1838 INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
FELLOW SHAREHOLDER:
The Fund's total return for the six-month period ended April 30, 2000 was 15.8%,
while the net total return for the Morgan Stanley Capital International Europe,
Australia and Far East Index (the "EAFE Index") for this period was 6.7%(1).
During the six-month period, the EAFE Growth Index outperformed the EAFE Value
Index by 12.5% points(2). At the very start of trading this year, January 3,
2000, the EAFE Index reached an all-time high, after which it corrected some 6%
through the end of April, mostly as a result of strength in the reporting
currency of the Fund, the US dollar, against the Euro, and on profit taking in
telecommunication, media and technology stocks.
SECTORS:
Following the spectacular performance during the second half of last year,
telecommunication and technology stocks were again among the biggest winners for
much of the first quarter of this year. The Fund benefited from the holdings in
market leaders such as Nortel Networks, Nokia, NEC, Taiwan Semiconductor and
Philips in the technology area, in which the Fund was over-weighted, and
Mannesmann, MobilCom, China Telecom, Vivendi, and Hutchison Whampoa in
telecommunications. The Fund also profited from energy stocks such as
Schlumberger and Total Fina Elf, with oil prices experiencing a sustained climb.
Nomura Securities, the leading Japanese securities broker, Elan and Takeda
Chemicals, two pharmaceutical holdings, also posted spectacular returns. Retail,
construction, car and bank stocks overall were down as much as 30% during the
first months of the year, but recovered during March. With such varying
performances between sectors and industries,--and within these--with big swings
during the six-month period, your broadly diversified portfolio came through
with a very solid performance.
COUNTRY PERFORMANCES:
Among the larger international markets, Continental European markets performed
well, with the German and French indices both posting about 15% total returns
for the six-month period ended April 30, 2000, followed by Italy at 9%. Company
earnings generally beat consensus estimates, on strong export demand, partly as
a result of weakness of the Euro. Rising interest rates hit the U.K. market,
which was among the worst performers in Europe, with a negative return of 3%
particularly hard (all return numbers are measured in US dollars). The Japanese
equity market ended the year 1999 on a very strong note, after which profit
taking, primarily by foreign investors, reduced the return for the six-month
period to 3%. Compared with the benchmark, the Fund had an above benchmark
weighting in non-Japan
----------
(1) Past performance is no guarantee of future results. The return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Please bear in
mind that investing in foreign securities can involve special risks such as
currency fluctuation, less extensive regulation of foreign brokers and
possible political instability. The Fund's returns assume the reinvestment
of all distributions. The MSCI EAFE Index is an unmanaged stock market index
without any associated expenses and the returns assume reinvestment of all
net dividends. You cannot invest directly in an index.
(2) The EAFE Growth Index and the EAFE Value Index are subsets of the EAFE
Index. All securities in the EAFE Index are classified as either growth or
value securities by using price/book value (P/BV) ratios. Securities with
low P/BV ratios are assigned to the EAFE Value Index and securities with
high P/BV ratios are assigned to the EAFE Growth Index.
1
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1838 INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
Asia (mostly in telecom and technology), and a slightly above benchmark
weighting in continental Europe. The Fund had slightly below benchmark exposure
to Japan (emphasizing specialty finance and electronics) and to the U.K. In
emerging markets, the Fund fared well with holdings in leaders such as Taiwan
Semiconductors, China Telecom and SK Telecom. These stock prices doubled or
tripled between the end of October and the end of February, but lost about a
third of their market values since.
OUTLOOK:
At present, the markets are very volatile with rising short term interest rates
and inflation offsetting the support from increasing corporate profits. The
dollar has been surprisingly strong on the back of the US economic performance
being much better than that of Japan and Europe during the last years. While
there are good reasons to expect equity markets to continue to do well over the
next years overseas, as corporate management is more focused than ever on the
bottom line results which are also supported by accelerating economic growth,
near term results are quite uncertain. We will try to increase exposure to
companies that benefit from overseas regional economic growth recoveries, rather
than just from US or US dollar boosted earnings.
Sincerely,
/s/ Hans van den Berg
----------------------------------
Hans van den Berg
Vice President & Portfolio Manager
May 22, 2000
2
<PAGE>
1838 INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Industry Shares (Note 2)
-------- --------- ------------
<S> <C> <C> <C>
COMMON STOCK -- 98.05%
AUSTRALIA -- 1.78%
Broken Hill Proprietary Co. Mining............................ 108,000 $ 1,162,052
Woodside Petroleum Ltd. Oil & Gas......................... 129,600 800,833
------------
1,962,885
------------
CANADA -- 2.58%
Nortel Networks Corp. Information Technology Hardware... 25,000 2,831,250
------------
FINLAND -- 1.88%
Nokia Corp. -- Sponsored ADR Information Technology Hardware... 36,400 2,070,250
------------
FRANCE -- 10.90%
Accor SA Leisure, Entertainment & Hotels... 20,000 744,487
AXA, Inc. Insurance......................... 8,800 1,307,891
Christian Dior Household Goods & Textiles........ 6,400 1,525,059
Cap Gemini SA Software & Computer Services...... 5,400 1,062,876
Construction & Building
Lafarge Materials....................... 11,470 952,175
Schlumberger, Ltd. Oil & Gas Services................ 15,200 1,163,750
Societe Generale (A Shares) Banks............................. 8,434 1,750,743
Total SA (B Shares) Oil & Gas......................... 13,000 1,977,128
Vivendi Diversified Industrials........... 15,200 1,506,980
------------
11,991,089
------------
GERMANY -- 6.96%
BMW AG Automobiles....................... 46,400 1,236,741
Fresenius Medical Care Health............................ 21,600 1,594,314
Henkel KGAA Personal Care & Household
Products........................ 15,000 781,848
Karstadt AG General Retailers................. 18,000 549,481
Schering AG Pharmaceuticals................... 9,700 1,374,476
MobilCom AG Telecommunication Services........ 17,200 2,115,910
------------
7,652,770
------------
HONG KONG -- 5.22%
China Telecom HK Ltd. -- Sponsored
ADR* Telecommunication Services........ 7,600 1,114,825
Giordano International Ltd. Household Goods & Textiles........ 972,000 1,591,049
HSBC Holdings plc Banks............................. 140,804 1,572,684
Hutchison Whampoa Ltd. Diversified Industrials........... 100,000 1,457,146
------------
5,735,704
------------
</TABLE>
See notes to financial statements.
