.8%
Rent-Way, Inc.*....................... 41,100 986,400
------------
RETAIL -- 1.4%
RoweCom, Inc.*........................ 17,700 772,162
------------
RETAIL-APPAREL -- 0.8%
Catherines Stores Corp.*.............. 26,400 184,800
Shoe Carnival, Inc.*.................. 21,500 268,750
------------
453,550
------------
RETAIL-AUTOMOBILE -- 2.3%
Lithia Motors, Inc. Cl. A*............ 12,100 192,087
Sonic Automotive, Inc.*............... 66,600 1,032,300
------------
1,224,387
------------
RETAIL-BUILDING PRODUCTS -- 0.2%
White Cap Industries, Inc.*........... 8,500 93,500
------------
RETAIL-GARDENING PRODUCTS -- 1.1%
Tractor Supply Co.*................... 22,500 575,156
------------
RETAIL-INTERNET -- 1.3%
Fatbrain.com, Inc.*................... 22,600 516,975
IMALL, Inc.*.......................... 11,200 180,600
------------
697,575
------------
RETAIL-MAIL ORDER -- 1.4%
DM Management Co.*.................... 48,400 756,250
------------
RETAIL-MUSIC STORE -- 0.6%
Musicland Stores Corp.*............... 18,900 166,556
Trans World Entertainment*............ 13,500 148,500
------------
315,056
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
22
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
RETAIL-RESTAURANTS -- 0.4%
Taco Cabana Cl. A*.................... 26,000 $ 229,125
------------
SAVINGS & LOANS -- 3.5%
Net.B@nk, Inc.*....................... 15,900 1,081,200
Telebanc Financial Corp.*............. 10,000 797,500
------------
1,878,700
------------
TELECOMMUNICATIONS -- 0.3%
Transaction Network Services, Inc.*... 9,300 152,287
------------
TELECOMMUNICATIONS EQUIPMENT -- 3.4%
Com21, Inc.*.......................... 19,400 509,250
Metro One Telecommunications*......... 13,900 198,075
Microwave Power Devices, Inc.*........ 30,200 241,600
Northeast Optic Network, Inc.*........ 36,200 511,325
P-Com, Inc.*.......................... 49,500 377,438
------------
1,837,688
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
TOYS/GAMES/HOBBIES -- 0.7%
Jakks Pacific, Inc.*.................. 19,300 $ 357,050
------------
TRANSPORTATION-TRUCKS -- 0.6%
Forward Air Corp.*.................... 23,800 312,375
------------
TOTAL COMMON STOCK
(Cost: $40,366,953).............................. 54,652,200
------------
TOTAL INVESTMENTS -- 102.0%
(Cost: $40,366,953)............................. 54,652,200
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.0%)... (1,059,160)
--------------
NET ASSETS -- 100.0%.............................. $ 53,593,040
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
23
<PAGE>
CONVERTIBLE FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; DOUGLAS FORSYTH, CFA, Portfolio Manager.
GOAL: The Convertible Fund seeks to maximize total return by investing
primarily in convertible and equity securities of US companies.
MARKET OVERVIEW: For much of the 12-month period ending March 31, 1999, a
variety of factors contributed to a favorable environment for convertible bonds
including:
- low inflation
- stable interest rates
- moderate economic growth
In late July and throughout August, however, the environment was highly
turbulent. Investors feared that the economic and currency turmoil in emerging
countries would spread worldwide, crimping economic growth and corporate
profits.
Rising yield spreads, falling stock prices and mass liquidations by
broker/dealers and convertible arbitrage funds caused extreme volatility for
convertible bonds. August was the second-worst performing month ever experienced
by the convertibles market behind October 1987. After climbing to record highs
in mid-July, US stocks and convertible securities alike fell sharply over the
next several weeks.
Investor confidence reappeared in September. The Federal Reserve Board cut
short-term interest rates late in September and two more times over the next six
weeks helping to restore liquidity and contributing to continued economic
growth.
PERFORMANCE: The Convertible Fund's I shares posted a gain for the 12-month
period ending March 31, 1999 of 19.9% versus 2.3% for the First Boston
Convertible Index. Returns for the fund even outdistanced the S&P 500 Index,
which was up 18.5% in the period.
PORTFOLIO SPECIFICS: Early in the period, concerns over acquisitions and
market volatility caused the convertible securities of broadcast companies, such
as Chancellor Media, to negatively affect the fund's performance.
However, issue selection, especially within the technology sector, contributed
to strong returns in the second half of the 12-month period. Among the fund's
top-performing holdings were Safeguard Scientifics and Qualcomm. Other strong
performers included America Online and Exodus Communications.
MARKET OUTLOOK: Applying our bottom-up approach, we continue to uncover
attractive convertible issues with the potential to deliver strong gains with
limited downside exposure. The environment remains positive given:
- solid corporate profits
- long-term interest rates near 30-year lows
- benign inflation
Following the liquidity crisis in late July and August, convertible bonds
continue to trade at discounts from what we believe to be their fair values.
- --------------------------------------------------------------------------------
24
<PAGE>
CONVERTIBLE FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN CONVERTIBLE FUND
INSTITUTIONAL SHARES WITH THE CS FIRST BOSTON CONVERTIBLE INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/99
1 YEAR 5 YEARS 10 YEARS
19.93% 17.54% 17.33%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CONVERTIBLE FUND INSTITUTIONAL FIRST BOSTON
INSTITUTIONAL SHARES CONVERTIBLE INDEX
12/31/86 250,000.00 250,000.00
<S> <C> <C>
12/87 242,192.10 249,438.54
12/88 290,338.44 282,892.46
12/89 372,774.09 321,822.20
12/90 379,632.61 299,660.78
12/91 525,252.06 386,904.65
12/92 576,918.91 454,915.53
12/93 733,163.96 539,287.59
12/94 677,511.21 513,857.47
12/95 828,291.41 635,736.19
12/96 1,002,375.72 723,744.87
12/97 1,235,942.36 846,216.97
12/98 1,502,171.25 901,614.86
3/31/99 1,606,750.81 936,715.77
</TABLE>
This graph compares a $250,000 investment in Convertible Fund Institutional
Shares with the CS First Boston Convertible ("First Boston Convertible") Index,
on a cumulative and average annual total return basis. All return calculations
reflect the reinvestment of income dividends and capital gains distributions, if
any, as well as all fees and expenses. Performance results reflect the total
returns of a predecessor limited partnership managed by Nicholas-Applegate
Capital Management prior to the effective date of the Fund's registration
statement which was 4/19/93. Limited partnership returns are restated to reflect
all fees and expenses applicable to the Fund. If the limited partnership had
been registered as an investment company under the federal securities laws, its
performance might have been adversely affected because of the additional
restrictions applicable to registered investment companies.
The total returns for the Fund reflect the fact that the Investment Adviser has
agreed to waive or defer its management fees and to pay other operating expenses
otherwise payable by the Fund, subject to possible later reimbursement during a
five year period. Total return results may have been lower had there been no
waiver or deferral.
The First Boston Convertible Index is an unmanaged market weighted index
representing the universe of convertible securities whether they are convertible
preferred stocks or convertible bonds.
The Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
25
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
CONVERTIBLE FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 31.0%
- -------------------------------------------------------------------
ADVERTISING -- 0.7%
Snyder Communications, Inc. 6.500%
(STRYPES)........................... 83,310 $ 2,171,267
------------
BROADCASTING -- 3.1%
Chancellor Media Corp. $3.00.......... 17,300 1,652,150
CSC Holdings, Inc. I 8.500%........... 39,250 4,376,375
Evergreen Media Corp. $3.00 144A...... 41,310 3,945,105
------------
9,973,630
------------
DIVERSIFIED FINANCIAL SERVICES -- 14.2%
Big Flower Trust 6.000%............... 49,630 3,089,467
Finova Finace Trust 5.500% (TOPRS).... 31,320 2,255,040
K Mart Financing I 7.750%............. 75,790 4,585,295
Merrill Lynch & Co. CIBER 7.875%
(STRYPES)........................... 36,800 1,600,800
Merrill Lynch & Co. Cox Communications
6.000% (STRYPES).................... 94,700 5,835,887
Morgan Stanley Dean Witter Discover &
Co. 6.000% (PERQS)*................. 34,165 3,847,833
Morgan Stanley Group, Inc. WCOM Reset
(PERQS)*............................ 660,900 5,782,875
Protective Life Capital Trust II
6.500% (PRIDES)..................... 48,100 2,997,231
Qualcomm Financial Trust 5.750%....... 57,800 5,252,575
Qwest Trends Trust 5.750%............. 89,000 5,818,375
United Rentals Trust I 6.500%......... 26,900 1,197,050
United Rentals Trust I 6.500% (QUIPS)
144A................................ 66,100 2,941,450
------------
45,203,878
------------
DRUGS/PHARMACEUTICALS -- 0.5%
Mckesson Financing Trust 5.000%....... 19,115 1,744,244
------------
ELECTRIC -- 3.5%
Houston Industries, Inc. (ACES)....... 43,900 5,289,950
Texas Utilities Co. 9.250% (PRIDES)... 108,200 5,768,412
------------
11,058,362
------------
HOME BUILDING -- 0.3%
Kaufman & Broad Home 8.250%
(PRIDES)............................ 120,600 964,800
------------
INSURANCE -- 1.4%
American General Corp. 6.000%
(MIPS).............................. 49,100 4,394,450
------------
MEDIA -- 2.1%
Mediaone Group, Inc. 4.500%........... 50,900 6,543,831
------------
OIL & GAS SERVICES -- 1.0%
EVI, Inc. 5.000%...................... 102,647 3,143,564
------------
PIPELINES -- 1.8%
Williams Cos., Inc. $3.50............. 30,300 5,650,950
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------
TELECOMMUNICATIONS -- 2.0%
Airtouch Communications, Inc.
C 4.250%............................ 33,382 $ 4,489,879
Winstar Communications, Inc.
D 7.000%............................ 38,000 1,743,250
------------
6,233,129
------------
TELECOMMUNICATIONS EQUIPMENT -- 0.4%
LM Erriccson Telephone Co. 4.250%..... 209,220 1,340,316
------------
TOTAL CONVERTIBLE PREFERRED STOCK
(Cost: $76,343,701)................................ 98,422,421
------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 61.2%
- -------------------------------------------------------------------
ADVERTISING -- 4.1%
Doubleclick, Inc.
4.750%, 03/15/06 144A............... $ 2,970,000 3,749,625
Omnicom Group, Inc.
4.250%, 01/03/07 144A............... 718,000 1,847,055
Omnicom Group, Inc.
2.250%, 01/06/13.................... 4,313,000 7,493,838
------------
13,090,518
------------
AEROSPACE/DEFENSE -- 0.7%
Kellstrom Industries, Inc.
5.500%, 06/15/03.................... 1,617,000 1,273,387
Orbital Sciences Corp.
5.000%, 10/01/02.................... 750,000 892,500
------------
2,165,887
------------
APPLICATIONS SOFTWARE -- 0.5%
Citrix Systems, Inc. 144A*
0.000%, 03/22/19.................... 5,010,000 1,722,188
------------
BIOTECHNOLOGY -- 1.0%
Centocor, Inc.
4.750%, 02/15/05.................... 3,230,000 3,149,250
------------
BROADCASTING -- 2.7%
CBS Radio, Inc. 144A
7.000%, 06/30/11.................... 1,555,000 2,514,241
Clear Channel Communications
2.625%, 04/01/03.................... 4,829,000 5,939,670
------------
8,453,911
------------
COMPUTER SOFTWARE -- 1.1%
Veritas Software Corp. 144A
5.250%, 11/01/04.................... 1,751,000 3,530,454
------------
COMPUTERS -- 7.1%
Affiliated Computer Services, Inc.
144A
4.000%, 03/15/05.................... 2,288,000 2,819,960
Apple Computer, Inc.
6.000%, 06/01/01.................... 3,341,000 4,343,300
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
26
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CONVERTIBLE CORPORATE BONDS (Continued)
- ---------------------------------------------------------
COMPUTERS (CONTINUED)
<TABLE>
<S> <C> <C>
Comverse Technology, Inc.
4.500%, 07/01/05.................... $ 55,000 $ 79,956
Comverse Technology, Inc. 144A
4.500%, 07/01/05.................... 4,415,000 6,418,306
EMC Corp. 144A
3.250%, 03/15/02.................... 1,042,000 5,979,777
Safeguard Scientifics, Inc. 144A
6.000%, 02/01/06.................... 1,245,000 2,947,537
------------
22,588,836
------------
DATA PROCESSING/MANAGEMENT SOFTWARE -- 1.7%
Automatic Data Processing*
0.000%, 02/20/12.................... 4,942,000 5,300,295
------------
DIVERSIFIED FINANCIAL SERVICES -- 4.9%
Allianze Finance BV
3.000%, 02/04/03.................... 2,390,000 1,367,065
Merrill Lynch & Co.
1.000%, 02/08/06.................... 4,120,000 3,975,800
Swiss Life Finance, Ltd. 144A
2.000%, 05/20/03.................... 5,122,000 5,813,470
Xerox Credit Corp.
2.875%, 07/01/02.................... 3,808,000 4,464,880
------------
15,621,215
------------
DRUGS/PHARMACEUTICALS -- 3.4%
Alpharma, Inc.
5.750%, 04/01/05.................... 1,040,000 1,565,200
Alpharma, Inc. 144A
5.750%, 04/01/05.................... 2,200,000 3,311,000
Sepracor, Inc. 144A
7.000%, 12/15/05.................... 5,000,000 5,831,250
------------
10,707,450
------------
ELECTRONIC COMPONENTS/SEMICONDUCTORS -- 2.5%
LSI Logic Corp. 144A
4.250%, 03/15/04.................... 2,390,000 2,876,963
Micron Technology, Inc.
7.000%, 07/01/04.................... 4,615,000 4,961,125
------------
7,838,088
------------
ELECTRONICS -- 1.8%
Solectron Corp. 144A*
0.000%, 01/27/19.................... 11,665,000 5,759,594
------------
ENVIRONMENTAL CONTROL -- 1.7%
Waste Management, Inc.
4.000%, 02/01/02.................... 4,553,000 5,361,158
------------
HOME BUILDING -- 0.9%
Lennar Corp.*
0.000%, 07/29/18.................... 6,592,000 2,892,240
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -------------------------------------------------------------------
INSURANCE -- 1.3%
Mutual Risk Management*
0.000%, 10/30/15.................... $ 5,071,000 $ 4,139,204
------------
INTERNET SOFTWARE -- 7.8%
America Online, Inc. 144A
4.000%, 11/15/02.................... 487,000 5,453,791
America Online, Inc.
4.000%, 11/15/02.................... 1,650,000 1,847,794
At Home Corp. 144A
0.525%, 12/28/18.................... 8,058,000 8,561,625
Exodus Communications, Inc. 144A
5.000%, 03/15/06.................... 2,930,000 4,691,663
Sportsline USA, Inc. 144A
5.000%, 04/01/06.................... 4,560,000 4,178,100
------------
24,732,973
------------
MISCELLANEOUS MANUFACTURING -- 1.4%
ADT Operations*
0.000%, 07/06/10.................... 2,213,000 4,345,779
------------
OIL & GAS PRODUCERS -- 3.4%
Diamond Offshore Drilling
3.750%, 02/15/07.................... 6,546,000 6,791,475
Pennzenergy Co.
4.900%, 08/15/08.................... 4,000,000 4,000,000
------------
10,791,475
------------
OTHER COMMERCIAL SERVICES -- 0.9%
Quintiles Transnational
4.250%, 05/31/00.................... 2,792,000 2,966,500
------------
PRINTING-COMMERCIAL -- 1.8%
Mail-Well, Inc.
5.000%, 11/01/02.................... 1,982,000 1,922,540
World Color Press, Inc.
6.000%, 10/01/07.................... 4,242,000 3,881,430
------------
5,803,970
------------
RETAIL-BUILDING PRODUCTS -- 1.7%
Home Depot, Inc.
3.250%, 10/01/01.................... 1,892,000 5,266,855
------------
RETAIL-HYPERMARKETS -- 2.2%
Costco Cos., Inc.*
0.000%, 08/19/17.................... 6,664,000 7,155,469
------------
RETAIL-INTERNET -- 1.7%
Amazon.Com, Inc. 144A
4.750%, 02/01/09.................... 4,305,000 5,435,063
------------
RETAIL-OFFICE SUPPLIES -- 1.7%
Office Depot, Inc.*
0.000%, 11/01/08.................... 6,250,000 5,523,438
------------
RETIREMENT/AGED CARE -- 1.0%
Sunrise Assisted Living, Inc.
5.500%, 06/15/02.................... 2,289,000 3,078,705
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
27
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999 -- CONTINUED
- --------------------------------------------------------------------------------
CONVERTIBLE FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CONVERTIBLE CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TELECOMMUNICATIONS -- 2.2%
Global Telesystems Group, Inc.
5.750%, 07/01/10.................... $ 1,190,000 $ 1,410,150
NTL, Inc. 144A
7.000%, 12/15/08.................... 3,650,000 5,529,750
------------
6,939,900
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost: $151,174,336)............................... 194,360,415
------------
<CAPTION>
NUMBER
OF SHARES
<S> <C> <C>
- -------------------------------------------------------------------
COMMON STOCK -- 3.1%
- -------------------------------------------------------------------
ELECTRONIC COMPONENTS/SEMICONDUCTORS -- 1.3%
Analog Devices*....................... 140,939 4,192,935
------------
MONEY CENTER BANKS -- 0.9%
BankAmerica Corp...................... 41,000 2,895,625
------------
REITS -- 0.5%
Reckson Associates Realty Corp........ 78,000 1,603,875
------------
TELECOMMUNICATIONS -- 0.0%
Winstar Communications, Inc.*......... 971 35,290
------------
TELECOMMUNICATIONS EQUIPMENT -- 0.4%
American Tower Corp. Cl. A*........... 52,900 1,296,050
------------
TOTAL COMMON STOCK
(Cost: $9,645,606)................................. 10,023,775
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -------------------------------------------------------------------
COMMERCIAL PAPER -- 5.0%
- -------------------------------------------------------------------
Central Illinois Public Utilities
5.030%, 04/01/99
(Cost: $15,868,000)................. $15,868,000 $ 15,868,000
------------
- -------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.7%
- -------------------------------------------------------------------
J.P. Morgan & Co., Inc. $2,270,000 at
4.900%, (Agreement dated 03/31/99;
to be repurchased at $2,270,309 on
04/01/99; collateralized by
$2,310,000 FNMA Notes, 5.340% due
01/24/02 (Value $2,337,895))
(Cost: $2,270,000).................. 2,270,000 2,270,000
------------
TOTAL INVESTMENTS -- 101.0%
(Cost: $255,301,643)............................ 320,944,611
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (1.0%).................................. (3,136,965)
--------------
NET ASSETS -- 100.0%.............................. $ 317,807,646
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
28
<PAGE>
HIGH QUALITY BOND FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: FRED S. ROBERTSON, III, Partner, Chief Investment Officer,
Fixed Income; JAMES E. KELLERMAN, Partner, Portfolio Manager; MALCOM S. DAY,
CFA, Portfolio Manager; SUSAN MALONE, Portfolio Manager.
GOAL: The High Quality Bond Fund seeks to maximize long-term total return from
a portfolio utilizing multiple sectors of the bond market including a broad
range of investment-grade issues, as well as, on an opportunistic basis,
developed international bonds and below-investment grade corporate issues.
MARKET OVERVIEW: Strong money growth, relatively low interest rates and benign
inflation largely offset risks posed by currency and economic turmoil among a
number of emerging markets during the 12-month period ending March 31, 1999.
Early in the period, the US bond market remained stretched between conflicting
economic signals. For example, although building wage pressure triggered fears
of rising prices, inflation remained low. Amid such contradictory signs, yields
were mired in a narrow trading range.
In August, however, the environment changed significantly. The Russian
currency crisis and concerns that devaluations and defaults would spread
worldwide prompted investors to seek safety. US Treasury bonds were the primary
beneficiary. Other sectors of the fixed income market, such as mortgage-backed
securities and high yield bonds were overlooked, resulting in their
underperformance versus Treasuries. The US Federal Reserve Board's decision to
lower short-term interest rates three times over a six-week period between late
September and mid November helped restore confidence and liquidity to the
world's financial markets. In February, evidence of a robust US economy pushed
interest rates higher and fears of inflation spread. In this environment,
Treasury issues were most severely affected while non-Treasury issues delivered
better relative returns. Investor fears diminished in March and US bonds closed
the period with gains.
PERFORMANCE: During the period, the High Quality Bond Fund's I shares were up
6.1%. The Lipper General Bond Fund Index gained 1.4% and the Lehman Aggregate
Index was up 6.5%.
PORTFOLIO SPECIFICS: Fund returns were affected by two primary factors --
interest-rate position and sector selection. In August, we anticipated an easing
of monetary policy and extended the duration of the portfolio. Our changes
proved beneficial as the Federal Reserve Board did indeed lower interest rates
late in the quarter. Later in the period, amid signs of near-term economic
acceleration, we adjusted our interest rate position to neutral. A modest
allocation to international developed market and high yield bonds had a positive
affect on returns both early and later in the period. During August, amid
investors' flight to quality, our underweight position in US Treasuries
negatively affected performance.
MARKET OUTLOOK: While the longer-term outlook for bonds remains positive,
near-term risks exist. With leading indicators suggesting a continuing surge in
economic growth, higher interest rates may eventually be necessary to slow the
economy to a less inflationary rate. In this environment, we believe a neutral
stance on interest rates is appropriate.
- --------------------------------------------------------------------------------
29
<PAGE>
HIGH QUALITY BOND FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN HIGH QUALITY BOND FUND
INSTITUTIONAL SHARES WITH THE LEHMAN AGGREGATE BOND INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/99 SINCE
1 YEAR 3 Years INCEPTION
6.14% 7.85% 8.13%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH QUALITY BOND FUND INSTITUTIONAL SHARES LEHMAN AGGREGATE BOND INDEX
8/31/95 $250,000.00 $250,000.00
12/95 $272,016.18 $263,175.71
<S> <C> <C>
3/96 $263,734.75 $258,481.07
6/96 $264,958.05 $259,956.87
9/96 $269,991.83 $264,743.39
12/96 $278,233.23 $272,688.49
3/97 $276,856.27 $271,173.85
6/97 $287,277.02 $281,162.74
9/97 $296,747.94 $290,536.96
12/97 $304,716.75 $299,096.26
3/98 $311,741.66 $303,711.47
6/98 $317,198.51 $310,810.66
9/98 $326,463.44 $323,947.25
12/98 $330,743.30 $325,039.25
03/31/99 $330,864.70 $323,387.35
</TABLE>
This graph compares a $250,000 investment in the High Quality Bond Fund
Institutional Shares with the Lehman Aggregate Bond Index, on a cumulative and
average annual total return basis. All return calculations reflect the
reinvestment of income dividends and capital gains distributions, if any, as
well as all fees and expenses.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five year
period. Total return results may have been lower had there been no waiver or
deferral.
The Lehman Brothers Aggregate Bond Index is composed of securities from Lehman
Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and
Asset-Backed Securities Index.
Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
30
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
HIGH QUALITY BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------
CORPORATE BONDS -- 35.8%
- -----------------------------------------------------------------
AEROSPACE/DEFENSE -- 0.9%
Rockwell International Corp.
5.200%, 01/15/98.................... $ 440,000 $ 323,607
-----------
AIRLINES -- 2.5%
Atlas Air, Inc.
9.375%, 11/15/06.................... 150,000 151,313
Continental Airlines, Inc. 991A
6.545%, 08/02/20.................... 400,000 396,976
Continental Airlines, Inc. 1998-3 A-2
6.320%, 11/01/08.................... 325,000 322,455
Trans World Airlines
11.375%, 03/01/06................... 50,000 26,375
-----------
897,119
-----------
APPAREL -- 1.2%
Jones Apparel
6.250%, 10/01/01.................... 460,000 454,296
-----------
BEVERAGES-ALCOHOLIC -- 0.5%
J Seagram & Sons
7.500%, 12/15/18.................... 180,000 181,307
-----------
BROADCASTING -- 2.2%
CD Radio, Inc.
0.000% (until 12/01/02, thereafter
15.000% to maturity), 12/01/07...... 100,000 54,875
Echostar DBS Corp.
9.375%, 02/01/09.................... 250,000 259,375
Fox Family Worldwide, Inc.
9.250%, 11/01/07.................... 100,000 94,750
Fox Family Worldwide, Inc.
0.000% (until 11/01/02, thereafter
10.250% to maturity), 11/01/07...... 150,000 96,188
News America Holdings
8.875%, 04/26/23.................... 210,000 247,409
Source Media, Inc.
12.000%, 11/01/04................... 75,000 60,000
-----------
812,597
-----------
CHEMICALS -- 0.4%
NL Industries
11.750%, 10/15/03................... 150,000 157,500
-----------
COMPUTER SOFTWARE -- 0.9%
Computer Associates International
6.375%, 04/15/05.................... 330,000 324,225
-----------
COMPUTERS -- 0.7%
Apple Computer, Inc.
6.500%, 02/15/04.................... 100,000 92,750
Unisys Corp.
12.000%, 04/15/03................... 150,000 165,938
-----------
258,688
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------
CREDIT CARDS -- 0.4%
Salton, Inc.
10.750%, 12/15/05................... $ 150,000 $ 156,375
-----------
DISTRIBUTION/WHOLESALE -- 0.3%
United Stationer Supply
12.750%, 05/01/05................... 100,000 111,000
-----------
DIVERSIFIED FINANCIAL SERVICES -- 4.4%
Amresco, Inc.
9.875%, 03/15/05.................... 15,000 11,813
AON Capital Trust A
8.205%, 01/01/27.................... 360,000 398,455
Countrywide Capital III
8.050%, 06/15/27.................... 100,000 104,820
Donaldson, Lufkin & Jenrette
6.280%, 05/15/03.................... 100,000 99,778
GS Escrow Corp.
6.750%, 08/01/01.................... 250,000 247,813
GS Escrow Corp.
7.000%, 08/01/03.................... 250,000 244,375
Household Finance Corp.
6.500%, 11/15/08.................... 100,000 100,500
MCII Holdings
12.000% (until 11/15/99, thereafter
15.000% to maturity), 11/15/02...... 50,000 44,000
Px Escrow Corp.
0.000% (until 02/01/02, thereafter
9.625% to maturity), 02/01/06....... 150,000 88,688
U.S. West Captial Funding, Inc.
6.875%, 07/15/28.................... 260,000 260,718
-----------
1,600,960
-----------
ENGINEERING & CONSTRUCTION -- 0.9%
McDermott, Inc.
9.375%, 03/15/02.................... 300,000 315,570
-----------
ENTERTAINMENT -- 1.8%
Argosy Gaming Co.
13.250%, 06/01/04................... 450,000 509,625
Ascent Entertainment Group
0.000% (until 12/01/02, thereafter
11.875% to maturity), 12/15/04...... 200,000 128,000
-----------
637,625
-----------
ENVIRONMENTAL CONTROL -- 0.5%
U.S. Filter Corp.
6.500%, 05/15/03.................... 195,000 194,982
-----------
HEALTH CARE -- 0.7%
Abbey Healthcare Group
9.500%, 11/01/02.................... 250,000 248,438
-----------
HOME BUILDING -- 0.6%
Lennar Corp.
7.625%, 03/01/09.................... 225,000 220,887
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
31
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999 -- CONTINUED
- --------------------------------------------------------------------------------
HIGH QUALITY BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<S> <C> <C>
</TABLE>
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
INSURANCE -- 3.2%
Florida Windstorm Under
7.125%, 02/25/19.................... $ 200,000 $ 200,650
Liberty Financial Co.
7.625%, 11/15/28.................... 560,000 585,250
Lumbermens Mutual Casualty
8.300%, 12/01/37.................... 135,000 135,444
Reliastar Financial Corp.
6.500%, 11/15/08.................... 255,000 256,063
-----------
1,177,407
-----------
INTERNET SOFTWARE -- 0.1%
IDT Corp.
8.750%, 02/15/06.................... 50,000 50,875
-----------
INVESTMENT COMPANIES -- 0.5%
Dryden Investor Trust
7.157%, 07/23/08.................... 183,740 180,139
-----------
LEISURE/GAMING -- 0.3%
Circus Circus Enterprises
9.250%, 12/01/05.................... 100,000 104,500
-----------
MANUFACTURING-OTHER -- 0.6%
Tyco International Group S.A.
7.000%, 06/15/28.................... 230,000 229,126
-----------
MEDICAL SUPPLIES/EQUIPMENT -- 1.0%
Guidant Corp.
6.150%, 02/15/06.................... 375,000 365,363
-----------
METALS-DIVERSIFIED -- 1.0%
Scotia Pacific Co. LLC
6.550%, 01/20/07.................... 386,658 363,512
-----------
OIL & GAS PRODUCERS -- 0.6%
Deeptech International, Inc.
12.000%, 12/15/00................... 200,000 216,250
-----------
OTHER COMMERCIAL SERVICES -- 0.6%
Cendant Corp.
7.750%, 12/01/03.................... 200,000 205,284
-----------
PIPELINES -- 0.3%
KN Energy, Inc.
6.450%, 03/01/03.................... 120,000 121,652
-----------
PUBLISHING -- 0.1%
American Lawyer Media
9.750%, 12/15/07.................... 50,000 51,875
-----------
REAL ESTATE -- 0.2%
Bluegreen Corp.
10.500%, 04/01/08................... 100,000 87,750
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------
RECREATIONAL CENTERS -- 0.2%
Bally Total Fitness Holdings
9.875%, 10/15/07.................... $ 75,000 $ 74,250
-----------
RENTAL AUTO/EQUIPMENT -- 0.1%
United Rentals, Inc.
9.500%, 06/01/08.................... 50,000 52,250
-----------
RETAIL-DISCOUNT -- 0.7%
K Mart Corp.
6.780%, 08/02/99.................... 250,000 250,938
-----------
RETAIL-INTERNET -- 0.4%
Amazon.Com, Inc.
0.000% (until 05/01/03, thereafter
10.000% to maturity), 05/01/08...... 200,000 135,750
-----------
RETAIL-MUSIC STORE -- 0.3%
Musicland Stores Corp.
9.875%, 03/15/08.................... 100,000 101,500
-----------
TELECOMMUNICATIONS -- 2.6%
Crown Castle International Corp.
0.000% (until 11/15/02, thereafter
12.750% to maturity), 11/15/07...... 200,000 141,250
Global Telesystems Group, Inc.
9.875%, 02/15/05.................... 200,000 193,500
International Cabletel, Inc.
0.000% (until 04/15/00, thereafter
12.750% to maturity), 04/15/05...... 250,000 239,062
Orbcomm Global LP
14.000%, 08/15/04................... 175,000 171,500
Pac-West Telecommunications, Inc.
13.500%, 02/01/09................... 200,000 198,000
-----------
943,312
-----------
TELECOMMUNICATIONS EQUIPMENT -- 1.2%
Covad Communications Group
0.000% (until 03/15/03, thereafter
13.500% to maturity), 03/15/08...... 250,000 136,563
Motorola, Inc.
6.500%, 11/15/28.................... 280,000 268,579
Northeast Optic Network
12.750%, 08/15/08................... 25,000 26,063
-----------
431,205
-----------
TELEPHONE -- 2.5%
AT&T Corp.
6.500%, 03/15/29.................... 180,000 175,961
GTE Corp.
6.940%, 04/15/28.................... 220,000 224,154
MCI Worldcom, Inc.
6.950%, 08/15/28.................... 230,000 233,588
Sprint Capital Corp.
6.875%, 11/15/28.................... 270,000 266,962
-----------
900,665
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
32
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<S> <C> <C>
</TABLE>
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TRANSPORTATION-AIR FREIGHT -- 0.4%
Federal Express Corp.
7.600%, 07/01/97.................... $ 150,000 $ 146,692
-----------
TOTAL CORPORATE BONDS
(Cost: $13,253,979)............................... 13,085,471
-----------
- -----------------------------------------------------------------
FOREIGN CORPORATE BONDS -- 7.7%
- -----------------------------------------------------------------
BERMUDA -- 0.7%
Sea Containers
12.500%, 12/01/04................... 225,000 243,000
-----------
CANADA -- 0.5%
Russell Metals
10.250%, 06/15/00................... 170,000 173,400
-----------
CHILE -- 1.3%
Empresa Nacional de Electricidad
7.875%, 02/01/27.................... 70,000 60,329
Empresa Nacional de Electricidad
8.125%, 02/01/97.................... 240,000 196,608
Endesa
7.200%, 04/01/06.................... 100,000 94,745
Enersis S.A.
7.400%, 12/01/16.................... 80,000 73,182
Enersis S.A.
6.600%, 12/01/26.................... 40,000 38,697
-----------
463,561
-----------
DENMARK -- 1.1%
NYKREDIT
5.000%, 10/01/29.................... 3,050,000 410,815
-----------
HONG KONG -- 0.2%
Hutchison Whampoa Financial
7.500%, 08/01/27.................... 100,000 84,838
-----------
MEXICO -- 0.9%
Pemex Finance, Ltd.
6.300%, 05/15/10.................... 350,000 340,669
-----------
SWEDEN -- 0.8%
Foreningssparbanken AB
7.500%, 09/29/49.................... 300,000 291,594
-----------
UNITED KINGDOM -- 0.5%
United Utilities PLC
6.875%, 08/15/28.................... 180,000 172,026
-----------
VENEZUELA -- 1.7%
Cerro Negro Finance, Ltd.
7.330%, 12/01/09.................... 110,000 92,179
Fetinitro Financial
8.290%, 04/01/20.................... 185,000 123,950
PDVSA Finance, Ltd.
6.800%, 11/15/08.................... 365,000 303,651
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------
</TABLE>
VENEZUELA (CONTINUED)
<TABLE>
<S> <C> <C>
PDVSA Finance, Ltd.
7.500%, 11/15/28.................... $ 145,000 $ 103,930
-----------
623,710
-----------
TOTAL FOREIGN CORPORATE BONDS
(Cost: $3,033,968)................................ 2,803,613
-----------
- -----------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 3.3%
- -----------------------------------------------------------------
U.S. TREASURY BONDS -- 0.9%
8.500%, 02/15/20...................... 260,000 339,828
-----------
U.S. TREASURY INFLATION INDEX -- 1.9%
3.625%, 01/15/08...................... 710,000 705,306
-----------
U.S. TREASURY NOTES -- 0.5%
6.375%, 05/15/99...................... 165,000 165,284
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost: $1,213,146)................................ 1,210,418
-----------
- -----------------------------------------------------------------
AGENCY OBLIGATIONS -- 5.8%
- -----------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. -- 2.7%
Pool # 200112
9.500%, 11/01/05.................... 142,200 147,877
Pool # 380032
10.000%, 10/01/03................... 51,170 53,085
Pool # 43 PG
6.500%, 12/17/22.................... 145,000 146,087
Pool # B00623
9.000%, 06/01/06.................... 57,714 59,357
Pool # E74572
5.500%, 01/01/14.................... 396,956 386,906
Pool # E74614
5.500%, 02/01/14.................... 196,236 191,267
-----------
984,579
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 2.3%
Pool # 1994 27 PJ
6.500%, 06/25/23.................... 255,000 256,673
Pool # 1996 59 K
6.500%, 07/25/23.................... 80,000 77,725
Pool # 273114
6.500%, 02/01/09.................... 225,665 227,911
Pool # 303262
9.500%, 05/01/07.................... 77,461 80,882
Pool # 303481
10.000%, 10/01/05................... 66,041 69,382
Pool # 303758
9.500%, 07/01/06.................... 62,919 65,699
Pool # 363503
9.500%, 06/01/05.................... 75,863 78,627
-----------
856,899
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
33
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999 -- CONTINUED
- --------------------------------------------------------------------------------
HIGH QUALITY BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<S> <C> <C>
</TABLE>
AGENCY OBLIGATIONS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 0.1%
Pool # 141741
11.000%, 11/15/15................... $ 2,428 $ 2,709
Pool # 299705
8.500%, 02/15/21.................... 8,159 8,637
Pool # 50700
11.500%, 02/15/12................... 2,676 2,999
Pool # 64054
11.500%, 02/15/13................... 3,574 3,983
Pool # 68958
11.500%, 07/15/13................... 4,665 5,229
-----------
23,557
-----------
TENNESSEE VALLEY AUTHORITY -- 0.7%
Tennessee Valley Authority -
Global Series A
6.375%, 06/15/05.................... 250,000 258,165
-----------
TOTAL AGENCY OBLIGATIONS
(Cost: $2,075,681)................................ 2,123,200
-----------
- -----------------------------------------------------------------
FOREIGN GOVERNMENT BONDS -- 3.4%
- -----------------------------------------------------------------
GERMANY -- 1.4%
German Unity Fund
8.000%, 01/21/02.................... 403,920 492,582
-----------
NEW ZEALAND -- 1.3%
Federal National Mortgage Association
7.250%, 06/20/02.................... 860,000 478,992
-----------
SWEDEN -- 0.7%
Swedish Government
5.500%, 04/12/02.................... 2,000,000 258,733
-----------
TOTAL FOREIGN GOVERNMENT BONDS
(Cost: $1,193,122)................................ 1,230,307
-----------
- -----------------------------------------------------------------
CMO'S AND ASSET-BACKED SECURITIES -- 26.0%
- -----------------------------------------------------------------
FINANCIAL SERVICES -- 0.7%
Captiva CBO 1997 1A A
6.860%, 11/30/09.................... 250,000 242,367
-----------
MORTGAGE-COMMERCIAL -- 21.0%
Allied Capital Commercial Mortgage
1998 1 C
6.710%, 12/25/04.................... 400,000 385,687
ARG Funding Corp. 1999 1A A3
6.020%, 05/20/05.................... 370,000 368,728
Asset Securitization Corp. 1996 D2 A1
6.920%, 02/14/29.................... 387,024 396,276
Comed Transitional Funding Trust
1998 1 A6
5.630%, 06/25/09.................... 310,000 301,548
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------
</TABLE>
MORTGAGE-COMMERCIAL (CONTINUED)
<TABLE>
<S> <C> <C>
Comed Transitional Funding Trust
1998 1 A7
5.740%, 12/25/10.................... $ 170,000 $ 164,409
CRIIMI MAE Commercial Mortgage
1998 C1 A2
7.000%, 03/02/11.................... 180,000 163,350
DLJ Commercial Mortgage Corp
1998 CF1 CP
0.608%, 04/15/05.................... 7,000,000 306,250
DLJ Commercial Mortgage Corp
1998 CF2 A1B
6.240%, 11/12/31.................... 750,000 742,969
DLJ Mortgage Acceptance Corp.
1996 CF1 S
0.727%, 03/12/06.................... 8,692,266 198,292
DLJ Mortgage Acceptance Corp.
1998 A A2
7.116%, 05/28/28.................... 225,901 224,631
Federal National Mortgage Association-
Aces 1996 M5 XS
0.537%, 01/25/13.................... 12,541,373 329,211
Federal National Mortgage Association-
Aces 1997 M8 X1
0.654%, 10/25/02.................... 18,000,000 362,812
Global Franchise Trust 1998 1 A1
6.349%, 04/10/04.................... 406,636 407,399
GMAC Commercial Mortgage Securities,
Inc. 1998 C2 A2
6.420%, 08/15/08.................... 260,000 260,812
GS Mortgage Securities Corp.
1998 C1 A1
6.060%, 10/18/30.................... 368,084 363,024
GS Mortgage Securities Corp.
1998 GLII A2
6.562%, 04/13/31.................... 470,000 469,302
JP Morgan Commercial Mortgage 1998 C6
A2
6.533%, 01/15/30.................... 690,000 697,763
Merrill Lynch Mortgage Investors, Inc.
1995 C2 IO
1.158%, 06/15/21.................... 7,038,926 215,567
Morgan Stanley Capital I 1998 XL2 A2
6.170%, 10/03/08.................... 410,000 402,056
Morgan Stanley Capital I 1999 RM1 A2
6.710%, 12/15/31.................... 340,000 346,694
Mortgage Capital Funding, Inc.
1998 MC3 A1
6.001%, 11/18/31.................... 285,104 283,100
Nomura Asset Securities Corp.
