<PAGE>
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LKCM FUND
P.O. BOX 2798
BOSTON, MA 02208-2798
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OFFICERS AND TRUSTEES
Luther King John M. Corcoran
Chairman of the Board, Assistant Treasurer
President
Raymond H. Edelman
H. Kirk Downey Assistant Treasurer
Trustee
Karl O. Hartman
Earle A. Shields, Jr. Assistant Secretary
Trustee
David D. May
Vice President, Treasurer
and Secretary
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INVESTMENT ADVISER
Luther King Capital Management Corp.
301 Commerce Street, Suite 1600
Fort Worth, TX 76102
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ADMINISTRATOR
Chase Global Funds Services Company
73 Tremont Street, Boston, MA 02108-3913
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CUSTODIAN
The Chase Manhattan Bank, N.A.
770 Broadway, New York, NY 10003-9598
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LEGAL COUNSEL
Gardere & Wynne
3000 Thanksgiving Tower Dallas, TX 75201
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INDEPENDENT AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
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DISTRIBUTOR
San Jacinto Securities, Inc.
5949 Sherry Lane, Suite 960
Dallas, TX 75225
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This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
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LKCM FUND
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LKCM SMALL
CAP EQUITY
PORTFOLIO
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SEMI-ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
LKCM FUND
---------------------
---------------------
DEAR SHAREHOLDERS:
We are pleased to report the following performance information for the LKCM
Small Cap Equity Portfolio (the "Fund"):
<TABLE>
<CAPTION>
AVERAGE
TOTAL ANNUALIZED
TOTAL RETURN SINCE TOTAL TOTAL RETURN
NET ASSET RETURN FOR THE INCEPTION RETURN FOR THE ONE YEAR SINCE INCEPTION
VALUE AT SIX MONTH PERIOD (7/14/94) THRU PERIOD FROM 1/1/95 TOTAL RETURN (7/14/94) THRU
10/31/95 ENDED 10/31/95 10/31/95 TO 10/31/95 ENDED 9/30/95 9/30/95
- --------- ---------------- -------------- ------------------ ------------- ---------------
<S> <C> <C> <C> <C> <C>
$12.78 11.32%** 27.80%** 21.71%** 24.79%** 25.75%**
</TABLE>
We would also like to announce the introduction of a convenient toll free
number to reach us with any of your questions or comments. The number is 1-
800/688-LKCM (5526).
The leadership in the market continues to be driven by stocks of larger
companies. Over the past eighteen months, small stocks as measured by the
Russell 2000 Index, have underperformed large stocks as measured by the
Standard and Poor's 500 Index, by more than 9%. This is especially significant
when compared with historical data in which stocks of small companies have
outperformed stocks of larger companies by over 2% per year on average. We
would expect this divergence to correct back to the historical normal returns;
therefore, we view this as an opportunity for the shareholders of this Fund.
Small companies are relatively inexpensive when compared with large
companies in terms of valuation parameters such as price/earnings and
price/cash flow. Stocks of small companies may also benefit from a proposed
tax cut, which would increase the premium investors will pay for smaller,
faster growing companies relative to larger companies. The Fund has a large
percentage of its investments in companies based in the Southwest, which we
believe offers a unique opportunity to investors to participate in a faster
growing segment of the national economy.
The total net asset value of the Fund as of October 31, 1995, was
$112,245,000 of which $92,057,000 was invested in common stocks and
$17,988,000 in short term interest-bearing securities. The Fund has a
diversified list of companies operating in many different industries. The
retail sector of the Fund represents 5.4% of the total net assets and is a
sector that has been out of favor with Wall Street investors, which we believe
may be an opportunity for the Fund in the future. The largest industry
holdings were health care, 16.0%, energy, 10.5%, and financial services, 8.4%.
We continue to evaluate the market for new company and industry investment
opportunities.
We appreciate the confidence you have placed in us, and we welcome any
comments or questions you may have.
Regards,
/s/ Luther King
November 29, 1995
** Total return reflects expenses waived and reimbursed by the Adviser.
Without such waivers or reimbursement, total return would be lower. Past
performance is not predictive of future performance. Your investment return
and principal value will fluctuate, thus when shares are redeemed, they may be
worth more or less than their original cost.
