UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR/A
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07384
NICHOLAS APPLEGATE INSTITUTIONAL FUNDS
(Exact name of registrant as specified in charter)
600 WEST BROADWAY, 30TH FLOOR, SAN DIEGO, CA 92101
(Address of principal executive offices)
CHARLES H. FIELD, JR.
C/O NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
600 WEST BROADWAY, 30TH FLOOR
SAN DIEGO, CA 92101
(Name and address of agent for service)
Copy to:
Deborah A. Wussow
c/o Nicholas-Applegate Capital Management
600 West Broadway, 30th Floor
San Diego, CA 92101
Registrant's telephone number, including area code: (619) 687-2988
Date of fiscal year end: March 31
Date of reporting period: March 31, 2005
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
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burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
[Logo NICHOLAS APPLEGATE INSTITUTIONAL FUNDS](Registered_Trademark)
Annual Report
Class I, II, III & IV Shares
March 31, 2005
Letter to Shareholders
Dear Fellow Shareholder,
Equity markets around the world turned in solid performance between April 1, 2004 and March 31, 2005. While ending the fiscal year in positive territory, the markets lacked a clear direction. Stock prices ebbed and flowed as both positive and negative factors shaped the investment landscape.
In this annual report, we review the performance of the financial markets and your investments during the fiscal year. We also share our outlook for the months ahead.
In the United States, broad equity indexes rose modestly, including the S&P 500 Index, which gained 6.69%. At levels near 20%, year-over-year quarterly earnings growth reported by companies during the period was as consistently strong as it had been in decades. The economy grew at a steady pace, with GDP expanding 4.4% in 2004 — the fastest growth since 1999. However, reports on the health of the economy were mixed, causing investors to question its underlying strength. In addition, volatile oil prices, a pickup in inflation and rising interest rates weighed on market sentiment. The Federal Reserve began the process of normalizing monetary policy by increasing the target funds rate by 0.25% on seven separate occasions. Despite these increases, rates remained low by historical standards.
In developed markets overseas, the MSCI EAFE Index rose an impressive 15.49% in U.S. dollar terms. Returns were more subdued in local currencies, as the dollar fell over 4% against a basket of currencies. From a macroeconomic perspective, growth in many countries was uninspiring: GDP grew by 2.6% in Japan and by 2% in the twelve euro nations in 2004. However, strong corporate earnings helped stock prices advance. Profits were close to a 25-year high as a percentage of GDP in Japan and Europe, driven in large part by companies’ restructuring efforts.
Equities delivered the strongest gains in developing markets, with the MSCI Emerging Markets Index rising 17.02% (in U.S. dollars). Economies in emerging countries worldwide experienced rapid growth, fueled by strong global demand for oil and other commodities. The Commodity Research Bureau (CRB) Index rose 11.3% during the period. In addition, policy reforms and debt restructuring have made many countries — and companies — more capable of sustaining growth.
Against this backdrop, nearly all of our mutual funds produced increases, led by the Emerging Markets Opportunities Fund, which advanced 26.32% since its May 2004 inception, and the International Growth Opportunities Fund, which rose 19.28% during the fiscal year. Additionally, many of our funds outpaced their benchmarks, including our Systematic strategies. These strategies delivered strong relative performance by leveraging our proprietary stock selection model in conjunction with traditional, fundamental analysis and portfolio construction tools that control unintended risks.
Nicholas-Applegate continues to place strong emphasis on controlling unintended risks in all of our mutual funds. We are constantly engaged in developing and using new techniques that help us analyze the portfolios’ exposures. For example, we recently implemented new risk management software that provides us with a different way of looking at the country and regional allocations in our non-U.S. funds.
We also continue to enhance our fundamental research process. During the period, we welcomed several highly qualified analysts to our U.S. and international investment teams. In addition, we’ve fine-tuned how the analysts research mid- and large-cap stocks by geographically broadening coverage by sector, where appropriate. For instance, we now have one analyst following the energy sector on a global basis, rather than one covering U.S. energy companies and another covering non-U.S energy companies. We continue to apply regional expertise to domestically focused industries, such as retail. We believe this combination of sector and regional specialists provides us with the best perspective for identifying companies poised to outperform.
In the new world of Regulation Fair Disclosure (Reg. FD), having a well-resourced, well-organized investment team is more important than ever. Reg. FD, which was passed in October 2000, requires that all material information about a company be disseminated publicly. All investors have simultaneous access to the news, and therefore, a more level playing field on which to analyze companies. Reg. FD has made our jobs as research analysts more challenging because we must now piece together mosaics of information rather than receive material information directly from companies. At the same time, Reg. FD has opened up greater opportunity to firms that are able to meet the challenges of conducting rigorous research. Nicholas-Applegate is one of those firms.
Looking forward, we expect the choppy market conditions that investors experienced in 2004 and early 2005 to continue. Economic activity is robust in many parts of the world, but there are signs of weakness. Inflationary pressures and higher interest rates in the United States have the potential to slow consumer spending and dampen investor sentiment. Economic data for Japan continues to deteriorate, and growth in Continental Europe remains tepid. That said, healthy corporate profits and increased business spending in the United States and many other markets paves the way for continued stock price appreciation.
In this environment, we believe that companies that can deliver strong earnings growth should once again command a premium valuation relative to others. Value stocks continued to outpace growth stocks during the fiscal year, and the valuation difference between growth and value globally is at its lowest level since the early 1990s. We also think this kind of environment is ideal for stock selection, particularly for investing in companies where positive change is leading to increased earnings estimates. We continue to search out those companies in all of our funds.
On behalf of everyone at Nicholas-Applegate, thank you for your participation in the Nicholas-Applegate Institutional Funds. We appreciate your business and look forward to serving your investment needs throughout the coming years.
Best Regards,
![Horacio A. Laleiras Signatire](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/valeiras_sign.jpg)
Horacio A. Valeiras, CFA
President and Chief Investment Officer
March 31, 2005
Table of Contents
Page | |
The Funds’ Review and Outlook, Performance and Schedule of Investments | |
U.S. Mini Cap Growth | 1 |
U.S. Emerging Growth | 6 |
U.S. Small Cap Value | 11 |
U.S. Large Cap Value | 16 |
U.S. Systematic Large Cap Growth | 20 |
U.S. Systematic SMID Growth | 24 |
U.S. Convertible | 29 |
Global Select | 34 |
International Growth | 38 |
International Growth Opportunities | 43 |
Emerging Markets Opportunities | 47 |
U.S. High Yield Bond | 51 |
The Funds’: | |
Shareholder Expense Example | 56 |
Financial Highlights | 60 |
Statements of Assets and Liabilities | 64 |
Statements of Operations | 66 |
Statements of Changes in Net Assets | 68 |
Notes to the Financial Statements | 72 |
Report of Independent Registered Public Accounting Firm | 78 |
Supplementary Information | 79 |
This report is authorized for distribution to shareholders and to others only when preceded or accompanied by a currently effective prospectus for Nicholas-Applegate Institutional Funds Class I, II, III & IV Shares. Distributor: Nicholas-Applegate Securities.
U.S. Mini Cap Growth Fund
Management Team: John C. McCraw, Lead Portfolio Manager; Travis T. Prentice, Portfolio Manager; K. Mathew Axline, Investment Analyst; Michael P. Giggie, Investment Analyst; Montie L. Weisenberger, Investment Analyst
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The U.S. Mini Cap Growth Fund seeks to maximize long-term capital appreciation by investing primarily in U.S. companies with “mini” market capitalizations that offer superior growth prospects.
Market Overview: Major U.S. stock market indexes posted moderate increases during the twelve months ended March 31, 2005. The economy grew at a solid pace during the period, despite giving off mixed signals along the way. Corporate profit growth was also strong due to accelerating demand and margin expansion fueled by productivity gains and the restructuring of balance sheets.
A number of concerns held back stock market gains. Oil prices rose nearly 55% during the fiscal year, stoking fears of inflation. The Federal Reserve began the process of normalizing interest rates from 45-year lows and increased the fed funds target rate by 1.75%. Military conflict persisted in Iraq, and there were threats of terrorism on major U.S. financial centers.
While the broad equity market generated a solid advance, returns of small-cap growth stocks were flat. Small, growing businesses are typically more sensitive to rising interest rates than larger companies because it becomes more expensive for them to finance their growth.
Within the small-cap growth universe, returns in most sectors were positive, led by strength in value-oriented groups, such as energy and industrials. In contrast, stocks in the higher-growth information technology and health care sectors declined.
Performance: From April 1, 2004 through March 31, 2005, the Fund’s Class I shares declined 8.05% and the Russell 2000 Growth Index rose 0.87%.
Portfolio Specifics: Stock selection in the industrials sector and an underweight in information technology companies had the largest favorable impact on performance versus the index. In contrast, issue selection in the information technology, consumer discretionary and materials sectors detracted from relative results. Given its focus on mini-cap stocks, the Fund’s weighted-average market cap was also unfavorable as the very smallest stocks within the Russell 2000 Growth Index underperformed.
Turning to individual stocks, two of the Fund’s best-performing holdings were American Science & Engineering, a maker of X-ray inspections systems, and Greenbrier, a railcar manufacturer. American Science & Engineering experienced increased sales of its mobile screening and parcel search systems. Greenbrier benefited from strong demand for railcars and had a sizeable order backlog.
Other notable performers were ATP Oil & Gas, an oil and gas producer; Matria Healthcare, a provider of disease management services; and Interchange, a supplier of paid-search services enabling businesses to reach consumers via targeted online advertising.
Market Outlook: Oil prices, inflation and interest rates are likely to remain key issues for investors in the months ahead. However, several factors pave the way for small-cap growth equities to move higher:
· Overall health of the economy
· Expectations that earnings growth for smaller companies will remain strong
· Attractive valuations
Regardless of how macroeconomic events unfold, we are confident our research-intensive investment process will reward shareholders over the long term.
Comparison of Change in Value of a $250,000 Investment in U.S. Mini Cap Growth Fund Class I Shares with the Russell 2000 Growth Index.
Annualized Total Returns | |||||
As of 3/31/05 | |||||
Since | |||||
1 Year | 5 Years | Inception | |||
- 8.05% | - 5.12% | 14.45% |
![U.S. Mini Cap Growth Fund](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/minicapgrowth.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund’s Class I shares compared with the Russell 2000 Growth Index for the periods indicated. Class I shares have a shareholder services fee of up to .25% of their average daily net assets. Class II shares are new and have no prior performance. The Fund’s Class I shares calculate their performance based upon the historical performance of their corresponding series of Nicholas-Applegate Mutual Funds (renamed ING Mutual Funds), adjusted to reflect all fees and expenses applicable to Class I shares. The Nicholas-Applegate Institutional Funds’ Class I shares were first available on May 7, 1999. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment. In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
The Russell 2000 Growth Index is an unmanaged index comprised of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index. The unmanaged Index differs from the Fund in composition, does not pay management fees or expenses and includes reinvested dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
U.S. Mini Cap Growth Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 97.5% | |||||
Advertising Services — 0.6% | |||||
Marchex, Inc. Cl. B* ## | 26,000 | $484,640 | |||
Aerospace/Defense-Equipment — 0.6% | |||||
Argon St, Inc.* | 16,300 | 537,900 | |||
Alternative Waste Technology — 0.9% | |||||
Calgon Carbon Corp.## | 85,780 | 732,561 | |||
Apparel Manufacturers — 1.0% | |||||
True Religion Apparel, Inc.* ## | 69,900 | 863,265 | |||
Applications Software — 0.9% | |||||
Moldflow Corp.* | 46,400 | 741,936 | |||
Audio/Video Products — 0.7% | |||||
American Technology Corp.* ## | 69,700 | 565,964 | |||
Auto/Truck Parts & Equipment-Replacement — 0.6% | |||||
Commercial Vehicle Group, Inc.* ## | 23,900 | 478,000 | |||
Auto-Medium & Heavy Duty Trucks — 0.8% | |||||
A. S. V., Inc.* ## | 17,500 | 693,787 | |||
Batteries/Battery Systems — 0.7% | |||||
Energy Conversion Devices, Inc.* ## | 25,740 | 585,070 | |||
Beverages-non-Alcoholic — 0.8% | |||||
Jones Soda Co.* ## | 114,000 | 638,400 | |||
Building-Maintenance & Service — 1.0% | |||||
Healthcare Services Group, Inc. | 36,050 | 874,212 | |||
Building-Residential/Commercial — 0.7% | |||||
Comstock Homebuilding | |||||
Companies, Inc.* | 24,560 | 522,883 | |||
Levitt Corp. Cl. A | 4,180 | 107,175 | |||
630,058 | |||||
Casino Hotels — 2.2% | |||||
MTR Gaming Group, Inc.* | 69,500 | 861,800 | |||
Monarch Casino & Resort, Inc.* ## | 31,100 | 618,890 | |||
Riviera Holdings Corp.* | 33,000 | 399,300 | |||
1,879,990 | |||||
Casino Services — 0.9% | |||||
Mikohn Gaming Corp.* ## | 59,900 | 752,344 | |||
Chemicals-Fibers — 0.6% | |||||
Zoltek Companies, Inc.* ## | 41,300 | 502,208 | |||
Circuit Boards — 0.6% | |||||
Multi-Fineline Electronix, Inc.* | 26,660 | 470,549 | |||
Coatings/Paint — 0.5% | |||||
CFC International, Inc.* | 18,000 | 397,980 | |||
Commercial Banks-Central US — 1.7% | |||||
Macatawa Bank Corp.## | 18,300 | 614,423 | |||
Mercantile Bank Corp.## | 20,600 | 842,128 | |||
1,456,551 | |||||
Commercial Banks-Eastern US — 0.8% | |||||
Yardville National Bancorp | 21,400 | 698,068 | |||
Commercial Banks-Southern US — 0.7% | |||||
First Bancorp## | 27,850 | 630,524 | |||
Commercial Banks-Western US — 5.3% | |||||
Center Financial Corp.## | 37,200 | 655,836 | |||
Cobiz, Inc. | 34,300 | 664,734 | |||
Hanmi Financial Corp. | 38,400 | 635,520 | |||
Placer Sierra Bancshares## | 23,600 | 542,092 | |||
Valley Bancorp* | 23,200 | 701,568 | |||
Vineyard National Bancorp Co.## | 23,500 | 643,665 | |||
West Coast Bancorp## | 25,700 | 611,660 | |||
4,455,075 | |||||
Communications Software — 0.8% | |||||
Digi International, Inc.* | 49,300 | $676,396 | |||
Computers — 0.8% | |||||
Icad, Inc.* ## | 167,240 | 635,512 | |||
Computers-Integrated Systems — 3.8% | |||||
3D Systems Corp.* ## | 32,400 | 611,388 | |||
Brooktrout, Inc.* | 14,000 | 157,500 | |||
Catapult Communications Corp.* ## | 27,800 | 593,530 | |||
Integral Systems, Inc. | 37,800 | 867,888 | |||
Radiant Systems, Inc.* ## | 97,100 | 951,580 | |||
3,181,886 | |||||
Computers-Memory Devices — 0.6% | |||||
Komag, Inc.* | 23,500 | 525,225 | |||
Computers-Peripheral Equipment — 0.7% | |||||
Rimage Corp.* | 28,000 | 555,800 | |||
Decision Support Software — 1.0% | |||||
SPSS, Inc.* | 47,400 | 824,286 | |||
Diagnostic Equipment — 0.9% | |||||
Cholestech Corp.* | 58,800 | 592,704 | |||
Neurometrix, Inc.* | 21,500 | 205,325 | |||
798,029 | |||||
Diagnostic Kits — 0.7% | |||||
Meridian Bioscience, Inc. | 37,800 | 563,220 | |||
Diversified Minerals — 0.0% | |||||
Charles & Colvard, Ltd.* | 1,400 | 17,850 | |||
Drug Delivery Systems — 0.6% | |||||
I-Flow Corp.* ## | 33,500 | 530,305 | |||
E-Commerce/Products — 0.8% | |||||
Nutrisystem, Inc.* ## | 113,900 | 717,570 | |||
Electronic Components-Miscellaneous — 1.0% | |||||
Labarge, Inc.* | 65,800 | 861,322 | |||
Electronic Components-Semiconductors — 1.3% | |||||
MIPS Technologies, Inc. Cl. A* | 49,400 | 568,100 | |||
Netlogic Microsystems, Inc.* ## | 43,400 | 538,594 | |||
1,106,694 | |||||
Electronic Design Automation — 1.1% | |||||
Ansoft Corp.* | 34,500 | 930,810 | |||
Electronic Forms — 0.8% | |||||
Datatrak International, Inc.* ## | 42,100 | 707,280 | |||
Electronic Measure Instruments — 0.8% | |||||
Zygo Corp.* ## | 54,000 | 699,840 | |||
Electronic Security Devices — 2.0% | |||||
American Science & Engineering, Inc.* | 16,500 | 737,715 | |||
LoJack Corp.* | 66,900 | 921,213 | |||
1,658,928 | |||||
E-Marketing/Information — 0.9% | |||||
Fastclick, Inc. | 15,000 | 180,000 | |||
Intermix Media, Inc.* ## | 73,400 | 539,490 | |||
719,490 | |||||
Energy-Alternate Sources — 0.8% | |||||
Syntroleum Corp.* | 54,300 | 664,632 | |||
Engineering/R & D Services — 1.1% | |||||
Baker Michael Corp.* | 41,500 | 915,075 | |||
Enterprise Software/Services — 0.9% | |||||
Emageon, Inc.* | 37,800 | 678,888 | |||
The Ultimate Software Group, Inc.* | 5,800 | 92,684 | |||
771,572 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
E-Services/Consulting — 1.5% | |||||
Access Integrated Technologies, Inc. | 4,200 | $27,888 | |||
Niku Corp.* | 28,400 | 512,620 | |||
Perficient, Inc.* ## | 90,030 | 692,331 | |||
1,232,839 | |||||
Food-Wholesale/Distribution — 0.9% | |||||
Spartan Stores, Inc.* | 71,100 | 756,504 | |||
Human Resources — 0.7% | |||||
Barrett Business Services, Inc.* | 27,000 | 592,380 | |||
Industrial Automation/Robotics — 0.5% | |||||
Hurco Companies, Inc.* ## | 29,200 | 407,340 | |||
Internet Financial Services — 0.6% | |||||
E-Loan, Inc.* ## | 207,600 | 550,140 | |||
Internet Security — 0.7% | |||||
Vasco Data Security International, Inc.* ## | 90,100 | 566,729 | |||
Internet Telephone — 0.5% | |||||
Deltathree, Inc.* ## | 110,000 | 423,500 | |||
Investment Companies — 0.6% | |||||
Gladstone Capital Corp.## | 25,200 | 534,744 | |||
Machinery-Farm — 0.9% | |||||
Gehl Co.* | 29,200 | 779,932 | |||
Machinery-General Industry — 0.8% | |||||
Flow International Corp.* | 112,600 | 677,852 | |||
Machinery-Thermal Process — 0.7% | |||||
Turbochef Technologies, Inc.* ## | 37,566 | 559,358 | |||
Medical Imaging Systems — 0.7% | |||||
Merge Technologies, Inc.* ## | 34,400 | 603,720 | |||
Medical Information Systems — 3.3% | |||||
Allscripts Healthcare Solutions, Inc.* ## | 64,700 | 925,210 | |||
Computer Programs & Systems, Inc.## | 34,400 | 965,952 | |||
Quality Systems, Inc.## | 21,800 | 923,012 | |||
2,814,174 | |||||
Medical Instruments — 0.8% | |||||
Angiodynamics, Inc.* | 38,700 | 708,210 | |||
Medical Laser Systems — 1.6% | |||||
Cutera, Inc.* ## | 43,100 | 830,968 | |||
Palomar Medical Technologies, Inc.* | 20,100 | 542,097 | |||
1,373,065 | |||||
Medical Products — 2.9% | |||||
HealthTronics Surgical Services, Inc.* | 90,600 | 974,856 | |||
Lifecore Biomedical, Inc.* | 47,500 | 844,075 | |||
NMT Medical, Inc.* | 80,800 | 662,560 | |||
2,481,491 | |||||
Medical-Biomedical/Genetics — 1.3% | |||||
Myriad Genetics, Inc.* ## | 24,400 | 448,716 | |||
Orchid Biosciences, Inc.* | 57,800 | 679,728 | |||
1,128,444 | |||||
Medical-Hospitals — 1.1% | |||||
Horizon Health Corp.* ## | 21,900 | 930,750 | |||
Medical-Outpatient/Home Medical Care — 2.6% | |||||
Amedisys, Inc.* | 19,560 | 591,690 | |||
Option Care, Inc. | 37,800 | 778,302 | |||
Radiation Therapy Services, Inc.* ## | 44,800 | 850,304 | |||
2,220,296 | |||||
Metal Processors & Fabrication — 1.0% | |||||
Circor International, Inc.## | 32,600 | 803,590 | |||
Non-Ferrous Metals — 0.7% | |||||
RTI International Metals, Inc.* | 23,600 | 552,240 | |||
Oil & Gas Drilling — 1.1% | |||||
Pioneer Drilling Co.* | 70,000 | $963,900 | |||
Oil Companies-Exploration & Production — 2.6% | |||||
GMX Resources, Inc.* ## | 48,600 | 559,386 | |||
McMoran Exploration Co.* ## | 42,880 | 861,888 | |||
Parallel Petroleum Corp.* | 105,800 | 777,630 | |||
2,198,904 | |||||
Oil Field Machinery & Equipment — 1.0% | |||||
Lufkin Industries Inc. | 17,200 | 830,588 | |||
Oil-Field Services — 0.8% | |||||
Hornbeck Offshore Services* | 25,600 | 641,536 | |||
Patient Monitoring Equipment — 2.1% | |||||
Aspect Medical Systems, Inc.* ## | 37,800 | 816,102 | |||
Lifeline Systems, Inc.* | 30,400 | 921,728 | |||
1,737,830 | |||||
Physical Practice Management — 2.0% | |||||
Matria Healthcare, Inc.* ## | 31,080 | 954,467 | |||
Qmed, Inc.* ## | 66,500 | 731,500 | |||
1,685,967 | |||||
Physical Therapy/Rehabilitation Centers — 2.4% | |||||
Paincare Holdings, Inc.* ## | 202,900 | 1,014,500 | |||
Psychiatric Solutions, Inc.* | 21,500 | 989,000 | |||
2,003,500 | |||||
Property/Casualty Insurance — 2.5% | |||||
American Physicians Cap, Inc.* | 24,700 | 846,469 | |||
Fpic Insurance Group, Inc.* ## | 21,500 | 691,225 | |||
National Interstate Corp. | 33,100 | 556,080 | |||
2,093,774 | |||||
Real Estate Management/Services — 0.9% | |||||
Tarragon Corp.* ## | 36,350 | 733,907 | |||
Research & Development — 1.5% | |||||
Kendle International, Inc.* | 63,300 | 727,950 | |||
SFBC International, Inc.* | 15,600 | 549,744 | |||
1,277,694 | |||||
Retail-Apparel/Shoe — 0.8% | |||||
Goody’s Family Clothing, Inc.## | 72,200 | 651,966 | |||
Retail-Catalog Shopping — 0.4% | |||||
RedEnvelope, Inc.* ## | 42,900 | 341,913 | |||
Retail-Regional Department Stores — 0.9% | |||||
Retail Ventures, Inc.* | 86,300 | 786,193 | |||
Retail-Restaurants — 1.7% | |||||
BJ’s Restaurants, Inc.* ## | 46,400 | 899,696 | |||
Rubio’s Restaurants, Inc.* | 50,500 | 505,000 | |||
1,404,696 | |||||
Retirement/Aged Care — 1.1% | |||||
American Retirement Corp.* | 66,800 | 971,272 | |||
Telecommunications Equipment — 0.5% | |||||
Sunrise Telecommunication, Inc. | 165,300 | 446,310 | |||
Telecommunications Equipment Fiber Optics — 0.5% | |||||
Essex Corp.* | 28,110 | 459,036 | |||
Textile-Apparel — 1.0% | |||||
Cherokee, Inc.## | 25,100 | 840,348 | |||
Textile-Products — 0.9% | |||||
Innovo Group, Inc.* | 160,300 | 795,088 | |||
Therapeutics — 0.4% | |||||
Viacell, Inc.* | 42,800 | 322,712 | |||
Transport-Equipment & Leasing — 0.7% | |||||
Greenbrier Cos., Inc.## | 18,000 | 631,620 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
Transport-Marine — 0.9% | |||||
K-Sea Transportation Partners L.P. | 21,100 | $725,840 | |||
Transport-Services — 0.9% | |||||
Hub Group, Inc. Cl. A* | 12,300 | 770,841 | |||
Transport-Truck — 0.8% | |||||
Marten Transport, Ltd.* | 31,100 | 663,363 | |||
Wireless Equipment — 0.7% | |||||
SpectraLink Corp.## | 40,800 | 576,096 | |||
TOTAL COMMON STOCK | |||||
(Cost: $75,957,113) | 82,382,996 | ||||
RIGHTS — 0.0% | |||||
Consumer Production - Miscellaneous — 0.0% | |||||
American Banknote Corp. — 10/01/07 | |||||
(Cost: $0) | 76 | $0 | |||
Principal | |||||
Amount | Value | ||||
SHORT TERM INVESTMENTS — 27.1% | |||||
Money Market Funds — 24.7% | |||||
Allianz Dresdner Daily Asset Fund** ^ | $20,861,800 | $20,861,800 | |||
Time Deposit — 2.4% | |||||
Wells Fargo Bank | |||||
2.290%, 04/01/05 | 2,010,589 | 2,010,589 | |||
TOTAL SHORT TERM INVESTMENTS | |||||
(Cost: $22,872,389) | 22,872,389 | ||||
TOTAL INVESTMENTS —124.6% | |||||
(Cost: $98,829,502) | 105,255,385 | ||||
LIABILITIES IN EXCESS OF OTHER | |||||
ASSETS — (24.6%) | (20,809,032) | ||||
NET ASSETS — 100.0% | $84,446,353 |
* Non-income producing securities.