1998 D6 A1B
6.590%, 03/17/28.................... 300,000 302,438
-----------
7,692,318
-----------
MORTGAGE-RESIDENTIAL -- 4.3%
Amresco Residential Securities 1996 3
A5
7.550%, 02/25/23.................... 320,000 323,700
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
34
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<S> <C> <C>
</TABLE>
CMO'S AND ASSET-BACKED SECURITIES (Continued)
- ---------------------------------------------------------
MORTGAGE-RESIDENTIAL (CONTINUED)
<TABLE>
<S> <C> <C>
Amresco Residential Securities 1997 3
A9
6.960%, 03/25/27.................... $ 410,000 $ 417,752
Bankboston Home Equity Loan Trust 1998
2 A4
6.110%, 09/25/13.................... 840,000 833,437
-----------
1,574,889
-----------
TOTAL CMO'S AND ASSET-BACKED SECURITIES
(Cost: $9,666,290)................................ 9,509,574
-----------
<CAPTION>
NUMBER
OF SHARES
<S> <C> <C>
- -----------------------------------------------------------------
PREFERRED STOCK -- 0.0%
- -----------------------------------------------------------------
TELECOMMUNICATIONS -- 0.0%
IXC Communications, Inc.*
(Cost: $10,000)..................... 100 10,925
-----------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------
MUTUAL FUNDS -- 7.1%
- -----------------------------------------------------------------
INVESTMENT COMPANIES -- 7.1%
Blackrock 2001 Term Trust............. $ 142,200 $ 1,279,800
Blackrock Strategic Term Trust........ 143,900 1,322,081
-----------
TOTAL MUTUAL FUNDS
(Cost: $2,409,688)................................ 2,601,881
-----------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------
COMMERCIAL PAPER -- 2.7%
- -----------------------------------------------------------------
Student Loan Marketing Association
4.800%, 04/01/99
(Cost: $1,001,000).................. $1,001,000 1,001,000
-----------
TOTAL INVESTMENTS -- 91.8%
(Cost: $33,856,874)................... 33,576,389
OTHER ASSETS IN EXCESS OF LIABILITIES --
8.2%.................................... 2,988,934
--------------
NET ASSETS -- 100.0%.................... $ 36,565,323
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
35
<PAGE>
HIGH YIELD BOND FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: FRED S. ROBERTSON, III, Partner, Chief Investment Officer,
Fixed Income; DOUGLAS FORSYTH, CFA, Portfolio Manager; SUSAN MALONE, Portfolio
Manager.
GOAL: The High Yield Bond Fund seeks to deliver total return via high current
income and long-term capital appreciation from a diversified portfolio
consisting primarily of U.S. corporate fixed income securities.
MARKET OVERVIEW: The environment for high yield investing was favorable at the
beginning and end of the 12-month period ending March 31, 1999. However, between
late July and October, a number of factors contributed to one of the most
difficult periods for high yield bonds in years.
In July, the devaluation of the Russian ruble and the Russian government's
default on short-term debt sparked concerns for additional devaluations and the
potential for worldwide recession.
Because foreign-issued debt, such as Russian bonds, was used as collateral by
a number of hedge funds, fears of default caused a wave of near failures among
hedge fund managers such as Long-Term Capital Management. The developments among
hedge funds created a financial crisis that impacted liquidity-sensitive
sectors, particularly high yield bonds.
Widespread selling among hedge funds to raise capital created a lack of
liquidity and caused prices for high yield bonds to drop and yield spreads to
widen to seven-year highs. The Federal Reserve Board's decision to cut
short-term interest rates and evidence of continued economic strength in the
United States helped restore investor confidence later in the period and returns
for high yield bonds improved.
PERFORMANCE: The High Yield Bond Fund's I shares posted a 1.7% gain in the
12-month period ending March 31, 1999 versus a decline of 0.8% for the CS First
Boston High Yield Index.
PORTFOLIO SPECIFICS: The extremely difficult environment between late July and
October dragged returns for the fund lower. Holdings in the financial sector
were among the hardest hit.
However, the lack of exposure to emerging market debt issues, which generally
suffered greater losses than US bonds, helped returns. Another factor
contributing to the fund's resilience was the lack of downgrades among holdings.
Later in the period, issue selection and an improving backdrop for high yield
bonds contributed to strong returns. Among the best-performing issues in the
first quarter were technology and telecommunications holdings such as Globix,
Metromedia Fiber, PSInet and Northeast Optic.
MARKET OUTLOOK: The environment for high yield bonds is attractive given
robust US economic growth, low inflation and strong demand. New issuance for
high yield bonds in the first quarter of 1999 was $28 billion versus $24.5
billion in the fourth quarter of 1998.
Following the liquidity crisis that developed in late July last year, high
yield bonds continue to trade at discounts from what we believe to be their fair
values.
- --------------------------------------------------------------------------------
36
<PAGE>
HIGH YIELD BOND FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN HIGH YIELD BOND FUND
INSTITUTIONAL SHARES WITH THE CS FIRST BOSTON HIGH YIELD INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
1.69% As of 03/31/99 15.06%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH YIELD BOND FUND INSTITUTIONAL SHARES CS FIRST BOSTON HIGH YIELD INDEX
<S> <C> <C>
7/31/96 $250,000.00 $250,000.00
9/96 $265,701.85 $257,071.87
12/96 $278,313.50 $268,409.15
3/97 $284,739.55 $272,366.41
6/97 $305,704.82 $284,126.03
9/97 $331,437.95 $297,492.29
12/97 $337,881.57 $302,300.65
3/98 $357,326.30 $311,386.98
6/98 $363,444.19 $315,324.34
9/98 $338,199.43 $295,941.62
12/98 $353,159.03 $304,057.09
03/31/99 $363,377.04 $309,057.77
</TABLE>
This graph compares a $250,000 investment in the High Yield Bond Fund
Institutional Shares with the CS First Boston High Yield Index, on a cumulative
and average annual total return basis. All return calculations reflect the
reinvestment of income dividends and capital gains distributions, if any, as
well as all fees and expenses applicable to the Fund.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five-year
period. Total return results may have been lower had there been no waiver or
deferral.
The CS First Boston High Yield Index includes over 180 US domestic issues with
an average maturity range of seven to ten years and with a minimum issues size
of $100 million.
The Index reflects the reinvestment of income, dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
37
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------
CORPORATE BONDS -- 91.8%
- -----------------------------------------------------------------
AIRLINES -- 5.8%
Atlas Air, Inc.
9.250%, 04/15/08.................... $1,500,000 $ 1,515,000
Atlas Air, Inc.
9.375%, 11/15/06.................... 1,500,000 1,513,125
Trans World Airlines
12.000%, 04/01/02................... 1,500,000 1,413,750
Trans World Airlines
11.500%, 12/15/04................... 1,000,000 777,500
Trans World Airlines
11.375%, 03/01/06................... 1,000,000 527,500
-----------
5,746,875
-----------
APPAREL -- 1.7%
Supreme International Corp.
12.250%, 04/01/06................... 1,750,000 1,729,910
-----------
BROADCASTING -- 8.5%
CD Radio, Inc. 0.000% (until 12/01/02,
thereafter 15.000% to maturity),
12/01/07............................ 2,000,000 1,097,500
Echostar DBS Corp. 144A
9.375%, 02/01/09.................... 500,000 518,750
Fox Family Worldwide, Inc.
9.250%, 11/01/07.................... 1,750,000 1,658,125
Fox Family Worldwide, Inc. 0.000%
(until 11/01/02, thereafter 10.250%
to maturity), 11/01/07.............. 2,500,000 1,603,125
Fox/Liberty Networks LLC
8.875%, 08/15/07.................... 1,450,000 1,497,125
Source Media, Inc.
12.000%, 11/01/04................... 1,375,000 1,100,000
United International Holdings
0.000%, 02/15/08.................... 1,500,000 1,016,250
-----------
8,490,875
-----------
COMPUTERS -- 7.5%
Apple Computer, Inc.
6.500%, 02/15/04.................... 2,000,000 1,855,000
Globix Corp.
13.000%, 05/01/05................... 1,800,000 1,845,000
Rhythms Netconnections
0.000%, 05/15/08.................... 1,500,000 819,375
Unisys Corp.
11.750%, 10/15/04................... 1,575,000 1,785,656
Unisys Corp.
12.000%, 04/15/03................... 1,050,000 1,161,563
-----------
7,466,594
-----------
CREDIT CARDS -- 1.6%
Salton, Inc. 144A
10.750%, 12/15/05................... 1,500,000 1,563,750
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 7.3%
Amresco, Inc.
8.750%, 07/01/99.................... $1,000,000 $ 1,001,250
Amresco, Inc.
9.875%, 03/15/05.................... 400,000 315,000
GS Escrow Corp.
6.750%, 08/01/01.................... 1,050,000 1,040,812
Indah Kiat International Finance
11.375%, 06/15/99................... 1,050,000 1,008,000
MCII Holdings 12.000% (until 11/15/99,
thereafter 15.000% to maturity),
11/15/02............................ 250,000 220,000
Px Escrow Corp. 0.000% (until
02/01/02, thereafter 9.625% to
maturity),
02/01/06............................ 2,075,000 1,226,844
Resource America, Inc.
12.000%, 08/01/04................... 2,550,000 2,266,313
United Cos. Financial
8.375%, 07/01/05.................... 1,500,000 225,000
-----------
7,303,219
-----------
DRUGS/PHARMACEUTICALS -- 0.4%
Twin Laboratories, Inc.
10.250%, 05/15/06................... 357,000 380,651
-----------
ENGINEERING & CONSTRUCTION -- 1.6%
McDermott, Inc.
9.375%, 03/15/02.................... 1,500,000 1,577,850
-----------
ENTERTAINMENT -- 4.2%
Argosy Gaming Co.
13.250%, 06/01/04................... 1,000,000 1,132,500
Ascent Entertainment Group 0.000%
(until 12/01/02, thereafter 11.875%
to maturity), 12/15/04.............. 2,108,000 1,349,120
SFX Entertainment, Inc.
9.125%, 02/01/08.................... 1,650,000 1,683,000
-----------
4,164,620
-----------
HEALTH CARE -- 2.0%
Apria Healthcare Group
9.500%, 11/01/02.................... 2,000,000 1,987,500
-----------
HOME BUILDING -- 0.4%
K Hovnanian Enterprise
11.250%, 04/15/02................... 345,000 351,900
-----------
INTERNET SOFTWARE -- 2.4%
IDT Corp.
8.750%, 02/15/06.................... 1,450,000 1,475,375
PSInet, Inc.
10.000%, 02/15/05................... 850,000 903,125
-----------
2,378,500
-----------
LEISURE/GAMING -- 0.1%
Hollywood Casino Corp.
12.750%, 11/01/03................... 79,000 86,308
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
38
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<S> <C> <C>
</TABLE>
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
MACHINERY-CONSTRUCTION & MINING -- 0.7%
Terex Corp. 144A
8.875%, 04/01/08.................... $ 750,000 $ 738,750
-----------
PACKAGING & CONTAINERS -- 1.6%
Stone Container
10.750%, 10/01/02................... 1,500,000 1,565,625
-----------
PUBLISHING -- 3.3%
American Lawyer Media
9.750%, 12/15/07.................... 250,000 259,375
American Lawyer Media
0.000%, 12/15/08.................... 1,600,000 1,032,000
Big Flower Press Holdings 144A
8.625%, 12/01/08.................... 2,000,000 2,015,000
-----------
3,306,375
-----------
REAL ESTATE -- 1.6%
Bluegreen Corp.
10.500%, 04/01/08................... 1,750,000 1,535,625
-----------
RECREATIONAL CENTERS -- 1.4%
Bally Total Fitness Holdings
9.875%, 10/15/07.................... 1,450,000 1,435,500
-----------
RENTAL AUTO/EQUIPMENT -- 1.3%
United Rentals, Inc.
9.500%, 06/01/08.................... 1,250,000 1,306,250
-----------
RETAIL-ARTS & CRAFTS -- 1.3%
Michaels Stores, Inc.
10.875%, 06/15/06................... 1,249,000 1,336,430
-----------
RETAIL-DISCOUNT -- 1.5%
Tuesday Morning Corp.
11.000%, 12/15/07................... 1,400,000 1,517,250
-----------
RETAIL-INTERNET -- 1.7%
Amazon.Com, Inc. 0.000% (until
05/01/03, thereafter 10.000% to
maturity), 05/01/08................. 2,550,000 1,730,813
-----------
RETAIL-MAIL ORDER -- 2.1%
Shop At Home, Inc.
11.000%, 04/01/05................... 2,000,000 2,105,000
-----------
RETAIL-MUSIC STORE -- 1.8%
Musicland Stores Corp.
9.000%, 06/15/03.................... 750,000 751,875
Musicland Stores Corp.
9.875%, 03/15/08.................... 1,000,000 1,015,000
-----------
1,766,875
-----------
RETAIL-RESTAURANTS -- 1.8%
Foodmaker, Inc.
8.375%, 04/15/08.................... 1,750,000 1,741,250
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------
RETAIL-VIDEO RENTAL -- 1.4%
Hollywood Entertainment Corp.
10.625%, 08/15/04................... $1,400,000 $ 1,400,000
-----------
TELECOMMUNICATIONS -- 17.4%
Caprock Communications
12.000%, 07/15/08................... 750,000 766,875
Colt Telecom Group PLC
0.000%, 12/15/06.................... 2,100,000 1,779,750
Crown Castle International Corp.
0.000% (until 11/15/02, thereafter
12.750% to maturity), 11/15/07...... 1,800,000 1,271,250
Global Telesystems Group, Inc.
9.875%, 02/15/05.................... 1,725,000 1,668,937
ICG Holdings, Inc.
0.000%, 09/15/05.................... 1,000,000 877,500
ITC Deltacom, Inc.
9.750%, 11/15/08.................... 1,000,000 1,050,000
NTL, Inc. 0.000% (until 04/15/000,
thereafter 12.750% to maturity),
04/15/05............................ 1,400,000 1,338,750
Orbcomm Global LP
14.000%, 08/15/04................... 2,000,000 1,960,000
Pac-West Telecommunications, Inc. 144A
13.500%, 02/01/09................... 2,200,000 2,178,000
Telesystem International Wireless
0.000%, 06/30/07.................... 1,025,000 553,500
Winstar Communications, Inc.
0.000%, 10/15/05.................... 1,800,000 2,018,250
Winstar Communications, Inc.
0.000%, 03/01/07.................... 2,100,000 1,842,750
-----------
17,305,562
-----------
TELECOMMUNICATIONS EQUIPMENT -- 6.3%
Completel Europe N.V. 144A
0.000%, 02/15/09.................... 2,000,000 1,050,000
Covad Communications Group 0.000%
(until 03/15/03, thereafter 13.500%
to maturity), 03/15/08.............. 2,600,000 1,420,250
Metromedia Fiber Network, Inc. 144A
10.000%, 11/15/08................... 2,250,000 2,413,125
Northeast Optic Network
12.750%, 08/15/08................... 1,300,000 1,355,250
-----------
6,238,625
-----------
TELEPHONE -- 2.3%
Viatel, Inc.
11.250%, 04/15/08................... 2,200,000 2,271,500
-----------
TOYS/GAMES/HOBBIES -- 0.8%
Marvel Enterprises, Inc. 144A
12.000%, 06/15/09................... 750,000 759,375
-----------
TOTAL CORPORATE BONDS
(Cost: $93,953,485)............................... 91,289,357
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
39
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999 -- CONTINUED
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<S> <C> <C>
FOREIGN CORPORATE BONDS -- 2.6%
- -----------------------------------------------------------------
AUSTRALIA -- 0.8%
Bulong Operations 144A
12.500%, 12/15/08................... $ 750,000 $ 768,750
-----------
BERMUDA -- 1.8%
Sea Containers
12.500%, 12/01/04................... 1,675,000 1,809,000
-----------
TOTAL FOREIGN CORPORATE BONDS
(Cost: $2,600,375)................................ 2,577,750
-----------
<CAPTION>
NUMBER
OF SHARES
<S> <C> <C>
- -----------------------------------------------------------------
COMMON STOCK -- 1.1%
- -----------------------------------------------------------------
INTERNET SOFTWARE -- 1.1%
Concentric Network Corp.
(Cost: $1,035,000).................. 10,000 1,080,000
-----------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------
PREFERRED STOCK -- 1.8%
- -----------------------------------------------------------------
BROADCASTING -- 1.7%
Capstar Broadcasting*................. 14,045 $ 1,660,821
-----------
TELECOMMUNICATIONS -- 0.0%
Dobson Communications*................ 70 6,710
-----------
TELEPHONE -- 0.1%
Viatel, Inc........................... 521 93,780
-----------
TOTAL PREFERRED STOCK
(Cost: $1,671,100)................................ 1,761,311
-----------
<CAPTION>
NUMBER
OF
WARRANTS
<S> <C> <C>
- -----------------------------------------------------------------
WARRANTS -- 0.0%
- -----------------------------------------------------------------
Bell Technology*
(Cost: $0).......................... 1,800 18
-----------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------
COMMERCIAL PAPER -- 2.6%
- -----------------------------------------------------------------
Associates First Capital Corp.
5.000%, 04/01/99
(Cost: $2,547,000).................. $2,547,000 2,547,000
-----------
TOTAL INVESTMENTS -- 99.9%
(Cost: $101,806,960)............................ 99,255,436
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.1%..... 141,674
--------------
NET ASSETS -- 100.0%.............................. $ 99,397,110
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
40
<PAGE>
SHORT-INTERMEDIATE FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: FRED S. ROBERTSON, III, Partner, Chief Investment Officer,
Fixed Income; JAMES E. KELLERMAN, Partner, Portfolio Manager; MALCOM S. DAY,
CFA, Portfolio Manager; SUSAN MALONE, Portfolio Manager.
GOAL: The primary goal of the Short-Intermediate Fund is to preserve principal
and provide liquidity. Secondarily, the fund seeks to provide a relatively high
level of current income. The fund invests in a portfolio of investment-grade,
fixed-income securities with a maximum dollar-weighted maturity of five years.
MARKET OVERVIEW: During the 12-month period, various sectors of the US bond
market delivered solid gains. Strong money growth, relatively low interest rates
and benign inflation offset risks posed by currency and economic turmoil among a
number of emerging markets. Early in the period, the US bond market remained
stretched between conflicting economic signals. For example, although building
wage pressure triggered fears of rising prices, inflation remained low and
yields were mired in a narrow trading range.
In August, however, the environment changed significantly. The Russian
currency crisis and concerns that devaluations and defaults would spread
prompted investors worldwide to seek safety. US Treasury bonds were the primary
beneficiary. Other sectors of the fixed income market, such as mortgage-backed
securities, were overlooked, resulting in their underperformance versus
Treasuries. The US Federal Reserve Board's decision to lower short-term interest
rates three times over a six-week period between late September and mid November
helped restore confidence and liquidity among the world's financial markets. In
February, evidence of a robust US economy pushed interest rates higher and fears
of inflation spread. Those fears diminished in March and US bonds closed the
period with gains.
PERFORMANCE: During the 12-month period ending March 31, 1999, the
Short-Intermediate Fund's I shares was up 6.0% versus a 6.1% gain for the
Merrill Lynch 1-3 Year Government Index.
PORTFOLIO SPECIFICS: In August, we anticipated an easing of monetary policy
and extended the duration of the portfolio. Our changes proved beneficial as the
Federal Reserve Board did indeed lower interest rates. Later in the period, amid
signs of near-term economic acceleration, we adjusted our interest-rate position
to neutral. As a result, we were well positioned for the rise in rates in
February. Returns were negatively impacted early in the period by the fund's
overweight position in mortgage and asset-backed securities and underweight
position in Treasuries relative to the Index. However, this allocation helped
returns later in the period. We maintain overweight positions in mortgages and
asset-backed securities because of their significant yield premiums over
Treasuries.
MARKET OUTLOOK: Investors appear to have grown more comfortable with US
economic strength and its negligible impact on inflation. While the longer-term
outlook for bonds remains positive, near-term risks exist. With leading
indicators suggesting a continuing surge in economic growth, higher interest
rates may eventually be necessary to slow the economy to a less inflationary
rate. In this environment, we believe a neutral stance on interest rates is
appropriate.
- --------------------------------------------------------------------------------
41
<PAGE>
SHORT-INTERMEDIATE FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN SHORT-INTERMEDIATE
FUND INSTITUTIONAL SHARES WITH THE MERRILL LYNCH 1-3 YEAR TREASURY INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/99 SINCE
1 YEAR 3 YEARS INCEPTION
6.02% 6.27% 6.76%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE
FUND MERRILL LYNCH 1-3 YEAR
<S> <C> <C>
Institutional Shares Treasury Index
8/31/95 $250,000.00 $250,000.00
9/95 $255,700.00 $251,200.00
12/95 $262,368.17 $257,506.86
3/96 $263,322.61 $258,372.20
6/96 $265,628.48 $260,987.59
9/96 $270,100.91 $265,288.62
12/96 $275,090.98 $270,352.19
3/97 $277,288.26 $272,138.68
6/97 $283,596.24 $278,141.96
9/97 $288,701.86 $283,593.66
12/97 $293,441.74 $288,325.28
3/98 $298,077.52 $292,578.72
6/98 $303,315.78 $297,048.46
9/98 $311,275.02 $306,194.09
12/98 $313,549.43 $308,493.48
3/31/99 $316,010.88 $310,367.26
</TABLE>
This graph compares a $250,000 investment in the Short-Intermediate Fund
Institutional Shares with the Merrill Lynch 1-3 Year Treasury Index, on a
cumulative and average annual total return basis. All return calculations
reflect the reinvestment of income and capital gains distributions, if any, as
well as all fees and expenses applicable to the Fund.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five-year
period. Total return results may have been lower had there been no waiver or
deferral.
The Merrill Lynch 1-3 Year Treasury is an index consisting of all public US
Treasury obligations having maturities from one to 2.99 years. It includes
income and distributions but does not reflect fees, brokerage commissions or
other expenses of investing.
The Index reflects the reinvestment of income, dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
42
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
SHORT-INTERMEDIATE FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------
CORPORATE BONDS -- 14.6%
- -----------------------------------------------------------------
AIRLINES -- 1.3%
Continental Airlines, Inc.
6.465%, 10/15/04.................... $ 240,000 $ 239,304
-----------
DIVERSIFIED FINANCIAL SERVICES -- 6.3%
AT&T Capital Corp
6.250%, 05/15/01.................... 135,000 136,181
Citigroup, Inc.
5.800%, 03/15/04.................... 225,000 223,850
Heller Financial, Inc.
5.875%, 11/01/00.................... 250,000 250,337
Lehman Brothers Holdings, Inc.
6.625%, 12/27/02.................... 200,000 199,962
National Rural Utilities Cooperative
Finance Corp.
5.000%, 10/01/02.................... 360,000 352,019
-----------
1,162,349
-----------
FINANCIAL SERVICES -- 1.0%
Union Acceptance Corp. 1997 D A5
6.410%, 05/10/05.................... 180,000 182,116
-----------
OTHER COMMERCIAL SERVICES -- 1.1%
Cendant Corp.
7.750%, 12/01/03.................... 200,000 205,284
-----------
PIPELINES -- 1.7%
KN Energy, Inc.
6.450%, 03/01/03.................... 35,000 35,482
KN Energy, Inc.
6.300%, 03/01/01.................... 135,000 136,103
KN Energy, Inc.
6.450%, 11/30/01.................... 150,000 151,534
-----------
323,119
-----------
REAL ESTATE -- 0.8%
Security Capital Group
7.750%, 11/15/03.................... 145,000 146,493
-----------
TELECOMMUNICATIONS -- 0.9%
Cable & Wireless Communications PLC
6.375%, 03/06/03.................... 170,000 171,232
-----------
TELEPHONE -- 1.5%
AT&T Corp.
5.625%, 03/15/04.................... 275,000 273,496
-----------
TOTAL CORPORATE BONDS
(Cost: $2,702,914)................................ 2,703,393
-----------
- -----------------------------------------------------------------
FOREIGN CORPORATE BONDS -- 0.9%
- -----------------------------------------------------------------
MEXICO -- 0.4%
Pemex Finance, Ltd. 144A
6.125%, 11/15/03.................... 70,000 69,909
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------
VENEZUELA -- 0.5%
PDVSA Finance, Ltd.
6.450%, 02/15/04.................... $ 100,000 $ 91,237
-----------
TOTAL FOREIGN CORPORATE BONDS
(Cost: $169,900).................................. 161,146
-----------
- -----------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 14.0%
- -----------------------------------------------------------------
U.S. TREASURY NOTES -- 14.0%
5.750%, 11/15/00...................... 2,420,000 2,447,225
5.500%, 02/28/03...................... 140,000 141,443
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost: $2,588,866)................................ 2,588,668
-----------
- -----------------------------------------------------------------
AGENCY OBLIGATIONS -- 25.6%
- -----------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. -- 18.7%
Pool # 1836 D
6.250%, 03/15/16.................... 300,000 302,718
Pool # 200112
9.500%, 11/01/05.................... 63,661 66,203
Pool # 2127 TD
6.000%, 01/15/11.................... 370,000 371,503
Pool # 380032
10.000%, 10/01/03................... 44,740 46,414
Pool # 380062
9.500%, 11/01/04.................... 118,383 124,205
Pool # 380078
9.000%, 04/01/05.................... 235,243 243,713
Pool # 504019
9.000%, 03/01/06.................... 110,284 112,746
Pool # 504132
9.000%, 07/01/06.................... 176,835 181,992
Pool # 555287
9.750%, 05/01/11.................... 179,058 190,697
Pool # 800455
9.000%, 12/01/03.................... 302,986 311,318
Pool # B00511
9.500%, 05/01/06.................... 177,681 183,985
Pool # B00623
9.000%, 06/01/06.................... 290,712 298,986
Pool # C12485
8.000%, 06/01/28.................... 133,609 138,286
Pool # C12488
8.000%, 05/01/28.................... 79,920 83,142
Pool # E00598
5.500%, 12/01/13.................... 577,385 562,766
Pool # G10453
9.000%, 06/01/07.................... 221,727 230,517
-----------
3,449,191
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 2.8%
Pool # 2454
14.750%, 10/01/12................... 4,657 5,556
Pool # 303758
9.500%, 07/01/06.................... 160,003 167,070
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
43
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999 -- CONTINUED
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<S> <C> <C>
</TABLE>
AGENCY OBLIGATIONS (Continued)
- ---------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
<TABLE>
<S> <C> <C>
Pool # 303920
9.500%, 10/01/03.................... $ 155,622 $ 161,292
Pool # 50155
10.000%, 12/01/03................... 3,765 3,956
Pool # 70722
9.000%, 01/01/06.................... 172,328 179,093
-----------
516,967
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 4.1%
Pool # 141741
11.000%, 11/15/15................... 1,707 1,905
Pool # 200947
9.500%, 12/15/17.................... 4,171 4,484
Pool # 59779
11.500%, 03/15/13................... 2,122 2,379
Pool # 64054
11.500%, 02/15/13................... 3,574 3,983
Pool # 780179
12.000%, 10/15/15................... 34,253 38,761
Pool # 780182
9.000%, 01/15/08.................... 270,968 279,813
Pool # 780306
9.000%, 11/15/06.................... 179,153 185,001
Pool # 780328
10.000%, 10/15/06................... 234,769 247,245
-----------
763,571
-----------
TOTAL AGENCY OBLIGATIONS
(Cost: $4,712,397)................................ 4,729,729
-----------
- -----------------------------------------------------------------
CMO'S AND ASSET-BACKED SECURITIES -- 21.9%
- -----------------------------------------------------------------
AUTO -- 2.5%
Ford Credit Auto Owner Trust 1999 A B
5.790%, 06/16/03.................... 230,000 227,987
Hyundai Auto Receivables Trust
1998 A A2
6.050%, 07/15/04.................... 235,000 235,862
-----------
463,849
-----------
MORTGAGE-COMMERCIAL -- 9.3%
Allied Capital Commercial Mortgage
144A
1998 1 A
6.310%, 09/25/03.................... 153,998 151,544
DLJ Commercial Mortgage Corp
1998 CF1 CP
0.906%, 04/15/05.................... 3,000,000 131,250
DLJ Mortgage Acceptance Corp. 144A
1996 CF1 S
0.727%, 03/12/06.................... 4,440,615 101,302
Enterprise Mortgage Acceptance Corp.
144A 1998 1 A1
6.110%, 07/15/03.................... 242,297 241,124
Federal National Mortgage Association
1993 136 PB
6.000%, 03/25/19.................... 120,000 120,277
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------
</TABLE>
MORTGAGE-COMMERCIAL (CONTINUED)
<TABLE>
<S> <C> <C>
Federal National Mortgage Association-
Aces 1996 M5 XS
0.537%, 01/25/13.................... $5,267,376 $ 138,269
Federal National Mortgage Association-
Aces 1997 M8 X1
0.654%, 10/25/02.................... 7,500,000 151,172
Merrill Lynch Mortgage Investors, Inc.
1995 C2 IO
1.158%, 06/15/21.................... 3,759,923 115,148
Morgan Stanley Capital I 1997 C1 A1A
6.850%, 02/15/20.................... 218,743 219,769
Sunlife Commercial Mortgage Trust
1997 C1 A
6.875%, 07/25/04.................... 210,462 213,883
Vanderbilt Mortgage Finance 1998 A 1A3
6.265%, 10/07/11.................... 145,000 146,020
-----------
1,729,758
-----------
MORTGAGE-RESIDENTIAL -- 5.4%
BankBoston Home Equity Loan Trust
1998 2 A4
6.110%, 09/25/13.................... 365,000 362,147
Residential Funding Mortgage Security
I 1993 S47 A8
5.650%, 12/25/23.................... 132,173 131,594
The Money Store Home Equity Trust
1996 C A14
7.785%, 12/15/22.................... 340,000 354,343
WMH Huntoon Paige
5.150%, 01/01/07.................... 146,966 143,517
-----------
991,601
-----------
RECEIVABLES -- 4.7%
California Infrastructure SCE 1997 1
A5
6.280%, 09/25/05.................... 380,000 386,650
Discover Master Trust 1998 6 A
5.850%, 01/17/06.................... 270,000 270,253
Fingerhut Master Trust 1998 2 A
6.230%, 02/15/07.................... 205,000 205,320
-----------
862,223
-----------
TOTAL CMO'S AND ASSET-BACKED SECURITIES
(Cost: $4,084,083)................................ 4,047,431
-----------
<CAPTION>
NUMBER
OF SHARES
<S> <C> <C>
- -----------------------------------------------------------------
MUTUAL FUNDS -- 7.4%
- -----------------------------------------------------------------
INVESTMENT COMPANIES -- 7.4%
Blackrock 2001 Term Trust............. 72,000 648,000
Blackrock Strategic Term Trust........ 77,400 711,113
-----------
TOTAL MUTUAL FUNDS
(Cost: $1,247,338)................................ 1,359,113
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
44
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<S> <C> <C>
COMMERCIAL PAPER -- 14.4%
- -----------------------------------------------------------------
Student Loan Marketing Association
Discount Note
4.800%, 04/01/99
(Cost: $2,659,000).................. $2,659,000 $ 2,659,000
-----------
TOTAL INVESTMENTS -- 98.8%
(COST: $18,164,498)............................. 18,248,480
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.2%..... 218,813
--------------
NET ASSETS -- 100.0%.............................. $ 18,467,293
--------------
--------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
45
<PAGE>
INTERNATIONAL CORE GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; LARRY SPEIDELL, CFA, Partner, Director of Global/Systematic
Portfolio Management and Research; LORETTA J. MORRIS, Partner, Portfolio
Manager; ALEX MUROMCEW, Portfolio Manager; ERNESTO RAMOS, PH.D., SENIOR
PORTFOLIO MANAGER; MELISA A. GRIGOLITE, Portfolio Manager; JOHN TRIBOLET,
Portfolio Manager.
GOAL: The International Core Growth Fund seeks to maximize long-term capital
appreciation through investments primarily in companies located outside the
United States corresponding to the top 75% in market capitalization within each
country.
MARKET OVERVIEW: The 12-month period ending March 31, 1999 was characterized
by:
- an enthusiastic pace of merger and acquisition activity
- concerted efforts by central banks globally to cut interest rates
- a continuing trend of privatization and deregulation
Many stock markets around the world climbed to record highs in the second
quarter of 1998 only to see those gains erased the following quarter. Worries of
a global economic slowdown, a currency devaluation in Russia and a pessimistic
outlook for the financial sector caused markets to fall in August and September.
However, investor confidence was restored by the fourth quarter and markets
recouped earlier losses and climbed toward record highs. A number of
developments soothed concerns and contributed to gains in both developed and
emerging markets during the period including the strengthening of the Japanese
yen and interest-rate reductions by a number of the world's central banks. In
Asia, the lingering effects of economic problems from 1997 continued to weigh on
investors throughout much of 1998. However, prospects improved amid currency
stabilization, strong corporate earnings and declining interest rates.
PERFORMANCE: For the 12-month period ending March 31, 1999, the fund's I
shares returned 6.4% versus 6.0% for the MSCI EAFE Index.
PORTFOLIO SPECIFICS: Among the factors contributing to the fund's gains:
- superior stock selection, especially in the United Kingdom, Spain, Denmark
and France
- outstanding performance from holdings such as Global Crossing, Colt Telecom,
Telepizza, Mannesmann and Nokia
- an overweight position and stock selection in the retail trade, technology
and commercial/ industrial sectors
- Concurrently, pricing concerns for health technology holdings and declining
energy prices hurt returns for energy stocks early in the period.
MARKET OUTLOOK: Given government reform measures and corporate restructuring
plans in Japan, we are cautiously optimistic on the country's prospects.
Accelerating earnings projections for a number of companies has resulted in an
increased weighting. In Europe, recent rate cuts, corporate restructuring and
merger and acquisition activity bode well for company profits.
- --------------------------------------------------------------------------------
46
<PAGE>
INTERNATIONAL CORE GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN INTERNATIONAL CORE
GROWTH FUND INSTITUTIONAL SHARES WITH THE MSCI EAFE INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
6.43% As of 03/31/99 24.74%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL CORE GROWTH FUND INSTITUTIONAL SHARES MSCI EAFE INDEX
12/27/96 $250,000.00 $250,000.00
01/97 $274,600.00 $240,743.38
<S> <C> <C>
02/97 $277,200.00 $244,691.57
03/97 $282,600.00 $245,572.46
04/97 $286,600.00 $246,873.99
05/97 $313,200.00 $262,945.49
06/97 $331,200.00 $277,433.78
07/97 $352,400.00 $281,928.21
08/97 $334,000.00 $260,868.17
09/97 $358,600.00 $275,476.79
10/97 $328,800.00 $254,292.63
11/97 $325,131.31 $251,698.84
12/97 $329,722.39 $253,888.62
01/98 $341,826.12 $265,491.33
02/98 $365,198.85 $282,527.91
03/98 $386,902.09 $291,229.77
04/98 $398,171.08 $293,536.31
05/98 $407,979.28 $292,112.66
06/98 $412,779.04 $294,332.71
07/98 $431,143.32 $297,305.47
08/98 $369,372.55 $260,469.33
09/98 $351,843.00 $252,472.92
10/98 $358,312.24 $278,780.60
11/98 $379,862.12 $293,054.16
12/98 $400,733.67 $304,600.50
01/99 $416,178.61 $303,686.69
02/99 $399,063.94 $296,458.95
03/31/99 $411,795.59 $308,465.54
</TABLE>
This graph compares a $250,000 investment in the International Core Growth Fund
Institutional Shares with the MSCI EAFE Index, on a cumulative and average
annual total return basis. All return calculations reflect the reinvestment of
income, dividends and capital gains distributions, if any, as well as all fees
and expenses applicable to the Fund.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five-year
period. Total return results may have been lower had there been no waiver or
deferral.
The Morgan Stanley Capital International ("MSCI") Europe, Australia, Far East
("EAFE") Index is an unmanaged index that is a generally accepted benchmark for
major overseas markets. The Index weightings represent the relative
capitalizations of the major overseas markets included in the index on a US
dollar-adjusted basis.
Index returns reflect the reinvestment of income, dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's share price is expected to be
more volatile than that of a United States only fund.
