[1838 GRAPHIC]
INVESTMENT ADVISORS FUNDS
----------------------
INTERNATIONAL EQUITY FUND
SMALL CAP EQUITY FUND
FIXED INCOME FUND
SEMI-ANNUAL REPORT
APRIL 30, 1999
<PAGE>
[1838 GRAPHIC] INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
FELLOW SHAREHOLDER:
Global equity markets have come a long way during the six months ended April 30,
1999, the period of this semi-annual report. When we last reported about the
period ended October 31, 1998, the capital markets were still in shock over the
severity of the economic and financial crisis in Asia, the debt default of
Russia and the near collapse of the large US hedge fund Long-Term Capital
Management. However, we also reported an improvement in the competitive
situation of some Asian companies and the beneficial effect of stabilizing
currencies and much reduced interest rates in that region. Most participants in
financial markets have by now regained confidence in Asia resuming economic
growth, Russian debt losses have appeared to be manageable for Western banks and
Long-Term Capital Management was bailed out by those same banks. Three interest
rate cuts by the Federal Reserve Bank definitely have helped to turn around the
gloomy mood and the equity markets quickly recovered lost ground, led by the
markets and industries that had been hit the most. Thus the EAFE index showed a
net total return of 15.3% during the six months ending April 30, 1999, and your
Fund's net asset value per share -- taking into account the distributions made
in December 1998 -- rose by 17.4%. Emerging markets, and the Asian markets,
which are part of the EAFE index, Japan, Hong Kong and Singapore, led the
gainers. The European markets were subdued after a buoyant start of the year.
The primary reasons for the subsequent cooling of European equity prices were
the unexpected weakness of the Euro (which started January 1, 1999) and the
pronounced slowdown in economic growth in Germany and Italy.
Listed below are the total returns in dollars for the six months ended April 30,
1999:
<TABLE>
<CAPTION>
MCSI Fund Allocation
Stock Market Index 4/30/99
------------------ ---------------
<S> <C> <C>
EAFE................................................ 15.3% 90.9%
Europe.............................................. 10.0% 66.1%
Japan............................................... 26.5% 20.2%
Hong Kong........................................... 25.6% 3.5%
Emerging markets.................................... 34.3% 6.7%
1838 International Equity Fund...................... 17.4%*
* Past performance is not predictive of future
results.
</TABLE>
With confidence returning in an improving global economic outlook, another
change in the equity markets became apparent: the switch from "growth and
defensive" stocks into "value and cyclical" stocks. Previously, while the
economic news outside of the US (and Continental Europe) was predominantly
downbeat, investors paid a premium for companies that were able to grow earnings
even under slow growth conditions. Companies in industries, such as
pharmaceuticals and telecommunications consequently received the highest
valuations. With rising expectations of more widely spread earnings growth as a
result of global economic growth, companies in industries such as energy, base
materials and capital goods producers, previously lowly valued, came into the
spotlight. This is illustrated by the performance of MSCI value and growth
indices for the EAFE markets during January through April 1999, with the
1
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[1838 GRAPHIC] INTERNATIONAL EQUITY FUND
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former appreciating 11.4%, the latter down by 0.4%! Quite a change from 1998,
when the EAFE growth index (up 22.2%) easily beat the EAFE value index (up
17.7%). Clearly this trend, if continued, presents a challenge to your Fund,
since part of our investment policy is to emphasize earnings visibility and
predictability, which are difficult to find in cyclical industries. However, as
we share the optimistic global economic outlook -- especially for a resumption
of growth in the year 2000 -- we have increased our exposure to global leaders
in all industries that should benefit from this development.
Sincerely,
/s/ Hans van den Berg
-------------------------------------
Hans van den Berg
Vice President & Portfolio Manager
2
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[1838 GRAPHIC] INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
--------- -----------
<S> <C> <C> <C>
COMMON STOCK -- 98.18%
AUSTRALIA -- 1.10%
News Corp. Ltd-ADR Multimedia........................ 25,000 $ 815,625
-----------
CHINA -- 0.92%
China Telecom Co., Ltd. ADR* Telecommunications/Equipment...... 15,000 686,250
-----------
FINLAND -- 3.41%
Nokia Corp. ADR Telecommunications/Equipment...... 30,000 2,225,625
Raisio Group plc Food-Misc/Diversified............. 34,000 311,151
-----------
2,536,776
-----------
FRANCE -- 8.28%
Accor * Lodging........................... 2,500 659,913
AXA, Inc. * Insurance......................... 8,500 1,098,921
Cap Gemini IT Services....................... 7,000 1,071,625
Lafarge * Cement............................ 7,500 730,004
Schlumberger, Ltd. * Exploration Services.............. 10,000 638,750
Societe Generale * Banking & Financial Services...... 4,834 866,356
Total S.A. (B Shares) * Oil & Gas Exploration............. 8,000 1,096,911
-----------
6,162,480
-----------
GERMANY -- 7.73%
Adidas AG * Sportswear........................ 8,500 838,130
Daimler * Automobile Manufacturer........... 7,135 700,568
Deutsche Lufthansa AG * Airines........................... 35,000 810,939
Henkel KGAA * Chemicals......................... 12,000 825,222
Mannesmann AG * Machinery Manufacturer............ 10,000 1,318,240
SAP ADR * Software.......................... 20,000 627,500
Volkswagen AG, Preferred * Automobile Manufacturer........... 15,000 630,819
-----------
5,751,418
-----------
HONG KONG -- 2.59%
Cathay Pacific Airways Ltd. Airlines.......................... 500,000 803,205
HSBC Holdings Financial Services................ 22,225 825,870
Huaneng Power Int'l., Inc. ADR * Electric Utilities................ 22,000 295,625
-----------
1,924,700
-----------
INDONESIA -- 0.00%
PT Bank Int'l. * Banking........................... 510 15
-----------
</TABLE>
See notes to financial statements.
3
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[1838 GRAPHIC] INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 1999
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<TABLE>
<CAPTION>
Value
Shares (Note 2)
--------- -----------
<S> <C> <C> <C>
IRELAND -- 1.93%
Allied Irish Banks Banking........................... 8,000 $ 768,000
Elan Corp. plc ADR * Pharmaceuticals................... 13,000 669,500
-----------
1,437,500
-----------
ITALY -- 4.02%
ENI * Oil Refining...................... 10,000 653,750
Telecom Italia Mobil SPA * Telecommunications................ 200,000 1,193,398
Unicredito Italiano SPA * Banking........................... 225,000 1,142,615
-----------
2,989,763
-----------
JAPAN -- 19.51%
Advantest Corporation Electronics....................... 12,900 986,727
Aiful Corp. Consumer Finance.................. 13,200 1,080,451
CSK Corp. Computer Services................. 30,000 894,762
Eisai Co., Ltd. Medical-Drugs..................... 40,000 748,986
Fujitsu Computer Manufacturer............. 8,000 978,542
Honda Motor Co. Automobile Manufacturer........... 22,000 969,493
Hoya Corp. Glass Manufacturer................ 15,000 785,430
KAO Corp. Household Goods................... 80,000 2,030,809
Kita Kyushu Coca Cola Bottling Co. * Food-Misc./Diversified............ 23,000 1,121,469
Minebea Co. Electronic Components............. 100,000 967,650
NTT Mobile Telecommunications Inc. Telephone......................... 20 1,172,909
Takeda Chemicals Industries Pharmaceuticals................... 30,000 1,304,443
TDK Corp. Electronic Components............. 8,000 605,221
Toshiba Corp. Electronics....................... 130,000 871,304
-----------
14,518,196
-----------
MEXICO -- 1.19%
Panamerican Beverages, Inc. Food-Misc./Diversified............ 40,000 887,500
-----------
NETHERLANDS -- 6.92%
Akzo N.V. Chemicals......................... 16,000 723,656
ING Groep, N.V. * Financial Services................ 20,198 1,245,814
Koninklijke Phillips Electronics - ADR Electronics....................... 10,000 853,750
The Unilever Group Consumer Products................. 15,000 974,063
Vedior CVA * Human Resources................... 24,000 540,838
Verenigde Nederlandse Uitgeversbedrijen Multimedia........................ 20,000 810,411
-----------
5,148,532
-----------
</TABLE>
See notes to financial statements.
