Table of Contents
Letter to Shareholders................................................. 1
Putting Your Fund's Performance in Perspective......................... 4
Active Core Fund
Portfolio of Investments.......................................... 6
Statement of Assets and Liabilities............................... 9
Statement of Operations........................................... 10
Statement of Changes in Net Assets................................ 11
Financial Highlights.............................................. 12
Limited Duration Fund
Portfolio of Investments.......................................... 13
Statement of Assets and Liabilities............................... 15
Statement of Operations........................................... 16
Statement of Changes in Net Assets................................ 17
Financial Highlights.............................................. 18
Notes to Financial Statements.......................................... 19
Report of Independent Accountants...................................... 22
EXPI ANR 2/99
<PAGE>
Letter to Shareholders
February 1, 1999
Dear Shareholder,
We are pleased to provide you our annual report for the 12-month period
ended December 31, 1998. The strength of the U.S. Treasury market was one of the
leading stories of 1998, particularly in the later half of the year. In July,
the Asian financial crisis deepened, which caused a "flight-to-quality" and
increased demand for U.S. Treasury securities. Subsequently, financial crisis in
Russia and Latin America created pressure throughout the global capital markets.
Despite relatively strong domestic economic fundamentals, the widening global
economic crisis caused the Federal Reserve Board to lower the federal funds rate
by a total of 75 basis points during the third and fourth quarter. In addition,
the 30-year U.S. Treasury bond yield fell to a historical low of 4.72 percent in
early October before rising to 5.09 percent at the end of the year.
Economic Review
The U.S. economy continued to be characterized by solid growth and low
inflation with yet another strong showing in the fourth quarter. Real gross
domestic product (GDP) was expected to grow by 3.8 percent for 1998. This growth
was supported by increases in nonfarm productivity, a strong housing market, low
unemployment, and rising incomes. Mixed signals are emerging, however, as key
economic indicators such as capacity utilization, industrial production, and
orders for capital goods are beginning to show weakness. Further problems have
occurred as our trade deficit has doubled from $8 billion per month in November,
1997 to approximately $15 billion per month by the end of 1998, as exports to
Canada, Brazil, and Central America have fallen by as much as 20 percent during
the past year.
Market Overview
The Lehman Brothers Aggregate Index returned 8.69 percent for the year
ended December 31, 1998. For the same 12-month period, the U.S. Treasury sector
returned 10.03 percent. Compared to U.S. Treasuries, all domestic fixed-income
sectors underperformed in 1998. The corporate bond sector, which returned 8.57
percent, fared the worst in terms of relative performance as the global economic
uncertainty raised questions about the sustainability of U.S. corporate profits.
Other sector total returns included 8.85 percent for U.S. government agency
securities, 7.76 percent for asset-backed securities, and 6.96 percent for
mortgage-backed securities.
Outlook
The current economic expansion has lasted approximately 94 months,
making it the longest peacetime expansion on record. The Federal Reserve now
faces a formidable task as it attempts to monitor the global liquidity crunch
while keeping the domestic economy on track. The recent reductions in the fed
funds rate appear to be adequate to achieve the delicate balance between
preserving stable growth and providing liquidity to the global markets to avoid
financial crisis.
1
Continued on page 2
<PAGE>
Active Core Fund -Portfolio Strategy and Overview
As of December 31, 1998, the Fund had a duration of 4.52 years, which
was comparable to the 4.49-year duration of the Fund's benchmark, the Lehman
Brothers Aggregate Bond Index. The Lehman Brothers Aggregate Index is a
broad-based index that reflects the general performance of the U.S.
investment-grade, fixed-rate bond market, including government and corporate
securities, agency mortgage pass-through securities, and asset-backed
securities. The index does not reflect any commissions or sales charges that
would be paid by an investor purchasing the securities it represents.
During the period, we reduced our weighting in mortgage-backed
securities as interest rates declined. The sharp drop in interest rates caused
mortgages with coupons above 7 percent to experience historically high
prepayments as investors opted to refinance in the lower interest rate
environment. In addition, we reduced reinvestment risk by purchasing lower
coupon mortgage securities with slower prepayment profiles. We intend to monitor
this sector and look for opportunities to increase our weighting during the
coming months.
We added to our weighting in the corporate bond sector during the
fourth quarter as larger yield premiums more adequately compensated investors.
The sector weighting moved from an underweight position to a neutral market
position. We continue to monitor this sector for relative value opportunities.
Our largest sector weighting increase was in asset-backed securities.
We increased our weighting in that sector by 10 percent as we saw a significant
increase in the yield premiums offered to investors of those securities.
The Active Core Fund generated a total return of 4.60 percent for the
six-month period and 8.45 percent for the 12-month period ended December 31,
1998.
Limited Duration Fund -Portfolio Strategy and Overview
As of December 31, 1998, the Fund had a duration of 1.6 years, which
was comparable to the 1.6-year duration of the Fund's benchmark, the Lehman
Brothers 1- to 3-Year Government Bond Index. The Lehman Brothers 1- to 3-Year
Government Index is a broad-based index that reflects the general performance of
Treasury bonds and U.S. agency debt issues, including publicly issued debt of
U.S. government agencies, quasi-federal corporations, and corporate and foreign
debt guaranteed by the U.S. government. The index does not reflect any
commissions or sales charges that would be paid by an investor purchasing the
securities it represents.
The short end of the U.S. Treasury yield curve benefited from the
increased demand for short-term U.S. Treasury securities as well as from the Fed
rate cuts. The 2-year Treasury note yield declined from 5.64 percent to 4.53
percent during the year. We have maintained and intend to continue to maintain a
portfolio composed of modest positions diversified among various sectors.
The Limited Duration Fund generated a total return of 3.73 percent for
the six-month period and 6.65 percent for the 12-month period ended December 31,
1998.
