LKCM FUNDS
P.O. BOX 701
MILWAUKEE, WI 53201-0701
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
J. Luther King, Jr., CFA Jacqui Brownfield
Chairman of the Board, Secretary & Treasurer
President
Paul W. Greenwell Joseph C. Neuberger
Vice President Assistant Treasurer
H. Kirk Downey Victoria A. Kampa
Trustee Assistant Secretary
Earle A. Shields, Jr. Robert Kern
Trustee Assistant Secretary
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Luther King Capital Management Corporation
301 Commerce Street, Suite 1600
Fort Worth, TX 76102
- --------------------------------------------------------------------------------
ADMINISTRATOR, TRANSFER AGENT, DIVIDEND
PAYING AGENT, SHAREHOLDER SERVICING
AGENT & CUSTODIAN
Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
- --------------------------------------------------------------------------------
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS
Deloitte & Touche LLP
411 East Wisconsin Avenue
Milwaukee, WI 53202
- --------------------------------------------------------------------------------
DISTRIBUTOR
First Data Distributors, Inc.
4400 Computer Drive
Westboro, MA 01581
- --------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
<PAGE>
- --------------------------------------------------------------------------------
LKCM
FUNDS
- --------------------------------------------------------------------------------
LKCM SMALL CAP EQUITY FUND
LKCM EQUITY FUND
LKCM BALANCED FUND
LKCM FIXED INCOME FUND
LKCM INTERNATIONAL FUND
Semi-Annual Report
June 30, 1999
<PAGE>
LKCM FUNDS
===============
DEAR FELLOW SHAREHOLDERS:
We are pleased to report the following performance information for the LKCM
Funds:
<TABLE>
<CAPTION>
AVERAGE
SIX MONTH ANNUAL
TOTAL TOTAL
NET ASSET RETURN RETURN
INCEPTION VALUE AT ENDED SINCE
FUNDS DATES 6/30/99 6/30/99 INCEPTION
<S> <C> <C> <C> <C> <C>
LKCM Equity Fund 01/03/96 $16.30 13.27% 19.28%
S&P 500 12.38% 27.99%
LKCM Small Cap Fund 07/14/94 $17.27 9.86% 17.25%
Russell 2000 9.28% 15.00%
S&P 500 12.38% 27.54%
LKCM International Fund 12/30/97 $11.21 1.82% 7.93%
EAFE Index* 3.97% 15.94%
LKCM Balanced Fund 12/30/97 $11.85 8.18% 14.26%
S&P 500 12.38% 27.90%
Lehman Bond Index** (2.28%) 3.95%
LKCM Fixed Income Fund 12/30/97 $9.89 (1.12%) 4.02%
Lehman Bond Index** (2.28%) 3.95%
</TABLE>
* Morgan Stanley Capital International Europe, Australasia, Far East Index
**Lehman Brothers Intermediate Government/Corporate Bond Index
The U.S stock market proved resilient in the first half of 1999, especially
in the face of interest rates that have risen steadily since the beginning of
the year. But, more importantly, the first half of 1999 may have marked an
inflection point in the make-up of stock market returns. Over the last several
years, the stock market's tremendous advance has been driven by out-sized
performance of shares among an exclusive, and ever-narrowing, group of large,
growth-oriented companies. This phenomenon was sustained for most of the first
quarter as investors continued to fixate on a handful of predictable
large-companies despite extreme price performance and valuation dichotomies.
However, as sentiment towards recovering global economies became more favorable
and concerns mounted about rising interest rates, shares of small and mid-sized
companies surged. In a sense, the drivers of the strong stock market performance
in the first half of 1999, in the face of rising interest rates, were also the
drivers of a greater number of companies participating in the market advance.
Over the last two quarters, company earnings have generally exceeded
expectations held by investors as we entered the year. At the same time, the
emerging economies, whose problems troubled global financial markets last year,
showed signs of recovery. One repercussion of the broad-based economic strength
was higher industrial commodity prices, including oil, and the consequent rise
in interest rates, which culminated in a precautionary response by the Federal
Reserve to tighten monetary policy as a defense against looming inflationary
pressures. Of course, the overall investment climate described above influences
the investment returns of the LKCM Funds.
The LKCM Equity Fund is managed to provide long-term capital appreciation
via investment primarily in common stocks of mid-sized and large companies.
During the first half of 1999, the LKCM Equity Fund outpaced its benchmark, the
S&P 500, and continued to post attractive absolute total returns. In addition to
a stock selection process that emphasizes quality companies with above-average
profitability, utilization of a valuation discipline paid off during the
quarter. The performance impact of the fund's under-weight position in
technology and communications versus the S&P 500 was largely offset by superior
1
<PAGE>
stock selection in those sectors. An overweight position in the energy sector
also positively impacted performance. As of June 30, 1999, the total net assets
of the portfolio were $44,967,225 with 92.5% of net assets invested in common
stocks and 7.5% in cash reserves net of liabilities. The Fund's collection of
attractively-valued investments in the common stocks of larger companies with
strong free cash flow and medium-sized companies with niche businesses positions
the fund well for the balance of the year.
The LKCM Small Cap Fund is managed to maximize capital appreciation through
investment primarily in the shares of smaller companies. The total return of the
LKCM Small Cap Fund for the first half of 1999 exceeded that of its primary
benchmark, the Russell 2000 Index. The Fund's successful investment strategy
focuses on investing in shares of reasonably valued, niche companies with above
average return and growth prospects. Our attraction to reasonable value helped
the Fund outperform the negative returns experienced by shares of small
companies in the first quarter while our appreciation for growth as a
performance driver allowed the fund to keep up with strong small-stock returns
in June. The performance of individual stocks had a greater impact on portfolio
performance than did sector weightings relative to the Russell 2000. In general,
the Fund had an overweight position in energy, healthcare, and consumer-related
companies. Technology and Finance were under-represented in the portfolio. As of
June 30, 1999, total net assets of the portfolio were $225,916,924 with 92.1% of
net assets invested in common and preferred stocks and 7.9% in cash reserves net
of liabilities. The Fund has taken advantage of small companies being
"out-of-favor" over the past several years to build a portfolio of solid
businesses at attractive prices.
The LKCM International Fund is managed in a style that seeks absolute
returns. The Fund posted a 1.8% return for the first half of 1999 versus an MSCI
EAFE return of 4.0%. Attribution analysis shows that reduced exposure to Europe
and increased play in Japan accompanied by active currency hedging were
important. European cyclicals bounced while our defensive holdings were hit in
the first quarter of 1999. In the second quarter of 1999, Japan accounted for
65% of fund performance, where our view was thematic (hi-tech, telephony,
capital investment, weak yen). In the first half of 1999 the asset base of the
Fund remained flat: US$58.1m on July 1, 1999 (US$57.0m on January 1, 1999).
Looking ahead, the answers to three questions are likely to determine growth
and, therefore, equity markets in the second half of 1999: Will the US slowdown
of its own accord? Will there be a self-sustaining recovery in Japan? And, will
Euroland growth pick up from below potential?
The LKCM Balanced Fund is managed using a total return approach, which
emphasizes capital appreciation, income generation, and protection against
excessive volatility. In order to attain the desired reward/risk profile, the
Fund invests in a blend of common stocks, convertible securities, government and
corporate bonds, and cash. Through June 30, the Fund has performed in line with
expectations, between the total return of the S&P 500 Index of common stocks and
the Lehman Brothers Government/Corporate Bond Index. While the bond component of
the portfolio remains an integral part of managing the portfolio's risk
characteristics, the common stock investments drove overall performance during
the first half of 1999. Late last year, the Fund stepped up its commitment to
communications-related technology, which made a material contribution to
portfolio performance during the period. As of June 30, 1999, total net assets
were $4,444,428 and the asset mix was 67.5% in common stocks, 3.4% in
convertible securities, 25.5% in corporate bonds, and 3.6% in cash reserves net
of liabilities. The "total return" philosophy of controlling risk via a blend of
asset classes remains an attractive investment alternative for most market
environments.
LKCM Fixed Income Fund emphasizes current income and capital preservation.
The Fund's strategy is to invest in a combination of noncallable bonds for their
offensive characteristics and callable bonds as defensive investments in order
to create a high quality, low volatility, intermediate maturity portfolio. The
Fund modestly trailed its bogey, the Lehman Brothers Intermediate
Government/Corporate Bond Index, during the first half of 1999, as the yield
differential between corporate bonds and government bonds widened. We have
relied upon our internal research capabilities in order to identify corporate
2
<PAGE>
bonds with strong credit profiles and attractive yields. The average effective
maturity of the Fund at the end of the period was approximately 4.9 years and
the average quality was A+. As of June 30, 1999, total net assets were
$19,396,931 and the asset mix was 70.2% in corporate bond, 27.1% in U.S.
Treasury Notes, and 2.7% in cash reserves net of liabilities. The portfolio is
well positioned to benefit from the current environment of low inflation and
continued economic growth.
We continue to be optimistic about the durability of the bull market that
has characterized the 1990s and prospects for a renewal of broad-based earnings
growth seems increasingly evident. However, in the short term, the stock market
appears to exhibit a rising level of risk as we enter the late summer or early
fall. After taking the first step of raising interest rates in June, we would
expect the Federal Reserve Board to raise interest rates again if the economy
continues to exhibit signs of above-average growth in conjunction with upward
pressure on wages or prices. Additionally, the approaching of the new millennium
may cause investor jitters in the fall. Nevertheless, as we relay these
cautions, we are excited about the attractive investment opportunities that we
continue to uncover for the LKCM Funds. We continue to focus the majority of our
analytical efforts on companies with high and sustainable returns on invested
capital, strong and growing cash flows, and high-quality balance sheets. Such
companies often have leadership positions in their respective industries with
opportunities to reinvest excess cash flows at attractive rates of return or
reinvest in their existing business by repurchasing shares. We believe that
these fundamental drivers coupled with our valuation discipline result in
investments with a reward/risk trade-off that will provide solid long-term
investment results to the shareholders of the LKCM Funds.