** All of the security is purchased with cash collateral proceeds from securities loans.
^ Affiliated institutional money market fund.
## All or a portion of the Fund’s holdings in this security was on loan as of 03/31/05.
Schedule of Investments by Industry as of March 31, 2005
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 1.7% | ||
Communications | 7.1 | ||
Consumer, Cyclical | 12.6 | ||
Consumer, Non-cyclical | 25.6 | ||
Energy | 6.3 | ||
Financial | 12.5 | ||
Industrial | 14.8% | ||
Technology | 16.9 | ||
Short Term Investments | 27.1 | ||
Liabilities in excess of other assets | (24.6) | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
U.S. Emerging Growth Fund
Management Team: John C. McCraw, Lead Portfolio Manager; Travis T. Prentice, Portfolio Manager; K. Mathew Axline, Investment Analyst; Michael P. Giggie, Investment Analyst; Montie L. Weisenberger, Investment Analyst
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The U.S. Emerging Growth Fund seeks to maximize long-term capital appreciation through investments primarily in U.S. companies with market capitalizations similar to the Russell 2000 Growth Index at time of purchase.
Market Overview: The U.S. stock market, as measured by the S&P 500 Index, rose 6.69% during the fiscal year ended March 31, 2005. Gains were concentrated in the fourth quarter of 2004 when a short-lived drop in oil prices, a pickup in merger activity and a decisive outcome to the presidential election boosted investor enthusiasm.
While corporate profits remained strong, equities languished during much of the period due to:
· Surging oil prices, which hit a record high of more than $57 a barrel in mid-March
· Tighter monetary policy, as the Federal Reserve began raising interest rates midyear 2004
· Mixed economic indicators, which obscured the solid rate of economic expansion
Within the universe of equities, performance was mixed. Value stocks posted solid gains across market capitalizations, while growth stocks — with the exception of mid caps — struggled to stay in positive territory. Value stocks have had a good run through this stage of the economic cycle due to historically low interest rates and robust demand for basic materials and commodities. At period-end, valuations of small-cap growth stocks were well below historical norms relative to small-cap value.
Performance: The Fund’s Class I shares gained 1.66% during the twelve months ended March 31, 2005 versus a 0.87% increase in the Russell 2000 Growth Index.
Portfolio Specifics: Except for information technology, the Fund’s holdings in every sector of investment generated positive returns. Positions in the energy sector produced the strongest gains.
On a comparative basis, the Fund outperformed the Russell 2000 Growth Index. Stock selection in the health care sector had the largest positive impact on relative results. Within health care, some of the best-performing names were Immucor, a manufacturer of blood-testing systems; Intuitive Surgical, a maker of products used in minimally invasive surgical techniques; and OSI Pharmaceuticals, a biotechnology firm specializing in oncology treatments.
Relative performance was also helped by an overweight in energy stocks and issue selection among energy, industrials and materials companies. Carpenter Technology, a maker of specialty metals, was a top performer in the industrials sector on strong demand from all of its end markets, particularly the aerospace industry.
Stock selection in the information technology sector was the main detractor from relative performance, where holdings in the Internet software and services industry were especially weak. Issue selection and an overweight in consumer discretionary stocks was also unfavorable.
Market Outlook: The outlook for small-cap stocks has moderated to some extent in recent months. While earnings growth expectations for smaller companies remain strong, the prospect of the Fed raising interest rates more aggressively to curb inflation is weighing on market sentiment.
A focus on individual stock selection remains critical in this environment. We are confident that our bottom-up investment approach will continue to lead us to small, rapidly growing companies with strong fundamentals.
Comparison of Change in Value of a $250,000 Investment in U.S. Emerging Growth Fund Class I Shares with the Russell 2000 Growth Index.
Annualized Total Returns | ||||
As of 3/31/05 | ||||
1 Year | 5 Years | 10 Years | ||
1.66% | - 12.43% | 7.38% |
![U.S. Emerging Growth Fund Class I Shares](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/emergrow1.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund’s Class I shares compared with the Russell 2000 Growth Index for the periods indicated. Class I shares have a shareholder services fee of up to .25% of their average daily net assets. The Fund’s Class I shares calculate their performance based upon the historical performance of their corresponding series of Nicholas-Applegate Mutual Funds (renamed ING Mutual Funds), adjusted to reflect all fees and expenses applicable to Class I shares. The Nicholas-Applegate Institutional Funds’ Class I shares were first available on May 7, 1999. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment. In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
The Russell 2000 Growth Index is an unmanaged index comprised of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index. The unmanaged Index differs from the Fund in composition, does not pay management fees or expenses and includes reinvested dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
U.S. Emerging Growth Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 96.3% | |||||
Advanced Materials/Products — 0.6% | |||||
Hexcel Corp.* ## | 6,400 | $99,264 | |||
Advertising Services — 0.6% | |||||
Ventiv Health, Inc.* | 4,000 | 92,000 | |||
Aerospace/Defense — 1.8% | |||||
Armor Holdings, Inc.* | 1,700 | 63,053 | |||
Esterline Technologies Corp.* | 3,100 | 107,105 | |||
Titan Corp.* | 6,200 | 112,592 | |||
282,750 | |||||
Aerospace/Defense-Equipment — 0.7% | |||||
BE Aerospace, Inc.* | 9,700 | 116,400 | |||
Apparel Manufacturers — 2.0% | |||||
Carter’s, Inc.* ## | 3,400 | 135,150 | |||
Oshkosh B’Gosh, Inc. Cl. A | 3,600 | 109,800 | |||
Quiksilver, Inc.* | 2,500 | 72,575 | |||
317,525 | |||||
Applications Software — 0.7% | |||||
Serena Software, Inc.* ## | 4,800 | 114,048 | |||
Auto/Truck Parts & Equipment-Original — 0.2% | |||||
Tenneco Automotive, Inc.* ## | 2,900 | 36,134 | |||
Auto-Medium & Heavy Duty Trucks — 0.6% | |||||
A. S. V., Inc.* ## | 2,500 | 99,112 | |||
Building & Construction Products-Miscellaneous — 1.4% | |||||
NCI Building Systems, Inc.* | 3,700 | 142,820 | |||
Simpson Manufacturing Co., Inc. | 2,300 | 71,070 | |||
213,890 | |||||
Building Products-Cement/Aggregate — 0.3% | |||||
Texas Industries, Inc. | 1,000 | 53,750 | |||
Building Products-Light Fixtures — 0.8% | |||||
Genlyte Group, Inc.* | 1,400 | 125,958 | |||
Building-Mobil Home/Manufactured Housing — 0.4% | |||||
Champion Enterprises, Inc.* | 7,300 | 68,620 | |||
Building-Residential/Commercial — 0.5% | |||||
Levitt Corp. Cl. A | 3,100 | 79,484 | |||
Cellular Telecommunications — 0.4% | |||||
Alamosa Holdings, Inc.* ## | 5,300 | 61,851 | |||
Coal — 0.5% | |||||
Foundation Coal Holdings, Inc. | 3,000 | 70,530 | |||
Commercial Banks-Western US — 0.6% | |||||
Silicon Valley Bancshares* | 2,300 | 101,338 | |||
Commercial Services-Finance — 0.7% | |||||
Euronet Worldwide, Inc.* ## | 3,800 | 108,490 | |||
Computer Aided Design — 0.6% | |||||
ANSYS, Inc.* | 2,700 | 92,367 | |||
Computer Services — 0.5% | |||||
Anteon International Corp.* | 2,200 | 85,646 | |||
Computers-Integrated Systems — 0.4% | |||||
Brocade Communications Systems, Inc.* | 9,800 | 58,016 | |||
Computers-Memory Devices — 0.6% | |||||
Komag, Inc.* ## | 4,400 | 98,340 | |||
Consulting Services — 0.9% | |||||
Charles River Associates, Inc.* ## | 1,600 | 78,960 | |||
Navigant Consulting, Inc.* | 2,500 | 68,075 | |||
147,035 | |||||
Consumer Products-Miscellaneous — 1.3% | |||||
Jarden Corp.* | 4,300 | 197,284 | |||
Cosmetics & Toiletries — 0.7% | |||||
Chattem, Inc.* ## | 2,400 | $106,728 | |||
Data Processing/Management — 0.9% | |||||
CSG Systems International, Inc.* | 5,000 | 81,450 | |||
eFunds Corp.* | 2,400 | 53,568 | |||
135,018 | |||||
Diagnostic Equipment — 1.9% | |||||
Cytyc Corp.* | 3,400 | 78,234 | |||
Gen-Probe, Inc.* | 1,800 | 80,208 | |||
Immucor, Inc.* | 4,825 | 145,667 | |||
304,109 | |||||
Diversified Manufacturing Operations — 1.2% | |||||
Esco Technologies, Inc.* | 1,200 | 96,420 | |||
Jacuzzi Brands, Inc.* | 8,700 | 84,912 | |||
181,332 | |||||
Drug Delivery Systems — 0.5% | |||||
Conor Medsystems, Inc.* | 4,800 | 78,192 | |||
E-Commerce/Products — 0.4% | |||||
Stamps.Com, Inc.* | 4,100 | 68,060 | |||
Electronic Components-Miscellaneous — 0.8% | |||||
Nam Tai Electronics, Inc.## | 5,000 | 133,000 | |||
Electronic Components-Semiconductors — 1.1% | |||||
Microsemi Corp.* | 5,100 | 83,079 | |||
MIPS Technologies, Inc. Cl. A* | 8,400 | 96,600 | |||
179,679 | |||||
Electronic Connectors — 0.6% | |||||
Thomas & Betts Corp.* ## | 3,000 | 96,900 | |||
Electronic Design Automation — 0.4% | |||||
Magma Design Automation* ## | 5,400 | 64,098 | |||
Electronic Measure Instruments — 1.9% | |||||
Itron, Inc.* ## | 5,500 | 163,020 | |||
Measurement Specialties, Inc.* ## | 2,500 | 57,500 | |||
Trimble Navigation, Ltd.* | 2,100 | 71,001 | |||
291,521 | |||||
Electronic Security Devices — 0.6% | |||||
American Science & Engineering, Inc.* | 2,100 | 93,891 | |||
E-Marketing/Information — 0.5% | |||||
Digital River, Inc.* | 2,600 | 81,016 | |||
Energy-Alternate Sources — 1.1% | |||||
Headwaters, Inc.* ## | 2,400 | 78,768 | |||
Syntroleum Corp.* | 8,200 | 100,368 | |||
179,136 | |||||
Engineering/R & D Services — 0.6% | |||||
URS Corp.* | 3,400 | 97,750 | |||
Enterprise Software/Services — 0.5% | |||||
Mantech International Corp. Cl. A* | 3,300 | 76,131 | |||
Entertainment Software — 0.5% | |||||
The 9, Ltd. — ADR* | 4,600 | 78,982 | |||
Finance-Credit Card — 0.5% | |||||
Metris Companies, Inc.* | 7,400 | 85,766 | |||
Finance-Investment Bankers/Brokers — 0.8% | |||||
GFI Group, Inc.* | 2,000 | 53,660 | |||
Investment Technology Group, Inc.* | 4,300 | 75,250 | |||
128,910 | |||||
Food-Wholesale/Distribution — 2.0% | |||||
Performance Food Group Co.* | 5,000 | 138,400 | |||
United Natural Foods, Inc.* | 6,300 | 180,369 | |||
318,769 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
Hotels & Motels — 0.7% | |||||
Orient Express Hotels, Ltd. Cl. A | 4,000 | $104,400 | |||
Human Resources — 3.3% | |||||
Heidrick & Struggles International, Inc.* | 4,300 | 158,111 | |||
Hudson Highland Group, Inc.* | 8,000 | 136,720 | |||
Korn/Ferry International* | 6,100 | 116,083 | |||
Labor Ready, Inc.* | 5,800 | 108,170 | |||
519,084 | |||||
Internet Content-Info/News — 0.6% | |||||
Cnet Networks, Inc.* ## | 10,000 | 94,400 | |||
Internet Infrastructure Software — 1.2% | |||||
Openwave Systems, Inc.* ## | 6,600 | 80,454 | |||
RADWARE, Ltd.* | 4,600 | 107,962 | |||
188,416 | |||||
Lasers-Systems/Components — 1.1% | |||||
Cymer, Inc.* | 3,300 | 88,341 | |||
Electro Scientific Industries, Inc.* | 4,300 | 83,377 | |||
171,718 | |||||
Machinery-Thermal Process — 0.5% | |||||
Global Power Equipment Group, Inc.* | 8,500 | 81,430 | |||
Machinery-Construction & Mining — 0.9% | |||||
Bucyrus International, Inc. Cl. A | 1,800 | 70,308 | |||
JLG Industries, Inc. | 3,300 | 71,115 | |||
141,423 | |||||
Machinery-General Industry — 1.6% | |||||
Gardner Denver, Inc.* | 1,800 | 71,118 | |||
Manitowoc Co., Inc. | 2,000 | 80,780 | |||
Wabtec Corp. | 4,800 | 98,352 | |||
250,250 | |||||
Medical Information Systems — 1.6% | |||||
Allscripts Healthcare Solutions, Inc.* ## | 10,200 | 145,860 | |||
Quality Systems, Inc. | 2,600 | 110,084 | |||
255,944 | |||||
Medical Instruments — 1.7% | |||||
Angiodynamics, Inc.* | 3,500 | 64,050 | |||
Intuitive Surgical, Inc.* | 1,300 | 59,111 | |||
Symmetry Medical, Inc.* | 3,500 | 66,570 | |||
Ventana Medical Systems, Inc.* ## | 1,900 | 71,174 | |||
260,905 | |||||
Medical Laser Systems — 1.5% | |||||
Intralase Corp.* ## | 4,700 | 78,678 | |||
Laserscope* ## | 4,700 | 149,178 | |||
227,856 | |||||
Medical Products — 0.6% | |||||
West Pharmaceutical Services | 3,700 | 88,430 | |||
Medical-Biomedical/Genetics — 1.9% | |||||
Keryx Biopharmaceuticals, Inc.* ## | 8,800 | 117,568 | |||
Northfield Laboratories, Inc.* ## | 4,800 | 54,000 | |||
Serologicals Corp.* ## | 5,500 | 134,420 | |||
305,988 | |||||
Medical-Drugs — 1.0% | |||||
Prestige Brand Holdings, Inc.* | 6,500 | 114,725 | |||
Vaxgen, Inc.* ## | 2,800 | 34,944 | |||
149,669 | |||||
Medical-Outpatient/Home Medical Care — 1.3% | |||||
Amedisys, Inc.* | 3,200 | 96,800 | |||
Option Care, Inc. | 4,700 | 96,773 | |||
193,573 | |||||
Motion Pictures & Services — 0.7% | |||||
Lions Gate Entertainment Corp.* | 9,500 | $104,975 | |||
Multilevel Direct Selling — 0.5% | |||||
Nu Skin Enterprises, Inc. Cl. A | 3,300 | 74,283 | |||
Networking Products — 1.1% | |||||
Aeroflex, Inc.* | 8,700 | 81,171 | |||
Ixia* | 5,200 | 92,508 | |||
173,679 | |||||
Non-Hazardous Waste Disposal — 0.4% | |||||
Waste Connections, Inc.* | 2,000 | 69,500 | |||
Oil & Gas Drilling — 1.8% | |||||
Grey Wolf, Inc.* ## | 15,300 | 100,674 | |||
Pioneer Drilling Co.* | 6,600 | 90,882 | |||
Todco Cl. A* | 3,600 | 93,024 | |||
284,580 | |||||
Oil Companies-Exploration & Production — 2.4% | |||||
Cheniere Energy, Inc.* | 700 | 45,157 | |||
Range Resources Corp. | 3,900 | 91,104 | |||
Swift Energy Co.* ## | 3,200 | 91,008 | |||
Toreador Resources Corp.* | 3,500 | 63,525 | |||
Unit Corp.* | 1,800 | 81,306 | |||
372,100 | |||||
Oil-Field Services — 3.5% | |||||
Core Laboratories NV* | 4,000 | 102,680 | |||
Cal Dive International, Inc.* | 1,300 | 58,890 | |||
Global Industries, Ltd.* | 9,200 | 86,480 | |||
Oceaneering International, Inc.* | 2,400 | 90,000 | |||
Superior Energy Services, Inc.* | 6,000 | 103,200 | |||
Tetra Technologies, Inc.* | 3,800 | 108,072 | |||
549,322 | |||||
Pharmacy Services — 0.4% | |||||
Healthextras, Inc.* | 3,800 | 63,270 | |||
Physical Practice Management — 1.6% | |||||
American Healthways, Inc.* ## | 4,200 | 138,684 | |||
Matria Healthcare, Inc.* ## | 3,700 | 113,627 | |||
252,311 | |||||
Physical Therapy/Rehabilitation Centers — 0.8% | |||||
Psychiatric Solutions, Inc.* | 2,800 | 128,800 | |||
Property/Casualty Insurance — 0.6% | |||||
Ohio Casualty Corp.* | 4,200 | 96,516 | |||
Real Estate Management/Services — 2.2% | |||||
Jones Lang LaSalle, Inc.* | 3,400 | 158,610 | |||
Tarragon Corp.* ## | 3,300 | 66,627 | |||
Trammell Crow Co.* | 5,700 | 117,249 | |||
342,486 | |||||
Real Estate Operation/Development — 0.3% | |||||
Corrections Corp. of America* | 1,200 | 46,320 | |||
Research & Development — 0.9% | |||||
SFBC International, Inc.* | 3,800 | 133,912 | |||
Resorts/Theme Parks — 1.3% | |||||
Great Wolf Resorts, Inc.* | 4,800 | 119,760 | |||
Vail Resorts, Inc.* ## | 3,300 | 83,325 | |||
203,085 | |||||
Respiratory Products — 0.7% | |||||
Respironics, Inc.* | 2,000 | 116,540 | |||
Retail-Apparel/Shoe — 1.6% | |||||
Children’s Place Retail Stores, Inc.* | 3,200 | 152,800 | |||
Jos A Bank Clothiers, Inc.* ## | 3,225 | 94,492 | |||
247,292 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
Retail-Leisure Products — 0.6% | |||||
MarineMax, Inc.* | 3,000 | $93,540 | |||
Retail-Pawn Shops — 0.5% | |||||
Cash America International, Inc. | 3,900 | 85,527 | |||
Retail-Restaurants — 1.8% | |||||
Buffalo Wild Wings, Inc.* ## | 3,300 | 124,839 | |||
CKE Restaurants, Inc.* ## | 5,500 | 87,175 | |||
McCormick & Schmick’s Seafood | |||||
Restaurants, Inc.* | 4,100 | 68,552 | |||
280,566 | |||||
Seismic Data Collection — 0.6% | |||||
Veritas DGC, Inc.* | 3,300 | 98,868 | |||
Semiconductor Components-Integrated Circuits — 0.8% | |||||
Sigmatel, Inc.* | 1,500 | 56,145 | |||
Standard Microsystems Corp.* | 4,000 | 69,440 | |||
125,585 | |||||
Semiconductor Equipment — 4.5% | |||||
Brooks Automation, Inc.* | 6,900 | 104,742 | |||
Credence Systems Corp.* ## | 15,200 | 120,232 | |||
Entegris, Inc.* | 11,300 | 111,757 | |||
Photronics, Inc.* | 4,900 | 88,690 | |||
Rudolph Technologies, Inc.* ## | 4,800 | 72,288 | |||
Tessera Technologies, Inc.* ## | 2,000 | 86,460 | |||
Varian Semiconductor Equipment | |||||
Associates, Inc.* | 3,200 | 121,632 | |||
705,801 | |||||
Steel Pipe &Tube — 1.5% | |||||
Maverick Tube Corp.* | 2,500 | 81,275 | |||
NS Group, Inc.* | 4,700 | 147,627 | |||
228,902 | |||||
Steel-Producers — 0.9% | |||||
AK Steel Holding Corp.* | 6,400 | 70,784 | |||
Carpenter Technology Corp. | 1,300 | 77,233 | |||
148,017 | |||||
Superconductor Products & Systems — 1.0% | |||||
Intermagnetics General Corp.* | 6,150 | 149,691 | |||
Telecommunications Equipment Fiber Optics — 0.6% | |||||
Harmonic, Inc.* ## | 9,900 | 94,644 | |||
Telecommunications Services — 0.6% | |||||
Premiere Global Services, Inc.* | 8,200 | 92,824 | |||
Therapeutics — 2.4% | |||||
Bone Care International, Inc.* | 4,400 | 114,136 | |||
Eyetech Pharmaceuticals, Inc.* | 2,700 | 74,250 | |||
Nabi Biopharmaceuticals* | 8,600 | 107,328 | |||
NitroMed, Inc.* ## | 2,900 | 50,199 | |||
United Therapeutics Corp.* | 700 | 31,987 | |||
377,900 | |||||
Transactional Software — 0.4% | |||||
Open Solutions, Inc.* ## | 3,200 | $63,456 | |||
Transport-Equipment & Leasing — 0.8% | |||||
Greenbrier Cos, Inc. | 3,700 | 129,833 | |||
Transport-Marine — 1.2% | |||||
Arlington Tankers, Ltd. | 3,300 | 77,550 | |||
Diana Shipping, Inc.* | 7,000 | 115,780 | |||
193,330 | |||||
Transport-Services — 1.0% | |||||
Hub Group, Inc. Cl. A* | 2,400 | 150,408 | |||
Transport-Truck — 0.5% | |||||
Arkansas Best Corp. | 2,000 | 75,560 | |||
Vitamins & Nutrition Products — 0.6% | |||||
Usana Health Sciences, Inc. | 2,000 | 94,600 | |||
Wire & Cable Products — 0.6% | |||||
General Cable Corp.* | 7,200 | 86,904 | |||
Wireless Equipment — 0.5% | |||||
RF Micro Devices, Inc.* | 14,900 | 77,778 | |||
TOTAL COMMON STOCK | |||||
(Cost: $12,794,151) | 15,145,011 | ||||
Principal | |||||
Amount | |||||
SHORT TERM INVESTMENTS — 17.0% | |||||
Money Market Funds — 14.9% | |||||
Allianz Dresdner Daily Asset Fund** ^ | $2,346,125 | 2,346,125 | |||
Time Deposit — 2.1% | |||||
Brown Brothers Harriman & Co. | |||||
2.290%, 04/01/05 | 324,881 | 324,881 | |||
TOTAL SHORT TERM INVESTMENTS | |||||
(Cost: $2,671,006) | 2,671,006 | ||||
TOTAL INVESTMENTS — 113.3% | |||||
(Cost: $15,465,157) | 17,816,017 | ||||
LIABILITIES IN EXCESS OF | |||||
OTHER ASSETS — (13.3%) | (2,092,355) | ||||
NET ASSETS — 100.0% | $15,723,662 |
* Non-income producing securities.