- --------------------------------------------------------------------------------
47
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
INTERNATIONAL CORE GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
COMMON STOCK -- 97.7%
- ------------------------------------------------------------------
AUSTRALIA -- 1.2%
Suncorp-Metway, Ltd................... 130,700 $ 792,356
Telstra Corp., Ltd.................... 234,000 1,219,850
------------
2,012,206
------------
BELGIUM -- 1.9%
Fortis (B)............................ 41,600 1,535,950
Mobistar S.A.*........................ 24,900 1,572,581
------------
3,108,531
------------
BERMUDA -- 1.0%
Global Crossing, Ltd.*................ 34,100 1,577,125
------------
BRAZIL -- 1.6%
Aracruz Celulose S.A. -- ADR.......... 61,700 894,650
Tele Norte Leste Participacoes --
ADR*................................ 115,000 1,768,125
------------
2,662,775
------------
CANADA -- 2.1%
ATI Technology, Inc.*................. 104,400 1,601,068
Rogers Communications Cl. B*.......... 53,600 970,816
Talisman Energy, Inc.*................ 38,200 826,982
------------
3,398,866
------------
FINLAND -- 2.7%
Nokia OYJ -- ADR...................... 20,400 3,177,300
Sonera Group OYJ...................... 75,800 1,260,224
------------
4,437,524
------------
FRANCE -- 12.0%
Banque Nationale de Paris............. 18,000 1,566,265
Banque Paribas........................ 14,800 1,652,114
Canal Plus............................ 6,800 1,993,134
Cap Gemini S.A........................ 8,300 1,389,785
Casino Guichard Perrachon............. 18,400 1,632,854
Castorama Dubois Investissements SCA.. 9,800 2,052,511
Elf Aquitaine......................... 12,000 1,629,745
Michelin (CGDE) Cl. B................. 44,800 2,009,587
Societe Television Francaise 1........ 6,100 1,145,215
Suez Lyonnaise des Eaux............... 9,500 1,757,892
Synthelabo............................ 5,600 1,218,206
Vivendi (EX-Generale des Eaux)........ 5,600 1,377,812
------------
19,425,120
------------
GERMANY -- 5.7%
DaimlerChrysler AG.................... 17,100 1,487,952
Dresdner Bank AG...................... 53,000 2,117,070
Mannesmann AG......................... 21,000 2,604,936
Muenchener Rueckversicher AG.......... 7,500 1,496,308
Veba AG............................... 29,200 1,536,792
------------
9,243,058
------------
GREECE -- 1.2%
National Bank Of Greece S.A........... 17,200 1,162,853
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
</TABLE>
GREECE (CONTINUED)
<TABLE>
<S> <C> <C>
Panafon Hellenic Telecommunications
co. 144A S.A. -- GDR*............... 30,900 $ 781,770
------------
1,944,623
------------
HONG KONG -- 1.3%
HSBC Holdings PLC..................... 40,800 1,279,352
Sun Hung Kai Properties............... 108,000 808,305
------------
2,087,657
------------
IRELAND -- 1.1%
CRH PLC............................... 49,200 849,320
ESAT Telecom Group PLC -- ADR*........ 22,600 946,375
------------
1,795,695
------------
ISRAEL -- 0.6%
Gilat Satellite Networks, Ltd.*....... 16,300 978,000
------------
ITALY -- 4.9%
Alleanza Assicurazioni SpA............ 127,400 1,519,810
Banca Commerciale Italiana............ 205,500 1,686,099
Mediaset SpA.......................... 149,900 1,409,540
Seat-Pagine Gialle SpA................ 1,125,900 1,318,825
Telecom Italia SpA.................... 193,800 2,058,764
------------
7,993,038
------------
JAPAN -- 16.9%
Advantest Corp........................ 17,300 1,322,004
Bank of Tokyo-Mitsubishi, Ltd......... 120,000 1,653,635
Fuji Soft ABC, Inc.................... 29,900 1,956,641
Fujitsu, Ltd.......................... 88,000 1,413,290
Honda Motor Co., Ltd.................. 37,000 1,671,451
Hoya Corp............................. 30,000 1,702,271
KAO Corp.............................. 41,000 905,303
Mitsui Fudosan Co., Ltd............... 188,000 1,693,793
Nomura Securities Co., Ltd............ 111,000 1,162,205
NTT Mobile Communications............. 39 1,926,454
Olympus Optical Co., Ltd.............. 75,000 987,925
Ryohin Keikaku Co., Ltd............... 16,300 2,587,519
Shohkoh Fund & Co., Ltd............... 3,920 1,985,983
Softbank Corp......................... 32,900 3,689,199
Sony Corp............................. 20,500 1,895,423
Tokyo Electron, Ltd................... 18,000 931,689
------------
27,484,785
------------
MEXICO -- 2.8%
Corparcion Interamericana de
Entretenmiento S.A. Cl. B*.......... 228,882 677,560
Corparcion Interamericana de
Entretenmiento S.A. Cl. L*.......... 91,000 243,595
Fomento Economico Mexicano S.A. --
ADR................................. 33,700 1,042,594
Grupo Carso Global Telecom S.A........ 238,000 1,232,966
Grupo Financiero Bancomer S.A. Cl. O.. 3,903,000 1,331,586
------------
4,528,301
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
48
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
NETHERLANDS -- 7.4%
ASM Lithography Holding N.V.*......... 44,800 $ 2,016,000
Equant N.V.*.......................... 33,100 2,490,775
Koninklijke Ahold N.V................. 35,700 1,368,215
Royal Dutch Petroleum Co.............. 31,000 1,612,000
STMicroelectronics N.V.*.............. 16,700 1,621,988
TNT Post Group N.V.................... 47,900 1,442,771
Wolters Kluwer N.V.................... 7,900 1,432,828
------------
11,984,577
------------
PORTUGAL -- 0.9%
Banco Comercial Portugues Cl. R....... 26,100 788,962
Brisa Autostradas..................... 15,100 699,346
------------
1,488,308
------------
SINGAPORE -- 1.6%
City Developments, Ltd................ 108,000 562,341
Natsteel Electronics, Ltd............. 126,000 344,069
Oversea-Chinese Banking Corp.......... 112,000 758,118
Singapore Tech Engineering, Ltd....... 1,050,000 947,648
------------
2,612,176
------------
SOUTH KOREA -- 0.5%
Samsung Electronics -- GDR*........... 21,700 886,445
------------
SPAIN -- 4.1%
Acciona S.A........................... 25,500 1,307,375
Banco Santander S.A................... 76,000 1,558,924
Centros Comerciales Continente S.A.... 41,300 1,148,560
Fomentos de Construcciones y Contratas
S.A................................. 20,600 1,267,651
Telefonica S.A. -- ADR................ 10,200 1,303,050
------------
6,585,560
------------
SWEDEN -- 0.9%
Europolitan Holdings AB............... 15,000 1,382,705
------------
SWITZERLAND -- 4.3%
Julius Baer Holding AG Cl. B.......... 600 1,945,343
Roche Holding AG...................... 140 1,707,259
Swisscom AG........................... 5,000 1,952,505
United Bank Switzerland AG............ 4,100 1,288,045
------------
6,893,152
------------
TAIWAN -- 1.6%
Taiwan Semiconductor -- ADR*.......... 79,000 1,866,375
Winbond Electronics Corp. -- GDR*..... 61,400 716,845
------------
2,583,220
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
UNITED KINGDOM -- 18.0%
ARM Holdings PLC*..................... 55,700 $ 2,427,761
Barclays PLC.......................... 74,000 2,127,564
Barratt Developments PLC.............. 314,000 1,495,335
BP Amoco PLC.......................... 132,900 2,265,561
British Telecom PLC................... 115,200 1,880,142
Cable & Wireless Communications PLC*.. 92,200 1,045,597
Capita Group PLC...................... 98,400 1,134,175
Colt Telecom Group PLC*............... 119,800 2,158,281
Dixons Group PLC...................... 97,400 2,064,480
Emap PLC.............................. 41,800 818,510
GKN PLC............................... 108,100 1,643,855
Lloyds TSB Group PLC.................. 72,500 1,096,641
Pearson PLC........................... 50,200 1,143,451
Penninsular & Orient Steam
Navigation.......................... 70,800 1,030,924
Sema Group PLC........................ 146,300 1,652,034
Smithkline Beecham PLC................ 128,900 1,859,236
Telewest Communications PLC*.......... 266,200 1,154,898
Vodafone Group PLC.................... 118,014 2,192,784
------------
29,191,229
------------
UNITED STATES -- 1.4%
Flextronics International, Ltd.*...... 19,400 989,400
Global Telesystems Group, Inc.*....... 21,600 1,208,250
------------
2,197,650
------------
TOTAL COMMON STOCK
(Cost: $135,964,342).............................. 158,482,326
------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ------------------------------------------------------------------
COMMERCIAL PAPER -- 4.0%
- ------------------------------------------------------------------
Smithkline Beecham PLC
5.000%, 04/01/99
(Cost: $6,567,000).................. $6,567,000 6,567,000
------------
TOTAL INVESTMENTS -- 101.7%
(Cost: $142,531,342)............................ 165,049,326
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.7%)... (2,831,724)
--------------
NET ASSETS -- 100.0%.............................. $ 162,217,602
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
49
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
INTERNATIONAL CORE GROWTH FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Audio/Video Products........................ 1.2%
Auto Manufacturers.......................... 1.9
Auto Parts - Equipment...................... 2.3
Broadcasting................................ 4.1
Building Materials.......................... 0.5
Computer Graphics Software.................. 1.0
Computer Software........................... 2.2
Computers................................... 4.5
Cosmetics/Personal Care..................... 0.6
Distribution/Wholesale...................... 2.3
Diversified Financial Services.............. 2.8
Drugs/Pharmaceuticals....................... 7.0
Electrical Components - Equipment........... 0.5
Electric.................................... 0.9
Electronics................................. 1.6
Engineering - Construction.................. 4.6
Electronic Components/Semiconductors........ 4.7
Entertainment............................... 0.6
Food........................................ 2.5
Insurance................................... 2.8
Machinery - Diversified..................... 1.6
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Money Center Banks.......................... 12.0%
Oil - Gas Producers......................... 3.9
Optical Supplies............................ 1.0
Other Commercial Services................... 1.5
Paper & Related Products.................... 0.6
Photo Equipment - Supplies.................. 0.6
Publishing.................................. 2.9
Real Estate................................. 1.9
Regional/Commercial Banks................... 1.2
Retail - Building Products.................. 1.3
Retail - Consumer Electronics............... 1.3
Retail - Hypermarkets....................... 0.7
Retail - Miscellaneous/Diversified.......... 1.6
Telecommunications Equipment................ 2.8
Telecommunications.......................... 9.6
Telephone................................... 7.1
Transportation - Marine..................... 0.6
Transportation - Other...................... 0.9
Liabilities in Excess of Other Assets....... (1.7)
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
50
<PAGE>
INTERNATIONAL SMALL CAP GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; LARRY SPEIDELL, CFA, Partner, Director of Global/Systematic
Portfolio Management and Research; LORETTA J. MORRIS, Partner, Portfolio
Manager; ALEX MUROMCEW, Portfolio Manager; ERNESTO RAMOS, PH.D., Senior
Portfolio Manager; MELISA GRIGOLITE, Portfolio Manager; JOHN TRIBOLET, Portfolio
Manager.
GOAL: The International Small Cap Growth Fund seeks to maximize long-term
capital appreciation through investments primarily in companies located outside
the United States corresponding to the lower 25% market capitalization within
each country, with a maximum market cap of $5 billion.
MARKET OVERVIEW: The 12-month period ending March 31, 1999 was characterized
by an enthusiastic pace of merger and acquisition activity, concerted efforts by
central banks globally to cut interest rates and a continuing trend of
privatization and deregulation.
Many stock markets around the world climbed to record highs in the second
quarter of 1998 only to see those gains erased the following quarter. Worries of
a global economic slowdown, a currency devaluation in Russia and a pessimistic
outlook for the financial sector caused markets to fall in August and September.
However, investor confidence was restored by the fourth quarter and markets
recouped earlier losses and climbed toward record highs. A number of
developments soothed concerns and contributed to gains in both developed and
emerging markets during the period including the strengthening of the Japanese
yen and interest-rate reductions by a number of the world's central banks. In
Asia, the lingering effects of economic problems from 1997 continued to weigh on
investors throughout much of 1998. However, prospects improved amid currency
stabilization, strong corporate earnings and declining interest rates.
PERFORMANCE: For the 12-month period ending March 31, 1999, the fund's I
shares easily outdistanced its benchmark, the Salomon EPAC/EMI Index. The fund
returned 18.0% versus -1.8% for the Index.
PORTFOLIO SPECIFICS: Among the reasons the fund outperformed:
- superior stock selection, especially in Japan, the United Kingdom and Italy
where we were underweight the benchmark
- outstanding returns from holdings such as EM TV Merchandising and Kamps in
Germany and Kojima, Hikari and BellSystem24 in Japan.
Due to concerns of an economic slowdown and its impact on corporate earnings,
we reduced our exposure in Europe from 76% in March of 1998 to 57% at the end of
March 1999. We have increased our weighting in Japan, on a company-by-company
basis from 7.7% in March of last year to 25.0% at the close of the first quarter
1999.
MARKET OUTLOOK: We are cautiously optimistic on Japan as a number of
improvements have led to increased corporate earnings projections. In Europe,
recent rate cuts, corporate restructuring and merger and acquisition activity
bode well for company profits going forward.
- --------------------------------------------------------------------------------
51
<PAGE>
INTERNATIONAL SMALL CAP GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN INTERNATIONAL SMALL
CAP GROWTH FUND INSTITUTIONAL SHARES WITH THE SALOMON EPAC EMI INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/99 SINCE
1 YEAR 5 YEARS INCEPTION
17.97% 16.35% 10.11%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP SALOMON EPAC
GROWTH FUND INSTITUTIONAL SHARES EMI INDEX
<S> <C> <C>
6/07/90 $250,000.00 $250,000.00
6/90 $253,508.33 $253,375.00
12/90 $206,310.17 $207,595.54
6/91 $212,831.81 $212,795.64
12/91 $230,619.37 $221,428.65
6/92 $218,711.51 $208,235.89
12/92 $202,112.08 $187,284.92
6/93 $252,214.60 $236,985.21
12/93 $254,717.12 $244,111.79
6/94 $284,875.63 $278,219.91
12/94 $276,653.41 $267,145.81
6/95 $274,382.38 $264,344.48
12/95 $293,256.86 $279,947.91
6/96 $333,246.43 $309,413.14
12/96 $346,834.50 $298,064.13
6/97 $409,451.50 $313,224.92
12/97 $395,704.11 $267,439.98
6/98 $536,106.59 $315,518.69
12/98 $539,503.77 $305,264.25
3/31/99 $584,324.08 $309,126.64
</TABLE>
This graph compares a $250,000 investment in the International Small Cap Growth
Fund Institutional Shares with the Salomon EPAC EMI Index, on a cumulative and
average annual total return basis. All return calculations reflect the
reinvestment of income, dividends and capital gains distributions, if any, as
well as all fees and expenses. Performance results reflect the total returns of
a predecessor limited partnership managed by Nicholas-Applegate Capital
Management prior to the effective date of the Fund's registration statement on
12/31/93. Limited partnership returns are restated to reflect all fees and
expenses applicable to the Fund. If the limited partnership had been registered
as an investment company under the federal securities laws, its performance
might have been adversely affected because of the additional restrictions
applicable to registered investment companies.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five-year
period. Total return results may have been lower had there been no waiver or
deferral.
The Salomon EPAC Extended Market Index ("EMI") is an unmanaged index. It is a
top-down, float capitalization-weighted index that includes shares of about
2,821 companies in 22 countries excluding Canada and the United States.
Companies within the Index are smaller-capitalization companies with available
float market capitalizations greater than US $100 million. Only issues that are
legally and practically available to outside investors are included in the
Index.
The Index reflects the reinvestment of income, dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's share price is expected to be
more volatile than that of a United States only fund.
- --------------------------------------------------------------------------------
52
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
INTERNATIONAL SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
COMMON STOCK -- 97.7%
- ------------------------------------------------------------------
AUSTRALIA -- 2.0%
AAPT, Ltd.*........................... 447,300 $ 1,327,609
Pacifica Group, Ltd................... 220,800 752,950
Woodside Petroleum, Ltd............... 176,383 1,062,733
------------
3,143,292
------------
BELGIUM -- 1.6%
Mobistar S.A.*........................ 18,200 1,149,436
Telinfo N.V........................... 10,400 1,406,832
------------
2,556,268
------------
BRAZIL -- 0.3%
Telec DO RIO Janeiro S.A.............. 20,540,000 489,233
------------
CANADA -- 2.2%
Celestica, Inc.*...................... 15,500 502,781
Celestica, Inc.*...................... 16,600 543,169
Research In Motion, Ltd.*............. 226,500 2,364,065
------------
3,410,015
------------
DENMARK -- 1.0%
ISS International Service System...... 23,000 1,494,818
------------
ESTONIA -- 0.5%
Estonian Telecom -- GDR*.............. 37,500 846,750
------------
FRANCE -- 8.9%
Altran Technologies S.A............... 8,800 2,232,586
Bouygues.............................. 7,400 2,053,159
Business Objects S.A. -- ADR*......... 41,600 1,235,000
Castorama Dubois Investissements SCA.. 5,600 1,172,863
Cie de Signaux S.A.................... 20,672 1,294,399
Galeries Lafayette.................... 1,000 1,036,404
Havas Advertising..................... 9,884 1,915,380
Infogrames Entertainment*............. 35,800 2,361,467
Transgene S.A. -- ADR*................ 54,700 683,750
------------
13,985,008
------------
GERMANY -- 11.4%
Aixtron............................... 9,800 2,094,831
Edel Music AG*........................ 3,400 1,233,320
EM.TV & Merchandising AG.............. 4,500 3,813,642
Ixos Software AG*..................... 7,300 1,875,675
Kamps AG.............................. 23,300 2,439,975
Kinowelt Medien AG*................... 13,700 2,499,568
Mobilcom AG........................... 7,032 1,920,689
Primacom AG*.......................... 57,100 1,910,977
------------
17,788,677
------------
GREECE -- 0.6%
Intrasoft S.A......................... 37,400 881,585
------------
HONG KONG -- 2.7%
DAH Sing Financial.................... 393,000 968,611
Johnson Electric Holdings............. 529,000 1,491,525
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
</TABLE>
HONG KONG (CONTINUED)
<TABLE>
<S> <C> <C>
Legend Holdings, Ltd.................. 2,540,000 $ 1,122,581
Vtech Holdings, Ltd................... 236,000 680,633
------------
4,263,350
------------
INDIA -- 1.0%
Infosys Technologies, Ltd............. 22,200 1,530,402
------------
IRELAND -- 0.5%
ESAT Telecom Group PLC -- ADR*........ 19,900 833,313
------------
ISRAEL -- 0.6%
Gilat Satellite Networks, Ltd.*....... 15,200 912,000
------------
ITALY -- 1.6%
Class Editori SpA*.................... 169,100 1,500,628
Ducati Motor Holding SpA*............. 343,300 1,004,386
------------
2,505,014
------------
JAPAN -- 25.3%
Able, Inc............................. 14,000 413,746
Aiful Corp............................ 29,040 1,978,829
Bellsystem 24, Inc.................... 7,200 2,462,213
Benesse Corp.......................... 14,500 1,171,705
Fancl Corp............................ 13,000 1,481,888
Fuji Heavy Industries, Ltd............ 242,000 1,497,813
Fuji Soft ABC, Inc.................... 27,820 1,820,526
Hikari Tsushin, Inc................... 12,700 2,241,239
Hino Motors, Ltd...................... 224,000 957,055
Homac Corp............................ 61,600 1,144,304
Japan Business Computer Co............ 43,000 609,980
Kojima Co., Ltd....................... 108,100 2,793,092
Nichii Gakkan Co...................... 5,600 409,018
Nidec Corp............................ 13,300 1,639,618
Nippon System Development............. 34,600 1,606,856
Nissin Food Products Co., Ltd......... 20,000 444,144
Otsuka Kagu, Ltd...................... 11,000 1,207,464
Ryohin Keikaku Co., Ltd............... 15,000 2,381,153
Saizeriya Co., Ltd.................... 22,000 1,140,589
Sony Chemicals Corp................... 52,000 2,634,468
Sumitomo Realty & Development......... 273,900 1,038,428
Suzuken Co., Ltd...................... 54,500 1,656,674
Tenma................................. 61,000 813,814
Tokyo Seimitsu Co., Ltd............... 20,700 818,002
Trans Cosmos.......................... 31,510 1,383,534
Trend Micro, Inc...................... 18,500 2,124,462
World Co., Ltd........................ 32,400 1,737,228
------------
39,607,842
------------
MEXICO -- 1.3%
Corparcion Interamericana de
Entretenmiento S.A. Cl. B*.......... 214,138 633,913
Corparcion Interamericana de
Entretenmiento S.A. Cl. L*.......... 182,784 489,289
Grupo Financiero Inbursa S.A. Cl. B... 336,300 896,701
------------
2,019,903
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
53
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999 -- CONTINUED
- --------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
NETHERLANDS -- 4.1%
Endemol Entertainment Holding......... 38,400 $ 1,305,869
Nutreco Holding N.V................... 32,509 1,338,924
Prolion Holding N.V.*................. 6,400 594,205
Unique International N.V.............. 55,000 1,588,343
United Pan-Europe Communications*..... 40,100 1,571,479
------------
6,398,820
------------
NEW ZEALAND -- 0.1%
Sky City, Ltd.*....................... 79,600 182,962
------------
NORWAY -- 2.0%
Elkjob ASA............................ 32,300 1,734,371
Tomra Systems ASA..................... 38,900 1,449,551
------------
3,183,922
------------
PORTUGAL -- 0.9%
Ibersol SGPS S.A...................... 7,900 715,049
SIVA-SGPS............................. 46,800 727,555
------------
1,442,604
------------
SINGAPORE -- 2.9%
Avimo Group, Ltd...................... 585,000 768,272
Datacraft Asia, Ltd................... 714,000 1,670,760
MMI Holding, Ltd...................... 1,105,000 677,643
Natsteel Electronics, Ltd............. 70,000 191,150
Venture Manufacturing, Ltd............ 260,000 1,173,278
------------
4,481,103
------------
SOUTH AFRICA -- 0.5%
Dimension Data Holdings, Ltd.*........ 177,962 788,381
------------
SPAIN -- 3.4%
Acciona S.A........................... 24,660 1,264,308
Baron de Ley*......................... 43,000 1,580,678
NH Hoteles S.A.*...................... 101,700 1,167,110
Transportes Azkar S.A................. 99,800 1,239,042
------------
5,251,138
------------
SWEDEN -- 1.7%
Modern Times Group Cl. B*............. 104,000 1,859,173
Ortivus AB Cl. B*..................... 121,200 825,391
------------
2,684,564
------------
SWITZERLAND -- 3.0%
Julius Baer Holding AG Cl. B.......... 460 1,491,430
Kudelski S.A.*........................ 420 1,674,155
Stratec Holding AG.................... 820 1,465,324
------------
4,630,909
------------
TAIWAN -- 0.7%
ASE Test, Ltd.*....................... 27,000 1,066,500
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
UNITED KINGDOM -- 14.8%
ARM Holdings PLC*..................... 44,000 $ 1,917,800
ARM Holdings PLC -- ADR*.............. 8,600 1,139,500
BBA Group PLC......................... 104,200 711,534
Beazer Group PLC...................... 415,300 1,263,747
Capita Group PLC...................... 188,400 2,171,531
Capital Radio PLC..................... 66,000 729,830
CMG PLC............................... 5,200 147,364
Dixons Group PLC...................... 132,800 2,814,814
F.I. Group PLC........................ 281,600 1,511,511
FKI PLC............................... 618,000 1,566,300
National Express Group PLC............ 117,700 2,213,550
Nestor Healthcare Group PLC........... 175,900 1,185,522
Newsquest PLC......................... 372,100 2,327,653
Powderject Pharmaceuticals*........... 131,174 1,916,387
Shire Pharmaceuticals PLC -- ADR*..... 34,800 793,875
Smith (Wh) Group PLC.................. 77,700 833,495
------------
23,244,413
------------
UNITED STATES -- 2.1%
Global Telesystems Group, Inc.*....... 18,700 1,046,031
Mettler Toledo International*......... 55,400 1,371,150
SCM Microsystems, Inc.*............... 15,000 911,250
------------
3,328,431
------------
TOTAL COMMON STOCK
(Cost: $117,710,965).............................. 152,951,217
------------
- ------------------------------------------------------------------
PREFERRED STOCK -- 1.5%
- ------------------------------------------------------------------
GERMANY -- 1.5%
Fielmann AG
(Cost: $2,483,647).................. 68,000 2,422,594
------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ------------------------------------------------------------------
COMMERCIAL PAPER -- 2.7%
- ------------------------------------------------------------------
Associates First Capital Corp.
5.000%, 04/01/99
(Cost: $4,243,000).................. $4,243,000 4,243,000
------------
TOTAL INVESTMENTS -- 101.9%
(Cost: $124,437,612)............................ 159,616,811
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.9%)... (3,000,020)
--------------
NET ASSETS -- 100.0%.............................. $ 156,616,791
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
54
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
INTERNATIONAL SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Advertising................................. 1.2%
Apparel..................................... 1.1
Applications Software....................... 1.2
Audio/Video Products........................ 1.7
Auto Manufacturers.......................... 1.6
Beverages - Alcoholic....................... 1.0
Biotechnology............................... 0.4
Broadcasting................................ 6.9
Chemicals................................... 0.5
Communications Software..................... 1.5
Computer Software........................... 7.2
Computers................................... 3.3
Cosmetics/Personal Care..................... 0.9
Distribution/Wholesale...................... 0.5
Diversified Financial Services.............. 4.5
Drugs/Pharmaceuticals....................... 2.8
Electronics................................. 2.8
Engineering & Construction.................. 3.5
Electronic Components/Semiconductors........ 7.3
Entertainment............................... 3.1
Environmental Control....................... 0.9
Food........................................ 2.7
Hand/Machine Tools.......................... 1.0
Home Building............................... 0.8
Home Furnishings............................ 0.4
Investment Companies........................ 0.7
Leisure/Gaming.............................. 0.1
Machinery - Diversified..................... 0.4
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Machinery/Equipment......................... 0.9%
Medical Supplies/Equipment.................. 1.5
Miscellaneous Manufacturing................. 1.9
Money Center Banks.......................... 1.0
Oil & Gas Producers......................... 0.7
Optical Supplies............................ 0.5
Other Commercial Services................... 5.9
Other Consumer Durables..................... 0.8
Other Health Services....................... 0.8
Publishing.................................. 2.4
Real Estate................................. 0.9
Recreational Products....................... 0.6
Regional/Commercial Banks................... 0.6
Retail - Building Products.................. 0.7
Retail - Consumer Electronics............... 4.7
Retail - Department Stores.................. 0.7
Retail - Home Furnishings................... 0.8
Retail - Miscellaneous/Diversified.......... 2.3
Retail - Restaurants........................ 1.2
Retail - Variety Stores..................... 0.5
Retail - Vision Service Center.............. 1.5
Telecommunications Equipment................ 1.4
Telecommunications.......................... 6.5
Telephone................................... 0.9
Transportation - Other...................... 2.2
Liabilities in Excess of Other Assets....... (1.9)
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
55
<PAGE>
EMERGING COUNTRIES FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; LARRY SPEIDELL, CFA, Partner, Director of Global/Systematic
Portfolio Management and Research; PEDRO V. MARCAL, Partner, Portfolio Manager;
ESWAR MENON, Portfolio Manager; ERNESTO RAMOS, PH.D., Senior Portfolio Manager;
JON BORCHARDT, Portfolio Manager; JESSICA HILINSKI, Portfolio Manager.
GOAL: The Emerging Countries Fund seeks to provide long-term capital
appreciation through investing in companies of developing countries around the
world.
MARKET ENVIRONMENT: Economic and currency woes continued to haunt emerging
countries for much of the fiscal year as the crisis that started in Southeast
Asia spread to Russia and Latin America. Among the factors that weighed on
emerging markets:
- concerns over a global economic slowdown
- currency devaluations in Russia and Brazil
- weak commodity prices
Despite prevailing concerns, many emerging markets bounced back in the fourth
quarter of 1998 and the first quarter of 1999 amid improving economic prospects
for select countries in Asia and Latin America, as well as those in the Europe,
Middle East and Africa (EMEA) region. Latin American and Asian markets benefited
from improved liquidity in the first quarter of 1999. Emerging European
countries lagged behind amid concerns over slowing export growth to Western
Europe and an unstable political environment brought on by events such as the
war in Kosovo and elections in Turkey.
PERFORMANCE: Against the backdrop of continued economic and political
uncertainties in developing nations, the Emerging Countries Fund's I shares
declined 21.2% in the 12-month period ending March 31, 1999, matching the drop
in the MSCI Emerging Markets Free Index, which fell 21.0%.
PORTFOLIO SPECIFICS: Our exposure to countries affected by the economic and
currency crises in Asia, Russia and Latin America hurt performance in the first
six months of the fiscal year. However, stock selection in India and Singapore
helped the fund register positive returns between September 1998 and the end of
the period. Our bottom-up stock selection helped us uncover promising
investments during the period. In India, we own Infosys Technologies, a contract
programmer whose client list includes blue-chip companies in the United States.
In Poland, we own Softbank, a leading software and systems integration company.
MARKET OUTLOOK: Despite continued uncertainties surrounding emerging
countries, the long-term prospects for the asset class remain compelling. The
following factors contribute to our optimism for emerging markets:
- competitive labor costs
- rising productivity
- the spread of free-market capitalism
We believe the financial crises that affected many emerging countries can be
positive factors over the long term, as governments accelerate the pace of
reform that will drive economic growth.
- --------------------------------------------------------------------------------
56
<PAGE>
EMERGING COUNTRIES FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN EMERGING COUNTRIES
FUND INSTITUTIONAL SHARES WITH THE MSCI EMERGING MARKETS FREE INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/99 SINCE
1 YEAR 3 YEARS INCEPTION
-21.22% 2.45% 4.54%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EMERGING COUNTRIES MSCI EMF
FUND INSTITUTIONAL SHARES INDEX
<S> <C> <C>
11/28/94 $250,000.00 $250,000.00
12/94 $237,014.39 $234,359.19
3/95 $218,397.55 $205,294.09
6/95 $251,427.42 $226,601.59
9/95 $267,041.55 $225,146.69
12/95 $253,510.75 $222,111.98
3/96 $281,857.31 $235,947.61
6/96 $310,806.99 $245,795.83
9/96 $317,441.29 $236,913.95
12/96 $324,695.98 $235,517.31
3/97 $353,679.46 $255,447.47
6/97 $406,782.05 $277,308.82
9/97 $421,983.17 $252,445.73
12/97 $357,562.74 $208,217.12
3/98 $384,705.20 $221,112.93
6/98 $331,317.54 $168,935.51
9/98 $245,394.11 $131,762.49
12/98 $281,673.68 $155,462.35
3/31/99 $303,080.88 $174,314.63
</TABLE>
This graph compares a $250,000 investment in the Emerging Countries Fund
Institutional Shares with the MSCI Emerging Markets Free Index ("EMF"), on a
cumulative and average annual total return basis. All return calculations
reflect the reinvestment of income, dividends and capital gains distributions,
if any, as well as all fees and expenses applicable to the Fund.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five-year
period. Total return results may have been lower had there been no waiver or
deferral.
The MSCI EMF is a market capitalization-weighted index composed of companies
representative of the market structure of 22 Emerging Market countries in
Europe, Latin America, and the Pacific Basin. The Index excludes closed markets
and those shares in otherwise free markets which are not purchasable by
foreigners.
Index returns reflect the reinvestment of income, dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's share price is expected to be
more volatile than that of a United States only fund. These risks are generally
intensified for investments in emerging markets.
- --------------------------------------------------------------------------------
57
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
EMERGING COUNTRIES FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------
COMMON STOCK -- 95.1%
- -------------------------------------------------------------------
ARGENTINA -- 4.2%
Banco de Galicia y Buenos Aires --
ADR................................. 219,000 $ 3,517,687
Perez Co. S.A......................... 637,900 2,998,310
Telecom Argentina S.A. -- ADR......... 93,400 2,562,662
YPF S.A -- ADR........................ 88,400 2,790,125
------------
11,868,784
------------
BRAZIL -- 10.8%
Aracruz Celulose S.A. -- ADR.......... 246,500 3,574,250
Banco Estado de Sao Paolo............. 40,000,000 1,819,189
Companhia Vale do Rio Doce A.......... 193,800 2,853,240
Electropaulo
Metropolitana-Electricidad de Sao
Paulo S.A........................... 31,210,000 1,128,259
Petroleo Brasileiro S.A............... 32,550,000 4,517,011
Tele Centro Oeste Celular
Participacoes S.A. -- ADR........... 48 177
Tele Centro Sul Participacoes --
ADR*................................ 91,600 4,230,775
Tele Norte Leste Participacoes --
ADR*................................ 265,400 4,080,526
Telesp Participacoes S.A. -- ADR...... 215,400 4,442,625
Uniao de Bancos Brasileiros -- GDR.... 198,400 3,819,200
------------
30,465,252
------------
CHINA -- 0.4%
Zhejiang Expressway Co. Ltd., Cl. H... 5,842,000 995,082
------------
CROATIA -- 0.9%
Pliva D.D. -- GDR..................... 161,400 2,590,470
------------
CZECHOSLOVAKIA -- 2.2%
Ceske Radiokomunikace -- GDR*......... 123,680 4,242,224
Komercni Banka AS -- GDR*............. 478,100 1,879,698
------------
6,121,922
------------
EGYPT -- 1.8%
Al-Ahram Beverages Co. -- GDR 144A*... 70,000 2,356,535
OPTD Egypt*........................... 90,443 688,976
Orascom Hotel Holding*................ 710,000 2,036,560
------------
5,082,071
------------
ESTONIA -- 0.7%
Estonian Telecom -- GDR 144A*......... 88,500 1,998,330
------------
GREECE -- 6.5%
Athens Medical Care S.A............... 68,280 1,374,719
Chipita............................... 26,910 978,610
Commercial Bank Of Greece............. 19,300 3,011,636
EFG Eurobank*......................... 3,470 97,511
Intracom S.A.......................... 78,820 4,586,193
Intrasoft S.A......................... 87,410 2,060,411
National Bank Of Greece S.A........... 81,060 5,480,285
Panafon Hellenic Telecommunications
Co. S.A. -- GDR*.................... 34,600 875,380
------------
18,464,745
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------
HONG KONG -- 2.7%
Cheung Kong Holdings, Ltd............. 95,000 $ 723,268
China Telecom, Ltd.................... 2,014,400 3,353,196
DAH Sing Financial.................... 374,900 924,001
DAO Heng Bank Group, Ltd.............. 302,000 997,632
Li & Fung, Ltd........................ 705,300 1,492,593
------------
7,490,690
------------
HUNGARY -- 0.5%
Magyar Tavkoziesi -- ADR.............. 56,950 1,523,413
------------
INDIA -- 12.1%
Hindustan Lever, Ltd.................. 193,000 10,298,178
Infosys Technologies, Ltd............. 130,000 8,961,813
NIIT, Ltd............................. 316,050 13,966,376
Oriental Bank Of Commerce............. 200 148
Punjab Tractors, Ltd.................. 25,000 821,205
------------
34,047,720
------------
ISRAEL -- 3.7%
Bank Hapoalim, Ltd.................... 993,600 2,334,752
Bezeq Israeli Telecommunication
Corp.*.............................. 791,600 3,265,980
Gilat Satellite Networks, Ltd.*....... 81,500 4,890,000
------------
10,490,732
------------
MEXICO -- 12.3%
Cemex S.A............................. 340,000 1,386,619
Corparcion Interamericana de
Entretenmiento S.A. Cl. B*.......... 1,785,430 5,285,415
Corparcion Interamericana de
Entretenmiento S.A. Cl. L*.......... 1,027,000 2,749,146
Fomento Economico Mexicano S.A........ 981,000 2,996,740
Grupo Carso Global Telecom S.A........ 1,964,900 10,179,226
Grupo Carso S.A....................... 749,100 3,074,706
Grupo Financiero Inbursa S.A. Cl. B... 453,800 1,210,000
Grupo Televisa S.A. -- GDR*........... 204,100 6,403,637
Kimberly-Clark de Mexico S.A. Cl. A... 345,000 1,298,361
------------
34,583,850
------------
PAKISTAN -- 0.0%
Pakistan State Oil Co., Ltd........... 2,198 3,781
------------
PERU -- 1.5%
Cementos Lima S.A..................... 145,129 1,872,896
Cementos Lima S.A. -- ADR............. 24,854 320,741
Ferreyros S.A......................... 2,731,153 1,942,610
------------
4,136,247
------------
PHILIPPINES -- 2.3%
Ayala Land, Inc....................... 4,842,800 1,405,972
Bank of Philippine Islands............ 771,600 1,931,487
Philippine Long Distance Telephone
Co.................................. 91,100 2,397,984
SM Prime Holdings, Inc................ 3,796,600 783,813
------------
6,519,256
------------
POLAND -- 2.0%
Elektrim S.A.......................... 230,200 2,445,270
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
58
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- -------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
POLAND (CONTINUED)
<TABLE>
<S> <C> <C>
Prokom Software S.A................... 70,300 $ 1,191,585
Softbank S.A. -- GDR.................. 49,700 1,447,155
Zaklady Piwowarskie W. Zywcu S.A...... 5,747 594,667
------------
5,678,677
------------
PORTUGAL -- 2.0%
Banco Comercial Portugues Cl. R....... 66,100 1,998,100
Brisa Autostradas..................... 13,690 634,043
Ibersol SGPS S.A...................... 10,128 916,711
Jeronimo Martins...................... 37,600 1,339,552
Jeronimo Martins new.................. 23,333 831,270
------------
5,719,676
------------
RUSSIA -- 0.6%
Lukoil-Holding -- ADR................. 65,600 1,755,653
------------
SINGAPORE -- 3.8%
Datacraft Asia, Ltd................... 1,939,100 4,537,494
Keppel Tat Lee Bank, Ltd.............. 948,000 1,596,006
Natsteel Electronics, Ltd............. 770,700 2,104,556
Venture Manufacturing, Ltd............ 530,700 2,394,842
------------
10,632,898
------------
SOUTH AFRICA -- 4.8%
ABSA Group, Ltd....................... 542,700 2,588,451
Anglo American Corp. of S.A., Ltd..... 44,300 1,532,765
Barlow, Ltd........................... 294,700 1,572,361
De Beers Consolidated Mines........... 81,900 1,575,756
Dimension Data Holdings, Ltd.*........ 581,217 2,574,821
Investec Group, Ltd................... 68,300 2,528,799
Pick'n Pay Stores, Ltd................ 945,633 1,093,168
------------
13,466,121
------------
SOUTH KOREA -- 2.9%
Korea Telecom Corp.................... 85,400 2,895,387
Samsung Corp.......................... 69,472 5,378,841
------------
8,274,228
------------
SRI LANKA -- 0.4%
John Keells Holdings, Ltd............. 413,500 1,072,092
------------
TAIWAN -- 6.1%
Asustek Computer, Inc.*............... 397,800 3,360,505
Cathay Life Insurance Co.............. 776,500 2,506,727
Compal Electronics*................... 1,376,820 3,613,917
Hon Hai Precision Industry*........... 541,100 2,889,565
Taiwan Semiconductor -- ADR*.......... 206,300 4,873,837
------------
17,244,551
------------
THAILAND -- 4.5%
Bangkok Bank Public Co., Ltd.*........ 3,121,400 6,398,183
Thai Farmers Bank..................... 3,120,900 6,314,078
------------
12,712,261
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------
TURKEY -- 3.3%
Akbank TAS............................ 98,202,500 $ 3,158,905
Aksigorta............................. 32,506,600 1,699,178
Migros Turk TAS....................... 1,626,300 2,136,139
Milliyet Gazetecilik AS............... 41,642,000 373,946
Yapi ve Kredi Bankasi................. 108,773,900 2,011,901
------------
9,380,069
------------
UNITED KINGDOM -- 1.5%
South African Breweries, Ltd. PLC..... 500,147 4,326,230
------------
UNITED STATES -- 0.0%
Central Asia Investment Co.*.......... 48,567 72,850
------------
VENEZUELA -- 0.6%
Electricidad de Caracas -- ADR........ 103,750 1,596,194
------------
TOTAL COMMON STOCK
(Cost: $222,488,981)............................... 268,313,845
------------
<CAPTION>
NUMBER OF
RIGHTS/
WARRANTS
<S> <C> <C>
- -------------------------------------------------------------------
RIGHTS AND WARRANTS -- 0.7%
- -------------------------------------------------------------------
CANADA -- 0.0%
Sedna Geotech (Warrants).............. 130,900 0
------------
CHILE -- 0.0%
Sociedad Quimica y Minera de Chile
S.A. (Rights)....................... 508 2,286
------------
PHILIPPINES -- 0.7%
Jollibee Foods (Warrants)*............ 4,039,700 2,032,879
------------
TOTAL RIGHTS AND WARRANTS
(Cost: $1,874,850)................................. 2,035,165
------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------
COMMERCIAL PAPER -- 1.3%
- -------------------------------------------------------------------
Associates First Capital Corp.
5.000%, 04/01/99
(Cost: $3,765,000).................. $ 3,765,000 3,765,000
------------
TOTAL INVESTMENTS -- 97.1%
(Cost: $228,128,831)............................ 274,114,010
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.9%..... 8,092,168
--------------
NET ASSETS -- 100.0%.............................. $ 282,206,178
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
59
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
EMERGING COUNTRIES FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Beverages - Alcoholic....................... 2.6%
Broadcasting................................ 2.3
Building Materials.......................... 1.3
Chemicals................................... 0.0
Computer Software........................... 9.1
Computers................................... 4.1
Distribution/Wholesale...................... 0.5
Diversified Financial Services.............. 2.7
Drugs/Pharmaceuticals....................... 0.9
Electrical Components & Equipment........... 2.8
Electric.................................... 1.0
Electronics................................. 1.6
Engineering & Construction.................. 0.2
Electronic Components/Semiconductors........ 4.4
Entertainment............................... 2.8
Food........................................ 2.9
Hospitals................................... 0.5
Insurance................................... 1.5
Investment Companies........................ 0.0
Machinery - Construction & Mining........... 0.7
Machinery/Equipment......................... 0.3
Manufacturing - Other....................... 0.6
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Metals...................................... 0.5%
Mining...................................... 1.6
Money Center Banks.......................... 4.3
Oil & Gas Producers......................... 4.3
Other Consumer Services..................... 1.1
Other Commercial Services................... 0.4
Other Consumer Non-Durables................. 3.6
Paper & Related Products.................... 1.7
Publishing.................................. 0.1
Real Estate................................. 2.0
Regional/Commercial Banks................... 13.3
Retail - Hypermarkets....................... 0.8
Retail - Miscellaneous/Diversified.......... 0.4
Retail - Restaurants........................ 0.3
Telecommunications Equipment................ 1.6
Telecommunications.......................... 4.3
Telephone................................... 13.6
Transportation - Other...................... 0.4
Other Assets in Excess of Liabilities....... 2.9
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
60
<PAGE>
GREATER CHINA FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; LARRY SPEIDELL, CFA, Partner, Director of Global/Systematic
Portfolio Management and Research.
GOAL: The Greater China Fund seeks to maximize total return through investing
in stocks in the Greater China region.
MARKET OVERVIEW: A long drawn-out financial crisis that gripped global markets
continued to cast a shadow on the Greater China region over the fiscal year. The
three markets in which the fund invests -- China (PRC), Hong Kong and Taiwan --
suffered precipitous declines during the period. A major factor that weighed on
the markets was the threat of a devaluation in the PRC's currency, the yuan. In
addition, the slowdown in economic growth in the region, as well as the dramatic
decline in asset values in Hong Kong weighed on the markets.
PERFORMANCE: For the 12-month period ending March 31, 1999, the Greater China
Fund's I shares posted a negative return of 26.8% versus a 46.9% decline for its
benchmark, the Credit Lyonnais China World Index.
PORTFOLIO SPECIFICS: In the first five months of the fiscal year, the fund
registered steep declines as the Asian economic crisis weighed heavily on the
Greater China region. However, from September through November of last year, the
fund posted positive returns on the strength of our stock selection and our
relative overweighting in the financial services and technology sectors.
The fund's holdings reflect diversity in terms of the stocks and sectors we
invest in, with the goal of giving investors a wide range of exposure to the
Greater China economy.
We identified stocks in the region benefiting from continued infrastructure
development and the strong growth in technology worldwide. One of the fund's
top-performing holdings during the fiscal year was Sichuan Expressway, a
toll-road company in the Sichuan province which connects the biggest cities in
the largest provinces in China. The company is expected to benefit from robust
economic growth in China over the long term.
Other top-performing holdings within the fund were Cheung Kong, a leading
property company in Hong Kong, and Taiwan Semiconductors, a leading micro chip
manufacturer.
MARKET OUTLOOK: Greater China continues to offer a source of attractive
investment opportunities. Over the long term, we believe the prospects for the
region remain compelling given the favorable demographics, competitive labor
cost, rising productivity and the spread of free-market capitalism.