2
Continued on page 3
<PAGE>
Summary
We believe 1999 will continue to present challenges for fixed-income
portfolios. We expect that we will continue to meet these challenges through
appropriate risk management and our disciplined investment style. The balance of
the report provides additional details about the funds. We appreciate your
investment in the Explorer Trust Funds and your confidence in our institutional
asset management team.
Sincerely,
/S/ Edward A. Treichel
Edward A. Treichel
Director of Institutional Asset Management
3
<PAGE>
Putting Your Fund's Performance in Perspective
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment performance at regular intervals. A
comparison of your Fund's performance to an applicable benchmark can:
o Illustrate the market environment in which your Fund is being managed.
o Reflect the impact of favorable market trends or difficult market
conditions.
o Help you evaluate how your Fund's management team has responded to
opportunities and challenges.
The following graph compares your Fund's performance to that of Lehman
Brothers Aggregate Bond Index over time. This index is a broad-based,
statistical composite that does not include any commissions or sales charges
that would be paid by an investor purchasing the securities it represents.
Growth of a Hypothetical $10,000 Investment
Explorer Institutional Active Core Fund vs. the Lehman Brothers
Aggregate Bond Index (April 23, 1996, through December 31, 1998)
[Line Chart]
EXLORER FUND
Active Core
LB Aggregate Bond Index
Month Index Fund
Apr-96 $ 10,000.00 $ 10,000.00
Apr-96 $ 9,944.00 $ 9,967.00
May-96 $ 9,924.11 $ 9,950.00
Jun-96 $ 10,057.10 $ 10,061 00
Jul-96 $ 10,084.25 $ 10,080.00
Aug-96 $ 10,067.1l $ 10,040.00
Sep-96 $ 10,242.27 $ 10,214.00
Oct-96 $ 10,469.65 $ 10,432.00
Nov-96 $ 10,648.68 $ 10,610.00
Dec-96 $ 10,549.65 $ 10,520.00
Jan-97 $ 10,582.35 $ 10,545.00
Feb-97 $ 10,608.81 $ 10,566.00
Mar-97 $ 10,491.05 $ 10,455.00
Apr-97 $ 10,648.42 $ 10,595.00
May-97 $ 10,749.58 $ 10,684.00
Jun-97 $ 10,877.50 $ 10,793.00
Jul-97 $ 11,171.19 $ 11,086.00
Aug-97 $ 11,076.24 $ 10,990.00
Sep-97 $ l1,240.16 $ 11,142.00
Oct-97 $ 11,403.15 $ 11,309.00
Nov-97 $ 11,455.60 $ 11,343.00
Dee-97 $ 11,571.30 $ 11,459.00
Jan-98 $ 11,719.41 $ 11,618.00
Feb-98 $ 11,710.04 $ 11,603.00
Mar-98 $ 11,749.85 $ 11,637.00
Apr-98 $ 11,810.95 $ 11,691.00
May-98 $ 11,923.16 $ 11,791.00
Jun-98 $ 12,024.50 $ 11,881.00
Jul-98 $ 12,049.76 $ 11,914.00
Aug-98 $ 12,246.17 $ 12,110.00
Sep-98 $ 12,532.73 $ 12,400.00
Oct-98 $ 12,466.30 $ 12,351.00
Nov-98 $ 12,537.36 $ 12,394.00
Dec-98 $ 12,574.97 $ 12,428.00
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
<PAGE>
Putting Your Fund's Performance in Perspective
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment performance at regular intervals. A
comparison of your Fund's performance to an applicable benchmark can:
o Illustrate the market environment in which your Fund is being managed.
o Reflect the impact of favorable market trends or difficult market
conditions.
o Help you evaluate how your Fund's management team has responded to
opportunities and challenges.
The following graph compares your Fund's performance to that of Lehman
Brothers 1- to 3-year Government Bond Index over time. This index is a
broad-based, statistical composite that does not include any commissions or
sales charges that would be paid by an investor purchasing the securities it
represents.
Growth of a Hypothetical $10,000 Investment
Explorer Institutional Limited Duration Fund vs. the Lehman
Brothers 1- to 3-year Government Bond Index (April 23, 1996, through
December 31, 1998)
Explorer Fund
Limited Duration
LB l-to 3-year Government Bond Index
Month Index Fund
Apr-96 $ 10,000.00 $ 10,000.00
Apr-96 $ 10,000.00 $ 9,997.00
May-96 $ 10,032.02 $ 9,993.00
Jun-96 $ 10,105.26 $ 10,071.00
Jul-96 $ 10,144.67 $ 10,109.00
Aug-96 $ 10,182.20 $ 10,117.00
Sep-96 $ 10,274.86 $ 10,215.00
Oct-96 $ 10,390.97 $ 10,337.00
Nov-96 $ 10,467.86 $ 10,426.00
Dee-96 $ 10,469.95 $ 10,414.00
Jan-97 $ 10,520.21 $ 10,454.00
Feb-97 $ 10.545.48 $ 10,480.00
Mar-97 $ 10,537.02 $ 10,458.00
Apr-97 $ 10,623.42 $ 10,551.00
May-97 $ 10,697.79 $ 10,614.00
Jun-97 $ 10,771.60 $ 10,686.00
Jul-97 $ 10,889.01 $ 10,802.00
Aug-97 $ 10,899.90 $ 10,811.00
Sep-97 $ 10,982.74 $ 10,893.00
Oct-97 $ 11,064.01 $ 10,956.00
Nov-97 $ 11,091.67 $ 10,996.00
Dec-97 $ 11,165.99 $ 11,069.00
Jan-98 $ 11,273.18 $ 11,166.00
Feb-98 $ 11,283.33 $ 11,176.00
Mar-98 $ 11,327.33 $ 11,217.00
Apr-98 $ 11,381.70 $ 11,266.00
May-98 $ 11,442.03 $ 11,331.00
Jun-98 $ 11,501.52 $ 11,382.00
Jul-98 $ 11,555.58 $ 11,433.00
Aug-98 $ 11.696.58 $ 11,554.00
Sep-98 $ 11,854.46 $ 11,720.00
Oct-98 $ 11,912.55 $ 11,759.00
Nov-98 $ 11,900.64 $ 11,776.00
Dec-98 $ 11,945,86 $ 11,806.00
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
<PAGE>
EXPLORER INSTITUTIONAL ACTIVE CORE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------------------------
Asset-Backed Securities 15.4%
<S> <C> <C> <C> <C>
$125 American Express Credit Account Master Trust 5.900% 04/15/04 $ 128,378
75 American Express Credit Account Master Trust 6.400 04/15/05 78,330
100 Citibank Credit Card Master Trust 5.800 02/07/05 101,400
200 CoMed Transitional Funding Trust 5.390 06/25/05 200,822
100 Equicredit Funding Trust 6.855 10/15/28 102,514
