---------------------------------------------------
LKCM FUNDS
P.O. BOX 701
MILWAUKEE, WI 53201-0701
---------------------------------------------------
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 Jeffrey T. Rauman
Trustee Assistant Secretary
Earle A. Shields, Jr. Robert Kern
Trustee Assistant Secretary
---------------------------------------------------
INVESTMENT ADVISER
Luther King Capital Management Corporation
301 Commerce Street, Suite 1600
Fort Worth, TX 76102
---------------------------------------------------
ADMINISTRATOR, TRANSFER AGENT, DIVIDEND
PAYING AGENT & SHAREHOLDER SERVICING AGENT
Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
---------------------------------------------------
CUSTODIAN
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
---------------------------------------------------
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
---------------------------------------------------
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue
Milwaukee, WI 53202
---------------------------------------------------
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center, 6th Floor
West Conshohocken, PA 19428-2961
---------------------------------------------------
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
Semi-Annual Report
June 30, 2000
<PAGE>
LKCM FUNDS
------------
DEAR FELLOW SHAREHOLDERS:
We are pleased to report the following performance information for the LKCM
Funds:
<TABLE>
<CAPTION>
AVERAGE
SIX MONTH ANNUAL
TOTAL TOTAL
NET ASSET RETURN RETURN
INCEPTION VALUE AT ENDED SINCE
FUNDS DATES 6/30/00 6/30/00 INCEPTION
----- ----- ------- ------- ---------
<S> <C> <C> <C> <C>
LKCM Equity Fund 01/03/96 $15.26 2.35% 17.42%
S&P 500 (0.42%) 23.04%
--------------------------------------------------------------------------------------------------------------------
LKCM Small Cap Fund 07/14/94 $19.23 6.36% 16.54%
Russell 2000 3.04% 14.88%
S&P 500 (0.42%) 23.88%
--------------------------------------------------------------------------------------------------------------------
LKCM International Fund 12/30/97 $15.29 (0.97%) 19.31%
EAFE Index* (4.06%) 16.41%
--------------------------------------------------------------------------------------------------------------------
LKCM Balanced Fund 12/30/97 $12.05 (0.97%) 9.97%
S&P 500 (0.42%) 19.16%
Lehman Bond Index** 3.22% 4.77%
--------------------------------------------------------------------------------------------------------------------
LKCM Fixed Income Fund 12/30/97 $ 9.71 3.05% 3.95%
Lehman Bond Index** 3.22% 4.77%
--------------------------------------------------------------------------------------------------------------------
</TABLE>
* Morgan Stanley Capital International Europe, Australasia, Far East Index
**Lehman Brothers Intermediate Government/Corporate Bond Index
Over the past six months, the stock market has transitioned from last
year's unsustainable and insatiable desire for "growth at any price" (GAAP) to a
perspective of "growth at a reasonable price" (GARP) in the second quarter of
2000. The first half of this year was the first time since 1994 that the Dow
Jones Industrial Average, the S&P 500, and the Nasdaq Composite have all
generated negative returns for the first half of a calendar year. Indices that
measure the results of growth and value investing styles revealed a mixed market
environment in which neither style could completely avoid negative returns
during the second quarter. It appears that, since the speculative market
extremes of late in the first quarter, the investment "sweet spot" has been
companies with moderate growth rates combined with moderate valuations, rather
than stocks with extreme growth or extreme value characteristics. Since our
firm's disciplines combine the attributes of growth and value within portfolios,
we have often been characterized as GARP investors. As markets have returned to
more disciplined methods of evaluating the worth of a business enterprise, our
Funds, reflecting a balanced emphasis on growth and value, have performed
relatively well. We view the current environment, which places greater emphasis
on traditional value metrics, as healthy for long-term investors. We believe
that fundamental investing disciplines are returning to the stock market, and in
that environment, profits once again matter and speculation has largely given
way to conservatism. We would be remiss in not mentioning the first half actions
of the Federal Reserve Board, which has an impact on both bond and stock
investors. The Federal Reserve's determination to minimize inflationary
imbalances in the economy culminated in a fifty basis point increase in
overnight borrowing rates on May 16. Since then, evidence has begun to build
that the economy is slowing from its torrid pace of the first quarter. All in
all, the investment environment in the first half of 2000 was challenging for
many investors, especially given the historically extreme levels of price
volatility. Nevertheless, the performance of our Funds reflects the successful
implementation of our durable investment philosophy that has stood the test of
time over many market environments.
1
<PAGE>
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
Fund focuses its investments in quality companies with above-average
profitability and reasonable valuations. The portfolio out-performed its
benchmark, the S&P 500, in the first half of 2000 - a strong follow on to
out-performance in 1999. After demonstrating in 1999, that being mindful of
valuation does not have to be an impediment to out-performance in a bull market,
the Fund's valuation discipline served it well in the highly volatile first half
of 2000. The Fund's over-weighted positions in the energy and health care
sectors, both among the top performing sectors so far this year, were material
contributors to the strong investment performance. As of June 30, the total net
assets of the portfolio were $26.0 million with 84.7% of net assets invested in
common stocks and 15.3% in cash reserves net of liabilities. While owning a
combination of stocks that have either above-average growth prospects or stocks
that exhibit very attractive value, the Fund has more of a value tilt at the
moment. We believe that investments in the Fund possess attractive capital
appreciation potential relative to the overall market.
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
diligent focus, not only on growth, but also on reasonable value, was a critical
element of success in the first half of 2000. During the six-month period, the
benchmark Russell 2000 Index, experienced four months of negative returns. The
valuation disciplines of the LKCM Small Cap Fund helped the portfolio outperform
its benchmark in all four of the down months as well as over the entire
six-month period. Stock selection remained solid across the board but a
substantial over-weight position in the energy sector was an important driver of
the Fund's strong performance during the period. As of June 30, the total net
assets of the portfolio were $204.7 million with 84.5% of net assets invested in
common and preferred stocks and 15.5% in cash reserves net of liabilities. The
Fund continues to be positioned with an attractive portfolio of companies that
possess niche growth opportunities but also exhibit reasonable valuations.
The LKCM International Fund is managed in a style that seeks absolute
returns. The Fund posted a net return of -0.97% for the first half of 2000
versus an MSCI EAFE return of -4.06%. 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 first half of 2000,
the asset base of the Fund continued to grow. At June 30, 2000 the Fund size was
US$103.1m (US$83.9m on December 31, 1999). At half-time for the 2000 match we
see the long-anticipated re-alignment of the global growth pattern now well
underway. U.S. performance indicators are now pointing in contradictory
directions, and that is most likely a sign that the burst of blistering growth
is coming to an end. Non-Japan Asian growth has also peaked. In both these
regions, investor risk is higher. On the other side of this growth see-saw, the
European growth trend has been confirmed over the last month. Japan remains
difficult to read, partly, for technical reasons, but on balance it's likely
that it is now set for growth, even if the pick-up is slow. But this realignment
process is only at the half-way point: by the time the next half-year is
through, the pattern of world economic activity will look quite different.
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 portfolio's strategic allocation proved to be
particularly important during the period as positive absolute returns in the
bond portfolio helped to cushion against equity market volatility. While the
fixed income portion of the Fund performed as expected, the return generated by
the equity portion of the portfolio was not up to our standard. While our
valuation discipline benefited the Fund during the down months of the period,
the portfolio did not fully participate in the sharp increase in the S&P 500 in
the month of March. Any successful investment strategy will experience temporary
periods of dislocation and those are exactly the times to adhere to it with the
most
2
<PAGE>
determination. Emerging from March, we did exactly that and the relative
performance results have been satisfying since. As of June 30, total net assets
were $7.0 million and the asset mix was 65.6% in common stocks, 2.0% in
convertible securities, 17.5% in corporate bonds, 10.9% in government bonds, and
4.0% in cash reserves 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.
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 during the past twelve months, but modestly trailed the
Lehman Brothers Intermediate Government/ Corporate Bond Index over that time
period. 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 June was approximately 5.0
years and the average quality was AA-. As of June 30, 2000, total net assets
were $30.2 million and the asset mix was 64.7% in corporate bonds, 33.4% in U.S.
Treasury Notes, and 1.9% in cash and cash equivalents. The portfolio is well
positioned to benefit from the current environment of low inflation and
continued economic growth.
From a macro-economic standpoint, the Federal Reserve Board seems to be
raising interest rates enough to temper inflationary pressures while, at the
same time, achieving a "soft landing" in economic growth. This would be an
especially attractive environment for financial assets. On the other hand,
investor sentiment seems to largely reflect the "soft landing" viewpoint, which
could create opportunity for disappointment. Volatility will likely remain high
as the impact that higher interest rates and slower economic growth will have on
corporate profits remains uncertain. Nevertheless, we believe that as the period
of unsustainable investor euphoria continues to wind down, fundamental investing
disciplines will continue to gain favor in the stock market. We continue to
focus the majority of our analytical efforts on companies with leadership
positions in their industries. These companies typically have business models
that are characterized by high and sustainable returns on invested capital,
strong and growing cash flows, and high quality balance sheets. As always,
valuation remains an important consideration in selecting investments. We
believe that companies meeting our investment criteria will remain among the
assets of choice as stock price volatility continues to separate market dominant
businesses from faulty business models, and long-term investors from
speculators.