** All of the security is purchased with cash collateral proceeds from securities loans.
^ Affiliated institutional money market fund.
## All or a portion of the Fund’s holdings in this security was on loan as of 03/31/05.
ADR — American Depository Receipt
Schedule of Investments by Industry as of March 31, 2005
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 0.9% | ||
Communications | 6.5 | ||
Consumer, Cyclical | 11.4 | ||
Consumer, Non-cyclical | 26.5 | ||
Energy | 9.9 | ||
Financial | 5.1 | ||
Industrial | 22.4% | ||
Technology | 13.6 | ||
Short Term Investments | 17.0 | ||
Liabilities in excess of other assets | (13.3) | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
U.S. Small Cap Value Fund
Management Team: Mark W. Stuckelman, Lead Portfolio Manager; Stephen Sexauer, Portfolio Manager; Charles Hoeveler, Investment Analyst; John Mazur, Investment Analyst; Nelson W. Shing, Investment Analyst; Aerus Tran, Investment Analyst; Mark P. Roemer, Portfolio Specialist
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The U.S. Small Cap Value Fund seeks to maximize long-term capital appreciation through investments primarily in smaller U.S. companies with market capitalizations corresponding to the Russell 2000 Value Index that, in the opinion of the Investment Adviser, are undervalued in the marketplace.
Market Overview: From April 1, 2004 through March 31, 2005, U.S. equities posted gains across most style and capitalization segments. Large-cap stocks modestly outpaced small caps, while value outperformed growth by a wide margin.
During the first six months of the period, the stock market struggled to advance as investors confronted rising oil prices, three interest-rate hikes from the Federal Reserve and a potential slowdown in the booming Chinese economy. Near the end of 2004, however, equity prices climbed sharply higher, buoyed by a decisive outcome to the presidential election, a drop in oil prices and strengthening in the U.S. economy. Stocks gave back some of their prior months’ gains in early 2005, as rising interest rates, record-high oil prices and disappointing job growth clouded the outlook for corporate profits.
Among small-cap value stocks, returns in most sectors were positive. Energy companies were the best performers, driven by rising oil and natural gas prices and strong refining margins. Industrials and materials also did notably well due to strong demand from China and improvement in the U.S. economy. In contrast, prices of information technology stocks declined amid lackluster growth in IT spending.
Performance: During the twelve months ended March 31, 2005, the Fund’s Class I shares gained 11.91%, outperforming the Russell 2000 Value Index, which rose 9.78%.
Portfolio Specifics: Holdings in the majority of sectors added value relative to the index, led by industrials, utilities and consumer discretionary. Solid performance in these and other groups offset pockets of relative weakness, such as stock selection in financials and an underweight in energy.
In industrials, positive stock selection and an overweight in the sector helped the portfolio. The Fund’s best-performing positions included Joy Global and ESCO Technologies. Joy Global, a manufacturer of coal and copper mining equipment, benefited from strong copper and coal prices. ESCO, which makes meters used for time-of-use meter reading, benefited from a surge of interest among utility companies moving to a time-of-use fee structure to encourage energy conservation.
In utilities, stock selection drove relative strength. Energen, a producer and distributor of natural gas, was a top performer this period on high natural gas prices. Issue selection was also positive in the consumer discretionary sector, where retailer Neiman Marcus and film production company Lions Gate were major contributors. Being underweight the group was an additional plus.
Market Outlook: The solid pace of earnings growth and economic expansion provides a favorable backdrop for continued stock price appreciation. That said, stubbornly high oil prices and concerns that the Fed will raise rates more aggressively to stem inflation may create a headwind for equities over the remainder of 2005.
Regardless of how events unfold, we remain confident that our diversified approach to small-cap value investing will produce excess return in any market environment.
Effective as of February 7, 2005, the Fund is closed to new investors. The Fund will continue to accept additional investments from existing shareholders.
Comparison of Change in Value of a $250,000 Investment in U.S. Small Cap Value Fund Class I Shares with the Russell 2000 Value Index.
Annualized Total Returns | ||||
As of 3/31/05 | ||||
Since | ||||
1 Year | 5 Years | Inception | ||
11.91% | 21.33% | 14.18% |
![U.S. Small Cap Value Fund Class I Shares](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/smallcapvalue.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund’s Class I shares compared with the Russell 2000 Value Index for the periods indicated. Class I shares have a shareholder services fee of up to .25% of their average daily net assets. Performance is shown for Class I shares only. Class II shares are new and have no prior performance. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. The Fund’s performance includes historical performance of comparable managed institutional pooled accounts managed by the Investment Adviser prior to the inception of the Fund. The Fund commenced operations on May 1, 2001. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment.
In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
The Russell 2000 Value Index measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The unmanaged index differs from the Fund in composition, does not pay management fees or expenses and includes reinvested dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
U.S. Small Cap Value Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 91.2% | |||||
Aerospace/Defense-Equipment — 1.4% | |||||
AAR Corp.* | 106,200 | $1,444,320 | |||
Apparel Manufacturers — 0.7% | |||||
Kellwood Co. | 26,500 | 762,935 | |||
Broadcast Services/Programming — 1.1% | |||||
UnitedGlobalCom, Inc. Cl. A* | 121,832 | 1,152,531 | |||
Building & Construction-Miscellaneous — 1.1% | |||||
Dycom Industries, Inc.* | 48,800 | 1,121,912 | |||
Building Products-Cement/Aggregate — 1.7% | |||||
Florida Rock Industries, Inc. | 16,700 | 982,294 | |||
Texas Industries, Inc. | 15,600 | 838,500 | |||
1,820,794 | |||||
Chemicals-Diversified — 1.0% | |||||
Lyondell Chemical Co. | 39,330 | 1,098,094 | |||
Chemicals-Plastics — 0.9% | |||||
Spartech Corp. | 47,600 | 944,860 | |||
Chemicals-Specialty — 1.1% | |||||
OM Group, Inc.* | 36,100 | 1,098,162 | |||
Coal — 0.3% | |||||
Foundation Coal Holdings, Inc. | 13,900 | 326,789 | |||
Commercial Banks-Central US — 3.8% | |||||
Amcore Financial, Inc. | 10,200 | 288,150 | |||
Associated Banc Corp. | 37,650 | 1,175,809 | |||
First Financial Bancorp | 46,200 | 843,150 | |||
Gold Banc Corp., Inc. | 79,500 | 1,115,385 | |||
Macatawa Bank Corp. | 16,505 | 554,155 | |||
3,976,649 | |||||
Commercial Banks-Eastern US — 0.9% | |||||
Community Bank Systems, Inc.## | 39,300 | 900,363 | |||
Commercial Banks-Western US — 1.1% | |||||
Greater Bay Bancorp | 46,500 | 1,135,065 | |||
Commercial Services — 1.1% | |||||
Sourcecorp, Inc.* | 55,100 | 1,109,714 | |||
Computer Services — 0.2% | |||||
Manhattan Associates, Inc.* | 8,800 | 179,256 | |||
Computers-Integrated Systems — 1.0% | |||||
MTS Systems Corp. | 20,100 | 583,503 | |||
Radisys Corp.* | 33,300 | 471,528 | |||
1,055,031 | |||||
Diversified Manufacturing Operations — 5.2% | |||||
Actuant Corp. Cl. A* | 18,400 | 826,528 | |||
Ameron International Corp. | 18,300 | 658,800 | |||
Carlisle Cos, Inc. | 14,600 | 1,018,642 | |||
ESCO Technologies, Inc.* | 13,400 | 1,076,690 | |||
The Brink’s Co. | 32,800 | 1,134,880 | |||
Tredegar Corp. | 42,200 | 711,492 | |||
5,427,032 | |||||
Electric-Integrated — 0.7% | |||||
Aquila, Inc.* ## | 187,700 | 718,891 | |||
Electronic Components-Miscellaneous — 1.8% | |||||
Methode Electronics, Inc. Cl. A | 98,600 | 1,194,046 | |||
Rogers Corp.* | 17,100 | 684,000 | |||
1,878,046 | |||||
Finance-Auto Loans — 1.1% | |||||
AmeriCredit Corp.* | 49,000 | 1,148,560 | |||
Finance-Investment Bankers/Brokers — 0.9% | |||||
Knight Trading Group, Inc.* | 96,400 | 929,296 | |||
Financial Guarantee Insurance — 1.1% | |||||
Assured Guaranty, Ltd. | 63,100 | 1,132,645 | |||
Funeral Services & Related Items — 1.1% | |||||
Stewart Enterprises, Inc. Cl. A* | 187,700 | $1,154,355 | |||
Garden Products — 1.0% | |||||
Toro Co. | 12,200 | 1,079,700 | |||
Gas-Distribution — 2.5% | |||||
Energen Corp. | 20,000 | 1,332,000 | |||
UGI Corp. | 28,650 | 1,301,283 | |||
2,633,283 | |||||
Hotels & Motels — 0.6% | |||||
Jameson Inns, Inc.* | 420,000 | 617,400 | |||
Index Fund-Small Cap — 4.9% | |||||
iShares Russell 2000 Value | |||||
Index Fund* | 28,000 | 5,159,000 | |||
Internet Applications Software — 1.0% | |||||
MatrixOne, Inc.* | 120,100 | 572,877 | |||
S1 Corp. | 68,200 | 473,308 | |||
1,046,185 | |||||
Internet Infrastructure Software — 0.6% | |||||
TIBCO Software, Inc.* | 81,300 | 605,685 | |||
Lasers-Systems/Components — 0.6% | |||||
Rofin-Sinar Technologies, Inc.* | 18,100 | 581,734 | |||
Machinery Tools & Related Products — 1.0% | |||||
Kennametal, Inc. | 22,700 | 1,078,023 | |||
Machinery-Construction & Mining — 1.1% | |||||
Joy Global, Inc. | 34,050 | 1,193,793 | |||
Machinery-General Industry — 2.2% | |||||
Albany International Corp. Cl. A | 33,800 | 1,043,744 | |||
Gardner Denver, Inc.* | 31,700 | 1,252,467 | |||
2,296,211 | |||||
Medical Laser Systems — 1.1% | |||||
Candela Corp.* | 125,900 | 1,123,028 | |||
Medical-Biomedical/Genetics — 1.1% | |||||
Applera Corp. - Celera | |||||
Genomics Group* | 51,000 | 522,750 | |||
Nektar Therapeutics* | 42,400 | 591,056 | |||
1,113,806 | |||||
Medical-Hospitals — 1.2% | |||||
LifePoint Hospitals, Inc.* ## | 28,800 | 1,262,592 | |||
Medical-Nursing Homes — 0.9% | |||||
Kindred Healthcare, Inc.* | 26,800 | 940,680 | |||
Metal-Aluminum — 1.2% | |||||
Century Aluminum Co.* | �� | 40,000 | 1,210,400 | ||
Motion Pictures & Services — 1.0% | |||||
Lions Gate Entertainment Corp.* | 96,800 | 1,069,640 | |||
Oil Companies-Exploration & Production — 0.6% | |||||
Forest Oil Corp.* | 14,500 | 587,250 | |||
Physical Practice Management — 1.0% | |||||
Pediatrix Medical Group, Inc.* | 15,400 | 1,056,286 | |||
Pollution Control — 0.5% | |||||
Duratek, Inc.* | 26,300 | 524,685 | |||
Poultry — 1.1% | |||||
Gold Kist, Inc.* | 72,500 | 1,152,750 | |||
Power Conversion/Supply Equipment — 0.6% | |||||
Artesyn Technologies, Inc.* | 68,000 | 592,280 | |||
Private Corrections — 1.1% | |||||
Corrections Corp. of America* | 30,900 | 1,192,740 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
Property/Casualty Insurance — 3.9% | |||||
Meadowbrook Insurance Group, Inc.* | 197,300 | $1,035,825 | |||
Navigators Group, Inc.* | 31,200 | 1,034,124 | |||
Quanta Capital Holdings, Ltd.* | 136,300 | 1,090,400 | |||
Tower Group, Inc. | 67,100 | 895,114 | |||
4,055,463 | |||||
Publishing-Newspapers — 1.0% | |||||
Lee Enterprises, Inc. | 22,900 | 993,860 | |||
Radio — 1.1% | |||||
Entercom Communications | |||||
Corp. Cl. A* | 15,600 | 554,112 | |||
Radio One, Inc. Cl. D* | 40,300 | 594,425 | |||
1,148,537 | |||||
Recycling — 0.6% | |||||
Aleris International, Inc.* | 26,261 | 655,212 | |||
REITS-Diversified — 4.3% | |||||
Capital Automotive## | 23,600 | 781,632 | |||
Equity Lifestyle Properties, Inc. | 22,900 | 807,225 | |||
People’s Choice Financial | |||||
Corp. 144A#*† | 104,700 | 1,047,000 | |||
Provident Senior Living Trust 144A#*† | 64,600 | 1,043,290 | |||
Washington Real Estate | |||||
Investment Trust | 27,700 | 796,375 | |||
4,475,522 | |||||
REITS-Hotels — 1.9% | |||||
Ashford Hospitality Trust, Inc.## | 85,900 | 876,180 | |||
Diamondrock Hospitality Co. 144A#*† | 101,300 | 1,078,845 | |||
1,955,025 | |||||
REITS-Mortgage — 3.8% | |||||
ECC Capital Corp. | 150,200 | 901,200 | |||
Fieldstone Investment Corp. | 48,500 | 704,220 | |||
Jer Investors Trust, Inc. 144A#*† | 86,100 | 1,291,500 | |||
Newcastle Investment Corp. | 35,500 | 1,050,800 | |||
3,947,720 | |||||
REITS-Shopping Centers — 0.7% | |||||
Equity One, Inc. | 37,900 | 780,361 | |||
Retail-Apparel/Shoe — 2.1% | |||||
Charming Shoppes, Inc.* | 147,200 | 1,196,736 | |||
Claires Stores, Inc. | 42,200 | 972,288 | |||
2,169,024 | |||||
Retail-Regional Department Stores — 0.9% | |||||
Neiman-Marcus Group, Inc. Cl. A | 9,800 | 896,798 | |||
Retail-Restaurants — 0.6% | |||||
Lone Star Steakhouse & Saloon, Inc. | 21,600 | 624,348 | |||
Retail-Sporting Goods — 1.1% | |||||
Hibbett Sporting Goods, Inc.* | 37,600 | 1,129,504 | |||
Rubber-Tires — 1.1% | |||||
Cooper Tire & Rubber Co. | 61,600 | 1,130,976 | |||
Savings & Loans/Thrifts-Central US — 1.1% | |||||
MAF Bancorp, Inc. | 26,600 | 1,104,964 | |||
Savings & Loans/Thrifts-Eastern US — 2.7% | |||||
Brookline Bancorp, Inc. | 74,028 | 1,103,017 | |||
First Niagara Financial Group, Inc. | 90,300 | 1,192,863 | |||
Parkvale Financial Corp. | 17,000 | 472,600 | |||
2,768,480 | |||||
Schools — 0.4% | |||||
Concorde Career Colleges, Inc.* | 25,100 | 426,700 | |||
Semiconductor Equipment — 1.1% | |||||
Mattson Technology, Inc.* | 71,500 | $567,710 | |||
Photronics, Inc.* | 30,700 | 555,670 | |||
1,123,380 | |||||
Telecommunications Equipment — 0.8% | |||||
Comtech Telecommunications Corp* | 16,500 | 859,650 | |||
Telecommunications Services — 0.5% | |||||
Premiere Global Services, Inc. | 50,600 | 572,792 | |||
Theaters — 0.9% | |||||
Carmike Cinemas, Inc. | 26,600 | 991,648 | |||
Therapeutics — 1.2% | |||||
CV Therapeutics, Inc.* | 25,800 | 525,288 | |||
Medarex, Inc.* | 102,500 | 730,825 | |||
1,256,113 | |||||
Transport-Rail — 1.1% | |||||
Genesee & Wyoming, Inc. Cl. A* | 45,950 | 1,190,565 | |||
Transport-Services — 0.3% | |||||
Laidlaw International, Inc.* | 14,800 | 307,840 | |||
Transport-Truck — 0.8% | |||||
Old Dominion Freight Line, Inc.* | 28,200 | 878,430 | |||
Venture Capital — 1.0% | |||||
Kohlberg Kravis | |||||
Roberts Corp. 144A#*† | 98,900 | 1,038,450 | |||
TOTAL COMMON STOCK | |||||
(Cost: $81,827,500) | 95,113,813 | ||||
Principal | |||||
Amount | |||||
SHORT TERM INVESTMENTS — 11.9% | |||||
Money Market Funds — 3.1% | |||||
Allianz Dresdner Daily Asset Fund** ^ | $3,218,000 | 3,218,000 | |||
Time Deposit — 8.8% | |||||
Wells Fargo Bank | |||||
2.290%, 04/01/05 | 9,221,712 | 9,221,712 | |||
TOTAL SHORT TERM INVESTMENTS | |||||
(Cost: $12,439,712) | 12,439,712 | ||||
TOTAL INVESTMENTS — 103.1% | |||||
(Cost: $94,267,212) | 107,553,525 | ||||
LIABILITIES IN EXCESS OF | |||||
OTHER ASSETS — (3.1%) | (3,187,057) | ||||
NET ASSETS — 100.0% | $104,366,468 |
* Non-income producing securities.
** All of the security is purchased with cash collateral proceeds from securities loans.
† Illiquid securities. Total cost of illiquid securities as of March 31, 2005 was $5,335,125. Total market value of illiquid securities owned at March 31, 2005 was $5,499,085 or 5.27% of net assets.
# 144A Security. Fair value private placement security exempt from registration under rule 144A. The total value at March 31, 2005 was 5,499,085 or 5.27% of net assets.
^ Affiliated institutional money market fund.
## All or a portion of the Fund’s holdings in this security was on loan as of 03/31/05.
See Accompanying Notes to Financial Statements.
Schedule of Investments by Industry as of March 31, 2005
U.S. Small Cap Value Fund
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 4.3% | ||
Communications | 6.1 | ||
Consumer, Cyclical | 10.0 | ||
Consumer, Non-cyclical | 11.3 | ||
Energy | 0.9 | ||
Financial | 28.1 | ||
Funds | 4.9 | ||
Industrial | 20.1% | ||
Technology | 2.3 | ||
Utilities | 3.2 | ||
Short Term Investments | 11.9 | ||
Liabilities in excess of other assets | (3.1) | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
U.S. Large Cap Value Fund
Management Team: Stephen Sexauer, Lead Portfolio Manager; Mark W. Stuckelman, Portfolio Manager; Charles Hoeveler, Investment Analyst; John Mazur, Investment Analyst; Nelson W. Shing, Investment Analyst; Aerus Tran, Investment Analyst; Mark P. Roemer, Portfolio Specialist
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The U.S. Large Cap Value Fund seeks long-term capital appreciation through investments in a diversified portfolio comprised predominantly of U.S. companies with larger market capitalizations that, in the opinion of the Investment Adviser, are undervalued relative to other market measures.
Market Overview: Driven by gains in the fourth quarter of 2004, U.S. equity indexes finished the fiscal year ended March 31, 2005 in positive territory. Value stocks outperformed growth stocks by a substantial margin, and large-cap companies outpaced small caps.
Both positive and negative themes influenced the investment environment, including:
· Soaring oil prices, which climbed nearly 55% and touched an all-time high of over $57 a barrel in mid-March 2005
· Rising interest rates, as the Federal Reserve increased the target fed funds rate by 1.75% on seven separate occasions beginning midyear 2004
· Healthy economic expansion, with GDP advancing by 4.4% in 2004 and expectations for continued steady growth in 2005
A consistent bright spot during the period was strength in company fundamentals. Many corporations have used record-high cash flows to reduce debt, purchase their own shares and increase dividends.
Performance: The Fund’s Class I shares gained 10.96% from April 1, 2004 through March 31, 2005. The Russell 1000 Value Index rose 13.17%.
Portfolio Specifics: The Fund’s double-digit increase was driven by impressive returns from energy stocks, which benefited from strong global demand for oil. Oil and gas producers Apache, ConocoPhillips and ExxonMobil were on the list of top-performing names. Materials and industrials holdings also performed well on robust demand for steel and construction materials and strength in the manufacturing sector of the economy.
Versus the benchmark, modest underperformance was largely due to stock selection among financials. Insurer American International Group (AIG) was notably weak on the announcement of a broad range of accounting issues and the chairman’s resignation. We continued to hold the stock at period-end and believe the current difficulties that the company is facing are being resolved and will not materially affect its earnings potential. An overweight in information technology and an underweight in consumer staples also hurt the Fund.
Stock selection in several areas helped relative performance, including the materials, industrials and information technology sectors. Praxair, a producer of industrial gases; Raytheon, a defense contractor; and Texas Instruments, an electronics manufacturer, were top performers in these groups.
Market Outlook: The outlook for U.S. equities remains positive for the remainder of 2005. The combination of a steadily expanding economy and healthy corporate earnings growth provides a potent catalyst for capital appreciation. Despite a favorable outlook, investors are likely to balance their enthusiasm with concerns about rising interest rates, inflation and high oil prices.
Nicholas-Applegate is confident that our research-intensive investment process will be rewarded in the current environment, which bodes well for the Fund.
Comparison of Change in Value of a $250,000 Investment in U.S. Large Cap Value Fund Class I Shares with the Russell 1000 Value Index.