1
<PAGE>
STATEMENT OF NET ASSETS
October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (82.0%)
- --------------------------------------------------------------------------------
BASIC RESOURCES (5.5%)
Freeport McMoRan, Inc. ..................................... 50,166 $ 1,875
Longview Fibre Co. ......................................... 55,000 797
Mississippi Chemical Corp. ................................. 50,000 1,206
Reliance Steel & Aluminum Co. .............................. 35,000 582
Vigoro Group................................................ 40,000 1,735
--------
6,195
--------
- --------------------------------------------------------------------------------
CONSUMER & COMMERCIAL SERVICES (7.2%)
AMP, Inc. .................................................. 40,000 1,570
*Carmike Cinemas, Inc. Class A............................... 60,200 1,257
*Kent Electronics Corp. ..................................... 52,050 2,537
National Service Industries, Inc. .......................... 41,300 1,229
Olsten Corp. ............................................... 10,000 385
Premier Industrial Corp. ................................... 45,000 1,119
--------
8,097
--------
- --------------------------------------------------------------------------------
CONSUMER DURABLES (3.4%)
Centex Corp. ............................................... 50,000 1,637
Justin Industries, Inc. .................................... 110,000 1,100
TJ International, Inc. ..................................... 60,000 1,039
--------
3,776
--------
- --------------------------------------------------------------------------------
ENERGY (10.5%)
Arethusa (Off Shore) Ltd. .................................. 50,000 969
*Brown (Tom), Inc. .......................................... 23,000 256
Cairn Energy USA, Inc. ..................................... 106,000 1,272
*Coda Energy, Inc. .......................................... 200,000 1,500
Diamond Offshore Drilling, Inc. ............................ 40,000 995
Falcon Drilling Co., Inc. .................................. 67,500 700
*Hornbeck Offshore Services, Inc. ........................... 86,200 1,261
*ICO, Inc. .................................................. 169,300 804
*Nabors Industries, Inc. .................................... 50,000 431
Noble Affiliates, Inc. ..................................... 60,000 1,485
*Noble Drilling Corp. ....................................... 140,000 980
*Parallel Petroleum Corp. ................................... 120,000 225
Western Gas Resources, Inc. ................................ 55,000 859
--------
11,737
--------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENVIRONMENT (0.8%)
*U.S. Filter Corp............................................ 40,000 $ 930
--------
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (8.4%)
Atlantic Gulf Communities Corp. ............................ 87,000 598
*Capsure Holdings Corp. ..................................... 81,700 1,113
Crescent Real Estate Equities, Inc. ........................ 40,000 1,280
Cullen/Frost Bankers, Inc. ................................. 25,000 1,275
First Victoria National Bank................................ 9,000 201
Gainsco, Inc. .............................................. 60,637 523
Greenpoint Financial Corp. ................................. 25,000 675
Life Partners Group, Inc. .................................. 80,000 1,450
Mercantile Bancorp.......................................... 20,000 880
Northern Trust Corp. ....................................... 20,000 955
Titan Holdings, Inc. ....................................... 30,450 430
--------
9,380
--------
- --------------------------------------------------------------------------------
HEALTH CARE (16.0%)
*Amsco International, Inc. .................................. 161,000 2,576
Bard (C. R.), Inc. ......................................... 75,000 2,119
*Biogen, Inc. ............................................... 15,000 919
*Charter Medical Corp. ...................................... 30,000 540
*Emcare Holdings, Inc. ...................................... 73,000 1,679
Fisher Scientific International, Inc. ...................... 35,400 1,111
*Genzyme Corp.--General Division............................. 20,000 1,165
Kinetic Concepts, Inc. ..................................... 100,000 1,113
*Maxxim Medical, Inc. ....................................... 120,000 1,665
OccuSystems, Inc. .......................................... 20,000 414
*PhyCor, Inc. ............................................... 39,625 1,456
*Scherer R.P. Corp. ......................................... 20,000 890
*Sybron International Corp. ................................. 25,000 1,063
*TECHNOL Medical Products, Inc. ............................. 67,000 1,273
--------
17,983
--------
- --------------------------------------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION (8.0%)
Air Express International Corp. ............................ 30,000 622
*Covenant Transport, Inc., Class A........................... 70,000 892
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- ----------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- ----------------------------------------------------------------------------------
HEAVY INDUSTRY/TRANSPORTATION--(CONTINUED)
Expeditors International of Washington, Inc. ................. 16,000 $ 420
*Kirby Corp. .................................................. 205,900 3,397