Regards,
/s/ J. Luther King, Jr., CFA
J. Luther King, Jr., CFA
July 27, 1999
3
<PAGE>
LKCM SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------
COMMON STOCKS - 91.99% SHARES VALUE
- --------------------------------------------------------
BASIC MATERIALS - 0.98%
ICO, Inc. 549,300 $ 686,625
UCAR International Inc. # 60,000 1,515,000
-----------
2,201,625
-----------
CAPITAL GOODS - 12.84%
Blount International, Inc. -
Class A 198,900 5,407,594
Casella Waste Systems, Inc. # 70,000 1,820,000
Chart Industries, Inc. # 170,000 1,338,750
Diebold, Inc. 70,000 2,012,500
Justin Industries, Inc. 320,000 4,460,000
Lindsay Manufacturing Company 225,000 3,951,563
Reliance Steel & Aluminum
Company 87,500 3,412,500
Scott Technologies, Inc. # 175,000 3,368,750
Superior Services, Inc. 121,000 3,229,188
-----------
29,000,845
-----------
CONSUMER CYCLICALS - 23.85%
Atlantic Gulf Communities
Corporation # 7,762 11,656
A.H. Belo Corporation -
Common Series A 110,000 2,165,625
Boise Cascade Office Products
Corporation # 70,000 822,500
Career Education Corporation # 70,000 2,366,875
Carmike Cinemas, Inc. - Class A #91,700 1,461,469
Centex Corporation 60,000 2,253,750
Copart, Inc. # 100,000 2,125,000
G & K Services Inc. - Class A 75,000 3,928,125
Happy Kids, Inc.# 110,200 957,362
Harte-Hanks, Inc. 170,000 4,611,250
ITT Educational Services, Inc. #100,000 2,606,250
Iron Mountain Incorporated # 100,000 2,862,500
Kevco, Inc. # 125,300 1,025,894
Mac-Gray Corporation # 50,000 437,500
Metro Networks, Inc. # 55,000 2,935,625
Mobile Mini, Inc. # 191,000 3,736,437
Penton Media, Inc. 70,000 1,697,500
PETsMART, Inc. # 120,000 1,230,000
Pier 1 Imports, Inc. 257,500 2,896,875
Play By Play Toy & Novelties,
Inc. # 215,000 880,156
Quest Education Corporation # 115,000 1,214,687
Romac International, Inc. # 120,000 1,065,000
Strayer Education, Inc. 40,000 1,227,500
TJ International, Inc. 85,000 2,635,000
Tractor Supply Company # 115,000 3,140,937
Tuesday Morning Corporation # 100,000 2,550,000
<PAGE>
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
CONSUMER CYCLICALS - (CONTINUED)
White Cap Industries, Inc. # 87,500 $ 1,033,594
-----------
53,879,067
-----------
CONSUMER STAPLES - 3.55%
International Home Foods, Inc. # 80,000 1,475,000
Luby's, Inc. 75,000 1,125,000
Patterson Dental Company # 100,000 3,475,000
Taco Cabana, Inc. - Class A # 190,100 1,936,644
-----------
8,011,644
-----------
ENERGY - 6.78%
Tom Brown, Inc. # 100,000 1,556,250
Carbo Ceramics, Inc. 40,000 1,217,500
Dril-Quip, Inc. # 75,000 1,720,312
Encal Energy Ltd. # (1) 487,500 2,387,930
HS Resources, Inc. # 110,000 1,622,500
Input/Output, Inc. # 145,000 1,096,563
Nabors Industries, Inc. # 67,500 1,649,531
Santa Fe Snyder Corporation 276,750 2,110,219
Stolt Comex Seaway, S.A. # 100,000 1,087,500
Varco International, Inc. # 80,000 875,000
-----------
15,323,305
-----------
FINANCIAL SERVICES - 10.31%
American Heritage Life
Investment Corporation 100,000 2,450,000
AmeriCredit Corporation # 50,000 800,000
AmerUs Life Holdings, Inc. -
Class A 108,712 2,935,224
Astoria Financial Corporation 23,000 1,010,563
CNA Surety Corporation # 210,000 3,215,625
Cullen/Frost Bankers, Inc. 75,000 2,067,187
FVNB Corporation 19,000 560,500
INSpire Insurance Solutions,
Inc. # 100,000 1,450,000
Investment Technology
Group, Inc. # 55,260 1,789,042
Jefferies Group, Inc. 30,000 900,000
PawnMart, Inc. # 50,000 123,438
Southwest Securities Group, Inc. 20,000 1,435,000
StanCorp Financial Group, Inc. # 26,900 807,000
Texas Regional Bancshares, Inc. 138,000 3,751,875
-----------
23,295,454
-----------
HEALTH CARE - 10.26%
Intelligent Polymers Limited # 150,000 6,281,250
Jones Pharma Incorporated 75,000 2,953,125
4
See notes to financail statements.
<PAGE>
LKCM SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
HEALTH CARE - (CONTINUED)
Maxxim Medical, Inc. # 179,400 $ 4,182,262
Mid Atlantic Medical Services,
Inc. # 180,000 1,777,500
Prime Medical Services, Inc. # 203,700 1,502,288
Sybron International
Corporation # 155,000 4,272,188
Teva Pharmaceutical
Industries Ltd. - ADR 45,000 2,205,000
-----------
23,173,613
-----------
REAL ESTATE INVESTMENT TRUSTS - 2.83%
Brandywine Realty Trust 87,000 1,723,687
Crescent Real Estate
Equities Trust 90,000 2,137,500
Prentiss Properties Trust 75,000 1,762,500
Storage USA, Inc. 24,500 780,938
-----------
6,404,625
-----------
TECHNOLOGY - 3.80%
Bell & Howell Company # 40,000 1,512,500
Dallas Semiconductor Corporation 77,500 3,913,750
Entrust Technologies, Inc. # 10,000 332,500
RadiSys Corporation # 30,000 1,166,250
Tekelec # 95,000 1,157,813
VocalTec Communications Ltd. # 40,000 500,000
-----------
8,582,813
-----------
TELECOMMUNICATIONS - 8.90%
AT&T Canada, Inc. # 60,000 3,843,750
ANTEC Corporation # 40,000 1,282,500
CapRock Communications
Corporation # 63,000 2,551,500
Crown Castle International
Corporation # 240,000 4,995,000
ITC DeltaCom, Inc. # 115,000 3,220,000
Metrocall, Inc. # 252,450 694,237
Pacific Gateway Exchange, Inc. # 37,000 1,077,625
Pinnacle Holdings, Inc. # 100,000 2,450,000
-----------
20,114,612
-----------
TRANSPORTATION - 7.89%
Covenant Transport, Inc.- Class A #90,000 1,417,500
Kirby Corporation # 280,000 5,932,500
RailAmerica, Inc. # 584,500 6,027,656
Swift Transporation Co., Inc. # 202,500 4,455,000
-----------
17,832,656
-----------
TOTAL COMMON STOCK
(cost $159,442,663) $207,820,259
-----------
<PAGE>
- -------------------------------------------------------
PREFERRED STOCK - 0.08% SHARES VALUE
- -------------------------------------------------------
TOTAL COMMON STOCK
(cost $159,442,663) $207,820,259
-----------
CONSUMER CYCLICALS - 0.08%
Atlantic Gulf Communities
Corporation #@* 26,017 185,371
-----------
TOTAL PREFERRED STOCK
(cost $293,585) 185,371
-----------
- -------------------------------------------------------
WARRANTS - 0.02%
- -------------------------------------------------------
CONSUMER CYCLICALS - 0.01%
Atlantic Gulf Communities
Corporation - Class A #@* 17,345 3,252
Atlantic Gulf Communities
Corporation - Class B #@* 17,345 3,252
Atlantic Gulf Communities
Corporation - Class C #@* 17,345 3,252
-----------
9,756
-----------
FINANCIAL SERVICES - 0.01%
PawnMart, Inc. - Class A,
expires 3/11/2003 # 50,000 17,188
PawnMart, Inc. - Class B,
expires 3/11/2004 # 50,000 9,375
-----------
26,563
-----------
TOTAL WARRANTS
(cost $12,497) 36,319
-----------
- -------------------------------------------------------
CASH EQUIVALENT - 7.18% PRINCIPAL VALUE
- -------------------------------------------------------
SHORT TERM INVESTMENTS - 7.18%
Firstar Bank Repo., 3.30% $ 5,365,000 5,365,000
dated 7/1/1999, due
Firstar Bank Demand Note,
4.97% due 12/31/2031 10,856,468 10,856,468
TOTAL CASH EQUIVALENTS -
(cost $16,221,468) 16,221,468
-----------
TOTAL INVESTMENTS - 99.27%
(cost $175,970,213) 224,263,417
-----------
Other Assets in excess of
liabilities - 0.73% 1,653,507
-----------
Total Net Assets - 100.00% $225,916,924
============
# - Non-income producing security.
(1) - Foreign Security.
@ - Security issued as a private placement and is illiquid by virtue
of the absence of a readily available market.
* - Security valued at fair value - See Note A to the financial statements.
ADR - American Depository Receipts.
See notes to financial statements.
