LKCM FUNDS
P.O. BOX 701
MILWAUKEE, WI 53201-0701
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OFFICERS AND TRUSTEES
J. Luther King, Jr., CFA Jacqui Brownfield
Chairman of the Board, Vice President,
President Secretary & Treasurer
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
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INVESTMENT ADVISER
Luther King Capital Management Corporation
301 Commerce Street, Suite 1600
Fort Worth, TX 76102
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ADMINISTRATOR, TRANSFER AGENT, DIVIDEND
PAYING AGENT, SHAREHOLDER SERVICING
AGENT & CUSTODIAN
Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
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LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
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INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue
Milwaukee, WI 53202
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DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center, 6th Floor
West Conshohocken, PA 19428-2961
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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.
LKCM
FUNDS
LKCM SMALL CAP EQUITY FUND
LKCM EQUITY FUND
LKCM BALANCED FUND
LKCM FIXED INCOME FUND
LKCM INTERNATIONAL FUND
Annual Report
December 31, 1999
<PAGE>
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On August 10, 1999, the Board of Trustees ratified the termination of Deloitte
and Touche LLP as the Funds' independent accountants. For the periods ended
April 30, 1995 and December 31, 1995 and the years ended December 31, 1996
through December 31, 1998, Deloitte and Touche LLP expressed an unqualified
opinion on the Funds' financial statements. There were no disagreements between
Fund management and Deloitte and Touche LLP prior to their termination. The
Board of Trustees approved the termination of Deloitte and Touche LLP and the
appointment of PricewaterhouseCoopers LLP as the Funds' independent accountants.
The Funds hereby designate the following amounts as long-term capital gain
distributions for purposes of the dividends paid deduction:
LKCM Small Cap Equity Fund --
LKCM Equity Fund $5,999,369
LKCM Balanced Fund 6,551
LKCM Fixed Income Fund --
LKCM International Fund 249,607
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<PAGE>
LKCM FUNDS
----------
DEAR FELLOW SHAREHOLDERS:
We are pleased to report the following performance information for the LKCM
Funds:
<TABLE>
<CAPTION>
AVERAGE
ONE YEAR ANNUAL
TOTAL TOTAL
NET ASSET RETURN RETURN
INCEPTION VALUE AT ENDED SINCE
FUNDS DATES 12/31/99 12/31/99 INCEPTION
- ----- --------- -------- -------- ---------
<S> <C> <C> <C> <C>
LKCM Equity Fund 01/03/96 $14.91 23.07% 19.11%
S&P 500 21.04% 26.40%
LKCM Small Cap Fund 07/14/94 $18.08 16.83% 16.85%
Russell 2000 21.26% 15.71%
S&P 500 21.04% 26.42%
LKCM International Fund 12/30/97 $15.44 42.71% 25.35%
EAFE Index* 26.96% 23.43%
LKCM Balanced Fund 12/30/97 $12.30 13.53% 13.18%
S&P 500 21.04% 24.75%
Lehman Bond Index** 0.39% 4.33%
LKCM Fixed Income Fund 12/30/97 $9.69 (0.34%) 3.40%
Lehman Bond Index** 0.39% 4.33%
</TABLE>
* Morgan Stanley Capital International Europe, Australasia, Far East Index
**Lehman Brothers Intermediate Government/Corporate Bond Index
The year of 1999 proved to be another resilient year for the stock market,
especially as measured by the popular indices. However, the year was unusual in
a number of ways. First, the extreme divergence in returns between growth stocks
and value stocks was unparalleled. In fact, out-performance by growth stocks was
pronounced in both the large capitalization and small capitalization segments of
the market. While it is true that most of the high quality growth companies
boast dominant market positions and rising returns on invested capital,
characteristics that often indicate strong future performance, investors seemed
to pursue high growth companies regardless of relative valuation. As a result,
the valuations of high-growth stocks today seem to fully consider their future
prospects. The second way in which 1999 seemed unusual was the limited impact on
share prices of a material increase in interest rates. Historically, highly
valued shares of growth companies have been vulnerable during periods of rising
interest rates. However, during 1999, shares of high growth companies ignored
the persistent rise in interest rates. Of course, last year's rise in interest
rates can largely be attributed to continued economic strength and the resultant
upward pressure on prices. The seemingly undying economic robustness in the US,
coupled with the economic recovery abroad, helped to sustain earnings at many
companies throughout the year. While all of the LKCM Funds are managed with a
focus on selection of individual investments, the investing climate including
the overall trends in stock prices, the bond market, and the general economy,
has an impact on the performance of the Funds. We are pleased with how each of
the Funds performed in 1999, especially considering our belief that the LKCM
Funds were positioned with less risk than their respective benchmarks.
The LKCM Equity Fund is managed to provide long-term capital appreciation
via investment primarily in common stocks of mid-sized and large companies. The
LKCM Equity Fund out-performed its benchmark, the S&P 500, in 1999. The Fund
focuses its investments in quality companies with above-average profitability
and reasonable valuations. Being mindful of valuation, while unpopular with
investors last year, is an important part of
1
<PAGE>
managing risk and does not have to be an impediment to strong portfolio
performance in a bull market. The LKCM Equity Fund demonstrated this in 1999.
Overall, an underweight position in the technology sector was the largest
constraint on performance. However, superior stock selection across many
sectors, including technology, was a more than offsetting positive. The strong
performance of Motorola, a sizable technology holding in the Fund, serves as an
example. As of December 31, the Fund's total net assets were $27,492,492 with
82.9% of net assets invested in common stocks and 17.1% in cash reserves and
other assets net of liabilities. As it stands, the Fund is well positioned for
2000 given its holdings of attractively valued investments with significant
growth potential.
The LKCM Small Cap Fund is managed to maximize capital appreciation through
investment primarily in the common stocks of smaller companies. The Fund's
successful investment strategy focuses on investing in shares of reasonably
valued, niche companies with above average return and growth prospects. Our
insistence on reasonable value, while a critical element of long-term investing,
limited the Fund's appreciation potential in 1999. While the Fund has
out-performed its primary benchmark, the Russell 2000, since its inception, the
LKCM Small Cap Fund lagged the benchmark in 1999. An under-weighted position in
technology stocks was a limiting factor in the Fund's performance as was an
above-average cash position. Selection of individual securities remained a
strong suit, however. For example, Dallas Semiconductor, a long-term Fund
holding and a strong performer, provides semiconductors for communications
applications. Another example, Jones Pharmaceutical was one of the Fund's top
contributors to performance in an otherwise lackluster health care sector.
Finally, the investment themes of an energy rebound and an explosion of
communications usage were major contributors to performance. As of December 31,
the Fund's total net assets were $230,163,672 with 82.0% of net assets invested
in common and preferred stocks and 18.0% in cash reserves and other assets net
of liabilities. The Fund continues to be somewhat defensively positioned but
possesses an attractive portfolio of companies as we enter 2000.
The LKCM International Fund is managed in a style that seeks absolute
returns. The Fund posted a net 40.16% return for the second half of 1999 versus
an MSCI EAFE return of 22.12%. Attribution analysis shows that a significant
outperformance of Japanese equities, accompanied by a strong performance of
tech/telco stocks in Europe, were key. In the second half of 1999 the asset base
of the Fund grew: US$83.9m on December 31, 1999 (US$58.1m on July 1, 1999).
Looking ahead we see a pull back in global equity markets, especially in those
stocks that gained the most at 1999-end, namely tech, media & telcos (so-called
TMTs). We need the froth to be taken out of markets and while we like technology
that adds to GDP, such as telcos, we are more wary of the Internet boom. We
suspect the US will slow either because Greenspan will engineer it (higher
rates), or the economy will slow of its own accord. The global economy will
continue to do well and growth will be more synchronized. The last communique of
the old millennium strongly suggested rates in the new one are headed for
increases. The question is how much?
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. The Fund's performance for the year of 1999 was
in-line with expectations, between the total return of the S&P 500 and the
Lehman Brothers Government/Corporate Bond Index. While the bond component of the
portfolio remains an integral part of managing the Fund's risk characteristics,
the common stock investments drove overall performance in 1999. In fact,
investment performance by the common stock segment of the Fund exceeded the
total return of the S&P 500. Performance was driven by a number of
communications-related technology investments that offered attractive
appreciation potential and possessed manageable risk profiles. As of December
31, 1999, total net assets were $6,850,607 and the asset mix was 63.8% in common
stocks, 1.8% in convertible securities, 20.1% in corporate bonds, 11.9% in
government bonds, and 2.4% in cash reserves and other assets net of liabilities.
The "total return" philosophy of controlling risk via a blend of asset classes
remains an attractive investment alternative in most market environments.
2
<PAGE>
The 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. As an example of our strategy, several of the Fund's largest
corporate bond holdings have unique call provisions that offer an attractive
combination of risk and return. The Fund outperformed the Lipper Intermediate
Investment Grade Index in each of the past four quarters, but modestly trailed
the Lehman Brothers Intermediate Government/ Corporate Bond Index for the
calendar year. We have relied upon our internal research capabilities in order
to identify corporate bonds with strong credit profiles and attractive yields.
The average effective maturity of the Fund at the end of the year was
approximately 4.7 years and the average quality was A+. As of December 31, 1999,
total net assets were $26,015,954 and the asset mix was 74.7% in corporate
bonds, 23.0% in U.S. Treasury Notes, and 2.3% in cash reserves and other assets
net of liabilities. The Fund is well positioned to benefit from the current
environment of low inflation and continued economic growth.
We continue to be optimistic about the resilience of the US financial
markets at a time of unprecedented economic expansion and technological
innovation. However, we must acknowledge the growing risks associated with the
stock market's rapid advance in the face of rising interest rates. Given the
high level of consumer confidence, the tight labor market, higher oil prices,
and excess liquidity provided for a smooth Y2K transition, the Fed is likely to
raise interest rates again in 2000. Historically, narrow stock market breadth
combined with rising interest rates has signaled a need to act prudently. As a
result, we believe that the financial markets will be quite volatile in 2000. We
also expect the bias toward growth stocks to continue but not at the extreme of
last year. In other words, stock market performance should experience some
broadening. Nevertheless, as we express our near-term caution, we continue to be
excited about investment opportunities included in and being uncovered for each
of the LKCM Funds.