140 First NBC Credit Card Master Trust 6.150 09/15/04 144,280
150 First USA Credit Card Master Trust 6.420 03/17/05 155,586
100 Green Tree Financial Corp. 6.330 11/01/29 102,440
75 Household Affinity Credit Card 5.600 05/15/02 75,513
100 MBNA Credit Card Master Trust 5.250 02/15/06 99,637
100 Nationsbank Credit Card Master Trust 6.000 12/15/05 102,523
175 Premier Auto Trust 5.820 02/06/02 176,916
100 Standard Credit Card Master Trust 5.950 10/07/04 102,005
250 Toyota Auto Lease Trust 6.350 04/26/04 253,888
---------
Total Asset-Backed Securities 1,824,232
---------
Corporate Bonds 21.2%
Aerospace/Defense 1.0%
115 McDonnell Douglas Corp. 6.875 11/01/06 121,732
---------
Consumer Services 0.7%
75 Hertz Corp. 7.000 07/01/04 78,153
---------
Finance 7.8%
100 American Express Credit Corp. 6.500 08/01/00 101,713
50 Ameritech Capital Funding Corp. 6.150 01/15/08 51,907
70 BankAmerica Corp. 6.250 04/01/08 72,112
125 BancOne Corp. 7.000 03/25/02 130,479
20 Capital One Bank 6.375 02/15/03 19,567
75 Chase Manhattan Corp. 7.125 06/15/09 82,097
50 Citigroup, Inc. 6.875 02/15/2098 49,958
100 Commercial Credit Group, Inc. 6.625 11/15/06 105,000
150 Deere (John) Capital Corp. 5.350 10/23/01 149,172
60 Finova Capital Corp. 6.150 03/31/03 60,134
100 First Union Corp. 6.400 04/01/08 104,935
---------
927,074
---------
Raw Materials/Processing Industries 4.2%
75 Du Pont (E. I.) de Nemours & Co. 6.750 09/01/07 82,202
60 Goodyear Tire Rubber Co. 6.375 03/15/08 60,923
100 Nalco Chemical Co. 6.250 05/15/08 102,108
150 Tyson Foods, Inc. 7.000 05/01/18 151,727
100 Union Pacific Resources Group, Inc. 7.000 10/15/06 99,238
---------
496,198
---------
Retail 0.7%
25 Nordstrom, Inc. 6.950 03/15/28 26,324
50 Sears Roebuck Acceptance Corp. 7.000 06/15/07 53,607
---------
79,931
---------
<PAGE>
<CAPTION>
Corporate Bonds (Continued)
Telecommunications 3.1%
<S> <C> <C> <C> <C>
$ 100 AT&T Corp. 7.750% 03/01/07 $115,654
50 GTE North, Inc. 6.730 02/15/28 52,916
100 MCI Communications Corp. 6.500 04/15/10 105,709
100 Sprint Capital Corp. 6.125 11/15/08 102,165
---------
376,444
---------
Transportation 0.9%
100 CSX Corp. 7.450 05/01/07 109,050
---------
Utilities 2.8%
15 Florida Power & Light Co. 7.050 12/01/26 15,875
25 Florida Power Corp. 6.750 02/01/28 26,348
100 Pacific Gas & Electric Co. 6.250 08/01/03 103,456
125 PacifiCorp 6.375 05/15/08 130,165
50 Wisconsin Electric Power Co. 6.625 11/15/06 53,787
---------
329,631
---------
Total Corporate Bonds 21.2% 2,518,213
---------
United States Government Agency Obligations 36.2%
100 Federal Home Loan Banks 5.905 12/23/02 103,013
300 Federal Home Loan Banks 5.690 06/19/03 307,299
665 Federal Home Loan Mortgage Corp. 5.630 01/10/03 677,316
121 Federal Home Loan Mortgage Corp. Gold
30 Year Pool #C00602 6.000 02/01/28 119,394
60 Federal Home Loan Mortgage Corp. Gold
Convertible 15 Year Pool #G10270 8.500 09/01/09 62,439
76 Federal Home Loan Mortgage Corp. Gold
Convertible 15 Year Pool #G10592 6.500 10/01/11 77,480
100 Federal National Mortgage Association
Medium Term Note 5.280 03/01/99 100,117
80 Federal National Mortgage Association
Medium Term Note 6.800 04/08/02 84,272
100 Federal National Mortgage Association
Medium Term Note 6.520 07/11/07 108,026
100 Federal National Mortgage Association PAC 7.000 10/25/09 103,084
230 Federal National Mortgage Association PAC 6.500 04/18/20 230,283
114 Federal National Mortgage Association Pool
#250649 6.500 07/01/11 115,076
110 Federal National Mortgage Association Pool
#124561 7.500 11/01/22 113,459
147 Federal National Mortgage Association Pool
#303828 6.500 04/01/26 148,343
130 Federal National Mortgage Association Pool
#250569 6.000 05/01/26 128,288
177 Federal National Mortgage Association Pool
#429249 7.000 05/01/28 180,199
75 Government National Mortgage Association
Platinum 15 Year Pool #780419 7.500 12/15/09 77,628
100 Government National Mortgage Association
Platinum Pool #780440 8.500 11/15/17 107,613
48 Government National Mortgage Association Pool
#780157 9.500 08/15/22 52,370
588 Government National Mortgage Association Pools 6.500 04/15/26 - 04/15/28 593,509
322 Government National Mortgage Association Pool
#462630 7.000 04/15/28 331,494
440 Tennessee Valley Authority 6.375 06/15/05 465,181
---------
Total United States Government Agency Obligations 4,285,883
---------
<PAGE>
<CAPTION>
United States Treasury Obligations 22.6%
<S> <C> <C> <C> <C>
$ 85 United States Treasury Bonds 8.125% 08/15/19 $113,497
555 United States Treasury Notes 6.000 08/15/00 566,871
1,325 United States Treasury Notes 5.875 11/30/01 1,370,964
1,695 United States Treasury STRIPS (a) * 05/15/15 - 05/15/18 634,258
---------
Total United States Treasury Obligations 2,685,590
---------
Total Long-Term Investments 95.4%
(Cost $10,970,743) 11,313,918
Short-Term Investments 3.9%
(Cost $461,779) 461,779
----------
Total Investments 99.3%
(Cost $11,432,522) 11,775,697
Other Assets in Excess of Liabilities 0.7% 78,080
----------
Net Assets 100.0% $ 11,853,777
==========
</TABLE>
*Zero coupon bond
(a) U.S. Treasury STRIPS (Separate Trading of Registered Interest and
Principal Securities) are securities issued by the U.S. Treasury
Department which evidence ownership in either the bond principal or
interest payments. These securities are used by the Fund to manage the
portfolio's duration.