3
<PAGE>
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SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Industry Shares (Note 2)
-------- --------- ------------
<S> <C> <C> <C>
IRELAND -- 2.41%
Allied Irish Banks -- Sponsored ADR Banks............................. 44,300 $ 891,537
Elan Corp. plc -- Sponsored ADR * Pharmaceuticals................... 41,000 1,757,875
------------
2,649,412
------------
ITALY -- 2.16%
Pirelli SPA Automobiles....................... 486,000 1,166,949
Unicredito Italiano RNC Banks............................. 75,000 220,066
Unicredito Italiano SPA Banks............................. 243,000 987,589
------------
2,374,604
------------
JAPAN -- 24.77%
Advantest Corp. Information Technology Hardware... 6,200 1,417,553
Aiful Corp. Specialty & Other Finance......... 20,550 2,072,588
Bank of Tokyo-Mitsubishi Ltd. Banks............................. 55,000 709,415
Fast Retailing Company Ltd. General Retailers................. 3,100 1,365,348
Fanuc Ltd. Electronic & Electrical
Equipment....................... 22,600 2,367,171
Fujitsu Support and Service Software & Computer Services...... 2,400 355,309
Honda Motor Co. Ltd. Automobiles....................... 24,000 1,072,588
Hoya Corp. Health............................ 17,000 1,730,280
KAO Corp. Personal Care & Household
Products........................ 87,000 2,648,439
Kyocera Corp. Information Technology Hardware... 7,700 1,287,430
Minebea Co. Ltd. Electronic & Electrical
Equipment....................... 100,000 1,221,374
Murata Manufacturing Co. Ltd. Information Technology Hardware... 8,000 1,554,476
NEC Corp. Information Technology Hardware... 71,000 1,931,437
Nomura Securities Co. Ltd. Specialty & Other Finance......... 70,000 1,761,740
Seven-Eleven Japan Co. Ltd. Food & Drug Retailers............. 12,000 1,476,752
Takeda Chemicals Inds. Pharmaceuticals................... 32,000 2,105,205
Takefuji Corp. Specialty & Other Finance......... 12,500 1,321,999
Tokio Marine & Fire Insurance Insurance......................... 86,000 838,714
------------
27,237,818
------------
MEXICO -- 2.60%
Telefonos De Mexico -- Sponsored ADR Telecommunication Services........ 23,500 1,382,094
Wal-Mart De Mexico * General Retailers................. 64,800 1,478,250
------------
2,860,344
------------
NETHERLANDS -- 5.10%
Aegon NV Life Assurance.................... 18,200 1,311,017
Akzo Nobel NV Chemicals......................... 27,900 1,144,831
ING Groep NV Banks............................. 22,269 1,217,956
Philips Electronics-NY Shares Electronic & Electrical
Equipment....................... 43,400 1,936,725
------------
5,610,529
------------
</TABLE>
See notes to financial statements.
4
<PAGE>
1838 INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Industry Shares (Note 2)
-------- --------- ------------
<S> <C> <C> <C>
NORWAY -- 0.77%
Royal Caribbean Cruises Ltd. Leisure, Entertainment & Hotels... 40,500 $ 842,906
------------
SINGAPORE -- 2.10%
DBS Group Holdings Banks............................. 102,855 1,415,574
Singapore Airlines, Ltd. Transport......................... 86,200 893,552
------------
2,309,126
------------
SOUTH KOREA -- 2.53%
Samsung Electronics Electronic & Electrical
Equipment....................... 5,600 1,513,854
SK Telecom Co. Ltd. Telecommunication Services........ 4,790 1,273,305
------------
2,787,159
------------
SPAIN -- 2.81%
Banco Bilboa Vizcaya Argentaria Banks............................. 81,000 1,107,162
Telefonica SA -- Sponsored ADR Telecommunication Services........ 29,981 1,986,241
------------
3,093,403
------------
SWEDEN -- 2.83%
ABB Ltd. * Engineering & Machinery........... 11,995 1,339,774
Electrolux AB (B Series) Household Goods & Textiles........ 61,600 1,042,377
Svenska Cellulosa AB (B Shares) Forestry & Paper.................. 38,500 731,040
------------
3,113,191
------------
SWITZERLAND -- 4.86%
Adecco SA -- Registered Shares Support Services.................. 2,700 2,220,575
Nestle SA -- Sponsored ADR Food Producers & Processors....... 12,300 1,076,250
Roche Holding AG Genuss Pharmaceuticals................... 90 942,110
Zurich Allied AG Insurance......................... 2,600 1,107,701
------------
5,346,636
------------
TAIWAN -- 1.54%
Taiwan Semiconductor -- SP Sponsored
ADR Information Technology Hardware... 32,400 1,694,925
------------
UNITED KINGDOM -- 14.25%
Barratt Developments plc Construction & Building
Materials....................... 257,000 1,003,373
Bass plc Beverages......................... 60,000 705,568
BP Amoco Oil & Gas......................... 235,958 2,047,364
Imperial Chemicals Inds. plc Chemicals......................... 117,800 1,009,226
Kingfisher plc General Retailers................. 92,147 762,774
</TABLE>
See notes to financial statements.
5
<PAGE>
1838 INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Industry Shares (Note 2)
-------- --------- ------------
<S> <C> <C> <C>
UNITED KINGDOM -- (CONTINUED)
Misys plc Software & Computer Services...... 92,606 $ 1,067,986
Pearson plc Media & Photography............... 41,600 1,428,199
Prudential Corp. plc Life Assurance.................... 65,000 1,011,526
Royal Bank of Scotland Group plc Banks............................. 55,216 864,452
TI Group plc Engineering & Machinery........... 170,600 933,007
Shell Transport & Trading Oil & Gas......................... 35,100 1,693,575
Vodafone Airtourch plc Telecommunication Services........ 683,989 3,141,348
------------
15,668,398
------------
TOTAL COMMON STOCK (Cost $84,798,125)....................................... 107,832,399
SHORT-TERM INVESTMENTS -- 2.99%
A.I.M. Liquid Asset Portfolio
(Cost $3,287,216)....................................................... 3,287,216 3,287,216
------------
TOTAL INVESTMENTS (Cost $88,085,341)+ -- 101.04%............................ $111,119,615
OTHER ASSETS AND LIABILITIES, NET -- (1.04%)................................ (1,147,859)
------------
NET ASSETS -- 100.00%....................................................... $109,971,756
============
</TABLE>
MARKET SECTOR DIVERSIFICATION (UNAUDITED)
As a Percentage of Total Common Stocks
Resources -- 8.20% Cyclical Services -- 9.54%
Basic Industries -- 4.49% Non-Cyclical Services -- 11.58%
General Industries -- 11.38% Information Technology -- 18.95%
Cyclical Consumer Goods -- 7.08% Financials -- 15.13%
Non-Cyclical Consumer Goods -- 13.65%
* Non-income Producing
+ The cost for federal income tax purposes was $88,085,341. The aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost of $31,908,452, and aggregate gross unrealized
depreciation for all securities for which there was an excess of tax cost over
market value of $8,874,178.
ADR -- American Depository Receipt
See notes to financial statements.
6
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1838 FIXED INCOME FUND
--------------------------------------------------------------------------------
TO THE SHAREHOLDER:
The beginning of the new millennium continued as a tale of two cities, depending
on where you were on the yield curve. The front end saw yields move upward as
the Federal Reserve consecutively raised rates 25 basis points at all three of
their meetings during the first half of the Fund's fiscal year. The additional
tightenings in monetary policy brought the Federal Funds rate to 6.0%. The move
on the long end was a result of technical factors (government surpluses and buy
backs of long dated Treasuries) defying the strength in the economy. The
divergence between the action of the different maturities of the yield curve
caused the curve between 2 year and 30 year Treasuries to invert as much as 70
basis points during the six-month period ended April 30, 2000. Spread product
(corporates, mortgages and agencies) had a tough time with spreads reaching
levels that rivaled those of the global financial meltdown of 1998 and the
recession of the early 1990's. Reasons for the spread widening were varied,
including equity market volatility, Federal Reserve on the move, inverted yield
curve and less risk tolerance on both sides of the "street".