5
<PAGE>
LKCM EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- -------------------------------------------------------
COMMON STOCK - 92.52% SHARES VALUE
- -------------------------------------------------------
BASIC MATERIALS - 6.21%
du Pont (E.I.) de Nemours &
Company 14,000 $ 956,375
Louisiana-Pacific Corporation 39,400 935,750
MacMillan Bloedel Limited 50,000 900,000
-----------
2,792,125
-----------
CAPITAL GOODS - 11.46%
Blount International, Inc. - Class A40,000 1,087,500
Browning-Ferris Industries, Inc. 20,000 860,000
Deere & Company 17,000 673,625
Diebold, Inc. 18,000 517,500
General Electric Company 8,000 904,000
Waste Management, Inc. 20,675 1,111,281
-----------
5,153,906
-----------
CONSUMER CYCLICALS - 13.35%
A.H. Belo Corporation -
Common Series A 15,000 295,312
H&R Block, Inc. 12,000 600,000
Gannett Company, Inc. 17,000 1,213,375
Home Depot, Inc. 17,000 1,095,436
Sherwin-Williams Company 26,000 721,500
Starwood Hotels & Resorts
Worldwide, Inc. 20,100 614,306
Tandy Corporation 30,000 1,466,250
-----------
6,006,179
-----------
CONSUMER STAPLES - 12.28%
Colgate-Palmolive Company 7,000 691,250
H.J. Heinz Company 14,500 726,812
Infinity Broadcasting
Corporation - Class A # 31,000 922,250
Kimberly-Clark Corporation 20,000 1,140,000
PepsiCo, Inc. 20,000 773,750
Phillip Morris Companies, Inc. 15,600 626,925
U.S. Foodservice # 15,000 639,375
-----------
5,520,362
-----------
ENERGY - 13.53%
Anadarko Petroleum Corporation 8,000 294,500
Burlington Resources, Inc. 16,000 692,000
- --------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------
ENERGY - (CONTINUED)
Cabot Oil & Gas Corporation 20,000 $ 372,500
Exxon Corporation 18,000 1,388,250
Halliburton Company 17,000 769,250
Mobil Corporation 12,000 1,188,000
Occidental Petroleum
Corporation 20,000 422,500
Schlumberger, Limited 15,000 955,313
-----------
6,082,313
-----------
FINANCIAL SERVICES - 11.30%
American General Corporation 15,000 1,130,625
Associates First Capital
Corporation 16,000 709,000
Astoria Financial Corporation 5,000 219,687
C.I.T. Group, Inc. - Class A 26,900 776,738
Hibernia Corporation 30,000 470,625
The MONY Group, Inc. 25,600 835,200
Wells Fargo Company 22,000 940,500
-----------
5,082,375
-----------
HEALTH CARE - 8.37%
Merck & Company, Inc. 9,000 666,000
Pharmacia & Upjohn, Inc. 12,000 681,750
Schering-Plough Corporation 15,000 795,000
SmithKline Beecham PLC ADR 12,000 792,750
Sybron International
Corporation # 30,000 826,875
-----------
3,762,375
-----------
REAL ESTATE INVESTMENT TRUSTS - 1.06%
Crescent Real Estate Equities
Company 20,000 475,000
-----------
TECHNOLOGY - 10.27%
Cisco Systems, Inc. # 20,000 1,288,750
Hewlett-Packard Company 10,000 1,005,000
International Business
Machines Corporation 3,500 452,375
Microsoft Corporation 5,000 450,938
Motorola, Inc. 15,000 1,421,250
-----------
4,618,313
-----------
See notes to the financial statements.
6
<PAGE>
LKCM EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
TELECOMMUNICATIONS - 4.69%
ALLTEL Corporation 1,600 $ 114,400
Lucent Technologies, Inc. 7,000 472,063
MCI WorldCom, Inc. # 8,700 743,690
Nortel Networks Corporation 8,300 720,544
Time Warner Telecom, Inc. -
Class A # 2,000 58,000
-----------
2,108,697
-----------
TOTAL COMMON STOCK
(cost $28,610,694) 41,601,645
-----------
- -------------------------------------------------------
CASH EQUIVALENT - 6.39% PRINCIPAL VALUE
- -------------------------------------------------------
SHORT TERM INVESTMENTS - 6.39%
Firstar Bank Repo, 3.00%
dated, due 7/1/1999 $ 730,000 $ 730,000
- -------------------------------------------------------
CASH EQUIVALENT - 6.39% PRINCIPAL VALUE
- -------------------------------------------------------
SHORT TERM INVESTMENTS - (CONTINUED)
Firstar Bank Demand Note, 4.97%
due 12/31/2031 2,143,772 $ 2,143,772
-----------
TOTAL CASH EQUIVALENTS
(cost $2,873,772) 2,873,772
-----------
TOTAL INVESTMENTS - 98.91%
(cost $31,484,466) 44,475,417
-----------
Other Assets in excess of
liabilities - 1.09% 491,808
-----------
Total Net Assets - 100.00% $44,967,225
===========
# - Non-income producing security.
ADR - American Depository Receipts.
7
See notes to the financial statements.
<PAGE>
LKCM BALANCED FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- -------------------------------------------------------
COMMON STOCKS - 67.56% SHARES VALUE
- -------------------------------------------------------
BASIC/DIVERSIFIED INDUSTRIAL - 2.13%
Tyco International Limited 1,000 $ 94,750
-----------
BEVERAGE & PERSONAL PRODUCTS - 3.50%
Estee Lauder Companies - TRACES 500 43,125
Gillette Company 1,000 41,000
Procter & Gamble Company 800 71,400
-----------
155,525
-----------
CAPITAL GOODS - 5.60%
Diebold, Inc. 3,100 89,125
General Electric Company 700 79,100
Waste Management, Inc. 1,500 80,625
-----------
248,850
-----------
CONSUMER & COMMERCIAL SERVICES - 3.20%
Galileo International, Inc. 1,500 80,156
Outdoor Systems, Inc. # 1,700 62,050
-----------
142,206
-----------
CONSUMER CYCLICALS - 4.93%
A.H. Belo Corporation,
Common Series A 1,700 33,469
Harte-Hanks, Inc. 2,000 54,250
ITT Educational Services, Inc. 1,000 26,062
Starwood Hotels & Resorts
Worldwide, Inc. 1,200 36,675
Tandy Corporation 1,400 68,425
-----------
218,881
-----------
CONSUMER STAPLES - 6.25%
Colgate-Palmolive Company 750 74,062
Kimberly-Clark Corporation 800 45,600
PepsiCo, Inc. 1,400 54,163
Phillip Morris Companies, Inc. 1,000 40,187
U.S. Foodservice # 1,500 63,938
-----------
277,950
-----------
ENERGY - 3.81%
Atlantic Richfield Company 900 75,206
Exxon Corporation 600 46,275
Schlumberger Limited 750 47,766
-----------
169,247
-----------
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
FINANCIAL SERVICES - 11.56%
AEGON N.V. 201 $ 14,874
Allstate Corporation 1,200 43,050
American General Corporation 800 60,300
American International Group, Inc. 300 35,119
Associates First
Capital Corporation 2,000 88,625
C.I.T. Group, Inc., Class A 1,800 51,975
Compass Bancshares, Inc. 2,200 59,950
Cullen/Frost Bankers, Inc. 1,600 44,100
First United Bancshares, Inc. 800 14,900
Mellon Bank Corporation 1,600 58,200
Wells Fargo Company 1,000 42,750
-----------
513,843
-----------
HEALTH CARE - 7.05%
American Home Products
Corporation 1,450 83,375
Pharmacia & Upjohn, Inc. 1,400 79,537
Schering-Plough Corporation 600 31,800
SmithKline Beecham PLC ADR 750 49,547
Sybron International Corporation #2,500 68,906
-----------
313,165
-----------
PUBLISHING & BROADCASTING - 2.05%
CBS Corporation 2,100 91,219
-----------
REAL ESTATE INVESTMENT TRUSTS - 0.75%
Crescent Real Estate Equities
Company 1,400 33,250
-----------
RETAIL - 0.95%
Saks, Inc. # 1,460 42,158
-----------
TECHNOLOGY - 7.64%
Cisco Systems, Inc. 500 32,219
Hewlett-Packard Company 900 90,450
Microsoft Corporation 800 72,150
Motorola, Inc. 1,000 94,750
Oracle Corporation 1,350 50,119
-----------
339,688
-----------
TELECOMMUNICATIONS - 6.17%
ALLTEL Corporation 1,200 85,800
Lucent Technologies, Inc. 300 20,231
See notes to the financial statements.
8
<PAGE>
LKCM BALANCED FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
TELECOMMUNICATIONS - (CONTINUED)
MCI WorldCom, Inc. # 944 $ 81,243
Nortel Networks Corporation 1,000 86,812
-----------
274,086
-----------
TRANSPORTATION - 1.97%
RailAmerica, Inc. # 8,500 87,656
-----------
TOTAL COMMON STOCK
(cost $2,441,524) 3,002,474
-----------
- -------------------------------------------------------
CORPORATE BONDS - 28.88% PRINCIPAL VALUE
- -------------------------------------------------------
BASIC/DIVERSIFIED INDUSTRIAL - 0.55%
Tyco International Group,
6.375%, 6/15/2005 25,000 24,398
-----------
CONSUMER CYCLICALS - 1.10%
Tandy Corporation3
6.95%, 9/01/2007 50,000 49,056
-----------
CONSUMER & COMMERCIAL SERVICES - 2.53%
Tribune Company,
2.00%, 5/15/2029 190 24,249
Union Camp Corporation,
Callable 8/12/99
10.00%, 5/1/2019 60,000 63,183
WMX Technologies,
6.70%, 5/01/2001 25,000 25,110
-----------
112,542
-----------
CONSUMER STAPLES - 1.69%
Phillip Morris Companies Inc.,
7.50%, 1/15/2002 25,000 25,531
Phillip Morris Companies Inc.,
7.00%, 07/15/2005 50,000 49,760
-----------
75,291
-----------
ELECTRIC - 1.61%
Old Domin Electric,
Callable 12/01/2003
7.48%, 12/01/2013 70,000 71,392
-----------
ENERGY - 1.64%
Nabors Industries, Inc.,
Callable 7/28/99,
5.00%, 5/15/2006 55,000 73,013
-----------
- -------------------------------------------------------
CORPORATE BONDS - 28.88% PRINCIPAL VALUE
- -------------------------------------------------------
FINANCIAL SERVICES - 13.74%
American General Corporation,
6.75%, 6/15/2005 50,000 $ 49,894
Associates Corp N.A.,
6.25%, 9/15/2000 50,000 50,172
Block Financial Corporation,
6.75%, 11/01/2004 75,000 75,118
Citicorp,
7.00%, 7/01/2007 75,000 74,929
Citigroup, Inc.,
5.80%, 3/15/2004 75,000 72,813
Morgan Stanley Group,
6.875%, 3/01/2007 65,000 64,513
Nationwide Mutual Insurance,
6.50%, 2/15/2004 75,000 74,083
Norwest Corporation,
6.625%, 3/15/2003 75,000 75,169
Sears Roebuck Acceptance
Corporation,
6.00%, 3/20/2003 75,000 73,888
-----------
610,579
-----------
HEAVY INDUSTRY/TRANSPORTATION - 0.12%
Union Pacific Railroad Corporation,
Callable 1/15/2000
8.50%, 1/15/2017 5,000 5,127
-----------
MANUFACTURING - 0.54%
Thomas & Betts Corporation,
6.50%, 1/15/2006 25,000 24,159
-----------
REAL ESTATE INVESTMENT TRUST - 2.14%
Bay Apartment Communities,
6.25%, 1/15/2003 25,000 24,047
EOP Operating LP,
6.80%, 1/15/2009 50,000 47,151
Prologis Trust,
7.05%, 7/15/2006 25,000 23,973
-----------
95,171
-----------
RETAIL - 0.09%
Toys R Us,
Callable 1/2000
8.25%, 2/01/2017 4,000 4,065
-----------
See notes to the financial statements.