4
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[1838 GRAPHIC] INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 1999
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<TABLE>
<CAPTION>
Value
Shares (Note 2)
--------- -----------
<S> <C> <C> <C>
PORTUGAL -- 0.51%
BPI-SGPS S.A. * Banking........................... 14,000 $ 377,698
-----------
SOUTH KOREA -- 4.27%
Korea Electric Power Corp. Electric Utilities................ 27,000 776,970
Pohang Iron & Steel Company, Ltd. ADR Iron & Steel Manufacturer......... 14,000 1,273,704
SK Telecom Co., Ltd. Telecommunication Equipment....... 1,000 1,130,241
-----------
3,180,915
-----------
SPAIN -- 3.30%
Banco Argentina S.A. * Banking........................... 30,000 706,517
Endesa S.A. Electric Utilities................ 22,000 485,375
Telefonica de Espana ADR Telecommunication Equipment....... 9,079 1,265,386
-----------
2,457,278
-----------
SWEDEN -- 3.63%
ABB AB A Shares Electronics....................... 70,000 977,909
Electrolux AB Series Consumer Products................. 57,000 1,158,867
Nordbanken Holdings AB Banking........................... 90,000 567,128
-----------
2,703,904
-----------
SWITZERLAND -- 7.17%
Adecco SA Business Services................. 2,500 1,262,726
Nestle SA ADR * Food Processing................... 11,300 1,039,600
Roche Holding AG Genuss Pharmaceuticals................... 90 1,060,493
United Bank of Switzerland Banking........................... 2,000 680,460
Zurich Allied AG * Insurance......................... 2,000 1,291,297
-----------
5,334,576
-----------
TAIWAN -- 1.17%
Taiwan Semiconductor Manufacturing Co.*
Electronics....................... 36,250 870,000
-----------
UNITED KINGDOM -- 20.53%
Barratt plc Building & Construction........... 200,000 1,170,504
Bass plc Brewery........................... 60,000 950,089
British Aerospace plc Aerospace......................... 173,158 1,297,083
British Petroleum Co. plc Oil............................... 65,529 1,242,852
Glaxo Wellcome plc Pharmaceuticals................... 16,000 932,000
Kingfisher plc Retail Department Stores.......... 112,431 1,685,288
Lloyds TSB Group plc Banking........................... 56,324 907,296
Misys plc Computer Services................. 125,253 1,176,705
</TABLE>
See notes to financial statements.
5
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[1838 GRAPHIC] INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 1999
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<TABLE>
<CAPTION>
Value
Shares (Note 2)
--------- -----------
<S> <C> <C> <C>
UNITED KINGDOM -- (CONTINUED)
Pearson plc Multimedia........................ 40,000 $ 849,461
Prudential Corp. plc Insurance......................... 65,000 928,796
Rentokil Initial plc Environmental Services............ 100,000 584,044
Royal Bank of Scotland Group plc Banking........................... 50,000 1,168,894
Thompson Travel Group ORD Travel............................ 200,000 410,562
TI Group plc Machinery Manufacturer............ 108,000 898,116
Vodafone Group plc ADR Telecommunications................ 6,000 1,080,000
-----------
15,281,690
-----------
TOTAL COMMON STOCK (Cost $57,182,299) -- 98.18%.............................. $73,064,816
SHORT-TERM INVESTMENTS -- 2.21%
A.I.M. Liquid Asset Portfolio
(Cost $1,645,711)........................................................ 1,645,711 1,645,711
-----------
TOTAL INVESTMENTS (Cost $58,828,010)+ -- 100.39%............................. $74,710,527
OTHER ASSETS AND LIABILITIES, NET -- 0.39%................................... (290,189)
-----------
NET ASSETS -- 100.00%........................................................ $74,420,338
===========
</TABLE>
* Non-income producing security.
+ The cost for federal income tax purposes was $58,828,010. The aggregate gross
unrealized appreciation for all securities in which there was an excess of
fair value over tax cost was $18,052,320 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
fair value was $2,169,803.
ADR -- American Depository Receipt
See notes to financial statements.
6
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[1838 GRAPHIC] SMALL CAP EQUITY FUND
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TO THE SHAREHOLDER:
For the first half of the fiscal 1999 year ended April 30, the 1838 Small Cap
Equity Fund achieved a 4.39% return, which compared unfavorably with a 15.16%
return for the small cap benchmark, the Russell 2000 Index. This six month
period captured the largest part of the rebound from the sharp stock market
correction during the summer of 1998. The rally during that period was sparked
by increasing confidence in the prospects for an eventual end to worldwide
economic instability and was triggered by the U.S. Federal Reserve Bank's
signal, through three discount rate cuts, that it would provide ample liquidity
to the then struggling world markets.
The strong move in the U.S. equity markets was led by a resumption of the old
leadership sectors, namely, the premium priced, large corporations which are
familiar to all investors and the broadly-defined technology group, which
includes the newly-minted internet industry. Given the nature of the market
leadership, the Fund was operating at a competitive disadvantage. Recall that
the 1838 Small Cap Equity Fund is designed to invest in small cap companies
whose price to (trailing twelve months) earnings ratio rank them in the lowest
40% of the small company universe, but whose prospects for growth are above
average. In short, the portfolio buys stocks that we perceive to be cheap and
inefficiently priced. Since the beginning of calendar year 1999, within the
Russell 2000 Index those companies whose consensus earnings are forecasted to be
losses have seen their stocks appreciate 28% year to date. In marked contrast,
however, those companies producing earnings (not necessarily even selling at low
price to earnings ratios) have demonstrated a negative 0.4% return during the
same calendar period ending April 30. An investment style designed to exploit
hidden fundamental values at reasonable prices, such as that utilized for the
1838 Small Cap Equity Fund, is very likely to lag in such an investment climate.
Within the portfolio the best performing stocks were found in the broad consumer
sector, and included Claire's Stores, Ames Department Stores, MGM Grand, and
BJ's Wholesale Club. The greatest negative impact resided in the nursing home
industry, where we believed that the long term needs for an aging society would
intersect positively with an implied social contract with the Federal
government. That assumption, at least on a short-term basis, proved to be wrong,
and the error cost the portfolio about 2% in absolute performance.
Looking forward we continue to be struck by the contrasting valuations in the
various market segments. At the end of April the 1838 Small Cap Equity Fund
compared favorably on summary characteristics with two popular market indices:
<TABLE>
<CAPTION>
Price/ Price/ 5 yr. EPS Debt/
Earnings Book Growth* ROE** Capital
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1838 Small Cap...................... 13.1x 2.4x 21.0% 20.1% 31.9%
Russell 2000........................ 15.8x 3.9x 15.2% 13.5% 38.7%
S&P 500............................. 31.6x 7.4x 15.4% 22.8% 46.0%
</TABLE>
* Historical
** Past performance is not predictive of future results
7
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[1838 GRAPHIC] SMALL CAP EQUITY FUND
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The chart shown before makes it clear that the 1838 Small Cap Equity Fund
continues to adhere to a highly disciplined value style which we believe has
demonstrated an ability, over time, to provide significant value-added benefits
to its investors. Toward the end of April 1999 the stock market, startled by
hint of inflation, began to question the high valuations of long duration assets
(including growth equities) and started to broaden its interest to include
other, less expensive equities. Should this continue for the balance of fiscal
1999, the Fund should be well positioned to benefit with improved performance.