The Fund will maintain a neutral to slightly short duration until signs of
slower growth emerge and the Fed appears to be done raising rates. We will also
stay with our overweight in spread product, as we believe spreads will compress
and valuations will normalize throughout the balance of the year.
As of April 30, 2000, the Fund's portfolio composition, as compared to the
Lehman Aggregate Bond Index ("Index"), was as follows:
1838 Fixed Lehman Aggregate
Income Fund Bond Index
----------- ----------------
Corporate Bonds........................ 32% 22%
Mortgage-Backed........................ 39% 36%
Asset-Backed........................... 8% 1%
Agencies............................... 10% 8%
Treasuries............................. 11% 33%
The total return for the 1838 Fixed Income Fund for the six-month period ended
April 30, 2000 was 0.63% versus 1.41% for the Index. The Fund's cumulative total
return since inception (September 2, 1997) to April 30, 2000 was 10.69% versus
the Index's return for the same period of 14.76%(1).
Sincerely,
/s/ Clifford D. Corso
----------------------------------
Clifford D. Corso
Vice President & Portfolio Manager
May 22, 2000
(1) Past performance is no guarantee of future results. The return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. The Fund's
returns assume the reinvestment of all distributions. The Lehman Aggregate
Bond Index is an unmanaged investment grade bond index without any
associated expenses and the returns assume reinvestment of all interest
income. You cannot invest directly in an index.
7
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1838 FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's/S&P Principal Value
Rating* Amount (Note 2)
----------- --------- --------
<S> <C> <C> <C>
CORPORATE BONDS -- 30.78%
BANKS -- 7.62%
Bank of America, 7.80%, 02/15/10 ....................... Aa3/A $ 1,710,000 $ 1,706,105
Royal Bank of Scotland, 8.817%, 03/31/49 ............... A1/A- 2,485,000 2,500,775
Wells Fargo Co., 7.20%, 05/01/2003 ..................... AA2/A+ 2,680,000 2,659,364
Westdeutsche Landesbank NY, 6.05%, 01/15/09 ............ Aa1/AA+ 3,525,000 3,090,064
------------
9,956,308
------------
FINANCIAL -- 9.60%
CIT Group Inc., 7.08%, 03/15/03......................... A1/A+ 2,920,000 2,896,871
Ford Motor Credit Corp., 7.45%, 07/16/31................ A2/A 2,330,000 2,215,434
Household Finance Corp., 7.875%, 03/01/07............... A2/A 1,220,000 1,210,062
Morgan Stanley Dean Witter, 7.125%, 01/15/03............ Aa3/A+ 1,950,000 1,926,684
Paine Webber Group, 7.59%, 05/02/02..................... Baa1/BBB+ 2,590,000 2,569,280
PNC Funding Corp., 6.125%, 09/01/03..................... Aa3/BBB+ 1,790,000 1,709,525
------------
12,527,856
------------
INDUSTRIAL & MISCELLANEOUS -- 13.56%
Avon Products Inc., 7.15%, 11/15/09..................... A2/A 90,000 84,727
Avon Products Inc., 7.15%, 11/15/09, 144A*.............. A2/A 2,310,000 2,089,921
Conoco Inc., 6.95%, 04/15/29............................ A3/A- 1,193,000 1,070,981
Consolidated Freightways, 8.875%, 05/01/10.............. Baa3/BBB 2,820,000 2,780,475
IBM Corp., 6.50%, 01/15/28.............................. A1/A+ 1,105,000 973,203
Lockheed Martin Corp., 8.20%, 12/01/09.................. Baa2/BBB- 2,250,000 2,202,525
Tyco Int'l. Group, 6.25%, 06/15/03...................... Baa1/A- 2,250,000 2,123,213
Tyco Int'l. Group, 7.00%, 06/15/28...................... Baa1/A- 1,187,000 1,013,913
United Dominion Inds., 8.625%, 03/15/03................. Baa2/BBB 2,790,000 2,775,866
Yosemite Sec. Trust, 8.25%, 11/15/04, 144A*............. Baa2/BBB+ 2,615,000 2,580,898
------------
17,695,722
------------
TOTAL CORPORATE BONDS (Cost $40,782,537)............................................ 40,179,886
------------
ASSET BACKED SECURITIES -- 7.85%
Bear Stearns CMS, Ser. 1999-WF2, Cl. A2, 7.08%,
06/15/09.............................................. Aaa/AAA 2,345,000 2,255,810
Citibank Credit Card Master Trust, Ser. 1999-2, Cl. A,
5.875%, 03/10/11...................................... Aaa/AAA 3,515,000 3,142,305
Navistar Financial Corp. Owner Trust, Ser. 2000-A, Cl.
A3, 7.20%, 05/17/04................................... Aaa/AAA 2,330,000 2,326,924
Union Acceptance Corp., Ser. 1999-D, Cl. A4, 6.85%,
02/08/06.............................................. Aaa/AAA 2,555,000 2,519,843
------------
TOTAL ASSET BACKED SECURITIES (Cost $10,594,957).................................... 10,244,882
------------
</TABLE>
See notes to financial statements.
8
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SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's/S&P Principal Value
Rating* Amount (Note 2)
----------- --------- --------
<S> <C> <C> <C>
MORTGAGE BACKED SECURITIES -- 38.49%
FGCI, Pool #E00617, 5.50%, 01/01/14..................... Aaa/AAA $ 1,043,120 $ 958,334
FGCI, Pool #E00765, 6.50%, 12/01/14..................... Aaa/AAA 1,973,836 1,891,507
FGLMC, Pool #D85515, 6.50%, 01/01/28.................... Aaa/AAA 1,944,065 1,817,961
FGLMC, Pool #C29190, 6.50%, 07/01/29.................... Aaa/AAA 2,179,321 2,036,902
FGLMC, Pool #C30260, 7.50%, 08/01/29.................... Aaa/AAA 1,258,723 1,233,433
FHLMC, Pool #G10557, 6.50%, 07/01/11.................... Aaa/AAA 1,550,990 1,494,317
FHLMC, Pool #A00930, 10.00%, 05/01/20................... Aaa/AAA 28,842 30,544
FHLMC, Pool #C80342, 6.50%, 09/01/25.................... Aaa/AAA 1,322,427 1,239,211
FHLMC, Pool #C00967, 8.50%, 02/01/30.................... Aaa/AAA 2,175,106 2,209,831
FNCL, Pool #482515, 5.50%, 01/01/14..................... Aaa/AAA 329,239 302,048
FNCL, Pool #252381, 5.50%, 04/01/14..................... Aaa/AAA 139,821 128,202
FNCL, Pool #535003, 7.00%, 11/01/14..................... Aaa/AAA 1,882,230 1,839,475
FNCL, Pool #498610, 6.00%, 05/01/29..................... Aaa/AAA 1,943,641 1,760,793
FNCL, Pool #491805, 6.50%, 06/01/29..................... Aaa/AAA 2,000,198 1,867,413
FNCL, Pool #515959, 7.50%, 11/01/29..................... Aaa/AAA 4,471,133 4,378,679
FNCL, Pool #522898, 8.00%, 01/01/30..................... Aaa/AAA 931,967 931,076
FNCL, Pool #526025, 8.00%, 01/01/30..................... Aaa/AAA 1,962,225 1,959,896
FNMA, Pool #250890, 7.00%, 04/01/04..................... Aaa/AAA 1,033,447 1,020,196
FNMA, Pool #303728, 6.00%, 01/01/11..................... Aaa/AAA 1,417,791 1,344,209
FNMA, Pool #190275, 8.00%, 11/01/26..................... Aaa/AAA 1,660,042 1,660,604
FNMA, Pool #481429, 6.00%, 01/01/29..................... Aaa/AAA 1,963,286 1,780,105
FNMA, Pool #487830, 6.00%, 03/01/29..................... Aaa/AAA 3,531,753 3,199,504
FNMA, Pool #TBA, 8.00%, 02/15/30........................ Aaa/AAA 2,995,628 2,996,769
GNMA, Pool #6937, 8.50%, 12/15/05....................... Aaa/AAA 3,895 3,966
GNMA, Pool #780374, 7.50%, 12/15/23..................... Aaa/AAA 1,031,525 1,017,864
GNMA, Pool #2038, 8.50%, 07/20/25....................... Aaa/AAA 142,541 144,433
GNMA, Pool #417239, 7.00%, 02/15/26..................... Aaa/AAA 2,076,106 1,999,662
GNMA, Pool #443623, 6.50%, 02/15/28..................... Aaa/AAA 1,955,688 1,833,626
GNMA, Pool #448178, 6.50%, 03/15/28..................... Aaa/AAA 193,110 181,159
GNMA, Pool #462556, 6.50%, 02/15/28..................... Aaa/AAA 2,626,060 2,463,546
GNMA, Pool #491223, 7.00%, 03/15/29..................... Aaa/AAA 2,981,589 2,869,091
GNMA, Pool #509609, 7.00%, 07/15/29..................... Aaa/AAA 1,712,753 1,648,129
------------
TOTAL MORTGAGE BACKED SECURITIES (Cost $51,572,262)................................. 50,242,485
------------
</TABLE>
See notes to financial statements.