Regards,
/s/ Luther King, Jr.
J. Luther King, Jr., CFA
January 26, 2000
3
<PAGE>
PERFORMANCE:
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The following information illustrates the historical performance of LKCM Small
Cap Equity Fund and LKCM Equity Fund, compared to the Funds' representative
market indices.
The S&P 500 Index is an unmanaged index of 500 stocks designed to mimic the
overall equity market's industry weightings. Most, but not all, large
capitalization stocks are in the index.
The Russell 2000 Index is an unmanaged index consisting of the 2,000 smallest of
the 3,000 largest stocks. Market capitalization is typically between $57 million
and $610 million.
Note: Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate. When shares are redeemed, they may be
worth more or less than the original cost.
An index is a fictitious unmanaged portfolio and does not trade or incur any
expenses. One can not invest in an unmanaged index.
AVERAGE ANNUAL TOTAL RETURN
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PAST PAST PAST SINCE
1 YEAR 3 YEARS 5 YEARS INCEPTION(1)
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LKCM SMALL
CAP EQUITY
FUND 16.83% 10.46% 17.43% 16.85%
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Russell 2000
Index 21.26% 13.08% 16.69% 15.71%
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S&P 500 Index 21.04% 27.56% 28.56% 26.42%
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(1) July 14, 1994
A $10,000 Investment in LKCM Small Cap Equity Fund
LKCM Small Cap Equity Fund $23,440
S&P 500 Index $36,055
Rusell 2000 Index $22,214
LKCM Small Cap
Equity Fund S&P 500 Index Rusell 2000 Index
7/94 10000 10000 10000
12/94 10500 10268 10267
6/95 12170 12343 11748
12/95 13839 14127 13188
6/96 16157 15554 14554
12/96 17392 17370 15363
6/97 19526 20950 16390
12/97 21404 23167 18798
6/98 22102 27270 19724
12/98 20064 29787 18320
6/99 22042 33474 20020
12/99 23440 36055 22214
AVERAGE ANNUAL TOTAL RETURN
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PAST PAST SINCE
1 YEAR 3 YEARS INCEPTION(1)
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LKCM EQUITY FUND 23.07% 19.80% 19.11%
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S&P 500 Index 21.04% 27.56% 26.40%
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(1) January 3, 1996
A $10,000 Investment in LKCM Equity Fund
LKCM Equity Fund $20,124
S&P 500 Index $25,522
LKCM Equity Fund S&P 500 Index
1/96 10000 10000
6/96 10800 11010
12/96 11700 12296
6/97 13491 14830
12/97 14457 16399
6/98 16179 19303
12/98 16352 21085
6/99 18522 23696
12/99 20124 25522
4
<PAGE>
PERFORMANCE:
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The following information illustrates the historical performance of LKCM
Balanced Fund and LKCM Fixed Income Fund compared to the Funds' representative
market indices.
The S&P 500 Index is an unmanaged index of 500 stocks designed to mimic the
overall equity market's industry weightings. Most, but not all, large
capitalization stocks are in the index.
The Lehman Brothers Intermediate Government/Corporate Bond Index is an unmanaged
market value weighted index measuring both the principal price changes of, and
income provided by, the underlying universe of securities that comprise the
index. Securities included in the index must meet the following criteria: fixed
as opposed to variable rate; remaining maturity of one to ten years; minimum
outstanding par value of $100 million; and rated investment grade or higher by
Moody's, Standard & Poor's or Fitch, in that order.
Note: Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate. When shares are redeemed, they may be
worth more or less than the original cost.
An index is a fictitious unmanaged portfolio and does not trade or incur any
expenses. One can not invest in an unmanaged index.
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------
PAST SINCE
1 YEAR INCEPTION(1)
- --------------------------------------------------------
LKCM BALANCED FUND 13.53% 13.18%
- --------------------------------------------------------
Lehman Bond Index(2) 0.39% 4.33%
- --------------------------------------------------------
S&P 500 Index 21.04% 24.75%
(1) December 30, 1997
(2) Lehman Brothers Intermediate Government/Corporate Bond Index
LKCM Balanced Fund $12,811
S&P 500 Index $15,564
Lehman Bond Index $10,885
LKCM Balanced Fund S&P 500 Index Lehman Bond Index
1/98 10000 10000 10000
3/98 10709 11395 10156
6/98 10694 11771 10347
9/98 10159 10600 10812
12/98 11284 12858 10844
3/99 11599 13498 10823
6/99 12207 14449 10780
9/99 11549 13548 10879
12/99 12811 15564 10885
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------
PAST SINCE
1 YEAR INCEPTION(1)
- --------------------------------------------------------
LKCM FIXED
INCOME FUND (0.34%) 3.40%
- --------------------------------------------------------
Lehman Bond Index(2) 0.39% 4.33%
- --------------------------------------------------------
(1) December 30, 1997
(2) Lehman Brothers Intermediate Government/Corporate Bond Index
A $10,000 Investment in LKCM Fixed Income Fund
LKCM Fixed Income Fund $10,691
Lehman Bond Index $10,885
LKCM Fixed Income Fund Lehman Bond Index
1/98 10000 10000
3/98 10103 10156
6/98 10309 10347
9/98 10745 10812
12/98 10727 10844
3/99 10700 10823
6/99 10607 10780
9/99 10683 10879
12/99 10691 10885
5
<PAGE>
PERFORMANCE:
- --------------------------------------------------------------------------------
The following information illustrates the historical performance of LKCM
International Fund compared to the Fund's representative market index.
The Morgan Stanley Capital International Europe Australasia, Far East Index
("MSCI/EAFE") is an unmanaged index composed of 20 European and Pacific Basin
countries. The MSCI/EAFE Index is the most recognized international index and is
weighted by market capitalization.
Note: Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate. When shares are redeemed, they may be
worth more or less than the original cost.
An index is a fictitious unmanaged portfolio and does not trade or incur any
expenses. One can not invest in an unmanaged index.
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------
PAST SINCE
1 YEAR INCEPTION(1)
- --------------------------------------------------------
LKCM INTERNATIONAL FUND 42.71% 25.35%
- --------------------------------------------------------
EAFE Index(2) 26.96% 23.43%
- --------------------------------------------------------
(1) December 30, 1997
(2) Morgan Stanley Capital International Europe, Australasia, Far East
Index.
A $10,000 Investment in LKCM International Fund
LKCM International Fund $15,710
EAFE Index $15,236
LKCM International Fund EAFE Index
1/98 10000 10000
3/98 10910 11471
6/98 10920 11593
9/98 9520 9945
12/98 11010 12000
3/99 10569 12167
6/99 11209 12476
9/99 11528 13024
12/99 15710 15236
6
<PAGE>
LKCM SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
- -------------------------------------------------------
COMMON STOCKS - 79.48% SHARES VALUE
- -------------------------------------------------------
BASIC MATERIALS - 0.77%
UCAR International Inc. # 100,000 $ 1,781,250
-----------
CAPITAL GOODS - 11.31%
Casella Waste Systems, Inc. # 106,000 2,000,750
Chart Industries, Inc. 97,050 388,200
Diebold, Inc. 110,000 2,585,000
Gentex Corporation # 100,000 2,775,000
Justin Industries, Inc. 320,000 4,760,000
Lindsay Manufacturing Company 225,000 4,106,250
Littelfuse, Inc. # 125,000 3,033,203
Reliance Steel & Aluminum
Company 131,250 3,076,172
Scott Technologies, Inc. 175,000 3,303,125
-----------
26,027,700
-----------
CONSUMER CYCLICALS - 9.81%
Anchor Gaming # 29,000 1,259,687
A.H. Belo Corporation -
Common Series A 110,000 2,096,875
Harte-Hanks, Inc. 170,000 3,697,500
ITT Educational Services, Inc. 100,000 1,543,750
Iron Mountain, Inc. # 100,000 3,931,250
Mobile Mini, Inc. # 191,000 4,106,500
Quest Education Corporation # 115,000 1,006,250
Tractor Supply Company # 110,500 1,768,000
Tuesday Morning Corporation # 100,000 1,843,750
White Cap Industries, Inc. # 87,500 1,312,500
-----------
22,566,062
-----------
CONSUMER STAPLES - 9.94%
Cott Corporation # 20,000 105,000
Cumulus Media, Inc. - Class A # 75,000 3,806,250
Earthgrains Company 113,000 1,822,125
Emmis Communications
Corporation - Class A # 16,900 2,106,427
International Home Foods, Inc. # 80,000 1,390,000
Luby's, Inc. 56,000 637,000
Patterson Dental Company # 100,000 4,262,500
Shop At Home, Inc. # 125,000 1,242,188
Taco Cabana, Inc. - Class A # 190,100 1,544,563
Westwood One, Inc. 45,000 3,420,000
Young Broadcasting, Inc. -
Class A # 50,000 2,550,000
-----------
22,886,053
-----------
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
ENERGY - 8.79%
Tom Brown, Inc. # 125,000 $ 1,671,875
Carbo Ceramics, Inc. 60,000 1,312,500
Dril-Quip, Inc. # 75,000 2,278,125
Encal Energy Ltd.(1) 487,500 2,230,049
HS Resources, Inc. # 110,000 1,897,500
Independent Energy Holdings
PLC - ADR # 110,000 3,664,375
Nabors Industries, Inc. # 67,500 2,088,281
Santa Fe Snyder Corporation 276,750 2,214,000
Stolt Comex Seaway, S.A. #(1) 150,000 1,659,375
Varco International, Inc. # 120,000 1,222,500
-----------
20,238,580
-----------
FINANCIAL SERVICES - 6.83%
E.W. Blanch Holdings, Inc. 20,000 1,225,000
CNA Surety Corporation 210,000 2,730,000
Cullen/Frost Bankers, Inc. 75,000 1,931,250
FVNB Corporation 19,000 688,750
INSpire Insurance
Solutions, Inc. # 190,000 872,812
Investment Technology
Group, Inc. # 55,260 1,588,725
Jefferies Group, Inc. 30,000 660,000
StanCorp Financial Group, Inc. 80,000 2,015,000
Texas Regional Bancshares, Inc. 138,000 4,002,000
-----------
15,713,537
-----------
HEALTH CARE - 7.87%
Intelligent Polymers Limited # 150,000 5,025,000
Jones Pharma, Inc. 112,500 4,886,719
Organogenesis, Inc. # 57,000 495,187
Prime Medical Services, Inc. # 200,000 1,825,000
Sybron International
Corporation # 155,000 3,826,563
Triad Hospitals, Inc. # 48,000 726,000
Wesley Jessen VisionCare, Inc. # 35,000 1,325,625
-----------
18,110,094
-----------
REAL ESTATE INVESTMENT TRUSTS - 1.10%
Brandywine Realty Trust 58,100 951,387
Prentiss Properties Trust 75,000 1,575,000
-----------
2,526,387
-----------
See notes to the financial statements.