Sincerely,
/s/ Edwin B. Powell
-----------------------------------
Edwin B. Powell
Vice President & Portfolio Manager
8
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[1838 GRAPHIC] SMALL CAP EQUITY FUND (UNAUDITED)
SCHEDULE OF INVESTMENTS APRIL 30, 1999
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<TABLE>
<CAPTION>
Value
Shares (Note 2)
--------- ------------
<S> <C> <C>
COMMON STOCK -- 94.97%
BASIC MATERIALS & MANUFACTURING -- 22.44%
Electronic Materials & Manufacturing -- 3.33%
Belden, Inc............................................. 13,100 $ 252,175
DII Group, Inc.......................................... 13,600 421,600
General Cable Corp...................................... 25,650 381,544
Universal Electronics, Inc.............................. 28,700 577,587
------------
1,632,906
------------
Homebuilders -- 3.15%
D. R. Horton, Inc....................................... 40,800 787,950
Engle Homes............................................. 20,200 234,825
Toll Brothers, Inc.*.................................... 24,300 519,413
------------
1,542,188
------------
Misc. Containers & Packaging -- 3.25%
IVEX Packaging Corp..................................... 17,800 350,438
Shorewood Packaging Corp.*.............................. 37,650 743,588
US Can Corp.*........................................... 29,365 497,370
------------
1,591,396
------------
Misc. Manufacturing Industries -- 2.48%
Holophane Corp.......................................... 19,300 498,181
Koala Corp.*............................................ 6,100 152,500
Velcro Industries N.V................................... 47,800 561,650
------------
1,212,331
------------
Printing & Publishing -- 4.81%
ADVO, Inc.*............................................. 31,200 616,200
Valassis Communications, Inc.*.......................... 21,100 1,181,600
World Color Press, Inc.*................................ 21,700 554,706
------------
2,352,506
------------
Retail Building Materials -- 1.07%
Building and Materials Holding Corp*.................... 41,015 522,941
------------
Steel & Aluminum Products -- 2.33%
Wolverine Tube, Inc..................................... 30,575 772,019
Quanex Corp............................................. 14,300 365,544
------------
1,137,563
------------
Textiles & Apparel -- 2.02%
Gerber Childrenswear*................................... 24,850 192,588
Tropical Sportswear International*...................... 36,200 794,138
------------
986,726
------------
TOTAL BASIC MATERIALS AND MANUFACTURING............... 10,978,557
------------
</TABLE>
See notes to financial statements.
9
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[1838 GRAPHIC] SMALL CAP EQUITY FUND (UNAUDITED)
SCHEDULE OF INVESTMENTS -- CONTINUED APRIL 30, 1999
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<TABLE>
<CAPTION>
Value
Shares (Note 2)
--------- ------------
<S> <C> <C>
CONSUMER CYCLICALS -- 23.41%
Entertainment -- 3.40%
Carmike Cinemas, Inc*................................... 3,300 $ 71,156
Harrah's Entertainment Inc.*............................ 39,500 869,000
Sun International Hotels Ltd.*.......................... 17,100 723,544
------------
1,663,700
------------
Furniture, Fixtures & Appliances -- 3.37%
American Woodmark Corp.................................. 14,900 573,650
Furniture Brands International, Inc.*................... 33,000 827,063
Fedders Corp. Cl A...................................... 46,540 250,153
------------
1,650,866
------------
Office Products -- 0.73%
United Stationers, Inc.*................................ 21,000 358,313
------------
Restaurants -- 2.02%
O'Charley's Inc.*....................................... 28,300 394,431
Rare Hospitality Intl, Inc.*............................ 32,900 592,200
------------
986,631
------------
Retail Trade -- 13.89%
Ames Department Stores, Inc.*........................... 20,400 712,725
BJ's Wholesale Club, Inc.*.............................. 35,100 932,344
Central Garden & Pet Co................................. 33,200 464,800
Claire's Stores, Inc.................................... 25,000 828,125
Cole (Kenneth) Productions*............................. 14,400 397,800
Cole National Corp.*.................................... 21,700 336,350
Finish Line, Inc.*...................................... 38,100 573,881
Hastings Entertainment, Inc.*........................... 24,500 375,156
Jan Bell Marketing, Inc.*............................... 75,700 231,831
Jostens, Inc............................................ 20,500 439,469
Pier 1 Imports, Inc..................................... 78,500 578,938
Zale Corp.*............................................. 24,375 921,680
------------
6,793,099
------------
TOTAL CONSUMER CYCLICALS.............................. 11,452,609
------------
CONSUMER STAPLES -- 7.54%
Food & Beverage -- 5.70%
Fresh Delmonte Produce*................................. 30,400 478,800
Merkert American Corp.*................................. 16,700 160,738
Ruddick Corp............................................ 44,135 780,638
Smithfield Foods, Inc.*................................. 43,500 1,027,688
Sylvan, Inc. *.......................................... 32,480 341,040
------------
2,788,904
------------
</TABLE>
See notes to financial statements.
10
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[1838 GRAPHIC] SMALL CAP EQUITY FUND (UNAUDITED)
SCHEDULE OF INVESTMENTS -- CONTINUED APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
--------- ------------
<S> <C> <C>
Manufacturing & Distribution -- 1.84%
Block Drug Co., Inc..................................... 7,219 $ 253,556
Buckeye Technology, Inc.*............................... 44,480 644,960
------------
898,516
------------
TOTAL CONSUMER STAPLES................................ 3,687,420
------------
ENERGY -- 2.59%
Petroleum Services -- 2.59%
Cal Dive International*................................. 15,300 489,600
Seacor Smit, Inc.*...................................... 14,700 778,181
------------
TOTAL ENERGY.......................................... 1,267,781
------------
FINANCE & INSURANCE -- 18.37%
Commercial Finance -- 1.85%
Heller Financial, Inc................................... 33,300 903,263
------------
Insurance Providers & Services -- 11.00%
Allmerica Financial Corp................................ 9,100 521,544
ARM Financial Group, Inc. Cl A.......................... 22,700 314,963
CNA Surety Corp......................................... 37,000 499,500
E.W. Blanch Holdings, Inc............................... 9,570 563,434
Everest Re Holdings, Inc................................ 19,525 591,852
FPIC Insurance Group, Inc.*............................. 11,900 535,500
HCC Insurance Holdings, Inc............................. 23,800 502,775
Harleysville Group, Inc................................. 26,600 495,425
The Mony Group Inc.*.................................... 13,300 352,450
Penn Treaty American Corp.*............................. 16,000 449,000
Reliance Group Holdings, Inc............................ 32,100 240,750
State Auto Financial Corp............................... 30,100 304,763
Stirling Cooke Brown Holdings, Ltd...................... 2,600 10,725
------------
5,382,681
------------
Real Estate Investment Trusts -- 3.96%
Brandywine Realty Trust................................. 18,300 345,412
Burnham Pacific Properties, Inc......................... 27,500 316,249
Chelsea GCA Realty, Inc................................. 16,900 556,643
Healthcare Realty Trust, Inc............................ 15,300 333,731
Pacific Gulf Properties, Inc............................ 18,400 382,950
------------
1,934,985
------------
State & National Banks -- 1.56%
Dime Community Bancorp. Inc............................. 29,300 659,250
United Security Bancorporation*......................... 8,119 105,548
------------
764,798
------------
TOTAL FINANCE & INSURANCE............................. 8,985,727
------------
</TABLE>
See notes to financial statements.