Lawson Products, Inc. ........................................ 58,500 1,404
Railtex, Inc. ................................................ 87,200 1,809
*UNC, Inc. .................................................... 86,700 499
--------
9,043
--------
- ----------------------------------------------------------------------------------
PUBLISHING & BROADCASTING (7.1%)
Belo (A.H.) Corp., Class A.................................... 50,000 1,731
*Clear Channel Communications, Inc. ........................... 4,000 328
Comcast Corp. ................................................ 80,000 1,430
*Comcast UK Cable Partners Ltd. ............................... 80,000 1,030
*Heftel Broadcasting Corp. .................................... 76,800 1,402
*Infinity Broadcasting Corp., Class A.......................... 15,000 487
*Jacor Communications, Inc. ................................... 13,900 212
*Saga Communication, Inc. ..................................... 27,500 433
Thomas Nelson, Inc. .......................................... 30,000 499
Wiley (John) & Sons, Inc., Class A............................ 8,000 238
Wireless One, Inc. ........................................... 20,000 235
--------
8,025
--------
- ----------------------------------------------------------------------------------
RETAIL (5.4%)
Borders Group, Inc. .......................................... 60,000 1,027
*Cameron Ashley, Inc. ......................................... 150,000 1,162
*Central Tractor Farm & Country, Inc. ......................... 37,000 250
Cross (A.T.) Co., Class A..................................... 38,400 547
Gadzooks, Inc. ............................................... 30,000 555
Haverty Furniture Co., Inc. .................................. 12,000 167
*Tractor Supply Co. ........................................... 53,000 835
*Whole Foods Market, Inc.. .................................... 122,000 1,495
--------
6,038
--------
- ----------------------------------------------------------------------------------
TECHNOLOGY (3.3%)
*Black Box Corp. .............................................. 60,000 975
Novadigm, Inc. ............................................... 47,500 974
3D Systems Corp. ............................................. 100,000 1,713
--------
3,662
--------
- ----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (6.4%)
*Airtouch Communications, Inc. ............................... 50,000 $ 1,425
*Cellular Communications, Inc. Class A........................ 25,000 1,341
*Metrocall, Inc. ............................................. 75,000 1,875
*Pronet, Inc. ................................................ 100,000 2,550
--------
7,191
--------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $86,418)........................... 92,057
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
CASH EQUIVALENTS (16.0%)
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT
The Chase Manhattan Bank, N.A. 5.60%, dated 10/31/95, due
11/1/95, to be repurchased at $17,991, collateralized by
$14,115 U.S. Treasury Bonds 8.875% due 8/15/17, valued
at $18,350 (COST $17,988)................................ $17,988 17,988
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.0%) (COST $104,406)................. 110,045
- ------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (2.0%)
- ------------------------------------------------------------------------------
Cash.............................................................. 1
Receivable for Investments Sold................................... 3,266
Receivable for Portfolio Shares Sold.............................. 27
Dividends Receivable.............................................. 42
Interest Receivable............................................... 3
Other Assets...................................................... 49
Payable for Investments Purchased................................. (914)
Payable for Investment Advisory Fees.............................. (183)
Payable for Administrative Fees................................... (19)
Other Liabilities................................................. (72)
--------
2,200
- ------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 8,785,667 outstanding shares of beneficial interest
(unlimited authorization, no par value).......................... $112,245
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE.................................................... $ 12.78
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
OCTOBER 31,
1995
(In Thousands) (UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends.................................................. $ 321
Interest................................................... 394
- -------------------------------------------------------------------------------
TOTAL INCOME.............................................. 715
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee................................................. $ 340
Less: Fee Waived.......................................... (42) 298
-----
Administrative Fees--Note C................................ 102
Trustees' Fees--Note E..................................... 7
Other Expenses............................................. 47
- -------------------------------------------------------------------------------
TOTAL EXPENSES............................................ 454
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME.................................... 261
- -------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS............................ 6,306