The following table summarizes the portfolio composition at December 31, 1998,
based upon the higher of the quality rating issued by Standard & Poor's or
Moody's.
Portfolio Composition by Credit Quality **
U.S. Government and Government Agency Obligations 61.6%
AAA 15.2
AA 8.7
A 10.6
BBB 3.0
NR 0.9
-------
100.0%
=======
** As a Percentage of Long-Term Investments
<PAGE>
EXPLORER INSTITUTIONAL ACTIVE CORE FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Total Investments (Cost $11,432,522) $ 11,775,697
Cash 361
Interest Receivable 110,700
Unamortized Organizational Costs 22,269
----------
Total Assets 11,909,027
----------
LIABILITIES:
Payables:
Distributor and Affiliates 18,336
Income and Capital Gain Distributions 490
Accrued Expenses 21,873
Trustees' Deferred Compensation and Retirement Plans 14,551
----------
Total Liabilities 55,250
----------
NET ASSETS $ 11,853,777
==========
NET ASSETS CONSIST OF:
Capital $ 11,512,187
Net Unrealized Appreciation 343,175
Accumulated Net Realized Gain 3,824
Accumulated Distributions in Excess of Net Investment Income (5,409)
----------
NET ASSETS $ 11,853,777
==========
Net Asset Value Per Share (Based on net assets of $11,853,777
and 1,143,960 shares of beneficial interest issued and outstanding) $ 10.36
==========
</TABLE>
<PAGE>
EXPLORER INSTITUTIONAL ACTIVE CORE FUND
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
INVESTMENT INCOME:
Interest $ 655,893
---------
EXPENSES:
Investment Advisory Fee 33,025
Legal 20,593
Audit 16,728
Custody 15,534
Shareholder Services 15,065
Accounting 14,419
Trustees' Fees and Expenses 13,188
Amortization of Organizational Costs 9,596
Shareholder Reports 6,113
Other 1,988
---------
Total Expenses 146,249
Less: Fees Waived and Expenses Reimbursed
($33,025 and $61,914, respectively) 94,939
Credits Earned on Cash Balances 7,272
---------
Net Expenses 44,038
---------
NET INVESTMENT INCOME $ 611,855
=========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 58,523
---------
Unrealized Appreciation/Depreciation:
Beginning of the Period 153,237
End of the Period 343,175
---------
Net Unrealized Appreciation During the Period 189,938
---------
NET REALIZED AND UNREALIZED GAIN $ 248,461
=========
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 860,316
=========
<PAGE>
<TABLE>
<CAPTION>
EXPLORER INSTITUTIONAL ACTIVE CORE FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1998 and 1997
Year Ended Year Ended
December 31, 1998 December 31, 1997
FROM INVESTMENT ACTIVITIES:
<S> <C> <C>
Operations:
Net Investment Income $ 611,855 $ 387,370
Net Realized Gain 58,523 97,464
Net Unrealized Appreciation During the Period 189,938 71,773
---------------- ----------------
Change in Net Assets from Operations 860,316 556,607
---------------- ----------------
Distributions from Net Investment Income (611,855) (387,370)
Distributions in Excess of Net Investment Income (4) (29)
---------------- ----------------
Distributions from and in Excess of
Net Investment Income (611,859) (387,399)
Distributions from Net Realized Gain (81,810) (77,231)
---------------- ----------------
Total Distributions (693,669) (464,630)
---------------- ----------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES 166,647 91,977
---------------- ----------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold 7,055,143 1,850,000
Net Asset Value of Shares Issued Through
Dividend Reinvestment 690,436 451,896
Cost of Shares Repurchased (996,722) (3,095,946)
---------------- ----------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 6,748,857 (794,050)
---------------- ----------------
TOTAL INCREASE/DECREASE IN NET ASSETS 6,915,504 (702,073)
NET ASSETS:
Beginning of the Period 4,938,273 5,640,346
---------------- ----------------
End of the Period (Including accumulated
distributions in excess of net investment
income of $5,409 and $3,598, respectively) $ 11,853,777 $ 4,938,273
================= ================
</TABLE>
<PAGE>
EXPLORER INSTITUTIONAL ACTIVE CORE FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
April 23, 1996
Year Year (Commencement
Ended Ended of Investment
December 31, December 31, Operations) to
1998 1997 December 31, 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 10.171 $ 10.085 $ 10.000
------------ ------------- -------------
Net Investment Income 0.579 0.626 0.409
Net Realized and Unrealized Gain 0.258 0.249 0.095
------------ ------------- -------------
Total from Investment Operations 0.837 0.875 0.504
------------ ------------- -------------
Less:
Distributions from and in Excess
of Net Investment Income 0.574 0.626 0.409
Distributions from Net Realized Gain 0.072 0.163 0.010
------------ ------------- -------------
Total Distributions 0.646 0.789 0.419
------------ ------------- -------------
Net Asset Value, End of the Period $ 10.362 $ 10.171 $ 10.085
============ ============= =============
Total Return * 8.45% 8.93% 5.20%**
Net Assets at End of the Period
(In millions) $11.9 $4.9 $5.6
Ratio of Expenses to Average Net
Assets* (a) 0.47% 0.60% 0.40%
Ratio of Net Investment Income to
Average Net Assets* 5.56% 6.19% 5.98%
Portfolio Turnover 79% 109% 84%**
*If certain expenses had not been assumed by Van Kampen, total return
would have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets (a) 1.33% 2.01% 1.81%
Ratio of Net Investment Income to
Average Net Assets 4.70% 4.78% 4.57%
</TABLE>
** Non-Annualized
(a) The Ratios of Expenses to Average Net Assets do not reflect
credits earned on overnight cash balances. If these credits
were reflected as a reduction of expenses, the ratios would
decrease by .07% and .20% for the periods ended December 31,
1998, and December 31, 1997, respectively.