7
<PAGE>
LKCM SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------
TECHNOLOGY - 9.87%
Artesyn Technologies, Inc. # 25,000 $ 525,000
DSET Corporation # 55,000 2,055,625
Dallas Semiconductor Corporation 52,500 3,382,969
Entrust Technologies, Inc. # 25,000 1,498,437
Harris Corporation 40,000 1,067,500
INET Technologies, Inc. # 10,000 698,750
InterVU, Inc. # 19,000 1,995,000
Mission Critical Software,
Inc. # 20,000 1,400,000
National Information
Consortium, Inc. # 55,000 1,760,000
NetIQ Corporation # 20,250 1,054,266
RadiSys Corporation # 45,000 2,295,000
Sanchez Computer
Associates, Inc. # 30,000 1,235,625
SonicWALL, Inc. # 5,000 201,250
Tekelec # 56,500 1,271,250
VocalTec Communications Ltd. # 70,000 1,172,500
Wind River Systems, Inc. # 30,000 1,098,750
-----------
22,711,922
-----------
TELECOMMUNICATIONS - 6.10%
AT&T Canada, Inc. # 70,000 2,817,500
Crown Castle International
Corporation # 95,000 3,051,875
ITC DeltaCom, Inc.# 115,000 3,176,875
ITXC Corporation # 10,000 336,250
Pinnacle Holdings, Inc. # 110,000 4,661,250
-----------
14,043,750
-----------
TRANSPORTATION - 7.09%
Covenant Transport, Inc.-
Class A # 90,000 1,563,750
Kirby Corporation 280,000 5,740,000
RailAmerica, Inc. # 584,500 5,004,781
RailTex, Inc. # 25,000 446,875
Swift Transporation Co., Inc. # 202,500 3,569,063
-----------
16,324,469
-----------
TOTAL COMMON STOCKS
(cost $126,909,204) 182,929,804
-----------
- -------------------------------------------------------
PREFERRED STOCKS - 0.06% SHARES VALUE
- -------------------------------------------------------
CONSUMER CYCLICALS - 0.06%
Atlantic Gulf Corporation #@ 26,017 $ 143,094
-----------
TOTAL PREFERRED STOCKS
(cost $293,583) 143,094
-----------
- -------------------------------------------------------
WARRANTS - 2.49%
- -------------------------------------------------------
FINANCIAL SERVICES - 0.01%
PawnMart, Inc. - Class A,
expires 3/11/2003 # 50,000 11,719
PawnMart, Inc. - Class B,
expires 3/11/2004 # 50,000 7,812
-----------
19,531
-----------
HEALTHCARE -2.48%
Biovail Corporation International,
expires 9/30/2002 # 100,000 5,725,000
-----------
TOTAL WARRANTS
(cost $727,492) 5,744,531
-----------
- -------------------------------------------------------
CASH EQUIVALENTS - 18.07% PRINCIPAL
- -------------------------------------------------------
SHORT TERM INVESTMENTS - 18.07%
Firstar Bank Demand Note,
6.24%, due 12/31/2031 $ 8,686,290 8,686,290
Firstar Bank Repo., 1.00%,
dated 12/31/1999,*
due 1/3/2000 32,900,000 32,900,000
-----------
TOTAL CASH EQUIVALENTS
(cost $41,586,290) 41,586,290
-----------
TOTAL INVESTMENTS - 100.10%
(cost $169,516,569) 230,403,719
-----------
Liabilities, less Other Assets - (0.10%) (240,047)
-----------
Total Net Assets - 100.00% $230,163,672
============
# 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.
* Collateralized by U.S. Government securities.
ADR American Depository Receipts.
See notes to the financial statements.
8
<PAGE>
LKCM EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
- -------------------------------------------------------
COMMON STOCKS - 82.88% SHARES VALUE
- -------------------------------------------------------
BASIC MATERIALS - 1.23%
Weyerhaeuser Company 4,700 $ 337,519
-----------
CAPITAL GOODS - 4.87%
Deere & Company 10,500 455,437
Diebold, Inc. 11,200 263,200
General Electric Company 4,000 619,000
-----------
1,337,637
-----------
CONSUMER CYCLICALS - 10.60%
A.H. Belo Corporation -
Common Series A 18,600 354,562
H&R Block, Inc. 7,500 328,125
Gannett Company, Inc. 10,500 856,406
Home Depot, Inc. 7,950 545,072
Sherwin-Williams Company 16,100 338,100
Tandy Corporation 10,000 491,875
-----------
2,914,140
-----------
CONSUMER STAPLES - 8.90%
AMFM, Inc. # 8,100 633,825
Colgate-Palmolive Company 8,700 565,500
Kimberly-Clark Corporation 12,400 809,100
PepsiCo, Inc. 12,400 437,100
-----------
2,445,525
-----------
ENERGY - 9.43%
Anadarko Petroleum Corporation 4,900 167,213
Burlington Resources, Inc. 9,900 327,319
Cabot Oil & Gas Corporation 12,400 199,175
Exxon Mobil Corporation 15,000 1,208,437
Halliburton Company 10,500 422,625
Occidental Petroleum Corporation 12,400 268,150
-----------
2,592,919
-----------
FINANCIAL SERVICES - 7.22%
American General Corporation 9,400 713,225
Hibernia Corporation 24,000 255,000
The MONY Group, Inc. 15,900 464,081
Wells Fargo Company 13,700 553,994
-----------
1,986,300
-----------
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
HEALTH CARE - 13.22%
Columbia/HCA Healthcare
Corporation 14,700 $ 430,894
IMS Health, Inc. 23,000 625,312
Medtronic, Inc. 4,400 160,325
Merck & Company, Inc. 5,600 375,550
Pfizer, Inc. 7,300 236,794
Schering-Plough Corporation 9,400 396,563
SmithKline Beecham PLC ADR 7,500 483,281
Sybron International
Corporation # 18,600 459,188
Teva Pharmaceutical Industries
Ltd. - ADR 6,500 465,969
-----------
3,633,876
-----------
TECHNOLOGY - 21.90%
Agilent Technologies, Inc. # 5,000 386,562
Cisco Systems, Inc. # 5,000 535,625
EMC Corporation 4,500 491,625
First Data Corporation 5,900 290,944
Hewlett-Packard Company 6,200 706,413
Intel Corporation 3,300 271,631
International Business Machines
Corporation 2,200 237,600
Lucent Technologies, Inc. 4,100 306,731
Microsoft Corporation # 5,900 688,825
Motorola, Inc. 9,400 1,384,150
Nortel Networks Corporation 5,000 505,000
Sun Microsystems, Inc. # 2,800 216,825
-----------
6,021,931
-----------
TELECOMMUNICATIONS - 5.51%
ALLTEL Corporation 6,200 512,662
Crown Castle International
Corporation # 15,600 501,150
GTE Corporation 3,500 246,969
MCI WorldCom, Inc. # 4,800 254,700
-----------
1,515,481
-----------
TOTAL COMMON STOCKS
(cost $15,069,636) 22,785,328
-----------
See notes to the financial statements.
9
<PAGE>
LKCM EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
- -------------------------------------------------------
CASH EQUIVALENTS - 17.14% PRINCIPAL VALUE
- -------------------------------------------------------
SHORT TERM INVESTMENTS - 17.14%
Firstar Bank Demand Note,
6.24%, due 12/31/2031 $ 812,402 $ 812,402
Firstar Bank Repo, 1.00%,
dated 12/31/99,
due 1/3/2000* 3,900,000 3,900,000
-----------
TOTAL CASH EQUIVALENTS
(cost $4,712,402) 4,712,402
-----------
TOTAL INVESTMENTS - 100.02%
(cost $19,782,038) 27,497,730
-----------
Liabilities, less Other Assets -
(0.02%) (5,238)
-----------
Total Net Assets - 100.00% $27,492,492
===========
# Non-income producing security.
* Collateralized by U.S. Government securities.
ADR American Depository Receipts.
See notes to the financial statements.