- --------------------------------------------------------------------------------
61
<PAGE>
GREATER CHINA FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN GREATER CHINA FUND
INSTITUTIONAL SHARES WITH THE CREDIT LYONNAIS CHINA WORLD INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
-26.79% As of 03/31/99 -14.04%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GREATER CHINA FUND INSTITUTIONAL SHARES CREDIT LYONNAIS CHINA WORLD INDEX
12/31/97 $250,000.00 $250,000.00
<S> <C> <C>
1/98 $241,000.00 $184,016.25
2/98 $288,600.00 $225,628.21
3/98 $282,800.00 $215,803.68
4/98 $263,600.00 $190,603.86
5/98 $237,000.00 $160,889.86
6/98 $212,400.00 $132,322.25
7/98 $197,400.00 $104,383.87
8/98 $178,600.00 $79,987.27
9/98 $203,400.00 $118,067.05
10/98 $219,600.00 $131,471.32
11/98 $221,814.98 $130,410.74
12/98 $214,108.73 $124,168.63
1/99 $195,780.36 $101,914.75
2/99 $193,281.04 $103,182.78
3/31/99 $207,027.32 $114,692.30
</TABLE>
This graph compares a $250,000 investment in the Greater China Fund
Institutional Shares with the Credit Lyonnais China World Index, on a cumulative
and average annual total return basis. All return calculations reflect the
reinvestment of income, dividends and capital gains distributions, if any, as
well as all fees and expenses.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five-year
period. Total return results may have been lower had there been no waiver or
deferral.
The Credit Lyonnais SA China World Index is a free float market
capitalization-weighted index composed of forty-three companies representing
approximately 44% of the entire China share universe available to foreign
investors, and is a representative benchmark for gauging the performance of
China funds which can invest in all classes of China shares available to foreign
investors. In selecting the constituents, an individual stock's weighting is
limited to no more than 10% of the index's total capitalization, mirroring the
constraints of many investment funds. The index should be feasible for index
funds to duplicate, as the majority of the constituent stocks have a free float
of more than US$50m and an average daily turnover greater than US$100,000. The
index is calculated without dividends or with gross dividends reinvested, in
both US dollars and local currencies.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's share price is expected to be
more volatile than that of a United States only fund. These risks are generally
intensified for investments in emerging markets.
- --------------------------------------------------------------------------------
62
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
GREATER CHINA FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------
COMMON STOCK -- 91.6%
- -----------------------------------------------------------------
CHINA -- 16.9%
Anhui Conch Cement Co., Ltd. Cl. H.... 205,000 $ 20,633
Anhui Expressway Co. Cl. H............ 62,000 6,000
China Southern Airlines Co., Ltd Cl.
H*.................................. 390,000 42,777
Jiangsu Express Co., Ltd. Cl. H....... 174,000 34,128
Shenzhen Expressway Cl. H............. 130,000 25,330
Yanzhou Coal Mining Co., Ltd.......... 166,000 27,633
Zhejiang Expressway Co. Cl. H......... 188,000 32,022
Zhejiang Southeast Electric Cl. B..... 203,000 45,472
-----------
233,995
-----------
HONG KONG -- 54.6%
Cheung Kong........................... 11,000 83,747
China Light & Power Holdings, Ltd..... 6,500 31,202
China Merchants Holdings International
Co.................................. 90,000 52,261
China Telecom, Ltd.................... 34,000 56,597
Citic Pacific, Ltd.................... 23,000 48,377
Cosco Pacific, Ltd.................... 120,000 56,132
DAH Sing Financial.................... 24,800 61,124
DAO Heng Bank Group, Ltd.............. 15,000 49,551
Esprit Holdings, Ltd.................. 90,000 45,293
Hengan International Group Co.,
Ltd................................. 84,000 32,518
Hong Kong Electric Holdings........... 10,000 30,260
HSBC Holdings PLC..................... 2,000 62,713
Kerry Properties, Ltd................. 54,000 43,202
Legend Holdings, Ltd.................. 88,000 38,893
Tingyi Holding Corp................... 538,000 49,291
WAI KEE Holdings, Ltd................. 100,000 14,711
-----------
755,872
-----------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------
SINGAPORE -- 0.5%
Eagle Brand Holdings Ltd.*............ 37,000 $ 7,215
-----------
TAIWAN -- 19.6%
Asustek Computer, Inc................. 4,000 33,791
Cathay Life Insurance Co.............. 5,000 16,141
D-Link Corp........................... 15,000 26,701
FAR Eastern Textile Co................ 50,000 49,178
Hon Hai Precision Industry............ 7,600 40,585
Taiwan Semiconductor.................. 28,000 87,856
Winbond Electronics Corp.............. 14,000 16,558
-----------
270,810
-----------
TOTAL COMMON STOCK
(Cost: $1,196,197)............................... 1,267,892
-----------
TOTAL INVESTMENTS -- 91.6%
(Cost: $1,196,197).............................. 1,267,892
OTHER ASSETS IN EXCESS OF LIABILITIES -- 8.4%..... 116,933
--------------
NET ASSETS -- 100.0%.............................. $ 1,384,825
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
63
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
GREATER CHINA FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Airlines.................................... 3.1%
Apparel..................................... 3.3
Building Materials.......................... 2.0
Chemicals................................... 3.8
Computers................................... 7.2
Electric.................................... 7.7
Engineering & Construction.................. 1.1
Electronic Components/Semiconductors........ 10.3
Food........................................ 3.6
Insurance................................... 1.2
Mining Services............................. 2.0
Money Center Banks.......................... 4.5
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Other Commercial Services................... 4.1%
Other Consumer Non-Durables................. 2.3
Real Estate................................. 9.2
Regional/Commercial Banks................... 8.0
Telecommunications.......................... 4.1
Telephone................................... 3.5
Textiles.................................... 3.6
Transportation - Other...................... 7.0
Other Assets in Excess of Liabilities....... 8.4
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
64
<PAGE>
LATIN AMERICA FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; LARRY SPEIDELL, CFA, Partner, Director of Global Systematic
Portfolio Management and Research; ERNESTO RAMOS, PH.D., Senior Portfolio
Manager; JON BORCHARDT, Portfolio Manager.
GOAL: The Latin America Fund seeks to provide long-term capital appreciation
primarily through investment in the securities of companies in Latin American
countries such as Mexico, Brazil, Argentina and Chile.
MARKET OVERVIEW: Latin American equities suffered steep declines in the first
six months of the fiscal year ending March 31, 1999 but managed to bounce back
in the second half. The following factors weighed on the region's bourses:
- concerns over emerging market economies
- currency weakness in Brazil
- worries over debt defaults in Brazil
- falling commodity prices
A major event in the period was the devaluation of the Brazilian real, the
value of which slid by about 40% in January, after markets forced the government
to abandon its currency policy aimed at combating inflation. Despite initial
weakness, stocks in the region rallied in February and March amid improved
investor sentiment.
PERFORMANCE: Following large declines in the second and third quarters of
1998, the fund's I shares recouped almost half of its losses in the fourth
quarter of 1998 and the first quarter of 1999. From April 1, 1998 through March
31, 1999, the Latin America Fund posted a 15.8% drop versus a 26.9% decline for
the MSCI EMF Latin America Index.
PORTFOLIO SPECIFICS: During the fiscal year, declining oil prices hurt
oil-exporting countries such as Mexico, Argentina and Venezuela. Many energy
companies suffered as a result, including some of the fund's holdings.
As sentiment for the region improved beginning in the fourth quarter of 1998,
the fund delivered above-benchmark gains of 11.1% versus 7.1% for the quarter.
Among the fund's best-performing holdings were retailer Kimberly Clark and
entertainment company Corp Inter Americana de Entretenimiento (CIE) which are
thriving from ongoing consumer-led economic growth in Mexico.
In Brazil, the fund holds telecommunications stocks such as Tele Norte, Telesp
Participacoes and Tele Centro Sul, which are well positioned to capture the huge
demand for telecommunications products and services despite the recessionary
environment.
MARKET OUTLOOK: Long-term trends in Latin America remain solid. Favorable
factors such as privatization, restructuring, declining inflation and improving
economic conditions all bode well for countries in the region. We expect Latin
America's biggest economies -- Mexico and Brazil-- to overcome political and
economic difficulties in the years ahead. The recent recovery in commodity
prices, including oil, is also very positive for the economic and fiscal health
of the region. To a large extent, Mexico and Brazil have come a long way in
overcoming the financial and economic troubles of last year.
- --------------------------------------------------------------------------------
65
<PAGE>
LATIN AMERICA FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN LATIN AMERICA FUND
INSTITUTIONAL SHARES WITH THE MSCI EMF LATIN AMERICA INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
-15.78% As of 03/31/99 -4.48%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LATIN AMERICA FUND MSCI EMF LATIN AMERICA INDEX
INSTITUTIONAL SHARES
<S> <C> <C>
11/28/97 $250,000.00 $250,000.00
12/97 $268,400.00 $266,600.00
01/98 $241,600.00 $236,986.07
02/98 $255,800.00 $249,434.95
03/98 $279,200.00 $267,119.89
04/98 $283,200.00 $261,000.17
05/98 $247,400.00 $227,242.41
06/98 $239,000.00 $213,812.38
07/98 $257,400.00 $224,391.82
08/98 $163,400.00 $146,554.79
09/98 $172,800.00 $161,560.53
10/98 $189,400.00 $174,049.16
11/98 $204,800.00 $187,485.75
12/98 $192,012.73 $172,993.11
01/99 $175,130.25 $152,510.72
02/99 $187,537.86 $162,240.91
3/31/99 $235,134.23 $195,224.48
</TABLE>
This graph compares a $250,000 investment in the Latin America Fund
Institutional Shares with the MSCI EMF Latin America Index, on a cumulative and
average annual total return basis. All return calculations reflect the
reinvestment of income, dividends and capital gains distributions, if any, as
well as all fees and expenses.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five-year
period. Total return results may have been lower had there been no waiver or
deferral.
The Morgan Stanley Capital International Latin America Index ("MSCI EMF Latin
America") is a market capitalization-weighted index composed of companies
representative of the market structure of 7 emerging market countries in Latin
America, including, Argentina, Chile, Columbia, Brazil, Mexico Free, Peru and
Venezuela. Stock selection takes into consideration the trading capabilities of
foreigners in emerging market countries. The index is calculated without
dividends or with gross dividends reinvested, in both US dollars and local
currency.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's share price is expected to be
more volatile than that of a United States only fund. These risks are generally
intensified for investments in emerging markets.
- --------------------------------------------------------------------------------
66
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
LATIN AMERICA FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------
COMMON STOCK -- 93.7%
- ---------------------------------------------------------------
ARGENTINA -- 11.8%
Banco de Galicia y Buenos Aires --
ADR................................. 2,700 $ 43,369
Telecom Argentina S.A. -- ADR......... 2,100 57,619
Telefonica de Argentina S.A. -- ADR... 1,700 51,425
YPF S.A -- ADR........................ 1,800 56,813
----------
209,226
----------
BRAZIL -- 38.8%
Banco Estado de Sao Paolo............. 1,994,060 90,689
CEMIG................................. 3,600,000 80,499
CIA Energetica DO Ceara............... 9,000,000 22,565
Petroleo Brasileiro S.A............... 630,000 87,426
Tele Centro Sul Participacoes --
ADR*................................ 1,700 78,519
Tele Norte Leste Participacoes --
ADR*................................ 6,000 92,250
Telerj Celular S.A.................... 4,800,000 81,164
Telesp Participacoes S.A. -- ADR...... 3,600 74,250
Uniao de Bancos Brasileiros -- GDR.... 4,200 80,850
----------
688,212
----------
MEXICO -- 38.2%
Cemex S.A............................. 21,000 85,644
Coca-Cola Femsa S.A. -- ADR........... 4,100 66,881
Corparcion Interamericana de
Entretenmiento S.A. Cl. B........... 1,247 3,691
Corparcion Interamericana de
Entretenmiento S.A. Cl. L*.......... 28,000 74,952
Grupo Carso Global Telecom S.A........ 17,000 88,069
Grupo Carso S.A....................... 14,000 57,463
Grupo Cementos de Chihuahua S.A. Cl.
B................................... 109,000 92,683
Grupo Financiero Bancomer S.A. Cl.
O................................... 249,000 84,951
Grupo Financiero Inbursa S.A. Cl. B... 2,000 $ 5,333
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------
</TABLE>
MEXICO (CONTINUED)
<TABLE>
<S> <C> <C>
Grupo Televisa S.A. -- GDR*........... 1,600 50,200
Kimberly-Clark de Mexico S.A. Cl. A... 18,100 68,117
----------
677,984
----------
PERU -- 1.1%
Ferreyros S.A......................... 26,842 19,092
----------
VENEZUELA -- 3.8%
Electricidad de Caracas -- ADR........ 4,433 68,212
----------
TOTAL COMMON STOCK
(Cost: $1,376,876)............................... 1,662,726
----------
<CAPTION>
NUMBER
OF
RIGHTS
<S> <C> <C>
- ---------------------------------------------------------------
RIGHTS -- 0.0%
- ---------------------------------------------------------------
CHILE -- 0.0%
Sociedad Quimica Y Minera de Chile
S.A.
(Cost: $0).......................... 6 27
----------
TOTAL INVESTMENTS -- 93.7%
(Cost: $1,376,876).............................. 1,662,753
OTHER ASSETS IN EXCESS OF LIABILITIES -- 6.3%..... 111,576
--------------
NET ASSETS -- 100.0%.............................. $ 1,774,329
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
67
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
LATIN AMERICA FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Beverages - Non-Alcoholic................... 3.6%
Broadcasting................................ 2.7
Building Materials.......................... 9.5
Diversified Financial Services.............. 5.8
Electric.................................... 10.1
Entertainment............................... 5.2
Machinery - Construction & Mining........... 2.0
Oil & Gas Producers......................... 8.7
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Other Consumer Services..................... 3.1%
Paper & Related Products.................... 3.6
Regional/Commercial Banks................... 11.5
Telecommunications.......................... 4.3
Telephone................................... 23.6
Other Assets in Excess of Liabilities....... 6.3
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
68
<PAGE>
PACIFIC RIM FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; LARRY SPEIDELL, CFA, Partner, Director of Global/Systematic
Portfolio Management and Research; ESWAR MENON, Portfolio Manager.
GOAL: The Pacific Rim Fund seeks to maximize total return through investing in
stocks located in countries within the Pacific Rim region including Australia,
China, Japan, India, Indonesia, South Korea, Malaysia, New Zealand, the
Philippines, Singapore and Taiwan.
MARKET OVERVIEW: Following a debilitating financial crisis that started in
Southeast Asia in 1997, economic and political uncertainties continued to haunt
countries in the Pacific Rim from April 1, 1998 through March 31, 1999. The
following factors negatively impacted performance in the region's markets:
- prevailing concerns over emerging market economies
- Japan's inability to initiate reforms to effect economic recovery
- the drop in commodity prices, including oil and copper
In the first six months of the fiscal year, a key factor that negatively
affected the region was the prolonged recession in Japan. A major trading
partner for many countries in the Pac Rim, Japan's continued economic weakness
weighed on export-oriented nations in the region. As a result, many markets
posted declines. However, in the fourth quarter of 1998 through the first
quarter of 1999, performance among many emerging markets started to improve amid
renewed investor interest for the asset class and signs of improving economic
prospects.
PERFORMANCE: During the fiscal year, the Pacific Rim Fund's I shares were down
2.7% versus an 8.2% gain for the MSCI Pacific Index.
PORTFOLIO SPECIFICS: Despite the difficult environment during the period, we
continued to uncover promising companies such as global electronics leader Sony
in Japan and Samsung Electronics of South Korea, the world's largest maker of
dynamic random access memory (DRAM) chips. Overall, stock selection in Singapore
and the Philippines positively impacted returns while our exposure to Taiwan and
Thailand negatively affected performance.
MARKET OUTLOOK: The changing landscape among Pacific Rim markets brings new
opportunities. Countries that are on the path of reform are coming out ahead of
those that are delaying moves to implement much-needed changes. The following
are positive factors in the Pacific Rim:
- interest rates have come down significantly from their peaks, dropping
approximately 10% in most Asian countries in the first quarter of 1999
- most Asian economies are forecast to continue their economic recovery in
1999 and 2000
- corporate restructuring is positively impacting companies in Japan.
- --------------------------------------------------------------------------------
69
<PAGE>
PACIFIC RIM FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN PACIFIC RIM FUND
INSTITUTIONAL SHARES WITH THE MSCI PACIFIC INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
-2.69% As of 03/31/99 -1.16%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PACIFIC RIM FUND INSTITUTIONAL SHARES MSCI PACIFIC INDEX
<S> <C> <C>
12/31/97 $250,000.00 $250,000.00
1/98 $252,000.00 $261,601.25
2/98 $258,600.00 $274,525.92
3/98 $253,200.00 $260,654.95
4/98 $241,200.00 $253,590.16
5/98 $207,400.00 $233,540.05
6/98 $193,600.00 $232,816.08
7/98 $197,400.00 $229,653.27
8/98 $178,200.00 $201,018.26
9/98 $192,200.00 $201,782.74
10/98 $208,200.00 $235,362.41
11/98 $225,600.00 $247,782.49
12/98 $233,600.00 $254,632.18
1/99 $238,200.00 $256,358.59
2/99 $229,400.00 $251,617.50
3/31/99 $246,400.00 $281,969.61
</TABLE>
This graph compares a $250,000 investment in the Pacific Rim Fund Institutional
Shares with the MSCI Pacific Index, on a cumulative and average annual total
return basis. All return calculations reflect the reinvestment of income,
dividends and capital gains distributions, if any, as well as all fees and
expenses.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five-year
period. Total return results may have been lower had there been no waiver or
deferral.
The Morgan Stanley Capital International Pacific Index ("MSCI Pacific") is a
market capitalization-weighted index composed of companies representative of the
market structure of 6 developed market countries in the Pacific Basin,
including, Australia, Hong Kong, Japan, Malaysia, New Zealand, and Singapore.
Stock selection takes into consideration the trading capabilities of foreigners
in emerging market countries. The index is calculated without dividends or with
gross dividends reinvested, in both US dollars and local currency.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's share price is expected to be
more volatile than that of a United States only fund. These risks are generally
intensified for investments in emerging markets.
- --------------------------------------------------------------------------------
70
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
PACIFIC RIM FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------
COMMON STOCK -- 91.8%
- -----------------------------------------------------------------
AUSTRALIA -- 12.3%
AAPT, Ltd.*........................... 7,000 $ 20,776
Brambles Industries, Ltd.............. 800 20,251
Colonial, Ltd......................... 6,800 26,925
Foster's Brewing Group, Ltd........... 6,700 19,636
Telstra Corp., Ltd.*.................. 4,800 25,023
Westpac Banking Corp.................. 3,100 22,513
-----------
135,124
-----------
HONG KONG -- 8.0%
Cheung Kong........................... 4,000 30,453
China Telecom, Ltd.................... 12,000 19,975
HSBC Holdings PLC..................... 1,200 37,628
-----------
88,056
-----------
INDIA -- 10.6%
Hindustan Lever, Ltd.................. 400 21,343
ITC, Ltd.--GDR........................ 1,000 27,250
NIIT, Ltd............................. 800 35,352
Ranbaxy Laboratories--GDR 144A........ 800 13,480
Wipro Corp., Ltd...................... 200 18,964
-----------
116,389
-----------
JAPAN -- 25.7%
Almedio, Inc.......................... 1,000 18,830
Bank of Tokyo-Mitsubishi, Ltd......... 1,000 13,780
Bellsystem 24, Inc.................... 100 34,197
Fuji Heavy Industries, Ltd............ 2,000 12,379
Japan Business Computer Co............ 2,000 28,371
Kojima Co., Ltd....................... 600 15,503
Nidec Corp............................ 100 12,328
Nomura Securities Co., Ltd............ 1,000 10,470
NTT Mobile Communications............. 1 49,396
Ryohin Keikaku Co., Ltd............... 100 15,874
Softbank Corp......................... 300 33,640
Sony Corp............................. 400 36,984
-----------
281,752
-----------
NEW ZEALAND -- 0.4%
Sky City, Ltd.*....................... 1,900 4,367
-----------
PHILIPPINES -- 5.9%
Ayala Land, Inc....................... 77,900 22,616
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------
</TABLE>
PHILIPPINES (CONTINUED)
<TABLE>
<S> <C> <C>
Philippine Long Distance Telephone
Co.................................. 1,500 $ 39,484
SM Prime Holdings, Inc................ 15,100 3,117
-----------
65,217
-----------
SINGAPORE -- 3.1%
Datacraft Asia, Ltd................... 6,200 14,508
Natsteel Electronics, Ltd............. 4,000 10,923
Venture Manufacturing, Ltd............ 2,000 9,025
-----------
34,456
-----------
SOUTH KOREA -- 8.1%
Korea Telecom Corp.................... 400 13,562
Samsung Corp.......................... 3,200 21,881
Samsung Electronics Co................ 687 53,191
-----------
88,634
-----------
TAIWAN -- 6.7%
Asustek Computer, Inc.*............... 1,000 8,448
Cathay Life Insurance Co.............. 3,000 9,685
Compal Electronics*................... 9,000 23,624
Siliconware Precision Industry*....... 8,000 16,292
Taiwan Semiconductor*................. 5,000 15,689
-----------
73,738
-----------
THAILAND -- 11.0%
Bangkok Bank Public Co., Ltd.......... 23,600 48,375
National Finance PCL.................. 97,500 28,551
Thai Farmers Bank..................... 21,800 44,105
-----------
121,031
-----------
TOTAL COMMON STOCK
(Cost: $864,479)................................. 1,008,764
-----------
TOTAL INVESTMENTS -- 91.8%
(Cost: $864,479)................................ 1,008,764
OTHER ASSETS IN EXCESS OF LIABILITIES -- 8.2%..... 90,100
--------------
NET ASSETS -- 100.0%.............................. $ 1,098,864
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
71
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
PACIFIC RIM FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Audio/Video Products........................ 3.4%
Auto Manufacturers.......................... 1.1
Beverages - Alcoholic....................... 1.8
Computer Software........................... 3.2
Computers................................... 5.5
Distribution/Wholesale...................... 3.1
Diversified Financial Services.............. 6.0
Drugs/Pharmaceuticals....................... 1.2
Electrical Components & Equipment........... 6.8
Electronics................................. 1.8
Electronic Components/Semiconductors........ 5.9
Hand/Machine Tools.......................... 1.1
Insurance................................... 0.9
Leisure/Gaming.............................. 0.4
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Money Center Banks.......................... 8.7%
Other Commercial Services................... 3.1
Other Consumer Non-Durables................. 5.5
Real Estate................................. 5.1
Regional/Commercial Banks................... 6.5
Retail - Consumer Electronics............... 1.4
Retail - Miscellaneous/Diversified.......... 1.4
Telecommunications.......................... 11.8
Telephone................................... 3.6
Tobacco..................................... 2.5
Other Assets in Excess of Liabilities....... 8.2
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
72
<PAGE>
WORLDWIDE GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; LARRY SPEIDELL, CFA, Partner, Director of Global/Systematic
Portfolio Management and Research; ANDREW B. GALLAGHER, Partner, Portfolio
Manager; LORETTA J. MORRIS, Partner, Portfolio Manager; ALEX MUROMCEW, Portfolio
Manager; ERNESTO RAMOS, PH.D., Senior Portfolio Manager; MELISA A. GRIGOLITE,
Portfolio Manager; JOHN TRIBOLET, Portfolio Manager.
GOAL: The Worldwide Growth Fund seeks to maximize long-term capital
appreciation through investments in growth-oriented companies around the world,
regardless of geographic location.
MARKET OVERVIEW: During the 12-month period ending March 31, 1999, world stock
markets were characterized by:
- an enthusiastic pace of mergers and acquisitions
- surging prices for technology stocks
- concerted efforts by central banks globally to cut interest rates
- the outperformance of US large-cap stocks
Many stock markets around the world climbed to record highs in the third
quarter of 1998 only to see those gains erased the following quarter. Worries of
a global economic slowing, a currency devaluation in Russia and a pessimistic
outlook for the financial sector caused markets to fall in late summer.
However, investor confidence was restored by the fourth quarter and markets
recouped earlier losses and climbed toward record highs. A number of
developments soothed concerns and contributed to gains in both developed and
emerging markets during the period including the strengthening of the Japanese
yen, interest-rate reductions by a number of the world's central banks and
surging tech stocks in the United States. In Asia, prospects improved amid
currency stabilization, strong corporate earnings and declining interest rates.
PERFORMANCE: For the 12-month period ending March 31, 1999, the fund's I
shares gained 34.3% versus 12.7% for its benchmark, the MSCI World Index.
PORTFOLIO SPECIFICS: Superior stock selection, especially among
telecommunications companies such as Colt Telecom, Nokia, Sprint and MCI
WorldCom, contributed to the fund's outperformance. US technology and
Internet-related companies including America Online, At Home, Sun Microsystems
and Cisco Systems also added to the fund's solid performance.
Due to concerns of an economic slowdown and its impact on corporate earnings,
we reduced our exposure in Europe from 81% in March of 1998 to 68% at the end of
March 1999. We increased our weighting in Japan on a company-by-company basis
during the period from 5.2% to approximately 17.0%.
MARKET OUTLOOK: We are cautiously optimistic on Japan as reforms have led to
increased corporate earnings projections. In Europe, recent rate cuts, corporate
restructuring and merger and acquisition activity are encouraging. And US
economic growth forecasts have been revised upward and the outlook for corporate
profits is strong.
- --------------------------------------------------------------------------------
73
<PAGE>
WORLDWIDE GROWTH FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN WORLDWIDE GROWTH FUND
INSTITUTIONAL SHARES WITH THE MSCI WORLD INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/99 SINCE
1 YEAR 5 YEARS INCEPTION
34.28% 19.75% 20.00%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
WORLDWIDE GROWTH FUND INSTITUTIONAL SHARES MSCI WORLD INDEX
<S> <C> <C>
4/19/93 $250,000.00 $250,000.00
6/93 $263,470.32 $257,076.48
9/93 $284,474.89 $269,143.44
12/93 $286,073.06 $273,515.66
3/94 $300,228.31 $275,182.42
6/94 $295,205.48 $283,458.30
9/94 $310,730.59 $289,540.37
12/94 $294,624.53 $287,458.30
3/95 $299,206.56 $300,441.60
6/95 $316,618.27 $313,260.12
9/95 $346,630.57 $330,310.26
12/95 $339,841.23 $345,989.58
3/96 $360,161.63 $360,070.55
6/96 $385,153.39 $370,524.84
9/96 $385,620.53 $375,468.33
12/96 $402,739.61 $392,649.45
3/97 $407,616.08 $393,775.48
6/97 $468,715.47 $453,026.83
9/97 $515,185.42 $465,985.28
12/97 $474,947.92 $454,494.69
3/98 $550,619.67 $519,594.22
6/98 $588,763.15 $530,164.29
9/98 $510,612.83 $466,585.27
12/98 $655,343.88 $565,076.75
3/31/99 $739,379.36 $585,301.09
</TABLE>
This graph compares a $250,000 investment in the Worldwide Growth Fund
Institutional Shares with the Morgan Stanley Capital International ("MSCI")
World Index, on a cumulative and average annual total return basis. The Fund's
Institutional Shares calculate their performance based upon the historical
performance of their corresponding series ("Fund") of Pilgrim Mutual Funds,
adjusted to reflect sales charges and operating expenses. The Fund's
Institutional Shares were first available on 10/1/93. All return calculations
reflect the reinvestment of income, dividends and capital gains distributions,
if any, as well as all fees and expenses applicable to the Fund.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five-year
period. Total return results may have been lower had there been no waiver or
deferral.
MSCI World Index consists of more than 1,400 securities listed on exchanges in
the United States, Europe, Canada, Australia, New Zealand, and the Far East. The
Index is a market-value weighted combination of countries and is unmanaged.
The Index reflects the reinvestment of income, dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's share price is expected to be
more volatile than that of a United States only fund.
- --------------------------------------------------------------------------------
74
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
WORLDWIDE GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
COMMON STOCK -- 97.6%
- --------------------------------------------------------------------
AUSTRALIA -- 0.5%
Suncorp-Metway, Ltd................... 83,100 $ 503,785
Telstra Corp., Ltd.................... 116,900 609,403
-------------
1,113,188
-------------
BELGIUM -- 0.9%
Fortis (B)............................ 30,000 1,107,656
Mobistar S.A.*........................ 17,700 1,117,859
-------------
2,225,515
-------------
BERMUDA -- 1.2%
Global Crossing, Ltd.*................ 17,500 809,375
RSL Communications, Ltd. Cl. A*....... 62,100 2,231,719
-------------
3,041,094
-------------
BRAZIL -- 0.3%
Aracruz Celulose S.A. -- ADR.......... 19,300 279,850
Tele Norte Leste Participacoes --
ADR*................................ 36,100 555,038
-------------
834,888
-------------
CANADA -- 1.0%
ATI Technology, Inc.*................. 79,700 1,222,271
Rogers Communications Cl. B*.......... 41,700 755,280
Talisman Energy, Inc.................. 20,300 439,469
-------------
2,417,020
-------------
FINLAND -- 3.2%
Nokia OYJ -- ADR...................... 44,700 6,962,025
Sonera Group OYJ...................... 50,700 842,920
-------------
7,804,945
-------------
FRANCE -- 5.1%
Banque Nationale de Paris............. 14,000 1,218,206
Banque Paribas........................ 11,900 1,328,389
Canal Plus............................ 4,700 1,377,607
Cap Gemini S.A........................ 8,600 1,440,018
Casino Guichard Perrachon............. 9,400 834,175
Castorama Dubois Investissements
SCA................................. 5,600 1,172,863
Elf Aquitaine......................... 7,600 1,032,172
Michelin (CGDE) Cl. B................. 27,000 1,211,135
Societe Television Francaise 1........ 3,600 675,865
Suez Lyonnaise des Eaux............... 4,400 814,181
Synthelabo............................ 2,400 522,088
Vivendi (EX-Generale des Eaux)........ 4,400 1,082,567
-------------
12,709,266
-------------
GERMANY -- 2.5%
DaimlerChrysler AG.................... 11,340 986,747
Dresdner Bank AG...................... 32,500 1,298,204
Mannesmann AG......................... 12,900 1,600,175
Muenchener Rueckversicher AG.......... 6,000 1,197,046
Veba AG............................... 20,700 1,089,438
-------------
6,171,610
-------------
GREECE -- 0.4%
National Bank Of Greece S.A........... 7,690 519,904
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
</TABLE>
GREECE (CONTINUED)
<TABLE>
<S> <C> <C>
Panafon Hellenic Telecommunications
Co. S.A. -- GDR 144A*............... 14,700 $ 371,910
-------------
891,814
-------------
HONG KONG -- 0.4%
HSBC Holdings PLC..................... 19,600 614,591
Sun Hung Kai Properties............... 64,000 478,996
-------------
1,093,587
-------------
INDIA -- 0.0%
Bombay Surburban Electric Supply Co.,
Ltd................................. 1,150 3,930
-------------
IRELAND -- 0.5%
CRH PLC............................... 43,100 744,018
ESAT Telecom Group PLC -- ADR*........ 13,000 544,375
-------------
1,288,393
-------------
ISRAEL -- 0.2%
Gilat Satellite Networks, Ltd.*....... 9,900 594,000
-------------
ITALY -- 2.3%
Alleanza Assicurazioni SpA............ 95,800 1,142,840
Banca Commerciale Italiana............ 145,200 1,191,346
Mediaset SpA.......................... 119,600 1,124,623
Seat-Pagine Gialle SpA................ 785,400 919,980
Telecom Italia SpA.................... 132,800 1,410,753
-------------
5,789,542
-------------
JAPAN -- 7.3%
Advantest Corp........................ 11,300 863,506
Bank of Tokyo-Mitsubishi, Ltd......... 76,000 1,047,302
Fuji Soft ABC, Inc.................... 20,720 1,355,906
Fujitsu, Ltd.......................... 68,000 1,092,088
Honda Motor Co., Ltd.................. 24,000 1,084,184
Hoya Corp............................. 18,000 1,021,363
Matsushita Communication Industrial
Co., Ltd............................ 10,000 676,349
Mitsui & Co., Ltd..................... 69,000 466,681
Mitsui Fudosan Co., Ltd............... 111,000 1,000,059
Nippon Steel Corp..................... 233,000 478,080
Nomura Securities Co., Ltd............ 77,000 806,214
NTT Mobile Communications............. 18 889,133
Ryohin Keikaku Co., Ltd............... 10,300 1,635,058
Shohkoh Fund & Co., Ltd............... 2,620 1,327,366
Softbank Corp......................... 21,000 2,354,808
Sony Corp............................. 13,400 1,238,959
Tokyo Electron, Ltd................... 13,000 672,887
-------------
18,009,943
-------------
MEXICO -- 0.6%
Corparcion Interamericana de
Entretenmiento S.A. Cl. B........... 100,300 296,918
Corparcion Interamericana de
Entretenmiento S.A. Cl. L........... 73,000 195,412
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
75
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999 -- CONTINUED
- --------------------------------------------------------------------------------
WORLDWIDE GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
MEXICO (CONTINUED)
<TABLE>
<S> <C> <C>
Fomento Economico Mexicano S.A. --
ADR................................. 14,900 $ 460,969
Grupo Carso Global Telecom S.A........ 120,000 621,664
-------------
1,574,963
-------------
NETHERLANDS -- 3.7%
ASM Lithography Holding N.V.*......... 42,300 1,903,500
Equant N.V.*.......................... 18,100 1,362,025
Koninklijke Ahold N.V................. 28,500 1,092,272
Royal Dutch Petroleum Co.............. 26,300 1,367,600
STMicroelectronics N.V.*.............. 13,400 1,301,475
TNT Post Group N.V.................... 37,400 1,126,506
Wolters Kluwer N.V.................... 5,900 1,070,087
-------------
9,223,465
-------------
NEW ZEALAND -- 0.2%
Telecom Of New Zealand................ 95,800 465,942
-------------
PORTUGAL -- 0.4%
Banco Comercial Portugues Cl. R....... 19,300 583,409
Brisa Autostradas..................... 11,300 523,351
-------------
1,106,760
-------------
SINGAPORE -- 0.1%
City Developments, Ltd................ 62,000 322,825
-------------
SOUTH AFRICA -- 0.2%
Dimension Data Holdings, Ltd.*........ 85,465 378,614
-------------
SOUTH KOREA -- 0.2%
Samsung Electronics -- GDR*........... 10,600 433,010
-------------
SPAIN -- 2.0%
Acciona S.A........................... 18,400 943,361
Banco Santander S.A................... 53,100 1,089,195
Centros Comerciales Continente S.A.... 35,700 992,823
Fomentos de Construcciones y Contratas
S.A................................. 15,600 959,969
Telefonica S.A. -- ADR................ 8,286 1,058,537
-------------
5,043,885
-------------
SWEDEN -- 0.3%
Europolitan Holdings AB............... 8,400 774,315
-------------
SWITZERLAND -- 2.1%
Julius Baer Holding AG Cl. B.......... 350 1,134,784
Roche Holding AG...................... 110 1,341,418
Swisscom AG........................... 3,600 1,405,803
United Bank Switzerland AG............ 3,800 1,193,798
-------------
5,075,803
-------------
TAIWAN -- 0.6%
Taiwan Semiconductor -- ADR*.......... 40,500 956,813
Winbond Electronics Corp. -- GDR*..... 36,000 420,300
-------------
1,377,113
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
UNITED KINGDOM -- 8.0%
ARM Holdings PLC -- ADR*.............. 14,400 $ 1,908,000
Barclays PLC.......................... 49,100 1,411,667
Barratt Developments PLC.............. 185,100 881,486
BP Amoco PLC.......................... 88,600 1,510,374
British Telecom PLC................... 73,300 1,196,305
Cable & Wireless Communications PLC*.. 53,900 611,254
Capita Group PLC...................... 82,300 948,604
Colt Telecom Group PLC*............... 71,100 1,280,916
Dixons Group PLC...................... 74,900 1,587,572
Emap PLC.............................. 29,100 569,824
GKN PLC............................... 82,400 1,253,040
Lloyds TSB Group PLC.................. 46,500 703,363
Pearson PLC........................... 29,600 674,226
Penninsular & Orient Steam
Navigation.......................... 54,600 795,035
Sema Group PLC........................ 85,800 968,862
Smithkline Beecham PLC................ 93,800 1,352,958
Telewest Communications PLC*.......... 185,800 806,086
Vodafone Group PLC.................... 68,508 1,272,927
-------------
19,732,499
-------------
UNITED STATES -- 53.4%
Alltel Corp........................... 67,900 4,235,262
America Online, Inc................... 33,400 4,876,400
American International Group.......... 31,092 3,750,472
Amgen, Inc.*.......................... 57,200 4,282,850
Ascend Communications, Inc.*.......... 51,400 4,301,537
At Home Corp. Series A*............... 27,700 4,362,750
AT&T Corp............................. 54,151 4,321,927
AT&T Corp. -- Liberty Media Group Cl.
A*.................................. 59,020 3,105,927
Cigna Corp............................ 38,500 3,226,781
Cisco Systems, Inc.*.................. 40,200 4,404,413
Comcast Corp. Cl. A................... 68,300 4,298,631
EMC Corp.*............................ 34,100 4,356,275
Flextronics International, Ltd.*...... 11,300 576,300
Forest Laboratories, Inc. Cl. A*...... 79,000 4,453,625
Global Telesystems Group, Inc.*....... 16,600 928,563
Halliburton Co........................ 107,300 4,131,050
Infinity Broadcasting Corp. Cl. A*.... 176,400 4,542,300
International Paper Co................ 100,000 4,218,750
Kroger Co.*........................... 71,700 4,293,038
MCI Worldcom, Inc..................... 47,800 4,233,288
MGM Grand, Inc.*...................... 63,600 2,138,550
Motorola, Inc......................... 58,700 4,299,775
Nike, Inc. Cl. B...................... 60,900 3,513,169
Pepsi Bottling Group, Inc.*........... 212,200 4,602,088
Qualcomm, Inc.*....................... 27,400 3,407,875
Qwest Communications International,
Inc.*............................... 59,100 4,260,741
Southwest Airlines.................... 138,300 4,183,575
Sprint Corp. -- PCS Group............. 98,400 4,360,350
Sun Microsystems, Inc.*............... 35,500 4,435,281
Time Warner, Inc...................... 62,800 4,462,725
Tyco International, Ltd............... 58,800 4,218,900
Wal-Mart Stores, Inc.................. 46,500 4,286,719
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
76
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
UNITED STATES (CONTINUED)
<TABLE>
<S> <C> <C>
Washington Mutual, Inc................ 76,900 $ 3,143,288
Williams Cos., Inc.................... 109,200 4,313,400
-------------
132,526,575
-------------
TOTAL COMMON STOCK
(Cost: $200,082,028).............................. 242,024,504
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------
COMMERCIAL PAPER -- 2.2%
- -------------------------------------------------------------------
Associates First Capital Corp.
5.000%, 04/01/99.................... $ 106,000 106,000
Smithkline Beecham PLC
5.000%, 04/01/99.................... 5,348,000 5,348,000
------------
TOTAL COMMERCIAL PAPER
(Cost: $5,454,000)................................. 5,454,000
------------
- -------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 18.2%
- -------------------------------------------------------------------
J.P. Morgan & Co., Inc. $45,197,000 at
4.900%, (Agreement dated 03/31/99 to
be repurchased at $45,203,152 on
04/01/99; collateralized by
$45,480,000 FNMA Notes, 5.960% due
07/23/99 (Value $47,067,606)
(Cost: $45,197,000)................. 45,197,000 45,197,000
------------
TOTAL INVESTMENTS -- 118.0%
(Cost: $250,733,028)............................ 292,675,504
LIABILITIES IN EXCESS OF OTHER ASSETS -- (18.0%).. (44,672,824)
--------------
NET ASSETS -- 100.0%.............................. $ 248,002,680
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
77
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
WORLDWIDE GROWTH FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Airlines.................................... 1.7%
Apparel..................................... 1.4
Audio/Video Products........................ 0.5
Auto Manufacturers.......................... 0.8
Auto Parts & Equipment...................... 1.0
Beverages - Non-Alcoholic................... 1.9
Biotechnology............................... 1.7
Broadcasting................................ 8.5
Building Materials.......................... 0.3
Computer Graphics Software.................. 0.5
Computer Software........................... 0.9
Computers................................... 7.8
Distribution/Wholesale...................... 1.1
Diversified Financial Services.............. 19.4
Drugs/Pharmaceuticals....................... 5.2
Electrical Components & Equipment........... 0.2
Electric.................................... 0.4
Electronics................................. 0.6
Engineering & Construction.................. 1.7
Electronic Components/Semiconductors........ 2.1
Entertainment............................... 0.2
Food........................................ 2.7
Insurance................................... 4.2
Internet Software........................... 3.7
Leisure/Gaming.............................. 0.9
Machinery - Diversified..................... 0.6
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Metals...................................... 0.2%
Miscellaneous Manufacturing................. 1.7
Money Center Banks.......................... 5.1
Oil & Gas Producers......................... 1.8
Oil & Gas Services.......................... 1.7
Optical Supplies............................ 0.4
Other Commercial Services................... 0.8
Paper & Related Products.................... 1.8
Pipelines................................... 1.7
Publishing.................................. 1.3
Real Estate................................. 0.7
Regional/Commercial Banks................... 0.4
Retail - Building Products.................. 0.5
Retail - Consumer Electronics............... 0.6
Retail - Discount........................... 1.7
Retail - Hypermarkets....................... 0.4
Retail - Miscellaneous/Diversified.......... 0.7
Savings & Loans............................. 1.3
Telecommunications Equipment................ 8.2
Telecommunications.......................... 8.2
Telephone................................... 8.0
Transportation - Marine..................... 0.3
Transportation - Other...................... 0.5
Liabilities in Excess of Other Assets....... (18.0)
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
78
<PAGE>
GLOBAL BLUE CHIP FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; LARRY SPEIDELL, CFA, Partner, Director of Global/Systematic
Portfolio Management and Research; LORETTA J. MORRIS, Partner, Portfolio
Manager; ALEX MUROMCEW, Portfolio Manager; MELISA A. GRIGOLITE, Portfolio
Manager; JOHN TRIBOLET, Portfolio Manager.