<PAGE>
<TABLE>
<CAPTION>
EXPLORER INSTITUTIONAL LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
Description Market Value
<S> <C> <C> <C> <C>
Asset-Backed Securities 6.6%
$ 30 American Express Credit Account Master Trust 6.400% 04/15/05 $ 31,332
10 CoMed Transitional Funding Trust 5.390 06/25/05 10,041
10 Equicredit Funding Trust 6.855 10/15/28 10,251
10 First NBC Credit Card Master Trust 6.150 09/15/04 10,306
15 First USA Credit Card Master Trust 6.420 03/17/05 15,559
30 Household Affinity Credit Card 5.600 05/15/02 30,205
30 MBNA Credit Card Master Trust 6.600 11/15/04 31,315
10 Nationsbank Credit Card Master Trust 6.000 12/15/05 10,252
10 Standard Credit Card Master Trust 5.950 10/07/04 10,200
20 Toyota Auto Lease Trust 6.350 04/26/04 20,311
----------
Total Asset-Backed Securities 179,772
----------
Corporate Bonds 20.6%
Finance 12.9%
150 American Express Credit Corp. 6.500 08/01/00 152,570
25 Deere (John) Capital Corp. 5.350 10/23/01 24,862
175 Ford Motor Credit Co. 5.750 01/25/01 176,323
----------
353,755
----------
Raw Materials/Processing Industries 5.8%
150 Du Pont (E. I.) de Nemours & Co. 6.750 10/15/02 157,542
----------
Utilities 1.9%
50 Pacific Gas & Electric Co. 6.250 08/01/03 51,728
----------
Total Corporate Bonds 563,025
----------
United States Government Agency Obligations 8.6%
100 Federal Home Loan Banks 5.690 06/19/03 102,433
100 Federal National Mortgage Association
Medium Term Note 5.280 03/01/99 100,117
30 Federal National Mortgage Association
Medium Term Note 6.800 04/08/02 31,602
----------
Total United States Government Agency Obligations 234,152
----------
United States Treasury Obligations 34.1%
385 United States Treasury Notes 5.875 11/15/99 - 11/30/01 394,124
325 United States Treasury Notes 6.750 04/30/00 333,645
100 United States Treasury Notes 6.250 02/15/03 105,820
120 United States Treasury STRIPS (a) * 05/15/03 97,940
----------
Total United States Treasury Obligations 931,529
----------
Total Long-Term Investments 69.9%
(Cost $1,866,782) 1,908,478
<PAGE>
<CAPTION>
<S> <C>
Short-Term Investments 30.4%
Federal Home Loan Banks Discount Note ($831,000 par, maturing 01/04/99, yielding 4.36%)
(Cost $830,603) $ 830,603
----------
Total Investments 100.3%
(Cost $2,697,385) 2,739,081
Liabilities in Excess of Other Assets (0.3)% (7,879)
----------
Net Assets 100.0% $2,731,202
==========
*Zero coupon bond
(a) U.S. Treasury STRIPS (Separate Trading of Registered Interest and
Principal Securities) are securities issued by the U.S. Treasury
Department which evidence ownership in either the bond principal or
interest payments. These securities are used by the Fund to manage the
portfolio's duration.
</TABLE>
The following table summarizes the portfolio composition at December 31, 1998,
based upon the higher of the quality rating issued by Standard & Poor's or
Moody's.