11
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[1838 GRAPIC] SMALL CAP EQUITY FUND (UNAUDITED)
SCHEDULE OF INVESTMENTS -- CONTINUED APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
--------- ------------
<S> <C> <C>
HEALTHCARE -- 2.74%
Medical & Health Services -- 1.94%
Coventry Corp.*......................................... 40,500 $ 372,094
Trigon Healthcare, Inc.*................................ 18,100 574,675
------------
946,769
------------
Precision Instruments & Medical Supplies -- 0.80%
Del Global Technologies Corp.*.......................... 44,900 392,875
------------
TOTAL HEALTHCARE...................................... 1,339,644
------------
TECHNOLOGY -- 10.15%
Computer Services -- 2.04%
Black Box Corp.*........................................ 29,200 1,000,100
------------
Misc. Electrical Equipment & Manufacturing -- 3.99%
AVX Corp................................................ 46,300 911,531
Oak Industries, Inc.*................................... 24,890 1,039,158
------------
1,950,689
------------
Semiconductors -- 1.92%
Burr-Brown Corp.*....................................... 20,918 554,327
Lattice Semiconductor*.................................. 9,400 384,225
------------
938,552
------------
Software -- 2.20%
GT Interactive Software Corp.*.......................... 52,400 183,400
Symantec Corp.*......................................... 44,900 892,388
------------
1,075,788
------------
TOTAL TECHNOLOGY...................................... 4,965,129
------------
TRANSPORTATION -- 5.31%
Alaska Air Group, Inc.*................................. 7,500 330,468
America West Holdings Corp.*............................ 29,700 619,987
Indigo Aviation AB ADR*................................. 28,400 220,099
Rollins Truck Leasing Corp.............................. 69,150 717,430
Sea Containers, Ltd..................................... 22,200 709,012
------------
TOTAL TRANSPORTATION.................................. 2,596,996
------------
TRANSPORTATION EQUIPMENT -- 2.42%
Avondale Industries, Inc.*.............................. 14,600 449,862
Coachmen Industries, Inc................................ 27,700 522,837
Delco Remy International, Inc.*......................... 21,400 209,987
------------
TOTAL TRANSPORTATION EQUIPMENT........................ 1,182,686
------------
TOTAL COMMON STOCK (COST $44,267,270) -- 94.97%....... 46,456,549
------------
</TABLE>
See notes to financial statements.
12
<PAGE>
[1838 GRAPHIC] SMALL CAP EQUITY FUND (UNAUDITED)
SCHEDULE OF INVESTMENTS -- CONTINUED APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
--------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 4.04%
SEI Daily Income Trust Prime Obligation
(Cost $1,977,388)...................................... 1,977,388 $ 1,977,388
------------
TOTAL INVESTMENTS** (COST $46,244,658)+ -- 99.01%........... $ 48,433,937
OTHER ASSETS AND LIABILITIES, NET -- 0.99%.................. 485,247
------------
NET ASSETS -- 100%.......................................... $ 48,919,184
============
</TABLE>
* Non-income producing security.
** On April 30, 1999 the Fund held 16,300 rights for IVEX Packaging Corp. and
25,045 rights for Marshall Industries. Both positions are determined to have
no market value.
+ The cost for federal income tax purposes was $46,244,658. The aggregate gross
unrealized appreciation for all securities in which there was an excess of
fair value over tax cost was $5,925,817 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
fair value was $3,736,538.
See notes to financial statements.
13
<PAGE>
[1838 GRAPHIC] FIXED INCOME FUND
- --------------------------------------------------------------------------------
TO THE SHAREHOLDER:
The first four months of activity in the fixed income markets during calendar
year 1999 could aptly be described as the mirror image of the last half of
calendar year 1998. The drivers of the "flight to quality" (which propelled
treasuries to 4.75% in the fall of 1998), international contagion, fears of
recession and illiquidity, quickly faded. Indeed, the U.S. economy proved
surprisingly strong in the first quarter, with GDP above 4%. This strength
quelled fears, causing investors to sell treasuries in an asset allocation shift
into stocks and the spread sectors (corporates, mortgages and asset-backeds) of
the fixed income markets. This shift led yields on long treasuries higher to
5.66% by April month end. While such a significant increase was generally
unanticipated by the market, the flow of monies to spread sectors buoyed
performance of the Fund due to an over weight in these sectors. In addition,
heavy new issue corporate supply was attractively priced and the Fund took
advantage of this opportunity through profitable trading activity. While yields
have increased in lock-step with stronger economic activity, the Fed has
recently changed its bias indicating a risk toward higher rates as well. While
we think there are factors which could slow economic activity over the balance
of 1999, the Fed's bias shift has led us to be more cautious with regard to our
duration stance. We expect to keep the duration of the Fund neutral to slightly
long the Lehman Aggregate Index (the "Index"). Our outlook on the economy
remains favorable, which should bode well for our over-weight in spread sectors.
Portfolio exposures as compared to the Index at April 30, 1999 were as follows:
<TABLE>
<CAPTION>
1838 Fixed Lehman
Income Fund Aggregate Index
----------- ---------------
<S> <C> <C>
Corporate Bonds.................................... 34% 22%
Mortgage-Backed.................................... 33% 32%
Asset-Backed....................................... 4% 1%
Agencies........................................... 13% 8%
Treasuries......................................... 16% 37%
</TABLE>
The total return for the 1838 Fixed Income Fund fiscal year to date through
April 30, 1999, was 1.06% versus 0.69% for the Index from inception to date
(September 1997 through April 1999), the Fund returned 10.29% versus the Index
at 9.91%.
Sincerely,
/s/ Clifford D. Corso
----------------------------------
Clifford D. Corso
Vice President & Portfolio Manager
14
<PAGE>
[1838 GRAPHIC] FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's/S&P Principal Value
Rating Amount (Note 2)
------------ ----------- ------------
<S> <C> <C> <C>
CORPORATE BONDS -- 33.78%
FINANCIAL -- 25.27%
Associates Corp. of N.A., 6.50%, 10/15/02............................... Aa3/AA- 1,800,000 $ 1,834,492
Citibank Credit Card Master Trust, 5.875%, 03/10/09..................... Aaa/AAA 2,410,000 2,335,338
FBS Capital I, Capital Securities, 8.09%, 11/15/26...................... A1/BBB+ 600,000 632,976
Ford Motor Credit Global, 7.20%, 06/15/07............................... A1/A 1,150,000 1,210,273
General MotorS Acceptance Corp., 5.35%, 12/07/01........................ A/A 2,800,000 2,780,736
Key Bank NA, 5.03%, 12/11/00............................................ Aa3/A 2,200,000 2,182,884
Keycorp Institutional Capital, 7.826%, 12/01/26......................... A1/BBB 1,400,000 1,436,345
Norwest Financial, Inc., 7.875%, 02/15/02............................... Aa3/A+ 1,400,000 1,477,951
Paine Webber Group, Inc., 5.83%, 01/25/01............................... Baa1/BBB+ 3,000,000 2,991,996
Salomon, Inc., 6.75%, 02/15/03.......................................... Aa3/A 1,000,000 1,025,685
Salomon, Inc., 6.75%, 08/15/03.......................................... Aa3/A 100,000 102,691
Suntrust Banks, Inc., 6.00%, 02/15/26................................... A2/A 1,500,000 1,476,930
Westdeutsche Landesbank, 6.05%, 01/15/09................................ Aa1/AA+ 1,930,000 1,874,763
------------
21,363,060
------------
INDUSTRIAL & MISCELLANEOUS -- 3.31%
Atlantic Richfield Co., 5.90%, 04/15/09................................. A2/A 1,640,000 1,608,840
Comed Transitional, 5.29%, 06/25/03..................................... Aaa/AAA 1,200,000 1,195,956
------------
2,804,796
------------
TELEPHONE & COMMUNICATIONS -- 5.20%
WorldCom, Inc., 6.40%, 08/15/05......................................... Baa2/BBB+ 2,000,000 2,011,228
Sprint Capital Corp., 6.875%, 11/15/28.................................. Baa1/BBB+ 2,450,000 2,382,017
------------
4,393,245
------------
TOTAL CORPORATE BONDS (COST $28,741,443)......................................................... 28,561,101
------------
MORTGAGE BACKED SECURITIES -- 33.30%
FHLMC CRA T-008, 7.00%, 01/15/19........................................ NR/NR 1,000,000 1,019,120
FHLMC Pool #C80342, 6.50%, 09/01/25..................................... NR/NR 1,277,678 1,273,014
FHLMC Pool #G10557, 6.50%, 07/01/11..................................... NR/NR 1,868,905 1,891,743
FNMA Pool #250890, 7.00%, 04/01/04...................................... NR/NR 1,368,294 1,377,701
FNMA Pool #303728, 6.00%, 01/01/11...................................... NR/NR 1,690,465 1,676,202
FNMA Pool #190275 , 8.00%, 11/01/26..................................... NR/NR 2,172,449 2,260,347
FNMA Pool #481429, 6.00%, 01/01/29...................................... NR/NR 2,013,137 1,952,824
FNMA Pool #487830, 6.00%, 03/01/29...................................... NR/NR 3,696,794 3,585,225
GNMA Pool #780374, 7.50%, 12/15/23...................................... NR/NR 1,140,810 1,178,377
GNMA Pool #2038, 8.50%, 07/20/25........................................ NR/NR 144,701 151,962
GNMA Pool #417239, 7.00%, 02/15/26...................................... NR/NR 2,072,370 2,105,424
GNMA Pool #780312, 6.00%, 01/15/26...................................... NR/NR 1,569,282 1,524,542
GNMA Pool #448178, 6.50%, 03/15/28...................................... NR/NR 195,526 194,464
GNMA Pool #462556, 6.50%, 03/15/28...................................... NR/NR 2,839,424 2,824,005
GNMA Pool #443623, 6.50%, 01/15/29...................................... NR/NR 2,013,896 2,002,416
GNMA Pool #491223, 7.00%, 03/15/29...................................... NR/NR 3,088,566 3,136,593
------------
TOTAL MORTGAGE BACKED SECURITIES (COST $28,045,546).............................................. 28,153,959
------------
</TABLE>
See notes to financial statements.