GOAL: The Global Blue Chip Fund seeks to maximize long-term capital
appreciation by investing in what we believe to be the strongest investment
opportunities in the world.
MARKET OVERVIEW: Investor optimism that growth for many of the world's
economies will remain solid over the long term overpowered concerns regarding
deflation and currency contagion. Some of the favorable developments in the
12-month period ending March 31, 1999 included:
- concerted efforts by central banks around the globe to cut interest rates
- an enthusiastic pace of merger and acquisition (M&A) activity
- robust growth with non-existent inflation in the United States
- the strengthening of the Japanese yen
These developments helped soothe investor concerns over a global economic
slowdown, a currency devaluation in Russia, Japan's prolonged economic slump and
continued difficulties in emerging markets.
In Europe, markets benefited from the prelude to European Monetary Union (EMU)
on January 1, 1999, which has led to the convergence of interest rates among
countries in the region.
PERFORMANCE: For the 12-month period ending March 31, 1999, the Global Blue
Chip Fund's I shares registered an increase of 39.6% versus 12.7% for its
benchmark, the MSCI World Index.
PORTFOLIO SPECIFICS: As of March 31, 1999, the fund's holdings were
concentrated in the United States and Europe, where stock selection contributed
to the fund's outstanding gains. Despite an expected economic slowdown in
Europe, we continued to find stocks meeting our investment criteria. We also
increased our weighting in Japan during the period. Amid announcements of
restructuring among large corporations and increased M&A activity, we identified
attractive opportunities on a stock-by-stock basis.
Technology and telecommunications holdings around the world were among the
fund's strongest performers, including Internet leader America Online in the
United States, telecommunications powerhouse NTT Mobile Communications in Japan
and international data network company Equant in the Netherlands.
MARKET OUTLOOK: Amid an ever-changing investment landscape, we remain
optimistic in our outlook for global investing. The favorable trends of
consolidation, restructuring and improving economic conditions create exciting
opportunities for our Global Blue Chip Fund.
- --------------------------------------------------------------------------------
79
<PAGE>
GLOBAL BLUE CHIP FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN GLOBAL BLUE CHIP FUND
INSTITUTIONAL SHARES WITH THE MSCI WORLD INDEX.
<TABLE>
<S> <C> <C>
TOTAL RETURN SINCE
1 YEAR SINCE INCEPTION INCEPTION
39.55% As of 03/31/99 39.86%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GLOBAL BLUE CHIP FUND INSTITUTIONAL SHARES MSCI WORLD INDEX
<S> <C> <C>
9/30/97 $250,000.00 $250,000.00
10/97 $235,000.00 $236,800.00
11/97 $236,200.00 $240,944.00
12/97 $247,000.00 $243,835.33
1/98 $255,800.00 $250,589.57
2/98 $275,000.00 $267,499.35
3/98 $296,200.00 $278,761.07
4/98 $310,400.00 $281,442.75
5/98 $311,200.00 $277,874.06
6/98 $325,800.00 $284,431.89
7/98 $334,000.00 $283,919.91
8/98 $277,000.00 $246,016.60
9/98 $286,800.00 $250,321.89
10/98 $298,200.00 $272,900.93
11/98 $319,686.98 $289,083.95
12/98 $361,060.62 $303,162.34
1/99 $397,186.86 $309,771.28
2/99 $377,610.07 $301,500.39
3/31/99 $413,332.67 $314,012.65
</TABLE>
This graph compares a $250,000 investment in the Global Blue Chip Fund
Institutional Shares with the MSCI World Index, on a cumulative and average
annual total return basis. All return calculations reflect the reinvestment of
income, dividends and capital gains distributions, if any, as well as all fees
and expenses applicable to the Fund.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five-year
period. Total return results may have been lower had there been no waiver or
deferral.
The Morgan Stanley Capital International ("MSCI") World Index consists of more
than 1,400 securities listed on exchanges in the United States, Europe, Canada,
Australia, New Zealand, and the Far East. The Index is a market-value weighted
combination of countries and is unmanaged.
Index returns reflect the reinvestment of income, dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's share price is expected to be
more volatile than that of a United States only fund.
- --------------------------------------------------------------------------------
80
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
GLOBAL BLUE CHIP FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
COMMON STOCK -- 95.6%
- ------------------------------------------------------------------
BERMUDA -- 0.4%
Global Crossing, Ltd.*................ 900 $ 41,625
------------
CANADA -- 0.3%
Rogers Communications Cl. B*.......... 2,000 36,224
------------
FINLAND -- 1.5%
Nokia OYJ--ADR........................ 1,000 155,750
------------
FRANCE -- 3.8%
Banque Nationale de Paris............. 1,100 95,716
Banque Paribas........................ 890 99,350
Michelin (CGDE) Cl. B................. 2,200 98,685
Vivendi (EX-Generale des Eaux)........ 400 98,415
------------
392,166
------------
GERMANY -- 4.5%
Dresdner Bank AG...................... 3,500 139,807
Mannesmann AG......................... 1,000 124,045
Muenchener Rueckversicher AG.......... 500 99,754
Veba AG............................... 1,900 99,997
------------
463,603
------------
IRELAND -- 0.5%
CRH PLC............................... 3,100 53,514
------------
ITALY -- 1.9%
Mediaset SpA.......................... 10,100 94,972
Telecom Italia SpA.................... 9,300 98,795
------------
193,767
------------
JAPAN -- 10.5%
Advantest Corp........................ 1,100 84,058
Bank of Tokyo-Mitsubishi, Ltd......... 7,000 96,462
Fujitsu, Ltd.......................... 6,000 96,361
Honda Motor Co., Ltd.................. 2,000 90,349
Nomura Securities Co., Ltd............ 10,000 104,703
NTT Mobile Communications............. 2 98,793
Ryohin Keikaku Co., Ltd............... 800 126,995
Shohkoh Fund & Co., Ltd............... 240 121,591
Softbank Corp......................... 1,400 156,987
Sony Corp............................. 1,300 120,198
------------
1,096,497
------------
MEXICO -- 1.3%
Grupo Carso Global Telecom S.A........ 26,000 134,694
------------
NETHERLANDS -- 5.6%
ASM Lithography Holding N.V.*......... 3,500 157,500
Equant N.V.*.......................... 2,200 165,550
Koninklijke Ahold N.V................. 2,100 80,483
Royal Dutch Petroleum Co.............. 2,000 104,000
Wolters Kluwer N.V.................... 400 72,548
------------
580,081
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
NEW ZEALAND -- 0.6%
Telecom Of New Zealand................ 13,800 $ 67,119
------------
SPAIN -- 2.0%
Banco Santander S.A................... 4,900 100,510
Telefonica S.A.--ADR.................. 804 102,711
------------
203,221
------------
SWITZERLAND -- 1.5%
Roche Holding AG...................... 7 85,363
United Bank Switzerland AG............ 240 75,398
------------
160,761
------------
UNITED KINGDOM -- 9.8%
Barclays PLC.......................... 2,400 69,002
British Telecom PLC................... 8,200 133,830
Cable & Wireless Communications
PLC*................................ 4,500 51,032
Colt Telecom Group PLC*............... 3,500 63,055
Dixons Group PLC...................... 6,400 135,654
Emap PLC.............................. 2,700 52,870
GKN PLC............................... 3,800 57,786
Lloyds TSB Group PLC.................. 4,500 68,067
Sema Group PLC........................ 5,300 59,848
Smithkline Beecham PLC................ 4,800 69,235
Telewest Communications PLC*.......... 15,900 68,981
Vodafone Group PLC.................... 10,326 191,864
------------
1,021,224
------------
UNITED STATES -- 51.4%
America Online, Inc................... 1,300 189,800
American Express Co................... 1,200 141,000
American International Group.......... 1,300 156,812
Amgen, Inc.*.......................... 2,000 149,750
AT&T Corp............................. 2,014 160,742
CBS Corp.*............................ 3,000 122,812
Charles Schwab Corp................... 1,000 96,125
Conexant Systems, Inc.*............... 7,000 193,812
EMC Corp.*............................ 1,000 127,750
Enron Corp............................ 2,000 128,500
FDX Corp.............................. 1,000 92,812
Forest Laboratories, Inc. Cl. A*...... 3,000 169,125
Fox Entertainment Group, Inc. Cl.
A*.................................. 6,000 162,750
Home Depot, Inc....................... 2,000 124,500
Intuit, Inc.*......................... 1,500 152,625
McDonald's Corp....................... 2,100 95,156
MCI Worldcom, Inc.*................... 2,000 177,125
Mirage Resorts, Inc.*................. 7,500 159,375
Montana Power Co...................... 2,500 183,906
Morgan Stanley Dean Witter Discover &
Co.................................. 1,000 99,937
Motorola, Inc......................... 1,200 87,900
Nike, Inc. Cl. B...................... 3,000 173,063
Qualcomm, Inc.*....................... 1,300 161,688
Qwest Communications International,
Inc................................. 2,400 173,025
Schlumberger, Ltd..................... 3,000 180,563
Smurfit-Stone Container Corp.*........ 5,000 96,562
Southwest Airlines.................... 5,900 178,475
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
81
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999 -- CONTINUED
- --------------------------------------------------------------------------------
GLOBAL BLUE CHIP FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
UNITED STATES (CONTINUED)
<TABLE>
<S> <C> <C>
Sprint Corp. -- PCS Group*............ 3,500 $ 155,094
Sun Microsystems, Inc.*............... 1,500 187,406
Teradyne, Inc.*....................... 3,000 163,688
Texas Instruments, Inc................ 2,000 198,500
Time Warner, Inc...................... 1,500 106,594
Veritas Software Corp.*............... 1,500 121,125
Wal-Mart Stores, Inc.................. 2,000 184,375
Washington Mutual, Inc................ 2,500 102,188
Williams Cos., Inc.................... 5,000 197,500
------------
5,352,160
------------
TOTAL COMMON STOCK
(Cost: $8,401,353)............................... 9,952,406
------------
TOTAL INVESTMENTS -- 95.6%
(Cost: $8,401,353).............................. 9,952,406
OTHER ASSETS IN EXCESS OF LIABILITIES -- 4.4%..... 461,166
--------------
NET ASSETS -- 100.0%.............................. $ 10,413,572
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
82
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
GLOBAL BLUE CHIP FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Airlines.................................... 1.7%
Apparel..................................... 1.7
Applications Software....................... 1.5
Audio/Video Products........................ 1.2
Auto Manufacturers.......................... 0.9
Auto Parts & Equipment...................... 1.5
Biotechnology............................... 1.4
Broadcasting................................ 5.7
Building Materials.......................... 0.5
Computer Software........................... 1.7
Computers................................... 7.1
Distribution/Wholesale...................... 1.5
Diversified Financial Services.............. 5.4
Drugs/Pharmaceuticals....................... 3.1
Electric.................................... 2.7
Electronics................................. 2.4
Electronic Components/Semiconductors........ 3.8
Food........................................ 0.8
Insurance................................... 2.5
Internet Software........................... 1.8
Leisure/Gaming.............................. 1.5
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Machinery - Diversified..................... 1.2%
Money Center Banks.......................... 7.1
Oil & Gas Producers......................... 1.0
Oil & Gas Services.......................... 1.7
Other Commercial Services................... 0.9
Packaging & Containers...................... 0.9
Pipelines................................... 3.1
Publishing.................................. 1.2
Retail - Building Products.................. 1.2
Retail - Consumer Electronics............... 1.3
Retail - Discount........................... 1.8
Retail - Miscellaneous/Diversified.......... 1.2
Retail - Restaurants........................ 0.9
Savings & Loans............................. 1.0
Telecommunications Equipment................ 3.9
Telecommunications.......................... 8.1
Telephone................................... 7.8
Transportation - Air Freight................ 0.9
Other Assets in Excess of Liabilities....... 4.4
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
83
<PAGE>
GLOBAL GROWTH & INCOME FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; LARRY SPEIDELL, CFA, Partner, Director of Global/Systematic
Portfolio Management and Research; LORETTA J. MORRIS, Partner, Portfolio
Manager; ALEX MUROMCEW, Portfolio Manager; MELISA GRIGOLITE, Portfolio Manager;
JOHN TRIBOLET, Portfolio Manager; MALCOM S. DAY, CFA, Portfolio Manager.
GOAL: The Global Growth & Income Fund seeks to deliver total return consisting
of long-term capital appreciation and current income from a diversified
portfolio of US and international stocks and fixed income securities.
MARKET OVERVIEW: Worldwide investing presented exciting opportunities in the
12-month period ending March 31, 1999. Investor optimism that growth for many of
the world's economies would remain solid over the long term overpowered concerns
regarding deflation and currency contagion. Some of the favorable developments
in period included:
- concerted efforts by central banks around the globe to cut interest rates
- an enthusiastic pace of merger and acquisition activity
- robust growth with non-existent inflation in the United States
- the strengthening of the Japanese yen
These developments helped soothe investor concerns over a global economic
slowdown, a currency devaluation in Russia, Japan's prolonged economic slump and
difficulties in emerging markets. In Europe, markets benefited from the prelude
to European Monetary Union (EMU) on January 1, 1999, which has led to the
convergence of interest rates.
PERFORMANCE: For the 12-month period ending March 31, 1999, the Global Growth
& Income Fund's I shares posted an increase of 13.1% versus 12.7% for its
benchmark, the MSCI World Index.
PORTFOLIO SPECIFICS: Stock selection and overweighting in the United States
versus the benchmark contributed to the fund's outperformance in the period.
Stock selection and our overweighting among technology stocks versus the
benchmark positively impacted returns. We held stocks such as Internet leader
America Online and wireless communications supplier Qualcomm in the United
States, Internet/software company Softbank in Japan and telecommunications
leader Nokia in Finland. Financial services stocks, especially those that were
hit hard by their exposure to Russia, select countries in Asia and Latin America
negatively impacted returns. We reduced our weighting in financial services on a
stock-by-stock basis.
MARKET OUTLOOK: We remain optimistic in our outlook for global investing as we
continue to unearth exciting opportunities on a stock-by-stock basis. Favorable
themes such as increased international trade, deregulation, restructuring and
consolidation among companies worldwide all bode well for our Global Growth and
Income Fund.
- --------------------------------------------------------------------------------
84
<PAGE>
GLOBAL GROWTH & INCOME FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN GLOBAL GROWTH & INCOME
FUND INSTITUTIONAL SHARES WITH THE MSCI WORLD INDEX.
<TABLE>
<S> <C> <C>
TOTAL RETURN SINCE
1 YEAR SINCE INCEPTION INCEPTION
13.13% As of 03/31/99 28.04%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GLOBAL GROWTH &
INCOME FUND MSCI WORLD
INSTITUTIONAL SHARES INDEX
<S> <C> <C>
6/30/97 $250,000.00 $250,000.00
7/97 $286,200.00 $261,475.00
8/97 $285,000.00 $243,930.03
9/97 $318,200.00 $257,151.03
10/97 $298,200.00 $243,573.46
11/97 $304,209.44 $247,836.00
12/97 $311,683.44 $250,810.03
1/98 $314,057.27 $257,757.47
2/98 $325,926.40 $275,150.94
3/98 $340,620.39 $286,734.79
4/98 $346,830.86 $289,493.18
5/98 $344,394.44 $285,822.41
6/98 $354,921.78 $292,567.82
7/98 $361,302.73 $292,041.20
8/98 $303,343.75 $253,053.70
9/98 $311,071.61 $257,482.14
10/98 $319,880.28 $280,707.02
11/98 $335,735.87 $297,352.95
12/98 $355,716.41 $311,834.04
1/99 $370,874.78 $318,632.02
2/99 $359,506.00 $310,124.55
3/31/99 $385,350.69 $322,994.72
</TABLE>
This graph compares a $250,000 investment in the Global Growth & Income Fund
Institutional Shares with the MSCI World Index, on a cumulative and average
annual total return basis. All return calculations reflect the reinvestment of
income, dividends and capital gains distributions, if any, as well as all fees
and expenses applicable to the Fund.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five-year
period. Total return results may have been lower had there been no waiver or
deferral.
The Morgan Stanley Capital International ("MSCI") World Index consists of more
than 1,400 securities listed on exchanges in the United States, Europe, Canada,
Australia, New Zealand, and the Far East. The Index is a market-value weighted
combination of countries and is unmanaged.
Index returns reflect the reinvestment of income, dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's share price is expected to be
more volatile than that of a United States only fund.
- --------------------------------------------------------------------------------
85
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
GLOBAL GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
COMMON STOCK -- 74.8%
- ------------------------------------------------------------------
FINLAND -- 1.7%
Nokia OYJ -- ADR...................... 600 $ 93,450
-----------
FRANCE -- 3.5%
Banque Nationale de Paris............. 600 52,209
Banque Paribas........................ 470 52,466
Bouygues.............................. 200 55,491
Societe Television Francaise 1........ 200 37,548
-----------
197,714
-----------
GERMANY -- 1.6%
Muenchener Rueckversicher AG.......... 200 39,902
Veba AG............................... 900 47,367
-----------
87,269
-----------
GREECE -- 0.5%
National Bank Of Greece S.A........... 420 28,395
-----------
ITALY -- 1.6%
Mediaset SpA.......................... 4,600 43,255
Telecom Italia SpA.................... 4,300 45,679
-----------
88,934
-----------
JAPAN -- 7.2%
Able, Inc............................. 1,000 29,553
Bank of Tokyo-Mitsubishi, Ltd......... 3,000 41,341
Nomura Securities Co., Ltd............ 5,000 52,352
Ryohin Keikaku Co., Ltd............... 400 63,497
Shohkoh Fund & Co., Ltd............... 110 55,729
Softbank Corp......................... 600 67,280
Sony Corp. -- ADR..................... 1,000 91,312
-----------
401,064
-----------
MEXICO -- 0.7%
Corparcion Interamericana de
Entretenmiento S.A. Cl. B*.......... 12,632 37,395
-----------
NETHERLANDS -- 4.6%
ASM Lithography Holding N.V.*......... 2,000 90,000
Equant N.V.*.......................... 1,000 75,250
Koninklijke Ahold N.V................. 1,200 45,990
Royal Dutch Petroleum Co.............. 900 46,800
-----------
258,040
-----------
NEW ZEALAND -- 0.9%
Sky City, Ltd.*....................... 2,400 5,504
Telecom Of New Zealand................ 9,000 43,773
-----------
49,277
-----------
SINGAPORE -- 0.7%
Rothmans Industries................... 8,000 41,192
-----------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------
SPAIN -- 1.8%
Banco Santander S.A................... 2,300 $ 47,178
Telefonica S.A. -- ADR................ 402 51,355
-----------
98,533
-----------
SWEDEN -- 1.7%
LM Erriccson Telephone Co. --ADR...... 4,000 95,250
-----------
SWITZERLAND -- 1.4%
Roche Holding AG...................... 3 36,584
United Bank Switzerland AG............ 130 40,840
-----------
77,424
-----------
UNITED KINGDOM -- 4.4%
Barclays PLC.......................... 1,100 31,626
British Telecom PLC................... 3,800 62,019
GKN PLC............................... 1,500 22,810
Lloyds TSB Group PLC.................. 2,600 39,328
Vodafone Group PLC.................... 5,000 92,904
-----------
248,687
-----------
UNITED STATES -- 42.5%
America Online, Inc................... 300 43,800
American Express Co................... 900 105,750
American International Group.......... 800 96,500
AT&T Corp............................. 700 55,869
Coors (Adolph) Cl. B.................. 1,500 81,000
Electronic Data Systems............... 800 38,950
EMC Corp.*............................ 900 114,975
Enron Corp............................ 1,800 115,650
Ford Motor Co......................... 1,700 96,475
Forest Laboratories, Inc. Cl. A*...... 2,000 112,750
International Business Machines
Corp................................ 600 106,350
Kroger Co.*........................... 1,500 89,812
MCI Worldcom, Inc.*................... 1,100 97,419
Mirage Resorts, Inc.*................. 3,800 80,750
Montana Power Co...................... 1,500 110,344
Morgan Stanley Dean Witter
Discover & Co....................... 1,000 101,060
Motorola, Inc......................... 600 43,950
PECO Energy Co........................ 2,000 92,500
Qualcomm, Inc.*....................... 1,000 124,375
Schering-Plough Corp.................. 1,200 66,375
Smurfit-Stone Container Corp.*........ 4,000 77,250
Southwest Airlines.................... 2,700 81,675
Sun Microsystems, Inc.*............... 800 99,950
TJX Cos., Inc......................... 1,800 61,200
Wal-Mart Stores, Inc.................. 1,000 92,187
Washington Mutual, Inc................ 2,000 81,750
Williams Cos., Inc.................... 2,700 106,650
-----------
2,375,316
-----------
TOTAL COMMON STOCK
(Cost: $3,638,386)................................ 4,177,940
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
86
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCK -- 2.9%
- ------------------------------------------------------------------
GERMANY -- 0.9%
Fielmann AG........................... 1,400 $ 49,877
-----------
UNITED STATES -- 2.0%
Houston Industries, Inc. (convertible)
7.000% (ACES)....................... 450 54,225
Morgan Stanley Dean Witter Discover &
Co. (convertible) 6.000% (PERQS).... 500 56,312
-----------
110,537
-----------
TOTAL PREFERRED STOCK
(Cost: $121,374).................................. 160,414
-----------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ------------------------------------------------------------------
CORPORATE BONDS -- 14.9%
- ------------------------------------------------------------------
UNITED STATES -- 14.9%
America Online, Inc. (convertible)
4.000%, 11/15/02.................... $ 7,000 78,365
Ameritech Capital Funding
6.150%, 01/15/08.................... 100,000 100,875
APP Global Finance, Ltd. (convertible)
144A
2.000%, 07/25/00.................... 120,000 103,650
Costco Cos., Inc.
0.000%, 08/19/17.................... 110,000 117,975
General Electric Capital Corp.
8.625%, 06/15/08.................... 185,000 217,838
Home Depot, Inc. (convertible)
3.250%, 10/01/01.................... 30,000 83,362
U.S. West Captial Funding, Inc.
6.375%, 07/15/08.................... 75,000 76,313
Waste Management, Inc. (convertible)
4.000%, 02/01/02.................... 46,000 53,935
-----------
728,663
-----------
TOTAL CORPORATE BONDS
(Cost: $717,440).................................. 832,313
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------
FOREIGN CORPORATE BONDS -- 1.6%
- ------------------------------------------------------------------
UNITED KINGDOM -- 1.6%
KFW International Finance, Inc.
7.250%, 07/23/07
(Cost: $92,680)..................... $ 50,000 $ 91,233
-----------
- ------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 1.5%
- ------------------------------------------------------------------
U.S. TREASURY NOTES -- 1.5%
6.500%, 10/15/06
(Cost: $87,400)..................... 80,000 85,225
-----------
- ------------------------------------------------------------------
AGENCY OBLIGATIONS -- 1.8%
- ------------------------------------------------------------------
UNITED STATES -- 1.8%
Federal National Mortgage Association
6.000%, 05/15/08
(Cost: $102,750).................... 100,000 101,111
-----------
- ------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS -- 1.0%
- ------------------------------------------------------------------
NEW ZEALAND -- 1.0%
Federal National Mortgage Association
7.250%, 06/20/02
(Cost: $52,510)..................... 100,000 55,697
-----------
TOTAL INVESTMENTS -- 98.5%
(Cost: $4,812,540).............................. 5,503,933
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.5%..... 85,525
--------------
NET ASSETS -- 100.0%.............................. $ 5,589,458
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
87
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
GLOBAL GROWTH & INCOME FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Airlines.................................... 1.5%
Audio/Video Products........................ 1.6
Auto Manufacturers.......................... 1.7
Auto Parts & Equipment...................... 0.4
Beverages - Alcoholic....................... 1.4
Broadcasting................................ 1.4
Computers................................... 9.4
Distribution/Wholesale...................... 1.2
Diversified Financial Services.............. 18.4
Drugs/Pharmaceuticals....................... 3.9
Electric.................................... 5.4
Engineering & Construction.................. 1.0
Entertainment............................... 0.7
Environmental Control....................... 1.0
Food........................................ 2.4
Insurance................................... 2.4
Internet Software........................... 2.2
Leisure/Gaming.............................. 1.5
Money Center Banks.......................... 5.5
Oil & Gas Producers......................... 0.8%
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Packaging & Containers...................... 1.4
Paper & Related Products.................... 1.9
Pipelines................................... 4.0
Real Estate................................. 0.5
Regional/Commercial Banks................... 0.5
Retail - Building Products.................. 1.5
Retail - Discount........................... 2.7
Retail - Hypermarkets....................... 2.1
Retail - Miscellaneous/Diversified.......... 1.1
Retail - Vision Service Center.............. 0.9
Savings & Loans............................. 1.5
Telecommunications Equipment................ 6.4
Telecommunications.......................... 2.4
Telephone................................... 5.6
Tobacco..................................... 0.7
U.S. Treasury Bonds......................... 1.5
Other Assets in Excess of Liabilities....... 1.5
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
88
<PAGE>
GLOBAL TECHNOLOGY FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
MANAGEMENT TEAM: CATHERINE SOMHEGYI, Partner, Chief Investment Officer, Global
Equity Management; LORETTA J. MORRIS, Partner, Portfolio Manager; ESWAR MENON,
Portfolio Manager; ALEX MUROMCEW, Portfolio Manager; AARON HARRIS, Portfolio
Manager.
GOAL: The Global Technology Fund seeks to maximize long-term capital
appreciation by investing primarily in common and preferred stocks, warrants and
convertible securities of technology-related companies worldwide.
MARKET OVERVIEW: The 12-month period ending March 31, 1999 marked spectacular
gains for technology stocks around the globe. Advances in various industries
within the sector, including the Internet, personal computers, semiconductors,
as well as software and hardware fueled a buying frenzy among investors.
In the United States, technology stocks soared amid investor optimism for
these stocks' long-term growth. Tech stocks were at the forefront of the US
market's record-breaking ascent in 1998 and the first quarter of 1999.
Although a significant number of recent top performers were US-based firms,
the dramatic growth among tech stocks spans the globe. Some of the world's
leading technology companies are based in Europe and Japan.
PERFORMANCE: Since its inception on August 1, 1999, the Global Technology
Fund's I shares registered a gain of 257.2% versus 40.6% for the Lipper Science
& Technology Funds Average and 48.6% for the Merrill Lynch Global Technology 100
Index.
PORTFOLIO SPECIFICS: The fund's outstanding gains were attributable to stock
selection, especially in the United States. One of the fund's best-performing
holdings was America Online (AOL), the world's leading online network service
provider. AOL users spent $1.2 billion in online shopping during the holidays
last year, with sales of $36 million on Dec. 17 alone. The recent AOL/Netscape
combination brings AOL's Internet market share to 58%.
Another strong contributor to the fund's performance was Verisign, a leading
Internet security provider. Verisign certifies the identity of parties
transacting business on the web. It has close to an 85% market share and
continues to build marketing and distribution partnerships to increase service
and systems integration worldwide.
MARKET OUTLOOK: We remain optimistic in our long-term outlook for technology
worldwide in light of the following factors:
- projected robust spending for information technology
- the brisk pace of merger and acquisition activities, which will spur
increased competition
- exciting growth opportunities created by the Internet in the United States
and around the globe
- --------------------------------------------------------------------------------
89
<PAGE>
GLOBAL TECHNOLOGY FUND INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN GLOBAL TECHNOLOGY FUND
INSTITUTIONAL SHARES WITH THE MERRILL LYNCH GLOBAL TECHNOLOGY 100 INDEX.
TOTAL RETURN
SINCE INCEPTION
257.20%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GLOBAL TECHNOLOGY MERRILL LYNCH
FUND INSTITUTIONAL GLOBAL TECHNOLOGY
SHARES 100 INDEX
<S> <C> <C>
7/31/98 250,000 250,000
8/31/98 205,800 193,360
9/30/98 236,000 225,106
10/31/98 244,000 248,224
11/30/98 361,400 281,916
12/31/98 454,200 333,884
1/31/99 638,200 379,446
2/28/99 668,000 335,656
3/31/99 893,000 371,607
</TABLE>
This graph compares a $250,000 investment in the Global Technology Fund
Institutional Shares with the Merrill Lynch Global Technology 100 Index, on a
cumulative and average annual total return basis. All return calculations
reflect the reinvestment of income, dividends and capital gains distributions,
if any, as well as all fees and expenses applicable to the Fund.
The total returns reflect the fact that the Investment Adviser has agreed to
waive or defer its management fees and to pay other operating expenses otherwise
payable by the Fund, subject to possible later reimbursement during a five-year
period. Total return results may have been lower had there been no waiver or
deferral.
The Merrill Lynch Global Technology 100 Index is an equally weighted unmanaged
Index containing the 100 largest market capitalizations in the global technology
sector.
Index returns reflect the reinvestment of income, dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's share price is expected to be
more volatile than that of a United States only fund.
- --------------------------------------------------------------------------------
90
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
GLOBAL TECHNOLOGY FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------
COMMON STOCK -- 96.7%
- -----------------------------------------------------------------
AUSTRALIA -- 0.9%
AAPT, Ltd.*........................... 76,000 $ 225,572
-----------
CANADA -- 1.7%
GST Telecommunications, Inc.*......... 17,400 190,312
Research In Motion, Ltd.*............. 20,800 216,909
-----------
407,221
-----------
FINLAND -- 2.3%
Nokia OYJ -- ADR...................... 3,600 560,700
-----------
FRANCE -- 1.0%
Canal Plus............................ 800 234,486
-----------
GERMANY -- 3.1%
Aixtron............................... 550 117,567
Mannesmann AG......................... 3,300 409,347
Primacom AG........................... 6,400 214,190
-----------
741,104
-----------
ISRAEL -- 0.8%
Gilat Satellite Networks, Ltd.*....... 3,100 186,000
-----------
ITALY -- 0.9%
Class Editori SpA*.................... 26,000 230,729
-----------
JAPAN -- 2.9%
Almedio, Inc.......................... 6,000 112,978
Fuji Soft ABC, Inc.................... 3,540 231,656
Hikari Tsushin, Inc................... 1,400 247,065
Sony Chemicals Corp................... 2,000 101,326
-----------
693,025
-----------
NETHERLANDS -- 4.5%
ASM Lithography Holding N.V.*......... 7,700 346,500
Equant N.V.*.......................... 4,200 316,050
STMicroelectronics N.V.*.............. 3,500 339,938
United Pan-Europe Communications*..... 1,900 74,459
-----------
1,076,947
-----------
SINGAPORE -- 2.8%
Datacraft Asia, Ltd................... 98,000 229,320
MMI Holding, Ltd...................... 340,000 208,506
Natsteel Electronics, Ltd............. 6,000 16,384
Venture Manufacturing, Ltd............ 49,000 221,118
-----------
675,328
-----------
SOUTH AFRICA -- 0.3%
Dimension Data Holdings, Ltd.*........ 19,000 84,171
-----------
UNITED KINGDOM -- 10.8%
ARM Holdings PLC*..................... 12,500 544,830
British Telecom PLC -- ADR............ 1,400 229,862
Colt Telecom Group PLC* 144A.......... 19,900 358,512
Dixons Group PLC...................... 20,800 440,875
Sema Group PLC........................ 18,100 204,387
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
Telewest Communications PLC*.......... 77,200 $ 334,929
Vodafone Group PLC.................... 25,800 479,382
-----------
2,592,777
-----------
UNITED STATES -- 64.7%
Advance Paradigm, Inc.*............... 2,100 132,694
Airtouch Communications, Inc.*........ 2,300 222,237
Allergan, Inc......................... 800 70,300
Amazon.Com, Inc.*..................... 4,300 740,406
America Online, Inc................... 3,900 569,400
Amgen, Inc.*.......................... 2,200 164,725
Ascend Communications, Inc.*.......... 2,600 217,587
At Home Corp. Series A*............... 2,200 346,500
AT&T Corp............................. 5,325 425,002
Autobytel.com, Inc.*.................. 2,800 117,250
Autoweb.com, Inc.*.................... 5,000 178,125
Aware, Inc.*.......................... 2,500 117,500
Big Flower Holdings, Inc.*............ 4,500 140,062
Biogen, Inc.*......................... 1,100 125,744
Broadcast.com, Inc.*.................. 2,800 330,925
Carrier Access Corp.*................. 2,000 154,625
Cisco Systems, Inc.*.................. 2,500 273,906
CMGI, Inc.*........................... 900 164,756
Concentric Network Corp.*............. 3,000 224,250
Critical Path, Inc.*.................. 7,000 539,000
Doubleclick, Inc.*.................... 1,250 227,578
E*trade Group, Inc.*.................. 5,200 303,225
Earthlink Network, Inc.*.............. 1,500 90,000
EarthWeb, Inc.*....................... 4,200 230,212
EMC Corp.*............................ 1,500 191,625
Exodus Communications, Inc.*.......... 1,700 228,650
Fatbrain.com, Inc.*................... 6,000 137,250
Flextronics International, Ltd.*...... 5,400 275,400
Forest Laboratories, Inc. Cl. A*...... 3,700 208,587
Globix Corp.*......................... 4,300 160,444
Go2net, Inc.*......................... 1,200 159,150
HI/FN, Inc.*.......................... 6,200 232,500
I2 Technologies, Inc.*................ 5,000 132,969
Infoseek Corp.*....................... 1,400 103,600
Infospace.com, Inc.*.................. 2,500 221,406
InterVU, Inc.*........................ 6,000 266,250
Intuit, Inc.*......................... 700 71,225
iVillage, Inc.*....................... 2,000 201,000
Lycos, Inc.*.......................... 1,400 120,487
MCI Worldcom, Inc.*................... 1,800 159,412
Medimmune, Inc.*...................... 1,700 100,619
Microsoft Corp.*...................... 3,600 322,650
Mindspring Enterprises, Inc.*......... 700 60,244
MiningCo.com, Inc.*................... 3,000 268,500
Motorola, Inc......................... 7,400 542,050
Net.B@nk, Inc.*....................... 2,900 197,200
Network Appliance, Inc.*.............. 1,000 50,625
New ERA Of Networks, Inc.*............ 3,100 210,025
Novell, Inc.*......................... 2,900 73,044
Omega Research, Inc.*................. 8,500 90,844
OneMain.com, Inc.*.................... 6,500 235,625
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
91
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1999 -- CONTINUED
- --------------------------------------------------------------------------------
GLOBAL TECHNOLOGY FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- -----------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (Continued)
- ---------------------------------------------------------
UNITED STATES (CONTINUED)
<TABLE>
<S> <C> <C>
Osteotech, Inc.*...................... 5,600 $ 192,500
Pacific Gateway Exchange, Inc.*....... 3,700 122,794
Priceline.com, Inc.*.................. 3,500 290,062
Qualcomm, Inc.*....................... 5,500 684,063
Qwest Communications International,
Inc.*............................... 2,400 173,025
RealNetworks, Inc.*................... 2,200 268,813
RF Micro Devices, Inc.*............... 1,000 95,688
RoweCom, Inc.*........................ 5,200 226,850
Sabre Group Holdings, Inc.*........... 2,900 131,588
Safeguard Scientifics, Inc.*.......... 3,000 203,438
Sanmina Corp.*........................ 1,800 114,750
Sportsline USA, Inc.*................. 2,300 104,937
Terayon Corp.*........................ 1,400 56,000
Texas Instruments, Inc................ 1,000 99,250
USWeb Corp.*.......................... 4,800 198,000
Verio, Inc.*.......................... 3,000 138,375
VeriSign, Inc.*....................... 1,200 184,800
Veritas Software Corp.*............... 1,600 129,200
Wave Systems Corp. Cl. A*............. 8,300 228,250
Webtrends Corp.*...................... 5,500 267,438
Xilinx, Inc.*......................... 2,600 105,463
Yahoo!, Inc.*......................... 2,300 387,263
Zoran Corp.*.......................... 3,600 58,950
-----------
15,588,887
-----------
TOTAL COMMON STOCK
(Cost: $18,940,284)............................... 23,296,947
-----------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------
COMMERCIAL PAPER -- 19.8%
- -----------------------------------------------------------------
Associates First Capital Corp.