Portfolio Composition by Credit Quality **
U.S. Government and Government Agency Obligations 61.1%
AAA 9.4
AA 19.0
A 10.5
----------
100.0%
----------
** As a Percentage of Long-Term Investments
<PAGE>
EXPLORER INSTITUTIONAL LIMITED DURATION FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
ASSETS:
Total Investments (Cost $2,697,385) $ 2,739,081
Cash 977
Interest Receivable 23,055
Unamortized Organizational Expenses 22,737
----------
Total Assets 2,785,850
----------
LIABILITIES:
Payables:
Distributor and Affiliates 16,781
Income and Capital Gain Distributions 2,457
Accrued Expenses 20,859
Trustees' Deferred Compensation and Retirement Plans 14,551
----------
Total Liabilities 54,648
----------
NET ASSETS $ 2,731,202
==========
NET ASSETS CONSIST OF:
Capital $ 2,699,369
Net Unrealized Appreciation 41,696
Accumulated Net Realized Gain 683
Accumulated Distributions in Excess
of Net Investment Income (10,546)
----------
NET ASSETS $ 2,731,202
==========
Net Asset Value Per Share (Based on net assets
of $2,731,202 and 279,454 shares of
beneficial interest issued and outstanding) $ 9.77
==========
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
INVESTMENT INCOME:
Interest $ 196,423
---------
EXPENSES:
Legal 20,457
Audit 19,628
Shareholder Services 16,822
Trustees' Fees and Expenses 13,188
Custody 13,026
Accounting 12,315
Investment Advisory Fee 10,092
Amortization of Organizational Costs 9,797
Shareholder Reports 6,113
Registration and Filing Fees 1,263
Other 760
---------
Total Expenses 123,461
Less: Fees Waived and Expenses Reimbursed
($10,092 and $92,743, respectively) 102,835
Credits Earned on Cash Balances 7,170
---------
Net Expenses 13,456
---------
NET INVESTMENT INCOME $ 182,967
=========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 91,400
---------
Unrealized Appreciation/Depreciation:
Beginning of the Period 79,004
End of the Period 41,696
---------
Net Unrealized Depreciation During the Period (37,308)
---------
NET REALIZED AND UNREALIZED GAIN $ 54,092
=========
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 237,059
=========
<PAGE>
EXPLORER INSTITUTIONAL LIMITED DURATION FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1998 and 1997
Year Year
Ended Ended
December 31, December 31,
1998 1997
------------ ------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income $ 182,967 $ 471,577
Net Realized Gain 91,400 25,119
Net Unrealized Appreciation/Depreciation
During the Period (37,308) 872
------------ ------------
Change in Net Assets from Operations 237,059 497,568
------------ ------------
Distributions from Net Investment Income (182,967) (471,577)
Distributions in Excess
of Net Investment Income (9,017) (62)
------------ ------------
Distributions from and in Excess
of Net Investment Income
(191,984) (471,639)
DIstributions from Net Realized Gain (90,705) (14,667)
------------ ------------
Total Distributions (282,689) (486,306)
------------ ------------
NET CHANGE IN NET ASSETS
FROM INVESTMENT ACTIVITIES (45,630) 11,262
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold 410,033 705,000
Net Asset Value of Shares Issued
Through Dividend Reinvestment 262,640 483,346
Cost of Shares Repurchased (6,127,927) (2,720,306)
------------ ------------
NET CHANGE IN NET ASSETS
FROM CAPITAL TRANSACTIONS (5,455,254) (1,531,960)
------------ ------------
TOTAL DECREASE IN NET ASSETS (5,500,884) (1,520,698)
NET ASSETS:
Beginning of the Period 8,232,086 9,752,784
------------ ------------
End of the Period (Including accumulated
distributions in excess of net investment
income of $10,546 and $1,541 respectively) $ 2,731,202 $ 8,232,086
============ ============
<PAGE>
EXPLORER INSTITUTIONAL LIMITED DURATION FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the period indicated.
<TABLE>
<CAPTION>
April 23, 1996
Year Year (Commencement
Ended Ended of Investment
December 31, December 31, Operations) to
1998 1997 December 31, 1996
----------- ------------ -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 10.037 $ 10.019 $ 10.000
Net Investment Income 0.514 0.574 0.386
Net Realized and Unrealized Gain 0.143 0.036 0.019
----------- ------------ -----------------
Total from Investment Operations 0.657 0.610 0.405
----------- ------------ -----------------
Less:
Distributions from and in Excess
of Net Investment Income 0.583 0.574 0.386
Distributions from Net Realized Gain 0.338 0.018 -0-
----------- ------------ -----------------
Total Distributions 0.921 0.592 0.386
----------- ------------ -----------------
Net Asset Value, End of the Period $ 9.773 $ 10.037 $ 10.019
=========== ============ =================
Total Return* 6.65% 6.29% 4.14%**
Net Assets at End of the Period (In millions) $2.7 $8.2 $9.8
Ratio of Expenses to Average Net Assets* (a) 0.61% 0.56% 0.40%
Ratio of Net Investment Income
to Average Net Assets* 5.44% 5.74% 5.68%
Portfolio Turnover 76% 41% 16%**
*If certain expenses had not been assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets (a) 3.67% 1.86% 1.40%
Ratio of Net Investment Income
to Average Net Assets 2.38% 4.59% 4.68%
</TABLE>
** Non-Annualized
(a) The ratios of Expenses to Average Net Assets do not reflect credits
earned on overnight cash balances. If these credits were reflected as a
reduction of expenses, the ratios would decrease by .21% and .16%, for
the periods ended December 31, 1998, and December 31, 1997,
respectively.
<PAGE>
THE EXPLORER INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. Significant Accounting Policies
The Explorer Institutional Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company comprised of two funds: Explorer Institutional Active Core Fund ("Active
Core Fund") and Explorer Institutional Limited Duration Fund ("Limited Duration
Fund"). Each Fund is accounted for as a separate entity.
Active Core Fund's investment objective is to provide an enhanced level of
total return as compared to an investment in an unmanaged portfolio consisting
primarily of investment grade intermediate- and long-term income securities of
U.S. issuers. Limited Duration Fund's investment objective is to provide an
enhanced level of total return as compared to an investment in an unmanaged
portfolio consisting primarily of investment grade short-and intermediate-term
income securities of U.S. issuers, consistent with the preservation of capital.
The Funds commenced investment operations on April 23, 1996.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. 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.
A. Security Valuation - Investments are stated at value using market quotations,
indications of value obtained from an independent pricing service, or, if such
valuations are not available, estimates obtained from yield data relating to
instruments or securities with similar characteristics in accordance with
procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. Security Transactions - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Funds may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Funds will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At December 31, 1998, there were no
when issued or delayed delivery purchase commitments.