Regards,
/S/ J. Luther King, Jr.
J. Luther King, Jr., CFA
July 20, 2000
3
<PAGE>
LKCM SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------
COMMON STOCKS - 82.17% SHARES VALUE
-------------------------------------------------------
BASIC MATERIALS - 2.67%
Boise Cascade Corporation 73,300 $ 1,896,637
Buckeye Technologies, Inc. # 80,000 1,755,000
Louisiana-Pacific Corporation 96,100 1,045,088
NL Industries, Inc. 50,000 762,500
-----------
5,459,225
-----------
CAPITAL GOODS - 16.43%
ACT Manufacturing, Inc. # 35,000 1,625,312
Belden Inc. 90,000 2,306,250
Casella Waste Systems, Inc. # 150,000 1,612,500
Chart Industries, Inc. # 200,000 975,000
Diebold, Inc. 110,000 3,066,250
Justin Industries, Inc. 320,000 7,000,000
Lindsay Manufacturing Company 225,000 4,415,625
Littelfuse, Inc. # 80,000 3,920,000
National Service Industries,
Inc. 75,000 1,462,500
Reliance Steel & Aluminum
Company 131,250 2,510,156
Scott Technologies, Inc. 175,000 3,007,813
Stewart & Stevenson
Services, Inc. 115,000 1,732,188
-----------
33,633,594
-----------
CONSUMER CYCLICALS - 5.39%
A.H. Belo Corporation -
Common Series A 90,000 1,558,125
Harte-Hanks, Inc. 170,000 4,250,000
Iron Mountain, Inc. # 100,000 3,400,000
Tractor Supply Company # 110,500 1,830,156
-----------
11,038,281
-----------
CONSUMER STAPLES - 6.87%
CBRL Group, Inc. 75,000 1,101,563
Cott Corporation #(1) 210,000 1,260,000
Earthgrains Company 140,000 2,721,250
Emmis Communications
Corporation - Class A # 45,600 1,886,700
Patterson Dental Company # 42,500 2,167,500
Regent Communications, Inc. # 125,000 1,074,219
Henry Schein, Inc. # 150,000 2,587,500
Taco Cabana, Inc. - Class A # 190,100 1,259,413
-----------
14,058,145
-----------
-------------------------------------------------------
COMMON STOCKS SHARES VALUE
-------------------------------------------------------
ENERGY - 11.50%
Tom Brown, Inc. # 125,000 $ 2,882,813
Carbo Ceramics, Inc. 60,000 2,107,500
Dril-Quip, Inc. # 75,000 3,506,250
Encal Energy Ltd.(1) 487,500 3,092,731
HS Resources, Inc. # 110,000 3,300,000
Independent Energy Holdings
PLC - ADR #(1) 80,000 665,000
McMoRan Exploration Co. # 45,000 742,500
Santa Fe Snyder Corporation # 276,750 3,148,031
Stolt Comex Seaway, S.A. #(1) 150,000 2,118,750
Varco International, Inc. # 85,500 1,987,875
-----------
23,551,450
-----------
FINANCIAL SERVICES - 7.58%
AmeriCredit Corp. # 50,000 850,000
CNA Surety Corporation 210,000 2,506,875
Cullen/Frost Bankers, Inc. 75,000 1,973,437
FVNB Corporation 19,000 641,250
Investment Technology
Group, Inc. 30,000 1,185,000
Mobile Mini, Inc. # 191,000 4,213,937
StanCorp Financial Group, Inc. 20,000 642,500
Texas Regional Bancshares, Inc. 138,000 3,501,750
-----------
15,514,749
-----------
HEALTH CARE - 11.13%
Hooper Holmes, Inc. 85,000 680,000
Intelligent Polymers Limited # 150,000 5,456,250
Jones Pharma, Inc. 132,750 5,301,703
Oxford Health Plans, Inc. # 158,000 3,762,375
Prime Medical Services, Inc. # 200,000 1,550,000
Sybron International
Corporation # 129,000 2,555,812
Triad Hospitals, Inc. # 83,000 2,007,563
Zoll Medical Corporation # 30,000 1,470,000
-----------
22,783,703
-----------
REAL ESTATE INVESTMENT TRUSTS - 1.12%
Brandywine Realty Trust 120,000 2,295,000
-----------
TECHNOLOGY - 9.64%
ANTEC Corporation # 50,000 $2,078,125
Credence Systems Corporation # 26,000 1,434,875
Dallas Semiconductor
Corporation 105,000 4,278,750
Great Plains Software, Inc. # 19,500 382,687
Harris Corporation 60,000 1,965,000
New Era of Networks, Inc. # 25,700 1,092,250
See notes to the financial statements.
4
<PAGE>
LKCM SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS Continued
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------
COMMON STOCKS SHARES VALUE
-------------------------------------------------------
TECHNOLOGY - (CONTINUED)
RadiSys Corporation # 35,000 $ 1,986,250
Tekelec # 58,500 2,818,969
Varian Semiconductor Equipment
Associates, Inc. # 28,000 1,758,750
VocalTec Communications
Ltd. #(1) 35,000 805,000
Wind River Systems, Inc. # 30,000 1,136,250
-----------
19,736,906
-----------
TELECOMMUNICATIONS - 3.85%
AirGate PCS, Inc. # 15,000 788,437
CapRock Communications Corp. # 50,000 975,000
ITC DeltaCom, Inc. # 115,000 2,565,938
LCC International, Inc.
- Class A # 71,000 1,939,188
Pinnacle Holdings, Inc. # 30,000 1,620,000
-----------
7,888,563
-----------
TRANSPORTATION - 5.99%
Kirby Corporation 280,000 5,950,000
RailAmerica, Inc. # 546,166 3,481,808
Swift Transportation
Co., Inc. # 202,500 2,835,000
-----------
12,266,808
-----------
TOTAL COMMON STOCK
(cost $122,303,943) 168,226,424
-----------
-------------------------------------------------------
PREFERRED STOCKS - 0.06%
-------------------------------------------------------
CONSUMER CYCLICALS - 0.06%
Atlantic Gulf Corporation #@ 26,017 130,085
-----------
TOTAL PREFERRED STOCK
(cost $293,583) 130,085
-----------
-------------------------------------------------------
WARRANTS - 2.23% SHARES VALUE
-------------------------------------------------------
HEALTHCARE - 2.23%
Biovail Corporation International,
expire 9/30/2002 #(1) 60,000 $ 4,560,000
-----------
TOTAL WARRANTS
(cost $438,117) 4,560,000
-----------
-------------------------------------------------------
SHORT-TERM
INVESTMENTS - 15.38% PRINCIPAL
-------------------------------------------------------
Firstar Bank Demand Note,
6.42% ^ $ 8,879,010 8,879,010
Firstar Bank Repurchase Agreement,
4.25%, dated 6/30/2000, *
due 7/3/2000 22,596,000 22,596,000
-----------
TOTAL SHORT-TERM INVESTMENTS -
(cost $31,475,010) 31,475,010
-----------
TOTAL INVESTMENTS - 99.84%
(cost $154,510,653) 204,391,519
-----------
Other Assets in excess
of Liabilities - 0.16% 329,236
-----------
Total Net Assets - 100.00% $204,720,755
============
# - 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.
^ - Variable rate demand notes are considered short-term obligations
and are payable on demand. Interest rates change periodically
on specified dates. The rate listed is as of June 30, 2000.
* - Collateralized by U.S. Government securities, certificates of deposit or
bankers' acceptances.
ADR - American Depository Receipts.
See notes to the financial statements.