Annualized Total Returns
As of 3/31/05
Since | ||
1 Year | 5 Years | Inception |
10.96% | 5.89% | 12.73% |
![U.S. LARGE CAP VALUE FUND](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/lrgcapvalue.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund’s Class I shares compared with the Russell 1000 Value Index for the periods indicated. Class I shares have a shareholder services fee of up to .25% of their average daily net assets. The Fund’s Class I shares calculate their performance based upon the historical performance of their corresponding series of Nicholas-Applegate Mutual Funds (renamed ING Mutual Funds). The Nicholas-Applegate Institutional Funds’ Class I shares were first available on May 7, 1999. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment. In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The unmanaged index differs from the Fund in composition, does not pay management fees or expenses and includes reinvested dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
U.S. Large Cap Value Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 97.9% | |||||
Aerospace/Defense — 0.9% | |||||
Raytheon Co. | 5,900 | $228,330 | |||
Applications Software — 3.2% | |||||
Microsoft Corp. | 32,600 | 787,942 | |||
Beverages-non-Alcoholic — 1.2% | |||||
PepsiCo, Inc. | 5,400 | 286,362 | |||
Cable TV — 2.0% | |||||
Comcast Corp. Cl. A* | 14,800 | 499,944 | |||
Commercial Banks-Eastern US — 1.9% | |||||
North Fork Bancorp., Inc. | 17,050 | 472,967 | |||
Computers — 1.7% | |||||
Hewlett-Packard Co. | 19,300 | 423,442 | |||
Consumer Products-Miscellaneous — 1.6% | |||||
Fortune Brands, Inc. | 5,100 | 411,213 | |||
Diversified Manufacturing Operations — 12.0% | |||||
General Electric Co. | 26,500 | 955,590 | |||
ITT Industries, Inc. | 12,000 | 1,082,880 | |||
Textron, Inc. | 7,200 | 537,264 | |||
Tyco International, Ltd. | 12,200 | 412,360 | |||
2,988,094 | |||||
Electric-Integrated — 1.0% | |||||
Public Services Enterprise Group, Inc. | 4,800 | 261,072 | |||
Electronic Components-Semiconductors — 4.4% | |||||
Freescale Semiconductor, Inc.* | 27,640 | 476,790 | |||
PPL Corp. | 5,300 | 286,147 | |||
Texas Instuments, Inc. | 13,600 | 346,664 | |||
1,109,601 | |||||
Fiduciary Banks — 2.2% | |||||
Bank of New York Co., Inc. | 18,600 | 540,330 | |||
Finance-Investment Bankers/Brokers — 4.4% | |||||
Morgan Stanley Dean Witter & Co. | 19,400 | 1,110,650 | |||
Finance-Mortgage Loan/Banker — 1.0% | |||||
Countrywide Credit Industries, Inc. | 7,700 | 249,942 | |||
Financial Guarantee Insurance — 1.9% | |||||
Ambac Financial Group, Inc. | 6,500 | 485,875 | |||
Industrial Gases — 2.4% | |||||
Praxair, Inc. | 12,700 | 607,822 | |||
Medical-Drugs — 3.7% | |||||
Abbott Laboratories | 8,900 | 414,918 | |||
Pfizer, Inc. | 19,500 | 512,265 | |||
927,183 | |||||
Medical-HMO — 2.1% | |||||
Wellpoint, Inc.* | 4,200 | 526,470 | |||
Multi-line Insurance — 5.2% | |||||
Allstate Corp. | 7,900 | 427,074 | |||
American International Group, Inc. | 15,800 | 875,478 | |||
1,302,552 | |||||
Multimedia — 5.4% | |||||
Time Warner, Inc.* | 42,400 | $744,120 | |||
Viacom, Inc. Cl. B | 8,700 | 303,021 | |||
Walt Disney Co. | 10,700 | 307,411 | |||
1,354,552 | |||||
Oil Companies-Exploration & Production — 2.3% | |||||
Apache Corp. | 9,250 | 566,378 | |||
Oil Companies-Integrated — 11.2% | |||||
ChevronTexaco Corp. | 8,300 | 483,973 | |||
ConocoPhillips | 10,510 | 1,133,398 | |||
Exxon Mobil Corp. | 19,700 | 1,174,120 | |||
2,791,491 | |||||
Property/Casualty Insurance — 2.5% | |||||
St. Paul Travelers Cos., Inc. | 17,288 | 634,988 | |||
Retail-Regional Department Stores — 4.4% | |||||
Federated Department Stores, Inc. | 17,100 | 1,088,244 | |||
Savings & Loans/Thrifts-Western US — 4.0% | |||||
Washington Mutual, Inc. | 25,100 | 991,450 | |||
Steel-Producers — 2.1% | |||||
United States Steel Corp. | 10,400 | 528,840 | |||
Super-Regional Banks-US — 8.3% | |||||
Bank of America Corp. | 16,112 | 710,539 | |||
US Bancorp. | 18,400 | 530,288 | |||
Wells Fargo & Co. | 13,900 | 831,220 | |||
2,072,047 | |||||
Telephone-Integrated — 3.0% | |||||
Sprint Corp. | 10,500 | 238,875 | |||
Verizon Communications, Inc. | 14,300 | 507,650 | |||
746,525 | |||||
Tobacco — 1.9% | |||||
Altria Group, Inc. | 7,300 | 477,347 | |||
TOTAL COMMON STOCK | |||||
(Cost: $19,875,082) | 24,471,653 | ||||
Principal | |||||
Amount | |||||
SHORT TERM INVESTMENTS — 1.5% | |||||
Time Deposit — 1.5% | |||||
Citibank Nassau | |||||
2.290%, 04/01/05 | |||||
(Cost: $365,126) | $365,126 | 365,126 | |||
TOTAL INVESTMENTS — 99.4% | |||||
(Cost: $20,240,208) | 24,836,779 | ||||
OTHER ASSETS IN EXCESS OF | |||||
LIABILITIES — 0.6% | 157,827 | ||||
NET ASSETS — 100.0% | $24,994,606 |
* Non-income producing securities.
See Accompanying Notes to Financial Statements.
Schedule of Investments by Industry as of March 31, 2005
U.S. Large Cap Value Fund
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 4.6% | ||
Communications | 10.4 | ||
Consumer, Cyclical | 4.4 | ||
Consumer, Non-cyclical | 10.5 | ||
Energy | 13.4 | ||
Financial | 31.4 | ||
Industrial | 12.9 | ||
Technology | 9.3% | ||
Utilities | 1.0 | ||
Short Term Investments | 1.5 | ||
Other assets in excess of liabilities | 0.6 | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
U.S. Systematic Large Cap Growth Fund
Management Team: David J. Pavan, CFA, Portfolio Manager; Stacey R. Nutt, Ph.D., Portfolio Manager; Zhuanxin Ding, Ph.D., Investment Analyst; Jane Edmonson, Investment Analyst; Frank Feng, Ph.D., Investment Analyst; James Li, Ph.D., CFA, Investment Analyst; Aerus Tran, Investment Analyst; Mark P. Roemer, Portfolio Specialist
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The U.S. Systematic Large Cap Growth Fund seeks to maximize long-term capital appreciation by investing primarily in stocks from a universe of large U.S. companies with market capitalizations similar to the upper 90% of the Russell 1000 Growth Index at time of purchase.
Market Overview: The broad U.S. stock market, as measured by the S&P 500 Index, rose 6.69% during the twelve months ended March 31, 2005, with gains concentrated in the fourth quarter of 2004. Value stocks outpaced growth stocks, and large-cap companies outperformed their small-cap counterparts.
In the first half of the fiscal year, equity returns were generally flat as a number of investor concerns overshadowed strong company fundamentals. The price of oil skyrocketed on surging global demand and worries about the amount of excess production capacity. In June, the Federal Reserve began raising short-term interest rates for the first time in four years, creating anxiety about the speed and magnitude of further rate hikes. The war in Iraq continued, and reports indicated that the economy had hit a soft spot in late spring.
Toward the end of 2004, however, investors bid stock prices sharply higher in response to a steep drop in oil prices, signs the economy had regained traction and a decisive conclusion to the U.S. presidential race. The rally ended in early 2005 as oil prices resumed their upward trend, interest rates kept rising and the pace of corporate profit growth, while healthy, continued to slow.
Performance: The Fund’s Class I shares gained 3.98% during the fiscal year ended March 31, 2005, outperforming the Russell 1000 Growth Index, which rose 1.17%.
Portfolio Specifics: Positions in nearly every sector of investment had a favorable impact on performance versus the index. The Fund’s health care holdings made the largest contribution to relative results, mainly due to strong stock selection. For example, UnitedHealth Group and Aetna were among the Fund’s best-performing positions. Shares of these health insurance companies benefited from positive trends in enrollment and medical costs.
In the materials and industrials sectors, stock selection was also a major source of relative strength. Top performers included United States Steel, a steel manufacturer; Norfolk Southern, a railroad operator; and Textron, a diversified industrial company.
While the Fund’s performance versus the index was favorable overall, there were pockets of weakness. Stock selection in the information technology sector was the primary detractor from relative results. In addition, issue selection among telecommunications services and consumer discretionary companies was modestly negative.
We maintained the Fund’s well-diversified structure throughout the fiscal year. As of March 31, 2005, the largest overweight versus the benchmark was in the industrials sector (+5.0%) and the largest underweight was in financials (-5.8%).
Market Outlook: Our process evaluates investment opportunities on a relative basis and is required to remain fully invested. As such, the process neither utilizes nor results in a forecast or outlook on the overall market, but expects to perform equally well versus the Russell 1000 Growth Index in both up and down markets.
We are confident that our proprietary stock-selection model, in conjunction with our risk-controlled approach to portfolio construction, will continue to add value to the benchmark over time.
Comparison of Change in Value of a $250,000 Investment in U.S. Systematic Large Cap Growth Fund Class I Shares with the Russell 1000 Growth Index.
Annualized Total Returns
As of 3/31/05
Since | ||
1 Year | 5 Years | Inception |
3.98% | - 20.17% | 6.45% |
![U.S. Systematic Large Cap Growth](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/syst_lrgcap.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund’s Class I shares compared with the Russell 1000 Growth Index for the periods indicated. Class I shares have a shareholder services fee of up to .25% of their average daily net assets. Performance is shown for Class I shares only. Class II-IV shares are new and have no prior performance. The Fund’s Class I shares calculate their performance based upon the historical performance of their corresponding series of Nicholas-Applegate Mutual Funds (renamed ING Mutual Funds), adjusted to reflect all fees and expenses applicable to the Fund’s Class I shares. The Nicholas-Applegate Institutional Funds’ Class I shares were first available on May 7, 1999. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment. In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Index consists of the 1,000 largest securities in the Russell 3000 Index, which represents approximately 90% of the total market capitalization of the Russell 3000 Index. It is a large-cap, market-oriented index and is highly correlated with the S&P 500 Index. The unmanaged Index differs from the Fund in composition, does not pay management fees or expenses and includes reinvested dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
U.S. Systematic Large Cap Growth Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 99.5% | |||||
Aerospace/Defense — 2.8% | |||||
Lockheed Martin Corp. | 2,200 | $134,332 | |||
Raytheon Co. | 3,800 | 147,060 | |||
281,392 | |||||
Apparel Manufacturers — 1.1% | |||||
V F Corp. | 1,800 | 106,452 | |||
Applications Software — 4.0% | |||||
Intuit, Inc.* | 2,800 | 122,556 | |||
Microsoft Corp. | 11,800 | 285,206 | |||
407,762 | |||||
Audio/Video Products — 1.3% | |||||
Harman International Industries, Inc. | 1,500 | 132,690 | |||
Beverages-Wine/Spirits — 1.5% | |||||
Brown-Forman Corp. Cl. B | 2,800 | 153,300 | |||
Cable TV — 0.9% | |||||
Cablevision Systems Corp. Cl. A* | 3,100 | 86,955 | |||
Chemicals-Diversified — 1.3% | |||||
Lyondell Chemical Co. | 1,600 | 44,672 | |||
PPG Industries, Inc. | 1,200 | 85,824 | |||
130,496 | |||||
Computer Aided Design — 1.4% | |||||
Autodesk, Inc.* | 4,800 | 142,848 | |||
Computer Services — 0.8% | |||||
Electronic Data Systems Corp. | 3,900 | 80,613 | |||
Computers — 8.3% | |||||
Apple Computer, Inc.* | 3,800 | 158,346 | |||
Dell, Inc.* | 7,800 | 299,676 | |||
International Business Machines Corp. | 3,600 | 328,968 | |||
Sun Microsystems, Inc.* | 13,400 | 54,136 | |||
841,126 | |||||
Computers-Memory Devices — 2.5% | |||||
EMC Corp.* | 13,300 | 163,856 | |||
Network Appliance, Inc.* | 3,100 | 85,746 | |||
249,602 | |||||
Cosmetics & Toiletries — 6.9% | |||||
Kimberly-Clark Corp. | 2,300 | 151,179 | |||
Procter & Gamble Co. | 6,400 | 339,200 | |||
The Gillette Co. | 4,000 | 201,920 | |||
692,299 | |||||
Distribution/Wholesale — 1.3% | |||||
WW Grainger, Inc. | 2,100 | 130,767 | |||
Diversified Manufacturing Operations — 1.1% | |||||
Textron, Inc. | 1,500 | 111,930 | |||
Diversified Operations/Commercial Services — 1.2% | |||||
Cendant Corp. | 5,900 | 121,186 | |||
E-Commerce/Services — 1.5% | |||||
eBay, Inc.* | 4,100 | 152,766 | |||
Electric Products-Miscellaneous — 1.4% | |||||
Emerson Electric Co. | 2,200 | 142,846 | |||
Electronic Components-Miscellaneous — 0.6% | |||||
Solectron Corp.* | 18,100 | 62,807 | |||
Electronic Components-Semiconductors — 2.9% | |||||
Intel Corp. | 12,600 | 292,698 | |||
Finance-Consumer Loans — 1.3% | |||||
First Marblehead Corp.* | 2,300 | 132,319 | |||
Food-Miscellaneous/Diversified — 0.6% | |||||
Kraft Foods, Inc. Cl. A | 1,800 | 59,490 | |||
Home Decoration Products — 1.0% | |||||
Newell Rubbermaid, Inc. | 4,500 | $98,730 | |||
Industrial Automation/Robotics — 1.3% | |||||
Rockwell Automation, Inc. | 2,400 | 135,936 | |||
Instruments-Controls — 1.3% | |||||
Parker-Hannifin Corp. | 1,500 | 91,380 | |||
Thermo Electron Corp.* | 1,400 | 35,406 | |||
126,786 | |||||
Instruments-Scientific — 1.3% | |||||
PerkinElmer, Inc. | 6,300 | 129,969 | |||
Internet Security — 3.1% | |||||
CheckFree Corp.* | 2,100 | 85,596 | |||
Symantec Corp.* | 5,100 | 108,783 | |||
VeriSign, Inc.* | 4,000 | 114,800 | |||
309,179 | |||||
Medical Labs & Testing Services — 1.6% | |||||
Covance, Inc.* | 3,400 | 161,874 | |||
Medical Products — 5.4% | |||||
Becton Dickinson & Co. | 2,500 | 146,050 | |||
Johnson & Johnson | 5,900 | 396,244 | |||
542,294 | |||||
Medical-Biomedical/Genetics — 1.5% | |||||
Amgen, Inc.* | 1,000 | 58,210 | |||
Invitrogen Corp.* | 1,300 | 89,960 | |||
148,170 | |||||
Medical-Drugs — 4.0% | |||||
Abbott Laboratories | 1,000 | 46,620 | |||
Pfizer, Inc. | 13,600 | 357,272 | |||
403,892 | |||||
Medical-HMO — 5.9% | |||||
Aetna, Inc. | 1,800 | 134,910 | |||
Humana, Inc.* | 3,400 | 108,596 | |||
UnitedHealth Group, Inc. | 2,900 | 276,602 | |||
Wellpoint, Inc.* | 600 | 75,210 | |||
595,318 | |||||
Multimedia — 1.7% | |||||
Gemstar - TV Guide International, Inc.* | 21,000 | 91,350 | |||
Time Warner, Inc.* | 4,300 | 75,465 | |||
166,815 | |||||
Networking Products — 2.1% | |||||
Cisco Systems, Inc.* | 12,100 | 216,469 | |||
Oil & Gas Drilling — 2.9% | |||||
Diamond Offshore Drilling | 3,800 | 189,620 | |||
Transocean Sedco Forex, Inc.* | 2,100 | 108,066 | |||
297,686 | |||||
Oil Companies-Integrated — 1.6% | |||||
ConocoPhillips | 1,500 | 161,760 | |||
Oil Field Machinery & Equipment — 1.1% | |||||
Grant Prideco, Inc.* | 4,800 | 115,968 | |||
Optical Supplies — 1.7% | |||||
Alcon, Inc. | 1,900 | 169,651 | |||
Property/Casualty Insurance — 1.4% | |||||
Chubb Corp. | 1,800 | 142,686 | |||
Retail-Apparel/Shoe — 2.1% | |||||
Abercrombie & Fitch Co. Cl. A | 2,100 | 120,204 | |||
American Eagle Outfitters, Inc. | 3,200 | 94,560 | |||
214,764 | |||||
Retail-Discount — 0.9% | |||||
Wal-Mart Stores, Inc. | 1,900 | 95,209 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
Retail-Office Supplies — 1.0% | |||||
Staples, Inc. | 3,200 | $100,576 | |||
Retail-Regional Department Stores — 1.1% | |||||
Federated Department Stores, Inc. | 1,700 | 108,188 | |||
Telecommunications Equipment — 1.9% | |||||
QUALCOMM, Inc. | 5,100 | 186,915 | |||
Telephone-Integrated — 3.5% | |||||
AT&T Corp. | 8,100 | 151,875 | |||
Bellsouth Corp. | 3,400 | 89,386 | |||
Verizon Communications, Inc. | 3,300 | 117,150 | |||
358,411 | |||||
Transport-Air Freight — 1.4% | |||||
CNF, Inc. | 3,100 | 145,049 | |||
Transport-Rail — 2.8% | |||||
Burlington Northern Santa Fe Corp. | 2,600 | 140,218 | |||
Norfolk Southern Corp. | 3,900 | 144,495 | |||
284,713 | |||||
Web Portals/ISP — 1.2% | |||||
Yahoo!, Inc.* | 3,500 | 118,650 | |||
TOTAL COMMON STOCK | |||||
(Cost: $9,321,679) | 10,048,002 | ||||
Principal | |||||
Amount | Value | ||||
SHORT TERM INVESTMENTS — 0.4% | |||||
Time Deposit — 0.4% | |||||
Brown Brothers Harriman & Co. | |||||
2.290%, 04/01/05 | |||||
(Cost: $36,488) | $36,488 | $36,488 | |||
TOTAL INVESTMENTS — 99.9% | |||||
(Cost: $9,358,167) | 10,084,490 | ||||
OTHER ASSETS IN EXCESS OF | |||||
LIABILITIES — 0.1% | 13,900 | ||||
NET ASSETS — 100.0% | $10,098,390 |
* Non-income producing securities.
Schedule of Investments by Industry as of March 31, 2005
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 1.3% | ||
Communications | 15.8 | ||
Consumer, Cyclical | 9.8 | ||
Consumer, Non-cyclical | 30.2 | ||
Energy | 5.7 | ||
Financial | 2.7 | ||
Industrial | 14.1% | ||
Technology | 19.9 | ||
Short Term Investments | 0.4 | ||
Other assets in excess of liabilities | 0.1 | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
U.S. Systematic SMID Growth Fund
Management Team: Stacey R. Nutt, Ph.D., Lead Portfolio Manager; Todd N. Wolter, CFA, Portfolio Manager; Carma Wallace, CFA, Investment Analyst; Aerus Tran, Investment Analyst; Mark P. Roemer, Portfolio Specialist
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The U.S. Systematic SMID Growth Fund seeks to maximize long-term capital appreciation through investments primarily in stocks of U.S. companies with small-mid (SMID) market capitalizations. Generally, small to mid companies are those within the capitalization range of the Russell 2500 Growth Index, as measured at time of purchase.
Market Overview: Major U.S. stock market indices, including the S&P 500 Index and the Dow Jones Industrial Average, registered modest increases during the twelve months ended March 31, 2005. Investors bid stock prices higher in response to:
· Strong growth in corporate profits
· Measured pace at which the Federal Reserve increased short-term interest rates
· Steady rate of economic expansion
A number of factors limited equity market gains, most notably the price of oil, which hit a record high of over $57 a barrel in March 2005. Higher energy prices sparked fears of inflation, causing investors to worry that the Federal Reserve might need to more aggressively raise rates in the future. Geopolitical concerns also weighed on the market, as terrorist threats and conflict in Iraq persisted.
Value stocks outpaced growth stocks this period, and mid-cap names bested large and small caps. Energy and utilities were top-performing sectors, while information technology and financials lagged.
Performance: The Fund’s Class I shares registered an 8.09% increase during the twelve-month period from April 1, 2004 to March 31, 2005. During the same time, the Russell 2500 Growth Index rose 3.91%.
Portfolio Specifics: Strong stock selection in the health care and industrials sectors drove the Fund’s outperformance versus the benchmark. In health care, top-performing positions included Coventry Health Care, an HMO which experienced strong enrollment growth, and Advanced Medical Optics, a producer of lenses used in cataract surgery that posted solid top-line growth, with earnings positively impacted by an improving balance sheet. In industrials, Joy Global, a maker of mining equipment, and Hub Group, a provider of transportation services, performed especially well. Joy Global benefited from strong demand for its products, as metals prices rose sharply on increased demand from China and other emerging countries. Hub Group benefited from improving pricing and industry trends in its intermodal business.
Stock selection was also positive in a number of other sectors, such as materials, financials and consumer staples. Areas that detracted from relative performance included stock selection in the information technology sector and an underweight in consumer discretionary stocks, which outperformed the Russell 2500 Growth Index. Issue selection among energy companies was also unfavorable, but this was more than offset by an overweight in the sector.
Market Outlook: Our process evaluates investment opportunities on a relative basis and is required to remain fully invested. As such, the process neither utilizes nor results in a forecast or outlook on the overall market, but expects to perform equally well versus the Russell 2500 Growth Index in both up and down markets.
By applying our disciplined, bottom-up approach in all investment environments, we believe the Fund will generate consistently strong returns over time.
Comparison of Change in Value of a $250,000 Investment in U.S. Systematic SMID Growth Fund Class I Shares with the Russell 2500 Growth Index.
Annualized Total Returns
As of 3/31/05
Since | |
1 Year | Inception |
8.09% | 6.29% |
![U.S. Systematic SMID Growth](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/syst_smid.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund’s Class I shares compared with the Russell 2500 Growth Index for the periods indicated. Class I shares have a shareholder services fee of up to .25% of their average daily net assets. Performance is shown for the Class I shares only. Class IV shares are new and have no prior performance. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment.