9
<PAGE>
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SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
Amount (Note 2)
--------- --------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS** -- 9.57%
FHLMC, 5.00%, 01/15/04.................................. $ 4,600,000 $ 4,263,818
FNMA, 7.25%, 01/15/10................................... 1,675,000 1,667,851
FNMA, 7.125%, 02/15/05.................................. 3,420,000 3,399,713
FNMA, 7.125%, 03/15/07.................................. 3,195,000 3,157,603
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $12,584,912)......................... 12,488,985
------------
U.S. TREASURY OBLIGATIONS** -- 10.56%
U.S. Treasury Notes, 6.125%, 12/31/01................... 970,000 961,512
U.S. Treasury Notes, 4.25%, 11/15/03.................... 65,000 60,308
U.S. Treasury Notes, 5.875%, 11/15/04................... 5,830,000 5,676,962
U.S. Treasury Notes, 6.50%, 02/15/10.................... 1,815,000 1,851,300
U.S. Treasury Bonds, 8.125%, 08/15/19................... 1,170,000 1,405,097
U.S. Treasury Bonds, 6.125%, 11/15/27................... 1,220,000 1,208,182
U.S. Treasury Bonds, 6.125%, 08/15/29................... 2,620,000 2,626,550
------------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $13,733,698).................................. 13,789,911
------------
<CAPTION>
Shares
-----------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 1.77%
SEI Daily Income Trust Prime Obligation
(Cost $2,314,415)..................................... 2,314,415 2,314,415
------------
TOTAL INVESTMENTS (Cost $131,582,781)+ -- 99.02%.......................................... $129,260,564
OTHER ASSETS AND LIABILITIES, NET -- 0.98%................................................ 1,274,902
------------
NET ASSETS -- 100%........................................................................ $130,535,466
============
</TABLE>
----------
* Resale restricted to institutional buyers.
** While no ratings are shown for U.S. Government Agency Obligations and U.S.
Treasury Obligations, they are considered to be of the highest quality,
comparable to Moody's AAA rating and S&P's Aaa rating.
+ The cost for federal income tax purposes was $131,635,196. The aggregate
gross unrealized appreciation for all securities for which there was an
excess of market value over tax cost of $146,136, and aggregate gross
unrealized depreciation for all securities for which there was an excess of
tax cost over market value of $2,520,768.
TBA Securities purchased on a forward commitment basis with an approximate
principal amount and no definitive maturity date. The actual principal and
maturity date will be determined upon settlement.
See notes to financial statements.
10
<PAGE>
1838 LARGE CAP EQUITY FUND
--------------------------------------------------------------------------------
TO THE SHAREHOLDER:
The 1838 Large Cap Equity Fund's total return was 10.13% for the six-month
period ended April 30, 2000, compared with a 7.17% return for the Standard &
Poor's 500 Stock Index(1). The Fund's total return since commencement of
operations (September 29, 1999) is 16.85% versus 15.28% for the S&P 500 Index
over the same period. We are pleased with this good start, especially given the
increased stock market volatility experienced along the way.
The Fund's weightings in the various industrial sectors stayed very close to
those of the Index, leaving all of this positive return to come from good stock
selection. It is important to note the S&P 500's wide disparity in returns
generated by the various industry sectors. At the extreme, S&P Tech stocks rose
37%, while the Index's Consumer Staples stocks fell almost 18%! It is impossible
to predict such movements on a consistent basis, and so our effort is placed on
picking stocks that can outperform in each sector category.
Our analysts were able to add value through superior stock selection in five out
of eight sectors, with strong excess returns coming in Healthcare, Technology
and Energy. Medtronic, Oracle and Transocean Sedco Forex, for example, have been
successful investments in each respective sector.
On the other hand, we struggled in the Consumer Cyclicals and Deregulated
Industries, underperforming the S&P in each case. Among the holdings that held
us back were Carnival Corp., McDonald's, SBC Communications and Worldcom. While
we cannot expect to outperform in each sector all the time, it is very important
to manage those investments that detract from good performance. We have an
established sale discipline that is consistently enforced. Of the names above,
McDonald's has been eliminated from the portfolio, and replaced with another
Consumer Cyclical investment with better prospects, CVS.
There have been significant shifts in investor sentiment during the past few
months, much of it in reaction to steady pressure by the Federal Reserve to
raise interest rates. At this writing, all major stock indices are in modest
negative territory, year to date. The mood has changed from one of euphoria (the
20% plus returns logged annually in the late nineties), to a lingering doubt
regarding the ultimate impact of these rate increases. We have faith that Alan
Greenspan manages the economy first, and that his goals, controlled real growth
and maintained "full" employment, will be realized and help produce positive
returns for the remainder of the year.
Sincerely,
/s/ George W. Gephart, Jr.
------------------------------------
George W. Gephart, Jr.
Vice President & Portfolio Manager
May 22, 2000
(1) Past performance is no guarantee of future results. The return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. The Fund's
returns assume the reinvestment of all distributions. The S&P 500 Index is
an unmanaged stock market index without any associated expenses and the
returns assume reinvestment of all dividends. You cannot invest directly in
an index.