5
<PAGE>
LKCM EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------
COMMON STOCK - 84.71% SHARES VALUE
-------------------------------------------------------
BASIC MATERIALS - 2.22%
Boise Cascade Corporation 9,800 $ 253,575
Louisiana-Pacific Corporation 12,000 130,500
Weyerhaeuser Company 4,500 193,500
-----------
577,575
-----------
CAPITAL GOODS - 5.14%
Deere & Company 10,500 388,500
Diebold, Inc. 11,200 312,200
General Electric Company 12,000 636,000
-----------
1,336,700
-----------
CONSUMER CYCLICALS - 7.90%
A.H. Belo Corporation - Common
Series A 10,000 173,125
H&R Block, Inc. 7,500 242,812
Gannett Company, Inc. 8,000 478,500
Home Depot, Inc. 6,600 329,587
Masco Corporation 8,000 144,500
RadioShack Corporation 10,000 473,750
Sherwin-Williams Company 10,000 211,875
-----------
2,054,149
-----------
CONSUMER STAPLES - 8.48%
AMFM, Inc. # 8,100 558,900
Colgate-Palmolive Company 5,000 299,375
Kimberly-Clark Corporation 10,000 573,750
PepsiCo, Inc. 8,000 355,500
Waste Management, Inc. 22,000 418,000
-----------
2,205,525
-----------
ENERGY - 11.77%
Anadarko Petroleum Corporation 7,000 345,187
BP Amoco PLC - ADR(1) 3,280 185,525
Burlington Resources, Inc. 9,900 378,675
Cabot Oil & Gas Corporation 12,400 262,725
Exxon Mobil Corporation 10,000 785,000
Halliburton Company 10,500 495,469
Triton Energy Limited(1) 7,000 275,188
Unocal Corporation 10,000 331,250
-----------
3,059,019
-----------
-------------------------------------------------------
COMMON STOCKS SHARES VALUE
-------------------------------------------------------
FINANCIAL SERVICES - 6.90%
American General Corporation 8,000 $ 488,000
Cullen/Frost Bankers, Inc. 9,000 236,812
Firstar Corporation 10,000 210,625
Hibernia Corporation 30,000 326,250
Wells Fargo Company 13,700 530,875
-----------
1,792,562
-----------
HEALTH CARE - 14.82%
HCA - The Healthcare Corporation 19,000 577,125
Merck & Company, Inc. 4,500 344,813
Millennium Pharmaceuticals,
Inc. # 1,500 167,813
Pfizer, Inc. 7,300 350,400
Pharmacia Corporation 13,090 676,589
Schering-Plough Corporation 11,000 555,500
SmithKline Beecham PLC ADR(1) 2,500 162,969
Sybron International
Corporation # 15,000 297,188
Tenet Healthcare Corporation # 6,100 164,700
Teva Pharmaceutical Industries Ltd.
- ADR(1) 10,000 554,375
-----------
3,851,472
-----------
TECHNOLOGY - 20.49%
Agilent Technologies, Inc. # 1,907 140,641
America Online, Inc. # 3,700 195,175
Cisco Systems, Inc. # 8,000 508,500
Dell Computer Corporation # 6,000 295,875
EMC Corporation 7,000 538,562
First Data Corporation 5,900 292,788
Hewlett-Packard Company 5,000 624,375
Intel Corporation 5,000 668,437
International Business Machines
Corporation 2,200 241,038
Lucent Technologies, Inc. 4,100 242,925
Microsoft Corporation # 2,950 236,000
Motorola, Inc. 12,000 348,750
National Semiconductor
Corporation # 1,000 56,750
Nortel Networks Corporation(1) 10,000 682,500
Sun Microsystems, Inc. # 2,800 254,625
-----------
5,326,941
-----------
See notes to the financial statements.
6
<PAGE>
LKCM EQUITY FUND
SCHEDULE OF INVESTMENTS Continued
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------
COMMON STOCKS SHARES VALUE
-------------------------------------------------------
TELECOMMUNICATIONS - 5.63%
ALLTEL Corporation 4,000 $ 247,750
AT&T Corp. 6,000 189,750
Alcatel SA - ADR(1) 5,300 352,450
Crown Castle International
Corporation # 8,000 292,000
GTE Corporation 3,500 217,875
Sprint Corporation 3,200 163,200
-----------
1,463,025
-----------
TRANSPORTATION - 1.36%
United Parcel Service, Inc.
- Class B 6,000 354,000
-----------
TOTAL COMMON STOCK
(cost $16,513,372) 22,020,968
-----------
-------------------------------------------------------
SHORT-TERM
INVESTMENTS - 15.33% PRINCIPAL VALUE
-------------------------------------------------------
Firstar Bank Demand Note,
6.42% ^ $ 653,428 $ 653,428
Firstar Bank Repurchase Agreement,
4.25%, dated 6/30/00, *
due 7/3/2000 3,332,000 3,332,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $3,985,428) 3,985,428
-----------
TOTAL INVESTMENTS - 100.04%
(cost $20,498,800) 26,006,396
-----------
Liabilities, less Other Assets - (0.04)% (11,667)
-----------
Total Net Assets - 100.00% $25,994,729
===========
# - Non-income producing security.
(1) - Foreign security.
^ - Variable rate demand notes are considered short-term obligations and
are payable on demand. Interest rates change periodically on specified
dates. The rate listed is as of June 30, 2000.
* - Collateralized by U.S. Government securities, certificates of deposit or
bankers' acceptances.
ADR - American Depository Receipts.
See notes to the financial statements.
7
<PAGE>
LKCM BALANCED FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------
COMMON STOCKS - 65.64% SHARES VALUE
--------------------------------------------------------
BASIC MATERIALS - 1.07%
Boise Cascade Corporation 2,900 $ 75,037
-----------
CAPITAL GOODS - 5.32%
Diebold, Inc. 3,200 89,200
General Electric Company 3,300 174,900
Tyco International Group(1) 1,600 75,800
Viasystems Group, Inc. # 2,000 32,375
-----------
372,275
-----------
CONSUMER CYCLICALS - 5.35%
A.H. Belo Corporation, Common
Series A 3,200 55,400
H&R Block, Inc. 2,400 77,700
Harte-Hanks, Inc. 4,000 100,000
Home Depot, Inc. 1,100 54,931
Wal-Mart Stores, Inc. 1,500 86,437
-----------
374,468
-----------
CONSUMER STAPLES - 6.75%
Colgate-Palmolive Company 1,900 113,762
Infinity Broadcasting
Corporation # 2,125 77,430
Kimberly-Clark Corporation 1,500 86,063
Philip Morris Companies, Inc. 2,000 53,125
Viacom, Inc. - Class B # 2,087 142,307
-----------
472,687
-----------
ENERGY - 5.26%
BP Amoco PLC - ADR(1) 1,400 79,187
EOG Resources, Inc. 2,100 70,350
Exxon Mobil Corporation 1,600 125,600
Schlumberger Limited 1,250 93,281
-----------
368,418
-----------
FINANCIAL SERVICES - 7.56%
AEGON N.V. - ADR(1) 402 14,321
American General Corporation 1,000 61,000
The Chase Manhattan Corporation 1,800 82,912
Citigroup, Inc. 1,200 72,300
Cullen/Frost Bankers, Inc. 1,800 47,362
Fannie Mae 1,400 73,063
Mellon Bank Corporation 2,440 88,908
Wells Fargo Company 2,300 89,125
-----------
528,991
-----------
-------------------------------------------------------
COMMON STOCKS SHARES VALUE
-------------------------------------------------------
HEALTH CARE - 7.81%
Medtronic, Inc. 1,600 $ 79,700
Pfizer, Inc. 2,200 105,600
Pharmacia Corporation 2,856 147,620
Tenet Healthcare Corporation # 3,000 81,000
Teva Pharmaceutical Industries Ltd.
- ADR(1) 2,400 133,050
-----------
546,970
-----------
REAL ESTATE INVESTMENT TRUSTS - 0.41%
Crescent Real Estate Equities
Company 1,400 28,700
-----------
TECHNOLOGY - 21.56%
Agilent Technologies, Inc. # 286 21,092
ANTEC Corporation # 1,900 78,969
Cisco Systems, Inc. # 1,900 120,769
Dell Computer Corporation # 1,700 83,831
EMC Corporation 1,460 112,329
First Data Corporation 1,400 69,475
Harris Corporation 3,000 98,250
Hewlett-Packard Company 750 93,656
Intel Corporation 1,150 153,741
KLA-Tencor Corporation # 1,200 70,275
Microsoft Corporation # 1,800 144,000
Motorola, Inc. 2,100 61,031
National Semiconductor
Corporation # 1,200 68,100
Nortel Networks Corporation(1) 1,800 122,850
Oracle Corporation 1,970 165,603
Sun Microsystems, Inc. # 500 45,469
-----------
1,509,440
-----------
TELECOMMUNICATIONS - 2.51%
ALLTEL Corporation 1,200 74,325
Bell Atlantic Corporation 1,200 60,975
Sprint Corporation 800 40,800
-----------
176,100
-----------
TRANSPORTATION - 2.04%
RailAmerica, Inc. # 8,500 54,188
United Parcel Service, Inc.
- Class B 1,500 88,500
-----------
142,688
-----------
TOTAL COMMON STOCKS
(cost $3,919,742) 4,595,774
-----------
See notes to the financial statements.
8
<PAGE>
LKCM BALANCED FUND
SCHEDULE OF INVESTMENTS Continued
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------
CORPORATE BONDS - 14.17% PRINCIPAL VALUE
-------------------------------------------------------
CAPITAL GOODS - 0.69%
Tyco International Group(1),
6.375%, 6/15/2005 $ 25,000 $ 23,638
WMX Technologies, Inc.,
6.70%, 5/01/2001 25,000 24,493
-----------
48,131
-----------
CONSUMER CYCLICALS - 0.68%
Tandy Corporation,
6.95%, 9/01/2007 50,000 47,856
-----------
CONSUMER STAPLES - 0.87%
Tribune Company, Convertible,
2.00%, 5/15/2029 530 61,083
-----------
FINANCIAL SERVICES - 7.73%
American General Corporation,
6.75%, 6/15/2005 50,000 47,924
Block Financial Corporation,
6.75%, 11/01/2004 75,000 71,931
Citigroup, Inc.,
5.80%, 3/15/2004 75,000 71,564
Lehman Brothers Holdings, Inc.