In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
The Russell 2500 Growth Index measures the performance of the 2,500 smallest companies in the Russell 3000 Index, which represents approximately 22% of the total market capitalization of the Russell 3000 Index. The Russell 2500 Growth Index is an unmanaged index comprised of those Russell 2500 companies with higher price-to-book ratios and higher forecasted growth values. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
U.S. Systematic SMID Growth Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 97.1% | |||||
Advertising Services — 1.4% | |||||
Getty Images, Inc.* | 1,300 | $92,443 | |||
Aerospace/Defense-Equipment — 1.1% | |||||
BE Aerospace, Inc.* | 1,800 | 21,600 | |||
United Defense Industries, Inc. | 700 | 51,394 | |||
72,994 | |||||
Apparel Manufacturers — 0.7% | |||||
Oshkosh B’Gosh, Inc. Cl. A | 1,600 | 48,800 | |||
Applications Software — 0.6% | |||||
Progress Software Corp.* | 800 | 20,976 | |||
SS&C Technologies, Inc. | 800 | 18,240 | |||
39,216 | |||||
Audio/Video Products — 0.9% | |||||
Harman International Industries, Inc. | 700 | 61,922 | |||
Auto/Truck Parts & Equipment-Original — 1.2% | |||||
Autoliv, Inc. | 1,700 | 81,005 | |||
Auto/Truck Parts & Equipment-Replacement — 0.4% | |||||
Standard Motor Products, Inc. | 2,600 | 30,420 | |||
Building & Construction Products-Miscellaneous — 0.3% | |||||
USG Corp.* | 700 | 23,212 | |||
Building Products-Cement/Aggregate — 0.6% | |||||
Martin Marietta Materials, Inc. | 500 | 27,960 | |||
Texas Industries, Inc. | 300 | 16,125 | |||
44,085 | |||||
Building-Maintenance & Service — 0.4% | |||||
ABM Industries, Inc. | 1,500 | 28,845 | |||
Cable TV — 0.7% | |||||
Cablevision Systems Corp. Cl. A* | 1,800 | 50,490 | |||
Cellular Telecommunications — 0.6% | |||||
Nextel Partners, Inc. Cl. A* | 1,800 | 39,528 | |||
Chemicals-Diversified — 1.3% | |||||
Georgia Gulf Corp. | 1,900 | 87,362 | |||
Chemicals-Specialty — 2.0% | |||||
Crompton Corp. | 4,600 | 67,160 | |||
Eastman Chemical Co. | 1,200 | 70,800 | |||
137,960 | |||||
Coal — 1.2% | |||||
Alliance Resource Partners LP | 1,300 | 83,564 | |||
Commercial Banks-Central US — 1.3% | |||||
Corus Bankshares, Inc. | 1,900 | 90,611 | |||
Commercial Services — 0.7% | |||||
Alliance Data Systems Corp.* | 1,200 | 48,480 | |||
Computers-Integrated Systems — 1.7% | |||||
Brocade Communications Systems, Inc.* | 15,200 | 89,984 | |||
McData Corp. Cl. A* | 6,800 | 25,636 | |||
115,620 | |||||
Consumer Products-Miscellaneous — 1.3% | |||||
American Greetings Corp. Cl. A## | 1,300 | 33,124 | |||
CNS, Inc. | 3,000 | 53,400 | |||
86,524 | |||||
Containers-Metal/Glass — 1.1% | |||||
Greif, Inc. Cl. A | 1,100 | 76,648 | |||
Data Processing/Management — 2.4% | |||||
Acxiom Corp.## | 1,500 | 31,395 | |||
The Dun & Bradstreet Corp.* | 2,200 | 135,190 | |||
166,585 | |||||
Distribution/Wholesale — 1.4% | |||||
Aviall, Inc.* | 3,400 | $95,200 | |||
Diversified Manufacturing Operations — 1.8% | |||||
Blount International, Inc.* | 1,200 | 20,376 | |||
Federal Signal Corp. | 1,300 | 19,721 | |||
The Brink’s Co. | 2,300 | 79,580 | |||
119,677 | |||||
Diversified Operations — 0.5% | |||||
Walter Industries, Inc. | 800 | 34,040 | |||
E-Commerce/Services — 0.9% | |||||
WebMD Corp.* | 7,200 | 61,200 | |||
Electronic Components-Miscellaneous — 0.8% | |||||
Sanmina-SCI Corp.* | 10,400 | 54,288 | |||
Electronic Components-Semiconductors — 1.6% | |||||
Fairchild Semiconductor | |||||
International, Inc. Cl. A* | 2,100 | 32,193 | |||
International Rectifier Corp.* | 1,000 | 45,500 | |||
LSI Logic Corp.* | 5,100 | 28,509 | |||
106,202 | |||||
Electronic Connectors — 1.3% | |||||
Thomas & Betts Corp.* | 2,800 | 90,440 | |||
Electronic Parts Distribution — 0.4% | |||||
Avnet, Inc.* | 1,600 | 29,472 | |||
Enterprise Software/Services — 0.5% | |||||
Ascential Software Corp.* | 1,900 | 35,207 | |||
Environmental Monitoring — 0.3% | |||||
Mine Safety Appliances Co. | 500 | 19,370 | |||
Fiduciary Banks — 0.9% | |||||
Investors Financial Services Corp. | 1,200 | 58,692 | |||
Finance-Consumer Loans — 1.7% | |||||
First Marblehead Corp.* ## | 2,000 | 115,060 | |||
Finance-Investment Bankers/Brokers — 1.2% | |||||
Investment Technology Group, Inc.* | 4,800 | 84,000 | |||
Finance-Mortgage Loan/Banker — 0.3% | |||||
CharterMac | 1,100 | 23,650 | |||
Food-Baking — 0.3% | |||||
Flowers Foods, Inc. | 800 | 22,568 | |||
Food-Miscellaneous/Diversified — 0.8% | |||||
Corn Products International, Inc. | 700 | 18,193 | |||
Ralcorp Holdings, Inc. | 700 | 33,145 | |||
51,338 | |||||
Food-Wholesale/Distribution — 1.2% | |||||
Supervalu, Inc. | 2,500 | 83,375 | |||
Funeral Services & Related Items — 1.0% | |||||
Service Corp. International | 6,500 | 48,620 | |||
Stewart Enterprises, Inc. Cl. A | 3,600 | 22,140 | |||
70,760 | |||||
Gambling (Non-Hotel) — 0.3% | |||||
Century Casinos, Inc.* | 1,900 | 17,233 | |||
Gas-Distribution — 0.6% | |||||
Piedmont Natural Gas Co. | 1,800 | 41,472 | |||
Hotels & Motels — 0.4% | |||||
Marcus Corp. | 1,300 | 26,650 | |||
Human Resources — 0.6% | |||||
Korn/Ferry International* | 2,000 | 38,060 | |||
Identification Systems/Devices — 0.2% | |||||
Checkpoint Systems, Inc.* | 900 | 15,192 | |||
Industrial Automation/Robotics — 0.4% | |||||
Nordson Corp. | 800 | 29,456 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
Instruments-Controls — 0.5% | |||||
Thermo Electron Corp.* | 1,400 | $35,406 | |||
Instruments-Scientific — 1.6% | |||||
PerkinElmer, Inc. | 5,300 | 109,339 | |||
Internet Applications Software — 0.3% | |||||
Verity, Inc.* | 2,200 | 20,790 | |||
Internet Content-Info/News — 0.4% | |||||
InfoSpace, Inc.* | 600 | 24,498 | |||
Internet Security — 3.7% | |||||
CheckFree Corp.* | 2,500 | 101,900 | |||
Internet Security Systems, Inc.* | 1,600 | 29,280 | |||
McAfee, Inc.* | 5,300 | 119,568 | |||
250,748 | |||||
Investment Management/Advisor Services — 0.6% | |||||
National Financial Partners Corp. | 1,000 | 39,800 | |||
Machinery-Construction & Mining — 1.3% | |||||
Joy Global, Inc. | 400 | 14,024 | |||
Terex Corp. | 1,700 | 73,610 | |||
87,634 | |||||
Machinery-General Industry — 0.3% | |||||
Gardner Denver, Inc.* | 600 | 23,706 | |||
Medical Instruments — 0.7% | |||||
Intuitive Surgical, Inc.* | 1,000 | 45,470 | |||
Medical Labs & Testing Services — 1.0% | |||||
Covance, Inc.* | 1,500 | 71,415 | |||
Medical Laser Systems — 0.5% | |||||
Lca-Vision, Inc. | 950 | 31,635 | |||
Medical Products — 2.0% | |||||
Haemonetics Corp.* | 1,600 | 67,456 | |||
Lifecore Biomedical, Inc.* | 3,900 | 69,303 | |||
136,759 | |||||
Medical-Biomedical/Genetics — 0.9% | |||||
Invitrogen Corp.* | 900 | 62,280 | |||
Medical-Drugs — 2.6% | |||||
First Horizon Pharmaceutical Corp.* | 1,600 | 27,008 | |||
OSI Pharmaceuticals, Inc.* | 1,800 | 74,412 | |||
Sepracor, Inc.* | 1,300 | 74,633 | |||
176,053 | |||||
Medical-Generic Drugs — 1.0% | |||||
Alpharma, Inc. Cl. A | 5,400 | 66,528 | |||
Medical-HMO — 1.0% | |||||
Coventry Health Care, Inc.* | 1,050 | 71,547 | |||
Medical-Nursing Homes — 1.6% | |||||
Genesis Healthcare Corp.* | 2,500 | 107,225 | |||
Medical-Outpatient/Home Medical Care — 1.1% | |||||
Amedisys, Inc.* | 1,700 | 51,425 | |||
Odyssey Healthcare, Inc.* | 2,200 | 25,872 | |||
77,297 | |||||
Metal-Copper — 0.4% | |||||
Southern Peru Copper Corp. | 500 | 27,730 | |||
Metal-Iron — 1.0% | |||||
Mesabi Trust | 4,500 | 67,500 | |||
Mining Services — 0.5% | |||||
Compass Minerals International, Inc. | 1,300 | 33,085 | |||
Multimedia — 1.1% | |||||
Gemstar - TV Guide International, Inc.* | 17,800 | 77,430 | |||
Office Furnishings-Original — 1.0% | |||||
HNI Corp. | 1,500 | 67,425 | |||
Oil & Gas Drilling — 1.1% | |||||
Todco Cl. A* | 2,900 | $74,936 | |||
Oil Companies-Exploration & Production — 5.2% | |||||
Berry Petroleum Co. Cl. A | 1,900 | 97,755 | |||
Cimarex Energy Co.* | 1,000 | 39,000 | |||
Harvest Natural Resources, Inc.* | 1,800 | 21,402 | |||
Houston Exploration Co.* | 1,700 | 96,815 | |||
Petroquest Energy, Inc.* | 10,600 | 70,384 | |||
Whiting Petroleum Corp.* | 700 | 28,546 | |||
353,902 | |||||
Oil Field Machinery & Equipment — 2.3% | |||||
Grant Prideco, Inc.* | 3,600 | 86,976 | |||
Universal Compression Holdings, Inc.* | 1,900 | 71,953 | |||
158,929 | |||||
Oil Refining & Marketing — 0.3% | |||||
Giant Industries, Inc.* | 900 | 23,130 | |||
Oil-Field Services — 1.9% | |||||
Cal Dive International, Inc.* | 2,200 | 99,660 | |||
Petroleum Geo Services ASA — ADR* | 400 | 26,868 | |||
126,528 | |||||
Optical Supplies — 1.3% | |||||
Bausch & Lomb, Inc. | 700 | 51,310 | |||
Oakley, Inc. | 3,000 | 38,460 | |||
89,770 | |||||
Paper & Related Products — 2.1% | |||||
Potlatch Corp. | 1,900 | 89,433 | |||
Temple-Inland, Inc. | 700 | 50,785 | |||
140,218 | |||||
Property/Casualty Insurance — 2.1% | |||||
Berkley Corp. | 2,500 | 124,000 | |||
Landamerica Financial Group, Inc. | 400 | 20,012 | |||
144,012 | |||||
Racetracks — 1.1% | |||||
Penn National Gaming, Inc.* | 2,500 | 73,450 | |||
Real Estate Management/Services — 0.3% | |||||
Jones Lang LaSalle, Inc.* | 500 | 23,325 | |||
Retail-Apparel/Shoe — 2.9% | |||||
Abercrombie & Fitch Co. Cl. A | 1,700 | 97,308 | |||
American Eagle Outfitters, Inc. | 1,900 | 56,145 | |||
Charming Shoppes, Inc.* | 3,100 | 25,203 | |||
Stein Mart, Inc.* | 1,000 | 22,500 | |||
201,156 | |||||
Retail-Convenience Store — 1.0% | |||||
Seven-Eleven, Inc.* | 2,800 | 67,256 | |||
Retail-Pawn Shops — 0.3% | |||||
Ezcorp, Inc. Cl. A* | 1,600 | 21,248 | |||
Retail-Regional Department Stores — 0.5% | |||||
Dillards, Inc. Cl. A | 1,300 | 34,970 | |||
Retail-Restaurants — 1.1% | |||||
Brinker International, Inc.* | 700 | 25,354 | |||
Famous Dave’s of America, Inc.* | 1,900 | 26,752 | |||
Ryan’s Restaurant Group, Inc.* | 1,500 | 21,795 | |||
73,901 | |||||
Steel-Specialty — 0.6% | |||||
Oregon Steel Mills, Inc.* | 1,700 | 39,100 | |||
Telecommunications Equipment — 1.4% | |||||
Comtech Telecommunications Corp* | 700 | 36,470 | |||
Harris Corp. | 1,800 | 58,770 | |||
95,240 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
Telecommunications Services — 0.4% | |||||
Intrado, Inc.* | 2,500 | $30,750 | |||
Transport-Air Freight — 1.0% | |||||
CNF, Inc. | 1,500 | 70,185 | |||
Transport-Truck — 1.3% | |||||
Overnite Corp. | 2,700 | 86,373 | |||
Trucking & Leasing — 1.0% | |||||
Gatx Corp. | 2,100 | 69,699 | |||
Wireless Equipment — 1.5% | |||||
Crown Castle International Corp.* | 6,200 | 99,572 | |||
TOTAL COMMON STOCK | |||||
(Cost: $6,194,234) | 6,637,866 | ||||
Principal | |||||
Amount | Value | ||||
SHORT TERM INVESTMENTS — 4.1% | |||||
Money Market Funds — 1.6% | |||||
Allianz Dresdner Daily Asset Fund** ^ | $110,450 | $110,450 | |||
Time Deposit — 2.5% | |||||
Wachovia Bank GC | |||||
2.290%, 04/01/05 | 166,462 | 166,462 | |||
TOTAL SHORT TERM INVESTMENTS | |||||
(Cost: $276,912) | 276,912 | ||||
TOTAL INVESTMENTS — 101.2% | |||||
(Cost: $6,471,146) | 6,914,778 | ||||
LIABILITIES IN EXCESS OF | |||||
OTHER ASSETS — (1.2%) | (80,575) | ||||
NET ASSETS — 100.0% | $6,834,203 |
* Non-income producing securities.
** All of the security is purchased with cash collateral proceeds from securities loans.
^ Affiliated institutional money market fund.
## All or a portion of the Fund’s holdings in this security was on loan as of 03/31/05.
ADR — American Depository Receipt
Schedule of Investments by Industry as of March 31, 2005
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 7.8% | ||
Communications | 12.3 | ||
Consumer, Cyclical | 13.2 | ||
Consumer, Non-cyclical | 20.0 | ||
Diversified | 0.5 | ||
Energy | 12.0 | ||
Financial | 8.5 | ||
Industrial | 15.4% | ||
Technology | 6.8 | ||
Utilities | 0.6 | ||
Short Term Investments | 4.1 | ||
Liabilities in excess of other assets | (1.2) | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
U.S. Convertible Fund
Management Team: Douglas G. Forsyth, CFA, Lead Portfolio Manager; Justin Kass, CFA, Portfolio Manager; William L. Stickney, Portfolio Manager; Michael E. Yee, Portfolio Manager; Elizabeth Lemesevski, Investment Analyst; Nicole D. Larrabee, Fixed Income Trading Assistant
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The U.S. Convertible Fund seeks to maximize total return consisting of capital appreciation and current income by investing primarily in convertible securities of U.S. companies across all market capitalizations.
Market Overview: The Merrill Lynch All Convertibles, All Qualities Index declined a modest 0.29% during the twelve months ended March 31, 2005. Solid corporate profits and a healthy economy were offset by rising interest rates, inflation fears and high energy prices.
During the first half of the fiscal year, prices of convertible securities traded slightly lower amid uncertainty about the pace and magnitude of Federal Reserve tightening. Reversing course, convertibles rallied sharply in the final months of 2004 as investors focused on solid corporate profits, strengthened balance sheets and the overall health of economies worldwide. In early 2005, prices of convertible securities retreated on a spike in oil prices and inflation fears. During the period, the Fed raised the target fed funds rate a total of 1.75% in seven separate policy actions.
Total-return and equity-sensitive convertibles outperformed yield-oriented issues, supported by the favorable earnings environment. Larger-cap companies outpaced their smaller-cap counterparts, as smaller companies were more influenced by economic news and monetary tightening. Investment-grade convertibles produced similar returns to non-investment-grade issues.
Performance: From April 1, 2004 through March 31, 2005, the Fund’s Class I shares rose 4.62%, outperforming the Merrill Lynch All Convertibles, All Qualities Index, down 0.29%.
Portfolio Specifics: Strong performance versus the index was driven by security selection, with holdings in diverse industries benefiting the Fund. Energy companies posted record earnings on higher oil and gas prices and improved drilling activity. Wireless service providers reported strong profits and experienced robust end-market demand. HMO companies were up on solid enrollment growth and better expense controls. Not owning biotech firms Elan and Biogen Idec was also beneficial given safety concerns associated with a drug they are jointly developing.
While the Fund outperformed, select issuers negatively affected results. For example, auto-related companies came under pressure as industry production was pared back, casting uncertainty on monthly sales and future revenue forecasts. Select financials were also weak as higher interest rates and a flattening yield curve dampened earnings expectations.
As of March 31, 2005, the Fund’s conversion premium was 18%, compared to the market’s premium of 41%. The Fund continues to be well-positioned to participate in the upside of an improving economic environment and provide downside protection.
Market Outlook: We believe convertible securities remain a compelling asset class for investment. Although rising interest rates are a headwind for the financial markets, the healthy economy, continued strength in corporate profits and low default rates all bode well for convertibles.
We continue to build the Fund one security at a time by finding companies that are opportunistically capitalizing on change. We are also maintaining our discipline of identifying the best convertibles with the optimal risk/reward profile: 70-80% of the upside and 40-50% of the downside.
Comparison of Change in Value of a $250,000 Investment in U.S. Convertible Fund Class I Shares with the Credit Suisse First Boston Convertible Index and the Merrill Lynch All Convertibles, All Qualities Index.
Annualized Total Returns
As of 3/31/05
1 Year | 5 Years | 10 Years |
4.62% | - 2.83% | 12.18% |
![U.S. Convertible](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/convertible.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund’s Class I shares compared with the Credit Suisse First Boston Convertible Index ("CSFB Convertible Index") and the Merrill Lynch All Convertibles, All Qualities Index for the periods indicated. Class I shares have a shareholder services fee of up to .25% of their average daily net assets. Performance is shown for Class I shares only. Class II-IV shares are new and have no prior performance. The Fund’s Class I shares calculate their performance based upon the historical performance of their corresponding series of Nicholas-Applegate Mutual Funds (renamed ING Mutual Funds), adjusted to reflect all fees and expenses applicable to the Fund’s Class I shares. The Nicholas-Applegate Institutional Funds’ Class I shares were first available on May 7, 1999. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment. In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
The Fund has compared it performance to the CSFB Convertible Index from its inception through the retirement of the CSFB Convertible Index on December 31, 2004. In future reports to shareholders, the Fund will compare its performance to the Merrill Lynch All Convertibles, All Qualities Index which the Investment Adviser finds to be appropriate substitute index since the composition of the Fund most closely resembles that of the Merrill Lynch All Convertibles, All Qualities Index.
The Credit Suisse First Boston Convertible Index is a market-weighted index representing the universe of convertible securities, including convertible preferred stocks or convertible bonds. Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index. The Merrill Lynch All Convertibles, All Qualities Index represents convertible securities spanning all corporate sectors and having a par amount outstanding of more than $25 Millions. Maturities must be at least one year. The coupon range must be equal to or greater than zero and all qualities of bonds are included. Preferred equity redemption stocks are not included nor are component bonds once they are converted into corporate stock.
The unmanaged indexes differ from the Fund in composition, do not pay management fees or expenses and include reinvested dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
U.S. Convertible Fund
Principal | |||||
Amount | Value | ||||
CONVERTIBLE CORPORATE BOND — 76.7% | |||||
Aerospace/Defense-Equipment — 1.8% | |||||
Gencorp, Inc. 144A# | |||||
2.250%, 11/15/24 | $555,000 | $654,900 | |||
Applications Software — 2.0% | |||||
Actuant Corp. | |||||
2.000%, 11/15/23 | 536,000 | 694,120 | |||
Broadcast Services/Programming — 1.6% | |||||
Liberty Media Group | |||||
0.750%, 03/30/23 | 530,000 | 583,000 | |||
Casino Hotels — 1.6% | |||||
Caesars Entertainment, Inc.†† | |||||
2.660%, 04/15/24 | 465,000 | 552,755 | |||
Casino Services — 1.4% | |||||
Scientific Games Corp. 144A# | |||||
0.750%, 12/01/24 | 520,000 | 507,000 | |||
Cellular Telecommunications — 5.7% | |||||
Nextel Communications, Inc. Cl. A | |||||
5.250%, 01/15/10 | 555,000 | 571,650 | |||
Nextel Partners, Inc. | |||||
1.500%, 11/15/08 | 265,000 | 769,163 | |||
NII Holdings, Inc. | |||||
3.500%, 09/15/33 | 306,000 | 685,058 | |||
2,025,871 | |||||
Chemicals-Specialty — 1.4% | |||||
Millennium Chemicals, Inc. | |||||
4.000%, 11/15/23 | 225,000 | 491,063 | |||
Commercial Services — 0.7% | |||||
Memberworks, Inc. | |||||
5.500%, 10/01/10 | 230,000 | 259,038 | |||
Commercial Services-Finance — 1.7% | |||||
Euronet Worldwide, Inc. 144A# | |||||
1.625%, 12/15/24 | 585,000 | 606,937 | |||
Consulting Services — 0.8% | |||||
Charles River Associates, Inc. | |||||
2.875%, 06/15/34 | 180,000 | 268,425 | |||
Cruise Lines — 1.4% | |||||
Carnival Corp. | |||||
0.000%, 10/24/21 | 585,000 | 507,487 | |||
Diagnostic Equipment — 1.5% | |||||
Cytyc Corp. | |||||
2.250%, 03/15/24 | 495,000 | 524,081 | |||
Diversified Manufacturing Operations — 3.8% | |||||
Roper Industries, Inc.†† | |||||
1.481%, 01/15/34 | 1,180,000 | 569,350 | |||
Tyco International Group S.A. | |||||
3.125%, 01/15/23 | 481,000 | 763,587 | |||
1,332,937 | |||||
Drug Delivery Systems — 1.9% | |||||
Alza Corp. | |||||
0.000%, 07/28/20 | 730,000 | 677,075 | |||
Electric-Integrated — 3.1% | |||||
CMS Energy Corp. | |||||
2.875%, 12/01/24 | 390,000 | 434,362 | |||
PPL Energy Supply LLC | |||||
2.625%, 05/15/23 | 589,000 | 662,625 | |||
1,096,987 | |||||
Electronic Measure Instruments — 1.5% | |||||
FLIR Systems, Inc. | |||||
3.000%, 06/01/23 | 354,000 | 542,505 | |||
Enterprise Software/Services — 1.6% | |||||
Computer Associates International, Inc. | |||||
1.625%, 12/15/09 | 387,000 | 553,894 | |||
Finance-Auto Loans — 1.6% | |||||
AmeriCredit Corp. | |||||
1.750%, 11/15/23 | $410,000 | $560,162 | |||
Finance-Consumer Loans — 1.6% | |||||
SLM Corp.†† | |||||
2.650%, 07/25/35 | 550,000 | 565,521 | |||
Hotels & Motels — 1.7% | |||||
Hilton Hotels Corp. | |||||
3.375%, 04/15/23 | 520,000 | 604,500 | |||
Instruments-Scientific — 1.6% | |||||
Fisher Scientific International, Inc. | |||||
2.500%, 10/01/23 | 422,000 | 567,063 | |||
Medical-Drugs — 2.0% | |||||
Celgene Corp. | |||||
1.750%, 06/01/08 | 130,000 | 195,000 | |||
Sepracor, Inc. | |||||
0.000%, 12/15/10 | 249,000 | 497,689 | |||
692,689 | |||||
Medical-HMO — 1.9% | |||||
Sierra Health Services, Inc. | |||||
2.250%, 03/15/23 | 191,000 | 672,081 | |||
Medical-Nursing Homes — 1.8% | |||||
Genesis HealthCare Corp. 144A# | |||||
2.500%, 03/15/25 | 600,000 | 622,500 | |||
Medical-Outpatient/Home Medical Care — 1.3% | |||||
Matria Healthcare, Inc. | |||||
4.875%, 05/01/24 | 265,000 | 457,125 | |||
Metal-Diversified — 1.8% | |||||
Inco, Ltd. | |||||
0.000%, 03/29/21 | 592,000 | 629,740 | |||
Networking Products — 1.5% | |||||
Anixter International, Inc. | |||||
0.000%, 07/07/33 | 1,035,000 | 547,256 | |||
Oil & Gas Drilling — 2.4% | |||||
Diamond Offshore Drilling, Inc. | |||||
1.500%, 04/15/31 | 260,000 | 305,825 | |||
Pride International, Inc. | |||||
3.250%, 05/01/33 | 465,000 | 549,281 | |||
855,106 | |||||
Oil-Field Services — 1.7% | |||||
Schlumberger, Ltd. | |||||
1.500%, 06/01/23 | 550,000 | 603,625 | |||
Optical Supplies — 3.6% | |||||
Advanced Medical Optics | |||||
2.500%, 07/15/24 | 605,000 | 603,488 | |||
Bausch & Lomb, Inc.†† | |||||
2.486%, 08/01/23 | 457,000 | 665,758 | |||
1,269,246 | |||||
Power Conversion/Supply Equipment — 1.0% | |||||
Artesyn Technologies, Inc. | |||||
5.500%, 08/15/10 | 274,000 | 358,255 | |||
Printing-Commercial — 1.4% | |||||
Bowne & Co., Inc. | |||||
5.000%, 10/01/33 | 447,000 | 492,817 | |||
Research & Development — 1.5% | |||||
SFBC International, Inc. | |||||
2.250%, 08/15/24 | 470,000 | 537,563 | |||
Retail-Building Products — 1.8% | |||||
Lowe’s Cos., Inc. | |||||
0.000%, 02/16/21 | 670,000 | 632,313 | |||
Retail-Music Store — 1.1% | |||||
Guitar Center, Inc. | |||||
4.000%, 07/15/13 | 241,000 | 396,746 |
See Accompanying Notes to Financial Statements.