15
<PAGE>
[1838 GRAPHIC] FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's/S&P Principal Value
Rating Amount (Note 2)
U.S. GOVERNMENT AGENCIES -- 13.37% ------------ ----------- ------------
<S> <C> <C> <C>
FED FARM CREDIT BANK, 6.22%, 10/12/04................................... NR/NR 1,500,000 $ 1,532,060
FHLB, 4.79%, 12/14/01................................................... NR/NR 4,000,000 3,942,227
FNMA, 5.125%, 02/13/04.................................................. NR/NR 3,500,000 3,428,338
FNMA, 6.50%, 04/29/09................................................... NR/NR 2,400,000 2,404,500
------------
TOTAL U.S. GOVERNMENT AGENCIES (COST $11,391,158)................................................ 11,307,125
------------
U.S. TREASURY OBLIGATIONS -- 15.55%
U.S. Treasury Notes, 4.875%, 03/31/01................................... NR/NR 1,000,000 996,563
U.S. Treasury Notes, 6.25%, 04/30/01.................................... NR/NR 4,840,000 4,947,390
U.S. Treasury Notes, 4.75%, 02/15/04.................................... NR/NR 1,000,000 980,313
U.S. Treasury Notes, 4.75%, 11/15/08.................................... NR/NR 3,270,000 3,123,874
U.S. Treasury Notes, 5.25%, 11/15/28.................................... NR/NR 3,350,000 3,096,656
------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $13,263,444)............................................... 13,144,796
------------
MUNICIPAL BONDS -- 2.12%
Alameda Corridor Transportation Authority (MBIA), 6.60% 10/01/29
(Cost $1,894,822)..................................................... Aaa/AAA 1,900,000 1,788,813
------------
<CAPTION>
Shares
-----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 0.74%
SEI Daily Income Trust Prime Obligation
(Cost $622,901)....................................................... 622,901 622,901
------------
TOTAL INVESTMENTS (Cost $83,959,314)+ -- 98.86%........................................................ $ 83,578,695
OTHER ASSETS AND LIABILITIES, NET -- 1.14%............................................................. 961,423
------------
NET ASSETS -- 100%..................................................................................... $ 84,540,118
============
</TABLE>
+ The cost for federal income tax purposes was $83,959,314. The aggregate
gross unrealized appreciation for all securities in which there was an
excess of fair value over tax cost was $263,557 and aggregate gross
unrealized depreciation for all securities in which there was an excess
of tax cost over fair value was $644,176.
See notes to financial statements.
16
<PAGE>
[1838 GRAPHIC] INVESTMENT ADVISORS FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Small Cap Fixed Income
Equity Fund Equity Fund Fund
------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (identified cost $58,828,010,
$46,244,658, and $83,959,314 respectively) (Note 2)....... $74,710,527 $48,433,937 $83,578,695
Cash........................................................ -- 3,936 10,614
Receivables:
Dividends and interest.................................... 78,494 21,223 1,015,108
Foreign taxes recoverable................................. 85,810 -- --
Fund shares sold.......................................... 18,613 3,000 --
Investment securities sold................................ 475,908 504,501 7,725,516
Deferred organizational costs (Note 2)...................... 32,446 -- --
-----------------------------------------
Total assets.......................................... 75,401,798 48,966,597 92,329,933
-----------------------------------------
LIABILITIES:
Payables:
Due to adviser............................................ 45,251 28,758 19,430
Payable for investment securities purchased............... 888,044 -- 7,758,112
Accrued expenses.......................................... 48,165 18,655 12,273
-----------------------------------------
Total liabilities..................................... 981,460 47,413 7,789,815
-----------------------------------------
NET ASSETS.................................................. $74,420,338 $48,919,184 $84,540,118
=========================================
NET ASSETS CONSIST OF:
Common stock................................................ $ 5,614,775 $ 4,568,782 $ 8,371,499
Additional capital paid-in.................................. 52,912,904 45,990,051 76,633,630
Undistributed net investment income (loss).................. (22,124) (25,072) 145,663
Accumulated realized gain (loss) on investments............. 32,229 (3,803,856) (230,055)
Net unrealized appreciation (depreciation) on:
Investments............................................. 15,882,517 2,189,279 (380,619)
Translation of assets and liabilities in foreign
currencies............................................ 37 -- --
-----------------------------------------
NET ASSETS, for 5,614,775, 4,568,782, and 8,371,499 shares
of beneficial interest outstanding, respectively.......... $74,420,338 $48,919,184 $84,540,118
=========================================
Net Asset Value, offering and redemption price per share.... $ 13.25 $ 10.71 $ 10.10
=========================================
</TABLE>
See notes to financial statements.
17
<PAGE>
[1838 GRAPHIC] INVESTMENT ADVISORS FUNDS
STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Small Cap Fixed Income
Equity Fund Equity Fund Fund
------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest.................................................. $ 69,416 $ 41,291 $2,315,372
Dividends................................................. 346,693 154,564 --
Foreign taxes withheld.................................... (55,644) -- --
------------------------------------------
Total Investment Income................................. 360,465 195,855 2,315,372
------------------------------------------
EXPENSES:
Investment advisory fees (Note 4)........................... 246,869 161,775 195,016
Administration fee (Note 4)................................. 13,750 10,000 10,000
Accounting fee (Note 4)..................................... 12,500 8,750 8,750
Custodian fees.............................................. 24,421 5,678 2,854
Transfer agency fees........................................ 6,000 6,000 6,000
Directors' fees and expenses (Note 4)....................... 7,439 5,752 8,632
Audit fees.................................................. 8,850 5,850 5,850
Legal fees.................................................. 14,809 3,472 5,476
Registration fees........................................... 10,987 6,048 10,800
Reports to shareholders..................................... 7,200 5,614 7,977
Amortization of organizational costs (Note 2)............... 12,820 -- --
Other....................................................... 16,944 1,988 10,058
------------------------------------------
Total expenses before reimbursement......................... 382,589 220,927 271,413
Advisory fee waived (Note 4).......................... -- -- (15,224)
------------------------------------------
Total expenses, net................................... 382,589 220,927 256,189
------------------------------------------
Net investment (income) loss.............................. (22,124) (25,072) 2,059,183
------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments............................................. (105,207) (3,199,731) (158,772)
Foreign currency transactions........................... 140,404 -- --
Net unrealized appreciation (depreciation) during the
period on:
Investments............................................. 10,549,062 5,080,732 (1,198,051)
Translation of assets and liabilities in foreign
currencies............................................ (4,024) -- --
------------------------------------------
Net gain (loss) on investments and currency............. 10,580,235 1,881,001 (1,356,823)
------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $10,558,111 $ 1,855,929 $ 702,360
==========================================
</TABLE>
See notes to financial statements.