9
<PAGE>
LKCM BALANCED FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- -------------------------------------------------------
CORPORATE BONDS PRINCIPAL VALUE
- -------------------------------------------------------
TECHNOLOGY - 1.72%
Kent Electronics,
Callable 09/06/2000,
4.50%, 09/01/2004 $ 60,000 $ 52,125
Oracle Corporation,
6.91%, 2/15/2007 25,000 24,065
-----------
76,190
-----------
TELECOMMUNICATIONS - 1.41% MCI WorldCom, Inc.
7.75%, 4/01/2007 60,000 62,794
-----------
TOTAL CORPORATE BONDS
(cost $1,303,051) 1,283,777
-----------
CASH EQUIVALENT - 2.67% PRINCIPAL VALUE
SHORT TERM INVESTMENTS - 2.67%
Firstar Bank Demand Note, 4.97%
due 12/31/2031
(cost $118,540) $ 118,540 $ 118,540
-----------
TOTAL INVESTMENTS - 99.11%
(cost $3,863,115) 4,404,791
Other Assets in excess
of liabilities - 0.89% 39,637
-----------
Total Net Assets - 100.00% $ 4,444,428
===========
# - Non-income producing security.
ADR - American Depository Receipts.
See notes to the financial statements.
10
<PAGE>
LKCM FIXED INCOME FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- -------------------------------------------------------
CORPORATE BONDS - 70.16% PRINCIPAL VALUE
- -------------------------------------------------------
BASIC/DIVERSIFIED INDUSTRIAL - 2.51%
Tyco International Group,
6.375%, 6/15/2005 $ 500,000 $ 487,964
CHEMICALS - 1.62%
M.A. Hanna Company,
9.375%, 9/15/2003 40,000 43,137
Solutia, Inc.,
6.50%, 10/15/2002 275,000 271,314
-----------
314,451
-----------
CONSUMER CYCLICALS - 2.53%
Tandy Corporation
6.95%, 9/01/2007 500,000 490,555
-----------
CONSUMER & COMMERCIAL SERVICES - 5.44%
Union Camp Corporation,
Callable 8/12/99
10.00%, 5/1/2019 525,000 552,847
-----------
WMX Technologies,
6.70%, 5/01/2001 500,000 502,191
-----------
1,055,038
-----------
CONSUMER STAPLES - 2.63%
Philip Morris Companies, Inc.,
7.50%, 1/15/2002 500,000 510,623
-----------
ELECTRIC - 3.29%
Interstate Power Company,,
Callable 9/15/1999,
8.625%, 9/15/2021 50,000 51,847
-----------
Old Domin Electric,
7.48%, 12/01/2013 575,000 586,436
-----------
638,283
-----------
ENERGY - 0.26%
Southwest Gas Corporation,
7.50%, 8/01/2006 50,000 49,885
-----------
FINANCIAL SERVICES - 30.86%
Associates Corp N.A.,
6.25%, 9/15/2000 275,000 275,944
- -------------------------------------------------------
CORPORATE BONDS PRINCIPAL VALUE
- -------------------------------------------------------
FINANCIAL SERVICES - (CONTINUED)
Banc One Corporation,
7.00%, 7/15/2005 $ 150,000 $ 151,942
Banc One Corporation,
7.60%, 5/01/2007 500,000 518,156
Block Financial Corporation,
6.75%, 11/01/2004 725,000 726,139
C.I.T. Group,
6.625%, 6/15/2005 500,000 495,156
Chartwell Re Holdings Corporation,
Callable 8/13/99,
10.25%, 3/01/2004 600,000 616,500
Citigroup, Inc.,
5.80%, 3/15/2004 500,000 485,421
Morgan Stanley Group,
6.875%, 3/01/2007 500,000 496,257
Nationwide Mutual Insurance,
6.50%, 2/15/2004 550,000 543,271
Norwest Corporation,
6.625%, 3/15/2003 500,000 501,129
Sears Roebuck Acceptance Corporation,
6.00%, 3/20/2003 500,000 492,588
State Street Boston Corporation,
5.95%, 9/15/2003 450,000 442,480
Wilmington Trust Corporation,
6.625%, 5/01/2008 250,000 241,279
-----------
5,986,262
-----------
HEAVY INDUSTRY/TRANSPORTATION - 0.31%
Union Pacific Railroad Corporation,
Callable 1/15/2000,
8.50%, 1/15/2017 59,000 60,498
-----------
MANUFACTURING - 0.75%
Thomas & Betts Corporation,
6.50%, 1/15/2006 150,000 144,956
-----------
REAL ESTATE INVESTMENT TRUST - 6.50%
Bay Apartment Communities,
6.25%, 1/15/2003 150,000 144,280
Camden Property Trust,
7.00%, 11/15/2006 300,000 285,152
EOP Operating LP,
6.80%, 1/15/2009 500,000 471,510
Prologis Trust,
7.05%, 7/15/2006 375,000 359,598
-----------
1,260,540
-----------
See notes to the financial statements.
11
<PAGE>
LKCM FIXED INCOME FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- ------------------------------------------------------
CORPORATE BONDS PRINCIPAL VALUE
- ------------------------------------------------------
RETAIL - 0.24%
Toys R Us,
Callable 1/2000
8.25%, 2/01/2017 $ 45,000 $ 45,735
-----------
TECHNOLOGY - 0.87%
Oracle Corporation,
6.91%, 2/15/2007 175,000 168,458
-----------
TELECOMMUNICATIONS - 8.76%
ALLTEL Corporation,
7.25%, 4/01/2004 500,000 515,551
GTE Hawaiian Telephone,
7.375%, 9/01/2006 650,000 660,901
MCI WorldCom, Inc.,
7.75%, 4/01/2007 500,000 523,286
-----------
1,699,738
-----------
TOOLS - HAND HELD - 3.59%
Black & Decker,
7.50%, 4/01/2003 675,000 695,776
-----------
TOTAL CORPORATE BONDS
(cost $13,987,165) 13,608,762
-----------
- -------------------------------------------------------
U.S. TREASURY
OBLIGATIONS - 27.09% PRINCIPAL VALUE
- -------------------------------------------------------
U.S. Treasury Notes:
5.625%, 2/28/2001 $ 800,000 $ 802,547
5.75%, 11/30/2002 1,000,000 1,001,563
4.75%, 2/15/2004 1,000,000 961,250
5.875%, 11/15/2005 1,000,000 999,688
5.625%, 2/15/2006 1,000,000 985,000
6.125%, 8/15/2007 500,000 505,625
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(cost $5,318,606) 5,255,673
-----------
- -------------------------------------------------------
CASH EQUIVALENT - 3.07%
- -------------------------------------------------------
SHORT TERM INVESTMENTS - 3.07%
Firstar Bank Demand Note, 4.97%
due 12/31/2031
TOTAL CASH EQUIVALENT
(cost $594,863) $ 594,863 $ 594,863
-----------
TOTAL INVESTMENTS - 100.32%
(cost $19,900,634) 19,459,298
-----------
Liabilities, less Other Assets - (0.32)% (62,367)
-----------
Total Net Assets - 100.00% $ 19,396,931
===========
See notes to the financial statements.