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS........ 1,660
- -------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN AND NET CHANGE IN UNREALIZED APPRE-
CIATION.................................................... 7,966
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $8,227
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JULY 14, 1994** OCTOBER 31,
TO APRIL 30, 1995
(In Thousands) 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................. $ 234 $ 261
Net Realized Gain................................. 470 6,306
Net Change in Unrealized Appreciation............. 3,979 1,660
- -------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions........................................... 4,683 8,227
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular................................... 62,359 43,197
Redeemed.......................................... (406) (5,915)
- -------------------------------------------------------------------------------
Net Increase from Capital Share Transactions..... 61,953 37,282
- -------------------------------------------------------------------------------
Total Increase.................................... 66,636 45,509
Net Assets:
Beginning of Period............................... 100 66,736
- -------------------------------------------------------------------------------
End of Period (2)................................. $66,736 $112,245
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Shares Issued and Redeemed:
Shares Issued................................ 5,841 3,423
Shares Redeemed.............................. (36) (452)
------- --------
5,805 2,971
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(2) Net Assets Consist of:
Paid in Capital.............................. $62,045 $ 99,327
Undistributed Net Investment Income.......... 242 503
Accumulated Net Realized Gain................ 470 6,776
Unrealized Appreciation...................... 3,979 5,639
------- --------
$66,736 $112,245
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
JULY 14, ENDED
1994** TO OCTOBER 31,
APRIL 30, 1995
1995 (UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................... $10.00 $11.48
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income+................................. 0.04 0.02
Net Realized and Unrealized Gain on Investments........ 1.44 1.28
- -------------------------------------------------------------------------------
Total From Investment Operations...................... 1.48 1.30
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.......................... $11.48 $12.78
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN++.......................................... 14.80% 11.32%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands)................... $66,736 $112,245
Ratio of Expenses to Average Net Assets................. 1.00%* 1.00%*
Ratio of Net Investment Income to Average Net Assets.... 1.15%* 0.57%*
Portfolio Turnover Rate................................. 53% 47%
- -------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntarily waived fees and reimbursed expenses of $0.04 and $0.003
per share for the periods ended April 30, 1995 and October 31, 1995,
respectively.
++ Total return would have been lower had the Adviser not waived or reimbursed
certain expenses during the periods ended April 30, 1995 and October 31,
1995.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
LKCM FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
LKCM Fund (the "Fund") was established under Delaware law by a Declaration
of Trust dated February 10, 1994 and is registered under the Investment
Company Act of 1940 as an open-end, management investment company. The LKCM
Small Cap Equity Portfolio (the "Portfolio"), a diversified portfolio of the
Fund, commenced operations on July 14, 1994.
A. SIGNIFICANT ACCOUNTING POLICIES. The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the Portfolio
in the preparation of its financial statements.
1. SECURITY VALUATION: Securities listed on a U.S. securities exchange or
NASDAQ for which market quotations are readily available are valued at the
last quoted sales price on the day the valuation is made. Price information
on listed securities is taken from the exchange where the security is
primarily traded. Unlisted U.S. securities and listed U.S. securities not
traded on the valuation date for which market quotations are readily
available are valued at the mean of the most recent quoted bid and asked
price. Securities listed on a foreign exchange for which market quotations
are readily available are valued at the latest quoted sales price available
before the time when assets are valued. Fixed-income securities (other than
obligations having a maturity of 60 days or less) are normally valued on
the basis of quotes obtained from pricing services. Fixed-income securities
purchased with remaining maturities of 60 days or less are valued at
amortized cost if it reflects fair value. Other assets and securities for
which no quotations are readily available (including restricted securities)
will be valued in good faith at fair value using methods determined by the
Board of Trustees.
2. FEDERAL INCOME TAXES: It is the Portfolio's intention to continue to
qualify for taxation as a regulated investment company under the Internal
Revenue Code so that the Portfolio will not be subject to Federal income
tax to the extent it distributes its income to its shareholders.