11
<PAGE>
1838 LARGE CAP EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
--------- ------------
<S> <C> <C>
COMMON STOCK -- 98.76%
Basic Industries -- 10.60%
Avery Dennison Corp........................................ 3,300 $ 216,562
E.I. Dupont de Nemours & Co................................ 2,600 123,337
General Electric Co........................................ 3,100 487,475
Illinois Tool Works........................................ 2,800 179,375
Tyco International Ltd..................................... 4,900 225,094
------------
1,231,843
------------
Consumer Cyclical -- 11.36%
Carnival Corp. (A Shares).................................. 6,200 154,225
CVS Corp................................................... 6,100 265,350
Ford Motor Co.............................................. 4,000 218,750
Interpublic Group of Cos................................... 4,700 192,700
Staples Inc.*.............................................. 8,100 154,406
Target Corp................................................ 1,700 113,156
Wal-Mart Stores Inc........................................ 4,000 221,500
------------
1,320,087
------------
Consumer Staples -- 6.91%
Coca Cola Co............................................... 3,300 155,306
Colgate-Palmolive Co....................................... 4,700 268,487
The Estee Lauder Cos. Inc. (A Shares)...................... 4,900 216,212
Safeway Inc.*.............................................. 3,700 163,263
------------
803,268
------------
Energy -- 7.33%
Chevron Corp............................................... 2,100 178,763
Exxon Mobil Corp........................................... 4,304 334,375
Schlumberger Ltd........................................... 2,400 183,750
Transocean Sedco Forex Inc................................. 3,310 155,570
------------
852,458
------------
Financial -- 12.62%
American International Group............................... 4,300 471,656
Citigroup Inc.............................................. 6,500 386,344
Fifth Third Bancorp........................................ 3,100 195,687
Firstar Corp............................................... 4,400 109,450
Wells Fargo Co............................................. 7,400 303,863
------------
1,467,000
------------
</TABLE>
See notes to financial statements.
12
<PAGE>
1838 LARGE CAP EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
--------- ------------
Healthcare -- 10.31%
<S> <C> <C>
Medtronic Inc.................................................. 6,200 $ 322,012
Merck & Co. Inc................................................ 2,800 194,600
Pharmacia Corp................................................. 3,927 196,105
Schering-Plough Corp........................................... 4,700 189,469
Warner-Lambert Co.............................................. 2,600 295,912
------------
1,198,098
------------
Technology -- 31.14%
America Online Inc.*........................................... 2,800 167,475
Applied Materials Inc.*........................................ 2,200 223,987
Cisco Systems Inc.*............................................ 8,500 589,289
Dell Computer Corp.*........................................... 5,100 255,638
EMC Corp.*..................................................... 1,700 236,194
Intel Corp..................................................... 4,100 519,931
Lucent Technologies Inc........................................ 4,400 273,625
Microsoft Corp.*............................................... 4,700 327,825
Nortel Networks Corp........................................... 2,400 271,800
Oracle Systems Corp.*.......................................... 2,900 231,819
Sun Microsystems Inc.*......................................... 2,500 229,844
Texas Instruments Inc.......................................... 1,800 293,175
------------
3,620,602
------------
Deregulated Industries -- 8.49%
Bell Atlantic Corp............................................. 2,900 171,825
SBC Communications Inc......................................... 8,200 359,263
Sprint Corp.................................................... 2,100 129,150
Worldcom Inc.*................................................. 7,200 327,150
------------
987,388
------------
TOTAL COMMON STOCKS (Cost $10,982,180)....................... 11,480,744
------------
SHORT-TERM INVESTMENTS -- 1.23%
SEI Daily Income Trust Prime Obligation (Cost $143,537)........ 143,537 143,537
------------
TOTAL INVESTMENTS (Cost $11,125,717)+ -- 99.99%.................... $ 11,624,281
OTHER ASSETS AND LIABILITIES, NET -- 0.01%......................... 1,053
------------
NET ASSETS -- 100%................................................. $ 11,625,334
============
</TABLE>
* Non-income producing security.
+ The cost for federal income tax purposes was $11,125,717. The aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost of $1,207,467, and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
market value of $708,903.
See notes to financial statements.
13
<PAGE>
1838 INVESTMENT ADVISORS FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Fixed Income Large Cap
Equity Fund Fund Equity Fund
--------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (identified cost $88,085,341, $131,582,781 and
$11,125,717 respectively) (Note 2)................................... $ 111,119,615 $129,260,564 $11,624,281
Receivables:
Dividends and interest............................................... 297,489 1,581,243 9,820
Investment securities sold........................................... -- 2,345,217 --
Reimbursement due from advisor....................................... -- -- 2,462
Other assets........................................................... 11,609 5,121 1,132
--------------------------------------------
Total assets..................................................... 111,428,713 133,192,145 11,637,695
--------------------------------------------
LIABILITIES:
Management fees due to advisor (Note 4).............................. 66,931 41,039 --
Due to affiliates (Note 4)........................................... 13,510 13,341 6,175
Payable for investment securities purchased.......................... 1,352,660 2,590,000 --
Other accrued expenses............................................... 23,856 12,299 6,186
--------------------------------------------
Total liabilities................................................ 1,456,957 2,656,679 12,361
--------------------------------------------
NET ASSETS............................................................. $ 109,971,756 $130,535,466 $11,625,334
============================================
NET ASSETS CONSIST OF:
Shares of beneficial interest (par $0.001)............................. $ 6,839 $ 13,679 $ 998
Additional capital paid-in............................................. 77,075,250 136,367,307 10,856,405
Distribution in excess of net investment income........................ -- (8,498) --
Accumulated net investment income (loss)............................... (212,700) -- 8,226
Accumulated net realized gain (loss) on investments.................... 10,074,327 (3,514,805) 261,141
Net unrealized appreciation (depreciation) on:
Investments.......................................................... 23,034,274 (2,322,217) 498,564
Translation of assets and liabilities in foreign currencies.......... (6,234) -- --
--------------------------------------------
NET ASSETS............................................................. $ 109,971,756 $130,535,466 $11,625,334
============================================
Shares of beneficial interest outstanding.............................. 6,839,162 13,679,227 998,164
--------------------------------------------
NET ASSETS VALUE, offering and redemption price per share (Net
assets/Outstanding shares of beneficial interest).................... $ 16.08 $ 9.54 $ 11.65
============================================
</TABLE>
See notes to financial statements.