12
<PAGE>
LKCM INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- -------------------------------------------------------
COMMON STOCK - 95.58% SHARES VALUE
- -------------------------------------------------------
AUSTRALIA - 0.54%
- -------------------------------------------------------
AIRLINES - 0.54%
Qantas Airways Limited 94,246 $ 311,284
-----------
TOTAL AUSTRALIA 311,284
-----------
- -------------------------------------------------------
DENMARK - 1.91%
- -------------------------------------------------------
TELECOMMUNICATION - 1.91
Tele Danmark A/S 22,591 1,111,960
-----------
TOTAL DENMARK 1,111,960
-----------
- -------------------------------------------------------
FINLAND - 5.01%
- -------------------------------------------------------
TELECOMMUNICATION - 5.01%
Nokia Oyj 33,228 2,912,933
-----------
TOTAL FINLAND 2,912,933
-----------
- -------------------------------------------------------
FRANCE - 19.58%
- -------------------------------------------------------
CONSUMER & COMMERCIAL SERVICES - 2.25%
Essilor International SA 4,177 1,305,743
-----------
ENERGY - 1.91%
Elf Aquitaine SA 7,559 1,109,371
-----------
ELECTRONICS - 1.22%
STMicroelectronics 10,686 711,959
-----------
FINANCIAL SERVICES - 2.18%
Banque Nationale de Paris 470 39,167
Societe Generale 6,963 1,227,286
-----------
1,266,453
-----------
FOOD, TOBACCO & OTHER - 1.48%
Sodexho Alliance 5,004 861,869
-----------
HEALTH CARE - 4.25%
Sanofi-Synthelabo SA # 58,190 2,469,594
-----------
MANUFACTURING - 2.10%
Societe BIC SA 23,181 1,222,884
-----------
MISCELLANEOUS - 0.45%
Suez Lyonnaise des Eaux 1,436 259,031
-----------
<PAGE>
- -------------------------------------------------------
COMMON STOCK SHARES VALUE
- -------------------------------------------------------
FRANCE - (CONTINUED)
- -------------------------------------------------------
RETAIL - 2.31%
Castorama Dubois Investisse 5,669 $ 1,344,750
-----------
TELECOMMUNICATION - 1.43%
Alcatel 5,888 828,911
-----------
TOTAL FRANCE 11,380,565
-----------
- -------------------------------------------------------
GERMANY - 1.64%
- -------------------------------------------------------
CONSUMER & COMMERCIAL SERVICES - 1.16%
Berliner Kraft und Licht AG 43,833 675,849
-----------
TELECOMMUNICATION - 0.48%
Mannesmann AG 1,876 279,968
-----------
TOTAL GERMANY 955,817
-----------
- -------------------------------------------------------
HONG KONG - 2.10%
- -------------------------------------------------------
PUBLISHING & BROADCASTING - 0.79%
Television Broadcasts Limited 98,000 459,756
-----------
REAL ESTATE INVESTMENT TRUSTS - 1.31%
Cheung Kong Limited 59,000 524,688
New World Development Company,
Limited 79,000 236,728
-----------
761,416
-----------
TOTAL HONG KONG 1,221,172
-----------
- -------------------------------------------------------
ITALY - 5.76%
- -------------------------------------------------------
TELECOMMUNICATION - 5.76%
Telecom Italia Mobile SpA 163,086 600,471
Telecom Italia SpA 264,288 2,747,548
-----------
TOTAL ITALY 3,348,019
-----------
- -------------------------------------------------------
JAPAN - 25.39%
- -------------------------------------------------------
AUTOS - 0.55%
Mazda Motor Corporation 56,000 321,547
-----------
CHEMICALS - 1.50%
Kaneka Corporation 25,000 235,460
Shin-Etsu Chemical Company,
Limited 19,000 635,741
-----------
871,201
-----------
See notes to the financial statements.
13
<PAGE>
LKCM INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- -------------------------------------------------------
COMMON STOCK SHARES VALUE
- -------------------------------------------------------
JAPAN - (CONTINUED)
- -------------------------------------------------------
DATA PROCESSING - 1.28%
Fujitsu Limited 37,000 $ 744,341
-----------
DISTRIBUTION - 0.84%
Softbank Corporation 2,400 485,988
-----------
EDUCATION - 0.75%
Benesse Corporation 4,000 434,567
-----------
ELECTRONICS - 6.05%
Aiwa Company, Limited 16,000 528,751
Funai Electric Company, Limited 1,900 376,732
Hosiden Corporation 13,000 280,497
Murata Manufacturing Company,
Limited 13,000 854,925
Rohm Company, Limited 5,000 782,800
Tokyo Electron Limited 4,000 271,291
Trend Micro Inc. 2,500 421,349
-----------
3,516,345
-----------
FINANCIAL SERVICES - 4.07%
Daiwa Securities Group, Inc. 134,000 885,658
The Fuji Bank Limited 64,000 446,266
Nikko Securities
Company, Limited 79,000 509,741
Takefuji Corporation 5,100 527,107
-----------
2,368,772
-----------
MACHINERY - 1.59%
SMC Corporation - 4,100 458,981
THK Company, Limited 20,200 467,284
-----------
926,265
-----------
MEDICAL - 1.19%
Shionogi & Company, Limited 41,000 324,061
Takeda Chemical Industries 8,000 370,787
-----------
694,848
-----------
MISCELLANEOUS METALS AND COMMODITIES - 1.14%
Nippon Sheet Glass Company,
Limited 123,000 437,980
Toyo Seikan Kaisha, Limited 10,000 224,719
-----------
662,699
-----------
<PAGE>
- -------------------------------------------------------
COMMON STOCK SHARES VALUE
JAPAN - (CONTINUED)
- -------------------------------------------------------
PHOTO EQUIPMENT & SUPPLIES - 1.29%
Nikon Corporation 26,000 $ 425,314
Olympus Optical Company, Limited 22,000 325,163
-----------
750,477
-----------
PUBLISHING & BROADCASTING - 0.49%
Kadokawa Shoten Publishing Company,
Limited 1,400 285,691
-----------
STEEL PRODUCERS - 1.43%
Nippon Steel Corporation 357,000 828,793
-----------
TELECOMMUNICATION - 2.37%
Hikari Tsushin, Inc. 1,900 587,079
Matsushita Communication
Industrial Company, Limited 8,000 571,712
NTT Mobile Communication
Network, Inc. 16 216,788
-----------
1,375,579
-----------
TOYS - 0.85%
Nintendo Company, Limited 3,500 491,863
-----------
TOTAL JAPAN 14,758,976
-----------
- -------------------------------------------------------
KOREA - 2.21%
- -------------------------------------------------------
ELECTRONICS - 0.61%
Samsung Electronics - ADR 6,902 355,798
-----------
STEEL PRODUCERS - 0.79%
Pohang Iron & Steel Co.,
Limited - ADR 13,565 456,123
-----------
TELECOMMUNICATION - 0.81%
Korea Telecom Corporation 11,800 472,000
-----------
TOTAL KOREA 1,283,921
-----------
- -------------------------------------------------------
NETHERLANDS - 7.17%
- -------------------------------------------------------
BEVERAGES - 2.40%
Heineken NV 27,250 1,395,382
-----------
See notes to the financial statements.
14
<PAGE>
LKCM INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- -------------------------------------------------------
COMMON STOCK SHARES VALUE
NETHERLANDS - (CONTINUED)
- -------------------------------------------------------
ELECTRONICS - 3.32%
Koninklijke Philips Electronics
N.V. 19,552 $ 1,928,768
-----------
PUBLISHING & BROADCASTING - 1.45%
VNU NV 21,084 842,621
-----------
TOTAL NETHERLANDS 4,166,771
-----------
- -------------------------------------------------------
SINGAPORE - 1.42%
- -------------------------------------------------------
AIRLINES - 0.28%
Singapore Airlines Limited 17,000 161,762
-----------
FINANCIAL SERVICES - 0.24%
Kim Eng Holdings 153,000 142,890
-----------
PUBLISHING & BROADCASTING - 0.47%
Singapore Press Holdings Limited 16,000 272,540
-----------
REAL ESTATE DEVELOPMENT - 0.43%
Wing Tai Holdings Limited 189,000 249,780
-----------
TOTAL SINGAPORE 826,972
-----------
- -------------------------------------------------------
SPAIN - 1.79%
- -------------------------------------------------------
TELECOMMUNICATION - 1.79%
Telefonica S.A. 21,539 1,037,631
-----------
TOTAL SPAIN 1,037,631
-----------
- -------------------------------------------------------
SWEDEN - 1.77%
- -------------------------------------------------------
TELECOMMUNICATION - 1.77%
Telefonaktiebolaget LM Ericsson 32,124 1,029,615
-----------
TOTAL SWEDEN 1,029,615
-----------
- -------------------------------------------------------
SWITZERLAND - 3.38%
- -------------------------------------------------------
CHEMICALS - 0.89%
Roche Holding AG 50 513,959
-----------
FINANCIAL SERVICES - 1.14%
Baloise Holding Limited 815 664,750
-----------
<PAGE>
- -------------------------------------------------------
COMMON STOCK SHARES VALUE
SWITZERLAND - (CONTINUED)
- -------------------------------------------------------
RECREATIONAL - 1.35%
The Swatch Group AG 1,166 $ 784,534
-----------
TOTAL SWITZERLAND 1,963,243
-----------
- -------------------------------------------------------
UNITED KINGDOM - 15.91%
- -------------------------------------------------------
ADVERTISING AGENCIES - 0.54%
WPP Group PLC 37,099 313,739
-----------
FINANCIAL SERVICES - 5.01%
Britannic PLC 51,555 779,339
Prudential Corporation PLC 83,065 1,222,930
Standard Chartered PLC 55,830 911,726
-----------
2,913,995
-----------
HEALTHCARE - 1.06%
Glaxo Wellcome PLC 18,920 525,788
Scotia Holdings PLC - # 51,371 89,883
-----------
615,671
-----------
PUBLISHING & BROADCASTING - 1.84%
Reuters Group PLC 81,310 1,069,565
-----------
TELECOMMUNICATION - 5.77%
British Telecommunications PLC 89,868 1,505,827
Vodafone AirTouch PLC 93,743 1,847,080
-----------
3,352,907
-----------
TOBACCO - 1.69%
British American Tobacco PLC 104,519 982,749
-----------
TOTAL UNITED KINGDOM 9,248,626
-----------
TOTAL COMMON STOCK (cost $53,904,914) 55,557,505
-----------
See notes to the financial statements.