18
<PAGE>
[1838 GRAPHIC] INVESTMENT ADVISORS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Small Cap Fixed Income
Equity Fund Equity Fund Fund
------------------------------------------
<S> <C> <C> <C>
FOR THE PERIOD ENDED APRIL 30, 1999 (UNAUDITED)
INCREASE IN NET ASSETS
Operations:
Net investment income (loss).............................. $ (22,124) $ (25,072) $ 2,059,183
Net realized gain (loss) on:
Investments............................................. (105,207) (3,199,731) (158,772)
Foreign currency transactions........................... 140,404 -- --
Net unrealized appreciation (depreciation) during the
period on:
Investments............................................. 10,549,062 5,080,732 (1,198,051)
Translation of assets and liabilities in foreign
currencies............................................ (4,024) -- --
------------------------------------------
Net increase (decrease) in net assets resulting from
operations................................................ 10,558,111 1,855,929 702,360
------------------------------------------
Distributions to shareholders from:
Net investment income ($0, $0, and $0.248 per share,
respectively)......................................... -- -- (1,913,520)
Net realized gain ($0.875, $0, and $0 per share,
respectively)......................................... (4,289,721) -- --
------------------------------------------
Total Distributions......................................... (4,289,721) -- (1,913,520)
------------------------------------------
Increase in net assets from Fund share transactions
(Note 5).................................................. 10,277,043 8,430,355 14,027,984
------------------------------------------
Increase in net assets...................................... 16,545,433 10,286,284 12,816,824
NET ASSETS:
Beginning of period....................................... 57,874,905 38,632,900 71,723,294
------------------------------------------
End of period............................................. $74,420,338 $48,919,184 $84,540,118
==========================================
FOR THE YEAR ENDED OCTOBER 31, 1998
INCREASE IN NET ASSETS
Operations:
Net investment income (loss).............................. $ 55,124 $ (48,758) $ 3,187,767
Net realized gain (loss) on:
Investments............................................. 4,316,341 (684,440) (71,283)
Foreign currency transactions........................... (1,100,539) -- --
Net unrealized appreciation during the year on:
Investments............................................. 370,237 (6,586,969) 526,819
Translation of assets and liabilites in foreign
currencies............................................ 1,691 -- --
------------------------------------------
Net increase in net assets resulting from operations........ 3,642,854 (7,320,167) 3,643,303
------------------------------------------
Distributions to shareholders from:
Net investment income ($0.004, $0, and $0.592 per share,
respectively)......................................... (17,086) -- (3,369,397)
Return of capital ($0, $0, and $0.04 per share,
respectively.......................................... -- -- (236,732)
Net realized gain ($0.669, $0.948, and $0.021 per share,
respectively)......................................... (2,857,635) (2,137,768) (92,049)
------------------------------------------
Total Distributions......................................... (2,874,721) (2,137,768) (3,698,178)
------------------------------------------
Increase in net assets from Fund share transactions
(Note 5).................................................. 6,061,174 19,168,298 39,241,000
------------------------------------------
Increase in net assets...................................... 6,829,307 9,710,363 39,186,125
NET ASSETS:
Beginning of year......................................... 51,045,598 28,922,537 32,537,169
------------------------------------------
End of year............................................... $57,874,905 $38,632,900 $71,723,294
==========================================
</TABLE>
See notes to the financial statements.
19
<PAGE>
[1838 GRAPHIC] INVESTMENT ADVISORS FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following tables include selected data for a share outstanding throughout
each fiscal year or period and other performance information derived from the
financial statements. They should be read in conjunction with the financial
statements and notes thereto.
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
For the
Period Ended For the Fiscal Year or Period Ended October 31,
April 30, 1999 --------------------------------------------------
(Unaudited) 1998 1997 1996 1995+
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD....... $ 12.08 $ 11.99 $ 10.44 $ 9.61 $ 10.00
-----------------------------------------------------------------------------
INVESTMENT OPERATIONS:
Net investment income..................... 0.00 0.01 0.02 0.07 0.02
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions............................ 2.05 0.75 1.57 0.80 (0.41)
-----------------------------------------------------------------------------
Total from investment operations...... 2.05 0.76 1.59 0.87 (0.39)
-----------------------------------------------------------------------------
Distributions:
From net investment income................ -- -- (0.04) (0.04) --
From net realized capital gain............ (0.88) (0.67) -- -- --
-----------------------------------------------------------------------------
Total distributions................... (0.88) (0.67) (0.04) (0.04) 0.00
-----------------------------------------------------------------------------
NET ASSET VALUE - END OF PERIOD............. $ 13.25 $ 12.08 $ 11.99 $ 10.44 $ 9.61
=============================================================================
TOTAL RETURN................................ 17.40%** 6.90% 15.23% 9.11% (3.90)%**
Ratios (to average net assets)/Supplemental
Data:
Expenses (net of fee waivers)........... 1.10%* 1.13% 1.25% 1.25% 1.25%*
Expenses (excluding fee waivers)........ N/A N/A 1.44% 1.80% 2.60%*
Net investment income................... (0.07)%* 0.10% 0.28% 0.70% 1.02%*
Portfolio turnover rate..................... 18.53% 166.77% 92.33% 59.11% 42.21%*
Net assets, end of period (in 000's)........ $74,420 $57,875 $51,046 $41,209 $16,764
</TABLE>
+ The International Equity Fund commenced operations on August 3, 1995.
* Annualized.
** Total return not annualized.
See notes to financial statements.
20
<PAGE>
[1838 GRAPHIC] INVESTMENT ADVISORS FUNDS
FINANCIAL HIGHLIGHTS -- CONTINUED
- --------------------------------------------------------------------------------
SMALL CAP EQUITY FUND
<TABLE>
<CAPTION>
For the For the Fiscal Year or
Period Ended Period Ended October 31,
April 30, 1999 ---------------------------------
(Unaudited) 1998 1997 1996+
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD................... $ 10.26 $ 13.08 $ 9.57 $ 10.00
------------------------------------------------------------
INVESTMENT OPERATIONS:
Net investment loss................................... (0.01) (0.01) (0.02) (0.02)
Net realized and unrealized gain (loss) on
investments......................................... 0.46 (1.86) 3.62 (0.41)
------------------------------------------------------------
Total from investment operations.................. 0.45 (1.87) 3.60 (0.43)
------------------------------------------------------------
Distributions:
From net investment income............................ -- -- -- --
From net realized capital gains....................... -- (0.95) (0.09) --
------------------------------------------------------------
Total distributions............................... 0.00 (0.95) (0.09) --
------------------------------------------------------------
NET ASSET VALUE - END OF PERIOD......................... $ 10.71 $ 10.26 $ 13.08 $ 9.57
============================================================
TOTAL RETURN............................................ 4.39%** (15.33)% 37.81% (4.30)%**
Ratios (to average net assets)/Supplemental Data:
Expenses (net of fee waivers)......................... 1.02%* 1.10% 1.25% 1.25%*
Expenses (excluding fee waivers)...................... N/A N/A 1.84% 4.63%*
Net investment loss................................... (0.12)%* (0.13)% (0.27)% (0.52)%*
Portfolio turnover rate................................. 29.21% 42.64% 67.66% 94.38%
Net assets, end of period (in 000's).................... $48,919 $38,633 $28,923 $ 5,428
</TABLE>
+ The Small Cap Equity Fund commenced operations on June 17, 1996.
* Annualized.
** Total return not annualized.
See notes to financial statements.