C. Investment Income - Interest income is recorded on an accrual basis. Bond
discount and premium are amortized over the life of each applicable security.
D. Organizational Costs - The Funds will reimburse Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Funds' organization in the amount of $47,718 for Active Core Fund and $48,676
for Limited Duration Fund. These costs are being amortized on a straight line
basis over the 60 month period ending April 22, 2001. Van Kampen Management Inc.
(the "Adviser") has agreed that in the event any of the initial shares of the
Funds originally purchased by Van Kampen are redeemed during the amortization
period, the Funds will be reimbursed for any unamortized organizational costs in
the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.
E. Federal Income Taxes - It is the Funds' policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and gains to
its shareholders. Therefore, no provision for federal income taxes is required.
Net realized gains differ for financial reporting purposes as a result of
the deferral for tax purposes of losses resulting from wash sales.
The following table presents the identified cost of investments at
December 31, 1998 for federal income tax purposes with the associated gross
unrealized appreciation, gross unrealized depreciation and net unrealized
appreciation/depreciation.
Active Core Limited
Fund Duration Fund
Cost of long-term and
Short-term investments $11,432,522 $2,697,526
============== ==================
Aggregate gross
Unrealized appreciation $348,703 $42,381
Aggregate gross
Unrealized depreciation 5,528 826
-------------- ------------------
Net unrealized
Appreciation $343,175 $41,555
============== ==================
F. Distribution of Income and Gains - Each Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains which are included in ordinary income for
tax purposes.
Due to inherent differences in the recognition of interest income under
generally accepted accounting principles and federal income tax purposes, the
amount of distributable net investment income may differ between book and
federal income tax purposes for a particular period. These differences are
temporary in nature, but may result in book basis distributions in excess of net
investment income for certain periods.
<PAGE>
Permanent book and tax basis differences relating to the recognition of
gains/losses on paydowns of mortgage pool obligations totaling $1,807 for Active
Core Fund and $12 for Limited Duration Fund have been reclassified from
accumulated net realized gain/loss to accumulated distributions in excess of net
investment income.
For federal income tax purposes, the following information is furnished
with respect to the distributions paid by the Trust during its taxable year
ended December 31, 1998. Active Core designated and paid $46,940 as a 20% rate
gain distribution for the fiscal year 1998. Limited Duration designated and paid
$69,954 as a 20% rate gain distribution for the fiscal year 1998. In January
1999, the Funds provided tax information to shareholders for the 1998 calendar
year.
G. Expense Reductions - During the year ended December 31, 1998, the custody
fees for Active Core Fund and Limited Duration Fund were reduced by $7,272 and
$7,170, respectively, as a result of credits earned on overnight cash balances.
2. Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of each of the Fund's Investment Advisory Agreements, the
Adviser will provide investment advice and facilities to the Funds for an annual
fee payable monthly as follows:
Average Net Assets % Per Annum
-------------------- -------------
First $1 billion .300 of 1%
Over $1 billion .250 of 1%
Van Kampen has agreed to waive fees or reimburse certain expenses such
that the net expenses of each Fund will not exceed 0.40% of average net assets.
Should the assets of a particular fund increase sufficiently to allow for
reimbursement of prior year's excess expenses to Van Kampen without causing that
funds' expense ratio to exceed 0.40%, that fund may be required to reimburse Van
Kampen for fees waived and/or expenses assumed within the previous four years.
Therefore, these cumulative expense subsidies totaling $232,264 and $254,369 for
Active Core Fund and Limited Duration Fund, respectively, could become
liabilities of each respective Fund at a future date.
For the year ended December 31, 1998, Active Core Fund and Limited
Duration Fund recognized expenses of approximately $200 and $100, respectively,
representing legal expenses provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Funds, of which a trustee of the Funds is an
affiliated person. All of this expense has been assumed by Van Kampen.
For the year ended December 31, 1998, Active Core Fund and Limited
Duration Fund recognized expenses of approximately $14,400 and $12,300,
respectively, representing Van Kampen's cost of providing accounting services to
the Funds. All of this expense has been assumed by Van Kampen.
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Funds. For the year ended
December 31, 1998, Active Core Fund and Limited Duration Fund recognized
expenses of approximately $14,600 each. Beginning in 1998, the transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based on competitive market benchmarks. All of this expense has been assumed
by Van Kampen.
Certain officers and trustees of the Funds are also officers and
directors of Van Kampen. The Funds do not compensate their officers or trustees
who are officers of Van Kampen.
The Funds provide deferred compensation and retirement plans for their
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Funds. The maximum
annual benefit per trustee under the plan is $2,500.
At December 31, 1998, Van Kampen owned 5,000 shares of each of the
Funds.
3. Capital Transactions
There are an unlimited number of shares of beneficial interest of each
Fund without par value authorized. For the year ended December 31, 1998,
transactions in common shares were as follows:
Active Limited
Core Duration Fund
Fund
--------------- ---------------
Beginning Shares 485,509 820,195
Shares Sold 688,318 40,755
Shares Issued
through 67,072 26,390
Dividend Reinvestment
Shares Repurchased (96,939) (607,886)
=============== ===============
Ending Shares 1,143,960 279,454
=============== ===============
Capital at 12/31/98 $11,512,187 $2,699,369
=============== ===============
For the period ended December 31, 1997, transactions in common shares were as
follows:
Active Limited
Core Fund Duration Fund
-------------- ----------------
Beginning Shares 559,271 973,451
Shares Sold 183,711 70,461
Shares Issued through
Dividend Reinvestment 44,685 48,307
Shares Repurchased (302,158) (272,024)
-------------- ----------------
Ending Shares 485,509 820,195
============== ================
Capital at 12/31/97 $4,763,330 $8,154,623
============== ================
<PAGE>
4. Investment Transactions
During the period, the cost of purchases and proceeds from sales of investments,
including principal paydowns and excluding forward commitment transactions and
short-term investments, were $14,388,882 and $8,146,061 for Active Core Fund and
$1,916,798 and $6,724,456 for Limited Duration Fund.