8.25%, 6/15/2007 75,000 75,163
Morgan Stanley Group,
6.875%, 3/01/2007 65,000 61,340
Norwest Corporation,
6.625%, 3/15/2003 75,000 73,140
Sears Roebuck Acceptance
Corporation,
6.00%, 3/20/2003 75,000 71,948
Wilmington Trust Corporation,
6.625%, 5/01/2008 75,000 67,762
-----------
540,772
-----------
MANUFACTURING - 0.34%
Thomas & Betts Corporation,
6.50%, 1/15/2006 25,000 23,907
-----------
REAL ESTATE INVESTMENT TRUST - 1.33%
Bay Apartment Communities, Inc.,
6.25%, 1/15/2003 25,000 24,115
EOP Operating LP,
6.80%, 1/15/2009 50,000 45,765
-------------------------------------------------------
CORPORATE BONDS PRINCIPAL VALUE
-------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - (CONTINUED)
Prologis Trust,
7.05%, 7/15/2006 $ 25,000 $ 23,500
-----------
93,380
-----------
TECHNOLOGY - 1.11%
Kent Electronics,
Callable 9/06/2000,
4.50%, 9/01/2004 60,000 53,625
Oracle Corporation,
6.91%, 2/15/2007 25,000 24,028
-----------
77,653
-----------
TELECOMMUNICATIONS - 1.42%
ITC DeltaCom, Inc. , Convertible,
Callable 5/17/2002,
4.50%, 5/15/2006 39,000 39,439
MCI WorldCom, Inc.,
7.75%, 4/01/2007 60,000 60,069
-----------
99,508
-----------
TOTAL CORPORATE BONDS
(cost $1,047,251) 992,290
-----------
-------------------------------------------------------
MORTGAGE-BACKED
SECURITIES - 3.27%
-------------------------------------------------------
UTILITIES - 3.27%
Old Domin Electric,
Callable 12/01/2003
7.48%, 12/01/2013 70,000 68,105
Potomac Edison Company,
Callable 8/10/2000
8.00%, 6/01/2006 100,000 100,091
Public Service Electric & Gas
Company,
6.375%, 5/01/2023 65,000 60,735
-----------
TOTAL MORTGAGE-BACKED SECURITIES
(cost $234,555) 228,931
-----------
-------------------------------------------------------
CONVERTIBLE PREFERRED
STOCKS - 1.96% SHARES VALUE
-------------------------------------------------------
TELECOMMUNICATIONS - 1.96%
Crown Castle International
Corporation, 7.25% 4,200 137,287
-----------
See notes to the financial statements.
9
<PAGE>
LKCM BALANCED FUND
SCHEDULE OF INVESTMENTS Continued
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------
CONVERTIBLE PREFERRED
STOCKS SHARES VALUE
-------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $94,137) $ 137,287
-----------
-------------------------------------------------------
U.S. TREASURY
OBLIGATIONS - 10.93% PRINCIPAL VALUE
-------------------------------------------------------
U.S. Treasury Notes:
7.50%, 11/15/2001 $150,000 $ 151,969
6.25%, 8/31/2002 150,000 149,484
5.75%, 8/15/2003 170,000 167,131
5.25%, 5/15/2004 100,000 96,500
6.00%, 8/15/2004 100,000 99,094
6.50%, 5/15/2005 100,000 101,125
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(cost $769,891) 765,303
-----------
-------------------------------------------------------
SHORT-TERM
INVESTMENTS - 8.03%
-------------------------------------------------------
Firstar Bank Demand Note,
6.42% ^ 134,850 134,850
Firstar Bank Repurchase Agreement,
4.25%, dated 6/30/00, *
due 7/3/2000 427,000 427,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $561,850) 561,850
-----------
TOTAL INVESTMENTS - 104.00%
(cost $6,627,426) $ 7,281,435
-----------
Liabilities, less Other Assets - (4.00)% (279,974)
-----------
Total Net Assets - 100.00% $ 7,001,461
===========
# - Non-income producing security.
(1) - Foreign security.
^ - Variable rate demand notes are considered short-term obligations and
are payable on demand. Interest rates change periodically on specified
dates. The rate listed is as of June 30, 2000.
* - Collateralized by U.S. Government securities, certificates of deposit or
bankers' acceptances.
ADR - American Depository Receipts.
See notes to the financial statements.
10
<PAGE>
LKCM FIXED INCOME FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------
CORPORATE BONDS - 53.08% PRINCIPAL VALUE
-------------------------------------------------------
CAPITAL GOODS - 4.75%
Tyco International Group(1),
6.375%, 6/15/2005 $1,000,000 $ 945,517
WMX Technologies, Inc.,
6.70%, 5/01/2001 500,000 489,850
-----------
1,435,367
-----------
CONSUMER CYCLICALS - 3.17%
Tandy Corporation,
6.95%, 9/01/2007 1,000,000 957,126
-----------
FINANCIAL SERVICES - 25.22%
Banc One Corporation:
7.00%, 7/15/2005 150,000 145,877
7.60%, 5/01/2007 500,000 489,846
Block Financial Corporation:
6.75%, 11/01/2004 1,000,000 959,074
8.50%, 4/15/2007 300,000 303,273
Citigroup, Inc.,
5.80%, 3/15/2004 500,000 477,095
Lehman Brothers Holdings, Inc.
8.25%, 6/15/2007 1,000,000 1,002,179
Morgan Stanley Group,
6.875%, 3/01/2007 1,000,000 943,695
Nationsbank Corporation,
6.875%, 2/15/2005 1,000,000 976,979
Northern Trust Company,
6.25%, 6/02/2008 459,000 420,914
Norwest Corporation,
6.625%, 3/15/2003 500,000 487,601
Sears Roebuck Acceptance
Corporation,
6.00%, 3/20/2003 500,000 479,654
State Street Boston Corporation,
5.95%, 9/15/2003 495,000 475,207
Wilmington Trust Corporation,
6.625%, 5/01/2008 500,000 451,745
-----------
7,613,139
-----------
-------------------------------------------------------
CORPORATE BONDS PRINCIPAL VALUE
-------------------------------------------------------
MANUFACTURING - 0.48%
Thomas & Betts Corporation,
6.50%, 1/15/2006 $ 150,000 $ 143,440
-----------
REAL ESTATE INVESTMENT TRUST - 5.84%
Bay Apartment Communities, Inc.,
6.25%, 1/15/2003 150,000 144,688
Camden Property Trust,
7.00%, 11/15/2006 800,000 761,342
EOP Operating LP,
6.80%, 1/15/2009 550,000 503,417
Prologis Trust,
7.05%, 7/15/2006 375,000 352,494
-----------
1,761,941
-----------
TECHNOLOGY - 5.45%
Oracle Corporation,
6.91%, 2/15/2007 675,000 648,757
Texas Instruments, Inc.,
7.00%, 8/15/2004 1,000,000 996,919
-----------
1,645,676
-----------
TELECOMMUNICATIONS - 5.77%
ALLTEL Corporation,
7.25%, 4/01/2004 750,000 742,058
MCI WorldCom, Inc.,
7.75%, 4/01/2007 1,000,000 1,001,152
-----------
1,743,210
-----------
TOOLS - HAND HELD - 2.24%
Black & Decker Corporation,
7.50%, 4/01/2003 675,000 676,276
-----------
UTILITIES - 0.16%
Southwest Gas Corporation,
7.50%, 8/01/2006 50,000 48,953
-----------
TOTAL CORPORATE BONDS
(cost $16,639,213) 16,025,128
-----------
See notes to the financial statements.