14
<PAGE>
1838 INVESTMENT ADVISORS FUNDS
STATEMENTS OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Fixed Income Large Cap
Equity Fund Fund Equity Fund
--------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................................... $ 607,228 -- $ 32,092
Interest................................................................ 66,905 $3,974,714 8,693
Foreign taxes withheld.................................................. (72,470) -- --
--------------------------------------------
Total Investment Income............................................. 601,663 3,974,714 40,785
--------------------------------------------
EXPENSES:
Investment advisory fees (Note 4)....................................... 378,139 282,043 25,700
Administration fee (Note 4)............................................. 30,251 33,845 7,466
Accounting fee (Note 4)................................................. 37,531 29,374 19,910
Custodian fees.......................................................... 22,875 3,775 4,632
Transfer agency fees (Note 4)........................................... 9,958 10,037 9,963
Trustees' fees (Note 4)................................................. 8,188 8,882 818
Audit fees.............................................................. 9,956 12,562 5,038
Legal fees.............................................................. 13,765 11,265 6,251
Registration fees....................................................... 10,663 12,115 6,927
Reports to shareholders................................................. 5,444 6,190 677
Amortization of organizational costs (Note 2)........................... 12,891 -- --
Other................................................................... 13,313 11,249 2,065
--------------------------------------------
Total expenses........................................................ 552,974 421,337 89,447
Advisory fee waived (Note 4)........................................ -- (81,962) (25,700)
Reimbursement from advisor (Note 4)................................. -- -- (34,012)
--------------------------------------------
Total expenses, net (Note 4)........................................ 552,974 339,375 29,735
--------------------------------------------
Net investment income............................................ 48,689 3,635,339 11,050
--------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investment transactions............................................... 10,074,358 (1,850,402) 261,655
Foreign currency transactions......................................... (261,398) -- --
--------------------------------------------
Total net realized gain (loss)...................................... 9,812,960 (1,850,402) 261,655
--------------------------------------------
Change in unrealized appreciation (depreciation) of:
Investments........................................................... 3,831,760 (831,133) 254,713
Translation of assets and liabilities in foreign currencies........... (8,090) -- --
--------------------------------------------
Total change in unrealized appreciation (depreciation).............. 3,823,670 (831,133) 254,713
--------------------------------------------
Net gain (loss) on investments and foreign currency............... 13,636,630 (2,681,535) 516,368
--------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................... $13,685,319 $ 953,804 $527,418
============================================
</TABLE>
See notes to financial statements.
15
<PAGE>
1838 INVESTMENT ADVISORS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Fixed Income Large Cap
Equity Fund Fund Equity Fund+
----------------------------------------------------
<S> <C> <C> <C>
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2000 (UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income........................................... $ 48,689 $ 3,635,339 $ 11,050
Net realized gain (loss) from investment and foreign currency
transactions.................................................. 9,812,960 (1,850,402) 261,655
Change in unrealized appreciation (depreciation) of investments
and foreign currency.......................................... 3,823,670 (831,133) 254,713
---------------------------------------------------
Net increase in net assets resulting from operations.............. 13,685,319 953,804 527,418
---------------------------------------------------
Distributions to shareholders:
Net investment income........................................... (7,576) (3,864,041) (6,623)
Net realized gains.............................................. (4,661,343) -- (15,233)
---------------------------------------------------
Total Distributions........................................... (4,668,919) (3,864,041) (21,856)
---------------------------------------------------
Increase in net assets from Fund share transactions (Note 5)...... 14,408,330 39,224,977 6,196,477
---------------------------------------------------
Increase in net assets............................................ 23,424,730 36,314,740 6,702,039
NET ASSETS:
Beginning of period............................................. 86,547,026 94,220,726 4,923,295
---------------------------------------------------
End of period................................................... $ 109,971,756 $130,535,466 $ 11,625,334
===================================================
FOR THE PERIOD ENDED OCTOBER 31, 1999
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income........................................... $ 169,958 $ 4,502,938 $ 3,799
Net realized gain (loss) from investment and foreign currency
transactions.................................................. 4,496,142 (1,593,120) 14,719
Change in unrealized appreciation (depreciation) of investments
and foreign currency.......................................... 13,866,854 (2,308,516) 243,851
---------------------------------------------------
Net increase in net assets resulting from operations.............. 18,532,954 601,302 262,369
---------------------------------------------------
Distributions to shareholders:
Net investment income........................................... -- (4,282,734) --
Net realized gains.............................................. (4,289,722) -- --
---------------------------------------------------
Total Distributions........................................... (4,289,722) (4,282,734) --
---------------------------------------------------
Increase in net assets from Fund share transactions (Note 5)...... 14,428,889 26,178,864 4,660,926
---------------------------------------------------
Increase in net assets............................................ 28,672,121 22,497,432 4,923,295
NET ASSETS:
Beginning of period............................................. 57,874,905 71,723,294 --
---------------------------------------------------
End of period................................................... $ 86,547,026 $ 94,220,726 $ 4,923,295
===================================================
</TABLE>
+ The Large Cap Equity Fund commenced operations on September 29, 1999.
See notes to the financial statements.
16
<PAGE>
1838 INVESTMENT ADVISORS FUNDS
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each fiscal year or period and other performance information derived from the
financial statements. It should be read in conjunction with the financial
statements and notes thereto.
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
For the
Six Month
Period Ended For the Fiscal Year or Period Ended October 31,
April 30, 2000 ------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995+
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD...... $ 14.57 $ 12.08 $ 11.99 $ 10.44 $ 9.61 $ 10.00
---------------------------------------------------------------------------
INVESTMENT OPERATIONS:
Net investment income.................... 0.01 0.03 0.01 0.02 0.07 0.02
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions........................... 2.27 3.34 0.75 1.57 0.80 (0.41)
---------------------------------------------------------------------------
Total from investment operations..... 2.28 3.37 0.76 1.59 0.87 (0.39)
---------------------------------------------------------------------------
DISTRIBUTIONS:
From net investment income............... -- -- -- (0.04) (0.04) --
From net realized gain on investments.... (0.77) (0.88) (0.67) -- -- --
---------------------------------------------------------------------------
Total distributions.................. (0.77) (0.88) (0.67) (0.04) (0.04) --
---------------------------------------------------------------------------
NET ASSET VALUE - END OF THE PERIOD........ $ 16.08 $ 14.57 $ 12.08 $ 11.99 $ 10.44 $ 9.61
===========================================================================
TOTAL RETURN............................... 15.79%** 29.10% 6.90% 15.23% 9.11% (3.90)%**
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL
DATA:
Expenses (net of fee waivers).......... 1.10%* 1.09% 1.13% 1.25% 1.25% 1.25%*
Expenses (excluding fee waivers)....... N/A N/A N/A 1.44% 1.80% 2.60%*
Net investment income.................. 0.10%* 0.23% 0.10% 0.28% 0.70% 1.02%*
Portfolio turnover rate.................... 29.15% 48.71% 166.77% 92.33% 59.11% 42.21%*
Net assets, end of period (in 000's)....... $109,972 $86,547 $ 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.
17
<PAGE>
1838 INVESTMENT ADVISORS FUNDS
FINANCIAL HIGHLIGHTS -- CONTINUED
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each fiscal year or period and other performance information derived from the
financial statements. It should be read in conjunction with the financial
statements and notes thereto.
FIXED INCOME FUND
<TABLE>
<CAPTION>
For the
Six-Months For the Fiscal Year or
Period Ended Period Ended October 31,
April 30, 2000 ----------------------------------
(Unaudited) 1999 1998 1997+
------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD........................... $ 9.81 $ 10.24 $ 10.27 $ 10.00
------------------------------------------------------
INVESTMENT OPERATIONS:
Net investment income......................................... 0.31 0.53 0.54 0.06
Net realized and unrealized gain (loss) on investments........ (0.25) (0.45) 0.08 0.21
------------------------------------------------------
Total from investment operations.......................... 0.06 0.08 0.62 0.27
------------------------------------------------------
DISTRIBUTIONS:
From net investment income.................................... (0.33) (0.51) (0.59) --
Return of capital............................................. -- -- (0.04) --
From net realized gain on investments......................... -- -- (0.02) --
------------------------------------------------------
Total distributions....................................... (0.33) (0.51) (0.65) --
------------------------------------------------------
NET ASSET VALUE - END OF THE PERIOD............................. $ 9.54 $ 9.81 $ 10.24 $ 10.27
======================================================
TOTAL RETURN.................................................... 0.63%** 0.79% 6.26% 2.70%**
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses (net of fee waivers)(1).............................. 0.60%* 0.61% 0.75% 0.75%*
Expenses (excluding fee waivers).............................. 0.75%* 0.73% 0.88% 2.12%*
Net investment income......................................... 6.44%* 5.35% 5.60% 5.83%*
Portfolio turnover rate......................................... 272.78% 834.18% 92.65% 39.12%*
Net assets, end of period (in 000's)............................ $ 130,535 $ 94,221 $71,723 $32,537
</TABLE>
+ The Fixed Income Fund commenced operations on September 2, 1997.