Principal | |||||
Amount | Value | ||||
CONVERTIBLE CORPORATE BOND (Continued) | |||||
Rubber-Tires — 1.7% | |||||
Goodyear Tire & Rubber Co. 144A# | |||||
4.000%, 06/15/34 | $460,000 | $596,275 | |||
Semiconductor Components-Integrated Circuits — 0.5% | |||||
Cypress Semiconductor Corp. | |||||
1.250%, 06/15/08 | 155,000 | 165,850 | |||
Telecommunications Equipment — 3.4% | |||||
Comverse Technology, Inc. | |||||
0.000%, 05/15/23 | 434,000 | 635,810 | |||
Harris Corp. | |||||
3.500%, 08/15/22 | 380,000 | 574,750 | |||
1,210,560 | |||||
Telephone-Integrated — 1.6% | |||||
CenturyTel, Inc. | |||||
4.750%, 08/01/32 | 525,000 | 560,437 | |||
Toys — 1.2% | |||||
Hasbro, Inc. | |||||
2.750%, 12/01/21 | 385,000 | 417,725 | |||
Web Portals/ISP — 0.4% | |||||
Yahoo!, Inc. | |||||
0.000%, 04/01/08 | 90,000 | 153,450 | |||
Wireless Equipment — 3.1% | |||||
American Tower Corp. | |||||
3.000%, 08/15/12 | 500,000 | 545,000 | |||
Crown Castle International Corp. | |||||
4.000%, 07/15/10 | 307,000 | 536,482 | |||
1,081,482 | |||||
TOTAL CONVERTIBLE CORPORATE BOND | |||||
(Cost: $24,011,369) | 27,128,162 | ||||
CONVERTIBLE PREFERRED STOCK — 22.3% | |||||
Auto-Cars/Light Trucks — 1.2% | |||||
Ford Motor Co. | |||||
6.500%, 01/15/32 | 9,092 | 412,231 | |||
Cellular Telecommunications — 1.5% | |||||
Alamosa Holdings, Inc. | |||||
7.500%, 07/31/13 | 610 | 543,015 | |||
Chemicals-Diversified — 1.5% | |||||
Huntsman Corp.## | |||||
5.000%, 02/16/08 | 10,470 | 533,970 | |||
Coal — 1.7% | |||||
Arch Coal, Inc. | |||||
5.000%, 12/31/49 | 5,795 | 621,514 | |||
Electric-Generation — 1.9% | |||||
AES Trust III## | |||||
6.750%, 10/15/29 | 13,843 | 657,543 | |||
Finance-Credit Card — 1.5% | |||||
Capital One Financial Corp. | |||||
6.250%, 05/17/05 | 10,861 | 549,132 | |||
Financial Guarantee Insurance — 1.6% | |||||
PMI Group, Inc. | |||||
5.875%, 11/15/06 | 23,040 | 559,872 | |||
Medical-Drugs — 1.6% | |||||
Schering-Plough Corp. | |||||
6.000%, 09/14/07 | 11,361 | 571,458 | |||
Office Automation & Equipment — 1.6% | |||||
Xerox Corp. | |||||
6.250%, 07/01/06 | 4,200 | 552,636 | |||
Oil Companies-Exploration & Production — 1.7% | |||||
Chesapeake Energy Corp. | |||||
5.000%, 12/31/49 | 4,060 | 586,670 | |||
Oil Companies-Integrated — 1.6% | |||||
Amerada Hess Corp. | |||||
7.000%, 12/01/06 | $6,765 | $567,516 | |||
Pipelines — 1.7% | |||||
Williams Holdings of Delaware## | |||||
5.500%, 06/01/33 | 6,570 | 597,870 | |||
Reinsurance — 1.1% | |||||
Platinum Underwriters Holdings, Inc. | |||||
7.000%, 11/15/05 | 12,920 | 376,295 | |||
Steel-Producers — 1.1% | |||||
United States Steel Corp. | |||||
7.000%, 06/15/06 | 2,423 | 399,189 | |||
Telecommunications Equipment Fiber Optics — 1.0% | |||||
Corning, Inc. | |||||
7.000%, 08/16/05 | 653 | 371,394 | |||
TOTAL CONVERTIBLE PREFERRED STOCK | |||||
(Cost: $6,461,767) | 7,900,305 | ||||
Number | |||||
of Shares | |||||
COMMON STOCK — 4.8% | |||||
Medical-HMO — 1.6% | |||||
Wellpoint, Inc.* | 4,403 | 551,916 | |||
Multi-line Insurance — 0.9% | |||||
Prudential Financial, Inc.* | 5,675 | 325,745 | |||
Retail-Apparel/Shoe — 1.1% | |||||
Gap, Inc. | 17,307 | 377,985 | |||
Retail-Major Department Stores — 1.2% | |||||
JC Penney Co., Inc. | 8,578 | 445,370 | |||
TOTAL COMMON STOCK | |||||
(Cost: $1,033,965) | 1,701,016 | ||||
Principal | |||||
Amount | |||||
SHORT TERM INVESTMENTS — 6.8% | |||||
Money Market Funds — 4.4% | |||||
Allianz Dresdner Daily Asset Fund** ^ | $1,572,025 | $1,572,025 | |||
Time Deposit — 2.4% | |||||
Citibank Nassau | |||||
2.290%, 04/01/05 | 848,929 | 848,929 | |||
TOTAL SHORT TERM INVESTMENTS | |||||
(Cost: $2,420,954) | 2,420,954 | ||||
TOTAL INVESTMENTS — 110.6% | |||||
(Cost: $33,928,055) | 39,150,437 | ||||
LIABILITIES IN EXCESS OF OTHER | |||||
ASSETS — (10.6%) | (3,753,395) | ||||
NET ASSETS — 100.0% | $35,397,042 |
* Non-income producing securities.
** All of the security is purchased with cash collateral proceeds from securities loans.
# 144A Security. Certain condition for public sale may exist.
The total market value of 144A securities owned at March 31, 2005 was $2,987,612 or 8.44% of net assets.
^ Affiliated institutional money market fund.
## All or a portion of the Fund’s holdings in this security was on loan as of 03/31/05.
†† The coupon rate shown on floating rate securities represents the rate at year end.
See Accompanying Notes to Financial Statements.
Schedule of Investments by Industry as of March 31, 2005
U.S. Convertible Fund
Percent of | |||
Industry | Net Assets | ||
Basic Materials | 5.8% | ||
Communications | 20.0 | ||
Consumer, Cyclical | 15.4 | ||
Consumer, Non-cyclical | 23.2 | ||
Energy | 10.8 | ||
Financial | 8.3 | ||
Industrial | 9.7 | ||
Technology | 5.6% | ||
Utilities | 5.0 | ||
Short Term Investments | 6.8 | ||
Liabilities in excess of other assets | (10.6) | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
Global Select Fund
Management Team: Nicholas Melhuish, Lead Portfolio Manager; Pedro V. Marcal, Lead Portfolio Manager
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The Global Select Fund seeks to maximize long-term capital appreciation by investing in companies that, in the opinion of the Investment Adviser, represent the “best of the best” globally.
Market Overview: During the twelve months ended March 31, 2005, global equities posted solid increases, as measured by the MSCI All Country World Index. Gains were concentrated in the fourth quarter of 2004.
During the period, corporate profit growth was healthy in many countries. However, a number of uncertainties weighed on the market, including:
· Surging commodity prices, including oil which hit an all-time high of over $57 in mid-March 2005
· Rising U.S. interest rates and mixed economic indicators in the United States that obscured the solid pace of expansion
· Tepid growth in most European economies and signs that the Japanese recovery had faltered
In addition, investors were anxious about whether Chinese officials would be able to engineer a “soft landing” for its red-hot economy. The government’s attempts to slow investment appeared to err in favor of growth, however, as the Chinese economy re-accelerated in the last three months of 2004.
Stock markets in most countries and sectors advanced during the period. In U.S. dollar terms, major markets that performed especially well included the United Kingdom, Canada and France. By sector, energy stocks were the clear winner followed by utilities and materials.
Performance: During the fiscal year ended March 31, 2005, the Fund’s Class I shares rose 9.27%. The MSCI All Country World Index increased 11.39%.
Portfolio Specifics: The Fund’s holdings in every sector of investment generated positive returns except for utilities. By country, returns were mixed. Positions in Hong Kong, Ireland and Thailand rose by more than 40% on average, while holdings in several nations produced double-digit declines, including Canada and the United Kingdom.
On a relative basis, the Fund outperformed the index during the second half of the period but modestly trailed for the full twelve months. Holdings in the United Kingdom and industrials sector had the largest negative impact on relative results. In these areas, both stock selection and below-benchmark weightings were unfavorable. Issue selection in South Korea and among consumer discretionary companies also detracted.
On the plus side, stock selection in the United States and the energy and health care sectors were primary sources of relative strength. Top performers included U.S. oil and gas producers ConocoPhillips and Williams, which advanced on record-high oil prices, and U.S.-based Allscripts Healthcare Solutions, a provider of medical information systems which benefited from accelerating demand for its products. Singapore-based Jardine Matheson, a company with diverse business interests, was another top performer driven by strength in its retail, motor vehicle and property development groups.
Market Outlook: The near-term outlook for global equity markets is mixed. In Europe and Japan, sluggish economic activity is producing a lack of catalysts for above-average growth. However, in the United States and many other markets, strengthening business spending and solid corporate earnings bode well for stock prices.
Regardless of the direction the broad market takes, we will continue to work hard to identify companies with exceptional growth prospects for the Fund.
Comparison of Change in Value of a $250,000 Investment in Global Select Fund Class I and II Shares with the MSCI All Country World Index.
Annualized Total Returns
As of 3/31/05
Since | ||
1 Year | 5 Years | Inception |
9.27% | - 3.36% | 15.44% |
![Global Select Cl. I](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/globlaselect1.jpg)
Since | ||
1 Year | Inception | |
9.34% | 15.44% |
![Global Select Cl. II](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/globalselect2.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund’s Class I and II shares compared with the Morgan Stanley Capital International All Country World Index (“MSCI ACWI”) over the periods indicated. Class I and II shares have a shareholder services fee of up to .25% of their average daily net assets. Class III-IV shares are new and have no prior performance. The Fund’s Class I shares calculate their performance based upon the historical performance of their corresponding series of Nicholas-Applegate Mutual Funds (renamed ING Mutual Funds), adjusted to reflect all fees and expenses applicable to the Fund’s Class I shares. The Nicholas-Applegate Institutional Funds’ Class I shares were first available on May 7, 1999. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment. In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
The MSCI ACWI Index is a market capitalization weighted index composed of over 2000 companies. The MSCI ACWI Index is representative of the market structure of 21 countries in North America, Europe, and the Pacific Rim, excluding closed markets and those shares in otherwise free markets that are not purchasable by foreigners.
The unmanaged Index differs from the Fund in composition, does not pay management fees or expenses and includes reinvested dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, currency volatility and the social, economic and political climates of countries where the Fund invests. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
Global Select Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 99.0% | |||||
Belgium — 0.8% | |||||
KBC Groupe S.A. | 12,534 | $1,059,652 | |||
China — 1.3% | |||||
Foxconn International Holdings, Ltd.* | 3,186,000 | 1,725,894 | |||
Egypt — 0.6% | |||||
Orascom Telecom SAE — GDR* | 22,531 | 793,091 | |||
France — 3.9% | |||||
JC Decaux S.A.* | 44,223 | 1,210,411 | |||
Pinault Printemps Redoute S.A.* | 11,297 | 1,211,277 | |||
Publicis Groupe* ## | 45,141 | 1,389,246 | |||
Sanofi - Synthelabo S.A | 18,146 | 1,534,103 | |||
5,345,037 | |||||
Germany — 3.0% | |||||
BASF AG* | 24,686 | 1,754,628 | |||
HeidelbergCement AG* | 18,132 | 1,142,326 | |||
Hypo Real Estate Holding AG* | 26,588 | 1,110,946 | |||
4,007,900 | |||||
Hong Kong — 1.6% | |||||
Dickson Concepts International, Ltd. | 634,450 | 1,130,717 | |||
Jardine Matheson Holdings, Ltd. | 60,400 | 1,050,960 | |||
2,181,677 | |||||
Hungary — 0.7% | |||||
BorsodChem Rt | 67,067 | 915,805 | |||
Indonesia — 0.7% | |||||
Indosat TBK PT | 1,958,500 | 1,008,204 | |||
Ireland — 1.1% | |||||
CRH PLC | 57,301 | 1,506,043 | |||
Israel — 1.7% | |||||
Syneron Medical, Ltd.* | 29,900 | 952,614 | |||
Teva Pharmaceutical | |||||
Industries, Ltd. — ADR | 45,300 | 1,404,300 | |||
2,356,914 | |||||
Japan — 8.8% | |||||
Ajinomoto Co., Inc. | 82,000 | 1,002,767 | |||
Fuji Fire & Marine | |||||
Insurance Co., Ltd.## | 402,000 | 1,386,855 | |||
Hokuhoku Financial Group, Inc. | 407,000 | 1,236,677 | |||
Japan Tobacco, Inc.* | 122 | 1,357,330 | |||
JSR Corp. | 50,000 | 988,687 | |||
Mitsubishi Tokyo Financial Group, Inc. | 166 | 1,443,343 | |||
Mizuho Financial Group, Inc.* | 272 | 1,289,304 | |||
Nippon Electric Glass Co. | 84,000 | 1,213,351 | |||
NTT Urban Development Corp. | 230 | 1,064,417 | |||
Pioneer Corp. | 54,400 | 981,092 | |||
11,963,823 | |||||
Luxembourg — 0.7% | |||||
Millicom International Cellular S.A.* | 45,900 | 930,393 | |||
Malaysia — 1.6% | |||||
Astro All Asia Networks PLC* | 728,500 | 987,309 | |||
Commerce Asset - Holding Berhad | 955,800 | 1,151,991 | |||
2,139,300 | |||||
Mexico — 0.9% | |||||
America Movil S.A. de CV - | |||||
Ser L — ADR | 24,500 | 1,264,200 | |||
Netherlands — 1.4% | |||||
Royal Numico NV* | 47,408 | 1,944,532 | |||
Singapore — 0.7% | |||||
Starhub, Ltd.* | 1,303,000 | 995,441 | |||
South Korea — 3.1% | |||||
Gravity Co., Ltd. Sponsored — ADR* | 38,526 | $363,685 | |||
Kookmin Bank — ADR## | 24,400 | 1,089,460 | |||
LG Electronics, Inc. | 16,980 | 1,138,688 | |||
Samsung Electronics Co., Ltd. | 3,210 | 1,586,824 | |||
4,178,657 | |||||
Switzerland — 4.5% | |||||
SGS S.A.## | 2,116 | 1,530,323 | |||
Swiss Life Holding* | 6,529 | 984,910 | |||
Synthes, Inc. | 11,388 | 1,270,748 | |||
UBS AG## | 27,268 | 2,310,654 | |||
6,096,635 | |||||
Taiwan — 0.5% | |||||
ASE Test, Ltd.* | 127,600 | 648,208 | |||
Thailand — 2.1% | |||||
Siam Cement PCL — NVDR | 148,400 | 948,485 | |||
Siam City Bank PCL | 1,383,500 | 884,252 | |||
TelecomAsia Corp. Public Co., Ltd.* | 4,462,300 | 1,032,438 | |||
2,865,175 | |||||
United Kingdom — 5.8% | |||||
Arm Holdings PLC* | 842,669 | 1,675,903 | |||
Man Group PLC | 43,948 | 1,141,027 | |||
Morrison Supermarkets | 485,008 | 1,796,283 | |||
Royal Bank of Scotland Group PLC* | 64,405 | 2,049,423 | |||
Shire Pharmaceuticals Group PLC | 33,400 | 1,144,952 | |||
7,807,588 | |||||
United States — 53.5% | |||||
Advanced Auto Parts, Inc.* | 19,300 | 973,685 | |||
Allscripts Healthcare | |||||
Solutions, Inc.* ## | 89,900 | 1,285,570 | |||
American Healthways, Inc.* ## | 37,000 | 1,221,740 | |||
American International Group, Inc. | 33,100 | 1,834,071 | |||
ANSYS, Inc.* | 24,600 | 841,566 | |||
Apple Computer, Inc.* | 26,000 | 1,083,420 | |||
Applied Materials, Inc.* | 63,800 | 1,036,750 | |||
Burlington Resources, Inc. | 15,700 | 786,099 | |||
Carter’s, Inc.* | 20,500 | 814,875 | |||
Citrix Systems, Inc.* | 61,500 | 1,464,930 | |||
Coach, Inc.* | 19,800 | 1,121,274 | |||
Comcast Corp. Cl. A* | 60,800 | 2,053,824 | |||
ConocoPhillips | 14,100 | 1,520,544 | |||
Dell, Inc.* | 51,700 | 1,986,314 | |||
Dow Chemical Co. | 26,700 | 1,330,995 | |||
Exxon Mobil Corp. | 58,600 | 3,492,560 | |||
Federated Department Stores, Inc. | 19,200 | 1,221,888 | |||
Freescale Semiconductor, Inc.* | 83,802 | 1,445,585 | |||
General Electric Co. | 99,800 | 3,598,788 | |||
Gilead Sciences, Inc.* | 63,800 | 2,284,040 | |||
Halliburton Co. | 24,200 | 1,046,650 | |||
Inamed Corp.* | 12,100 | 845,548 | |||
Intel Corp. | 61,300 | 1,423,999 | |||
ITT Industries, Inc. | 22,600 | 2,039,424 | |||
Jabil Circuit, Inc.* | 36,800 | 1,049,536 | |||
Kinetic Concepts, Inc.* | 18,900 | 1,127,385 | |||
Lafarge North America, Inc. | 15,800 | 923,510 | |||
May Department Stores Co. | 14,600 | 540,492 | |||
McAfee, Inc.* | 36,600 | 825,696 | |||
Microsoft Corp. | 121,500 | 2,936,655 | |||
Morgan Stanley Dean Witter & Co. | 29,300 | 1,677,425 | |||
Nabors Industries, Ltd.* | 19,100 | 1,129,574 | |||
News Corp. Cl. B | 100,800 | 1,775,088 | |||
Nordstrom, Inc.## | 24,200 | 1,340,196 | |||
Orchid Biosciences, Inc.* | 51,500 | 605,640 | |||
Oxford Industries, Inc. | 27,000 | 987,930 | |||
Pfizer, Inc. | 51,600 | 1,355,532 | |||
Praxair, Inc. | 37,900 | 1,813,894 | |||
QUALCOMM, Inc. | 37,500 | 1,374,375 | |||
Quiksilver, Inc.* | 55,300 | 1,605,359 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
United States (Continued) | |||||
Stericycle, Inc.* | 23,700 | $1,047,540 | |||
Symantec Corp.* | 67,400 | 1,437,642 | |||
Texas Instuments, Inc. | 73,100 | 1,863,319 | |||
TIBCO Software, Inc.* | 105,000 | 782,250 | |||
Time Warner, Inc.* | 57,300 | 1,005,615 | |||
Transocean Sedco Forex, Inc.* | 35,000 | 1,801,100 | |||
Turbochef Technologies, Inc.* ## | 37,866 | 563,825 | |||
Tyco International, Ltd. | 60,600 | 2,048,280 | |||
Viacell, Inc.* | 61,700 | 465,218 | |||
Williams Cos., Inc. | 61,372 | 1,154,407 | |||
Yahoo!, Inc.* | 32,300 | 1,094,970 | |||
Zimmer Holdings, Inc.* | 19,600 | 1,525,076 | |||
72,611,668 | |||||
TOTAL COMMON STOCK | |||||
(Cost: $118,279,623) | 134,345,837 | ||||
Principal | |||||
Amount | Value | ||||
SHORT TERM INVESTMENTS — 6.3% | |||||
Money Market Funds — 6.0% | |||||
Allianz Dresdner Daily Asset Fund** ^ | $8,090,290 | $8,090,290 | |||
Time Deposits — 0.3% | |||||
Wachovia Bank GC | |||||
2.290%, 04/01/05 | 389,397 | 389,397 | |||
TOTAL SHORT TERM INVESTMENTS | |||||
(Cost: $8,479,687) | 8,479,687 | ||||
TOTAL INVESTMENTS — 105.3% | |||||
(Cost: $126,759,310) | 142,825,524 | ||||
LIABILITIES IN EXCESS OF | |||||
OTHER ASSETS — (5.3%) | (7,162,611) | ||||
NET ASSETS — 100.0% | $135,662,913 |
* Non-income producing securities.
** All of the security is purchased with cash collateral proceeds from securities loans.
^ Affiliated institutional money market fund.
## All or a portion of the Fund’s holdings in this security was on loan as of 03/31/05.
ADR — American Depository Receipt
GDR — Global Depository Receipt
NVDR — Non Voting Depository Receipt
Schedule of Investments by Industry as of March 31, 2005
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 5.0% | ||
Communications | 16.0 | ||
Consumer, Cyclical | 9.0 | ||
Consumer, Non-cyclical | 17.2 | ||
Diversified | 0.8 | ||
Energy | 8.1 | ||
Financial | 16.0 | ||
Industrial | 12.7% | ||
Technology | 14.2 | ||
Short Term Investments | 6.3 | ||
Liabilities in excess of other assets | (5.3) | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
International Growth Fund
Management Team: Horacio A. Valeiras, CFA, Lead Portfolio Manager and Chief Investment Officer; Linda Ba, Portfolio Manager; Jason Campbell, Portfolio Manager; Rebecca K. Hagstrom, CFA, Investment Analyst; Flora Kim, Investment Analyst; Karl Richtenburg, Investment Analyst; Eric Sagmeister, Investment Analyst; Scott R. Williams, Investment Analyst; Michael J. Fredericks, Portfolio Specialist
Goal: The International Growth Fund seeks to maximize long-term capital appreciation through investments primarily in companies located outside the United States with market capitalizations predominantly in the top 75% of publicly traded companies as measured by stock market capitalizations within each country.
Market Overview: Equities in developed non-U.S. markets posted strong increases during the twelve months ended March 31, 2005. Gains were widespread, as stock prices climbed higher in most countries in local currency terms. The U.S. dollar weakened relative to a broad basket of currencies, enhancing returns for U.S.-based investors.
During the first half of the period, equity performance was flat. Negative factors, such as rising oil prices and interest rates, were offset by expectations that slowing economic growth would keep central bankers from boosting rates as quickly as investors had originally thought. However, in the fourth quarter of 2004, the markets rallied on a steep drop in oil prices. Equities continued to advance in early 2005 (in local currency terms), yet at a more moderate pace.
Among the larger markets, Japan produced a solid gain but trailed the MSCI EAFE Index on weaker-than-expected economic data. Alternatively, stock markets in Australia and Spain performed especially well. In Australia, domestic demand remained brisk, and exports of metals and coal to China have risen 45% since 2001. In Spain, a boom in the housing market drove strength in consumer spending.
Performance: Between April 1, 2004 and March 31, 2005, the Fund’s Class I shares posted a 9.55% increase. The MSCI EAFE Index gained 15.49%.
Portfolio Specifics: Investors favored international value stocks over their growth counterparts during the fiscal year. This hurt the Fund’s relative performance since, consistent with our philosophy, holdings were concentrated in growth issues while the style-neutral benchmark is a blend of growth and value names. Stock selection in the United Kingdom, France and among financials also detracted from performance versus the index, as did an overweight in the information technology sector.
On a brighter note, issue selection in Canada, Hong Kong and the telecommunications services and consumer discretionary sectors helped relative results. The Fund’s best-performing holdings included Canada-based Precision Drilling, a contract drilling company; Hong-Kong based Esprit Holdings, a specialty retailer; and Telecom Italia Mobile, a wireless services provider based in Italy.
As a result of our stock-by-stock investment decisions, the Fund was underweight European markets at March 31, 2005. We found better opportunities elsewhere, particularly in emerging Asia where many companies are benefiting from high end-market demand and expanding operating margins.
Market Outlook: Near term, the outlook for international equities is mixed. Economic growth in Continental Europe has been weak, and economic indicators for Japan continue to deteriorate. On the other hand, corporate profits in Japan remain robust, and the European retail sector has been quite strong. In addition, there is still room for companies to increase margins through balance sheet restructuring and productivity gains.
Against this challenging backdrop, individual stock selection remains critical. We are confident our bottom-up investment process will uncover attractive opportunities for the Fund.
Comparison of Change in Value of a $250,000 Investment in International Growth Fund Class I, III and IV Shares with the MSCI EAFE Index.