11
<PAGE>
LKCM FIXED INCOME FUND
SCHEDULE OF INVESTMENTS, Continued
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------
MORTGAGE-BACKED
SECURITIES - 11.60% PRINCIPAL VALUE
-------------------------------------------------------
UTILITIES - 11.60%
Interstate Power Company,
Callable 9/15/2000,
8.625%, 9/15/2021 $ 50,000 $ 51,054
Old Domin Electric,
7.48%, 12/01/2013 575,000 559,431
PP&L Resources, Inc.,
6.55%, 3/01/2006 1,000,000 956,477
Potomac Edison Company,
Callable 8/10/2000
8.00%, 6/01/2006 1,000,000 1,000,913
Public Service Electric & Gas
Company,
6.375%, 5/01/2023 1,000,000 934,377
-----------
TOTAL MORTGAGE-BACKED SECURITIES
(cost $3,541,310) 3,502,252
-----------
-------------------------------------------------------
U.S. TREASURY
OBLIGATIONS - 33.37%
-------------------------------------------------------
5.375%, 2/15/2001 1,000,000 993,750
5.75%, 11/30/2002 1,000,000 985,625
6.25%, 2/15/2003 1,000,000 997,500
7.25%, 8/15/2004 1,000,000 1,033,750
7.50%, 2/15/2005 1,000,000 1,049,063
6.50%, 5/15/2005 1,000,000 1,011,250
5.875%, 11/15/2005 1,000,000 983,125
6.50%, 10/15/2006 1,000,000 1,011,563
6.125%, 8/15/2007 1,500,000 1,491,562
6.50%, 10/15/2010 500,000 517,188
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(cost $10,094,432) 10,074,376
-----------
SHORT-TERM
INVESTMENTS - 0.28% PRINCIPAL VALUE
-------------------------------------------------------
Firstar Bank Demand Note,
6.42% ^ $ 82,719 $ 82,719
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $82,719) 82,719
-----------
TOTAL INVESTMENTS - 98.33%
(cost $30,357,674) 29,684,475
-----------
Other Assets in excess
of Liabilities - 1.67% 504,051
-----------
Total Net Assets - 100.00% $30,188,526
===========
(1) - Foreign security.
^ - Variable rate demand notes are considered short-term obligations and
are payable on demand. Interest rates change periodically on specified
dates. The rate listed is as of June 30, 2000.
See notes to the financial statements.
12
<PAGE>
LKCM INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------
COMMON STOCKS - 84.90% SHARES VALUE
-------------------------------------------------------
BELGIUM - 1.35%
-------------------------------------------------------
FINANCIAL SERVICES - 1.35%
Dexia 9,081 $ 1,392,925
Dexia - STRIP VVPR # 9,081 435
-----------
TOTAL BELGIUM 1,393,360
-----------
-------------------------------------------------------
CANADA - 0.51%
-------------------------------------------------------
ENERGY - 0.51%
Ballard Power Systems, Inc. # 5,827 526,974
-----------
TOTAL CANADA 526,974
-----------
-------------------------------------------------------
DENMARK - 0.49%
-------------------------------------------------------
ENERGY - 0.49%
Vestas Wind Systems A/S 13,753 507,184
-----------
TOTAL DENMARK 507,184
-----------
-------------------------------------------------------
FINLAND - 2.02%
-------------------------------------------------------
TELECOMMUNICATIONS - 2.02%
Nokia Oyj 40,628 2,081,839
-----------
TOTAL FINLAND 2,081,839
-----------
-------------------------------------------------------
FRANCE - 7.25%
-------------------------------------------------------
FINANCIAL SERVICES - 3.42%
Axa 12,734 2,014,294
BNP Paribas 10,417 1,006,647
Credit Lyonnais SA 10,543 503,347
-----------
3,524,288
-----------
ELECTRONICS - 0.35%
Thomson CSF 8,988 355,522
-----------
MEDICAL - 3.48%
Aventis SA 48,995 3,590,900
-----------
TOTAL FRANCE 7,470,710
-----------
-------------------------------------------------------
GERMANY - 8.50%
-------------------------------------------------------
CHEMICALS - 1.94%
Bayer AG 40,551 1,586,119
SGL Carbon AG 6,158 411,478
-----------
1,997,597
-----------
-------------------------------------------------------
COMMON STOCKS SHARES VALUE
-------------------------------------------------------
GERMANY - (CONTINUED)
-------------------------------------------------------
DIVERSIFIED MANUFACTURING - 2.98%
E.On AG 48,498 $ 2,389,787
MAN AG 22,229 683,002
-----------
3,072,789
-----------
ELECTRONIC COMPONENTS - 0.60%
Aixtron AG 4,448 614,047
-----------
FINANCIAL SERVICES - 1.08%
Ergo Versicherungs Gruppe AG 9,825 1,115,214
-----------
INTERNET SOFTWARE - 0.52%
Intershop Communications AG # 1,193 540,973
-----------
MEDICAL - 1.38%
Altana AG 3,479 276,826
Merck KGaA 37,599 1,146,245
-----------
1,423,071
-----------
TOTAL GERMANY 8,763,691
-----------
-------------------------------------------------------
HONG KONG - 1.70%
-------------------------------------------------------
DIVERSIFIED OPERATIONS - 0.58%
Hutchison Whampoa, Limited 47,600 598,412
-----------
LODGING - 0.05%
Lai Sun Hotels International
Limited # 1,006,000 50,330
-----------
TELECOMMUNICATIONS - 1.07%
China Mobile (Hong Kong),
Limited # 125,000 1,102,427
-----------
TOTAL HONG KONG 1,751,169
-----------
-------------------------------------------------------
IRELAND - 0.80%
-------------------------------------------------------
MEDICAL - 0.80%
Elan Corporation PLC - ADR # 17,086 827,603
-----------
TOTAL IRELAND 827,603
-----------
-------------------------------------------------------
ITALY - 5.88%
-------------------------------------------------------
ENERGY - 2.18%
ENI SpA 387,580 2,247,971
-----------
See notes to the financial statements.
13
<PAGE>
LKCM INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS Continued
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------
COMMON STOCKS SHARES VALUE
-------------------------------------------------------
ITALY - (CONTINUED)
-------------------------------------------------------
FINANCIAL SERVICES - 3.70%
Assicurazioni Genrali 77,700 $ 2,674,173
Banca Nazionale del Lavoro # 321,628 1,137,769
-----------
3,811,942
-----------
TOTAL ITALY 6,059,913
-----------
-------------------------------------------------------
JAPAN - 11.08%
-------------------------------------------------------
BUILDING & CONSTRUCTION - 1.91%
Matsushita Electric Works, Ltd. 42,000 521,602
Nippon Sheet Glass Company,
Limited 36,000 501,527
Sekisui House, Ltd. 13,000 120,533
Toto Ltd. 107,000 823,194
-----------
1,966,856
-----------
ELECTRICAL EQUIPMENT - 0.51%
The Furukawa Electric Co., Ltd. 25,000 523,369
-----------
ELECTRONICS - 5.20%
Canon Inc. 21,000 1,047,967
Kyocera Corporation 4,000 680,120
NEC Corporation 27,000 849,772
Sanyo Electric Company, Ltd. 60,000 540,996
Sharp Corporation 19,000 336,705
Tokyo Electron Limited 7,000 960,636
Toshiba Corporation 43,000 486,471
Yaskawa Electric Corporation 38,000 455,045
-----------
5,357,712
-----------
FINANCIAL SERVICES - 0.27%
Credit Saison Co., Ltd. 12,100 281,329
-----------
MACHINERY - 0.62%
AMADA Co., Ltd. 55,000 467,842
Tsugami Corporation # 35,000 174,661
-----------
642,503
-----------
MEDICAL - 0.56%
Chugai Pharmaceutical Co., Ltd. 18,000 341,100
Dainippon Pharmaceutical Co.,
Ltd. 18,000 240,556
-----------
581,656
-----------
-------------------------------------------------------
COMMON STOCKS SHARES VALUE
-------------------------------------------------------
JAPAN - (CONTINUED)
-------------------------------------------------------
PUBLISHING & BROADCASTING - 0.62%
Nippon Television Network
Corporation # 400 $ 261,614
Nippon Television Network
Corporation 580 378,243
-----------
639,857
-----------
RETAIL - 0.96%
Isetan Company Limited 27,000 331,743
Marui Co., Ltd. 34,000 652,333
-----------
984,076
-----------
SOFTWARE - 0.24%
CAPCOM Co., LTD. 50 1,611
Trend Micro Incorporated # 1,500 248,098
-----------
249,709
-----------
TELECOMMUNICATIONS - 0.19%
Nippon COMSYS Corporation 9,000 191,815
-----------
TOTAL JAPAN 11,418,882
-----------
-------------------------------------------------------
KOREA - 1.01%
-------------------------------------------------------
ELECTRONICS - 1.01%
Samsung Electronics 3,158 1,045,091
-----------
TOTAL KOREA 1,045,091
-----------
-------------------------------------------------------
NETHERLANDS - 5.86%
-------------------------------------------------------
ELECTRONICS - 4.46%
ASM Lithography Holding N.V. # 25,266 1,090,476
Koninklijke Philips
Electronics N.V. 74,062 3,507,490
-----------
4,597,966
-----------
MEDICAL - 1.40%
QIAGEN N.V. - # 8,281 1,444,868
-----------
TOTAL NETHERLANDS 6,042,834
-----------
-------------------------------------------------------
SPAIN - 6.25%
-------------------------------------------------------
Empresa Nacional de Electricidad SA 41,583 808,857
Gas Natural SDG, SA 23,189 417,940
See notes to the financial statements.