21
<PAGE>
[1838 GRAPHIC] INVESTMENT ADVISORS FUNDS
FINANCIAL HIGHLIGHTS -- CONTINUED
- --------------------------------------------------------------------------------
FIXED INCOME FUND
<TABLE>
<CAPTION>
For the For the Fiscal Year or
Period Ended Period Ended October 31,
April 30, 1999 --------------------------
(Unaudited) 1998 1997+
----------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD....................... $ 10.24 $ 10.27 $ 10.00
----------------------------------------------
INVESTMENT OPERATIONS:
Net investment income..................................... 0.27 0.54 0.06
Net realized and unrealized gain (loss) on investments.... (0.16) 0.08 0.21
----------------------------------------------
Total from investment operations...................... 0.11 0.62 0.27
----------------------------------------------
Distributions:
From net investment income................................ (0.25) (0.59) --
Return of capital......................................... -- (0.04) --
From net realized capital gains........................... -- (0.02) --
----------------------------------------------
Total distributions................................... (0.25) (0.65) --
----------------------------------------------
NET ASSET VALUE - END OF PERIOD............................. $ 10.10 $ 10.24 $ 10.27
==============================================
TOTAL RETURN................................................ 1.06%** 6.26% 2.70%**
Ratios (to average net assets)/Supplemental Data:
Expenses (net of fee waivers)............................. 0.65%* 0.75% 0.75%*
Expenses (excluding fee waivers).......................... 0.69%* 0.88% 2.12%*
Net investment income..................................... 5.25%* 5.60% 5.83%*
Portfolio turnover rate..................................... 609.14% 92.65% 39.12%*
Net assets, end of period (in 000's)........................ $84,540 $71,723 $32,537
</TABLE>
+ The Fixed Income Fund commenced operations on September 2, 1997.
* Annualized.
** Total return not annualized.
See notes to financial statements.
22
<PAGE>
[1838 GRAPHIC] INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) APRIL 30, 1999
- --------------------------------------------------------------------------------
NOTE 1 -- DESCRIPTION OF THE FUNDS
The 1838 Investment Advisors Funds was organized as a Delaware series
business trust on December 9, 1994, and is an open-end, management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Trust's Agreement and Declaration of Trust
permits the Trustees to issue an unlimited number of shares of beneficial
interest. The Trust consists of five Funds: the 1838 International Equity
Fund, the 1838 Small Cap Equity Fund, the 1838 Fixed Income Fund, the 1838
Large Cap Equity Fund and the 1838 Special Equity Fund (each a "Fund" and
collectively, the "Funds"). Each of the Funds, except the 1838 Special
Equity Fund, is diversified. The investment objectives of each Fund are
set forth below.
The 1838 International Equity Fund (the "International Equity Fund"), the
first of the series currently offered by the Trust, commenced operation on
August 3, 1995. The Fund's investment objective is capital appreciation,
with a secondary objective of income. The Fund seeks to achieve its
objective by investing at least 65% of its total assets in a diversified
portfolio of equity securities of issuers located in countries other than
the United States.
The 1838 Small Cap Equity Fund (the "Small Cap Equity Fund") commenced
operations on June 17, 1996. The Fund's investment objective is long-term
growth. The Fund seeks to achieve its objective by investing at least 65%
of its total assets in the common stock of U.S. companies with market
capitalization, of $1 billion or less (small cap), which are believed to
be undervalued and have good prospects for capital appreciation.
The 1838 Fixed Income Fund (the "Fixed Income Fund") commenced operations
on September 2, 1997. The Fund's investment objective is maximum current
income, with a secondary objective of growth. The Fund seeks to achieve
its objective by investing, under normal circumstances, at least 65% of
its assets in a diversified portfolio of fixed income securities.
The 1838 Large Cap Equity Fund has not commenced operations as of April
30, 1999. The Fund's investment objective is long-term total return. The
Fund will seek to achieve its objective by investing at least 90% of its
total assets in the common stock of U.S. companies with market
capitalization greater than $5 billion.
The 1838 Special Equity Fund has not commenced operations as of April 30,
1999. The Fund's investment objective is high total return. The Fund will
seek to achieve its objective by investing at least 90% of its total
assets in a select portfolio of the common stock of U.S. companies with
market capitalization greater than $5 billion.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
Security Valuation. Each Fund's securities, except investments with
remaining maturities of 60 days or less, are valued at the last quoted
sales price on the security's principal exchange on that day. If there are
no sales of the relevant security on such day, the security will be valued
at the mean between the closing bid and asked price on that day, if any.
Debt securities having a maturity of 60 days or less are valued at
amortized cost. Securities for which market quotations are not readily
available and all other assets will be valued at their respective fair
value as determined in good faith by, or under procedures established by,
the Board of Trustees.
23
<PAGE>
[1838 GRAPHIC] INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 1999
- --------------------------------------------------------------------------------
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Federal Income Taxes. Each Fund is treated as a separate entity and
intends to qualify as a "regulated investment company" under Subchapter M
of the Internal Revenue Code of 1986 and to distribute all of its taxable
income to its shareholders. Therefore, no federal income or excise tax
provision is required.
Dividends and Capital Gain Distributions. Distributions of net investment
income and net realized gains are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments
for foreign currency transactions for the International Equity Fund and
differing cost basis for securities sold for the Small Cap Equity Fund,
since certain securities were transferred to the Fund at its inception.
These distributions by each Fund will be made annually in December.
Additional distributions may be made by each Fund to the extent necessary.
Deferred Organizational Costs. Costs incurred by the International Equity
Fund in connection with the initial registration and public offering of
shares have been deferred and are being amortized on a straight-line basis
over a five-year period beginning on the date that the Fund commenced
operations.
Foreign Currency Translations. The books and records of the International
Equity Fund are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars on the following basis:
(i) fair 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 as the rates of exchange
prevailing on the respective dates of such transactions.
The International Equity Fund does not isolate that portion of the results
of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized gain (loss) on foreign currency transactions arise
from sales and maturities of short-term securities, sales of foreign
currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses at the
end of the fiscal year arise from changes in the value of assets and
liabilities, other than investments in securities, resulting from changes
in exchange rates.
Forward Foreign Currency Exchange Contracts. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
International Equity Fund may enter into forward foreign currency exchange
contracts ("FFCEC"). Additionally, the International Equity Fund may enter
into these contracts to hedge certain foreign currency assets. Foreign
currency exchange contracts are recorded at fair value. Certain risks may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts. Realized gains or
losses arising from such transactions are included in net realized gain
(loss) from foreign currency transactions. There are no FFCEC outstanding
at April 30, 1999.
Use of Estimates in the Preparation of Financial Statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
24
<PAGE>
[1838 GRAPHIC] INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 1999
- --------------------------------------------------------------------------------
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
assumptions that may affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
Other. Investment security transactions are accounted for on a trade date
basis. The specific identification method is utilized for determining
realized gain or loss on investments for both financial and federal income
tax reporting purposes. Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income is recorded on an
accrual basis.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES
During the period ended April 30, 1999, purchases and sales of investment
securities, other than short-term investments, were as follows:
<TABLE>
<CAPTION>
International Small Cap Fixed Income
Equity Fund Equity Fund Fund
------------- ----------- ------------
<S> <C> <C> <C>
Purchases............................... $18,286,985 $22,382,627 $482,802,041
Sales................................... 11,885,429 12,324,613 468,724,951
</TABLE>
NOTE 4 -- ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust, on behalf of each Fund, employs 1838 Investment Advisors, Inc.
(the "Investment Advisor"), a Delaware corporation and registered
investment adviser under the 1940 Act, to furnish investment advisory
services to the Funds pursuant to an Investment Advisory Agreement with
the Trust. The Investment Advisor supervises the investment of the assets
of the Fund in accordance with each Fund's investment objective, policies
and restrictions.
The Trust pays the Investment Advisor a monthly fee at the following
annual rates of each Fund's average daily net assets: 0.75% for the
International Equity Fund, 0.75% for the Small Cap Equity Fund and 0.50%
for the Fixed Income Fund. The Investment Advisor has voluntarily agreed
to waive its advisory fee or reimburse each Fund monthly to the extent
that the total operating expenses will exceed the following annual rates
of each Fund's average daily net assets: 1.25% for the International
Equity Fund, 1.25% for the Small Cap Equity Fund and, effective January 1,
1999, 0.60% for the Fixed Income Fund. This undertaking may be rescinded
at any time in the future.