15
<PAGE>
LKCM INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
- -------------------------------------------------------
PREFERRED STOCK - 1.50% SHARES VALUE
ITALY - 0.92%
- -------------------------------------------------------
MULTIPLE INDUSTRY - 0.92%
IFI Istituto Finanziario 37,502 $ 531,820
-----------
TOTAL ITALY 531,820
-----------
- -------------------------------------------------------
THAILAND - 0.58%
- -------------------------------------------------------
FINANCIAL SERVICES - 0.58%
Siam Commercial Bank 238,030 338,890
-----------
TOTAL THAILAND 338,890
-----------
TOTAL PREFERRED STOCK (cost $173,849) 870,710
-----------
- -------------------------------------------------------
WARRANTS - 0.50%
- -------------------------------------------------------
SINGAPORE - 0.18%
- -------------------------------------------------------
AIRLINES - 0.18%
Singapore Airlines Limited # 20,400 103,048
-----------
TOTAL SINGAPORE 103,048
-----------
- -------------------------------------------------------
THAILAND - 0.32%
- -------------------------------------------------------
FINANCIAL SERVICES - 0.32%
Siam Commercial Bank # 288,680 185,929
-----------
TOTAL THAILAND 185,929
-----------
TOTAL WARRANTS (cost $99,799) 288,977
-----------
- -------------------------------------------------------
MONEY MARKET FUNDS - 2.14% SHARES VALUE
- -------------------------------------------------------
Chase United States, 3.7187%
(cost $1,245,259) $ 1,245,259
-----------
TOTAL INVESTMENTS - 99.72%
(cost $55,423,821) 57,962,451
-----------
SHORT SALES - (39.34%) (22,865,257)
(Proceeds - $23,074,332)*
Other Assets in excess
of liabilities - 39.62% 23,030,208
-----------
Total net assets - 100.00% $58,127,402
===========
# - Non-income producing security.
ADR - American Depository Receipts.
*SCHEDULE OF FOREIGN CURRENCIES SOLD SHORT
JUNE 30, 1999
- -------------------------------------------------------
FOREIGN CURRENCY VALUE
- -------------------------------------------------------
European Monetary Unit $(11,860,561)
Hong Kong Dollars (1,250,177)
Japanese Yen (286,598)
British Pounds (9,142,497)
Thailand Bhat (325,424)
-----------
Total Foreign Currencies Sold Short $(22,865,257)
=============
See notes to the financial statements.
16
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
LKCM LKCM LKCM LKCM
SMALL CAP LKCM BALANCED FIXED INCOME INTERNATIONAL
EQUITY FUND EQUITY FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value*.................. $224,263,417 $44,475,417 $4,404,791 $19,459,298 $57,962,451
Cash.................................... 267,012 -- -- -- --
Foreign currency**...................... -- -- -- -- 1,121,804
Dividends and interest receivable....... 203,246 63,812 26,962 342,308 100,017
Receivable from Advisor................. -- -- 7,673 -- --
Receivable for investments sold......... 2,672,803 1,948,124 -- 199,953 34,039,217
Receivable for fund shares sold......... -- 3,000 -- 50,000 1,000
Organizational expenses, net of
accumulated amortization.............. 348 -- 11,412 11,412 20,916
Prepaid expenses........................ 9,768 6,822 3,300 2,434 3,872
----------- ---------- --------- ---------- ----------
Total assets......................... 227,416,594 46,497,175 4,454,138 20,065,405 93,249,277
----------- ---------- --------- ---------- ----------
LIABILITIES:
Payable for foreign currency contracts
(proceeds received of $0, $0, $0, $0,
$23,074,332).......................... -- -- -- -- 22,865,257
Payable for investments purchased....... 1,015,534 1,405,770 -- 644,935 12,118,552
Payable for investment advisory fees.... 405,134 58,755 -- 9,368 88,093
Payable for fund shares repurchased..... -- 46,000 -- -- 31,326
Accrued expenses and other liabilities.. 79,002 19,425 9,710 14,171 18,647
----------- ---------- --------- ---------- ----------
Total liabilities.................... 1,499,670 1,529,950 9,710 668,474 35,121,875
----------- ---------- --------- ---------- ----------
NET ASSETS.............................. $225,916,924 $44,967,225 $4,444,428 $19,396,931 $58,127,402
=========== ========== ========= ========== ==========
NET ASSETS CONSIST OF:
Paid in capital......................... $165,594,017 $26,782,102 $3,876,229 $19,789,178 $54,143,512
Undistributed net investment
income (loss) 246,512 152,295 (621) 4,871 (129,914)
Undistributed net realized gain (loss) on
securities and foreign
currency transactions 11,783,191 5,041,877 27,144 44,218 1,367,843
Net unrealized appreciation of securities and
foreign currency transactions......... 48,293,204 12,990,951 541,676 (441,336) 2,745,961
----------- ---------- --------- ---------- ----------
NET ASSETS.............................. $225,916,924 $44,967,225 $4,444,428 $19,396,931 $58,127,402
=========== ========== ========= ========== ==========
Shares of beneficial interest outstanding
(unlimited shares of no
par value authorized) 13,085,151 2,759,366 375,074 1,961,597 5,183,497
Net asset value per share
(offering and redemption price)....... $ 17.27 $ 16.30 $ 11.85 $ 9.89 $ 11.21
=========== ========== ========= ========== ==========
* Cost of Investments................... $175,970,213 $31,484,466 $3,863,115 $19,900,634 $55,423,821
=========== ========== ========= ========== ==========
** Cost of Foreign Currency............. $ 0 $ 0 $ 0 $ 0 $ 1,122,900
=========== ========== ========= ========== ==========
See notes to the financial statements.
17
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
LKCM LKCM LKCM LKCM
SMALL CAP LKCM BALANCED FIXED INCOME INTERNATIONAL
EQUITY FUND EQUITY FUND FUND FUND FUND
INVESTMENT INCOME:
Dividend income*........................ $ 731,723 $ 250,287 $ 16,289 $ -- $ 401,269
Interest................................ 536,282 71,253 35,321 497,658 35,460
---------- --------- ------- -------- ---------
Total income......................... 1,268,005 321,540 51,610 497,658 436,729
---------- --------- ------- -------- ---------
EXPENSES:
Investment advisory fees................ 827,064 148,089 13,179 41,207 276,282
Administrative fees..................... 71,530 12,508 4,111 9,881 19,972
Custody fees and expenses............... 17,053 211 3,401 2,436 70,683
Accounting and transfer
agent fees and expenses............... 41,463 18,207 16,667 19,877 25,504
Federal and state registration.......... 5,527 4,740 1,893 1,216 2,054
Professional fees....................... 27,390 6,133 31 1,426 5,785
Trustees' fees.......................... 9,100 1,610 139 377 637
Amortization of deferred charges........ 5,332 -- 1,616 1,616 2,932
Reports to shareholders................. 7,640 1,386 279 362 1,267
Other................................... 9,588 2,089 31 419 1,563
---------- --------- ------- -------- ---------
Total expenses....................... 1,021,687 194,973 41,347 78,817 406,679
Less, expense reimbursement.......... -- (25,728) (25,127) (25,240) (75,141)
---------- --------- ------- -------- ---------
Net expenses......................... 1,021,687 169,245 16,220 53,577 331,538
---------- --------- ------- -------- ---------
NET INVESTMENT INCOME................... 246,318 152,295 35,390 444,081 105,191
---------- --------- ------- -------- ---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain (loss) on:
Investments.......................... 12,398,773 4,946,998 46,602 22,327 (298,004)
Foreign currency..................... -- -- -- -- 1,882,672
---------- --------- ------- -------- ---------
12,398,773 4,946,998 46,602 22,327 1,584,668
---------- --------- ------- -------- ---------
Net change in unrealized appreciation
(depreciation) of:
Investments.......................... 5,679,576 269,876 238,253 (652,531) (719,042)
Foreign currency..................... -- -- -- -- --
---------- --------- ------- -------- ---------
5,679,576 269,876 238,253 (652,531) (719,042)
---------- --------- ------- -------- ---------
NET GAIN (LOSS) ON INVESTMENTS.......... 18,078,349 5,216,874 284,855 (630,204) 865,626
---------- --------- ------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATION.............. $18,324,667 $5,369,169 $320,245 $(186,123) $ 970,817
========== ========= ======= ======== =========
* Net of Foreign Taxes Withheld......... $ 1,635 $ 1,282 $ 96 $ 0 $ 53,488
========== ========= ======= ======== =========
</TABLE>
See notes to the financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
LKCM
SMALL CAP EQUITY FUND LKCM EQUITY FUND
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998 (UNAUDITED) DECEMBER 31, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................... $ 246,318 $ 934,374 $ 152,295 $ 284,720
Net realized gain (loss) on investments
and foreign currency transactions...... 12,398,773 (630,210) 4,946,998 627,597
Net change in unrealized appreciation
of securities and foreign currency
transactions........................... 5,679,576 (18,659,746) 269,876 4,346,775
----------- ----------- ---------- ----------
Net increase in net assets
resulting from operations.......... 18,324,667 (18,355,582) 5,369,169 5,259,092
----------- ----------- ---------- ----------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income.................... -- (1,034,445) -- (284,136)
Net realized gain on investments......... -- (730,451) -- (1,148,795)
----------- ----------- ---------- ----------
Total dividends and distributions.... -- (1,764,896) -- (1,432,931)
----------- ----------- ---------- ----------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold............ 5,712,479 22,128,815 1,964,797 6,668,985
Shares issued in connection with payment
of dividends and distributions......... -- 1,643,267 -- 1,238,620
Cost of shares redeemed.................. (46,137,839) (30,421,264) (3,435,889) (23,056,392)
----------- ----------- ---------- ----------
Net increase in net asset from Fund
share transactions................. (40,425,360) (6,649,182) (1,471,092) (15,148,787)
----------- ----------- ---------- ----------
Total inrcease........................... (22,100,693) (26,769,660) 3,898,077 (11,322,626)
NET ASSETS:
Beginning of period...................... 248,017,617 274,787,277 41,069,148 52,391,774
----------- ----------- ---------- ----------
End of period*........................... $225,916,924 $248,017,617 $44,967,225 $41,069,148
=========== =========== ========== ==========
*Including undistributed net
investment income of:.................. $ 246,512 $ 193 $ 152,295 $ --
=========== =========== ========== ==========
CHANGES IN SHARES OUTSTANDING:
Shares sold.............................. 375,895 1,329,026 131,760 482,978
Shares issued in connection with payment
of dividends and distributions......... -- 104,533 -- 86,075
Shares redeemed.......................... (3,070,186) (1,924,372) (226,649) (1,690,990)
----------- ----------- ---------- ----------
(2,694,291) (490,813) (94,889) (1,121,937)
=========== =========== ========== ==========
(1)The Funds commenced operations on December 30, 1997. At December 31, 1997,
the Funds had no operations other than those related to organizational
matters.