* Annualized.
** Total return not annualized.
(1) Effective March 1, 1999, 1838 Investment Advisors voluntarily agreed to
waive its fees and/or reimburse the Fund so that the total operating
expenses do not exceed 0.60% of average daily net assets.
See notes to financial statements.
18
<PAGE>
1838 INVESTMENT ADVISORS FUNDS
FINANCIAL HIGHLIGHTS -- CONTINUED
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each fiscal year or period and other performance information derived from the
financial statements. It should be read in conjunction with the financial
statements and notes thereto.
LARGE CAP EQUITY FUND
<TABLE>
<CAPTION>
For the
Six-Month
Period Ended For the
April 30, 2000 Period Ended
(Unaudited) October 31, 1999+
------------------------------------
<S> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD................................... $ 10.61 $ 10.00
----------------------------------
INVESTMENT OPERATIONS:
Net investment income................................................. 0.01 0.01
Net realized and unrealized gain on investments....................... 1.06 0.60
----------------------------------
Total from investment operations.................................. 1.07 0.61
----------------------------------
DISTRIBUTIONS:
From net investment income............................................ (0.01) --
From net realized gain on investments................................. (0.02) --
----------------------------------
Total distributions............................................... (0.03) --
----------------------------------
NET ASSET VALUE - END OF THE PERIOD..................................... $ 11.65 $ 10.61
----------------------------------
----------------------------------
TOTAL RETURN............................................................ 10.13%** 6.10%**
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses (net of fee waivers)......................................... 0.75%* 0.75%*
Expenses (excluding fee waivers)...................................... 2.26%* 4.98%*
Net investment income................................................. 0.28%* 1.55%*
Portfolio turnover rate................................................. 17.29% 5.58%
Net assets, end of period (in 000's).................................... $ 11,625 $ 4,923
</TABLE>
+ The Large Cap Equity Fund commenced operations on September 29, 1999.
* Annualized.
** Total return not annualized.
See notes to financial statements.
19
<PAGE>
1838 INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) APRIL 30, 2000
--------------------------------------------------------------------------------
NOTE 1 -- DESCRIPTION OF THE FUNDS
The 1838 Investment Advisors Funds (the "Trust") 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 three Funds: the 1838
International Equity Fund, the 1838 Fixed Income Fund and the 1838 Large
Cap Equity Fund (each a "Fund" and collectively, the "Funds"). The
investment objectives of each Fund are set forth below.
The 1838 International Equity Fund (the "International Fund") commenced
operations 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 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 (the "Large Cap Fund") commenced operations
on September 29, 1999. The Fund's investment objective is long-term total
return. The Fund seeks to achieve its objective by investing at least 90%
of its total assets in the common stock of U.S. companies with market
capitalizations 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. As of April 30, 2000, there were no securities
valued by, or under procedures established by, the Board of Trustees.
Federal Income Taxes. Each Fund is treated as a separate entity and
intends to remain qualified 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 that may differ from generally accepted accounting principles.
The difference is primarily due to the differing treatments for foreign
currency transactions for the International Fund. The Fixed Income Fund
distributes net investment income monthly. All other distributions by
each Fund will be made annually in December. Additional distributions may
be made by each Fund to the extent necessary.
20
<PAGE>
1838 INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000
--------------------------------------------------------------------------------
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Deferred Organizational Costs. Costs incurred by the International 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
Fund are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars on the following basis:
(i) market value of investment securities, assets and
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and
interest income and certain expenses at the rates of
exchange prevailing on the respective dates of such
transactions.
The International 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 market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments.
Reported net realized foreign exchange gains or losses 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, the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the
International Fund's books, and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains and
losses 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 Fund may enter into forward foreign currency exchange
contracts ("FFCEC"). Additionally, the International 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 were no FFCEC outstanding
on April 30, 2000.
Securities Transferred In-kind. Shareholders may periodically contribute
marketable securities to a respective Fund, upon approval of the Fund's
management, in exchange for capital shares of the respective Fund. The
exchange is conducted on a taxable basis, whereby any unrealized
appreciation or depreciation on the marketable securities on the date of
transfer is recognized by the shareholder and the Fund's basis in the
securities is the market value as of the date of transfer. The number of
shares issued to the shareholder is calculated by dividing the market
value of the marketable securities by the current net asset value per
share of the respective Fund on the date of transfer.
21
<PAGE>
1838 INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000
--------------------------------------------------------------------------------
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
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
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 six-month period ended April 30, 2000, purchases and sales of
investment securities, other than short-term investments, were as follows:
<TABLE>
<CAPTION>
International Fixed Income Large Cap
Fund Fund Fund
------------- ------------- ------------
<S> <C> <C> <C>
Purchases......................................... $36,503,638 $333,801,145 $ 7,581,842
Sales............................................. 28,431,084 297,014,926 1,239,623
</TABLE>
Purchases and sales of U.S. Government securities, during the six-month
period ended April 30, 2000, were as follows:
<TABLE>
<CAPTION>
International Fixed Income Large Cap
Fund Fund Fund
------------- ------------ -----------
<S> <C> <C> <C>
Purchases......................................... $19,496,796 $126,450,057 $16,496,405
Sales............................................. 19,500,000 120,781,675 16,500,000
</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 direct, wholly-owned subsidiary of MBIA,
Inc., 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 Fund, 0.50% for the Fixed Income Fund and 0.65% for the
Large Cap Fund. The Investment Advisor has voluntarily agreed to waive its
advisory fee and/or reimburse each Fund monthly to the extent that the
total operating expenses (excluding taxes, extraordinary expenses,
brokerage commissions and interest) will exceed the following annual rates
of each Fund's average daily net assets: 1.25% for the International Fund,
0.60% for the Fixed Income Fund and 0.75% for Large Cap Fund. This
undertaking may be rescinded at any time in the future.
22
<PAGE>
1838 INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000
--------------------------------------------------------------------------------
NOTE 4 -- ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES -- (CONTINUED)
The following table summarizes the advisory fees incurred by the Funds for
the six-month period ended April 30, 2000:
<TABLE>
<CAPTION>
Gross Advisory Fee Net Advisor
Advisory Fee Waiver Advisory Fee Reimbursement
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
International Fund....................... $378,139 $ -0- $378,139 $ -0-
Fixed Income Fund........................ 282,043 81,962 200,081 -0-
Large Cap Fund........................... 25,700 25,700 -0- 34,012
</TABLE>
1838 Investment Advisors, Inc. ("1838") also serves as Administrator to
the Trust pursuant to an Administration Agreement with the Trust on behalf
of each Fund. As Administrator, 1838 is responsible for services such as
financial reporting, compliance monitoring and corporate management. The
Trust pays 1838 a monthly asset-based fee at the annual rate of 0.06% of
each Fund's average daily net assets, with a minimum annual fee per Fund
of $15,000. For the six-month period ended April 30, 2000, 1838's
administration fees amount to $30,251, $33,845 and $7,466, for the
International Fund, the Fixed Income Fund and the Large Cap Fund,
respectively.