10
<PAGE>
LKCM BALANCED FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
- -------------------------------------------------------
COMMON STOCKS - 63.83% SHARES VALUE
- -------------------------------------------------------
BEVERAGE & PERSONAL PRODUCTS - 2.99%
Estee Lauder Companies - TRACES 500 $ 43,281
Gillette Company 1,000 41,187
Procter & Gamble Company 1,100 120,519
-----------
204,987
-----------
CAPITAL GOODS - 4.15%
Diebold, Inc. 4,600 108,100
General Electric Company 860 133,085
Republic Services, Inc. # 3,000 43,125
-----------
284,310
-----------
CONSUMER CYCLICALS - 5.48%
A.H. Belo Corporation,
Common Series A 3,200 61,000
Harte-Hanks, Inc. 4,000 87,000
Infinity Broadcasting
Corporation #2,125 76,898
Tandy Corporation 950 46,728
Wal-Mart Stores, Inc. 1,500 103,688
-----------
375,314
-----------
CONSUMER STAPLES - 7.93%
CBS Corporation # 3,000 191,812
Colgate-Palmolive Company 1,900 123,500
Kimberly-Clark Corporation 1,500 97,875
Philip Morris Companies, Inc. 2,000 46,375
U.S. Foodservice # 5,000 83,750
-----------
543,312
-----------
ENERGY - 5.72%
Atlantic Richfield Company 900 77,850
BP Amoco PLC - ADR 1,400 83,038
Exxon Mobil Corporation 1,200 96,675
Nabors Industries, Inc. # 1,800 55,688
Schlumberger Limited 1,250 70,313
Transocean Sedco Forex, Inc. 242 8,152
-----------
391,716
-----------
FINANCIAL SERVICES - 7.64%
AEGON N.V. - ADR 201 19,196
Allstate Corporation 1,200 28,800
American General Corporation 800 60,700
American International Group, Inc. 575 62,172
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
FINANCIAL SERVICES - (CONTINUED)
Associates First Capital
Corporation 2,700 $ 74,081
Capital One Financial Corporation 1,100 53,006
Compass Bancshares, Inc. 2,200 49,088
Mellon Bank Corporation 2,440 83,113
Wells Fargo Company 2,300 93,006
-----------
523,162
-----------
HEALTH CARE - 7.56%
American Home Products
Corporation 1,450 57,184
IMS Health, Inc. 4,000 108,750
Medtronic, Inc. 2,900 105,669
Schering-Plough Corporation 600 25,312
SmithKline Beecham PLC ADR 750 48,328
Sybron International
Corporation # 3,500 86,406
Teva Pharmaceutical Industries
Ltd. - ADR 1,200 86,025
-----------
517,674
-----------
REAL ESTATE INVESTMENT TRUSTS - 0.37%
Crescent Real Estate Equities
Company 1,400 25,725
-----------
TECHNOLOGY - 12.80%
Cisco Systems, Inc. # 500 53,563
EMC Corporation 1,300 142,025
Hewlett-Packard Company 750 85,453
Intel Corporation 750 61,734
Microsoft Corporation # 1,100 128,425
Motorola, Inc. 700 103,075
Nortel Networks Corporation 1,500 151,500
Oracle Corporation 1,350 151,284
-----------
877,059
-----------
TELECOMMUNICATIONS - 6.62%
ALLTEL Corporation 1,200 99,225
AT&T Corporation 1,900 96,425
Bell Atlantic Corporation 2,300 141,594
MCI WorldCom, Inc. # 2,190 116,207
-----------
453,451
-----------
See notes to the financial statements.
11
<PAGE>
LKCM BALANCED FUND
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
TRANSPORTATION - 2.57%
RailAmerica, Inc. # 8,500 $ 72,781
United Parcel Service, Inc. -
Class B 1,500 103,500
-----------
176,281
-----------
TOTAL COMMON STOCKS
(cost $3,523,614) 4,372,991
-----------
- -------------------------------------------------------
CORPORATE BONDS - 20.14% PRINCIPAL
- --------------------------------------------------------
BASIC MATERIALS - 0.12%
Union Camp Corporation,
Callable 2/14/00,
10.00%, 5/1/2019 $ 8,000 8,421
-----------
CAPITAL GOODS - 0.70%
Tyco International Group(1),
6.375%, 6/15/2005 25,000 23,466
WMX Technologies,
6.70%, 5/01/2001 25,000 24,169
-----------
47,635
-----------
CONSUMER CYCLICALS - 0.69%
Tandy Corporation,
6.95%, 9/01/2007 50,000 47,400
-----------
CONSUMER STAPLES - 1.42%
Clear Channel Communications, Inc.,
Convertible,
1.50%, 12/01/2002 50,000 51,375
Tribune Company, Convertible,
2.00%, 5/15/2029 290 46,110
-----------
97,485
-----------
FINANCIAL SERVICES - 9.73%
American General Corporation,
6.75%, 6/15/2005 50,000 48,555
Associates Corp N.A.,
6.25%, 9/15/2000 50,000 49,944
Block Financial Corporation,
6.75%, 11/01/2004 75,000 73,413
Citicorp,
7.00%, 7/01/2007 75,000 72,759
Citigroup, Inc.,
5.80%, 3/15/2004 75,000 71,368
- -------------------------------------------------------
CORPORATE BONDS PRINCIPAL VALUE
- -------------------------------------------------------
FINANCIAL SERVICES - (CONTINUED)
Morgan Stanley Group,
6.875%, 3/01/2007 $ 65,000 $ 62,640
Nationwide Mutual Insurance,
6.50%, 2/15/2004 75,000 71,996
Norwest Corporation,
6.625%, 3/15/2003 75,000 73,736
Sears Roebuck Acceptance
Corporation,
6.00%, 3/20/2003 75,000 71,761
Wilmington Trust Corporation,
6.625%, 5/01/2008 75,000 70,395
-----------
666,567
-----------
HEAVY INDUSTRY/TRANSPORTATION - 0.07%
Union Pacific Railroad Corporation,
Callable 1/15/2000,
8.50%, 1/15/2017 5,000 5,109
-----------
MANUFACTURING - 0.35%
Thomas & Betts Corporation,
6.50%, 1/15/2006 25,000 23,641
-----------
REAL ESTATE INVESTMENT TRUST - 1.36%
Bay Apartment Communities,
6.25%, 1/15/2003 25,000 23,903
EOP Operating LP,
6.80%, 1/15/2009 50,000 45,715
Prologis Trust,
7.05%, 7/15/2006 25,000 23,652
-----------
93,270
-----------
RETAIL - 0.79%
Toys R Us,
Callable 1/2000,
8.25%, 2/01/2017 54,000 54,215
-----------
TECHNOLOGY - 1.08%
Kent Electronics,
Callable 9/06/2000,
4.50%, 9/01/2004 60,000 49,950
Oracle Corporation,
6.91%, 2/15/2007 25,000 23,763
-----------
73,713
-----------
See notes to the financial statements.
12
<PAGE>
LKCM BALANCED FUND
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
- -------------------------------------------------------
CORPORATE BONDS PRINCIPAL VALUE
- -------------------------------------------------------
TELECOMMUNICATIONS - 1.37%
ITC DeltaCom, Inc., Convertible,
Callable 5/17/2002,
4.50%, 5/15/2006 $ 27,000 $ 32,400
MCI WorldCom, Inc.,
7.75%, 4/01/2007 60,000 61,247
-----------
93,647
-----------
UTILITIES - 2.46%
Old Domin Electric,
Callable 12/01/2003,
7.48%, 12/01/2013 70,000 68,311
Potomac Edison Company,
Callable 2/14/2000,
8.00%, 6/01/2006 100,000 100,357
-----------
168,668
-----------
TOTAL CORPORATE BONDS
(cost $1,426,264) 1,379,771
-----------
- -------------------------------------------------------
CONVERTIBLE PREFERRED
STOCKS - 1.76% SHARES
- -------------------------------------------------------
TELECOMMUNICATIONS - 1.76%
Crown Castle International
Corporation, 7.25% 4,200 120,750
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $94,137) 120,750
-----------
- -------------------------------------------------------
U.S. TREASURY
OBLIGATIONS - 11.91% PRINCIPAL VALUE
- -------------------------------------------------------
U.S. Treasury Notes:
5.375%, 2/15/2001 $ 100,000 $ 99,218
6.625%, 6/30/2001 100,000 100,625
6.375%, 9/30/2001 70,000 70,153
7.50%, 11/15/2001 150,000 153,328
5.75%, 8/15/2003 100,000 97,938
5.25%, 5/15/2004 100,000 95,812
6.00%, 8/15/2004 100,000 98,469
6.50%, 5/15/2005 100,000 100,063
-----------
TOTAL U. S. TREASURY OBLIGATIONS
(cost $823,434) 815,606
-----------
- -------------------------------------------------------
CASH EQUIVALENTS - 1.62%
- -------------------------------------------------------
SHORT TERM INVESTMENTS - 1.62%
Firstar Bank Demand Note,
6.24%, due 12/31/2031 111,194 111,194
-----------
TOTAL CASH EQUIVALENTS
(cost $111,194) 111,194
-----------
TOTAL INVESTMENTS - 99.26%
(cost $5,978,643) 6,800,312
-----------
Other Assets in excess of
Liabilities - 0.74% 50,295
-----------
Total Net Assets - 100.00% $ 6,850,607
===========
# Non-income producing security.
(1) Foreign Security.
ADR American Depository Receipts.
TRACES Trust Automatic Common Exchange Securities.
See notes to the financial statements.
13
<PAGE>
LKCM FIXED INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
- -------------------------------------------------------
CORPORATE BONDS - 74.67% PRINCIPAL VALUE
- -------------------------------------------------------
BASIC MATERIALS - 0.28%
Union Camp Corporation,
Callable 2/14/00,
10.00%, 5/1/2019 $ 69,000 $ 72,633
-----------
CAPITAL GOODS - 3.66%
Tyco International Group(1),
6.375%, 6/15/2005 500,000 469,313
WMX Technologies,
6.70%, 5/01/2001 500,000 483,387
-----------
952,700
-----------
CHEMICALS - 0.16%
M.A. Hanna Company,
9.375%, 9/15/2003 40,000 42,069
-----------
CONSUMER CYCLICALS - 1.82%
Tandy Corporation,
6.95%, 9/01/2007 500,000 474,000
-----------
FINANCIAL SERVICES - 30.83%
Associates Corp N.A.,
6.25%, 9/15/2000 275,000 274,691
Banc One Corporation,
7.00%, 7/15/2005 150,000 147,449
Banc One Corporation,
7.60%, 5/01/2007 500,000 498,257
Block Financial Corporation,
6.75%, 11/01/2004 725,000 709,655
C.I.T. Group,
6.625%, 6/15/2005 500,000 483,226
Chartwell Re Holdings
Corporation,
Callable 2/14/00,
10.25%, 3/01/2004 1,000,000 1,035,000
Citigroup, Inc.,
5.80%, 3/15/2004 500,000 475,784
Morgan Stanley Group,
6.875%, 3/01/2007 1,000,000 963,698
Nationsbank Corporation,
6.875%, 2/15/2005 1,000,000 986,136
Nationwide Mutual Insurance,
6.50%, 2/15/2004 550,000 527,969
Norwest Corporation,
6.625%, 3/15/2003 500,000 491,572
- -------------------------------------------------------
CORPORATE BONDS PRINCIPAL VALUE
- -------------------------------------------------------
FINANCIAL SERVICES - (CONTINUED)
Sears Roebuck Acceptance
Corporation,
6.00%, 3/20/2003 $ 500,000 $ 478,407
State Street Boston Corporation,
5.95%, 9/15/2003 495,000 478,543
Wilmington Trust Corporation,
6.625%, 5/01/2008 500,000 469,298
-----------
8,019,685
-----------
HEAVY INDUSTRY/TRANSPORTATION - 0.23%
Union Pacific Railroad Corporation,
Callable 1/15/2000,
8.50%, 1/15/2017 59,000 60,284
-----------
MANUFACTURING - 0.55%
Thomas & Betts Corporation,
6.50%, 1/15/2006 150,000 141,846
-----------
REAL ESTATE INVESTMENT TRUST - 6.72%
Bay Apartment Communities,
6.25%, 1/15/2003 150,000 143,418
Camden Property Trust,
7.00%, 11/15/2006 800,000 748,202
EOP Operating LP,
6.80%, 1/15/2009 550,000 502,864
Prologis Trust,
7.05%, 7/15/2006 375,000 354,787
-----------
1,749,271
-----------
RETAIL - 2.10%
Toys R Us,
Callable 2/1/2000,
8.25%, 2/01/2017 545,000 547,165
-----------
TECHNOLOGY - 6.25%
Oracle Corporation,
6.91%, 2/15/2007 675,000 641,599
Texas Instruments, Inc.,
7.00%, 8/15/2004 1,000,000 983,292
-----------
1,624,891
-----------
See notes to the financial statements.