See notes to the financial statements.
19
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
LKCM
LKCM BALANCED FUND FIXED INCOME FUND
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998 (UNAUDITED) DECEMBER 31, 1998
-------------- -------------- -------------- --------------
OPERATIONS:
Net investment income.................... $ 35,390 $ 46,691 $ 444,081 $ 555,507
Net realized gain (loss) on investments
and foreign currency transactions...... 46,602 (19,531) 22,327 28,673
Net change in unrealized appreciation
of securities and foreign currency
transactions........................... 238,253 303,423 (652,531) 211,195
--------- --------- ---------- ----------
Net increase in net assets
resulting from operations.......... 320,245 330,583 (186,123) 795,375
--------- --------- ---------- ----------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income.................... (36,013) (48,212) (439,210) (558,872)
Net realized gain on investments......... -- -- -- (5,476)
--------- --------- ---------- ----------
Total dividends and distributions.... (36,013) (48,212) (439,210) (564,348)
--------- --------- ---------- ----------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold............ 492,770 3,312,403 5,659,296 14,242,524
Shares issued in connection with payment
of dividends and distributions......... 35,569 48,212 356,335 489,910
Cost of shares redeemed.................. (7,304) (3,835) (549,940) (406,898)
--------- --------- ---------- ----------
Net increase in net asset from Fund
share transactions................. 521,035 3,356,780 5,465,691 14,325,536
--------- --------- ---------- ----------
Total inrcease........................... 805,267 3,639,151 4,840,358 14,556,563
NET ASSETS:
Beginning of period...................... 3,639,161 10 14,556,573 10
--------- --------- ---------- ----------
End of period*........................... $4,444,428 $3,639,161 $19,396,931 $14,556,573
========= ========= ========== ==========
*Including undistributed net
investment income of:.................. $ (621) $ 2 $ 4,871 $ 2
========= ========= ========== ==========
CHANGES IN SHARES OUTSTANDING:
Shares sold.............................. 43,386 325,041 560,883 1,411,297
Shares issued in connection with payment
of dividends and distributions......... 3,098 4,558 35,785 47,820
Shares redeemed.......................... (642) (367) (54,579) (39,609)
--------- --------- ---------- ----------
45,842 329,232 542,089 1,419,508
========= ========= ========== ==========
</TABLE>
(1) The Funds commenced operations on December 30, 1997. At December 31, 1997,
the Funds had no operations other than those related to organizational
matters.
See notes to the financial statements.
20
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LKCM
INTERNATIONAL FUND
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income........................................................ $ 105,191 $ 213,860
Net realized gain (loss) on investments and foreign currency transactions.... 1,584,668 (2,604,820)
Net change in unrealized appreciation of securities and foreign
currency transactions...................................................... (719,042) 3,465,003
---------- ----------
Net increase in net assets resulting from operations..................... 970,817 1,074,043
---------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income........................................................ -- --
Net realized gain on investments............................................. -- --
---------- ----------
Total dividends and distributions........................................ -- --
---------- ----------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold................................................ 4,609,577 61,462,930
Shares issued in connection with payment of dividends and distributions...... -- --
Cost of shares redeemed...................................................... (4,438,214) (5,551,761)
---------- ----------
Net increase in net asset from Fund share transactions................... 171,363 55,911,169
---------- ----------
Total inrcease............................................................... 1,142,180 56,985,212
NET ASSETS:
Beginning of period.......................................................... 56,985,222 10
---------- ----------
End of period*............................................................... $58,127,402 $56,985,222
========== ==========
*Including undistributed net investment income of:........................... $ (129,914) $ (125,614)
========== ==========
CHANGES IN SHARES OUTSTANDING:
Shares sold.................................................................. 424,118 5,709,472
Shares issued in connection with payment of dividends and distributions...... -- --
Shares redeemed.............................................................. (414,817) (535,276)
---------- ----------
9,301 5,174,196
========== ==========
</TABLE>
(1) The Funds commenced operations on December 30, 1997. At December 31, 1997,
the Funds had no operations other than those related to organizational
matters.
See notes to the financial statements.
21
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<TABLE>
<CAPTION>
LKCM SMALL CAP EQUITY FUND
SIX MONTHS YEAR YEAR YEAR MAY 1, 1995JULY 14, 1994(1)
ENDED ENDED ENDED ENDED THROUGH THROUGH
JUNE 30, 1999DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, APRIL 30,
(UNAUDITED) 1998 1997 1996 1995 1995
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE --
BEGINNING OF PERIOD............ $ 15.72 $ 16.89 $ 16.20 $ 13.84 $ 11.48 $ 10.00
-------- -------- -------- -------- -------- -------
Net investment income............ 0.02(2) 0.05 0.02 0.05 0.03 0.04
Net realized gain (loss)
and unrealized
appreciation (depreciation).... 1.53 (1.10) 3.38 3.26 2.33 1.44
-------- -------- -------- -------- -------- -------
Total from investment
operations................. 1.55 (1.05) 3.40 3.31 2.36 1.48
-------- -------- -------- -------- -------- -------
Dividends from net investment
income......................... -- (0.07) (0.07) (0.07) -- --
Distributions from net realized gain
from investment transactions... -- (0.05) (2.64) (0.88) -- --
-------- -------- -------- -------- -------- -------
Total distributions.......... -- (0.12) (2.71) (0.95) -- --
-------- -------- -------- -------- -------- -------
NET ASSET VALUE-- END OF PERIOD.. $ 17.27 $ 15.72 $ 16.89 $ 16.20 $ 13.84 $ 11.48
======== ======== ======== ======== ======== =======
TOTAL RETURN..................... 9.86%(3) -6.26% 23.07% 25.67% 20.56%(3) 14.80%(3)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $225,917 $284,018 $274,787 $199,088 $121,430 $66,736
Ratio of expenses to average net assets:
Before expense reimbursement... 0.93%(4) 0.91% 0.95% 1.00% 1.00%(4) 1.00%(4)
After expense reimbursement.... 0.93%(4) 0.91% 0.95% 1.00% 1.00%(4) 1.00%(4)
Ratio of net investment income to
average net assets:
Before expense reimbursement... 0.22%(4) 0.35% 0.22% 0.39% 0.53%(4) 1.15%(4)
After expense reimbursement.... 0.22%(4) 0.35% 0.22% 0.39% 0.53%(4) 1.15%(4)
Portfolio turnover rate(3)....... 20% 35% 34% 66% 57% 53%
</TABLE>
(1) Commencement of Operations
(2) Net investment income per share is calculated using the ending balance of
undistributed net investment loss prior to considerations of adjustments
for permanent book and tax differences.
(3) Not Annualized
(4) Annualized
See notes to the financial statements.
22
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<TABLE>
<CAPTION>
LKCM EQUITY FUND
SIX MONTHS YEAR YEAR JANUARY 3, 1996(1)
ENDED ENDED ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1998 1997 1996
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE-- BEGINNING OF PERIOD........... $ 14.39 $ 13.18 $ 11.70 $ 10.00
------- ------- ------- -------
Net investment income........................... 0.06(2) 0.10 0.10 0.15
Net realized gain (loss) and unrealized
appreciation (depreciation).................... 1.85 1.63 2.52 1.55
------- ------- ------- -------
Total from investment operations............ 1.91 1.73 2.62 1.70
------- ------- ------- -------
Dividends from net investment income............ -- (0.10) (0.25) --
Distributions from net realized gain from
investment transactions....................... -- (0.42) (0.89) --
------- ------- ------- -------
Total distributions......................... -- (0.52) (1.14) --
------- ------- ------- -------
NET ASSET VALUE-- END OF PERIOD................. $ 16.30 $ 14.39 $ 13.18 $ 11.70
======= ======= ======= =======
TOTAL RETURN.................................... 13.27%(3) 13.11% 23.57% 17.00%(3)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (thousands)........... $44,967 $41,069 $52,392 $34,608
Ratio of expenses to average net assets:
Before expense reimbursement.................. 0.80%(4) 1.02% 1.16% 1.32%(4)
After expense reimbursement................... 0.92%(4) 0.80% 0.80% 0.80%(4)
Ratio of net investment income to average net assets:
Before expense reimbursement.................. 0.60%(4) 0.49% 0.57% 0.98%(4)
After expense reimbursement................... 0.72%(4) 0.71% 0.93% 1.50%(4)
Portfolio turnover rate(3)...................... 29% 45% 48% 79%
</TABLE>
(1) Commencement of Operations
(2) Net investment income per share is calculated using the ending balance of
undistributed net investment loss prior to considerations of adjustments
for permanent book and tax differences.
(3) Not Annualized
(4) Annualized
See notes to the financial statements.
23
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<TABLE>
<CAPTION>
LKCM BALANCED FUND LKCM FIXED LKCM
INCOME FUND INTERNATIONAL FUND
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998 (UNAUDITED) 1998 (UNAUDITED) 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE --
BEGINNING OF PERIOD............ $11.05 $ 10.00 $ 10.25 $ 10.00 $ 11.01 $ 10.00
------ ------ ------- ------- ------- -------
Net investment income............ 0.10(1) 0.22 0.25(1) 0.54(2) (0.03)(1) 0.04(1)
Net realized gain (loss) and unrealized
appreciation (depreciation).... 0.80 1.05 (0.36) 0.17 0.23 0.97
------ ------ ------- ------- ------- -------
Total from investment
operations................. 0.90 1.27 (0.11) 0.71 0.20 1.01
------ ------ ------- ------- ------- -------
Dividends from net investment
income......................... (0.10) (0.22) (0.25) (0.46) -- --
Distributions from net realized gain
from investment transactions... -- -- -- -- -- --
------ ------ ------- ------- ------- -------
Total distributions.......... (0.10) (0.22) (0.25) (0.46) -- --
------ ------ ------- ------- ------- -------
NET ASSET VALUE-- END OF PERIOD.. $11.85 $11.05 $ 9.89 $ 10.25 $ 11.21 $ 11.01
====== ====== ======= ======= ======= =======
TOTAL RETURN..................... 8.18%(3) 12.84% -1.12%(3) 7.27% 1.82%(3) 10.10%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $4,444 $3,639 $19,397 $14,557 $58,127 $56,985
Ratio of expenses to average net assets:
Before expense reimbursement... 2.04%(4) 4.59% 0.96%(4) 1.28% 1.47%(4) 1.40%
After expense reimbursement.... 0.80%(4) 0.80% 0.65%(4) 0.65% 1.20%(4) 1.20%
Ratio of net investment income to
average net assets:
Before expense reimbursement... 0.51%(4) -1.38% 5.08%(4) 4.66% 0.11%(4) 0.34%
After expense reimbursement.... 1.75%(4) 2.41% 5.39%(4) 5.29% 0.38%(4) 0.54%
Portfolio turnover rate(3)....... 30% 39% 24% 82% 109% 196%
(1) Net investment income per share is calculated using the ending balance of
undistributed net investment loss prior to considerations of adjustments
for permanent book and tax differences.