5.000%, 04/01/99.................... $1,175,000 $ 1,175,000
Central Illinois Public Utilities
5.030%, 04/01/99.................... 3,588,000 3,588,000
-----------
TOTAL COMMERCIAL PAPER
(Cost: $4,763,000)................................ 4,763,000
-----------
- -----------------------------------------------------------------
REPURCHASE AGREEMENTS -- 8.5%
- -----------------------------------------------------------------
J.P. Morgan & Co., Inc. $2,062,000 at
4.900%, (Agreement dated 03/31/99 to
be repurchased at $2,062,281 on
04/01/99; collateralized by
$2,100,000 FNMA Notes, 5.340% due on
01/24/02 (Value $2,124,105))
(Cost: $2,062,000).................. 2,062,000 2,062,000
-----------
TOTAL INVESTMENTS -- 125.0%
(Cost: $25,765,284)............................. 30,121,947
LIABILITIES IN EXCESS OF OTHER ASSETS --
(25.0%)......................................... (6,027,539)
--------------
NET ASSETS -- 100.0%.............................. $ 24,094,408
--------------
--------------
- ---------------
</TABLE>
* Non-income producing securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
92
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1999
- ------------------------------------------------------------------------
GLOBAL TECHNOLOGY FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Advertising................................. 0.9%
Applications Software....................... 3.2
Audio/Video Products........................ 0.4
Biotechnology............................... 1.2
Broadcasting................................ 3.3
Communications Software..................... 0.9
Computer Software........................... 3.7
Computers................................... 9.3
Diversified Financial Services.............. 14.7
Drugs/Pharmaceuticals....................... 2.1
Electric.................................... 14.9
Electronics................................. 2.1
Electronic Components/Semiconductors........ 8.1
Internet Software........................... 22.3
Leisure/Gaming.............................. 0.5
Machinery - Diversified..................... 1.7
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Medical Supplies/Equipment.................. 0.8%
Network Software............................ 0.3
Other Consumer Services..................... 1.1
Other Commercial Services................... 0.8
Publishing.................................. 1.5
Retail - Other.............................. 0.9
Retail - Consumer Electronics............... 1.8
Retail - Internet........................... 4.8
Savings & Loans............................. 0.8
Telecommunications Equipment................ 11.1
Telecommunications.......................... 8.4
Telephone................................... 3.4
Liabilities in Excess of Other Assets....... (25.0)
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
93
<PAGE>
Nicholas-Applegate Mutual Funds
(renamed Pilgrim Mutual Funds)
Financial Highlights
For an Institutional share outstanding during the period indicated
<TABLE>
<CAPTION>
DISTRIBUTIONS FROM:
----------------------------
NET ASSET NET NET REALIZED NET NET NET ASSET
VALUE, INVESTMENT AND UNREALIZED INVESTMENT REALIZED VALUE,
BEGINNING INCOME (LOSS) GAINS (LOSSES) INCOME CAPITAL GAINS ENDING
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
US EQUITY FUNDS
LARGE CAP GROWTH
For the year ended
3/31/99 $16.50 $ 0.01 $10.53 $ -- $ (0.15) $26.89
For the year ended
3/31/98 13.00 (0.02) 7.55 -- (4.03) 16.50
12/27/96 (commenced) to
3/31/97 12.50 -- 0.50 -- -- 13.00
VALUE
For the year ended
3/31/99 $21.90 $ 0.13 $ 0.80 $(0.12) $ (1.81) $20.90
For the year ended
3/31/98 15.06 -- 8.27 -- (1.43) 21.90
4/30/96 (commenced) to
3/31/97 12.50 1.50 3.11 (1.44) (0.61) 15.06
MID CAP GROWTH
For the year ended
3/31/99 $17.16 $(0.10) $ 2.76 $ -- $ (0.65) $19.17
For the year ended
3/31/98 15.39 (0.07) 6.00 -- (4.16) 17.16
For the year ended
3/31/97 16.26 (0.08) 0.49 -- (1.28) 15.39
For the year ended
3/31/96 12.62 (0.03) 4.47 -- (0.80) 16.26
For the year ended
3/31/95 12.68 (0.01) 0.38 -- (0.43) 12.62
SMALL CAP GROWTH
For the year ended
3/31/99 $14.17 $(0.14) $ 0.17 $ -- $ (0.67) $13.53
For the year ended
3/31/98 11.06 (0.03) 5.10 -- (1.96) 14.17
For the year ended
3/31/97 15.10 (0.08) (0.31) -- (3.65) 11.06
For the year ended
3/31/96 11.58 (0.11) 4.45 -- (0.82) 15.10
For the year ended
3/31/95 11.38 (0.05) 0.95 -- (0.70) 11.58
MINI CAP GROWTH
For the year ended
3/31/99 $25.05 $(0.42) $(3.05) $ -- $ (1.34) $20.24
For the year ended
3/31/98 15.94 (0.17) 10.93 -- (1.65) 25.05
For the year ended
3/31/97 15.85 (0.17) 0.84 -- (0.58) 15.94
7/12/95 (commenced) to
3/31/96 12.50 (0.05) 3.40 -- -- 15.85
CONVERTIBLE
For the year ended
3/31/99 $18.64 $ 0.50 $ 3.11 $(0.54) $ (0.18) $21.53
For the year ended
3/31/98 14.97 0.47 4.20 (0.47) (0.53) 18.64
For the year ended
3/31/97 14.45 0.51 1.51 (0.52) (0.98) 14.97
For the year ended
3/31/96 11.86 0.53 2.59 (0.53) -- 14.45
For the year ended
3/31/95 13.39 0.54 (0.85) (0.54) (0.68) 11.86
US FIXED INCOME FUNDS
HIGH QUALITY BOND
For the year ended
3/31/99 $13.10 $ 0.83 $(0.05) $(0.78) $ (0.39) $12.71
For the year ended
3/31/98 12.54 0.84 0.70 (0.84) (0.14) 13.10
For the year ended
3/31/97 12.72 0.79 (0.17) (0.80) -- 12.54
8/31/95 (commenced) to
3/31/96 12.50 0.45 0.47 (0.44) (0.26) 12.72
HIGH YIELD BOND
For the year ended
3/31/99 $13.46 $ 1.25 $(1.06) $(1.28) $ -- $12.37
For the year ended
3/31/98 13.20 1.11 2.02 (1.15) (1.72) 13.46
7/31/96 (commenced) to
3/31/97 12.50 0.74 0.95 (0.73) (0.26) 13.20
SHORT INTERMEDIATE
For the year ended
3/31/99 $12.76 $ 0.79 $(0.04) $(0.79) $ -- $12.72
For the year ended
3/31/98 12.66 0.83 0.10 (0.83) -- 12.76
For the year ended
3/31/97 12.79 0.79 (0.13) (0.79) -- 12.66
8/31/95 (commenced) to
3/31/96 12.50 0.37 0.29 (0.37) -- 12.79
INTERNATIONAL EQUITY FUNDS
INTERNATIONAL CORE GROWTH
For the year ended
3/31/99 $18.55 $ -- $ 1.18 $ -- $ -- $19.73
For the year ended
3/31/98 14.13 (0.02) 5.12 -- (0.68) 18.55
12/27/96 (commenced) to
3/31/97 12.50 -- 1.63 -- -- 14.13
INTERNATIONAL SMALL CAP
GROWTH
For the year ended
3/31/99 $18.45 $ 0.03 $ 3.22 $ -- $ (0.58) $21.12
For the year ended
3/31/98 17.02 (0.13) 5.50 -- (3.94) 18.45
For the year ended
3/31/97 15.05 -- 2.28 (0.08) (0.23) 17.02
For the year ended
3/31/96 13.09 0.06 2.02 (0.12) -- 15.05
For the year ended
3/31/95 13.47 0.02 (0.22) (0.06) (0.12) 13.09
EMERGING COUNTRIES
For the year ended
3/31/99 $17.15 $(0.01) $(3.63) $ -- $ (0.07) $13.44
For the year ended
3/31/98 17.45 0.09 1.23 -- (1.62) 17.15
For the year ended
3/31/97 14.02 (0.06) 3.67 (0.05) (0.13) 17.45
For the year ended
3/31/96 10.91 -- 3.16 (0.05) -- 14.02
11/28/94 (commenced) to
3/31/95 12.50 0.08 (1.66) (0.01) -- 10.91
GREATER CHINA
For the year ended
3/31/99 $14.14 $ 0.24 $(3.98) $(0.46) $ -- $ 9.94
12/31/97 (commenced) to
3/31/98 12.50 0.02 1.62 -- -- 14.14
LATIN AMERICA
For the year ended
3/31/99 $13.92 $ 0.06 $(2.27) $(0.15) $ -- $11.56
11/28/97 (commenced) to
3/31/98 12.50 0.15 1.27 -- -- 13.92
PACIFIC RIM
For the year ended
3/31/99 $12.66 $(0.07) $(0.26) $ -- $ -- $12.33
12/31/97 (commenced) to
3/31/98 12.50 0.02 0.14 -- -- 12.66
GLOBAL EQUITY FUNDS
WORLDWIDE GROWTH
For the year ended
3/31/99 $17.90 $ 0.67 $ 5.16 $(0.64) $ (0.83) $22.26
For the year ended
3/31/98 14.21 0.25 4.56 -- (1.12) 17.90
For the year ended
3/31/97 15.42 (0.12) 2.08 -- (3.17) 14.21
For the year ended
3/31/96 13.06 0.06 2.58 (0.28) -- 15.42
For the year ended
3/31/95 13.15 (0.01) (0.04) (0.04) -- 13.06
GLOBAL BLUE CHIP
For the year ended
3/31/99 $14.81 $(0.05) $ 5.86 $ -- $ (0.14) $20.48
9/30/97 (commenced) to
3/31/98 12.50 -- 2.31 -- -- 14.81
GLOBAL GROWTH & INCOME
For the year ended
3/31/99 $14.25 $ 0.22 $ 1.55 $(0.13) $ (0.68) $15.21
6/30/97 (commenced) to
3/31/98 12.50 0.34 3.86 (0.34) (2.11) 14.25
GLOBAL TECHNOLOGY
7/31/98 (commenced) to
3/31/99 $12.50 $(0.05) $32.19 $ -- $ -- $44.64
</TABLE>
- ------------------------------------------------
(1) Total returns are not annualized for periods of less than one year.
(2) Ratios are annualized for periods of less than one year. Expense
reimbursements reflect voluntary reductions to total expenses, as discussed
in the notes to financial statements. Such amounts would decrease net
investment income (loss) ratios had such reductions not occurred.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
94
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS (2)
------------------------------------------------------ FUND'S
NET PORTFOLIO NET ASSETS,
TOTAL INVESTMENT TOTAL EXPENSE NET TURNOVER ENDING
RETURN (1) INCOME (LOSS) EXPENSES REIMBURSEMENTS EXPENSES RATE (IN 000S)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
US EQUITY FUNDS
LARGE CAP GROWTH
For the year ended
3/31/99 64.28% (0.01%) 1.63% (0.65%) 0.98% 253% $ 5,940
For the year ended
3/31/98 63.32% (0.17%) 3.67% (2.66%) 1.01% 306% 2,556
12/27/96 (commenced) to
3/31/97 4.00% (0.06%) 4.99% (3.99%) 1.00% 321% 1,293
VALUE
For the year ended
3/31/99 4.43% 0.87% 2.11% (1.12%) 0.99% 147% $ 15,322
For the year ended
3/31/98 57.78% 2.33% 2.46% (1.45%) 1.01% 55% 10,260
4/30/96 (commenced) to
3/31/97 26.77% 1.64% 3.34% (2.34%) 1.00% 139% 3,062
MID CAP GROWTH
For the year ended
3/31/99 16.09% (0.44%) 1.04% (0.08%) 0.96% 154% $165,014
For the year ended
3/31/98 42.49% (0.72%) 1.19% (0.22%) 0.97% 200% 169,412
For the year ended
3/31/97 1.74% (0.45%) 1.02% (0.02%) 1.00% 153% 156,443
For the year ended
3/31/96 35.81% (0.32%) 1.06% (0.08%) 0.98% 114% 149,969
For the year ended
3/31/95 3.30% (0.06%) 1.07% (0.08%) 0.99% 98% 72,826
SMALL CAP GROWTH
For the year ended
3/31/99 1.03% (0.71%) 1.35% (0.10%) 1.25% 90% $213,149
For the year ended
3/31/98 47.38% (1.16%) 1.44% (0.25%) 1.19% 92% 257,599
For the year ended
3/31/97 (5.66%) (0.72%) 1.26% (0.09%) 1.17% 113% 167,230
For the year ended
3/31/96 38.27% (0.62%) 1.20% (0.04%) 1.16% 130% 224,077
For the year ended
3/31/95 8.69% (0.58%) 1.24% (0.06%) 1.18% 100% 206,696
MINI CAP GROWTH
For the year ended
3/31/99 (13.78%) (1.18%) 1.70% (0.11%) 1.59% 115% $ 53,593
For the year ended
3/31/98 68.89% (2.51%) 1.83% (0.26%) 1.57% 113% 82,122
For the year ended
3/31/97 3.90% (1.08%) 1.99% (0.43%) 1.56% 164% 28,712
7/12/95 (commenced) to
3/31/96 26.80% (0.98%) 2.46% (0.91%) 1.55% 107% 25,237
CONVERTIBLE
For the year ended
3/31/99 19.93% 2.67% 1.07% (0.11%) 0.96% 138% $ 88,590
For the year ended
3/31/98 31.78% 6.25% 1.20% (0.23%) 0.97% 160% 80,084
For the year ended
3/31/97 14.37% 3.43% 1.37% (0.37%) 1.00% 167% 18,344
For the year ended
3/31/96 26.69% 3.88% 1.53% (0.53%) 1.00% 145% 17,239
For the year ended
3/31/95 (2.02%) 4.28% 1.48% (0.48%) 1.00% 126% 12,506
US FIXED INCOME FUNDS
HIGH QUALITY BOND
For the year ended
3/31/99 6.14% 6.41% 1.15% (0.72%) 0.43% 274% $ 15,735
For the year ended
3/31/98 12.60% 12.80% 1.64% (1.18%) 0.46% 407% 15,759
For the year ended
3/31/97 4.98% 6.12% 3.74% (3.29%) 0.45% 190% 15,865
8/31/95 (commenced) to
3/31/96 5.49% 6.39% 6.45% (6.00%) 0.45% 60% 4,413
HIGH YIELD BOND
For the year ended
3/31/99 1.69% 9.79% 1.09% (0.41%) 0.68% 242% $ 11,319
For the year ended
3/31/98 25.49% 8.28% 2.66% (1.90%) 0.76% 484% 10,771
7/31/96 (commenced) to
3/31/97 13.90% 8.47% 1.95% (1.20%) 0.75% 465% 4,608
SHORT INTERMEDIATE
For the year ended
3/31/99 6.02% 6.11% 1.34% (1.00%) 0.34% 104% $ 18,467
For the year ended
3/31/98 7.50% 13.03% 1.51% (1.15%) 0.36% 197% 13,535
For the year ended
3/31/97 5.30% 6.18% 2.86% (2.51%) 0.35% 132% 5,364
8/31/95 (commenced) to
3/31/96 5.33% 5.81% 3.17% (2.82%) 0.35% 114% 4,726
INTERNATIONAL EQUITY FUNDS
INTERNATIONAL CORE GROWTH
For the year ended
3/31/99 6.43% (0.01%) 1.59% (0.24%) 1.35% 214% $107,890
For the year ended
3/31/98 36.91% (0.12%) 1.92% (0.51%) 1.41% 274% 32,305
12/27/96 (commenced) to
3/31/97 13.04% 0.43% 3.14% (1.74%) 1.40% 76% 4,593
INTERNATIONAL SMALL CAP
GROWTH
For the year ended
3/31/99 17.97% (0.30%) 1.53% (0.15%) 1.38% 146% $ 69,077
For the year ended
3/31/98 37.02% (0.91%) 1.94% (0.53%) 1.41% 198% 42,851
For the year ended
3/31/97 15.25% (0.38%) 1.68% (0.28%) 1.40% 206% 48,505
For the year ended
3/31/96 15.99% 0.34% 2.44% (1.04%) 1.40% 141% 20,245
For the year ended
3/31/95 (1.54%) 0.19% 1.92% (0.52%) 1.40% 75% 16,924
EMERGING COUNTRIES
For the year ended
3/31/99 (21.22%) 0.11% 1.97% (0.30%) 1.67% 213% $140,318
For the year ended
3/31/98 8.77% 1.15% 2.02% (0.36%) 1.66% 243% 88,063
For the year ended
3/31/97 25.48% (0.52%) 1.87% (0.22%) 1.65% 176% 56,918
For the year ended
3/31/96 29.06% 0.29% 3.59% (1.94%) 1.65% 118% 6,878
11/28/94 (commenced) to
3/31/95 (12.64%) 1.73% 2.14% (0.49%) 1.65% 61% 2,021
GREATER CHINA
For the year ended
3/31/99 (26.79%) 1.02% 13.38% (11.99%) 1.39% 178% $ 1,385
12/31/97 (commenced) to
3/31/98 13.12% 0.57% 4.70% (3.30%) 1.40% 34% 1,192
LATIN AMERICA
For the year ended
3/31/99 (15.78%) 0.95% 14.61% (12.97%) 1.64% 575% $ 1,774
11/28/97 (commenced) to
3/31/98 11.14% 3.33% 5.20% (3.55%) 1.65% 188% 1,184
PACIFIC RIM
For the year ended
3/31/99 (2.69%) (0.67%) 14.68% (13.11%) 1.57% 450% $ 1,099
12/31/97 (commenced) to
3/31/98 1.28% 0.74% 4.50% (3.10%) 1.40% 86% 1,197
GLOBAL EQUITY FUNDS
WORLDWIDE GROWTH
For the year ended
3/31/99 34.28% 0.19% 1.51% (0.17%) 1.34% 247% $ 74,523
For the year ended
3/31/98 35.08% (0.31%) 1.87% (0.51%) 1.36% 202% 11,686
For the year ended
3/31/97 13.18% (0.43%) 3.05% (1.70%) 1.35% 182% 2,656
For the year ended
3/31/96 20.37% 0.20% 2.60% (1.25%) 1.35% 132% 3,613
For the year ended
3/31/95 (0.34%) 0.05% 2.50% (1.15%) 1.35% 99% 4,087
GLOBAL BLUE CHIP
For the year ended
3/31/99 39.55% (0.31%) 3.14% (1.81%) 1.33% 419% $ 10,414
9/30/97 (commenced) to
3/31/98 18.48% (0.06%) 2.14% (0.94%) 1.20% 238% 7,320
GLOBAL GROWTH & INCOME
For the year ended
3/31/99 13.13% 1.64% 4.37% (2.96%) 1.41% 328% $ 5,589
6/30/97 (commenced) to
3/31/98 36.25% 7.13% 2.45% (1.09%) 1.36% 413% 6,065
GLOBAL TECHNOLOGY
7/31/98 (commenced) to
3/31/99 257.20% (0.84%) 4.12% (2.69%) 1.43% 254% $ 24,094
</TABLE>
- ------------------------------------------------
- --------------------------------------------------------------------------------
95
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1999
<TABLE>
<CAPTION>
LARGE CAP MID CAP SMALL CAP MINI CAP
GROWTH VALUE GROWTH GROWTH GROWTH
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at value* $52,467,911 $19,818,453 $445,357,154 $505,043,007 $54,652,200
Foreign currencies, at
value** -- -- -- -- --
Cash 1,216 5,249 2,609 -- --
Receivables:
Investment securities
sold 2,321,837 1,432,644 3,315,149 6,412,276 827,390
Capital shares sold 905,860 4,873 651,447 477,408 44,927
Dividends 33,827 15,853 57,322 77,449 943
Interest -- -- -- -- --
Securities lending 6,082 254 82,303 105,924 10,589
From investment advisor -- -- -- -- --
Unrealized gain on
forward currency
contracts -- -- -- -- --
Other assets 5,743 35,687 27,774 29,820 3,764
----------- ----------- ------------ ------------ -----------
Total assets 55,742,476 21,313,013 449,493,758 512,145,884 55,539,813
----------- ----------- ------------ ------------ -----------
LIABILITIES
Payables:
Bank overdraft -- -- -- 1,078,258 1,221,727
Investments purchased 4,109,915 5,958,973 12,954,207 1,889,321 532,350
Capital shares
purchased 258,086 7,432 1,392,976 1,989,366 48,143
Dividends -- -- -- -- --
To investment advisor 3,315 237 288,476 494,825 17,539
Other Liabilities 34,173 24,012 383,616 272,957 127,014
----------- ----------- ------------ ------------ -----------
Total Liabilities 4,405,489 5,990,654 15,019,275 5,724,727 1,946,773
----------- ----------- ------------ ------------ -----------
NET ASSETS $51,336,987 $15,322,359 $434,474,483 $506,421,157 $53,593,040
----------- ----------- ------------ ------------ -----------
* Investments, at cost $41,319,071 $18,296,029 $324,558,478 $341,234,228 $40,366,953
----------- ----------- ------------ ------------ -----------
** Foreign currencies,
at cost $ -- $ -- $ -- $ -- $ --
----------- ----------- ------------ ------------ -----------
NET ASSETS CONSIST OF:
Paid-in capital $35,215,061 $13,032,442 $295,914,552 $361,772,159 $38,571,510
Undistributed net
investment income
(loss) (225,010) 44,685 (21,862,409) (36,692,610) (2,148,020)
Accumulated net realized
gain (loss) on
investments and foreign
currencies 5,198,096 722,808 39,623,664 17,532,829 2,884,303
Net unrealized
appreciation
(depreciation) of
investments and of
other assets and
liabilities denominated
in foreign currencies 11,148,840 1,522,424 120,798,676 163,808,779 14,285,247
----------- ----------- ------------ ------------ -----------
Net assets applicable to
all shares outstanding $51,336,987 $15,322,359 $434,474,483 $506,421,157 $53,593,040
----------- ----------- ------------ ------------ -----------
Net Assets of
Institutional Shares $ 5,940,332 $15,322,359 $165,014,106 $213,149,377 $53,593,040
----------- ----------- ------------ ------------ -----------
Institutional Shares
outstanding 220,880 733,167 8,609,811 15,758,852 2,648,524
----------- ----------- ------------ ------------ -----------
Net Asset Value --
Institutional Share $ 26.89 $ 20.90 $ 19.17 $ 13.53 $ 20.24
----------- ----------- ------------ ------------ -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
96
<PAGE>
<TABLE>
<CAPTION>
HIGH QUALITY HIGH YIELD SHORT INTERNATIONAL INTERNATIONAL
CONVERTIBLE BOND BOND INTERMEDIATE CORE GROWTH SMALL CAP GROWTH
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value* $320,944,611 $33,576,389 $ 99,255,436 $18,248,480 $165,049,326 $159,616,811
Foreign currencies, at
value** -- 276,299 -- -- 1,679,661 228,100
Cash 2,199 17,135 -- 15,117 -- 845
Receivables:
Investment securities
sold -- 609,941 -- -- 3,508,346 3,120,438
Capital shares sold 1,281,801 2,444,873 586,812 -- 1,115,767 752,084
Dividends 73,877 -- -- -- 260,306 270,233
Interest 1,151,421 447,628 2,221,628 163,372 -- --
Securities lending 4,403 -- -- -- 4,125 2,187
From investment advisor -- 32,617 21,285 13,629 -- --
Unrealized gain on
forward currency
contracts -- 32,559 -- -- -- --
Other assets 22,167 61,113 1,925 39,749 25,291 96,685
------------ ------------- ------------- ------------- ------------- -----------------
Total assets 323,480,479 37,498,554 102,087,086 18,480,347 171,642,822 164,087,383
------------ ------------- ------------- ------------- ------------- -----------------
LIABILITIES
Payables:
Bank overdraft -- -- 392,992 -- 200,064 --
Investments purchased 4,312,902 772,573 1,729,910 -- 6,986,127 4,887,995
Capital shares
purchased 911,544 103,993 340,690 -- 2,032,367 2,366,712
Dividends -- -- 1,022 -- -- --
To investment advisor -- -- -- -- 71,205 55,662
Other Liabilities 448,387 56,665 225,362 13,054 135,457 160,223
------------ ------------- ------------- ------------- ------------- -----------------
Total Liabilities 5,672,833 933,231 2,689,976 13,054 9,425,220 7,470,592
------------ ------------- ------------- ------------- ------------- -----------------
NET ASSETS $317,807,646 $36,565,323 $ 99,397,110 $18,467,293 $162,217,602 $156,616,791
------------ ------------- ------------- ------------- ------------- -----------------
* Investments, at cost $255,301,643 $33,856,874 $ 101,806,960 $18,164,498 $142,531,342 $124,437,612
------------ ------------- ------------- ------------- ------------- -----------------
** Foreign currencies,
at cost $ -- $ 276,299 $ -- $ -- $ 1,698,958 $ 228,084
------------ ------------- ------------- ------------- ------------- -----------------
NET ASSETS CONSIST OF:
Paid-in capital $229,802,929 $36,735,960 $ 104,908,272 $18,519,755 $142,906,577 $117,700,756
Undistributed net
investment income
(loss) (27,873) 59,206 (251,717) (2,869) (647,924) (1,982,021)
Accumulated net realized
gain (loss) on
investments and foreign
currencies 22,389,741 14,629 (2,707,921) (133,575) (2,547,323) 5,723,148
Net unrealized
appreciation
(depreciation) of
investments and of
other assets and
liabilities denominated
in foreign currencies 65,642,849 (244,472) (2,551,524) 83,982 22,506,272 35,174,908
------------ ------------- ------------- ------------- ------------- -----------------
Net assets applicable to
all shares outstanding $317,807,646 $36,565,323 $ 99,397,110 $18,467,293 $162,217,602 $156,616,791
------------ ------------- ------------- ------------- ------------- -----------------
Net Assets of
Institutional Shares $ 88,590,428 $15,735,326 $ 11,318,609 $18,467,293 $107,889,510 $ 69,076,882
------------ ------------- ------------- ------------- ------------- -----------------
Institutional Shares
outstanding 4,114,722 1,238,466 915,322 1,451,431 5,467,086 3,270,846
------------ ------------- ------------- ------------- ------------- -----------------
Net Asset Value --
Institutional Share $ 21.53 $ 12.71 $ 12.37 $ 12.72 $ 19.73 $ 21.12
------------ ------------- ------------- ------------- ------------- -----------------
<CAPTION>
COUNTRIES CHINA
<S> <C> <C>
ASSETS
Investments, at value* $ 274,114,010 $ 1,267,892
Foreign currencies, at
value** 3,244,895 33,091
Cash 1,137,328 44,433
Receivables:
Investment securities
sold 12,483,932 3,879
Capital shares sold 646,199 15
Dividends 640,577 3,424
Interest 54,195 --
Securities lending 16,413 --
From investment advisor -- 38,509
Unrealized gain on
forward currency
contracts -- --
Other assets 31,562 15,637
-------------- ------------
Total assets 292,369,111 1,406,880
-------------- ------------
LIABILITIES
Payables:
Bank overdraft -- --
Investments purchased 8,696,700 --
Capital shares
purchased 801,324 1,441
Dividends -- --
To investment advisor 169,286 --
Other Liabilities 495,623 20,614
-------------- ------------
Total Liabilities 10,162,933 22,055
-------------- ------------
NET ASSETS $ 282,206,178 $ 1,384,825
-------------- ------------
* Investments, at cost $ 228,128,831 $ 1,196,197
-------------- ------------
** Foreign currencies,
at cost $ 3,246,963 $ 33,068
-------------- ------------
NET ASSETS CONSIST OF:
Paid-in capital $ 344,316,502 $ 1,577,684
Undistributed net
investment income
(loss) (2,164,624) (27,458)
Accumulated net realized
gain (loss) on
investments and foreign
currencies (105,843,215) (237,119)
Net unrealized
appreciation
(depreciation) of
investments and of
other assets and
liabilities denominated
in foreign currencies 45,897,515 71,718
-------------- ------------
Net assets applicable to
all shares outstanding $ 282,206,178 $ 1,384,825
-------------- ------------
Net Assets of
Institutional Shares $ 140,317,891 $ 1,384,825
-------------- ------------
Institutional Shares
outstanding 10,441,062 139,296
-------------- ------------
Net Asset Value --
Institutional Share $ 13.44 $ 9.94
-------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
97
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
STATEMENTS OF ASSETS AND LIABILITIES -- CONTINUED
MARCH 31, 1999
<TABLE>
<CAPTION>
GLOBAL
LATIN PACIFIC WORLDWIDE GLOBAL GROWTH & GLOBAL
AMERICA RIM GROWTH BLUE CHIP INCOME TECHNOLOGY
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value* $ 1,662,753 $ 1,008,764 $ 292,675,504 $ 9,952,406 $ 5,503,933 $ 30,121,947
Foreign currencies, at
value** -- 43,376 2,075,966 -- -- --
Cash 76,470 -- 3,530 13,120 212,067 38,061
Receivables:
Investment securities
sold -- 23,318 6,664,708 468,137 28,354 1,816,628
Capital shares sold 2,575 82 1,259,986 31,687 2,181 84,964
Dividends 2,978 3,581 273,215 13,519 10,608 3,993
Interest 1,324 -- 6,152 -- 18,237 281
Securities lending -- 11 20,612 457 235 --
From investment advisor 47,012 59,846 -- 43,458 58,169 11,018
Unrealized gain on
forward currency
contracts -- -- -- -- 3,017 --
Other assets 13,536 14,145 44,288 3,597 3,092 54
------------ ------------ -------------- ------------- ------------ ------------
Total assets 1,806,648 1,153,123 303,023,961 10,526,381 5,839,893 32,076,946
------------ ------------ -------------- ------------- ------------ ------------
LIABILITIES
Payables:
Bank overdraft -- 16,343 -- -- -- --
Investments purchased -- 4,053 53,428,329 83,719 191,411 7,958,979
Capital shares
purchased 15,201 9,773 1,286,440 3,712 12 --
To investment advisor -- -- 106,376 -- -- --
Other Liabilities 17,118 24,090 200,136 25,378 59,012 23,559
------------ ------------ -------------- ------------- ------------ ------------
Total Liabilities 32,319 54,259 55,021,281 112,809 250,435 7,982,538
------------ ------------ -------------- ------------- ------------ ------------
NET ASSETS $ 1,774,329 $ 1,098,864 $ 248,002,680 $ 10,413,572 $ 5,589,458 $ 24,094,408
------------ ------------ -------------- ------------- ------------ ------------
* Investments, at cost $ 1,376,876 $ 864,479 $ 250,733,028 $ 8,401,353 $ 4,812,540 $ 25,765,284
------------ ------------ -------------- ------------- ------------ ------------
** Foreign currencies,
at cost $ -- $ 43,865 $ 2,075,952 $ -- $ -- $ --
------------ ------------ -------------- ------------- ------------ ------------
NET ASSETS CONSIST OF:
Paid-in capital $ 1,747,822 $ 1,119,801 $ 186,212,979 $ 6,628,441 $ 4,758,817 $ 16,117,258
Undistributed net
investment income
(loss) 8,719 (4,660) (7,189,744) (26,611) 32,609 (25,089)
Accumulated net realized
gain (loss) on
investments and foreign
currencies (267,785) (160,052) 27,122,956 2,259,970 101,877 3,644,794
Net unrealized
appreciation
(depreciation) of
investments and of
other assets and
liabilities denominated
in foreign currencies 285,573 143,775 41,856,489 1,551,772 696,155 4,357,445
------------ ------------ -------------- ------------- ------------ ------------
Net assets applicable to
all shares outstanding $ 1,774,329 $ 1,098,864 $ 248,002,680 $ 10,413,572 $ 5,589,458 $ 24,094,408
------------ ------------ -------------- ------------- ------------ ------------
Net Assets of
Institutional Shares $ 1,774,329 $ 1,098,864 $ 74,523,153 $ 10,413,572 $ 5,589,458 $ 24,094,408
------------ ------------ -------------- ------------- ------------ ------------
Institutional Shares
outstanding 153,436 89,125 3,347,918 508,495 367,455 539,689
------------ ------------ -------------- ------------- ------------ ------------
Net Asset Value --
Institutional Share $ 11.56 $ 12.33 $ 22.26 $ 20.48 $ 15.21 $ 44.64
------------ ------------ -------------- ------------- ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
98
<PAGE>
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- --------------------------------------------------------------------------------
99
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
LARGE CAP MID CAP SMALL CAP MINI CAP
GROWTH VALUE GROWTH GROWTH GROWTH
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends, net of foreign
taxes $ 88,826 $ 162,916 $ 600,518 $ 1,186,130 $ 54,437
Interest 91,130 9,284 484,431 385,506 115,959
Securities lending 48,659 4,382 1,036,944 1,291,855 129,508
------------ ----------- ------------ ------------- -------------
Total Income 228,615 176,582 2,121,893 2,863,491 299,904
------------ ----------- ------------ ------------- -------------
EXPENSES
Advisory fee 178,627 70,871 3,049,230 5,334,833 921,377
Accounting and
administration fees 95,257 76,724 546,605 656,416 135,218
Custodian fees 21,063 12,360 53,515 47,117 27,516
Transfer agent fees and
expenses 34,932 6,472 467,821 595,466 38,733
Distribution and
shareholder servicing
fees 142,925 9,421 2,075,413 2,534,830 --
Administrative services 19,606 3,929 305,145 404,865 25,049
Professional fees 18,724 10,291 231,642 287,926 30,082
Shareholder reporting 5,111 2,542 23,813 22,868 652
Registration fees 49,256 22,380 48,494 87,994 29,166
Trustees' fees and
expenses 270 515 34,006 54,131 1,307
Interest and credit
facility fee 1,336 2,812 40,120 450,220 28,154
Insurance 301 127 5,414 7,095 1,024
Miscellaneous 11,689 4,517 56,413 98,464 12,310
------------ ----------- ------------ ------------- -------------
Total Expenses 579,097 222,961 6,937,631 10,582,225 1,250,588
Expenses reimbursed (154,098 ) (116,404 ) (301,613 ) (518,164 ) (83,434 )
------------ ----------- ------------ ------------- -------------
Net Expenses 424,999 106,557 6,636,018 10,064,061 1,167,154
------------ ----------- ------------ ------------- -------------
NET INVESTMENT INCOME
(LOSS) (196,384 ) 70,025 (4,514,125 ) (7,200,570 ) (867,250 )
------------ ----------- ------------ ------------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain (loss)
from:
Securities 5,409,155 1,416,016 47,761,620 86,043,833 5,442,273
Foreign currency
transactions -- -- -- -- --
------------ ----------- ------------ ------------- -------------
Net realized gain
(loss) 5,409,155 1,416,016 47,761,620 86,043,833 5,442,273
------------ ----------- ------------ ------------- -------------
Change in unrealized
appreciation
(depreciation) of:
Investments 9,499,395 (833,831 ) 8,536,297 (93,770,559 ) (12,989,539 )
Other assets and
liabilities
denominated in
foreign currencies -- -- -- -- --
------------ ----------- ------------ ------------- -------------
Net unrealized
appreciation
(depreciation) 9,499,395 (833,831 ) 8,536,297 (93,770,559 ) (12,989,539 )
------------ ----------- ------------ ------------- -------------
NET GAIN (LOSS) ON
INVESTMENTS 14,908,550 582,185 56,297,917 (7,726,726 ) (7,547,266 )
------------ ----------- ------------ ------------- -------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $14,712,166 $ 652,210 $51,783,792 $(14,927,296 ) $ (8,414,516 )
------------ ----------- ------------ ------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
100
<PAGE>
<TABLE>
<CAPTION>
HIGH QUALITY HIGH YIELD SHORT INTERNATIONAL INTERNATIONAL
CONVERTIBLE BOND BOND INTERMEDIATE CORE GROWTH SMALL CAP GROWTH
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends, net of foreign
taxes $ 3,782,442 $ 115,650 $ 305,770 $ 65,479 $ 1,034,114 $ 746,291
Interest 5,736,177 1,715,145 7,924,233 889,414 362,746 472,518
Securities lending 105,947 -- -- -- 41,295 52,931
------------ ------------- ------------- ------------- -------------- -----------------
Total Income 9,624,566 1,830,795 8,230,003 954,893 1,438,155 1,271,740
------------ ------------- ------------- ------------- -------------- -----------------
EXPENSES
Advisory fee 1,997,038 124,514 466,926 44,439 1,061,288 1,149,529
Accounting and
administration fees 386,381 90,504 113,645 81,415 173,481 183,409
Custodian fees 37,058 25,448 16,542 9,915 239,497 200,220
Transfer agent fees and
expenses 276,626 25,041 55,799 7,549 79,193 89,085
Distribution and
shareholder servicing
fees 1,505,314 52,773 558,242 -- 248,904 325,037
Administrative services 241,779 16,102 46,319 4,260 48,776 61,224
Professional fees 157,249 4,619 39,929 13,630 64,493 57,055
Shareholder reporting 66,319 27,433 97,053 1,944 20,270 14,023
Registration fees 41,995 43,712 44,673 19,729 35,343 52,542
Trustees' fees and
expenses 12,587 328 1,154 139 999 1,037
Interest and credit
facility fee 11,059 281 6,001 219 3,782 1,894
Insurance 3,565 384 1,068 197 1,435 1,530
Miscellaneous 43,212 37,339 12,742 15,764 25,062 28,547
------------ ------------- ------------- ------------- -------------- -----------------
Total Expenses 4,780,182 448,478 1,460,093 199,200 2,002,523 2,165,132
Expenses reimbursed (318,025 ) (232,922) (318,323) (149,179) (253,811) (168,199)
------------ ------------- ------------- ------------- -------------- -----------------
Net Expenses 4,462,157 215,556 1,141,770 50,021 1,748,712 1,996,933
------------ ------------- ------------- ------------- -------------- -----------------
NET INVESTMENT INCOME
(LOSS) 5,162,409 1,615,239 7,088,233 904,872 (310,557) (725,193)
------------ ------------- ------------- ------------- -------------- -----------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain (loss)
from:
Securities 25,488,999 656,976 (2,958,000) (39,072) 793,552 8,536,211
Foreign currency
transactions (33,135 ) (326,116) -- -- (1,322,452) (310,687)
------------ ------------- ------------- ------------- -------------- -----------------
Net realized gain
(loss) 25,455,864 330,860 (2,958,000) (39,072) (528,900) 8,225,524
------------ ------------- ------------- ------------- -------------- -----------------
Change in unrealized
appreciation
(depreciation) of:
Investments 19,262,546 (431,343) (2,908,667) (23,068) 13,541,108 14,384,412
Other assets and
liabilities
denominated in
foreign currencies (119 ) 58,948 -- -- (28,814) (26,496)
------------ ------------- ------------- ------------- -------------- -----------------
Net unrealized
appreciation
(depreciation) 19,262,427 (372,395) (2,908,667) (23,068) 13,512,294 14,357,916
------------ ------------- ------------- ------------- -------------- -----------------
NET GAIN (LOSS) ON
INVESTMENTS 44,718,291 (41,535) (5,866,667) (62,140) 12,983,394 22,583,440
------------ ------------- ------------- ------------- -------------- -----------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $49,880,700 $1,573,704 $ 1,221,566 $ 842,732 $ 12,672,837 $ 21,858,247
------------ ------------- ------------- ------------- -------------- -----------------
<CAPTION>
EMERGING GREATER
COUNTRIES CHINA
<S> <C> <C>
INVESTMENT INCOME
Dividends, net of foreign
taxes $ 4,191,769 $ 17,779
Interest 797,757 4,546
Securities lending 356,077 --
--------------- ------------
Total Income 5,345,603 22,325
--------------- ------------
EXPENSES
Advisory fee 3,476,180 9,285
Accounting and
administration fees 384,714 62,642
Custodian fees 940,358 26,018
Transfer agent fees and
expenses 251,494 470
Distribution and
shareholder servicing
fees 867,645 --
Administrative services 164,760 334
Professional fees 180,178 7,224
Shareholder reporting 78,110 169
Registration fees 80,376 15,153
Trustees' fees and
expenses 16,070 24
Interest and credit
facility fee 99,031 43
Insurance 3,720 13
Miscellaneous 64,151 2,824
--------------- ------------
Total Expenses 6,606,787 124,199
Expenses reimbursed (816,718) (111,312)
--------------- ------------
Net Expenses 5,790,069 12,887
--------------- ------------
NET INVESTMENT INCOME
(LOSS) (444,466) 9,438
--------------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain (loss)
from:
Securities (82,042,109) (264,905)
Foreign currency
transactions (1,781,198) (9,107)
--------------- ------------
Net realized gain
(loss) (83,823,307) (274,012)
--------------- ------------
Change in unrealized
appreciation
(depreciation) of:
Investments 10,604,952 (30,852)
Other assets and
liabilities
denominated in
foreign currencies (87,082) 427
--------------- ------------
Net unrealized
appreciation
(depreciation) 10,517,870 (30,425)
--------------- ------------
NET GAIN (LOSS) ON
INVESTMENTS (73,305,437) (304,437)
--------------- ------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $ (73,749,903) $ (294,999)
--------------- ------------
</TABLE>
- ------------------------------
- --------------------------------------------------------------------------------
101
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
STATEMENTS OF OPERATIONS -- CONTINUED
YEAR ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
GLOBAL
LATIN PACIFIC WORLDWIDE GLOBAL GROWTH & GLOBAL
AMERICA RIM GROWTH BLUE CHIP INCOME TECHNOLOGY(1)
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends, net of foreign
taxes $ 21,350 $ 8,976 $ 1,324,136 $ 72,213 $ 72,875 $ 5,021
Interest 2,702 63 326,825 1,730 89,017 12,433
Securities lending 942 82 190,621 8,249 3,970 --
------------ ----------- -------------- ------------- ------------ --------------
Total Income 24,994 9,121 1,841,582 82,192 165,862 17,454
------------ ----------- -------------- ------------- ------------ --------------
EXPENSES
Advisory fee 12,038 10,116 1,472,492 64,474 46,259 29,783
Accounting and
administration fees 68,362 67,118 224,190 78,337 71,645 35,651
Custodian fees 35,539 38,981 198,979 57,444 51,315 27,759
Transfer agent fees and
expenses 492 509 175,204 4,106 2,969 1,181
Distribution and
shareholder servicing
fees -- -- 1,107,696 -- -- --
Administrative services 368 336 137,648 2,653 1,889 --
Professional fees 8,429 7,368 95,641 24,567 16,587 6,491
Shareholder reporting 171 229 15,667 352 653 378
Registration fees 12,655 18,657 57,552 7,590 38,942 5,580
Trustees' fees and
expenses 75 87 1,776 403 429 78
Interest and credit
facility fee 59 1,858 14,192 10,352 3,575 797
Insurance 12 14 1,908 107 73 29
Miscellaneous 2,482 3,240 42,555 2,739 3,595 14,969
------------ ----------- -------------- ------------- ------------ --------------
Total Expenses 140,682 148,513 3,545,500 253,124 237,931 122,696
Expenses reimbursed (124,861) (132,636) (242,660) (145,902) (161,466) (80,153)
------------ ----------- -------------- ------------- ------------ --------------
Net Expenses 15,821 15,877 3,302,840 107,222 76,465 42,543
------------ ----------- -------------- ------------- ------------ --------------
NET INVESTMENT INCOME
(LOSS) 9,173 (6,756) (1,461,258) (25,030) 89,397 (25,089)
------------ ----------- -------------- ------------- ------------ --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain (loss)
from:
Securities (234,991) (95,094) 34,678,990 2,475,975 305,065 3,644,686
Foreign currency
transactions (26,421) (16,041) (229,650) (36,009) (34,886) 108
------------ ----------- -------------- ------------- ------------ --------------
Net realized gain
(loss) (261,412) (111,135) 34,449,340 2,439,966 270,179 3,644,794
------------ ----------- -------------- ------------- ------------ --------------
Change in unrealized
appreciation
(depreciation) of:
Investments 174,077 86,907 12,707,158 380,397 243,783 4,356,663
Other assets and
liabilities
denominated in
foreign currencies (275) (2,910) (93,137) 2,921 4,136 782
------------ ----------- -------------- ------------- ------------ --------------
Net unrealized
appreciation 173,802 83,997 12,614,021 383,318 247,919 4,357,445
------------ ----------- -------------- ------------- ------------ --------------
NET GAIN (LOSS) ON
INVESTMENTS (87,610) (27,138) 47,063,361 2,823,284 518,098 8,002,239
------------ ----------- -------------- ------------- ------------ --------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $ (78,437) $ (33,894) $ 45,602,103 $ 2,798,254 $ 607,495 $ 7,977,150
------------ ----------- -------------- ------------- ------------ --------------
</TABLE>
- ------------------------------
(1) Commenced operations on 7/31/98.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
102
<PAGE>
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- --------------------------------------------------------------------------------
103
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED MARCH 31
<TABLE>
<CAPTION>
LARGE CAP GROWTH VALUE
------------------------------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) $ (196,384 ) $ (27,991 ) $ 70,025 $ 78,752
Net realized gain 5,409,155 459,203 1,416,016 589,196
Net unrealized
appreciation
(depreciation) 9,499,395 1,684,560 (833,831 ) 2,119,154
------------ ------------ ------------ ------------
Net increase
(decrease) in net
assets from
investment
operations 14,712,166 2,115,772 652,210 2,787,102
------------ ------------ ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Institutional Class -- (428 ) (40,798 ) (63,521 )
Retail and Advisory
Classes -- (15 ) (11,631 ) --
From net realized gains
Institutional Class (21,815 ) (431,887 ) (635,615 ) (619,777 )
Retail and Advisory
Classes (282,701 ) (5,222 ) (200,829 ) --
------------ ------------ ------------ ------------
Total distributions (304,516 ) (437,552 ) (888,873 ) (683,298 )
------------ ------------ ------------ ------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold
Institutional Class 5,703,404 2,299,980 10,293,767 5,455,630
Retail and Advisory
Classes 30,222,419 9,214,908 4,019,463 --
Distributions
reinvested