MBIA Municipal Investors Services Corporation ("MBIA MISC"), a direct,
wholly-owned subsidiary of MBIA, Inc., serves as Accounting Agent to the
Trust. As Accounting Agent, MBIA MISC 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. The Trust pays MBIA MISC
a monthly asset-based fee at the annual rate of $40,000, plus 0.03% of
each Fund's average daily net assets in excess of $50 million for the
Fixed Income Fund and the Large Cap Fund. The International Fund pays at
the annual rate of $60,000, plus 0.03% of average daily net assets in
excess of $50 million. For the six-month period ended April 30, 2000, MBIA
MISC's accounting fees amount to $37,531, $29,374 and $19,910, for the
International Fund, the Fixed Income Fund and the Large Cap Fund,
respectively.
MBIA MISC also serves as the Fund's transfer agent pursuant to a Transfer
Agency Agreement with the Trust. For these services, MBIA MISC receives an
annual fee per Fund of $20,000, and is reimbursed for out-of-pocket
expenses. For the six-month period ended April 30, 2000, MBIA MISC's
transfer agent fees amount to $9,958, $10,037 and $9,963, for the
International Fund, the Fixed Income Fund and the Large Cap Fund,
respectively.
MBIA Capital Management Corporation (the "Distributor"), a direct,
wholly-owned subsidiary of MBIA, Inc., entered into a Distribution
Agreement with the Trust to assist in securing purchasers for shares of
each Fund. The Distributor also directly or through its affiliates,
provides investor support services. The Distributor receives no
compensation for distributing the Funds' shares, except for reimbursement
of its out-of-pocket expenses.
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.
23
<PAGE>
1838 INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000
--------------------------------------------------------------------------------
NOTE 5 -- FUND SHARE TRANSACTIONS
At April 30, 2000, there were an unlimited number of shares of beneficial
interest with a $0.001 par value, authorized. The following table
summarizes the activity in shares of each Fund:
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
For the Six-Month Period
Ended April 30, 2000 For the Fiscal Year
(Unaudited) Ended October 31, 1999
-------------------------- -------------------------
Shares Amount Shares Amount
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold............................................ 1,217,176 $19,896,285 1,088,189 $13,964,098
Shares issued to shareholders in reinvestment
of distributions..................................... 277,928 4,352,350 315,651 3,926,698
Shares redeemed........................................ (594,471) (9,840,305) (254,808) (3,461,907)
---------- ----------- --------- -----------
Net increase........................................... 900,633 $14,408,330 1,149,032 $14,428,889
=========== ===========
Shares outstanding:
Beginning of period............................... 5,938,529 4,789,497
---------- ---------
End of period..................................... 6,839,162 5,938,529
========== =========
</TABLE>
FIXED INCOME FUND
<TABLE>
<CAPTION>
For the Six-Month Period
Ended April 30, 2000 For the Fiscal Year
(Unaudited) Ended October 31, 1999
-------------------------- -------------------------
Shares Amount Shares Amount
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold............................................ 1,930,723 $18,622,444 2,618,322 $26,346,425
Shares issued in exchange for securities transferred
in-kind (Note 2)..................................... 2,093,317 20,137,687 -- --
Shares issued to shareholders in reinvestment
of distributions..................................... 362,244 3,480,841 387,326 3,867,673
Shares redeemed........................................ (311,639) (3,015,995) (405,513) (4,035,234)
---------- ----------- --------- -----------
Net increase........................................... 4,074,645 $39,224,977 2,600,135 $26,178,864
=========== ===========
Shares outstanding:
Beginning of period............................... 9,604,582 7,004,447
---------- ---------
End of period..................................... 13,679,227 9,604,582
========== =========
</TABLE>
24
<PAGE>
1838 INVESTMENT ADVISORS FUNDS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000
--------------------------------------------------------------------------------
NOTE 5 -- FUND SHARE TRANSACTIONS -- (CONTINUED)
LARGE CAP FUND
<TABLE>
<CAPTION>
For the Six-Month Period
Ended April 30, 2000 For the Fiscal Year
(Unaudited) Ended October 31, 1999
-------------------------- -------------------------
Shares Amount Shares Amount
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold............................................ 591,289 $ 6,847,680 471,281 $ 4,733,341
Shares issued to shareholders in reinvestment
of distributions..................................... 1,965 21,856 -- --
Shares redeemed........................................ (59,034) (673,059) (7,337) (72,415)
---------- ----------- --------- -----------
Net increase........................................... 534,220 $ 6,196,477 463,944 $ 4,660,926
=========== ===========
Shares outstanding:
Beginning of period............................... 463,944 0
---------- ---------
End of period..................................... 998,164 463,944
========== =========
</TABLE>
NOTE 6 -- CONCENTRATION OF RISKS
The International 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
The following table shows the capital loss carryover available to offset
possible future capital gains for the Fixed Income Fund:
Amount Expiration Date
---------- ---------------
$ 71,283 10/31/2006
1,540,705 10/31/2007
NOTE 8 -- TERMINATION OF THE 1838 SMALL CAP EQUITY FUND
At a meeting held on March 20, 2000, the Board of Trustees of 1838
Investment Advisors Funds (the "Trust") unanimously approved the
termination of the 1838 Small Cap Equity Fund (the "Small Cap Fund"), a
separate series of the Trust, upon the redemption of all outstanding
shares of the Small Cap Fund. As of the close of business on March 31,
2000, all shareholders of the Small Cap Fund had redeemed all of their
Fund shares, and the Fund's assets were liquidated and distributed to the
shareholders.
25
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
INVESTMENT ADVISER
AND ADMINISTRATOR
------------------------------------------
1838 INVESTMENT ADVISORS, INC.
FIVE RADNOR CORPORATE CENTER
SUITE 320
100 MATSONFORD ROAD
RADNOR, PA 19087
DISTRIBUTOR
------------------------------------------
MBIA CAPITAL MANAGEMENT CORPORATION
113 KING STREET
ARMONK, NY 10504
ACCOUNTING AND
TRANSFER AGENT
------------------------------------------
MBIA MUNICIPAL INVESTORS SERVICE CORPORATION
113 KING STREET
ARMONK, NY 10504
CUSTODIAN
------------------------------------------
FIRST UNION NATIONAL BANK
123 S. BROAD STREET
PHILADELPHIA, PA 19101
LEGAL COUNSEL
------------------------------------------
PEPPER HAMILTON LLP
3000 TWO LOGAN SQUARE
EIGHTEENTH & ARCH STREETS
PHILADELPHIA, PA 19103
AUDITORS
------------------------------------------
PRICEWATERHOUSECOOPERS LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NY 10036
1838
INVESTMENT ADVISORS FUNDS
------------------------------------------
INTERNATIONAL EQUITY FUND
FIXED INCOME FUND
LARGE CAP EQUITY FUND
SEMI-ANNUAL REPORT
APRIL 30, 2000
SR 04/00