(2) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the year.
(3) Not Annualized
(4) Annualized
</TABLE>
See notes to the financial statements.
24
<PAGE>
LKCM FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
A. ACCOUNTING POLICIES. LKCM Funds (the "Trust") is registered under the
Investment Company Act as a diversified open-end, management company. The Trust
was organized as a Delaware business trust on February 10, 1994 and consists of
five series of shares comprising the LKCM Small Cap Equity Fund, the LKCM Equity
Fund, the LKCM Balanced Fund, the LKCM Fixed Income Fund and the LKCM
International Fund (collectively, the "Funds"), the assets of which are invested
in separate, independently managed portfolios. Investment operations of the
Funds began on July 14, 1994 (the LKCM Small Cap Equity Fund), January 3, 1996
(the LKCM Equity Fund), and December 30, 1997 (the LKCM Balanced Fund, the LKCM
Fixed Income Fund and the LKCM International Fund). The LKCM Small Cap Equity
Fund seeks to maximize capital appreciation. The LKCM Equity Fund seeks to
maximize long-term capital appreciation. The LKCM Balanced Fund seeks to provide
investors with current income and capital appreciation. The LKCM Fixed Income
Fund seeks to provide investors with current income. The LKCM International Fund
seeks to provide investors with a total return in excess of the Morgan Stanley
Capital International EAFE Index. The following is a summary of significant
accounting policies followed by the Funds in preparation of the financial
statements.
1. SECURITY VALUATION: Securities listed on a U.S. securities exchange or
the Nasdaq Stock Market for which market quotations are readily available
are valued at the last quoted sale 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 last 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 each Fund's policy to meet the requirements
of the Internal Revenue Code applicable to regulated investment companies
and each Fund intends to distribute investment company net taxable income
and net capital gains to shareholders. Therefore, no federal income tax
provision is required. Generally accepted accounting
principles require that certain components of net assets be adjusted to
reflect permanent differences between financial and tax reporting. These
reclassifications have no effect on net assets or net asset values per
share.
3. REPURCHASE AGREEMENTS: Each Fund may enter into repurchase
agreements with broker-dealers or banks that meet the credit guidelines
established by the Board of Trustees. In connection with transactions in
repurchase agreements, it is the Fund's policy that the custodian take
possession of the underlying collateral securities, the value of which
exceeds the principal amount of the repurchase transaction, including
accrued interest. If the seller defaults, and the value of the collateral
declines, realization of the collateral by the Funds may be delayed or
limited.
4. DISTRIBUTIONS TO SHAREHOLDERS: The Small Cap Equity, Equity and
International Funds intend to pay dividends and net capital gains
distributions, if any, on an annual basis. The Balanced and Fixed Income
Funds intend to pay dividends on a quarterly basis and net capital gain
distributions, if any, on an annual basis.
5. FOREIGN SECURITIES: Investing in securities of foreign companies and
foreign governments involves special risks and considerations not typically
associated with investing in U.S. companies and securities of the U.S.
government. These risks include revaluation of currencies and future adverse
political and economic developments. Moreover, securities of many foreign
companies and foreign governments and their markets may be less liquid and
their prices more volatile than those of securities of comparable U.S.
companies and securities of the U.S. government.
25
<PAGE>
6. FOREIGN CURRENCY TRANSLATIONS: The books and records of the Funds are
maintained in U.S. dollars. Foreign currency transactions are translated
into U.S. dollars on the following basis: (i) market value of investment
securities, assets and liabilities at the daily rates of exchange, and (ii)
purchases and sales of investment securities, dividend and interest income
and certain expenses at the rates of exchange prevailing on the respective
dates of such transactions. For financial reporting purposes, the Funds do
not isolate changes in the exchange rate of investment securities from the
fluctuations arising from changes in the market prices of securities.
However, for federal income tax purposes the Funds do isolate and treat as
ordinary income the effect of changes in foreign exchange rates on realized
gain or loss from the sale of investment securities and payables and
receivables arising from trade date and settlement date differences.
7. FORWARD CURRENCY OPTIONS AND FUTURES:
The LKCM International Fund may purchase or sell listed or over- the-counter
foreign currency options, foreign currency futures and related options on
foreign currency futures as a short or long hedge against possible
variations in foreign exchange rates. Such transactions may be effected with
respect to hedge on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated to be
purchased by the Fund.
8. EXPENSE ALLOCATION: Common expenses incurred by the Funds are allocated
among the Funds based upon (i) relative average net assets, (ii) as incurred
on a specific identification basis, or (iii) evenly among the Funds,
depending on the nature of the expenditure.
9. 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 reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
10. OTHER: Security and shareholder transactions are recorded on
trade date. Realized gains and losses on sales of investments are calculated
on the identified cost basis. Dividend income and dividends and
distributions to shareholders are recorded on the ex-dividend date. Interest
income is recognized on the accrual basis. Generally accepted accounting
principles required that permanent financial reporting and tax differences
relating to shareholder distributions be reclassified to paid in capital.
B. INVESTMENT ADVISORY AND OTHER AGREEMENTS: Luther King Capital Management
Corporation (the "Adviser"), serves as the investment adviser to the Funds under
an Investment Advisory Agreement (the "Agreement"). The Adviser receives a fee,
computed daily and payable quarterly, at the annual rates presented below as
applied to each Fund's daily net assets. The Advisor entered into a Subadvisory
Agreement with TT International Investment Management (the "Sub-Adviser") for
the LKCMInternational Fund. Pursuant to its Subadvisory Agreement with the
Adviser, the Sub-Adviser is entitled to recevice a fee from the Adviser,
calculated daily and payable quarterly, at the annual rate below as applied to
the LKCM International Fund's daily net assets. The Adviser has voluntarily
agreed to pay operating expenses in excess of the annual rates presented below
as applied to each Fund's daily net assets. For the six months ended June 30,
1999 the Adviser waived the following fees:
<TABLE>
<CAPTION>
LKCM LKCM LKCM LKCM LKCM
SMALL CAP EQUITY EQUITY BALANCED FIXED INCOME INTERNATIONAL
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
Annual Advisory Rate 0.75% 0.70% 0.65% 0.50% (1)(2)
Annual Cap on Expenses 1.00% 0.80% 0.80% 0.65% 1.20%
Fees Waived -- 25,728 25,127 25,240 75,141
</TABLE>
26
<PAGE>
(1) The Adviser is entitled to receive a fee, calculated daily and payable
quarterly, at the annual rate of 1.00% of the Fund's average daily net assets.
(2) Pursuant to its Subadvisory Agreement with the Adviser, the Sub-Adviser is
entitled to receive a fee from the Advisor, calculated daily and payable
quarterly, at the annual rate of 0.50%. Firstar Mutual Fund Services, LLC serves
as custodian, transfer agent, administrator and accounting services agent for
the Trust. Distribution services are performed pursuant to distribution
contracts with First Data Distributors, Inc., the Trust's principal underwriter,
and other broker-dealers.
C. SECURITY TRANSACTIONS: Purchases and sales of investment securities, other
than short-term investments, for the six months ended June 30, 1999 were
as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
U.S. GOVERNMENT OTHER U.S. GOVERNMENT OTHER
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
LKCM Small Cap Equity Fund -- $38,943,413 -- $58,112,579
LKCM Equity Fund -- 11,309,003 -- 13,505,031
LKCM Balanced Fund $ 50,463 1,528,267 $ 334,139 849,998
LKCM Fixed Income Fund 4,536,086 4,559,419 2,899,680 914,021
LKCM International Fund -- 60,685,898 -- 57,464,557
At June 30, 1999, cost and unrealized appreciation (depreciation) of investments
for Federal income tax purposes were:
NET
COST APPRECIATION (DEPRECIATION) APPRECIATION
------------- ------------- ------------- -------------
LKCM Small Cap Equity Fund $175,970,213 $62,025,130 ($13,731,926) $48,293,204
LKCM Equity Fund 31,484,466 13,198,006 (207,055) 12,990,951
LKCM Balanced Fund 3,863,115 628,687 (87,011) 541,676
LKCM Fixed Income Fund 19,900,634 17,990 (459,326) (441,336)
LKCM International Fund 56,717,364 5,989,286 (3,411,968) 2,577,318
</TABLE>
The LKCM Small Cap Equity Fund and LKCM Balanced Fund realized, on a tax basis,
capital loss carryforwards
of $609,640 and $19,458 which expire at December 31, 2006, respectively. These
losses are available to offset future capital gains prior to distribution.
D. OTHER: At June 30, 1999, the percentage of total shares outstanding and the
number of record shareholders owning 10% or greater of the
Funds were as follows:
NO. OF %
SHAREHOLDERS OWNERSHIP
------------- -------------
LKCM Small Cap Equity Fund 0 --
LKCM Equity Fund 1 34.12%
LKCM Balanced Fund 4 66.93%
LKCM Fixed Income Fund 1 14.63%
LKCM International Fund 2 61.05%
27