Paid in capital and undistributed net investment income have been adjusted
for permanent book tax differences.
At October 31, 1995, the Portfolio's cost for Federal income tax purposes
was approximately $104,406,000. Unrealized appreciation for Federal income
tax purposes aggregated $5,639,000 of which $8,976,000 related to
appreciated securities and $3,337,000 related to depreciated securities.
3. REPURCHASE AGREEMENTS: The Portfolio may enter into repurchase
agreements with brokers, dealers or banks that meet the credit guidelines
established by the Board of Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase it at
a mutually agreed upon date and price, reflecting the interest rate
effective for the term of the agreement. The term of these agreements is
usually from overnight to one week and never exceeds one year. A repurchase
agreement may be viewed as a fully collateralized loan of money by the
Portfolio to the seller. The Portfolio always receives securities as
collateral with a market value at least equal to the purchase price,
including accrued interest, and this value is maintained during the term of
the agreement. If the seller defaults and the collateral value declines,
the Portfolio might incur a loss. If bankruptcy proceedings are commenced
with respect to the seller, the Portfolio's realization upon the collateral
may be delayed or limited.
4. DISTRIBUTION TO SHAREHOLDERS: The Portfolio intends to pay dividends and
net capital gains distributions, if any, on an annual basis. All
distributions will be recorded on ex-dividend date.
9
<PAGE>
LKCM FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
The amount and character of income and capital gain distributions are
determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles.
5. OTHER. Security transactions are accounted for on the date the
securities are purchased or sold. Costs used in determining realized gains
and losses on the sale of investment securities are those of specific
securities sold. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recognized using the
accrual basis.
B. ADVISORY SERVICES: Luther King Capital Management Corporation (the
"Adviser"), serves as the investment adviser to the Portfolio. Under an
Investment Advisory Agreement (the "Agreement"), the Adviser receives a fee
calculated by applying a quarterly rate, equal on an annual basis to .75% of
the Portfolio's average daily net assets for the quarter. Until further
notice, the Adviser has voluntarily agreed to waive its advisory fees and to
reimburse expenses to the extent necessary to keep total operating expenses
from exceeding 1.00%.
C. ADMINISTRATIVE SERVICES: Effective September 1, 1995, Chase Global Funds
Services Company (the "Administrator"), an affiliate of The Chase Manhattan
Bank, NA, ("Chase") and formerly Mutual Funds Service Company, provides the
Portfolio with administrative, fund accounting, dividend disbursing and
transfer agency services pursuant to a fund administration agreement.
Effective September 1, 1995, Chase provides the Portfolio with custodial
services pursuant to a custodial agreement. Pursuant to the fund
administration agreement and the custody agreement, the Portfolio pays the
administrator an aggregate monthly fee, which on an annualized basis equals
.215% of the first $75 million of the average daily net assets of the
Portfolio; plus .135% of the next $75 million of the average daily net assets
of the Portfolio; plus .095% of the average daily net assets of the Portfolio
in excess of $150 million (with a minimum annual fee of $145,000 plus .015% of
average daily net assets). Prior to September 1, 1995, Mutual Funds Service
Company and United States Trust Company of New York provided administration
and custodial services to the Portfolio under the same terms, conditions and
fees as stated above.
D. PURCHASES AND SALES: For the period ended October 31, 1995, the Portfolio
made purchases of approximately $64,046,000 and sales of $36,246,000 on
investment securities other than long-term U.S. Government Securities and
temporary cash investments. There were no purchases and sales of long-term
U.S. Government securities.
E. BOARD OF TRUSTEES: Trustees, other than those who are officers or
affiliates of the Adviser, receive an annual fee plus a meeting fee for each
meeting attended and are reimbursed for expenses incurred in attending Board
Meetings.
F. OTHER: During the period ended October 31, 1995, the Portfolio incurred
approximately $3,300 in brokerage commission fees paid to San Jacinto
Securities, Inc., an affiliated broker/dealer of the Portfolio.
At October 31, 1995, 26.7% of total shares outstanding were held by two record
shareholders owning 10% or greater of the aggregate total shares outstanding.
10