14
<PAGE>
LKCM FIXED INCOME FUND
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
- -------------------------------------------------------
CORPORATE BONDS PRINCIPAL VALUE
- -------------------------------------------------------
TELECOMMUNICATIONS - 13.07%
ALLTEL Corporation,
7.25%, 4/01/2004 $ 750,000 $ 749,629
Cable & Wireless
Communications PLC,
6.75%, 12/01/2008(1) 1,000,000 991,862
GTE Hawaiian Telephone,
7.375%, 9/01/2006 650,000 638,040
MCI WorldCom, Inc.,
7.75%, 4/01/2007 1,000,000 1,020,785
-----------
3,400,316
-----------
TOOLS - HAND HELD - 2.60%
Black & Decker,
7.50%, 4/01/2003 675,000 676,798
-----------
UTILITIES - 6.40%
Interstate Power Company,
Callable 9/15/2000,
8.625%, 9/15/2021 50,000 51,240
Old Domin Electric,
7.48%, 12/01/2013 575,000 561,129
Potomac Edison Company,
Callable 2/14/2000
8.00%, 6/01/2006 1,000,000 1,003,572
Southwest Gas Corporation,
7.50%, 8/01/2006 50,000 48,855
-----------
1,664,796
-----------
TOTAL CORPORATE BONDS
(cost $20,200,927) 19,426,454
-----------
- -------------------------------------------------------
U.S. TREASURY
OBLIGATIONS - 22.98% PRINCIPAL VALUE
- -------------------------------------------------------
U.S. Treasury Notes:
5.375%, 2/15/2001 $1,000,000 $ 992,188
5.75%, 11/30/2002 1,000,000 985,000
6.25%, 2/15/2003 1,000,000 997,188
7.25%, 8/15/2004 1,000,000 1,032,188
6.50%, 5/15/2005 1,000,000 1,000,625
5.875%, 11/15/2005 1,000,000 971,250
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(cost $6,077,878) 5,978,439
-----------
- -------------------------------------------------------
CASH EQUIVALENTS - 0.58%
- -------------------------------------------------------
SHORT TERM INVESTMENTS - 0.58%
Firstar Bank Demand Note,
6.24%, due 12/31/2031 149,554 149,554
-----------
TOTAL CASH EQUIVALENTS
(cost $149,554) 149,554
-----------
TOTAL INVESTMENTS - 98.23%
(cost $26,428,359) 25,554,447
-----------
Other Assets in excess of
Liabilities - 1.77% 461,507
-----------
Total Net Assets - 100.00% $26,015,954
===========
(1) Foreign Security.
See notes to the financial statements.
15
<PAGE>
LKCM INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
- -------------------------------------------------------
COMMON STOCKS - 87.80% SHARES VALUE
- -------------------------------------------------------
AUSTRALIA - 0.86%
- -------------------------------------------------------
COMPUTER SOFTWARE - 0.08%
Solution 6 Holdings, Limited # 6,127 $ 66,746
-----------
DIVERSIFIED MINERALS - 0.78%
WMC, Limited - ADR 119,042 656,219
-----------
TOTAL AUSTRALIA 722,965
-----------
- -------------------------------------------------------
CANADA - 0.04%
- -------------------------------------------------------
ENERGY - 0.04%
Ballard Power Systems, Inc. # 1,142 32,254
-----------
TOTAL CANADA 32,254
-----------
- -------------------------------------------------------
FINLAND - 3.16%
- -------------------------------------------------------
TELECOMMUNICATION - 3.16%
Nokia Oyj 14,609 2,648,290
-----------
TOTAL FINLAND 2,648,290
-----------
- -------------------------------------------------------
FRANCE - 9.22%
- -------------------------------------------------------
BUILDING & CONSTRUCTION - 2.91%
Bouygues SA 3,839 2,439,608
-----------
ELECTRONICS - 1.86%
STMicroelectronics 10,126 1,558,238
-----------
FINANCIAL SERVICES - 1.57%
Banque Nationale de Paris 14,250 1,314,568
Compagnie Financiere de Paribas 5 559
-----------
1,315,127
-----------
MEDICAL - 1.06%
Aventis SA 15,388 894,192
-----------
METAL PROCESSORS & FABRICATORS - 0.07%
Pechiney SA - Class A 853 60,950
-----------
PUBLISHING & BROADCASTING - 0.90%
Societe Television Francaise 1 1,438 753,069
-----------
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
FRANCE - (CONTINUED)
- -------------------------------------------------------
RETAIL - 0.85%
Castorama Dubois Investisse 2,360 $ 717,780
-----------
TOTAL FRANCE 7,738,964
-----------
- -------------------------------------------------------
GERMANY - 11.46%
- -------------------------------------------------------
AUTOS - 0.59%
Bayersiche Motoren Werke
(BMW) AG 16,237 495,474
-----------
DIVERSIFIED MANUFACTURING - 0.77%
Veba AG - ADR 6,729 326,979
Viag AG 17,604 322,668
-----------
649,647
-----------
ELECTRONIC COMPONENTS - 0.23%
Aixtron AG 1,339 188,521
-----------
FINANCIAL SERVICES - 3.95%
Deutsche Bank AG 9,089 767,524
Dresdner Bank AG 27,295 1,484,395
Muenchener Rueckversicherungs-
Gesellscahft AG 4,200 1,065,069
-----------
3,316,988
-----------
INTERNET SOFTWARE - 0.60%
Intershop Communications AG # 1,773 499,965
-----------
TELECOMMUNICATION - 5.32%
Mannesmann AG 18,496 4,461,243
-----------
TOTAL GERMANY 9,611,838
-----------
- -------------------------------------------------------
HONG KONG - 4.16%
- -------------------------------------------------------
DIVERSIFIED OPERATIONS - 0.78%
Hutchison Whampoa, Limited 45,000 654,134
-----------
ELECTRONIC COMPONENTS - 0.67%
Great Wall Technology Company # 576,000 561,282
-----------
FINANCIAL SERVICES - 0.50%
Bank of East Asia, Limited 150,800 419,502
-----------
See notes to the financial statements.
16
<PAGE>
LKCM INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------
HONG KONG - (CONTINUED)
- --------------------------------------------------------
PUBLISHING & BROADCASTING - 0.80%
Television Broadcasts, Limited 98,000 $ 668,156
-----------
TELECOMMUNICATION - 1.41%
China Telecom (Hong Kong),
Limited 190,000 1,186,640
-----------
TOTAL HONG KONG 3,489,714
-----------
- -------------------------------------------------------
ITALY - 4.06%
- -------------------------------------------------------
TELECOMMUNICATION - 4.06%
Tecnost SpA 301,482 1,138,584
Telecom Italia SpA 161,112 2,271,583
-----------
TOTAL ITALY 3,410,167
-----------
- -------------------------------------------------------
JAPAN - 32.54%
- -------------------------------------------------------
ADVERTISING AGENCIES - 0.82%
Asatsu-DK, Inc. 10,200 689,091
-----------
APPAREL MANUFACTURERS - 0.56%
World Company, Limited 3,800 472,514
-----------
AUDIO/VIDEO PRODUCTS - 1.31%
Sony Corporation 3,700 1,097,669
-----------
CHEMICALS - 0.38%
Kaneka Corporation 25,000 319,921
-----------
COMMERCIAL SERVICES - 0.42%
Toyo Information Systems
Company, Limited 5,000 352,476
-----------
COMPUTERS - 0.13%
Data Communication System
Company, Limited 900 111,030
-----------
COMPUTER SOFTWARE - 0.73%
Konami Company, Limited 3,400 607,532
-----------
DISTRIBUTION - 2.60%
Softbank Corporation 1,700 1,627,852
Sumitomo Corporation 57,000 553,064
-----------
2,180,916
-----------
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
JAPAN - (CONTINUED)
- -------------------------------------------------------
EDUCATION - 1.01%
Benesse Corporation 3,500 $ 843,005
-----------
ELECTRIC - INTEGRATED - 0.65%
The Tokyo Electric Power
Company, Inc. 20,200 541,912
-----------
ELECTRONICS - 11.10%
Advantest Corporation 2,800 740,200
Funai Electric Company, Limited 1,100 648,360
Honda Tsushin Kogyo Company,
Limited 3,000 221,766
Keyence Corporation 700 284,429
Kyocera Corporation 4,400 1,141,631
Murata Manufacturing Company,
Limited 11,000 2,584,824
Nitto Denko Corporation 12,000 600,384
Omron Corporation 20,000 461,156
Rohm Company, Limited 2,300 945,811
Tokyo Electron, Limited 8,000 1,096,592
Yaskawa Electric Corporation 83,000 589,986
-----------
9,315,139
-----------
FINANCIAL SERVICES - 2.70%
Daiwa Securities Group, Inc. 68,000 1,064,595
Nikko Securities Company,
Limited 95,000 1,202,678
-----------
2,267,273
-----------
HUMAN RESOURCES - 0.17%
Pasona Softbank, Inc. 1,800 143,105
-----------
IDENTIFICATION SYSTEMS - 0.39%
Secom Company, Limited 3,000 330,446
-----------
MACHINERY - 1.49%
SMC Corporation 4,100 907,635
THK Company, Limited 8,500 343,713
-----------
1,251,348
-----------
METAL PROCESSORS - 0.24%
NSK, Limited 29,000 198,473
-----------
See notes to the financial statements.