14
<PAGE>
LKCM INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS Continued
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------
COMMON STOCKS SHARES VALUE
-------------------------------------------------------
SPAIN - (CONTINUED)
-------------------------------------------------------
ENERGY - (CONTINUED)
Iberdrola S.A. 66,024 $ 854,495
Repsol YPF, SA 84,965 1,698,323
-----------
3,779,615
-----------
TELECOMMUNICATIONS - 1.01%
Telefonica S.A. 48,322 1,042,321
-----------
TRANSPORTATION SERVICES - 1.57%
Amadeus Global Travel
Distribution SA 141,201 1,617,632
-----------
TOTAL SPAIN 6,439,568
-----------
-------------------------------------------------------
SWEDEN - 2.77%
-------------------------------------------------------
FINANCIAL SERVICES - 1.34%
Nordic Baltic Holdings AB 182,210 1,381,480
-----------
TELECOMMUNICATIONS - 1.43%
Telefonaktiebolaget LM Ericsson
AB - Class B 74,234 1,476,894
-----------
TOTAL SWEDEN 2,858,374
-----------
-------------------------------------------------------
SWITZERLAND - 5.57%
-------------------------------------------------------
FINANCIAL SERVICES - 1.43%
Swiss Re 723 1,478,369
-----------
FOOD & BEVERAGES - 3.13%
Nestle SA 1,605 3,222,634
-----------
RETAIL - 1.01%
The Swatch Group AG - Class B 817 1,042,038
-----------
TOTAL SWITZERLAND 5,743,041
-----------
-------------------------------------------------------
UNITED KINGDOM - 23.86%
-------------------------------------------------------
AEROSPACE - 0.98%
BAE Systems PLC 162,361 1,012,759
-----------
-------------------------------------------------------
COMMON STOCKS SHARES VALUE
-------------------------------------------------------
UNITED KINGDOM - (CONTINUED)
-------------------------------------------------------
ENERGY - 2.70%
BG Group PLC 15,226 $ 98,433
National Power PLC 19,477 124,146
Shell Transport & Trading
Company PLC 227,465 1,899,273
United Utilities PLC 66,729 660,723
-----------
2,782,575
-----------
FINANCIAL SERVICES - 3.61%
Amvescap PLC 99,106 1,590,498
Prudential PLC 65,719 963,149
Standard Chartered PLC 93,546 1,165,607
-----------
3,719,254
-----------
FOOD & BEVERAGES - 4.70%
Diageo PLC 375,061 3,367,315
Unilever PLC 243,581 1,475,131
-----------
4,842,446
-----------
MEDICAL - 4.23%
AstraZeneca Group PLC 35,148 1,641,659
Celltech Group PLC # 50,692 982,373
Nycomed Amersham PLC 175,466 1,742,705
-----------
4,366,737
-----------
RETAIL - 3.57%
Dixons Group PLC 204,042 830,996
Kingfisher PLC 190,330 1,733,285
Safeway PLC 286,741 1,115,707
-----------
3,679,988
-----------
TELECOMMUNICATIONS - 1.51%
Vodafone AirTouch PLC 384,496 1,554,284
-----------
TRANSPORTATION - 2.56%
Railtrack Group PLC 169,628 2,636,232
-----------
TOTAL UNITED KINGDOM 24,594,275
-----------
TOTAL COMMON STOCKS
(cost $79,827,123) 87,524,508
-----------
See notes to the financial statements.
15
<PAGE>
LKCM INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS Continued
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------
WARRANTS - 0.11% SHARES VALUE
-------------------------------------------------------
JAPAN - 0.11%
-------------------------------------------------------
PUBLISHING & BROADCASTING - 0.11%
Nippon Television Network
Corporation 180 $ 117,386
-----------
TOTAL JAPAN 117,386
-----------
TOTAL WARRANTS
(cost $102,203) 117,386
-----------
TOTAL INVESTMENTS - 85.01%
(cost $79,929,326) $87,641,894
-----------
Other Assets in excess
of Liabilities - 14.99% 15,453,922
-----------
Total Net Assets - 100.00% $103,095,816
============
# - Non-income producing security.
STRIP VVPR - Belgian tax recovery coupon.
ADR - American Depository Receipts.
See notes to the financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
LKCM SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
June 30, 2000 (Unaudited)
LKCM LKCM LKCM LKCM
SMALL CAP LKCM BALANCED FIXED INCOME INTERNATIONAL
EQUITY FUND EQUITY FUND FUND FUND FUND
ASSETS:
<S> <C> <C> <C> <C> <C>
Investments, at value*.................. $181,795,519 $22,674,396 $6,854,435 $29,684,475 $ 87,641,894
Repurchase agreements................... 22,596,000 3,332,000 427,000 -- --
Cash.................................... -- -- -- -- 12,383,167
Foreign currency**...................... -- -- -- -- 1,662,305
Dividends and interest receivable....... 167,111 27,392 33,593 520,006 322,463
Receivable from Adviser................. -- -- 6,397 -- --
Receivable for investments sold......... 2,104,643 -- -- -- 3,874,231
Receivable for fund shares sold......... -- -- -- -- 10,412
Organizational expenses, net of
accumulated amortization.............. -- -- 8,143 8,143 14,943
Other assets............................ 21,395 5,389 4,826 8,687 14,510
----------- ---------- --------- ---------- -----------
Total assets......................... 206,684,668 26,039,177 7,334,394 30,221,311 105,923,925
----------- ---------- --------- ---------- -----------
LIABILITIES:
Payable for investments purchased....... 1,516,195 -- 321,428 -- 2,363,967
Payable for investment advisory fees.... 390,322 30,255 -- 20,000 164,070
Payable for fund shares purchased....... -- -- -- -- 220,768
Accrued expenses and other liabilities.. 57,396 14,193 11,505 12,785 79,304
----------- ---------- --------- ---------- -----------
Total liabilities.................... 1,963,913 44,448 332,933 32,785 2,828,109
----------- ---------- --------- ---------- -----------
NET ASSETS.............................. $204,720,755 $25,994,729 $7,001,461 $30,188,526 $103,095,816
=========== ========== ========= ========== ===========
NET ASSETS CONSIST OF:
Paid in capital......................... $121,475,012 $16,661,327 $6,312,006 $31,068,131 $ 79,117,117
Undistributed net investment income..... 221,370 545,191 904 9,812 232,751
Undistributed net realized gain (loss)
on securities and foreign currency
transactions.......................... 33,143,507 3,280,615 34,542 (216,218) 16,024,377
Net unrealized appreciation or
depreciation on:
Investments securities................ 49,880,866 5,507,596 654,009 (673,199) 7,712,568
Other assets and liabilities
denominated in foreign currency...... -- -- -- -- 9,003
----------- ---------- --------- ---------- -----------
NET ASSETS.............................. $204,720,755 $25,994,729 $7,001,461 $30,188,526 $103,095,816
=========== ========== ========= ========== ===========
Shares of beneficial interest
outstanding (unlimited shares of no
par value authorized) 10,645,584 1,703,885 581,261 3,109,383 6,744,633
Net asset value per share (offering and
redemption price)..................... $ 19.23 $ 15.26 $ 12.05 $ 9.71 $ 15.29
=========== ========== ========= ========== ===========
* Cost of Investments................... $154,510,653 $20,498,800 $6,627,426 $30,357,674 $ 79,929,326
=========== ========== ========= ========== ===========
** Cost of Foreign Currency............. $ -- $ -- $ -- $ -- $ 1,660,442
=========== ========== ========= ========== ===========
</TABLE>
See notes to the financial statements.
17
<PAGE>
STATEMENTS OF OPERATIONS
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
LKCM LKCM LKCM LKCM
SMALL CAP LKCM BALANCED FIXED INCOME INTERNATIONAL
EQUITY FUND EQUITY FUND FUND FUND FUND
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Dividends*.............................. $ 463,896 $ 568,726 $ 25,591 $ -- $ 640,859
Interest................................ 717,086 79,724 75,986 921,127 248,367
---------- --------- ------- -------- ----------
Total income......................... 1,180,982 648,450 101,577 921,127 889,226
---------- --------- ------- -------- ----------
EXPENSES:
Investment advisory fees................ 823,472 91,269 22,214 70,904 471,962
Administrative fees..................... 64,957 10,225 9,810 9,849 32,738
Custody fees and expenses............... 18,070 4,475 3,383 2,302 111,838
Accounting and transfer agent
fees and expenses..................... 43,041 18,901 18,223 20,704 33,142
Federal and state registration.......... 9,028 5,121 4,153 9,210 13,083
Professional fees....................... 35,878 4,444 867 3,756 12,770
Trustees' fees.......................... 8,594 1,466 182 832 2,446
Amortization of deferred charges........ -- -- 1,625 1,625 2,970
Reports to shareholders................. 9,414 1,698 212 838 2,782
Other................................... 8,720 1,572 129 572 2,062
---------- --------- ------- -------- ----------
Total expenses....................... 1,021,174 139,171 60,798 120,592 685,793
Less, expense waiver and/or
reimbursement........................ -- (34,864) (33,458) (28,419) (119,439)
---------- --------- ------- -------- ----------
Net expenses......................... 1,021,174 104,307 27,340 92,173 566,354
---------- --------- ------- -------- ----------
NET INVESTMENT INCOME................... 159,808 544,143 74,237 828,954 322,872
---------- --------- ------- -------- ----------
REALIZED/UNREALIZED GAIN/LOSS ON INVESTMENTS:
Net realized gain (loss) on:
Investments.......................... 23,656,227 2,199,628 25,908 (130,209) 15,721,129
Foreign currency transactions........ -- -- -- -- (1,311,677)
Futures contracts.................... -- -- -- -- (113,395)
---------- --------- ------- -------- ----------
23,656,227 2,199,628 25,908 (130,209) 14,296,057
---------- --------- ------- -------- ----------
Net change in unrealized on:
Investments.......................... (11,006,284) (2,208,096) (167,660) 200,713 (15,978,968)
Foreign currency transactions........ -- -- -- -- 11,433
---------- --------- ------- -------- ----------
(11,006,284) (2,208,096) (167,660) 200,713 (15,967,535)
---------- --------- ------- -------- ----------
NET GAIN (LOSS) ON INVESTMENTS.......... 12,649,943 (8,468) (141,752) 70,504 (1,671,478)
---------- --------- ------- -------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............. $12,809,751 $ 535,675 $(67,515) $ 899,458 $(1,348,606)
========== ========= ======= ======== ==========
* Net of Foreign Taxes Withheld......... $ -- $ 932 $ 190 $ -- $ 84,885
========== ========= ======= ======== ==========
</TABLE>
See notes to the financial statements.