Institutional Class 21,814 108,962 676,413 683,297
Retail and Advisory
Classes 271,035 4,766 196,299 --
Cost of shares redeemed
Institutional Class (4,437,561 ) (1,628,524 ) (5,480,508 ) (1,045,434 )
Retail and Advisory
Classes (7,095,138 ) (727,913 ) (4,406,086 ) --
------------ ------------ ------------ ------------
Net increase
(decrease) in net
assets from share
transactions 24,685,973 9,272,179 5,299,348 5,093,493
------------ ------------ ------------ ------------
Net Increase
(Decrease) in Net
Assets 39,093,623 10,950,399 5,062,685 7,197,297
NET ASSETS
Beginning 12,243,364 1,292,965 10,259,674 3,062,377
------------ ------------ ------------ ------------
Ending $51,336,987 $12,243,364 $15,322,359 $10,259,674
------------ ------------ ------------ ------------
Undistributed net
investment income
(loss), ending $ (225,010 ) $ (28,626 ) $ 44,685 $ 27,089
------------ ------------ ------------ ------------
INSTITUTIONAL CLASS --
CAPITAL SHARE ACTIVITY
Shares sold 251,717 151,871 492,373 284,117
Distributions
reinvested 1,199 7,739 32,288 36,737
Shares redeemed (186,940 ) (104,127 ) (259,954 ) (55,733 )
------------ ------------ ------------ ------------
Net Institutional
Share Activity 65,976 55,483 264,707 265,121
------------ ------------ ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
104
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
MID CAP GROWTH SMALL CAP GROWTH MINI CAP GROWTH
------------ -------------- ---------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) $ (4,514,125) $ (5,007,955 ) $ (7,200,570 ) $ (8,756,479 ) $ (867,250 ) $ (880,862)
Net realized gain 47,761,620 71,334,950 86,043,833 52,691,131 5,442,273 5,702,809
Net unrealized
appreciation
(depreciation) 8,536,297 91,335,002 (93,770,559 ) 211,279,518 (12,989,539 ) 25,834,769
------------ -------------- ---------------- ---------------- ------------- -------------
Net increase
(decrease) in net
assets from
investment
operations 51,783,792 157,661,997 (14,927,296 ) 255,214,170 (8,414,516 ) 30,656,716
------------ -------------- ---------------- ---------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Institutional Class -- -- -- -- -- --
Retail and Advisory
Classes -- -- -- -- -- --
From net realized gains
Institutional Class (5,782,266) (32,727,125 ) (10,703,108 ) (32,260,858 ) (4,923,430 ) (5,282,913)
Retail and Advisory
Classes (17,990,295) (67,287,177 ) (43,475,876 ) (50,682,131 ) -- --
------------ -------------- ---------------- ---------------- ------------- -------------
Total distributions (23,772,561) (100,014,302 ) (54,178,984 ) (82,942,989 ) (4,923,430 ) (5,282,913)
------------ -------------- ---------------- ---------------- ------------- -------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold
Institutional Class 30,558,347 53,115,867 94,831,960 189,400,743 42,216,905 69,138,576
Retail and Advisory
Classes 127,574,701 278,016,216 877,323,807 2,054,958,405 -- --
Distributions
reinvested
Institutional Class 5,780,500 32,405,271 10,605,375 30,980,160 4,872,195 4,472,132
Retail and Advisory
Classes 6,525,926 59,509,696 32,265,262 39,987,358 -- --
Cost of shares redeemed
Institutional Class (56,388,475) (93,209,233 ) (137,276,709 ) (183,086,234 ) (62,280,044 ) (45,574,203)
Retail and Advisory
Classes (193,478,345) (333,765,072 ) (1,054,513,058 ) (2,053,142,122 ) -- --
------------ -------------- ---------------- ---------------- ------------- -------------
Net increase
(decrease) in net
assets from share
transactions (79,427,346) (3,927,255 ) (176,763,363 ) 79,098,310 (15,190,944 ) 28,036,505
------------ -------------- ---------------- ---------------- ------------- -------------
Net Increase
(Decrease) in Net
Assets (51,416,115) 53,720,440 (245,869,643 ) 251,369,491 (28,528,890 ) 53,410,308
NET ASSETS
Beginning 485,890,598 432,170,158 752,290,800 500,921,309 82,121,930 28,711,622
------------ -------------- ---------------- ---------------- ------------- -------------
Ending $434,474,483 $ 485,890,598 $ 506,421,157 $ 752,290,800 $ 53,593,040 $ 82,121,930
------------ -------------- ---------------- ---------------- ------------- -------------
Undistributed net
investment income
(loss), ending $(21,862,409) $ (17,348,284 ) $ (36,692,610 ) $ (29,492,040 ) $ (2,148,020 ) $ (1,280,770)
------------ -------------- ---------------- ---------------- ------------- -------------
INSTITUTIONAL CLASS --
CAPITAL SHARE ACTIVITY
Shares sold 1,856,583 3,262,811 7,191,439 14,212,349 2,151,115 3,242,406
Distributions
reinvested 345,931 2,167,577 915,910 2,375,782 244,133 202,450
Shares redeemed (3,464,165) (5,721,983 ) (10,528,574 ) (13,528,637 ) (3,025,658 ) (1,966,971)
------------ -------------- ---------------- ---------------- ------------- -------------
Net Institutional
Share Activity (1,261,651) (291,595 ) (2,421,225 ) 3,059,494 (630,410 ) 1,477,885
------------ -------------- ---------------- ---------------- ------------- -------------
<CAPTION>
CONVERTIBLE
----------------------------
1999 1998
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) $ 5,162,409 $ 4,493,508
Net realized gain 25,455,864 8,251,684
Net unrealized
appreciation
(depreciation) 19,262,427 35,936,585
------------- -------------
Net increase
(decrease) in net
assets from
investment
operations 49,880,700 48,681,777
------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Institutional Class (2,171,105 ) (1,679,051 )
Retail and Advisory
Classes (3,008,166 ) (2,806,726 )
From net realized gains
Institutional Class (790,823 ) (2,257,675 )
Retail and Advisory
Classes (3,283,720 ) (12,524,244 )
------------- -------------
Total distributions (9,253,814 ) (19,267,696 )
------------- -------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold
Institutional Class 12,682,711 60,694,323
Retail and Advisory
Classes 71,159,014 51,183,225
Distributions
reinvested
Institutional Class 1,938,394 3,556,387
Retail and Advisory
Classes 5,012,393 11,612,702
Cost of shares redeemed
Institutional Class (17,016,695 ) (11,207,998 )
Retail and Advisory
Classes (49,334,531 ) (22,420,543 )
------------- -------------
Net increase
(decrease) in net
assets from share
transactions 24,441,286 93,418,096
------------- -------------
Net Increase
(Decrease) in Net
Assets 65,068,172 122,832,177
NET ASSETS
Beginning 252,739,474 129,907,297
------------- -------------
Ending $317,807,646 $252,739,474
------------- -------------
Undistributed net
investment income
(loss), ending $ (27,873 ) $ (11,011 )
------------- -------------
INSTITUTIONAL CLASS --
CAPITAL SHARE ACTIVITY
Shares sold 634,869 3,503,331
Distributions
reinvested 100,804 204,577
Shares redeemed (916,368 ) (637,651 )
------------- -------------
Net Institutional
Share Activity (180,695 ) 3,070,257
------------- -------------
</TABLE>
- ----------------------------------
- --------------------------------------------------------------------------------
105
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
STATEMENTS OF CHANGES IN NET ASSETS -- CONTINUED
YEARS ENDED MARCH 31
<TABLE>
<CAPTION>
HIGH QUALITY BOND
--------------------------- HIGH YIELD BOND
---------------------------
--------------------------------------------------------
1999 1998 1999 1998
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) $ 1,615,239 $ 894,810 $ 7,088,233 $ 499,478
Net realized gain 330,860 520,891 (2,958,000 ) 551,791
Net unrealized
appreciation
(depreciation) (372,395 ) 245,777 (2,908,667 ) 310,375
------------- ------------ ------------- ------------
Net increase
(decrease) in net
assets from
investment
operations 1,573,704 1,661,478 1,221,566 1,361,644
------------- ------------ ------------- ------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Institutional Class (922,336 ) (892,591 ) (1,043,087 ) (516,768 )
Retail and Advisory
Classes (633,711 ) -- (6,309,568 ) --
From net realized gains
Institutional Class (440,165 ) (156,503 ) -- (551,174 )
Retail and Advisory
Classes (154,483 ) -- -- --
------------- ------------ ------------- ------------
Total distributions (2,150,695 ) (1,049,094 ) (7,352,655 ) (1,067,942 )
------------- ------------ ------------- ------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold
Institutional Class 7,161,241 4,978,031 3,471,657 6,471,123
Retail and Advisory
Classes 23,093,551 -- 100,337,249 4,260,639
Proceeds from shares
issued in merger
Institutional Class -- -- -- --
Retail and Advisory
Classes 10,271,727 -- -- 16,364,513
Distributions
reinvested
Institutional Class 1,361,995 1,048,960 646,110 237,690
Retail and Advisory
Classes 352,154 -- 2,899,495 --
Cost of shares redeemed
Institutional Class (8,058,811 ) (6,745,829 ) (2,673,458 ) (811,321 )
Retail and Advisory
Classes (12,798,531 ) -- (28,887,632 ) (1,689,127 )
------------- ------------ ------------- ------------
Net increase
(decrease) in net
assets from share
transactions 21,383,326 (718,838 ) 75,793,421 24,833,517
------------- ------------ ------------- ------------
Net Increase
(Decrease) in Net
Assets 20,806,335 (106,454 ) 69,662,332 25,127,219
NET ASSETS
Beginning 15,758,988 15,865,442 29,734,778 4,607,559
------------- ------------ ------------- ------------
Ending $ 36,565,323 $15,758,988 $ 99,397,110 $29,734,778
------------- ------------ ------------- ------------
Undistributed net
investment income
(loss), ending $ 59,206 $ 14 $ (251,717 ) $ 12,705
------------- ------------ ------------- ------------
INSTITUTIONAL CLASS --
CAPITAL SHARE ACTIVITY
Shares sold 551,756 385,596 268,127 492,047
Distributions
reinvested 105,723 80,778 51,066 17,883
Shares redeemed (621,629 ) (528,896 ) (203,999 ) (58,848 )
------------- ------------ ------------- ------------
Net Institutional
Share Activity 35,850 (62,522 ) 115,194 451,082
------------- ------------ ------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
106
<PAGE>
<TABLE>
<CAPTION>
SHORT INTERMEDIATE INTERNATIONAL SMALL EMERGING
INTERNATIONAL CORE GROWTH CAP GROWTH COUNTRIES
--------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999
------------ ------------ ------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) $ 904,872 $ 807,947 $ (310,557 ) $ (105,124 ) $ (725,193 ) $ (535,283 ) $ (444,466)
Net realized gain (39,072 ) (49,687 ) (528,900 ) (798,230 ) 8,225,524 8,493,580 (83,823,307)
Net unrealized
appreciation
(depreciation) (23,068 ) 143,949 13,512,294 8,937,191 14,357,916 14,373,569 10,517,870
------------ ------------ ------------- ------------- -------------- -------------- --------------
Net increase
(decrease) in net
assets from
investment
operations 842,732 902,209 12,672,837 8,033,837 21,858,247 22,331,866 (73,749,903)
------------ ------------ ------------- ------------- -------------- -------------- --------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Institutional Class (907,270 ) (808,721 ) -- -- -- -- --
Retail and Advisory
Classes -- -- (234,751 ) -- (76,552 ) -- (781,738)
From net realized gains
Institutional Class -- -- (12,026 ) (1,082,268 ) (1,656,995 ) (7,618,866 ) (431,659)
Retail and Advisory
Classes -- -- (156,718 ) (94,711 ) (2,343,137 ) (1,578,053 ) (685,405)
------------ ------------ ------------- ------------- -------------- -------------- --------------
Total distributions (907,270 ) (808,721 ) (403,495 ) (1,176,979 ) (4,076,684 ) (9,196,919 ) (1,898,802)
------------ ------------ ------------- ------------- -------------- -------------- --------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold
Institutional Class 6,153,060 9,403,730 77,169,583 31,163,454 35,646,605 10,259,992 111,049,571
Retail and Advisory
Classes -- -- 96,715,006 51,484,457 159,177,303 133,668,195 123,837,441
-- -- -- -- -- -- --
-- -- -- -- -- -- --
Distributions
reinvested
Institutional Class 907,267 808,691 11,572 1,028,071 1,653,387 6,778,949 427,601
Retail and Advisory
Classes -- -- 216,631 88,139 1,772,355 1,252,956 1,071,833
Cost of shares redeemed
Institutional Class (2,063,058 ) (2,135,309 ) (11,217,807 ) (8,557,936 ) (21,462,454 ) (28,903,413 ) (33,675,382)
Retail and Advisory
Classes -- -- (71,093,774 ) (28,556,240 ) (120,842,425 ) (116,089,266 ) (126,426,701)
------------ ------------ ------------- ------------- -------------- -------------- --------------
Net increase
(decrease) in net
assets from share
transactions 4,997,269 8,077,112 91,801,211 46,649,945 55,944,771 6,967,413 76,284,363
------------ ------------ ------------- ------------- -------------- -------------- --------------
Net Increase
(Decrease) in Net
Assets 4,932,731 8,170,600 104,070,553 53,506,803 73,726,334 20,102,360 635,658
NET ASSETS
Beginning 13,534,562 5,363,962 58,147,049 4,640,246 82,890,457 62,788,097 281,570,520
------------ ------------ ------------- ------------- -------------- -------------- --------------
Ending $18,467,293 $13,534,562 $162,217,602 $ 58,147,049 $ 156,616,791 $ 82,890,457 $ 282,206,178
------------ ------------ ------------- ------------- -------------- -------------- --------------
Undistributed net
investment income
(loss), ending $ (2,869 ) $ (471 ) $ (647,924 ) $ (102,616 ) $ (1,982,021 ) $ (1,180,276 ) $ (2,164,624)
------------ ------------ ------------- ------------- -------------- -------------- --------------
INSTITUTIONAL CLASS --
CAPITAL SHARE ACTIVITY
Shares sold 481,478 739,286 4,324,459 1,878,191 1,958,150 562,317 7,798,321
Distributions
reinvested 70,965 63,425 648 65,944 86,519 455,575 26,995
Shares redeemed (161,326 ) (166,136 ) (599,270 ) (527,910 ) (1,096,339 ) (1,544,723 ) (2,520,022)
------------ ------------ ------------- ------------- -------------- -------------- --------------
Net Institutional
Share Activity 391,117 636,575 3,725,837 1,416,225 948,330 (526,831 ) 5,305,294
------------ ------------ ------------- ------------- -------------- -------------- --------------
<CAPTION>
1998
-------------
<S> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) $ (106,300 )
Net realized gain (17,633,714 )
Net unrealized
appreciation
(depreciation) 30,115,298
-------------
Net increase
(decrease) in net
assets from
investment
operations 12,375,284
-------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Institutional Class --
Retail and Advisory
Classes --
From net realized gains
Institutional Class (6,562,875 )
Retail and Advisory
Classes (7,420,071 )
-------------
Total distributions (13,982,946 )
-------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold
Institutional Class 36,845,701
Retail and Advisory
Classes 150,589,614
--
--
Distributions
reinvested
Institutional Class 5,812,038
Retail and Advisory
Classes 6,160,647
Cost of shares redeemed
Institutional Class (10,335,888 )
Retail and Advisory
Classes (64,093,578 )
-------------
Net increase
(decrease) in net
assets from share
transactions 124,978,534
-------------
Net Increase
(Decrease) in Net
Assets 123,370,872
NET ASSETS
Beginning 158,199,648
-------------
Ending $281,570,520
-------------
Undistributed net
investment income
(loss), ending $ (938,420 )
-------------
INSTITUTIONAL CLASS --
CAPITAL SHARE ACTIVITY
Shares sold 2,098,718
Distributions
reinvested 382,371
Shares redeemed (607,772 )
-------------
Net Institutional
Share Activity 1,873,317
-------------
</TABLE>
- ----------------------------------
- --------------------------------------------------------------------------------
107
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
STATEMENTS OF CHANGES IN NET ASSETS -- CONTINUED
YEARS ENDED MARCH 31
<TABLE>
<CAPTION>
GREATER CHINA LATIN AMERICA
-----------------------------------------------------
1999 1998(1) 1999 1998(2)
----------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) $ 9,438 $ 1,562 $ 9,173 $ 12,745
Net realized gain (274,012 ) 36,893 (261,412 ) (6,373 )
Net unrealized
appreciation
(depreciation) (30,425 ) 102,143 173,802 111,771
----------- -------------- ----------- -----------
Net increase
(decrease) in net
assets from
investment
operations (294,999 ) 140,598 (78,437 ) 118,143
----------- -------------- ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Institutional Class (38,458 ) -- (13,199 ) --
Retail and Advisory
Classes -- -- -- --
From net realized gains
Institutional Class -- -- -- --
Retail and Advisory
Classes -- -- -- --
----------- -------------- ----------- -----------
Total distributions (38,458 ) -- (13,199 ) --
----------- -------------- ----------- -----------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold
Institutional Class 507,655 1,063,297 746,937 1,255,972
Retail and Advisory
Classes -- -- -- --
Distributions
reinvested
Institutional Class 38,456 -- 13,198 --
Retail and Advisory
Classes -- -- -- --
Cost of shares redeemed
Institutional Class (20,197 ) (11,527 ) (78,001 ) (190,284 )
Retail and Advisory
Classes -- -- -- --
----------- -------------- ----------- -----------
Net increase
(decrease) in net
assets from share
transactions 525,914 1,051,770 682,134 1,065,688
----------- -------------- ----------- -----------
Net Increase
(Decrease) in Net
Assets 192,457 1,192,368 590,498 1,183,831
NET ASSETS
Beginning 1,192,368 -- 1,183,831 --
----------- -------------- ----------- -----------
Ending $1,384,825 $ 1,192,368 $1,774,329 $1,183,831
----------- -------------- ----------- -----------
Undistributed net
investment income
(loss), ending $ (27,458 ) $ 1,562 $ 8,719 $ 12,745
----------- -------------- ----------- -----------
INSTITUTIONAL CLASS --
CAPITAL SHARE ACTIVITY
Shares sold 53,242 85,172 75,004 99,495
Distributions
reinvested 3,458 -- 1,459 --
Shares redeemed (1,746 ) (830 ) (8,069 ) (14,471 )
----------- -------------- ----------- -----------
Net Institutional
Share Activity 54,954 84,342 68,394 85,024
----------- -------------- ----------- -----------
</TABLE>
- ----------------------------------
(1) Commenced operations on 12/31/97.
(2) Commenced operations on 11/28/97.
(3) Commenced operations on 9/30/97.
(4) Commenced operations on 6/30/97.
(5) Commenced operations on 7/31/98.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
108
<PAGE>
<TABLE>
<CAPTION>
PACIFIC RIM GLOBAL
WORLDWIDE GROWTH GLOBAL BLUE CHIP GROWTH &
INCOME
------------------------------------------------------------------------------------------------
1999 1998(1) 1999 1998 1999 1998(3) 1999
----------- ----------- -------------- -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) $ (6,756 ) $ 2,096 $ (1,461,258 ) $ (1,375,278 ) $ (25,030 ) $ (1,581 ) $ 89,397
Net realized gain (111,135 ) (48,917 ) 34,449,340 21,743,157 2,439,966 (110,669 ) 270,179
Net unrealized
appreciation
(depreciation) 83,997 59,778 12,614,021 16,567,799 383,318 1,168,454 247,919
----------- ----------- -------------- -------------- ------------ ----------- -----------
Net increase
(decrease) in net
assets from
investment
operations (33,894 ) 12,957 45,602,103 36,935,678 2,798,254 1,056,204 607,495
----------- ----------- -------------- -------------- ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Institutional Class -- -- (327,430 ) -- -- -- (56,460)
Retail and Advisory
Classes -- -- (146,362 ) -- -- -- --
From net realized gains
Institutional Class -- -- (401,455 ) (542,247 ) (69,327 ) -- (270,030)
Retail and Advisory
Classes -- -- (20,868,188 ) (17,346,814 ) -- -- --
----------- ----------- -------------- -------------- ------------ ----------- -----------
Total distributions -- -- (21,743,435 ) (17,889,061 ) (69,327 ) -- (326,490)
----------- ----------- -------------- -------------- ------------ ----------- -----------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold
Institutional Class 122,463 1,223,943 88,622,595 49,390,340 3,234,669 6,967,912 174,943
Retail and Advisory
Classes -- -- 153,548,169 122,925,841 -- -- --
Distributions
reinvested
Institutional Class -- -- 720,746 536,101 69,075 -- 324,756
Retail and Advisory
Classes -- -- 4,773,499 14,971,998 -- -- --
Cost of shares redeemed
Institutional Class (186,769 ) (39,836 ) (30,325,173 ) (42,511,651 ) (2,938,697 ) (704,518 ) (1,256,256)
Retail and Advisory
Classes -- -- (138,549,406 ) (122,611,948 ) -- -- --
----------- ----------- -------------- -------------- ------------ ----------- -----------
Net increase
(decrease) in net
assets from share
transactions (64,306 ) 1,184,107 78,790,430 22,700,681 365,047 6,263,394 (756,557)
----------- ----------- -------------- -------------- ------------ ----------- -----------
Net Increase
(Decrease) in Net
Assets (98,200 ) 1,197,064 102,649,098 41,747,298 3,093,974 7,319,598 (475,552)
NET ASSETS
Beginning 1,197,064 -- 145,353,582 103,606,284 7,319,598 -- 6,065,010
----------- ----------- -------------- -------------- ------------ ----------- -----------
Ending $1,098,864 $1,197,064 $ 248,002,680 $ 145,353,582 $10,413,572 $7,319,598 $5,589,458
----------- ----------- -------------- -------------- ------------ ----------- -----------
Undistributed net
investment income
(loss), ending $ (4,660 ) $ 2,096 $ (7,189,744 ) $ (5,254,694 ) $ (26,611 ) $ (1,581 ) $ 32,609
----------- ----------- -------------- -------------- ------------ ----------- -----------
INSTITUTIONAL CLASS --
CAPITAL SHARE ACTIVITY
Shares sold 11,462 97,763 4,285,331 3,023,399 194,931 553,026 12,201
Distributions
reinvested -- -- 38,682 34,789 4,408 -- 23,627
Shares redeemed (16,908 ) (3,192 ) (1,628,893 ) (2,592,329 ) (184,922 ) (58,948 ) (93,861)
----------- ----------- -------------- -------------- ------------ ----------- -----------
Net Institutional
Share Activity (5,446 ) 94,571 2,695,120 465,859 14,417 494,078 (58,033)
----------- ----------- -------------- -------------- ------------ ----------- -----------
<CAPTION>
TECHNOLOGY
1998(4) 1999(5)
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) $ 121,285 $ (25,089 )
Net realized gain 714,872 3,644,794
Net unrealized
appreciation
(depreciation) 448,236 4,357,445
------------ ------------
Net increase
(decrease) in net
assets from
investment
operations 1,284,393 7,977,150
------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income
Institutional Class (121,613 ) --
Retail and Advisory
Classes -- --
From net realized gains
Institutional Class (613,144 ) --
Retail and Advisory
Classes -- --
------------ ------------
Total distributions (734,757 ) --
------------ ------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold
Institutional Class 6,637,915 17,468,706
Retail and Advisory
Classes -- --
Distributions
reinvested
Institutional Class 709,144 --
Retail and Advisory
Classes -- --
Cost of shares redeemed
Institutional Class (1,831,685 ) (1,351,448 )
Retail and Advisory
Classes -- --
------------ ------------
Net increase
(decrease) in net
assets from share
transactions 5,515,374 16,117,258
------------ ------------
Net Increase
(Decrease) in Net
Assets 6,065,010 24,094,408
NET ASSETS
Beginning -- --
------------ ------------
Ending $ 6,065,010 $24,094,408
------------ ------------
Undistributed net
investment income
(loss), ending $ (328 ) $ (25,089 )
------------ ------------
INSTITUTIONAL CLASS --
CAPITAL SHARE ACTIVITY
Shares sold 498,490 600,526
Distributions
reinvested 54,908 --
Shares redeemed (127,910 ) (60,837 )
------------ ------------
Net Institutional
Share Activity 425,488 539,689
------------ ------------
</TABLE>
- ----------------------------------
- --------------------------------------------------------------------------------
109
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------
NOTE A -- ORGANIZATION
Nicholas-Applegate Mutual Funds, renamed Pilgrim Mutual Funds (the "Trust"),
is an open end management investment company, organized as a Delaware business
trust with a number of separate series (Funds), including the nineteen Funds
covered by this report. The Funds' prospectus describes the investment objective
of the respective Funds. Each Fund is a registered, diversified, open-end
management investment company with their operations accounted for separately.
The Trust offers Institutional shares (Class I) for all Funds. Some Funds
additionally offer retail shares (Class A, B and C) and Advisory shares (Class
Q). The retail shares have front-end or deferred sales charges and have
distribution and shareholder servicing fees, the Advisory shares have a
shareholder servicing fee and the Institutional shares have no sales charge,
distribution or servicing fee.
REORGANIZATION
Before a shareholder approved reorganization effective July 24, 1998, the
series of the Trust invested all of their assets in corresponding portfolios of
Nicholas-Applegate Investment Trust, an arrangement known as a "master/feeder"
structure with the exception of Greater China, Latin America, Pacific Rim,
Global Blue Chip and Global Technology Funds. Upon the reorganization, the
Institutional Portfolio series of the Trust were renamed Funds and were
authorized to issue multiple classes of shares, and their outstanding shares
were reclassified as Class I shares. At the same time, the A, B, C and Advisory
Portfolios of the Trust (other than the Government Income Portfolios)
transferred their assets to the corresponding Funds, and their shareholders
received Class A, B, C and Q shares of the Funds on a tax-free basis. The A, B,
C and Advisory Government Income Portfolios transferred their assets to the
Fully Discretionary Fixed Income Fund, and their shareholders received Class A,
B, C and Q shares of that Fund. Note F describes the net assets received by each
Fund in the reorganization.
As part of the reorganization, the following Funds changed to more descriptive
names:
<TABLE>
<CAPTION>
NEW NAME FORMERLY
- ----------------------------- -----------------------------
<S> <C>
Mid Cap Growth Core Growth
Small Cap Growth Emerging Growth
Convertible Income & Growth
Fully Discretionary Fixed
High Quality Bond Income
</TABLE>
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies consistently followed by the Funds in
preparing these financial statements are described below. The policies conform
with generally accepted accounting principles.
SECURITY VALUATIONS
The Funds value equity securities traded on national or international
exchanges and market systems at the last sales price reported by the security's
primary market at the time of daily valuation. If a last sales price is not
available, these securities are valued at the mean between last reported bid and
ask prices. Debt securities are valued at bid prices obtained from independent
pricing services or from one or more dealers making markets in the securities.
Security prices quoted in a foreign currency are translated using the current
U.S. dollar exchange rate. Short-term securities maturing within 60 days are
valued at amortized cost which approximates market value. When market quotations
for securities are not readily available, a fair value is determined under the
direction of the Board of Trustees.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. Realized gains and
losses from security transactions are determined on an identified-cost basis.
- --------------------------------------------------------------------------------
110
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
Dividend income is recorded on the ex-dividend date or, for certain foreign
securities, when the information becomes available to the Funds. Interest income
is recorded on an accrual basis. Discounts and premiums on debt securities are
accreted and amortized on the same basis as used for federal tax reporting.
FOREIGN CURRENCY TRANSACTIONS
At each net asset valuation date, the value of assets and liabilities
denominated in foreign currencies are translated into U.S. dollars using the
current exchange rate. Security transactions, income and expenses are converted
at the prevailing exchange rate on the day of the event. The effect of changes
in exchange rates on securities denominated in a foreign currency is included
with the net realized and unrealized gain or loss of the associated security.
Other foreign currency gains or losses are reported separately.
Certain Funds may use forward foreign currency contracts to reduce their
exposure to currency fluctuations of their foreign securities. These contracts
are commitments to purchase or sell a foreign currency at a specified rate on a
future date. When the contract is fulfilled or closed, gains or losses are
realized. Until then, the gain or loss is included in unrealized appreciation or
depreciation of investments. The contract commitment is fully collateralized by
cash or securities of the Fund. Foreign denominated assets and forward currency
contracts may involve more risks than domestic transactions, including currency
risk, political and economic risk, regulatory and market risk. Evaluating and
monitoring such risk exposure is a part of the Funds' management strategy.
FUTURES CONTRACTS
Each Fund may enter into futures contracts involving foreign currency,
interest rates, securities, and securities indices, for hedging purposes only. A
futures contract obligates the seller of the contract to deliver and the
purchaser of the contract to take delivery of the type of foreign currency,
financial instrument or security called for in the contract at a specified
future time for a specified price. Upon entering into such a contract, a Fund is
required to deposit and maintain as collateral such initial margin as required
by the exchange on which the contract is traded. Pursuant to the contract, a
Fund agrees to receive from or pay to the broker an amount equal to the daily
fluctuations in the value of the contract. Such receipts or payments are known
as variation margin and are recorded as unrealized gains or losses by the Fund.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
FUND EXPENSES AND MULTI-CLASS ALLOCATIONS
Each Fund bears expenses incurred specifically on its behalf plus an
allocation of its share of Trust level expenses. Each share offered by a Fund
has equal rights to assets but incurs certain Class specific expenses. The Fund
allocates income, gains and losses, both realized and unrealized, and Fund level
expenses, except for Class specific expenses, based on the relative net assets
of each Class.
SECURITIES LENDING
Each Fund may temporarily loan securities up to 30% of its total assets to
brokers, dealers or other financial institutions in exchange for a negotiated
lender's fee. The borrower fully collateralizes the loans with cash, letters of
credit or U.S. Government securities.
- --------------------------------------------------------------------------------
111
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
The market value of securities on loan and the related collateral at March 31,
1999 were:
<TABLE>
<CAPTION>
MARKET VALUE COLLATERAL
FUND (IN 000'S) (IN 000'S)
- -------------------------------------------- ------------ -----------
<S> <C> <C>
Large Cap Growth............................ $ 3,249 $ 3,363
Value....................................... 15 24
Mid Cap Growth.............................. 65,334 66,833
Small Cap Growth............................ 128,214 131,775
Mini Cap Growth............................. 12,389 12,557
Convertible................................. 4,553 4,591
International Core Growth................... 4,108 4,220
International Small Cap Growth.............. 2,957 3,134
Emerging Countries.......................... 18,076 18,539
Latin America............................... 67 70
Worldwide Growth............................ 15,457 15,894
Global Blue Chip............................ 123 123
Global Growth & Income...................... 82 82
</TABLE>
FEDERAL INCOME TAXES
The Funds intend to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially all
of their taxable income to shareholders. Accordingly, no provision for federal
income taxes is required. A Fund investing in foreign securities records any
foreign taxes on income and gains on such investments in accordance with the
applicable tax rules. The Funds' tax accounting treatment of loss deferrals,
passive foreign investment companies and expiration of capital loss
carryforwards are different from the financial statement recognition of income
and gains.
Capital loss carryforwards may be used to offset current or future capital
gains until expiration. The capital loss carryforwards for Nicholas-Applegate
Portfolios A, B, C and Q under the master/feeder structure may be used by the
newly restructured Funds subject to certain limitations. The following table
reflects the capital loss carryforwards as of July 24, 1998, as well as the
expiration dates as of April 1, 1998.
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYFORWARD EXPIRATION
FUND (IN 000'S) DATE
- ------------------------------------------- ------------- -----------
<S> <C> <C>
High Yield Bond............................ $ 2920 2007
Short Intermediate......................... 139 2005-2007
Emerging Countries......................... 87,816 2005-2007
Greater China.............................. 251 2007
Latin America.............................. 216 2006-2007
Pacific Rim................................ 128 2006-2007
</TABLE>
DISTRIBUTIONS TO SHAREHOLDERS
The Funds record distributions to shareholders on the ex-dividend date.
Distributions are determined in accordance with income tax regulations that may
differ from generally accepted accounting principles. Accordingly, the Funds'
capital accounts are periodically reclassified to reflect income and gains
available for distribution under income tax regulations. The Funds make income
and capital gain distributions at least annually. Funds with income objectives
make distributions either quarterly, monthly or daily in accordance with their
respective prospectuses.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.
RECLASSIFICATIONS
As a result of the reorganization discussed in Note A, the statements of
changes in net assets for the year ended March 31, 1998 have been reclassified
to conform to the current year presentation.
- --------------------------------------------------------------------------------
112
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
NOTE C -- TRANSACTIONS WITH AFFILIATES
Nicholas-Applegate Capital Management, as the Investment Advisor of the Funds,
receives the following annual fees payable monthly based on the average daily
net assets of each Fund.
<TABLE>
<S> <C>
Mini Cap Growth, Emerging Countries and
Latin America......................... 1.25%
Small Cap Growth, International Core
Growth, International Small Cap
Growth, Greater China, Pacific Rim,
Worldwide Growth and Global
Technology............................ 1.00%
Global Growth & Income.................. 0.85%
Global Blue Chip........................ 0.80%
Large Cap Growth, Value, Mid Cap Growth,
and Convertible....................... 0.75%
High Yield Bond......................... 0.60%
High Quality Bond....................... 0.45%
Short Intermediate...................... 0.30%
</TABLE>
The fees are reduced on Large Cap Growth, Mid Cap Growth, Convertible, High
Quality Bond, Short Intermediate, International Core Growth, International Small
Cap Growth and Worldwide Growth when the average net assets exceed $500 million
($250 million for Short Intermediate).
Under an Administrative Services agreement the Investment Advisor provides
operational support services for certain Classes of the Funds at an annual fee
on average daily net assets of 0.10% for retail and 0.05% for Advisory Classes.
Beginning on November 10, 1998, the Advisory Class was no longer charged this
fee.
The Investment Advisor has volunteered to limit the Funds' expenses to certain
levels through March 31, 1999. Expenses reimbursed by the Investment Advisor
through March 31, 1998 may be recouped from the Funds through March 31, 2003.
Any expenses reimbursed after March 31, 1998 may be recouped within five years
after the year in which they are reimbursed. The Investment Advisor will recover
such reimbursements to the extent of the difference between a Fund's actual
expenses (exclusive of interest expense and credit facility fees) when they fall
below the limit, and the voluntary limit.
<TABLE>
<CAPTION>
EXPENSE LIMITS BY CLASS
- -----------------------------------------------------------------------------
RETAIL
CLASSES
INSTITUTIONAL CLASS A/ ADVISORY UNREIMBURSED
FUND CLASS CLASSES B&C CLASS AMOUNTS
- -------------------- ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Large Cap Growth.... 1.00% 1.60%/2.25% 1.25% $ 300,116
Value............... 1.00% n/a n/a 272,303
Mid Cap Growth...... 1.00% 1.60%/2.25% 1.25% 1,547,229
Small Cap Growth.... 1.17% 1.95%/2.60% 1.50% 1,653,384
Mini Cap Growth..... 1.56% n/a n/a 459,651
Convertible......... 1.00% 1.60%/2.25% 1.25% 1,413,974
High Quality Bond... 0.45% 0.95%/1.35% 0.85% 1,904,182
High Yield Bond..... 0.75% 1.10%/1.75% 1.00% 448,984
Short
Intermediate....... 0.35% n/a n/a 492,928
International Core
Growth............. 1.40% 1.95%/2.60% 1.65% 495,879
International Small
Cap Growth......... 1.40% 1.95%/2.60% 1.65% 1,408,928
Emerging
Countries.......... 1.65% 2.25%/2.90% 1.90% 2,256,119
Greater China....... 1.40% n/a n/a 120,289
Latin America....... 1.65% n/a n/a 138,421
Pacific Rim......... 1.40% n/a n/a 141,473
Worldwide Growth.... 1.35% 1.85%/2.50% 1.60% 1,605,061
Global Blue Chip.... 1.20% n/a n/a 171,079
Global Growth &
Income............. 1.35% n/a n/a 199,813
Global Technology... 1.40% n/a n/a 80,153
</TABLE>
The Trust has a distribution plan (12b-1) under which Nicholas-Applegate
Securities, the Distributor and an affiliate of the Investment Advisor, is paid
for certain activities related to the sale of retail shares. Both the retail and
Advisory Classes have a shareholder servicing agreement with the Distributor
which allows the Distributor to pay other financial institutions for shareholder
account maintenance and servicing. Each Class pays an annual fee on its average
daily net assets of up to 0.25% on Class A
- --------------------------------------------------------------------------------
113
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
and 0.75% on Classes B and C under the distribution plan, and up to 0.10% on
Class A and 0.25% on Classes B, C and Q under the shareholder servicing
agreement.
The Distributor also receives a portion of the front-end sales charge and all
of the deferred sales charges of the retail Classes. During the fiscal year
ended March 31, 1999 the Distributor received the following sales charges net of
amounts re-allowed to other broker-dealers:
<TABLE>
<S> <C>
Large Cap Growth..................... $ 44,192
Mid Cap Growth....................... 199,000
Small Cap Growth..................... 200,791
Convertible.......................... 199,214
High Quality Bond.................... 67,980
High Yield Bond...................... 125,934
International Core Growth............ 71,702
International Small Cap Growth....... 108,313
Emerging Countries................... 194,217
Worldwide Growth..................... 54,170
</TABLE>
Certain officers of the Trust are also officers of the Investment Advisor and
Distributor. The Trustees who are not affiliated with the Investment Advisor
receive annual compensation of approximately $18,000 each from the Trust.
NOTE D -- INVESTMENT TRANSACTIONS
The following table presents purchases and sales of securities, excluding
short-term investments, during the fiscal year ended March 31, 1999 to indicate
the volume of transactions in each Fund. The tax cost of securities held at
March 31, 1999, and the related gross and net unrealized appreciation and
depreciation, provides aggregate information on a tax basis against which future
gains and losses on these investments are measured for distribution purposes.