25
<PAGE>
[1838 GRAPHIC] INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 1999
- --------------------------------------------------------------------------------
NOTE 4 -- ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES -- (CONTINUED)
The following table summarizes the advisory fees incurred by the Funds for
the period ended April 30, 1999:
<TABLE>
<CAPTION>
Gross Advisory Fee Net
Advisory Fee Waiver Advisory Fee
------------ ------------ ------------
<S> <C> <C> <C>
International Equity Fund.................... $246,869 $ -0- $246,869
Small Cap Equity Fund........................ 161,775 -0- 161,775
Fixed Income Fund............................ 195,016 15,224 179,792
</TABLE>
Declaration Service Company, Inc. ("DSC"), serves as Administrator to the
Trust pursuant to an Administration Agreement with the Trust on behalf of
each Fund. As Administrator, DSC is responsible for services such as
financial reporting, compliance monitoring and corporate management. For
the services provided, Declaration receives a monthly asset-based fee from
the Trust at the annual rate of 0.04% of the average daily net assets of
the Trust on the second $50 million; 0.02% of such assets in excess of
$100 million to $200 million; and 0.01% of such assets in excess of $200
million. Each series pays its pro-rata portion based upon total Trust
assets. DSC also receives fixed administration fees. For the period ended
April 30, 1999, DSC's administration fees amounted to $13,750, $10,000 and
$10,000, for the International Equity Fund, the Small Cap Equity Fund and
the Fixed Income Fund, respectively. At April 30, 1999, administration
fees payable to DSC amounted to $2,292, $1,667, and $1,667, for the
International Equity Fund, the Small Cap Equity Fund, and the Fixed Income
Fund, respectively.
Declaration Distributors, Inc. ("DDI") is engaged pursuant to a
Distribution Agreement with the Trust to assist in securing purchasers for
shares of each Fund. DDI also directly or through its affiliates, provides
investor support services. DDI receives no compensation for distribution
of shares of the Funds, except for reimbursement of out-of-pocket
expenses.
DSC serves as Accounting Agent to the Funds. As Accounting Agent, DSC
determines each Fund's net asset value per share and provides accounting
services to the Funds pursuant to an Accounting Services Agreement with
the Trust. At April 30, 1999, accounting service fees payable to DSC
amounted to $2,083, $1,458, and $1,458 for the International Equity Fund,
the Small Cap Equity Fund, and the Fixed Income Fund, respectively.
DSC also serves as the Fund's Transfer Agent pursuant to a Transfer Agency
Agreement with the Trust. For these services, DSC receives a monthly fee
computed on the basis of the number of shareholder accounts that the
Transfer Agent maintains for each Fund during the month, and is reimbursed
for out-of-pocket expenses. At April 30, 1999, Transfer Agent fees payable
to DSC amounted to $1,000, $1,000, and $1,000 for the International Equity
Fund, the Small Cap Equity Fund, and the Fixed Income Fund, respectively.
The Trustees of the Trust who are "interested persons" of the Trust, the
Investment Advisor or its affiliates and all personnel of the Trust or the
Investment Advisor performing services related to research, statistical
and investment activities are paid by the Investment Advisor or its
affiliates.
26
<PAGE>
[1838 GRAPHIC] INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 1999
- --------------------------------------------------------------------------------
NOTE 5 -- FUND SHARE TRANSACTIONS
At April 30, 1999, there were an unlimited number of shares of beneficial
interest with a $0.0001 par value, authorized. The following table
summarizes the activity in shares of each Fund:
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
For the Period Ended
April 30, 1999 For the Fiscal Year
(Unaudited) Ended October 31, 1998
-------------------------- --------------------------
Shares Amount Shares Amount
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold.................................. 554,951 $ 6,901,924 586,353 $ 7,038,369
Shares issued to shareholders in reinvestment
of distributions........................... 315,651 3,926,698 234,719 2,586,605
Shares redeemed.............................. (45,324) (551,579) (289,378) (3,563,800)
--------- ----------- --------- -----------
Net increase................................. 825,278 $10,277,043 531,694 $ 6,061,174
=========== ===========
Shares outstanding:
Beginning of period..................... 4,789,497 4,257,803
--------- ---------
End of period........................... 5,614,775 4,789,497
========= =========
</TABLE>
SMALL CAP EQUITY FUND
<TABLE>
<CAPTION>
For the Period Ended
April 30, 1999 For the Fiscal Year
(Unaudited) Ended October 31, 1998
-------------------------- --------------------------
Shares Amount Shares Amount
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold.................................. 819,579 $ 8,617,855 1,563,530 $19,341,335
Shares issued to shareholders in reinvestment
of distributions........................... 0 0 167,292 1,995,798
Shares redeemed.............................. (17,545) (187,500) (175,962) (2,168,835)
--------- ----------- --------- -----------
Net increase................................. 802,034 $ 8,430,355 1,554,860 $19,168,298
=========== ===========
Shares outstanding:
Beginning of period..................... 3,766,748 2,211,888
--------- ---------
End of period........................... 4,568,782 3,766,748
========= =========
</TABLE>
27
<PAGE>
[1838 GRAPHIC] INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 1999
- --------------------------------------------------------------------------------
NOTE 5 -- FUND SHARE TRANSACTIONS -- (CONTINUED)
FIXED INCOME FUND
<TABLE>
<CAPTION>
For the Period Ended
April 30, 1999 For the Fiscal Year
(Unaudited) Ended October 31, 1998
-------------------------- --------------------------
Shares Amount Shares Amount
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold.................................. 1,317,255 $13,525,002 4,099,344 $41,981,069
Shares issued to shareholders in reinvestment
of distributions........................... 172,116 1,752,482 326,222 3,334,313
Shares redeemed.............................. (122,319) (1,249,500) (590,184) (6,074,382)
--------- ----------- --------- -----------
Net increase................................. 1,367,052 $14,027,984 3,835,382 $39,241,000
=========== ===========
Shares outstanding:
Beginning of period..................... 7,004,447 3,169,065
--------- ---------
End of period........................... 8,371,499 7,004,447
========= =========
</TABLE>
NOTE 6 -- CONCENTRATION OF RISKS
The International Equity Fund invests in securities of foreign issuers in
various countries. These investments may involve certain considerations
and risks not typically associated with investments in the U.S., as a
result of, among other factors, the possibility of future political and
economical developments and the level of government supervision and
regulation of securities markets in the various countries.
NOTE 7 -- CAPITAL LOSS CARRYOVERS
At October 31, 1998, a capital loss carryover of $600,456 and $71,283,
which will expire on October 31, 2006, was available to offset possible
future realized capital gains in the Small Cap Equity Fund and the Fixed
Income Fund, respectively.
28
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<PAGE>
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<PAGE>
I N V E S T M E N T A D V I S E R
----------------------
1838 INVESTMENT ADVISORS, INC.
FIVE RADNOR CORPORATE CENTER
SUITE 320
100 MATSONFORD ROAD
RADNOR, PA 19087
U N D E R W R I T E R
----------------------
DECLARATION DISTRIBUTORS, INC.
555 NORTH LANE
SUITE 6160
CONSHOHOCKEN, PA 19428
S H A R E H O L D E R S E R V I C E S
----------------------
DECLARATION SERVICE COMPANY, INC.
555 NORTH LANE
SUITE 6160
CONSHOHOCKEN, PA 19428
C U S T O D I A N
----------------------
FIRST UNION NATIONAL BANK
530 WALNUT STREET
PHILADELPHIA, PA 19101
L E G A L C O U N S E L
----------------------
PEPPER HAMILTON LLP
3000 TWO LOGAN SQUARE
EIGHTEENTH & ARCH STREETS
PHILADELPHIA, PA 19103
A U D I T O R S
----------------------
PRICEWATERHOUSECOOPERS LLP
2400 ELEVEN PENN CENTER
PHILADELPHIA, PA 19103