Annualized Total Returns
As of 3/31/05
Since | ||
1 Year | 5 Years | Inception |
9.55% | - 6.93% | 7.80% |
![International Growth Cl. I](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/int_growth1.jpg)
Since | ||
1 Year | Inception | |
9.77% | 7.84% |
![International Growth Cl. III](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/int_growth3.jpg)
Annualized Total Returns
As of 3/31/05
Since | ||
1 Year | Inception | |
9.95% | 7.88% |
![International Growth Cl. IV](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/int_growth4.jpg)
The graphs above show the value of a hypothetical $250,000 investment in the Fund’s Class I, III and IV shares compared with the Morgan Stanley Capital International Europe, Australasia, Far East Index (“MSCI EAFE”) over the periods indicated. Class I, III and IV shares have a shareholder services fee of up to .25% of their average daily net assets. The Fund’s Class II shares are new and have no prior performance. The Fund’s Class I shares calculate their performance based upon the historical performance of their corresponding series of Nicholas-Applegate Mutual Funds (renamed ING Mutual Funds), adjusted to reflect all fees and expenses applicable to the Fund’s Class I shares. The Nicholas-Applegate Institutional Funds’ Class I shares were first available on May 7, 1999. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment. In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
The MSCI EAFE Index is an unmanaged index of over 900 companies, and is a generally accepted benchmark for major overseas markets. Index weightings represent the relative capitalizations of the major overseas markets included in the index on a U.S. dollar adjusted basis. The unmanaged Index differs from the Fund in composition, does not pay management fees or expenses and includes reinvested dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, currency volatility and the social, economic and political climates of countries where the Fund invests. You may have a gain or loss when you sell your shares.
schedule of Investments as of March 31, 2005
International Growth Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 95.9% | |||||
Belgium — 2.1% | |||||
KBC Groupe S.A. | 27,128 | $2,293,462 | |||
Canada — 6.0% | |||||
ATI Technologies, Inc.* | 61,200 | 1,056,312 | |||
Cameco Corp. | 46,100 | 2,041,226 | |||
Canadian Pacific Railway, Ltd. | 34,100 | 1,233,107 | |||
Fording Canadian Coal Trust | 11,700 | 1,074,996 | |||
Precision Drilling Corp.* | 15,700 | 1,172,162 | |||
6,577,803 | |||||
Egypt — 1.4% | |||||
Orascom Telecom SAE — GDR* | 43,818 | 1,542,394 | |||
France — 8.1% | |||||
Accor S.A. | 25,095 | 1,231,532 | |||
Lagardere S.C.A* | 15,085 | 1,144,945 | |||
Pinault Printemps Redoute S.A.* ## | 20,561 | 2,204,574 | |||
Publicis Groupe* ## | 55,997 | 1,723,348 | |||
Sanofi — Synthelabo S.A. | 29,825 | 2,521,472 | |||
8,825,871 | |||||
Germany — 7.9% | |||||
Adidas Salomon AG | 11,529 | 1,834,300 | |||
Bayer AG | 46,759 | 1,547,820 | |||
Bayerische Motoren Werke AG | 39,112 | 1,781,658 | |||
HeidelbergCement AG* | 17,437 | 1,099,787 | |||
Merck KGaA* ## | 33,235 | 2,375,663 | |||
8,639,228 | |||||
Greece — 1.0% | |||||
Hellenic Telecommunications Organization S.A. | 60,200 | 1,059,355 | |||
Indonesia — 1.0% | |||||
PT Indosat — ADR | 42,600 | 1,101,210 | |||
Israel — 0.7% | |||||
Machteshim-Agan Industries, Ltd. | 144,425 | 807,256 | |||
Italy — 4.8% | |||||
ENI SpA | 102,987 | 2,680,956 | |||
Mediobanca SpA* | 98,579 | 1,715,503 | |||
Saipem SpA | 64,535 | 820,277 | |||
5,216,736 | |||||
Japan — 18.1% | |||||
Asahi Glass Co., Ltd. | 128,300 | 1,355,451 | |||
Canon, Inc. | 26,300 | 1,413,846 | |||
Fuji Photo Film Co., Ltd. | 37,700 | 1,381,675 | |||
Japan Tobacco, Inc. | 187 | 2,080,497 | |||
Mitsubishi Estate## | 170,000 | 1,980,366 | |||
Mitsubishi Tokyo Financial Group, Inc. | 239 | 2,078,067 | |||
Shin-Etsu Chemical Co., Ltd. | 38,000 | 1,442,408 | |||
SMC Corp. | 11,200 | 1,270,157 | |||
Sumitomo Corp. | 160,000 | 1,374,720 | |||
Sumitomo Mitsui Financial Group* | 407 | 2,762,547 | |||
Tokyo Gas Co., Ltd. | 345,000 | 1,393,418 | |||
Toppan Printing Co., Ltd. | 121,000 | 1,328,104 | |||
19,861,256 | |||||
Luxembourg — 2.1% | |||||
Millicom International Cellular S.A.* | 53,800 | 1,090,526 | |||
Stolt Offshores S.A.* | 160,800 | 1,245,268 | |||
2,335,794 | |||||
Mexico — 1.5% | |||||
America Movil S.A. de CV - | |||||
Ser L — ADR | 31,700 | 1,635,720 | |||
Netherlands — 2.6% | |||||
Royal Numico NV* ## | 70,502 | 2,891,777 | |||
Republic Of China — 6.4% | |||||
China Telecom Corp. Ltd. — ADR* | 31,700 | $1,104,428 | |||
Esprit Holdings, Ltd. | 445,000 | 3,038,234 | |||
Foxconn International Holdings, Ltd. | 2,245,000 | 1,216,143 | |||
PetroChina Co., Ltd. Ser. H | 2,694,000 | 1,675,255 | |||
7,034,060 | |||||
Singapore — 1.4% | |||||
Singapore Telecommunications Ltd. | 952,000 | 1,489,214 | |||
South Korea — 2.2% | |||||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | 70,080 | 1,318,097 | |||
LG Electronics, Inc. | 16,100 | 1,079,675 | |||
2,397,772 | |||||
Spain — 2.8% | |||||
Banco Bilbao Vizcaya Argentaria S.A. | 95,292 | 1,555,509 | |||
Gestevision Telecinco S.A.* | 64,960 | 1,514,589 | |||
3,070,098 | |||||
Switzerland — 7.9% | |||||
Adecco SA-Reg | 25,692 | 1,416,196 | |||
Roche Holding AG-Genusschein | 19,178 | 2,062,773 | |||
Straumann AG## | 5,300 | 1,151,691 | |||
Swiss Life Holding* | 11,369 | 1,715,032 | |||
UBS AG## | 27,304 | 2,313,704 | |||
8,659,396 | |||||
Thailand — 2.1% | |||||
Italian - Thai Development PLC* | 4,316,100 | 1,136,542 | |||
TelecomAsia Corp. Public Co., Ltd.* | 4,994,700 | 1,155,619 | |||
2,292,161 | |||||
United Kingdom — 15.8% | |||||
Arm Holdings PLC | 984,315 | 1,957,610 | |||
Diageo PLC | 78,309 | 1,103,876 | |||
easyJET PLC* | 209,923 | 855,817 | |||
Man Group PLC | 82,937 | 2,153,302 | |||
Morrison Supermarkets | 820,616 | 3,039,247 | |||
Premier Farnell PLC | 311,711 | 999,843 | |||
Royal Bank of Scotland Group PLC* | 61,512 | 1,957,365 | |||
Shire Pharmaceuticals Group PLC* | 88,915 | 1,015,643 | |||
Taylor Woodrow PLC | 149,624 | 865,152 | |||
Vodafone Group PLC | 1,263,934 | 3,355,603 | |||
17,303,458 | |||||
TOTAL COMMON STOCK | |||||
(Cost: $93,686,887) | 105,034,021 | ||||
EQUITY-LINKED SECURITIES — 2.0% | |||||
United Kingdom — 2.0% | |||||
UBS AG Far EasTone Telecommunications Co., Ltd — 03/10/06 | 1,764,000 | 2,233,224 | |||
TOTAL EQUITY-LINKED SECURITIES — 2.0% | |||||
(Cost: $2,241,132) | 2,233,224 | ||||
Principal | |||||
Amount | |||||
SHORT TERM INVESTMENTS — 11.6% | |||||
Money Market Funds — 9.6% | |||||
Allianz Dresdner Daily Asset Fund** ^ | $10,497,014 | 10,497,014 | |||
Time Deposits — 2.0% | |||||
Wachovia Bank GC | |||||
2.290%, 04/01/05 | 2,199,657 | 2,199,657 | |||
TOTAL SHORT TERM INVESTMENTS | |||||
(Cost: $12,696,671) | 12,696,671 |
See Accompanying Notes to Financial Statements.
Value | |||||
TOTAL INVESTMENTS — 109.5% | |||||
(Cost: $108,624,690) | $119,963,916 | ||||
LIABILITIES IN EXCESS OF OTHER ASSETS — (9.5%) | (10,393,122) | ||||
NET ASSETS — 100.0% | $109,570,794 |
* Non-income producing securities.
** All of the security is purchased with cash collateral proceeds from securities loans.
^ Affiliated institutional money market fund.
## All or a portion of the Fund’s holdings in this security was on loan as of 03/31/05.
ADR — American Depository Receipt
Schedule of Investments by Industry as of March 31, 2005
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 5.3% | ||
Communications | 19.5 | ||
Consumer, Cyclical | 11.3 | ||
Consumer, Non-cyclical | 19.2 | ||
Energy | 7.9 | ||
Financial | 18.7 | ||
Industrial | 10.7 | ||
Technology | 4.0% | ||
Utilities | 1.3 | ||
Short Term Investments | 11.6 | ||
Liabilities in excess of other assets | (9.5) | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
International Growth Opportunities Fund
Management Team: Christopher A. Herrera, Portfolio Manager; Linda Ba, Portfolio Manager; Jason Campbell, Portfolio Manager; Rebecca K. Hagstrom, CFA, Investment Analyst; Flora Kim, Investment Analyst; Karl Richtenburg, Investment Analyst; Eric Sagmeister, Investment Analyst; Scott R. Williams, Investment Analyst; Michael J. Fredericks, Portfolio Specialist
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The International Growth Opportunities Fund seeks to maximize long-term capital appreciation through investments primarily in companies located outside the United States with market capitalizations predominantly in the bottom 25% of publicly traded companies as measured by the market capitalization in each country.
Market Overview: Prices of international small-cap stocks climbed sharply higher from April 1, 2004 through March 31, 2005, with the Citigroup World ex-U.S. EMI rising 22.06%. This compared favorably to large-cap U.S. and non-U.S. stocks, as the Russell 1000 Index advanced 7.25% and the MSCI EAFE Index gained 15.49%.
Key themes influencing prices of international small-cap stocks included:
· Broad-based decline in the U.S. dollar, which boosted returns for U.S.-based investors
· Measured pace of monetary tightening cycle initiated by the Federal Reserve on June 30
· Rising price of oil and other commodities
Gains were concentrated in the fourth quarter of 2004 when a sharp drop in the price of oil buoyed investor sentiment. The price decline turned out to be short-lived, however. In early 2005, oil resumed its upward path and hit a new high in mid-March.
Performance: During the fiscal year ended March 31, 2005, the Fund’s Class I shares gained 19.28%. The Citigroup World ex-U.S. EMI posted a 22.06% increase.
Portfolio Specifics: The Fund emphasizes companies with above-average earnings growth prospects, while its benchmark includes both growth and value stocks. This difference in style hurt performance versus the benchmark, as international small-cap value stocks outperformed their growth counterparts by a wide margin. Stock selection in the United Kingdom, Germany and the industrial goods and services sector was also unfavorable.
On the positive side, issue selection in Canada, Spain, and among consumer cyclical and transportation companies helped results versus the benchmark. Canada-based Ipsco, a steel producer, and Norway-based Frontline, an oil tanker company, were top-performing stocks. Ipsco experienced strong demand and pricing for its plate and energy tubular products. Frontline benefited from favorable industry dynamics, as demand for ships is outpacing vessel capacity.
As a result of our bottom-up investment decisions, during the period, holdings tended to move toward higher-quality, later-stage cyclical growth companies at the expense of lower-quality, early-stage, cyclical names. For example, the Fund’s weighting in energy increased, while its basic materials exposure decreased.
Market Outlook: Our outlook for non-U.S. small-cap equities is positive. We are especially optimistic about the prospects for growth stocks since their valuations are at attractive levels versus historical averages. That said, we continue to closely monitor how higher materials prices, U.S. monetary policy, and the direction of the U.S. dollar will impact companies’ earnings.
As always, we remain focused on the early identification of small-cap companies with strong fundamentals and earnings visibility for the Fund.
Comparison of Change in Value of a $250,000 Investment in International Growth Opportunities Fund Class I and II Shares with the Citigroup World ex-US EMI.
Annualized Total Returns
As of 3/31/05
1 Year | 5 Years | 10 Years |
19.28% | - 2.18% | 16.79% |
![International Growth Opp. Cl. I](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/int_growthopp1.jpg)
1 Year | 5 Years | 10 Years |
19.43% | - 2.13% | 16.82% |
![International Growth Opp. Cl. II](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/int_growthopp2.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund’s Class I and II shares compared with the Citigroup World ex-US EMI Index for the periods indicated. Class I and II shares have a shareholder services fee of up to .25% of their average daily net assets. The Fund’s Class III-IV shares are new and have no prior performance. The Fund’s Class I shares calculate their performance based upon the historical performance of their corresponding series of Nicholas-Applegate Mutual Funds (renamed ING Mutual Funds), adjusted to reflect all fees and expenses applicable to the Fund’s Class I shares. The NicholasApplegate Institutional Funds’ Class I shares were first available on May 7, 1999. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment. In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results. The Citigroup (formerly Salomon Smith Barney) World ex-US Extended Market Index (EMI) is a world market capitalization weighted index measuring capital appreciation excluding the U.S. Major corporate events such as extraordinary dividends, spin-offs, scrip issues in other securities, and shares repurchased via tender offers are accounted for in the calculation. Company eligibility is determined based upon market capitalization and investability criteria, representing capitalizations equal to or greater than US $100 Million. The index is unmanaged and does not include dividends; however, total rates of return, including all payments to shareholders, are calculated and published each month-end. The EMI defines the small-capitalization stock universe or bottom 20% of the available capital and includes approximately 75% of the Broad Market Index issues.
The unmanaged index differs from the Fund in composition, does not pay management fees or expenses and includes reinvested dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, currency volatility and the social, economic and political climates of countries where the Fund invests. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
International Growth Opportunities Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 97.2% | |||||
Austria — 0.8% | |||||
Wienerberger AG## | 16,057 | $732,692 | |||
Belgium — 4.6% | |||||
Agfa Gevaert NV## | 34,792 | 1,220,418 | |||
SBS Broadcasting S.A.* | 41,500 | 1,853,390 | |||
Union Miniere S.A.## | 10,954 | 1,114,707 | |||
4,188,515 | |||||
Canada — 4.6% | |||||
ACE Aviation Holdings, Inc. Cl. A* | 47,600 | 1,491,127 | |||
IPSCO, Inc. | 17,600 | 904,403 | |||
Novelis, Inc. | 33,600 | 735,959 | |||
RONA, Inc.* | 53,000 | 1,036,038 | |||
4,167,527 | |||||
Colombia — 1.6% | |||||
Banco Latinoamericano de Exportaciones S.A. | 69,200 | 1,414,448 | |||
Denmark — 1.9% | |||||
GN Store Nord AS | 57,000 | 656,293 | |||
H. Lundbeck A/S## | 20,000 | 486,724 | |||
Jyske Bank* ## | 15,650 | 586,308 | |||
1,729,325 | |||||
Finland — 1.6% | |||||
Nokian Renkaat OYJ | 8,680 | 1,402,224 | |||
France — 7.0% | |||||
Compagnie Generale de Geophysique S.A.* ## | 23,332 | 2,046,832 | |||
Elior | 77,820 | 992,171 | |||
Gemplus International S.A.* | 502,315 | 1,188,157 | |||
JC Decaux S.A.* | 24,660 | 674,960 | |||
Neopost S.A.* | 16,266 | 1,412,159 | |||
6,314,279 | |||||
Germany — 6.8% | |||||
GPC Biotech AG* ## | 20,020 | 232,089 | |||
Heidelberger Druckmaschinen AG* | 26,077 | 835,412 | |||
Hypo Real Estate Holding AG | 50,013 | 2,089,731 | |||
Schwarz Pharma AG## | 20,517 | 906,607 | |||
Stada Arzneimittel AG## | 37,790 | 1,184,133 | |||
Wincor Nixdorf AG | 11,900 | 951,149 | |||
6,199,121 | |||||
Greece — 1.8% | |||||
Cosmote Mobile Communications S.A. | 24,910 | 438,348 | |||
Germanos S.A. | 39,870 | 1,231,173 | |||
1,669,521 | |||||
Hong Kong — 1.4% | |||||
Hong Kong & Shanghai Hotels, Ltd. | 203,000 | 187,400 | |||
Solomon Systech International, Ltd.## | 3,286,000 | 1,032,227 | |||
1,219,627 | |||||
Ireland — 2.7% | |||||
Anglo Irish Bank Corp. PLC | 37,044 | 930,628 | |||
Grafton Group PLC* | 81,962 | 974,676 | |||
Kerry Group PLC Cl. A | 23,340 | 562,693 | |||
2,467,997 | |||||
Italy — 2.3% | |||||
Buzzi Unicem SpA## | 56,977 | 884,899 | |||
Fastweb* | 23,820 | 1,168,652 | |||
2,053,551 | |||||
Japan — 17.9% | |||||
Brother Industries, Ltd. | 124,000 | 1,194,091 | |||
Circle K Sunkus Co., Ltd.* | 34,300 | 790,478 | |||
FamilyMart Co., Ltd. | 19,800 | 584,966 | |||
Fuji Fire & Marine Insurance Co., Ltd.## | 340,000 | 1,172,962 | |||
Funai Electric Co., Ltd.## | 5,600 | $692,147 | |||
Haseko Corp.* | 29,000 | 63,987 | |||
Hiroshima Bank, Ltd. | 113,000 | 589,510 | |||
Hokuhoku Financial Group, Inc. | 460,000 | 1,397,719 | |||
Japan General Estate Co., Ltd.## | 42,000 | 488,874 | |||
Kenwood Corp.* ## | 517,000 | 1,106,890 | |||
Kinden Corp. | 95,000 | 745,185 | |||
Komeri Co., Ltd. | 30,500 | 808,410 | |||
Marubeni Corp. | 313,000 | 1,006,657 | |||
Mitsui Mining & Smelting Co., Ltd. | 191,000 | 848,214 | |||
Nippon Electric Glass Co., Ltd. | 70,000 | 1,011,126 | |||
Nishi-Nippon City Bank, Ltd. | 235,000 | 1,008,461 | |||
NTT Urban Development Corp.* | 218 | 1,008,882 | |||
Shima Seiki Manufacturing, Ltd.## | 20,400 | 625,580 | |||
Taiheiyo Cement Corp. | 399,000 | 1,122,840 | |||
16,266,979 | |||||
Luxembourg — 2.0% | |||||
Millicom International Cellular S.A.* | 43,900 | 889,853 | |||
Stolt Offshores S.A.* | 113,000 | 875,095 | |||
1,764,948 | |||||
Malaysia — 0.8% | |||||
Commerce Asset Holding Berhad | 600,300 | 723,519 | |||
Netherlands — 1.3% | |||||
Aalberts Industries NV## | 23,287 | 1,206,058 | |||
Norway — 3.9% | |||||
Golar LNG, Ltd.* ## | 78,700 | 997,086 | |||
Smedvig ASA## | 73,400 | 1,383,283 | |||
Storebrand ASA | 125,000 | 1,138,271 | |||
3,518,640 | |||||
Republic Of China — 1.9% | |||||
Byd Co., Ltd. Cl. H## | 295,500 | 867,630 | |||
China Oilfield Services, Ltd. | 2,557,000 | 885,189 | |||
1,752,819 | |||||
Singapore — 3.2% | |||||
Hi-P International, Ltd.## | 691,000 | 641,017 | |||
Keppel Corp., Ltd. | 139,000 | 918,632 | |||
Magnecomp International, Ltd. | 1,153,000 | 503,341 | |||
Starhub, Ltd.* | 1,072,000 | 818,966 | |||
2,881,956 | |||||
South Korea — 1.0% | |||||
Industrial Bank of Korea | 105,150 | 910,161 | |||
Spain — 6.1% | |||||
Antena 3 De Television S.A. | 16,442 | 1,345,169 | |||
Cortefiel S.A. | 105,415 | 1,831,725 | |||
Fadesa Inmobiliaria S.A.* | 68,447 | 1,503,376 | |||
Red Electrica De Espana S.A. | 35,766 | 887,831 | |||
5,568,101 | |||||
Sweden — 3.3% | |||||
Eniro AB | 180,800 | 2,143,458 | |||
Nobel Biocare Holding AG## | 4,119 | 870,004 | |||
3,013,462 | |||||
Switzerland — 4.4% | |||||
Baloise Holding, Ltd. | 27,747 | 1,338,579 | |||
Geberit AG## | 1,051 | 772,444 | |||
SGS Societe Generale de Surveillance Holding S.A.* ## | 1,575 | 1,139,064 | |||
Ypsomed Holding AG* | 6,713 | 698,391 | |||
3,948,478 | |||||
Thailand — 1.7% | |||||
Italian - Thai Development PLC — NVDR | 2,663,800 | 701,448 | |||
Siam City Bank PLC — NVDR## | 1,313,800 | 839,703 | |||
1,541,151 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
United Kingdom — 12.6% | |||||
Burberry Group PLC | 88,687 | $686,252 | |||
Cobham PLC | 30,995 | 818,197 | |||
De Vere Group PLC | 81,472 | 820,551 | |||
DX Services PLC | 143,951 | 1,049,958 | |||
HMV Group PLC | 229,813 | 1,086,722 | |||
Kesa Electricals PLC | 177,305 | 1,012,645 | |||
Man Group PLC | 31,428 | 815,968 | |||
MyTravel Group PLC* | 7,869,400 | 872,870 | |||
Pendragon PLC | 201,349 | 1,171,845 | |||
Punch Taverns PLC | 20,864 | 271,241 | |||
Spectris PLC | 90,995 | 870,897 | |||
Taylor Nelson Sofres PLC | 261,134 | 1,095,434 | |||
Taylor Woodrow PLC | 150,829 | 872,120 | |||
11,444,700 | |||||
TOTAL COMMON STOCK | |||||
(Cost: $69,024,762) | 88,099,799 | ||||
Principal | |||||
Amount | Value | ||||
SHORT TERM INVESTMENTS — 27.8% | |||||
Money Market Funds — 21.5% | |||||
Allianz Dresdner Daily Asset Fund** ^ | $19,507,989 | $19,507,989 | |||
Time Deposits — 6.3% | |||||
Wells Fargo Bank | |||||
2.290%, 04/01/05 | 5,722,315 | 5,722,315 | |||
TOTAL SHORT TERM INVESTMENTS | |||||
(Cost: $25,230,304) | 25,230,304 | ||||
TOTAL INVESTMENTS — 125.0% | |||||
(Cost: $94,255,066) | 113,330,103 | ||||
LIABILITIES IN EXCESS OF OTHER ASSETS — (25.0%) | (22,634,589) | ||||
NET ASSETS — 100.0% | $90,695,514 |
* Non-income producing securities.
** All of the security is purchased with cash collateral proceeds from securities loans.
^ Affiliated institutional money market fund.
## All or a portion of the Fund’s holdings in this security was on loan as of 03/31/05.
NVDR — Non Voting Depository Receipt
Schedule of Investments by Industry as of March 31, 2005
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 4.0% | ||
Communications | 12.2 | ||
Consumer, Cyclical | 21.4 | ||
Consumer, Non-cyclical | 6.7 | ||
Diversified | 1.0 | ||
Energy | 5.7 | ||
Financial | 19.8 | ||
Industrial | 20.3% | ||
Technology | 5.1 | ||
Utilities | 1.0 | ||
Short Term Investments | 27.8 | ||
Liabilities in excess of other assets | (25.0) | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
Emerging Markets Opportunities Fund
Management Team: Andrew Beal, Lead Portfolio Manager; Linda Ba, Portfolio Manager; Jason Campbell, Portfolio Manager; Rebecca K. Hagstrom, CFA, Investment Analyst; Flora Kim, Investment Analyst; Karl Richtenburg, Investment Analyst; Eric Sagmeister, Investment Analyst; Scott R. Williams, Investment Analyst; Michael J. Fredericks, Portfolio Specialist
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The Emerging Markets Opportunities Fund seeks to maximize long-term capital appreciation through investments in companies located in developing countries around the world, emphasizing companies with market capitalizations that are generally less than that of the top fifty securities in the MSCI Emerging Markets Index.
Market Overview: During the fiscal year ended March 31, 2005, the MSCI Emerging Markets Index rose 17.02%, outpacing returns in the United States and non-U.S. developed markets. Weakness in the U.S. dollar relative to currencies worldwide boosted emerging market returns for U.S.-based investors. Key themes contributing to equity gains included:
· Robust economic growth in developing countries, fueled by rising commodity prices
· Relatively subdued inflation in many emerging markets
· Improving balance sheets, as countries and companies took advantage of the low interest rates of the last few years
Latin American equities performed especially well. The region’s two largest markets, Brazil and Mexico, benefited from brisk export activity and accelerating domestic demand.