5. Mortgage Backed Securities
A Mortgage Backed Security (MBS) is a pass-through security created by pooling
mortgages and selling participations in the principal and interest payments
received from borrowers. Most of these securities are guaranteed by federally
sponsored agencies, such as Government National Mortgage Association (GNMA),
Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage
Corporation (FHLMC).
A Collateralized Mortgage Obligation (CMO) is a bond which is
collateralized by a pool of MBS's. These MBS pools are divided into classes or
tranches with each class having its own characteristics. For instance, a PAC
(Planned Amortization Class) is a specific class of mortgages which over its
life will generally have the most stable cash flows and the lowest prepayment
risk.
<PAGE>
THE EXPLORER INSTITUTIONAL TRUST
Board of Trustees Investment Adviser
David C. Arch
Rod Dammeyer Van Kampen Management Inc.
Howard J Kerr 1 Parkview Plaza
Dennis J. McDonnell* - Chairman P.O. Box 5555
Steven Muller Oakbrook Terrace, Illinois 60181-5555
Theodore A. Myers
Don G. Powell* Distributor
Hugo F. Sonnenschein
Wayne W. Whalen* Van Kampen Funds Inc.
1 Parkview Plaza
Officers P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Dennis J. McDonnell*
President Shareholder Servicing Agent
Ronald A. Nyberg* Van Kampen Investor Services Inc.
Vice President and Secretary P.O. Box 418256
Kansas City, Missouri 64141-9256
John L. Sullivan*
Vice President, Treasurer, Custodian
and Chief Financial Officer
State Street Bank and Trust Company
Curtis W. Morell* 225 Franklin Street
Vice President and Chief
Accounting Officer P.O. Box 1713
Boston, Massachusetts 02105
Tanya M. Loden*
Controller Legal Counsel
Peter W. Hegel* Skadden, Arps, Slate,
Meagher & Flom (Illinois)
Michael P. Kamradt* 333 West Wacker Drive
John M. McCareins* Chicago, Illinois 60606
Edward A. Treichel*
Edward C. Wood, III* Independent Accountants
Vice Presidents
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment
Company Act of 1940.
(C) Van Kampen Funds Inc., 1999
All Rights Reserved.
SM denotes a service mark of Van Kampen Funds Inc.
<PAGE>
Year 2000 Readiness Disclosure
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest which, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> ACTIVE CORE
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 11,432,522
<INVESTMENTS-AT-VALUE> 11,775,697
<RECEIVABLES> 110,700
<ASSETS-OTHER> 22,269
<OTHER-ITEMS-ASSETS> 361
<TOTAL-ASSETS> 11,909,027
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55,250
<TOTAL-LIABILITIES> 55,250
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,512,187
<SHARES-COMMON-STOCK> 1,143,960
<SHARES-COMMON-PRIOR> 485,509
<ACCUMULATED-NII-CURRENT> (5,409)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,824
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 343,175
<NET-ASSETS> 11,853,777
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 655,893
<OTHER-INCOME> 0
<EXPENSES-NET> (44,038)
<NET-INVESTMENT-INCOME> 611,855
<REALIZED-GAINS-CURRENT> 58,523
<APPREC-INCREASE-CURRENT> 189,938
<NET-CHANGE-FROM-OPS> 860,316
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (611,859)
<DISTRIBUTIONS-OF-GAINS> (81,810)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 688,318
<NUMBER-OF-SHARES-REDEEMED> (96,939)
<SHARES-REINVESTED> 67,072
<NET-CHANGE-IN-ASSETS> 6,915,504
<ACCUMULATED-NII-PRIOR> (3,598)
<ACCUMULATED-GAINS-PRIOR> 25,304
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33,025
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 146,249
<AVERAGE-NET-ASSETS> 11,009,415
<PER-SHARE-NAV-BEGIN> 10.171
<PER-SHARE-NII> 0.579
<PER-SHARE-GAIN-APPREC> 0.258
<PER-SHARE-DIVIDEND> (0.574)
<PER-SHARE-DISTRIBUTIONS> (0.072)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.362
<EXPENSE-RATIO> 0.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 21
<NAME> LIMITED DURATION
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 2,697,385
<INVESTMENTS-AT-VALUE> 2,739,081
<RECEIVABLES> 23,055
<ASSETS-OTHER> 22,737
<OTHER-ITEMS-ASSETS> 977
<TOTAL-ASSETS> 2,785,850
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,648
<TOTAL-LIABILITIES> 54,648
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,699,369
<SHARES-COMMON-STOCK> 279,454
<SHARES-COMMON-PRIOR> 820,195
<ACCUMULATED-NII-CURRENT> (10,546)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 683
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 41,696
<NET-ASSETS> 2,731,202
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 196,423
<OTHER-INCOME> 0
<EXPENSES-NET> (13,456)
<NET-INVESTMENT-INCOME> 182,967
<REALIZED-GAINS-CURRENT> 91,400
<APPREC-INCREASE-CURRENT> (37,308)
<NET-CHANGE-FROM-OPS> 237,059
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (191,984)
<DISTRIBUTIONS-OF-GAINS> (90,705)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40,755
<NUMBER-OF-SHARES-REDEEMED> (607,886)
<SHARES-REINVESTED> 26,390
<NET-CHANGE-IN-ASSETS> (5,500,884)
<ACCUMULATED-NII-PRIOR> (1,541)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,092
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 123,461
<AVERAGE-NET-ASSETS> 3,364,067
<PER-SHARE-NAV-BEGIN> 10.037
<PER-SHARE-NII> 0.514
<PER-SHARE-GAIN-APPREC> 0.143
<PER-SHARE-DIVIDEND> (0.583)
<PER-SHARE-DISTRIBUTIONS> (0.338)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.773
<EXPENSE-RATIO> 0.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