17
<PAGE>
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
JAPAN - (CONTINUED)
- -------------------------------------------------------
OFFICE AUTOMATION & EQUIPMENT - 0.63%
Ricoh Company, Limited 28,000 $ 528,009
-----------
PAPER & RELATED PRODUCTS - 0.17%
Nippon Paper Industries Company,
Limited 25,000 137,808
-----------
PUBLISHING & BROADCASTING - 0.56%
Nippon Television Network
Corporation 400 469,968
-----------
RETAIL - 1.70%
Ryohin Keikaku Company, Limited 1,800 361,464
Seven-Eleven Japan Company,
Limited 2,000 317,228
Sunkus & Associates, Inc. 7,100 311,432
Yamada Denki Company, Limited 4,000 434,720
-----------
1,424,844
-----------
TELECOMMUNICATION - 4.78%
Hikari Tsushin, Inc. 400 802,862
NTT Mobile Communications
Network, Inc. 42 1,616,102
Nippon Telegraph & Telephone
Corporation 80 1,370,740
Toyo Communication Equipment
Company, Limited 12,000 223,235
-----------
4,012,939
-----------
TOTAL JAPAN 27,295,418
-----------
- -------------------------------------------------------
KOREA - 4.42%
- -------------------------------------------------------
ELECTRONICS - 1.05%
Samsung Electronics - GDR 7,390 885,876
-----------
FINANCIAL SERVICES - 0.47%
Samsung Securities Company,
Limited 12,982 392,417
-----------
STEEL PRODUCERS - 0.63%
Pohang Iron & Steel Co.,
Limited - ADR 15,028 525,980
-----------
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
KOREA - (CONTINUED)
- -------------------------------------------------------
TELECOMMUNICATION - 2.27%
Korea Telecom Corporation 13,861 $ 1,036,110
Korea Thrunet Company,
Limited - Class A # 6,522 442,681
SK Telecom Company, Limited 120 429,157
-----------
1,907,948
-----------
TOTAL KOREA 3,712,221
-----------
- -------------------------------------------------------
NETHERLANDS - 3.55%
- -------------------------------------------------------
COMPUTER SERVICES - 0.54%
Getronics NV 5,713 455,682
-----------
ELECTRONICS - 3.01%
Koninklijke Philips
Electronics N.V. 18,581 2,526,245
-----------
TOTAL NETHERLANDS 2,981,927
-----------
- -------------------------------------------------------
SINGAPORE - 1.69%
- -------------------------------------------------------
AIRLINES - 0.29%
Singapore Airlines, Limited 21,000 238,235
-----------
FINANCIAL SERVICES - 0.73%
DBS Group Holdings, Limited 33,000 540,756
Kim Eng Holdings 114,000 71,849
-----------
612,605
-----------
PUBLISHING & BROADCASTING - 0.67%
Singapore Press Holdings,
Limited 26,000 563,385
-----------
TOTAL SINGAPORE 1,414,225
-----------
- -------------------------------------------------------
SPAIN - 1.88%
- -------------------------------------------------------
TELECOMMUNICATION - 1.88%
Telefonica S.A. 63,167 1,577,664
-----------
TOTAL SPAIN 1,577,664
-----------
- -------------------------------------------------------
SWEDEN - 2.56%
- -------------------------------------------------------
Telefonaktiebolaget LM Ericsson 33,406 2,148,549
-----------
TOTAL SWEDEN 2,148,549
-----------
See notes to the financial statements.
18
<PAGE>
LKCM INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED
DECEMBER 31, 1999
- -------------------------------------------------------
COMMON STOCKS SHARES VALUE
- -------------------------------------------------------
SWITZERLAND - 1.52%
- -------------------------------------------------------
RECREATIONAL - 1.52%
The Swatch Group AG 1,108 $ 1,275,714
-----------
TOTAL SWITZERLAND 1,275,714
-----------
- -------------------------------------------------------
TAIWAN - 0.75%
- -------------------------------------------------------
COMPUTERS - 0.44%
Synnex Technology International
Corporation 14,000 368,200
-----------
TEXTILE MANUFACTURERS - 0.31%
Far Eastern Textile Limited # 10,729 257,496
-----------
TOTAL TAIWAN 625,696
-----------
- -------------------------------------------------------
UNITED KINGDOM - 5.93%
- -------------------------------------------------------
DIVERSIFIED MINERALS - 0.13%
Rio Tinto PLC 4,664 112,630
-----------
FINANCIAL SERVICES - 3.28%
Amvescap PLC - ADR 87,799 1,021,116
Britannic PLC 45,449 695,963
Standard Chartered PLC 66,562 1,033,244
-----------
2,750,323
-----------
FOOD - 0.90%
Unilever PLC 102,144 751,544
-----------
MEDICAL - 0.33%
AstraZeneca Group PLC 6,693 277,632
-----------
RETAIL - 0.70%
Boots Company PLC 60,443 587,754
-----------
TELECOMMUNICATION - 0.59%
Vodafone AirTouch PLC 99,513 493,080
-----------
TOTAL UNITED KINGDOM 4,972,963
-----------
TOTAL COMMON STOCKS (cost $49,627,435) 73,658,569
-----------
- -------------------------------------------------------
PREFERRED STOCKS - 0.59% SHARES VALUE
- -------------------------------------------------------
ITALY - 0.59%
- -------------------------------------------------------
MULTIPLE INDUSTRY - 0.59%
IFI Istituto Finanziario 17,603 $ 490,888
-----------
TOTAL ITALY 490,888
-----------
TOTAL PREFERRED STOCKS (cost $922,483) 490,888
-----------
- -------------------------------------------------------
WARRANTS - 0.18%
- -------------------------------------------------------
SINGAPORE - 0.18%
- -------------------------------------------------------
AIRLINES - 0.18%
Singapore Airlines, Limited # 20,400 154,286
-----------
TOTAL SINGAPORE 154,286
-----------
TOTAL WARRANTS (cost $62,289) 154,286
-----------
TOTAL INVESTMENTS - 88.57%
(cost $50,612,207) 74,303,743
-----------
Other Assets in excess of
Liabilities - 11.43% 9,588,074
-----------
Total Net Assets - 100.00% $83,891,817
===========
# Non-income producing security.
ADR American Depository Receipts.
GDR Global Depository Receipts
See notes to the financial statements.
19
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<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 * ................. $197,503,719 $ 23,597,730 $ 6,800,312 $ 25,554,447 $ 74,303,743
Repurchase Agreements* .................. 32,900,000 3,900,000 -- -- --
Cash .................................... 39,250 10,532 -- -- 5,849,797
Foreign currency ** ..................... -- -- -- -- 2,371,865
Dividends and interest receivable ....... 159,543 35,740 39,816 470,198 73,781
Receivable from Adviser ................. -- -- 4,461 -- --
Receivable for investments sold ......... -- -- -- -- 1,846,930
Organizational expenses, net of
accumulated amortization .............. -- -- 9,768 9,768 17,913
Prepaid expenses ........................ 26,750 8,986 3,663 9,469 8,198
------------ ------------ ------------ ------------ ------------
Total assets ......................... 230,629,262 27,552,988 6,858,020 26,043,882 84,472,227
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Payable for investments purchased ....... -- -- -- -- 425,586
Payable for investment advisory fees .... 403,222 45,710 -- 18,627 106,237
Accrued expenses and other liabilities .. 62,368 14,786 7,413 9,301 48,587
------------ ------------ ------------ ------------ ------------
Total liabilities .................... 465,590 60,496 7,413 27,928 580,410
------------ ------------ ------------ ------------ ------------
NET ASSETS .............................. $230,163,672 $ 27,492,492 $ 6,850,607 $ 26,015,954 $ 83,891,817
============ ============ ============ ============ ============
NET ASSETS CONSIST OF:
Paid in capital ......................... $159,727,680 $ 18,694,765 $ 6,019,841 $ 26,971,952 $ 58,566,532
Undistributed net investment income ..... 61,562 1,048 463 3,923 --
Undistributed net realized gain (loss)
on securities and foreign currency
transactions .......................... 9,487,280 1,080,987 8,634 (86,009) 1,636,179
Net unrealized appreciation or
depreciation on:
Investments securities ............... 60,887,150 7,715,692 821,669 (873,912) 23,691,536
Other assets and liabilities
denominated in foreign currency ..... -- -- -- -- (2,430)
------------ ------------ ------------ ------------ ------------
NET ASSETS .............................. $230,163,672 $ 27,492,492 $ 6,850,607 $ 26,015,954 $ 83,891,817
============ ============ ============ ============ ============
Shares of beneficial interest outstanding
(unlimited shares of no par value
authorized) ........................... 12,733,220 1,843,883 556,809 2,686,077 5,434,429
Net asset value per share
(offering and redemption price) ....... $ 18.08 $ 14.91 $ 12.30 $ 9.69 $ 15.44
============ ============ ============ ============ ============
* Cost of Investments ................... $169,516,569 $ 19,782,038 $ 5,978,643 $ 26,428,359 $ 50,612,207
============ ============ ============ ============ ============
** Cost of Foreign Currency ............. $ -- $ -- $ -- $ -- $ 2,374,847
============ ============ ============ ============ ============
See notes to the financial statements.