<TABLE>
<CAPTION>
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
PURCHASES SALES TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
FUND (IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S)
- -------------------------------------- ----------- ----------- ----------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Large Cap Growth...................... $ 79,922 $ 57,336 $ 41,319 $ 11,407 $ 258 $ 11,149
Value................................. 18,440 14,144 18,296 1,752 230 1,522
Mid Cap Growth........................ 619,476 730,084 324,558 128,025 7,226 120,799
Small Cap Growth...................... 484,724 718,845 341,234 189,541 25,732 163,809
Mini Cap Growth....................... 81,952 100,981 40,367 17,128 2,843 14,285
Convertible........................... 365,645 359,344 255,302 70,385 4,742 65,643
High Quality Bond..................... 79,808 70,378 33,857 482 762 (280)
High Yield Bond....................... 252,013 176,214 101,807 2,009 4,561 (2,552)
Short Intermediate.................... 18,544 13,837 18,164 173 89 84
International Core Growth............. 303,078 213,818 142,531 25,177 2,659 22,518
International Small Cap Growth........ 207,966 156,825 124,438 38,728 3,549 35,179
Emerging Countries.................... 632,654 558,072 228,129 56,819 10,834 45,985
Greater China......................... 1,795 1,327 1,196 91 19 72
Latin America......................... 5,833 5,218 1,377 301 15 286
Pacific Rim........................... 4,455 4,539 864 166 22 144
Worldwide Growth...................... 421,357 360,243 250,733 44,582 2,640 41,942
Global Blue Chip...................... 33,895 34,215 8,401 1,682 131 1,551
Global Growth & Income................ 17,399 18,357 4,813 765 74 691
Global Technology..................... 32,635 16,891 25,765 4,559 202 4,357
</TABLE>
NOTE E -- CREDIT FACILITY
The Trust has a $75 million credit facility available to fund temporary or
emergency borrowing. Each Fund pays its pro-rata share of an annual commitment
fee plus interest on its specific borrowings. The credit facility was not used
during the year.
NOTE F -- CAPITAL ACTIVITY
The Trust has unlimited shares of no par value beneficial interest authorized.
- --------------------------------------------------------------------------------
114
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
The following table shows the net assets of the Funds immediately before and
after the reorganization described in Note A. The reorganization, which
represented a change in corporate form, is accounted for by pooling the net
assets and results of operations of the combined Funds.
<TABLE>
<CAPTION>
NET ASSETS
------------------------
BEFORE AFTER
FUND (IN 000'S) (IN 000'S)
- ------------------------------------------------ ----------- -----------
<S> <C> <C>
Large Cap Growth................................ $ 17,322 $ 17,322
Value........................................... 8,275 8,275
Mid Cap Growth.................................. 432,710 432,710
Small Cap Growth................................ 571,169 571,169
Mini Cap Growth................................. 71,430 71,430
Convertible..................................... 277,161 277,161
Short Intermediate.............................. 13,385 13,385
International Core Growth....................... 84,885 84,885
International Small Cap Growth.................. 111,445 111,445
Emerging Countries.............................. 336,147 336,147
Worldwide Growth................................ 146,797 146,797
Global Growth & Income.......................... 6,103 6,103
</TABLE>
The combination of High Quality Bond (formerly Fully Discretionary Fixed
Income) and Government Income, which represented a change in ownership of
separate portfolios, was accounted for as a merger of net assets. The results of
operations of High Quality Bond reflect the full period of High Quality Bond
Class I and combined Fund, Classes A, B, C, and Q, since the merger date. High
Yield Bond underwent a similar merger of separate portfolios on March 27, 1998
of the prior fiscal period. The net assets merged and the components of the net
assets contributed are shown below.
<TABLE>
<CAPTION>
COMPONENTS OF NET ASSETS OF ACQUIRED FUND
NET ASSETS ---------------------------------------------
------------------------ PAID IN UNREALIZED CAPITAL LOSS
BEFORE AFTER CAPITAL APPRECIATION CARRYFORWARD
FUND (IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S)
- -------------------- ----------- ----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Date of Merger --
July 24, 1998
Fully
Discretionary
Portfolio I..... $ 14,805 $ 25,251 -- -- --
Government Income
-- Portfolio A,
B, C & Q........ 10,446 n/a $ 10,272 $ 174 $ 3,375
Date of Merger --
March 27, 1998
High Yield Bond
Portfolio I..... 10,692 27,056 -- -- --
High Yield Bond --
Classes A, B, C
& Q............. 16,364 n/a 16,258 71 --
</TABLE>
NOTE G -- PROPOSED REORGANIZATION
On February 19, 1999, the Board of Trustees approved the reorganization of
Mini-Cap Growth, Short Intermediate, Greater China, Latin America, Pacific Rim,
Global Blue Chip, Global Growth & Income, and Global Technology Funds into a
separate series of Nicholas-Applegate Investment Trust (to be renamed
Nicholas-Applegate Institutional Funds) (the New Trust), by transferring all
their assets to the New Trust in exchange for Class I shares of the
corresponding series of the New Trust, and to dissolve the existing Funds. In
addition, the Board of Trustees approved various related measures the purpose of
which was to separate the existing institutional assets in all other series of
the Trust into a separate series of the New Trust.
- --------------------------------------------------------------------------------
115
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
NOTES TO FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
NOTE H -- RETAIL AND ADVISORY CLASS SUMMARIES
The following provides detail of the retail and Advisory Class activity which
are shown in the aggregate in the related financial statements (in thousands
except NAVs).
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1999
--------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
DISTRIBUTIONS FROM SHARES SOLD REINVESTED
NET SHARES ---------------------- --------------------- --------------------
ASSETS OUTSTANDING NAV INCOME GAINS SHARES VALUE SHARES VALUE
-------- ----------- -------- --------- ---------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LARGE CAP GROWTH
Class A $ 12,445 499 $ 24.94 $ -- $ (162) 387 $ 7,119 9 $ 160
Class B 20,039 800 25.04 -- (78) 722 13,914 4 71
Class C 8,004 321 24.97 -- (23) 293 5,793 1 21
Class Q 4,908 194 25.24 -- (20) 177 3,396 1 20
--------- ---------- -------- ---------- -------- ---------
Total $ -- $ (283) 1,579 $ 30,222 15 $ 272
--------- ---------- -------- ---------- -------- ---------
MID CAP GROWTH
Class A $ 67,550 3,390 $ 19.93 $ -- $ (5,649) 5,215 $ 93,222 130 $ 2,272
Class B 45,876 1,949 23.54 -- (2,217) 550 11,154 70 1,445
Class C 141,685 7,662 18.49 -- (9,292) 1,185 19,063 122 1,981
Class Q 14,350 571 25.14 -- (833) 195 4,135 38 828
--------- ---------- -------- ---------- -------- ---------
Total $ -- $ (17,991) 7,145 $ 127,574 360 $ 6,526
--------- ---------- -------- ---------- -------- ---------
SMALL CAP GROWTH
Class A $ 94,428 5,648 $ 16.72 $ -- $ (19,566) 44,256 $ 815,913 919 $ 14,800
Class B 45,140 2,138 21.12 -- (3,014) 1,030 19,581 121 2,372
Class C 144,597 8,756 16.51 -- (20,600) 1,807 29,105 926 14,801
Class Q 9,107 491 18.56 -- (296) 793 12,725 18 292
--------- ---------- -------- ---------- -------- ---------
Total $ -- $ (43,476) 47,886 $ 877,324 1,984 $ 32,265
--------- ---------- -------- ---------- -------- ---------
CONVERTIBLE
Class A $ 65,742 2,999 $ 21.92 $ (1,129) $ (932) 1,235 $ 22,826 85 $ 1,677
Class B 58,736 2,462 23.86 (606) (394) 1,107 22,989 37 775
Class C 95,998 4,286 22.40 (1,087) (1,833) 885 17,300 111 2,256
Class Q 8,741 412 21.22 (186) (125) 423 8,044 16 304
--------- ---------- -------- ---------- -------- ---------
Total $ (3,008) $ (3,284) 3,650 $ 71,159 249 $ 5,012
--------- ---------- -------- ---------- -------- ---------
HIGH QUALITY BOND
Class A+ $ 5,751 446 $ 12.89 $ (96) $ (19) 646 $ 8,384 6 $ 74
Class B+ 6,637 526 12.61 (232) (58) 595 7,617 13 164
Class C+ 8,128 621 13.10 (294) (75) 533 7,080 8 100
Class Q+ 314 26 12.26 (12) (3) 1 13 1 15
--------- ---------- -------- ---------- -------- ---------
Total $ (634) $ (155) 1,775 $ 23,094 28 $ 353
--------- ---------- -------- ---------- -------- ---------
HIGH YIELD BOND
Class A $ 17,327 1,487 $ 11.66 $ (1,417) $ -- 2,218 $ 27,084 69 $ 808
Class B 42,960 3,685 11.66 (2,984) -- 3,517 42,704 91 1,044
Class C 21,290 1,826 11.66 (1,608) -- 1,848 22,779 68 776
Class Q 6,502 557 11.68 (300) -- 669 7,770 23 272
--------- ---------- -------- ---------- -------- ---------
Total $ (6,309) $ -- 8,252 $ 100,337 251 $ 2,900
--------- ---------- -------- ---------- -------- ---------
INTERNATIONAL CORE GROWTH
Class A $ 21,627 1,221 $ 17.71 $ (151) $ (114) 4,112 $ 72,899 6 $ 110
Class B 11,033 617 17.89 (17) (40) 318 5,553 2 47
Class C 10,400 580 17.94 (37) (1) 456 7,964 1 28
Class Q 11,268 614 18.36 (30) (1) 581 10,301 1 31
--------- ---------- -------- ---------- -------- ---------
Total $ (235) $ (156) 5,467 $ 96,717 10 $ 216
--------- ---------- -------- ---------- -------- ---------
INTERNATIONAL SMALL CAP
GROWTH
Class A $ 25,336 1,205 $ 21.03 $ -- $ (1,154) 4,954 $ 101,530 41 $ 812
Class B 16,158 720 22.43 -- (584) 574 12,178 22 453
Class C 13,226 642 20.60 -- (426) 660 12,934 13 258
Class Q 32,819 1,476 22.23 (77) (179) 1,567 32,536 13 250
--------- ---------- -------- ---------- -------- ---------
Total $ (77) $ (2,343) 7,755 $ 159,178 89 $ 1,773
--------- ---------- -------- ---------- -------- ---------
EMERGING COUNTRIES
Class A $ 47,180 3,512 $ 13.43 $ (105) $ (332) 3,262 $ 45,427 17 $ 278
Class B 22,338 1,638 13.64 -- (183) 382 5,699 7 118
Class C 19,246 1,465 13.14 -- (171) 522 7,327 5 82
Class Q 53,125 3,853 13.79 (676) -- 4,617 65,385 36 594
--------- ---------- -------- ---------- -------- ---------
Total $ (781) $ (686) 8,783 $ 123,838 65 $ 1,072
--------- ---------- -------- ---------- -------- ---------
WORLDWIDE GROWTH
Class A $ 49,134 2,297 $ 21.39 $ (93) $ (5,994) 5,576 $ 110,311 96 $ 1,739
Class B 18,556 766 24.21 (4) (1,182) 545 11,617 39 799
Class C 98,470 4,576 21.52 (40) (13,610) 1,258 23,847 118 2,145
Class Q 7,320 298 24.59 (10) (82) 350 7,774 4 90
--------- ---------- -------- ---------- -------- ---------
Total $ (147) $ (20,868) 7,729 $ 153,549 257 $ 4,773
--------- ---------- -------- ---------- -------- ---------
<CAPTION>
SHARES REDEEMED
-------------------------
SHARES VALUE
--------- -------------
<S> <C> <C>
LARGE CAP GROWTH
Class A (199) $ (3,328)
Class B (130) (2,524)
Class C (36) (643)
Class Q (34) (601)
--------- -------------
Total (399) $ (7,096)
--------- -------------
MID CAP GROWTH
Class A (6,820) $ (120,721)
Class B (843) (16,827)
Class C (3,371) (52,212)
Class Q (185) (3,718)
--------- -------------
Total (11,219) $ (193,478)
--------- -------------
SMALL CAP GROWTH
Class A (49,754) $ (917,280)
Class B (1,464) (28,085)
Class C (6,062) (93,185)
Class Q (970) (15,963)
--------- -------------
Total (58,250) $ (1,054,513)
--------- -------------
CONVERTIBLE
Class A (795) $ (14,627)
Class B (469) (9,913)
Class C (881) (17,113)
Class Q (411) (7,681)
--------- -------------
Total (2,556) $ (49,334)
--------- -------------
HIGH QUALITY BOND
Class A+ (381) $ (4,962)
Class B+ (341) (4,353)
Class C+ (263) (3,483)
Class Q+ - -
--------- -------------
Total (985) $ (12,798)
--------- -------------
HIGH YIELD BOND
Class A (1,169) $ (14,038)
Class B (622) (7,282)
Class C (469) (5,466)
Class Q (180) (2,101)
--------- -------------
Total (2,440) $ (28,887)
--------- -------------
INTERNATIONAL CORE GROWTH
Class A (3,641) $ (65,603)
Class B (168) (2,893)
Class C (82) (1,412)
Class Q (68) (1,185)
--------- -------------
Total (3,959) $ (71,093)
--------- -------------
INTERNATIONAL SMALL CAP
GROWTH
Class A (4,370) $ (90,419)
Class B (472) (9,959)
Class C (464) (9,056)
Class Q (563) (11,409)
--------- -------------
Total (5,869) $ (120,843)
--------- -------------
EMERGING COUNTRIES
Class A (3,852) $ (51,942)
Class B (952) (12,756)
Class C (1,240) (16,381)
Class Q (3,432) (45,347)
--------- -------------
Total (9,476) $ (126,426)
--------- -------------
WORLDWIDE GROWTH
Class A (5,374) $ (107,031)
Class B (319) (6,779)
Class C (1,225) (22,855)
Class Q (90) (1,884)
--------- -------------
Total (7,008) $ (138,549)
--------- -------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31, 1999
Shares Issued in
Merger
----------------------
SHARES VALUE
----------- ---------
<S> <C> <C>
HIGH QUALITY BOND
Class A 175 $ 2,260
Class B 260 3,266
Class C 342 4,460
Class Q 23 286
--
---------
Total 800 $ 10,272
--
---------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1998
SHARES ISSUED IN
MERGER
----------------------
SHARES VALUE
----------- ---------
<S> <C> <C>
HIGH YIELD BOND
Class A 327 $ 4,153
Class B 613 7,773
Class C 307 3,901
Class Q 42 538
----- ---------
Total 1,289 $ 16,365
----- ---------
</TABLE>
- ------------------------------------------------
+ Commenced operations on July 24, 1998.
- --------------------------------------------------------------------------------
116
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1998
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
DISTRIBUTIONS FROM SHARES SOLD REINVESTED SHARES REDEEMED
----------------------- ------------------------ -------------------- --------------------------
INCOME GAINS SHARES VALUE SHARES VALUE SHARES VALUE
---------- ---------- --------- ------------ -------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LARGE CAP GROWTH
Class A $ -- $ (1) 315 $ 4,335 -- $ 1 (13) $ (178)
Class B -- (3) 239 3,275 -- 3 (36) (494)
Class C -- (1) 65 890 -- 1 (4) (54)
Class Q -- -- 51 715 -- -- -- (3)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
Total $ -- $ (5) 670 $ 9,215 -- $ 5 (53) $ (729)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
MID CAP GROWTH
Class A -- $ (19,865) 12,406 $ 224,326 1,013 $ 16,459 (13,083) $ (237,097)
Class B -- (2,515) 1,073 20,188 123 2,327 (799) (15,026)
Class C -- (43,762) 1,750 29,917 2,641 39,590 (4,221) (72,774)
Class Q -- (1,145) 170 3,584 56 1,134 (430) (8,868)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
Total -- $ (67,287) 15,399 $ 278,015 3,833 $ 59,510 (18,533) $ (333,765)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
SMALL CAP GROWTH
Class A -- $ (21,481) 104,821 $ 1,931,765 831 $ 15,132 (103,464) $ (1,921,658)
Class B -- -- 1,553 30,441 -- -- (910) (17,600)
Class C -- (29,183) 4,137 72,645 1,443 24,837 (5,946) (104,108)
Class Q -- (17) 1,103 20,108 1 18 (532) (9,776)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
Total -- $ (50,681) 111,614 $ 2,054,959 2,275 $ 39,987 (110,852) $ (2,053,142)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
CONVERTIBLE
Class A $ (947) $ (3,864) 709 $ 12,820 154 $ 2,762 (323) $ (5,890)
Class B (401) (788) 1,126 21,635 51 973 (159) (3,026)
Class C (1,290) (7,550) 792 14,822 408 7,387 (672) (12,485)
Class Q (169) (322) 111 1,906 28 490 (59) (1,019)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
Total $ (2,807) $ (12,524) 2,738 $ 51,183 641 $ 11,612 (1,213) $ (22,420)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
HIGH QUALITY BOND
Class A+ n/a n/a n/a n/a n/a n/a n/a n/a
Class B+ n/a n/a n/a n/a n/a n/a n/a n/a
Class C+ n/a n/a n/a n/a n/a n/a n/a n/a
Class Q+ n/a n/a n/a n/a n/a n/a n/a n/a
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
Total n/a n/a n/a n/a n/a n/a n/a n/a
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
HIGH YIELD BOND
Class A -- $ -- 174 $ 2,189 -- $ -- (132) $ (1,659)
Class B -- -- 89 1,136 -- -- (2) (30)
Class C -- -- 71 908 -- -- -- --
Class Q -- -- 2 28 -- -- -- --
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
Total -- $ -- 336 $ 4,261 -- $ -- (134) $ (1,689)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
INTERNATIONAL CORE GROWTH
Class A -- $ (53) 2,435 $ 38,637 3 $ 48 (1,694) $ (27,350)
Class B -- (42) 501 7,550 3 40 (39) (594)
Class C -- -- 225 3,489 -- -- (23) (348)
Class Q -- -- 116 1,809 -- -- (17) (265)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
Total -- $ (95) 3,277 $ 51,485 6 $ 88 (1,773) $ (28,557)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
INTERNATIONAL SMALL CAP
GROWTH
Class A -- $ (624) 6,609 $ 109,494 25 $ 383 (6,427) $ (107,700)
Class B -- (558) 463 8,304 32 517 (218) (3,839)
Class C -- (396) 441 7,326 24 353 (273) (4,516)
Class Q -- -- 458 8,544 -- -- (2) (34)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
Total -- $ (1,578) 7,971 $ 133,668 81 $ 1,253 (6,920) $ (116,089)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
EMERGING COUNTRIES
Class A -- $ (3,291) 3,250 $ 56,509 149 $ 2,308 (1,564) $ (27,276)
Class B -- (1,711) 1,214 22,259 102 1,591 (536) (9,195)
Class C -- (2,230) 1,150 20,756 139 2,109 (859) (13,968)
Class Q -- (188) 2,910 51,065 10 152 (815) (13,655)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
Total -- $ (7,420) 8,524 $ 150,589 400 $ 6,160 (3,774) $ (64,094)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
WORLDWIDE GROWTH
Class A -- $ (4,404) 5,938 $ 108,062 214 $ 3,565 (5,576) $ (102,392)
Class B -- (549) 293 5,360 26 449 (188) (3,334)
Class C -- (12,371) 436 7,995 664 10,935 (834) (15,192)
Class Q -- (23) 89 1,509 1 23 (100) (1,693)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
Total -- $ (17,347) 6,756 $ 122,926 905 $ 14,972 (6,698) $ (122,611)
- ------------------------- ---------- ---------- --------- ------------ -------- --------- ---------- -------------
</TABLE>
- --------------------------------------------------------------------------------
117
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
SHAREHOLDER MEETINGS (UNAUDITED)
- ------------------------------------------------------------------------
SPECIAL MEETINGS OF SHAREHOLDERS
A series of special meetings of shareholders of the Trust were held at the
offices of the Trust on March 23, 1998, March 26, 1998, and June 5, 1998. A
brief description of each matter voted upon as well as the voting results are
outlined below.
1. Shareholders of the Institutional Portfolios were asked to vote upon an
amendment to the Trust's Declaration of Trust authorizing its Board of
Trustees to create classes of shares of the Institutional Portfolios, to
rename the Institutional Portfolios as the "Funds" and to designate the
existing shares of the Institutional Portfolios as "Class I" shares of the
Funds.
<TABLE>
<CAPTION>
INSTITUTIONAL
PORTFOLIO FOR AGAINST ABSTAINING TOTAL
- --------------------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Balanced Growth...... 46,650 -- 34 46,684
Convertible(1)....... 3,513,890 -- 279 3,514,169
Emerging Countries... 2,460,148 7,576 167 2,467,891
Global Growth &
Income.............. 309,121 -- -- 309,121
High Quality
Bond(2)............. 1,095,280 -- 8 1,095,288
High Yield Bond...... 338,312 -- -- 338,312
International Core
Growth.............. 1,638,162 -- -- 1,638,162
International Small
Cap Growth.......... 2,005,760 -- 158 2,005,918
Large Cap Growth..... 112,411 -- -- 112,411
Mid Cap Growth(3).... 6,801,623 -- 141 6,801,764
Mini Cap Growth...... 2,458,511 11,202 26,236 2,495,949
Short Intermediate... 1,043,978 -- -- 1,043,978
Small Cap
Growth(4)........... 11,986,928 32,059 106,366 12,125,353
Strategic Income..... 308,625 -- -- 308,625
Value................ 399,635 -- 131 399,766
Worldwide Growth..... 350,845 -- -- 350,845
</TABLE>
2. Shareholders of the Institutional Portfolios and the Money Market Portfolio
were asked to authorize the Board of Trustees to eliminate each such
Portfolios current policy of investing all of its assets in a corresponding
portfolio of Nicholas-Applegate Investment Trust.
<TABLE>
<CAPTION>
INSTITUTIONAL
PORTFOLIO FOR AGAINST ABSTAINING TOTAL
- --------------------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Balanced Growth...... 46,650 -- 34 46,684
Convertible(1)....... 3,513,890 -- 279 3,514,169
Emerging Countries... 2,460,148 7,576 167 2,467,891
Global Growth &
Income.............. 309,121 -- -- 309,121
High Quality
Bond(2)............. 1,095,288 -- 8 1,095,296
High Yield Bond...... 338,312 -- -- 338,312
International Core
Growth.............. 1,638,162 -- -- 1,638,162
International Small
Cap Growth.......... 2,005,760 -- 158 2,005,918
Large Cap Growth..... 112,411 -- -- 112,411
Mid Cap Growth(3).... 6,801,623 -- 141 6,801,764
Mini Cap Growth...... 2,458,511 11,009 18,681 2,488,201
Money Market......... 32,231,906 708 -- 32,232,614
Short Intermediate... 1,043,978 -- -- 1,043,978
Small Cap
Growth(4)........... 11,986,928 32,059 1,106,366 13,125,353
Strategic Income..... 308,625 -- -- 308,625
Value................ 399,766 -- 131 399,897
Worldwide Growth..... 350,845 -- -- 350,845
</TABLE>
3. Shareholders of the A, B, C and Advisory Portfolios were asked to vote upon
the proposed reorganization of the A, B, C and Advisory Portfolios pursuant
to an Agreement and Plan of Reorganization providing for (i) the receipt by
each A, B, C and Advisory Portfolio of its pro rata portion of the assets of
the corresponding series of Nicholas-Applegate Investment Trust, upon
dissolution of such series; (ii) the transfer by the A, B, C and Advisory
Portfolios of such assets to the corresponding Fund of the Trust in exchange
for Class A, B, C and Q shares of such Fund; (iii) the receipt by each
shareholder of an A, B, C or Advisory Portfolio of Class A, B, C or Q shares
of the corresponding Fund in exchange for shares of such Portfolio; and (iv)
the termination of the A, B, C and Advisory Portfolios.
- --------------------------------------------------------------------------------
118
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
SHAREHOLDER MEETINGS (UNAUDITED) -- CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO FOR AGAINST ABSTAINING TOTAL
- --------------------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Balanced Growth A.... 137,199 2,658 4,810 144,667
Balanced Growth B.... 79,926 973 2,068 82,967
Balanced Growth C.... 571,784 23,359 19,639 614,782
Balanced Growth Q.... 6,443 -- -- 6,443
Convertible A(1)..... 1,246,268 85,067 53,901 1,385,236
Convertible B(1)..... 598,288 8,941 25,255 632,484
Convertible C(1)..... 1,700,256 40,783 104,070 1,845,109
Convertible Q(1)..... 181,774 518 2,976 185,268
Emerging Countries
A................... 1,389,836 11,056 49,195 1,450,087
Emerging Countries
B................... 871,587 15,106 35,797 922,490
Emerging Countries
C................... 991,168 24,641 43,133 1,058,942
Emerging Countries
Q................... 835,630 13,620 17,059 866,309
Government Income
A(5)................ 35,786 5,208 2,790 43,784
Government Income
B(5)................ 93,081 75 3,084 96,240
Government Income
C(5)................ 206,416 6,536 5,742 218,694
Government Income
Q(5)................ 1,406 -- -- 1,406
International Core
Growth A............ 115,833 500 4,268 120,601
International Core
Growth B............ 171,226 4,838 3,630 179,694
International Core
Growth C............ 41,318 3,710 -- 45,028
International Core
Growth Q............ 45,571 1,163 -- 46,734
International Small
Cap Growth A........ 224,765 132 2,632 227,529
International Small
Cap Growth B........ 226,522 1,596 9,228 237,346
International Small
Cap Growth C........ 110,154 58 39,726 149,938
International Small
Cap Growth Q........ 8,548 201 -- 8,749
Large Cap Growth A... 101,399 1,089 -- 102,488
Large Cap Growth B... 63,775 -- 5,526 69,301
Large Cap Growth C... 9,645 397 -- 10,042
Large Cap Growth Q... 2,046 -- -- 2,046
Mid Cap Growth
A(3)................ 2,184,407 42,489 107,979 2,334,875
Mid Cap Growth
B(3)................ 783,044 8,446 36,576 828,066
Mid Cap Growth
C(3)................ 4,008,874 95,478 494,597 4,598,949
Mid Cap Growth
Q(3)................ 426,681 -- -- 426,681
Small Cap Growth
A(4)................ 4,401,185 176,289 189,843 4,767,317
Small Cap Growth
B(4)................ 917,672 17,971 51,960 987,603
Small Cap Growth
C(4)................ 5,200,887 201,855 436,980 5,839,722
Small Cap Growth
Q(4)................ 79,480 871 3,854 84,205
Worldwide Growth A... 673,839 21,161 26,054 721,054
Worldwide Growth B... 232,913 38 5,799 238,750
Worldwide Growth C... 2,017,936 51,334 99,945 2,169,215
Worldwide Growth Q... 21,757 155 112 22,024
</TABLE>
4. Shareholders for all of the Portfolios were asked to elect the following
Trustees of the Trust to hold office until their successors are elected and
qualified:
Fred C. Applegate
Arthur B. Laffer
Charles E. Young
Arthur E. Nicholas
Dann V. Angeloff
Walter E. Auch
Theodore J. Coburn
Darlene D. Deremer
George F. Keane
For the Portfolios listed, the Trustees each received the following votes:
<TABLE>
<CAPTION>
PORTFOLIO FOR AGAINST ABSTAINING TOTAL
- ---------------------- ---------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Balanced Growth A..... 175,018 1,507 312 176,837
Balanced Growth B..... 116,966 1,831 113 118,910
Balanced Growth C..... 660,578 6,092 741 667,411
Balanced Growth I..... 46,650 -- 34 46,684
Balanced Growth Q..... 6,443 -- -- 6,443
Convertible A(1)...... 1,270,916 116,355 7,836 1,395,107
Convertible B(1)...... 777,283 19,445 7,449 804,177
Convertible C(1)...... 1,932,993 68,945 3,910 2,005,848
Convertible I(1)...... 3,516,133 -- 122 3,516,255
Convertible Q(1)...... 185,909 518 -- 186,427
Emerging Countries A.. 1,666,613+ 68,568+ 12,367 1,797,542
Emerging Countries B.. 1,174,056 51,672 9,029 1,234,757
Emerging Countries C.. 1,249,671 26,476 3,382 1,279,529
Emerging Countries I.. 2,459,570 7,576 1,161 2,468,307
Emerging Countries Q.. 1,087,663 40,089 -- 1,127,752
Emerging Markets Bond
I.................... 344,193 -- -- 344,193
Global Blue Chip I.... 596,188 -- -- 596,188
Global Growth & Income
I.................... 309,853 -- -- 309,853
Government Income
A(5)................. 43,632 953 4,606 49,191
Government Income
B(5)................. 136,668++ 948 -- 137,616
Government Income
C(5)................. 202,611 6,048 14,809 223,468
Government Income
Q(5)................. 1,406 -- -- 1,406
High Quality Bond
I(2)................. 1,095,280 -- 8 1,095,288
High Yield Bond
I(1)................. 338,312 -- -- 338,312
</TABLE>
- --------------------------------------------------------------------------------
119
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
SHAREHOLDER MEETINGS (UNAUDITED) -- CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO FOR AGAINST ABSTAINING TOTAL
- ---------------------- ---------------- ------------ ----------- -----------
International Core
Growth A............. 134,930 10,297 1,268 146,495
<S> <C> <C> <C> <C>
International Core
Growth B............. 182,340 7,667 1,377 191,384
International Core
Growth C............. 60,098 -- 1,115 61,213
International Core
Growth I............. 1,638,981 -- -- 1,638,981
International Core
Growth Q............. 45,571 1,163 -- 46,734
International Small
Cap Growth A......... 260,326 7,423+++ 132 267,881
International Small
Cap Growth B......... 281,546 13,462 1,338 296,346
International Small
Cap Growth C......... 169,390++++ 7,515 581 176,986
International Small
Cap Growth I......... 2,005,760 -- 158 2,005,918
International Small
Cap Growth Q......... 8,749 -- -- 8,749
Large Cap Growth A.... 104,774 -- -- 104,774
Large Cap Growth B.... 76,170 7,007 7 83,184
Large Cap Growth C.... 12,647 -- 251 12,898
Large Cap Growth I.... 112,411 -- -- 112,411
Large Cap Growth Q.... 2,554 -- -- 2,554
Latin America I....... 86,894 -- -- 86,894
Mid Cap Growth A(3)... 2,661,222 89,517 8,343 2,759,082
Mid Cap Growth B(3)... 1,087,174 51,311 10,622 1,149,107
Mid Cap Growth C(3)... 5,135,927 -- 385,760 5,521,687
Mid Cap Growth I(3)... 6,802,230 -- -- 6,802,230
Mid Cap Growth Q(3)... 594,557 -- -- 594,557
Mini Cap Growth I..... 3,177,559 8,288 5,616 3,191,463
Money Market.......... 34,608,375 -- 751 34,609,126
Short Intermediate
I.................... 1,043,978 -- -- 1,043,978
Small Cap Growth
A(4)................. 5,298,173 -- 144,089 5,442,262
Small Cap Growth
B(4)................. 1,180,573 51,027 5,689 1,237,289
Small Cap Growth
C(4)................. 6,379,457 -- 226,912 6,606,369
Small Cap Growth
I(4)................. 11,986,514 32,059 1,106,779 13,125,352
Small Cap Growth
Q(4)................. 83,614 -- -- 83,614
Strategic Income I.... 308,625 -- -- 308,625
Value I............... 399,635 -- 131 399,766
Worldwide Growth A.... 804,022 21,337 3,046 828,405
Worldwide Growth B.... 314,449 3,240 1,949 319,638
Worldwide Growth C.... 2,272,218 -- 58,763 2,330,981
<CAPTION>
PORTFOLIO FOR AGAINST ABSTAINING TOTAL
- ---------------------- ---------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Worldwide Growth I.... 350,845 -- -- 350,845
Worldwide Growth Q.... 14,220 -- 112 14,332
</TABLE>
+ For Emerging Countries Portfolio A, Fred C. Applegate, Arthur B. Laffer
and Charles E. Young each received 1,716,613 votes "for" and 68,562
votes "against" election.
++ For Government Income Portfolio B, Arthur B. Laffer received 140,452
votes "for" election.
+++ For International Small Cap Growth A, Fred C. Applegate received 14,623
votes "against" election.
++++ For International Small Cap Growth C, Fred C. Applegate received 168,890
votes "for" election.
5. Shareholders were asked to ratify the selection of Ernst & Young, L.L.P. as
independent accountants for the Trust.
<TABLE>
<CAPTION>
PORTFOLIO FOR AGAINST ABSTAINING TOTAL
- ----------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balanced Growth A............ 173,471 268 3,097 176,836
Balanced Growth B............ 116,732 -- 2,177 118,909
Balanced Growth C............ 637,650 20,713 9,047 667,410
Balanced Growth I............ 46,684 -- -- 46,684
Balanced Growth Q............ 6,443 -- -- 6,443
Convertible A(1)............. 1,360,911 4,607 29,588 1,395,106
Convertible B(1)............. 787,787 1,783 14,608 804,178
Convertible C(1)............. 1,934,565 15,151 56,133 2,005,849
Convertible I(1)............. 3,516,254 -- -- 3,516,254
Convertible Q(1)............. 185,067 429 930 186,426
Emerging Countries A......... 1,707,053 5,985 34,271 1,747,309
Emerging Countries B......... 1,206,380 6,100 22,279 1,234,759
Emerging Countries C......... 1,254,750 8,587 16,192 1,279,529
Emerging Countries I......... 2,466,786 112 1,409 2,468,307
Emerging Countries Q......... 1,112,378 6,525 8,849 1,127,752
Emerging Markets Bond I...... 344,193 -- -- 344,193
Global Blue Chip I........... 596,188 -- -- 596,188
Global Growth & Income I..... 309,853 -- -- 309,853
Government Income A(5)....... 40,659 1,137 7,396 49,192
Government Income B(5)....... 135,679 -- 1,937 137,616
Government Income C(5)....... 204,329 -- 19,139 223,468
Government Income Q(5)....... 1,406 -- -- 1,406
High Quality Bond I(2)....... 1,095,280 -- 8 1,095,288
High Yield Bond.............. 338,312 -- -- 338,312
International Core Growth A.. 133,197 510 12,789 146,496
International Core Growth B.. 184,911 2,843 4,377 192,131
International Core Growth C.. 61,214 -- -- 61,214
International Core Growth
I........................... 46,734 -- -- 46,734
International Core Growth Q.. 1,638,981 -- -- 1,638,981
International Small Cap
Growth A.................... 266,899 -- 982 267,881
</TABLE>
- --------------------------------------------------------------------------------
120
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
SHAREHOLDER MEETINGS (UNAUDITED) -- CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO FOR AGAINST ABSTAINING TOTAL
- ----------------------------- ----------- ----------- ----------- -----------
International Small Cap
Growth B.................... 284,198 2,032 10,117 296,347
<S> <C> <C> <C> <C>
International Small Cap
Growth C.................... 172,826 3 4,657 177,486
International Small Cap
Growth I.................... 2,005,760 -- 158 2,005,918
International Small Cap Q.... 8,749 -- -- 8,749
Large Cap Growth A........... 103,685 1,089 1,179 105,953
Large Cap Growth B........... 76,480 -- 5,704 82,184
Large Cap Growth C........... 12,250 397 251 12,898
Large Cap Growth I........... 112,411 -- -- 112,411
Large Cap Growth Q........... 2,554 -- -- 2,554
Latin America I.............. 86,894 -- -- 86,894
Mid Cap Growth A(3).......... 2,693,525 20,617 44,942 2,759,084
Mid Cap Growth B(3).......... 1,117,102 11,372 20,633 1,149,107
Mid Cap Growth C(3).......... 5,135,292 44,582 356,248 5,536,122
Mid Cap Growth I(3).......... 6,802,371 -- -- 6,802,371
Mid Cap Growth Q(3).......... 591,517 3,040 -- 594,557
Mini Cap Growth I............ 3,168,700 3,496 19,265 3,191,461
Money Market................. 35,332,925 13 22,145 35,355,083
Short Intermediate I......... 1,043,954 24 -- 1,043,978
Small Cap Growth A(4)........ 5,324,588 35,475 210,997 5,571,060
Small Cap Growth B(4)........ 1,204,324 12,498 20,463 1,237,285
Small Cap Growth C(4)........ 6,389,013 71,618 157,262 6,617,893
Small Cap Growth I(4)........ 7,229,243 -- 5,896,109 13,125,352
Small Cap Growth Q(4)........ 90,625 871 2,802 94,298
Strategic Income I........... 308,625 -- -- 308,625
Value I...................... 399,635 -- 131 399,766
Worldwide Growth A........... 802,970 3,437 21,998 828,405
Worldwide Growth B........... 314,659 1,004 3,975 319,638
Worldwide Growth C........... 2,291,944 10,935 35,866 2,338,745
Worldwide Growth I........... 350,845 -- -- 350,845
Worldwide Growth Q........... 22,025 -- -- 22,025
</TABLE>
1 Prior to July 24, 1998, the Portfolios were named Income & Growth
Portfolios.
2 Prior to July 24, 1998, the Portfolio was named Fully Discretionary
Fixed Income Portfolio I.
3 Prior to July 24, 1998, the Portfolios were named Core Growth
Portfolios.
4 Prior to July 24, 1998, the Portfolios were named Emerging Growth
Portfolios.
5 On July 24, 1998, Government Income Portfolios A, B, C and Qualified
transferred their assets to the Fully Discretionary Fixed Income
Portfolio, which subsequently changed its name to the High Quality Bond
Fund.
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121
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
FEDERAL TAX INFORMATION (UNAUDITED)
- ------------------------------------------------------------------------
Pursuant to section 852 of the I.R.C., as amended, the Funds hereby designate
the following amounts as capital gain:
<TABLE>
<S> <C>
Convertible..................................... 790,823
Emerging Countries.............................. 433,310
Global Blue Chip................................ 2,866
High Quality Bond............................... 82,031
International Core Growth....................... --
International Small Cap......................... 2,221,926
Large Cap Growth................................ --
Mid Cap Growth.................................. 5,782,119
Mini Cap Growth................................. 4,859,971
Small Cap Growth................................ 19,119,994
Value........................................... 591,285
Worldwide Growth................................ 1,925,187
</TABLE>
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122
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- ------------------------------------------------------------------------
ERNST & YOUNG LLP
725 SOUTH FIGUEROA STREET
LOS ANGELES, CALIFORNIA 90017
PHONE: 213 977 3200
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED PILGRIM MUTUAL FUNDS)
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the following series of
Nicholas-Applegate Mutual Funds (renamed Pilgrim Mutual Funds): Large Cap Growth
Fund, Value Fund, Mid Cap Growth Fund (formerly Core Growth Fund), Small Cap
Growth Fund (formerly Emerging Growth Fund), Mini Cap Growth Fund, Convertible
Fund (formerly Income & Growth Fund), High Quality Bond Fund (formerly Fully
Discretionary Fixed Income Fund), High Yield Bond Fund, Short-Intermediate Fund,
International Core Growth Fund, International Small Cap Growth Fund (formerly
International Growth Fund), Emerging Countries Fund, Greater China Fund, Latin
America Fund, Pacific Rim Fund, Worldwide Growth Fund, Global Blue Chip Fund,
Global Growth & Income Fund and Global Technology Fund (hereinafter the "Funds")
as of March 31, 1999, and the related statements of operations for the fiscal
year then ended, the statements of changes in net assets for each of the two
fiscal years in the period then ended and the financial highlights of the Funds'
Institutional shares (Class I) for each of the four fiscal years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the fiscal year ended March 31, 1995 were
audited by other auditors whose report dated May 12, 1995 expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of March 31, 1999, by correspondence with the custodians and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and the 1996 through 1999 financial
highlights referred to above present fairly, in all material respects, the
financial position of each of the respective above-mentioned Funds of
Nicholas-Applegate Mutual Funds (renamed Pilgrim Mutual Funds) as of March 31,
1999, the results of their operations for the fiscal year then ended, changes in
their net assets for each of the two fiscal years in the period then ended, and
the financial highlights for each of the four fiscal years in the period then
ended, as described in the first paragraph, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
May 7, 1999
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123
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<PAGE>
TRUSTEES_ OF_ PILGRIM_ MUTUAL_ FUNDS
Arthur E. Nicholas
Fred C. Applegate
Dr. Arthur B. Laffer
Charles E. Young
Dann V. Angeloff
Walter A. Auch
Theodore J. Coburn
Darlene T. DeRemer
George F. Keane
OFFICERS
Arthur E. Nicholas, PRESIDENT
Peter J. Johnson, VICE PRESIDENT
E. Blake Moore, Jr., SECRETARY
William Maher, TREASURER
INVESTMENT_ MANAGER
Nicholas-Applegate Capital Management
DISTRIBUTOR
Nicholas-Applegate Securities
CUSTODIAN
PNC Bank
TRANSFER_ AGENT
State Street Bank & Trust Company
<PAGE>
NICHOLAS-APPLEGATE-Registered
Trademark-
MUTUAL FUNDS
600 West Broadway
San Diego, California 92101
800 - 551 - 8643
Nicholas-Applegate Securities, Distributor
ANN98INST