18
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LKCM
SMALL CAP EQUITY FUND LKCM EQUITY FUND
Six Months Ended Six Months Ended
June 30, 2000 Year Ended June 30, 2000 Year Ended
(Unaudited) December 31, 1999 (Unaudited) December 31, 1999
-------------- -------------- -------------- --------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income.................... $ 159,808 $ 360,678 $ 544,143 $ 276,897
Net realized gain on investments......... 23,656,227 13,148,667 2,199,628 11,960,994
Net change in unrealized appreciation/
depreciation........................... (11,006,284) 18,273,521 (2,208,096) (5,005,383)
----------- ----------- ---------- ----------
Net increase in net assets
resulting from operations........... 12,809,751 31,782,866 535,675 7,232,508
----------- ----------- ---------- ----------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income.................... -- (363,466) -- (275,849)
Net realized gain on investments......... -- (3,140,224) -- (6,529,751)
----------- ----------- ---------- ----------
Total dividends and distributions.... -- (3,503,690) -- (6,805,600)
----------- ----------- ---------- ----------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold............ 6,264,516 8,454,712 2,325,993 6,077,832
Shares issued on reinvestment of
dividends and distributions............ -- 3,408,485 -- 3,914,068
Cost of shares redeemed.................. (44,517,184) (57,996,318) (4,359,431) (23,995,464)
----------- ----------- ---------- ----------
Net decrease in net assets from
from Fund share transactions....... (38,252,668) (46,133,121) (2,033,438) (14,003,564)
----------- ----------- ---------- ----------
Total decrease in net assets............. (25,442,917) (17,853,945) (1,497,763) (13,576,656)
NET ASSETS:
Beginning of period...................... 230,163,672 248,017,617 27,492,492 41,069,148
----------- ----------- ---------- ----------
End of period*........................... $204,720,755 $230,163,672 $25,994,729 $27,492,492
=========== =========== ========== ==========
* Including undistributed net
investment income of:................. $ 221,370 $ 61,562 $ 545,191 $ 1,048
=========== =========== ========== ==========
CHANGES IN SHARES OUTSTANDING:
Shares sold.............................. 336,703 536,898 153,868 402,049
Shares issued in reinvestment of
dividends and distributions........... -- 192,244 -- 285,910
Shares redeemed.......................... (2,424,339) (3,775,364) (293,866) (1,698,331)
----------- ----------- ---------- ----------
(2,087,636) (3,046,222) (139,998) (1,010,372)
Beginning of period...................... 12,733,220 15,779,442 1,843,883 2,854,255
----------- ----------- ---------- ----------
End of period............................ 10,645,584 12,733,220 1,703,885 1,843,883
=========== =========== ========== ==========
</TABLE>
See notes to the financial statements.
19
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LKCM
LKCM BALANCED FUND FIXED INCOME FUND
Six Months Ended Six Months Ended
June 30, 2000 Year Ended June 30, 2000 Year Ended
(Unaudited) December 31, 1999 (Unaudited) December 31, 1999
-------------- -------------- -------------- --------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income.................... $ 74,237 $ 91,811 $ 828,954 $ 1,144,788
Net realized gain (loss) on investments.. 25,908 34,641 (130,209) (85,458)
Net change in unrealized appreciation/
depreciation.......................... (167,660) 518,246 200,713 (1,085,107)
--------- --------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations.......... (67,515) 644,698 899,458 (25,777)
--------- --------- ---------- ----------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income.................... (74,820) (93,999) (824,089) (1,142,793)
Net realized gain on investments......... -- (6,417) -- (22,567)
--------- --------- ---------- ----------
Total dividends and distributions.... (74,820) (100,416) (824,089) (1,165,360)
--------- --------- ---------- ----------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold............ 369,141 2,627,719 4,231,041 16,042,143
Shares issued on reinvestment of
dividends and distributions........... 74,609 99,323 605,765 929,489
Cost of shares redeemed.................. (150,561) (59,878) (739,603) (4,321,114)
--------- --------- ---------- ----------
Net increase in net assets from
from Fund share transactions....... 293,189 2,667,164 4,097,203 12,650,518
--------- --------- ---------- ----------
Total increase in net assets............. 150,854 3,211,446 4,172,572 11,459,381
NET ASSETS:
Beginning of period...................... 6,850,607 3,639,161 26,015,954 14,556,573
--------- --------- ---------- ----------
End of period*........................... $7,001,461 $6,850,607 $30,188,526 $26,015,954
========= ========= ========== ==========
* Including undistributed net
investment income of:.................. $ 904 $ 463 $ 9,812 $ 3,923
========= ========= ========== ==========
CHANGES IN SHARES OUTSTANDING:
Shares sold.............................. 30,875 224,075 436,926 1,611,115
Shares issued in reinvestment of
dividends and distributions............ 6,197 8,525 62,577 94,556
Shares redeemed.......................... (12,620) (5,023) (76,197) (439,102)
----------- ----------- ---------- ----------
24,452 227,577 423,306 1,266,569
Beginning of period...................... 556,809 329,232 2,686,077 1,419,508
----------- ----------- ---------- ----------
End of period............................ 581,261 556,809 3,109,383 2,686,077
=========== =========== ========== ==========
</TABLE>
See notes to the financial statements.
20
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LKCM
INTERNATIONAL FUND
Six Months Ended
June 30, 2000 Year Ended
(Unaudited) December 31, 1999
-------------- --------------
OPERATIONS:
<S> <C> <C>
Net investment income........................................................ $ 322,872 $ 21,738
Net realized gain on investments............................................. 14,296,057 3,312,002
Net change in unrealized appreciation/depreciation........................... (15,967,535) 20,224,103
----------- ----------
Net increase (decrease) in net assets resulting from operations.......... (1,348,606) 23,557,843
----------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
NET REALIZED GAIN ON INVESTMENTS........................................... -- (1,451,155)
----------- ----------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold................................................ 33,373,200 14,148,239
Shares issued on reinvestment of dividends and distributions................. -- 1,444,287
Cost of shares redeemed...................................................... (12,820,595) (10,792,619)
----------- ----------
Net increase in net assets from Fund share transactions.................. 20,552,605 4,799,907
----------- ----------
Total increase in net assets................................................. 19,203,999 26,906,595
NET ASSETS:
Beginning of period.......................................................... 83,891,817 56,985,222
----------- ----------
End of period*............................................................... $103,095,816 $83,891,817
=========== ==========
*Including undistributed net investment income of:........................... $ 232,751 $ --
=========== ==========
CHANGES IN SHARES OUTSTANDING:
Shares sold.................................................................. 2,137,322 1,118,117
Shares issued on reinvestment of dividends and distributions................. -- 93,907
Shares redeemed.............................................................. (827,118) (951,791)
----------- ----------
1,310,204 260,233
----------- ----------
Beginning of period.......................................................... 5,434,429 5,174,196
----------- ----------
End of period................................................................ 6,744,633 5,434,429
=========== ==========
</TABLE>
See notes to the financial statements.