</TABLE>
20
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<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>
INVESTMENT INCOME:
Dividends* .............................. $ 1,284,652 $ 433,476 $ 37,942 $ -- $ 663,007
Interest ................................ 1,057,984 167,681 91,494 1,278,234 62,107
------------ ------------ ------------ ------------ ------------
Total income ......................... 2,342,636 601,157 129,436 1,278,234 725,114
------------ ------------ ------------ ------------ ------------
EXPENSES:
Investment advisory fees ................ 1,644,113 282,731 30,428 102,645 586,147
Administrative fees ..................... 130,065 26,054 9,458 20,167 40,976
Custody fees and expenses ............... 27,107 3,711 6,779 4,658 168,098
Accounting and transfer agent
fees and expenses ..................... 75,979 36,346 35,287 40,919 54,005
Federal and state registration .......... 11,923 10,001 4,632 3,864 8,777
Professional fees ....................... 54,664 11,408 735 5,062 15,919
Trustees' fees .......................... 17,137 3,205 282 1,134 4,116
Amortization of deferred charges ........ 5,680 -- 3,260 3,260 5,935
Reports to shareholders ................. 13,618 2,554 279 894 4,750
Other ................................... 1,672 715 98 343 865
------------ ------------ ------------ ------------ ------------
Total expenses ....................... 1,981,958 376,725 91,238 182,946 889,588
Less, expense waiver and/or
reimbursement ...................... -- (52,465) (53,613) (49,500) (186,212)
------------ ------------ ------------ ------------ ------------
Net expenses ......................... 1,981,958 324,260 37,625 133,446 703,376
------------ ------------ ------------ ------------ ------------
NET INVESTMENT INCOME ................... 360,678 276,897 91,811 1,144,788 21,738
------------ ------------ ------------ ------------ ------------
REALIZED/UNREALIZED GAIN/LOSS
ON INVESTMENTS:
Net realized gain (loss) on:
Investments: ......................... 13,148,667 11,960,994 34,641 (85,458) 5,622,610
Foreign currency transactions ........ -- -- -- -- (213,393)
Futures contracts .................... -- -- -- -- (2,097,215)
------------ ------------ ------------ ------------ ------------
13,148,667 11,960,994 34,641 (85,458) 3,312,002
------------ ------------ ------------ ------------ ------------
Net change in unrealized appreciation on:
Investments .......................... 18,273,521 (5,005,383) 518,246 (1,085,107) 20,280,184
Foreign currency transactions ........ -- -- -- -- 106,063
Futures contracts .................... -- -- -- -- (162,144)
------------ ------------ ------------ ------------ ------------
18,273,521 (5,005,383) 518,246 (1,085,107) 20,224,103
------------ ------------ ------------ ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS .......... 31,422,188 6,955,611 552,887 (1,170,565) 23,536,105
------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............. $ 31,782,866 $ 7,232,508 $ 644,698 $ (25,777) $ 23,557,843
============ ============ ============ ============ ============
* Net of Foreign Taxes Withheld ......... $ 3,229 $ 2,818 $ 237 $ -- $ 78,087
============ ============ ============ ============ ============
See notes to the financial statements.
21
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
LKCM
SMALL CAP EQUITY FUND LKCM EQUITY FUND
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................ $ 360,678 $ 934,374 $ 276,897 $ 284,720
Net realized gain (loss) on investments ...... 13,148,667 (630,210) 11,960,994 627,597
Net change in unrealized appreciation ........ 18,273,521 (18,659,746) (5,005,383) 4,346,775
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations .............. 31,782,866 (18,355,582) 7,232,508 5,259,092
------------- ------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income ........................ (363,466) (1,034,445) (275,849) (284,136)
Net realized gain on investments ............. (3,140,224) (730,451) (6,529,751) (1,148,795)
------------- ------------- ------------- -------------
Total dividends and distributions ........ (3,503,690) (1,764,896) (6,805,600) (1,432,931)
------------- ------------- ------------- -------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold ................ 8,454,712 22,128,815 6,077,832 6,668,985
Shares issued on reinvestment of dividends
and distributions ......................... 3,408,485 1,643,267 3,914,068 1,238,620
Cost of shares redeemed ...................... (57,996,318) (30,421,264) (23,995,464) (23,056,392)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from
Fund share transactions ................ (46,133,121) (6,649,182) (14,003,564) (15,148,787)
------------- ------------- ------------- -------------
Total increase (decrease) in net assets ...... (17,853,945) (26,769,660) (13,576,656) (11,322,626)
NET ASSETS:
Beginning of period .......................... 248,017,617 274,787,277 41,069,148 52,391,774
------------- ------------- ------------- -------------
End of period* ............................... $ 230,163,672 $ 248,017,617 $ 27,492,492 $ 41,069,148
============= ============= ============= =============
*Including undistributed net
investment income of: ...................... $ 61,562 $ 193 $ 1,048 $ --
============= ============= ============= =============
CHANGES IN SHARES OUTSTANDING:
Shares sold .................................. 536,898 1,329,026 402,049 482,978
Shares issued on reinvestment of dividends
and distributions ......................... 192,244 104,533 285,910 86,075
Shares redeemed .............................. (3,775,364) (1,924,372) (1,698,331) (1,690,990)
------------- ------------- ------------- -------------
(3,046,222) (490,813) (1,010,372) (1,121,937)
============= ============= ============= =============
See notes to the financial statements.
22
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
LKCM
LKCM BALANCED FUND FIXED INCOME FUND
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ......................... $ 91,811 $ 46,691 $ 1,144,788 $ 555,507
Net realized gain (loss) on investments ....... 34,641 (19,531) (85,458) 28,673
Net change in unrealized appreciation ......... 518,246 303,423 (1,085,107) 211,195
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ............... 644,698 330,583 (25,777) 795,375
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income ......................... (93,999) (48,212) (1,142,793) (558,872)
Net realized gain on investments .............. (6,417) -- (22,567) (5,476)
------------ ------------ ------------ ------------
Total dividends and distributions ......... (100,416) (48,212) (1,165,360) (564,348)
------------ ------------ ------------ ------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold ................. 2,627,719 3,312,403 16,042,143 14,242,524
Shares issued on reinvestment of dividends
and distributions .......................... 99,323 48,212 929,489 489,910
Cost of shares redeemed ....................... (59,878) (3,835) (4,321,114) (406,898)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets from
Fund share transactions ................ 2,667,164 3,356,780 12,650,518 14,325,536
------------ ------------ ------------ ------------
Total increase (decrease) in net assets ....... 3,211,446 3,639,151 11,459,381 14,556,563
NET ASSETS:
Beginning of period ........................... 3,639,161 10 14,556,573 10
------------ ------------ ------------ ------------
End of period* ................................ $ 6,850,607 $ 3,639,161 $ 26,015,954 $ 14,556,573
============ ============ ============ ============
*Including undistributed net
investment income of: ...................... $ 463 $ 2 $ 3,923 $ --
============ ============ ============ ============
CHANGES IN SHARES OUTSTANDING:
Shares sold ................................... 224,075 325,041 1,611,115 1,411,297
Shares issued on reinvestment of dividends
and distributions .......................... 8,525 4,558 94,556 47,820
Shares redeemed ............................... (5,023) (367) (439,102) (39,609)
------------ ------------ ------------ ------------
227,577 329,232 1,266,569 1,419,508
============ ============ ============ ============
See notes to the financial statements.
23
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LKCM
INTERNATIONAL FUND
Year Ended Year Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................ $ 21,738 $ 213,860
Net realized gain (loss) on investments .............................. 3,312,002 (2,604,820)
Net change in unrealized appreciation ................................ 20,224,103 3,465,003
------------ ------------
Net increase (decrease) in net assets resulting from operations . 23,557,843 1,074,043
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ................................................ -- --
Net realized gain on investments ..................................... (1,451,155) --
------------ ------------
Total dividends and distributions ................................ (1,451,155) --
------------ ------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold ........................................ 14,148,239 61,462,930
Shares issued on reinvestment of dividends and distributions ......... 1,444,287 --
Cost of shares redeemed .............................................. (10,792,619) (5,551,761)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 4,799,907 55,911,169
------------ ------------
Total increase (decrease) in net assets .............................. 26,906,595 56,985,212
NET ASSETS:
Beginning of period .................................................. 56,985,222 10
------------ ------------
End of period* ....................................................... $ 83,891,817 $ 56,985,222
============ ============
*Including undistributed net investment income of: ................... $ -- $ (125,614)
============ ============
CHANGES IN SHARES OUTSTANDING:
Shares sold .......................................................... 1,118,117 5,709,472
Shares issued on reinvestment of dividends and distributions ......... 93,907 --
Shares redeemed ...................................................... (951,791) (535,276)
------------ ------------
260,233 5,174,196
============ ============
See notes to the financial statements.
24
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<TABLE>
<CAPTION>
LKCM SMALL CAP EQUITY FUND
Year Year Year Year May 1, 1995 July 14, 1994(1)
Ended Ended Ended Ended through through
December 31, December 31, December 31, December 31, December 31, April 30,
1999 1998 1997 1996 1995(2) 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............ 0.03 0.05 0.02 0.05 0.03 0.04
Net realized gain (loss) and
unrealized appreciation
(depreciation)................. 2.61 (1.10) 3.38 3.26 2.33 1.44
-------- -------- -------- -------- -------- -------
Total from investment
operations................. 2.64 (1.05) 3.40 3.31 2.36 1.48
-------- -------- -------- -------- -------- -------
Dividends from net investment
income......................... (0.03) (0.07) (0.07) (0.07) -- --
Distributions from net realized
gain from investment
transactions................... (0.25) (0.05) (2.64) (0.88) -- --
-------- -------- -------- -------- -------- -------
Total distributions.......... (0.28) (0.12) (2.71) (0.95) -- --
-------- -------- -------- -------- -------- -------
NET ASSET VALUE-- END OF PERIOD.. $ 18.08 $ 15.72 $ 16.89 $ 16.20 $ 13.84 $ 11.48
======== ======== ======== ======== ======== =======
TOTAL RETURN..................... 16.83% (6.26%) 23.07% 25.67% 20.56%(3) 14.80%(3)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of
period (thousands)............. $230,164 $284,018 $274,787 $199,088 $121,430 $66,736
Ratio of expenses to average
net assets..................... 0.90% 0.91% 0.95% 1.00% 1.00%(4) 1.00%(4)
Ratio of net investment income
to average net assets.......... 0.16% 0.35% 0.22% 0.39% 0.53%(4) 1.15%(4)
Portfolio turnover rate.......... 48% 35% 34% 66% 57% 53%
</TABLE>
(1) Commencement of operations.
(2) Effective April 30, 1995, the Fund changed its fiscal year end to
December 31.
(3) Not annualized.
(4) Annualized.