21
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<TABLE>
<CAPTION>
LKCM SMALL CAP EQUITY FUND
Six Months July 14,
Ended Year Year Year Year May 1, 1995 1994(1)
June 30, Ended Ended Ended Ended through through
2000 December 31, December 31, December 31, December 31, December 31, April 30,
(Unaudited) 1999 1998 1997 1996 1995 (2) 1995
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE --
BEGINNING OF PERIOD $ 18.08 $ 15.72 $ 16.89 $ 16.20 $ 13.84 $ 11.48 $ 10.00
-------- -------- -------- -------- -------- -------- --------
Net investment income 0.02 0.03 0.05 0.02 0.05 0.03 0.04
Net realized gain (loss)
and unrealized
appreciation
(depreciation)..... 1.13 2.61 (1.10) 3.38 3.26 2.33 1.44
-------- -------- -------- -------- -------- -------- --------
Total from
investment
operations..... 1.15 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...... $ 19.23 $ 18.08 $ 15.72 $ 16.89 $ 16.20 $ 13.84 $ 11.48
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN......... 6.36%(3) 16.83% (6.26)% 23.07% 25.67% 20.56%(3) 14.80%(3)
RATIOS AND
SUPPLEMENTAL DATA:
Net assets, end of
period
(thousands)........ $204,721 $230,164 $284,018 $274,787 $199,088 $121,430 $ 66,736
Ratio of expenses
to average
net assets......... 0.93%(4) 0.90% 0.91% 0.95% 1.00% 1.00%(4) 1.00%(4)
Ratio of net investment
income to average
net assets......... 0.15%(4) 0.16% 0.35% 0.22% 0.39% 0.53%(4) 1.15%(4)
Portfolio turnover
rate............... 37% 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.
22
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<TABLE>
<CAPTION>
LKCM EQUITY FUND
Six Months January 3,
Ended Year Year Year 1996(1)
June 30, Ended Ended Ended through
2000 December 31, December 31, December 31, December 31,
(Unaudited) 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD......... $ 14.91 $ 14.39 $ 13.18 $ 11.70 $ 10.00
------- ------- ------- ------- -------
Net investment income......................... 0.32 0.10(2) 0.10 0.10 0.15
Net realized gain and unrealized
appreciation (depreciation)................. 0.03 2.97 1.63 2.52 1.55
------- ------- ------- ------- -------
Total from investment operations.......... 0.35 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............... $ 15.26 $ 14.91 $ 14.39 $ 13.18 $ 11.70
======= ======= ======= ======= =======
TOTAL RETURN.................................. 2.35%(3) 23.07% 13.11% 23.57% 17.00%(3)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (thousands)......... $25,995 $27,492 $41,069 $52,392 $34,608
Ratio of expenses to average net assets:
Before expense waiver and/or reimbursement.. 1.07%(4) 0.93% 1.02% 1.16% 1.32%(4)
After expense waiver and/or reimbursement... 0.80%(4) 0.80% 0.80% 0.80% 0.80%(4)
Ratio of net investment income to average
net assets:
Before expense waiver and/or reimbursement.. 3.92%(4) 0.56% 0.49% 0.57% 0.98%(4)
After expense waiver and/or reimbursement... 4.19%(4) 0.69% 0.71% 0.93% 1.50%(4)
Portfolio turnover rate....................... 32% 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.
23
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<TABLE>
<CAPTION>
LKCM BALANCED FUND LKCM FIXED INCOME FUND
Six Months Year Year Six Months Year Year
Ended Ended Ended Ended Ended Ended
June 30, 2000December 31, December 31, June 30, 2000 December 31, December 31,
(Unaudited) 1999 1998 (Unaudited) 1999 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE --
BEGINNING OF PERIOD............ $12.30 $11.05 $10.00 $ 9.69 $ 10.25 $ 10.00
------ ------ ------ ------- ------- -------
Net investment income............ 0.13 0.22 0.22 0.27 0.52 0.54(1)
Net realized gain (loss) and
unrealized appreciation
(depreciation)................. (0.25) 1.26 1.05 0.02 (0.55) 0.17
------ ------ ------ ------- ------- -------
Total from investment
operations................. (0.12) 1.48 1.27 0.29 (0.03) 0.71
------ ------ ------ ------- ------- -------
Dividends from net investment
income......................... (0.13) (0.22) (0.22) (0.27) (0.52) (0.46)
Distributions from net realized
gain from investment
transactions................... -- (0.01) -- -- (0.01) --
------ ------ ------ ------- ------- -------
Total distributions.......... (0.13) (0.23) (0.22) (0.27) (0.53) (0.46)
------ ------ ------ ------- ------- -------
NET ASSET VALUE-- END OF PERIOD.. $12.05 $12.30 $11.05 $ 9.71 $ 9.69 $ 10.25
====== ====== ====== ======= ======= =======
TOTAL RETURN..................... (0.97)%(2) 13.53% 12.84% 3.05%(2) (0.34)% 7.27%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period
(thousands).................... $7,001 $6,851 $3,639 $30,189 $26,016 $14,557
Ratio of expenses to average
net assets:
Before expense reimbursement... 1.78%(3) 1.95% 4.59% 0.85%(3) 0.89% 1.28%
After expense reimbursement.... 0.80%(3) 0.80% 0.80% 0.65%(3) 0.65% 0.65%
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement... 1.20%(3) 0.81% (1.38)% 5.65%(3) 5.34% 4.66%
After expense reimbursement.... 2.18%(3) 1.96% 2.41% 5.85%(3) 5.58% 5.29%
Portfolio turnover rate.......... 38% 47% 39% 19% 68% 82%
</TABLE>
(1) Net investment income per share represents net investment income
divided by the average shares outstanding throughout the year.
(2) Not Annualized
(3) Annualized
See notes to the financial statements.
24
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<TABLE>
<CAPTION>
LKCM INTERNATIONAL FUND
Six Months Year Year
Ended Ended Ended
June 30, 2000 December 31, December 31,
(Unaudited) 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
NET ASSET VALUE --
BEGINNING OF PERIOD..................................... $ 15.44 $ 11.01 $ 10.00
-------- ------- -------
Net investment income..................................... 0.05(1) 0.00 0.04(2)
Net realized gain (loss) and unrealized
appreciation (depreciation)............................. (0.20) 4.70 0.97
-------- ------- -------
Total from investment
operations.......................................... (0.15) 4.70 1.01
-------- ------- -------
Distributions from net realized gain
from investment transactions............................ -- (0.27) --
-------- ------- -------
NET ASSET VALUE-- END OF PERIOD........................... $ 15.29 $ 15.44 $ 11.01
======== ======= =======
TOTAL RETURN.............................................. (0.97)%(3) 42.71% 10.10%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (thousands)..................... $103,096 $83,892 $56,985
Ratio of expenses to average net assets:
Before expense reimbursement............................ 1.45%(4) 1.52% 1.40%
After expense reimbursement............................. 1.20%(4) 1.20% 1.20%
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement............................ 0.43%(4) (0.28)% 0.34%
After expense reimbursement............................. 0.68%(4) 0.04% 0.54%
Portfolio turnover rate................................... 142% 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 loss prior to considerations of adjustments
for permanent book and tax differences.
(3) Not Annualized
(4) Annualized
See notes to the financial statements.
25
<PAGE>
LKCM FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
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 value of which exceeds the
principal amount of the repurchase transaction, including accrued interest.
If the
26
<PAGE>
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.
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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.
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 six months ended June 30,
2000, 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 -- $34,864 $33,458 $28,419 $119,439
</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 transfer agent, administrator and accounting services agent for the Trust.
Firstar Bank, N.A. serves as custodian 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 six months ended June 30, 2000 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 $ -- $ 69,569,679 $ -- $ 97,762,452
LKCM Equity Fund -- 7,172,152 -- 8,361,320
LKCM Balanced Fund 447,374 2,231,749 498,861 2,005,228
LKCM Fixed Income Fund 4,543,281 4,805,520 518,594 4,462,476
LKCM International Fund -- 129,032,104 -- 115,337,776
</TABLE>
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At June 30, 2000, 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 $154,495,102 $57,644,738 ($7,748,321) $49,896,417
LKCM Equity Fund 20,498,800 6,311,697 (804,101) 5,507,596
LKCM Balanced Fund 6,625,487 958,986 (303,038) 655,948
LKCM Fixed Income Fund 30,357,674 90,685 (763,884) (673,199)
LKCM International Fund 80,223,847 10,169,657 (2,751,610) 7,418,047
</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 June 30, 2000, the LKCM Balanced Fund and the LKCM International
Fund each had five shareholders who, in aggregate, owned greater than 50% of the
outstanding shares.
E. SUBSEQUENT EVENT: On August 29, 2000, the LKCM International Fund will have a
special meeting of shareholders and those shareholders will be asked to approve
a new policy that has been unanimously recommended by the Trustees of the Fund.
This policy will allow the LKCM International Fund to adopt a "master-feeder
structure" under which it would be a "feeder" fund that invests all of its
investable assets into a separate "master" mutual fund that performs portfolio
management, fund accounting and custodial functions.
If the new policy is approved, LKCM International Fund intends to invest in a
new master fund that is advised by TTInternational Investment Management, the
current subadviser for the LKCM International Fund. At least one other mutual
fund will invest in this new master fund and it is expected that the pooling of
that fund's assets with the LKCM International Fund's assets will result in a
lower expense ratio for the LKCM International Fund.
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