See notes to the financial statements.
25
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<TABLE>
<CAPTION>
LKCM EQUITY FUND
Year Year Year January 3, 1996(1)
Ended Ended Ended through
December 31, December 31, December 31, December 31,
1999 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........................... 0.10(2) 0.10 0.10 0.15
Net realized gain (loss) and unrealized
appreciation (depreciation).................. 2.97 1.63 2.52 1.55
------- ------- ------- -------
Total from investment operations............ 3.07 1.73 2.62 1.70
------- ------- ------- -------
Dividends from net investment income............ (0.15) (0.10) (0.25) --
Distributions from net realized gain from
investment transactions....................... (2.40) (0.42) (0.89) --
------- ------- ------- -------
Total distributions......................... (2.55) (0.52) (1.14) --
------- ------- ------- -------
NET ASSET VALUE-- END OF PERIOD................. $ 14.91 $ 14.39 $ 13.18 $ 11.70
======= ======= ======= =======
TOTAL RETURN.................................... 23.07% 13.11% 23.57% 17.00%(3)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (thousands)........... $27,492 $41,069 $52,392 $34,608
Ratio of expenses to average net assets:
Before expense waiver and/or reimbursement.... 0.93% 1.02% 1.16% 1.32%(4)
After expense waiver and/or reimbursement..... 0.80% 0.80% 0.80% 0.80%(4)
Ratio of net investment income to average
net assets:
Before expense waiver and/or reimbursement.... 0.56% 0.49% 0.57% 0.98%(4)
After expense waiver and/or reimbursement..... 0.69% 0.71% 0.93% 1.50%(4)
Portfolio turnover rate......................... 59% 45% 48% 79%
</TABLE>
(1) Commencement of operations.
(2) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the year.
(3) Not annualized.
(4) Annualized.
See notes to the financial statements.
26
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<TABLE>
<CAPTION>
LKCM BALANCED FUND LKCM FIXED LKCM
INCOME FUND INTERNATIONAL FUND
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1999 1998 1999 1998 1999 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............ 0.22 0.22 0.52 0.54(1) 0.00 0.04(2)
Net realized gain (loss) and
unrealized appreciation
(depreciation)................. 1.26 1.05 (0.55) 0.17 4.70 0.97
------ ------ ------- ------- ------- -------
Total from investment
operations................. 1.48 1.27 (0.03) 0.71 4.70 1.01
------ ------ ------- ------- ------- -------
Dividends from net investment
income......................... (0.22) (0.22) (0.52) (0.46) -- --
Distributions from net realized
gain from investment
transactions................... (0.01) -- (0.01) -- (0.27) --
------ ------ ------- ------- ------- -------
Total distributions.......... (0.23) (0.22) (0.53) (0.46) (0.27) --
------ ------ ------- ------- ------- -------
NET ASSET VALUE--END OF PERIOD.. $12.30 $11.05 $ 9.69 $ 10.25 $ 15.44 $ 11.01
====== ====== ======= ======= ======= =======
TOTAL RETURN..................... 13.53% 12.84% (0.34%) 7.27% 42.71% 10.10%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period
(thousands).................... $6,851 $3,639 $26,016 $14,557 $83,892 $56,985
Ratio of expenses to average
net assets:
Before expense waiver and/or
reimbursement................ 1.95% 4.59% 0.89% 1.28% 1.52% 1.40%
After expense waiver and/or
reimbursement................ 0.80% 0.80% 0.65% 0.65% 1.20% 1.20%
Ratio of net investment income to
average net assets:
Before expense waiver and/or
reimbursement................ 0.81% (1.38%) 5.34% 4.66% (0.28%) 0.34%
After expense waiver and/or
reimbursement................ 1.96% 2.41% 5.58% 5.29% 0.04% 0.54%
Portfolio turnover rate.......... 47% 39% 68% 82% 205% 196%
</TABLE>
(1) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the year.
(2) Net investment income per share is calculated using the ending balance of
undistributed net investment income prior to consideration of
adjustments for permanent book and tax differences.
See notes to the financial statements.
27
<PAGE>
LKCM FUNDS
NOTES TO THE FINANCIAL STATEMENTS
A. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: LKCM Funds (the "Trust") is
registered under the Investment Company Act as a diversified open-end,
management investment 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, LKCM Equity Fund, LKCM Balanced Fund, LKCM Fixed
Income Fund and 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 (LKCM Small Cap Equity Fund),
January 3, 1996 (LKCM Equity Fund), and December 30, 1997 (LKCM Balanced Fund,
LKCM Fixed Income Fund and LKCM International Fund). The LKCM Small Cap Equity
Fund seeks to maximize capital appreciation by investing primarily in equity
securities of small companies (those with market values less than $1 billion)
which the Adviser believes are likely to have above-average growth in revenue
and/or earnings and potential for above-average capital appreciation. The LKCM
Equity Fund seeks to maximize long-term capital appreciation by investing
primarily in equity securities of companies which the Adviser believes are
likely to have above-average growth in revenue and/or earnings with above
average returns on the shareholders' equity and under-leveraged balance sheets,
and potential for above-average capital appreciation. The LKCM Balanced Fund
seeks to provide investors with current income and capital appreciation by
investing primarily in a diversified portfolio of equity and debt securities of
companies with established operating histories and strong fundamental
characteristics. The LKCMFixed Income Fund seeks to provide investors with
current income by investing primarily in a diversified portfolio of investment
grade, intermediate-term debt securities issued by corporations, the U.S.
Government, agencies or instrumentalities of the U.S. Government and cash
equivalent securities. The International Fund seeks to provide investors with a
total return in excess of the Morgan Stanley Capital International EAFE Index by
using geopolitical analysis to eliminate countries where the Subadviser believes
it is unsafe to invest and to highlight countries where change is likely to
occur. 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. Debt securities (other
than obligations having a maturity of 60 days or less) are normally valued
on the basis of quotes obtained from pricing services. Debt 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 substantially all of its investment
company net taxable income and net capital gains to shareholders. Therefore,
no federal income tax provision is required.
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
See notes to the financial statements.
28
<PAGE>
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 LKCM Small Cap Equity, LKCM Equity and
LKCM International Funds intend to pay dividends and net capital gain
distributions, if any, on an annual basis. The LKCM Balanced and LKCM 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.
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 currency,
currency contracts 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 to hedge non-U.S. 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. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial margin
as required by the exchange on which the transaction is effected. Pursuant
to the contract, the Fund agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in the value of the contract.
Such receipts or payments are known as variation margin and are recorded by
the Fund as unrealized gains and losses. When the contract is closed, the
Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it
was closed. As collateral for options and futures contracts, the Fund is
required under the 1940 Act to maintain assets consisting of cash, cash
equivalents or liquid securities. This collateral is required to be adjusted
daily. The risk associated with the use of foreign currency options and
futures includes the possibility of an illiquid market.
8. EXPENSE ALLOCATION: 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 expense.
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.
See notes to the financial statements.
29
<PAGE>
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
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. During 1999, the LKCM Equity Fund had a redemption-in-kind, resulting
in a net realized capital gain of $4,447,463 for financial reporting
purposes, which for income tax purposes is not recognized.
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 Adviser 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 receive 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 year ended December 31,
1999, the Adviser waived and/or reimbursed the following expenses:
<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%
Expenses Waived and/or Reimbursed -- $52,465 $53,613 $49,500 $186,212
</TABLE>
(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 Adviser, 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
Provident 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 year ended December 31, 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 $ -- $ 93,069,104 $ -- $140,987,782
LKCM Equity Fund -- 21,319,312 -- 43,458,016
LKCM Balanced Fund 874,185 3,767,956 334,140 1,774,459
LKCM Fixed Income Fund 12,552,375 13,135,052 10,064,484 3,219,794
LKCM International Fund -- 114,247,527 -- 119,318,359
</TABLE>
See notes to the financial statements.
30
<PAGE>
At December 31, 1999, cost and unrealized appreciation (depreciation) of
investments for federal income tax purposes were:
<TABLE>
<CAPTION>
NET APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
LKCM Small Cap Equity Fund $169,510,193 $65,986,296 ($5,092,770) $60,893,526
LKCM Equity Fund 19,782,038 8,004,348 (288,656) 7,715,692
LKCM Balanced Fund 5,984,861 1,086,633 (271,182) 815,451
LKCM Fixed Income Fund 26,439,050 9,865 (894,468) (884,603)
LKCM International Fund 50,778,099 25,119,750 (1,594,106) 23,525,644
</TABLE>
The tax cost basis of the Funds' securities differ from the book cost basis
primarily as a result of the deferral of losses relating to wash sale
transactions and return of capital distributions from real estate investment
trusts.
At December 31, 1999, the LKCM Fixed Income Fund had accumulated a capital loss
carryforward of $64,453 expiring in the year 2007. To the extent the Fund
realizes future net capital gains, those gains will be offset by any unused
capital loss carryforward. For the year ended December 31, 1999, capital loss
carryforwards of $600,383 and $19,456 were utilized by the LKCM Small Cap Equity
Fund and LKCMBalanced Fund, respectively. At December 31, 1999, the LKCM Fixed
Income Fund and LKCM International Fund had net realized capital losses from
transactions between November 1, 1999 and December 31, 1999 of $10,865 and
$931,167, respectively, which for tax purposes are deferred and will be
recognized in 2000.
D. OTHER: At December 31, 1999, the LKCM Balanced Fund and the LKCM
International Fund each had five shareholders who, in aggregate, owned greater
than 50% of the outstanding shares.
See notes to the financial statements.
31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders
of LKCM Funds
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the LKCM Small Cap Equity Fund,
LKCM Equity Fund, LKCM Balanced Fund, LKCM Fixed Income Fund and LKCM
International Fund (constituting the LKCM Funds, hereafter referred to as the
"Funds") at December 31, 1999, the results of each of their operations, the
changes in each of their net assets and the financial highlights for the year
then ended, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at December 31, 1999 by
correspondence with the custodians and brokers, provides a reasonable basis for
the opinion expressed above. The financial statements of the Funds for the year
ended December 31, 1998, and each of the preceding periods presented, were
audited by other independent accountants whose report dated February, 12, 1999
expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 15, 2000
34