Performance: The Fund’s Class I shares advanced 26.32% from its May 28, 2004 inception through March 31, 2005. The MSCI Emerging Markets Index rose 29.45%.
Portfolio Specifics: Holdings in most countries and sectors of investment produced solid gains. Versus the index, the Fund trailed by a modest amount in the rapidly rising market. From the Fund’s inception through March 31, 2005, investors in emerging countries favored value stocks over growth stocks. This hurt the Fund’s relative return since, consistent with our philosophy, holdings are concentrated in growth issues while the style-neutral benchmark contains both growth and value stocks.
From a country perspective, stock selection in South Africa, Mexico and Brazil helped relative performance, while issue selection was negative in Malaysia and Taiwan. By sector, stock selection was a source of relative strength among consumer discretionary and materials companies and a source of relative weakness in energy and industrials.
This period’s best-performing stocks included Edgars Consolidated, a South African department store chain that had very strong sales growth, and Usinas Siderurgicas de Minas, a Brazilian steel manufacturer that reported record-high operating margins and profits amid surging steel prices.
Market Outlook: We continue to believe that emerging market equities present an attractive investment opportunity. One challenge is that higher U.S. interest rates will encourage capital to flow away from developing nations, putting pressure on their currencies and increasing borrowing costs. However, emerging countries are more financially sound than in prior periods of U.S. monetary tightening, the economic outlook for many countries remains robust, and valuations are attractive relative to developed markets.
In this environment, we continue to find exciting investment opportunities at the individual stock level for the Fund.
Schedule of Investments as of March 31, 2005
Emerging Markets Opportunities Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 91.8% | |||||
Argentina — 0.5% | |||||
Petrobas Energia | |||||
Participaciones S.A. — ADR | 14,000 | $170,800 | |||
Brazil — 7.0% | |||||
Banco Bradesco S.A. — ADR | 8,800 | 255,200 | |||
Banco Itau S.A. — ADR | 400 | 32,460 | |||
Companhia Brasileira de Distribuicao | |||||
Grupo Pao de Acucar — ADR | 4,900 | 102,851 | |||
Companhia de Bebidas | |||||
das Americas — ADR | 5,700 | 164,673 | |||
Companhia de Saneamento Basico | |||||
do Estado de Sal Paulo | 1,753,000 | 85,886 | |||
Embratel Participacoes — ADR* ## | 23,300 | 189,895 | |||
Empresa Brasiliera de Aeronautica | |||||
S.A. — ADR | 2,200 | 68,860 | |||
Petroleo Brasileiro S.A. — ADR | 4,100 | 157,727 | |||
Petroleo Brasileiro S.A. — ADR | 12,100 | 534,578 | |||
Porto Seguro S.A. | 20,500 | 185,144 | |||
Tele Norte Leste Participacoes | |||||
S.A. — ADR | 12,100 | 187,187 | |||
Telesp Celular Participacoes | |||||
S.A. — ADR* | 28,300 | 169,234 | |||
Tim Participacoes S.A. — ADR | 5,342 | 80,183 | |||
Uniao de Bancos Brasileiros | |||||
S.A. — GDR | 4,300 | 147,834 | |||
Unibanco-Uniao de Bancos | |||||
Brasileiros S.A. | 16,800 | 116,908 | |||
2,478,620 | |||||
Chile — 0.5% | |||||
Antofagasta PLC | 7,441 | 179,412 | |||
Colombia — 0.7% | |||||
Banco Latinoamericano | |||||
de Exportaciones S.A. | 12,000 | 245,280 | |||
Czech Republic — 0.4% | |||||
Komercni Banka AS. | 1,024 | 146,576 | |||
Egypt — 1.4% | |||||
Egyptian Mobile Phone | 7,870 | 237,457 | |||
Orascom Telecom Holding* | 3,996 | 282,476 | |||
519,933 | |||||
Hong Kong — 0.2% | |||||
GOME Electrical Appliances | |||||
Holdings, Ltd. | 69,000 | 73,872 | |||
Hungary — 0.8% | |||||
Borsodchem RT | 6,800 | 92,855 | |||
Gedeon Richter RT | 1,300 | 179,019 | |||
271,874 | |||||
India — 2.3% | |||||
India Tobacco, Ltd. — GDR 144A# | 11,400 | 350,824 | |||
Reliance Industries-Spons. — GDR 144A# | 13,820 | 354,068 | |||
Satyam Computer Services, Ltd. — ADR | 4,500 | 105,120 | |||
810,012 | |||||
Indonesia — 2.0% | |||||
Bank Central Asia PT | 1,126,200 | 404,338 | |||
Telekomunikasi TBK PT | 640,900 | 302,854 | |||
707,192 | |||||
Israel — 3.8% | |||||
Bank Hapoalim, Ltd. | 109,021 | 367,071 | |||
Bezeq Israeli Telecommunication Corp., Ltd. | 140,325 | 164,785 | |||
Leumi Bank Le Israel | 42,211 | 118,210 | |||
Machteshim-Agan Industries, Ltd. | 48,600 | 271,647 | |||
Super-Sol, Ltd. B Shares | 33,535 | $86,299 | |||
Syneron Medical, Ltd.* | 5,400 | 172,044 | |||
Teva Pharmaceutical Industries, Ltd. — ADR | 5,900 | 182,900 | |||
1,362,956 | |||||
Malaysia — 4.3% | |||||
AMMB Holdings Berhad | 457,720 | 338,472 | |||
Astro All Asia Networks PLC* | 260,600 | 353,182 | |||
Commerce Asset Holding Berhad | 305,100 | 367,726 | |||
IOI Corp. Berhad | 106,600 | 251,071 | |||
Tenaga Nasional Berhad | 81,800 | 219,568 | |||
1,530,019 | |||||
Mexico — 7.5% | |||||
Coca-Cola Femsa S.A. | |||||
de CV Ser L — ADR | 5,700 | 137,769 | |||
Empresas ICA S.A. — ADR* | 4,000 | 9,360 | |||
Empresas ICA Sociedad Controladora S.A.* | 433,500 | 166,708 | |||
Grupo Carso S.A. De CV Ser. A | 66,807 | 340,562 | |||
Grupo Elektra S.A. | 54,600 | 436,986 | |||
Grupo Financiero Banorte S.A. de C.V. | 57,752 | 375,493 | |||
Grupo Financiero Inbursa S.A. de C.V. | 101,400 | 198,601 | |||
Grupo Mexico S.A. Ser. B* | 52,439 | 275,526 | |||
Grupo Telavisa S.A. — ADR | 5,100 | 299,880 | |||
Industrias Penoles S.A. de C.V. | 49,400 | 256,245 | |||
Sare Holding S.A. De CV Cl. B* | 233,267 | 173,153 | |||
2,670,283 | |||||
Philippines — 0.7% | |||||
SM Investments Corp.* | 60,500 | 251,142 | |||
Poland — 1.7% | |||||
Bank Pekao S.A. | 1,100 | 48,846 | |||
Bank Przemyslowo Handlowy PBK S.A. | 700 | 111,857 | |||
BRE Bank S.A.* | 3,197 | 129,244 | |||
Orbis S.A. | 10,405 | 80,484 | |||
Prokom Software S.A.* | 2,200 | 89,989 | |||
Telekomunikacja Polska S.A. | 19,791 | 134,187 | |||
594,607 | |||||
Republic Of China — 6.3% | |||||
Aluminum Corp. of China, Ltd. | 636,300 | 367,127 | |||
China Mobile Hong Kong, Ltd. | 126,800 | 414,573 | |||
China Petroleum & Chemical Corp. | 1,039,600 | 423,206 | |||
Foxconn International Holdings, Ltd.* | 713,000 | 386,240 | |||
Huaneng Power International, Inc. Ser. H | 219,700 | 161,972 | |||
Jiangsu Express Co., Ltd. | 842,000 | 385,949 | |||
Sinopec Shanghai Petrochem Cl. H | 268,000 | 109,958 | |||
2,249,025 | |||||
Russian Federation — 3.8% | |||||
Irkutskenergo | 130,438 | 30,262 | |||
JSC Scientific Production Corp.* | 308,771 | 191,129 | |||
LUKOIL Oil — ADR | 2,600 | 351,520 | |||
North-West Telecom | 118,816 | 73,102 | |||
RAO Unified Energy System — GDR | 3,781 | 110,216 | |||
Sibirtelecom | 1,497,637 | 87,013 | |||
Slavneft-Megionneftgas*† | 9,500 | 243,200 | |||
Surgutneftegaz — ADR | 2,700 | 160,650 | |||
Uralelektromed* | 1,660 | 96,280 | |||
1,343,372 | |||||
South Africa — 9.2% | |||||
African Bank Investment, Ltd. | 188,106 | 504,739 | |||
Edgars Consolidated Stores, Ltd. | 5,411 | 239,079 | |||
Ellerine Holdings, Ltd. | 22,372 | 179,731 | |||
FirstRand | 109,679 | 234,910 | |||
Foshini, Ltd. | 20,374 | 116,376 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
South Africa (Continued) | |||||
Impala Platinum Holdings, Ltd. | 2,956 | $249,351 | |||
Kumba Resources, Ltd. | 33,581 | 364,204 | |||
Liberty Group, Ltd. | 6,529 | 68,010 | |||
Metropolitan Holdings, Ltd. | 150,584 | 250,419 | |||
Mvelephanda Resources, Ltd.* | 22,445 | 54,095 | |||
Pretoria Portland Cement Co., Ltd. | 7,359 | 261,548 | |||
Reunert, Ltd. | 26,974 | 153,858 | |||
Sanlam, Ltd. | 21,461 | 41,862 | |||
Sasol, Ltd. | 17,099 | 399,029 | |||
Wilson Bayly Holmes-Ovcon, Ltd. | 39,523 | 174,635 | |||
3,291,846 | |||||
South Korea — 18.0% | |||||
Cheil Industries, Inc. | 22,600 | 367,208 | |||
Daishin Securities Co., Ltd.* | 31,050 | 447,939 | |||
GS Home Shopping, Inc. | 5,820 | 451,616 | |||
Hynix Semiconductor, Inc.* | 22,590 | 290,300 | |||
Hyundai Engineering & Construction* | 22,690 | 392,131 | |||
Hyundai Motor Co. — GDR 144A# | 4,000 | 108,680 | |||
Hyundai Motor Co., Ltd. | 4,830 | 261,595 | |||
Industrial Bank of Korea | 47,310 | 409,508 | |||
Interflex Co., Ltd. | 11,000 | 185,229 | |||
Kia Motors Corp.* | 20,500 | 282,619 | |||
LG Chemical, Ltd. | 14,230 | 574,525 | |||
LG Electronics, Inc.* | 5,780 | 387,610 | |||
Pohang Iron & Steel Co., Ltd. | 1,610 | 318,671 | |||
POSCO — ADR | 2,300 | 113,528 | |||
Samsung SDI Co., Ltd. | 5,000 | 514,525 | |||
Shinhan Financial Group Co., Ltd. — ADR | 3,100 | 166,532 | |||
Shinhan Financial Group Co., Ltd. | 23,430 | 627,569 | |||
SK Telecom Co., Ltd. | 630 | 106,086 | |||
Ssangyong Motor Co.* | 56,810 | 407,824 | |||
6,413,695 | |||||
Taiwan — 13.6% | |||||
Acer, Inc. | 62,000 | 97,410 | |||
Asustek Computer, Inc. — GDR 144A# | 136,079 | 371,496 | |||
Au Optronics Corp. — ADR## | 24,700 | 362,102 | |||
Cathay Financial Holding Co., Ltd. | 222,000 | 421,367 | |||
China Steel Corp — GDR | 15,899 | 352,322 | |||
Chinatrust Financial Holding | 190,986 | 215,500 | |||
E.Sun Financial Holding Co., Ltd. | 478,000 | 389,154 | |||
Eva Airways Corp.* | 216,723 | 101,462 | |||
Formosa Plastics Corp. | 128,534 | 230,501 | |||
Fubon Financial Holding Corp. | 370,000 | 350,552 | |||
Optimax Technology Corp. | 148,827 | 418,526 | |||
Siliconware Precision Industries Co. | 540,100 | 468,855 | |||
Taiwan Cement Corp. | 568,000 | 329,918 | |||
Taiwan Fertilizer Co., Ltd. | 339,000 | 407,260 | |||
United Microelectronics Corp.* | 316,342 | 191,275 | |||
Yuanta Core Pacific Securities Co., Ltd. | 185,348 | 135,602 | |||
4,843,302 | |||||
Thailand — 4.6% | |||||
Bangkok Bank PLC | 121,700 | 348,470 | |||
Italian-Thai Development PLC — NVDR | 1,170,600 | 308,249 | |||
Siam Cement PCL — NVDR | 15,800 | 100,984 | |||
Siam City Bank PLC — NVDR## | 537,400 | 343,474 | |||
Thai Oil PCL | 164,700 | 265,272 | |||
True Corp. PCL* | 1,187,700 | 274,797 | |||
1,641,246 | |||||
Turkey — 2.1% | |||||
Akcansa Cimento AS | 37,767 | 137,029 | |||
Hurriyet Gazetecilik AS | 98,437 | 214,295 | |||
Turkiye Garanti Bankasi AS* | 108,396 | 410,950 | |||
762,274 | |||||
United States — 0.4% | |||||
NII Holdings, Inc. Cl. B* | 1,700 | $97,750 | |||
Perrigo Co.* | 2,061 | 39,528 | |||
137,278 | |||||
TOTAL COMMON STOCK | |||||
(Cost: $26,154,849) | 32,694,616 | ||||
PREFERRED STOCK — 3.7% | |||||
Brazil — 3.3% | |||||
All America Latina Logistica* | 61,500 | 338,904 | |||
Banco Bradesco S.A. | 249 | 7,240 | |||
Caemi Mineracao E Metal* | 257,900 | 240,584 | |||
Centrais Eletricas Brasileiras | |||||
S.A. — Eletrobras Cl. B | 5,000,000 | 64,322 | |||
Centrais Eletricas de Santa | |||||
Catarina S.A.* | 76,000 | 25,729 | |||
Suzano Bahia Sul Papel e Celulose S.A. | 11,201 | 51,318 | |||
Telemar Norte Leste S.A. | 11,100 | 258,868 | |||
Usinas Siderurgicas de Minas | |||||
Gerais Ser. A | 9,400 | 203,310 | |||
1,190,275 | |||||
South Korea — 0.4% | |||||
Hyundai Motor Co., Ltd. | 3,750 | 131,462 | |||
TOTAL PREFERRED STOCK | |||||
(Cost: $757,959) | 1,321,737 | ||||
EQUITY-LINKED SECURITIES — 3.2% | |||||
India — 1.5% | |||||
UBS AG London Bharat Petroleum Corp. — 2/09/06 | 28,054 | 227,321 | |||
UBS AG Satyam Computer Services, Ltd. — 01/10/06 | 33,312 | 311,634 | |||
538,955 | |||||
South Korea — 1.7% | |||||
Credit Suisse FB Kia Motors Corp. — 09/02/05* | 8,610 | 118,697 | |||
Credit Suisse FB LG Electronics, Inc. — 05/06/05 | 2,520 | 168,994 | |||
UBS AG Halla Climate Control Corp. — 05/27/05 | 11,530 | 100,934 | |||
UBS AG Hynix Semiconductor, Inc. — 05/27/05 | 11,830 | 152,027 | |||
UBS AG Interflex Co., Ltd. — 05/27/05 | 3,661 | 61,648 | |||
602,300 | |||||
TOTAL EQUITY-LINKED SECURITIES | |||||
(Cost: $784,698) | 1,141,255 | ||||
RIGHTS — 0.0% | |||||
Brazil — 0.0% | |||||
Embratel Participacoes SA — 03/21/05 | 8,620 | 0 | |||
Malaysia — 0.0% | |||||
AMMB Holdings Berhad — 12/31/49 | 91,544 | 0 | |||
TOTAL RIGHTS | |||||
(Cost: $34,316) | 0 |
See Accompanying Notes to Financial Statements.
Principal | |||||
Amount | Value | ||||
SHORT TERM INVESTMENTS — 0.8% | |||||
Money Market Funds — 0.8% | |||||
Allianz Dresdner Daily Asset Fund** ^ | |||||
(Cost: $278,325) | $278,325 | $278,325 | |||
TOTAL INVESTMENTS — 99.5% | |||||
(Cost: $28,010,147) | 35,435,933 | ||||
OTHER ASSETS IN EXCESS OF LIABILITIES — 0.5% | 192,567 | ||||
NET ASSETS — 100.0% | $35,628,500 |
* Non-income producing securities.
** All of the security is purchased with cash collateral proceeds from securities loans.
† Illiquid securities. Total cost of illiquid securities as of March 31, 2005 was $207,775. Total market value of illiquid securities owned at March 31, 2005 was $243,200 or 0.68% of net assets.
# 144A Security. Certain condition for public sale may exist.
The total market value of 144A securities owned at March 31, 2005 was $1,185,068 or 3.33% of net assets.
^ Affiliated institutional money market fund.
## All or a portion of the Fund’s holdings in this security was on loan as of 03/31/05.
ADR — American Depository Receipt
GDR — Global Depository Receipt
NVDR — Non Voting Depository Receipt
Schedule of Investments by Industry as of March 31, 2005
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 13.3% | ||
Communications | 12.1 | ||
Consumer, Cyclical | 9.5 | ||
Consumer, Non-cyclical | 6.9 | ||
Diversified | 1.7 | ||
Energy | 7.7 | ||
Financial | 26.4 | ||
Industrial | 14.3% | ||
Technology | 4.8 | ||
Utilities | 2.0 | ||
Short Term Investments | 0.8 | ||
Other assets in excess of liabilities | 0.5 | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
U.S. High Yield Bond Fund
Management Team: Douglas G. Forsyth, CFA, Lead Portfolio Manager; Justin Kass, CFA, Portfolio Manager; William L. Stickney, Portfolio Manager; Michael E. Yee, Portfolio Manager; Elizabeth Lemesevski, Investment Analyst; Nicole D. Larrabee, Fixed Income Trading Assistant
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The U.S. High Yield Bond Fund seeks to deliver total return via high current income and capital growth from a diversified portfolio consisting primarily of lower-rated U.S. corporate fixed-income securities.
Market Overview: The high-yield bond market produced gains from April 1, 2004 through March 31, 2005. The Merrill Lynch High Yield II Master Index rose 6.94%, outpacing the S&P 500 Index, up 6.69%, and the investment-grade Lehman U.S. Government/Credit Index, which rose 0.38%.
Prices of high-yield bonds dipped modestly early in the period due to rising interest rates and company-specific credit events. The market began to rally in June as positive fundamentals buoyed investor confidence, including healthy U.S. and international economies, robust corporate profits and strengthening balance sheets. In early 2005, high-yield bonds gave back some of their prior months’ gains on concerns that inflationary pressures would cause the Federal Reserve to increase short-term interest rates more aggressively.
Throughout the fiscal year, the credit environment remained on stable footing. The majority of high-yield issuers refinanced to increase cash balances and lock in low borrowing rates. Rating agencies Moody’s and Standard & Poor’s responded: after being slanted toward downgrades for a few years, the ratio of upgrades to downgrades improved and was near 1 to 1 at March 31, 2005. Additionally, the trailing twelve-month default rate dropped below 1% during the period.
Performance: From April 1, 2004 through March 31, 2005, the Fund’s Class I shares rose 5.40% and the Merrill Lynch High Yield Master Index II gained 6.94%.
Portfolio Specifics: The Fund produced a solid increase this period, while modestly trailing the benchmark. Relative performance was hurt by below-index exposure to lower-quality and low-coupon, longer-duration issues which outperformed the broad market. In managing the Fund, we focus on upgrade candidates in the single-B and double-B rating categories, as we believe they have the most attractive risk/reward profile. We also avoid interest-rate-sensitive bonds because, unless there is an imminent move to investment grade, there is no total return advantage in these securities for either the intermediate or longer term.
On the plus side, superior credit selection helped relative performance. Ten issuers were upgraded in the first quarter of 2005 alone, favorably impacting holdings in the steel, telecommunications and chemical industries. Other issues helped through positive price change, including select positions in the energy and materials sectors, which benefited from rising commodity prices.
Market Outlook: We believe the high-yield market remains a compelling area of investment compared to other fixed-income alternatives. The economy is growing, corporate profits are solid and defaults are low and stable. While rising interest rates will weigh on returns, high-yield spreads versus Treasuries should not widen materially given this positive fundamental backdrop.
Of course, the long-term driver of total return in a high-yield portfolio is company fundamentals. As such, we continue to build the Fund one security at a time, performing rigorous credit analysis to identify companies that are capitalizing on change.
Comparison of Change in Value of a $250,000 Investment in U.S. High Yield Bond Fund Class I and II Shares with the Merrill Lynch High Yield Master II Index.
Annualized Total Returns
As of 3/31/05
Since | ||
1 Year | 5 Years | Inception |
5.40% | 5.82% | 8.63% |
![High Yld cl. I](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/hi_yld1.jpg)
Since | ||
1 Year | Inception | |
5.40% | 8.63% |
![High Yld cl. II](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/hi_yld2.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund’s Class I and II shares compared with the Merrill Lynch High Yield Master II Index for the periods indicated. Class I and II Shares have a shareholder services fee of up to .25% of their average daily net assets. The Fund’s Class III and IV shares are new and have no prior performance. The Fund’s Class I shares calculate their performance based upon the historical performance of their corresponding series of Nicholas-Applegate Mutual Funds (renamed ING Mutual Funds), adjusted to reflect all fees and expenses applicable to the Fund’s Class I shares. The Nicholas-Applegate Institutional Funds’ Class I shares were first available on May 7, 1999. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment. In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
The Merrill Lynch High Yield Master II Index is an unmanaged index consisting of U.S. dollar denominated bonds that are issued in countries having a BBB3 or higher debt rating with at least one year remaining till maturity. All bonds must have a credit rating below investment grade but not in default.
The unmanaged Index differs from the Fund in composition, does not pay management fees or expenses and includes reinvested income and dividends. One cannot invest directly in an index.
Bond prices, and thus the Fund’s share price, generally move in the opposite direction from interest rates. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
U.S. High Yield Bond Fund
Principal | |||||
Amount | Value | ||||
CORPORATE BONDS — 84.5% | |||||
Aerospace/Defense-Equipment — 1.5% | |||||
BE Aerospace, Inc. Ser. B | |||||
8.875%, 05/01/11 | $2,610,000 | $2,642,625 | |||
Apparel Manufacturers — 3.8% | |||||
Levi Strauss & Co. 144A# | |||||
9.750%, 01/15/15 | 1,685,000 | 1,655,512 | |||
Oxford Industries, Inc. | �� | ||||
8.875%, 06/01/11 | 2,035,000 | 2,157,100 | |||
Phillips-Van Heusen Corp. | |||||
8.125%, 05/01/13 | 2,620,000 | 2,744,450 | |||
6,557,062 | |||||
Building Products-Cement/Aggregate — 0.8% | |||||
U.S. Concrete, Inc. | |||||
8.375%, 04/01/14 | 1,400,000 | 1,393,000 | |||
Building-Residential/Commercial — 1.3% | |||||
Standard-Pacific Corp. | |||||
9.500%, 09/15/10 | 1,085,000 | 1,144,675 | |||
William Lyon Homes, Inc. | |||||
10.750%, 04/01/13 | 985,000 | 1,083,500 | |||
2,228,175 | |||||
Cable TV — 3.6% | |||||
Cablevision Systems Corp. 144A# | |||||
8.000%, 04/15/12 | 1,040,000 | 1,068,600 | |||
Charter Communications | |||||
Holdings LLC | |||||
10.750%, 10/01/09 | 1,520,000 | 1,246,401 | |||
CSC Holdings, Inc. | |||||
7.250%, 07/15/08 | 1,425,000 | 1,460,625 | |||
LodgeNet Entertainment Corp. | |||||
9.500%, 06/15/13 | 2,320,000 | 2,528,800 | |||
6,304,426 | |||||
Cellular Telecommunications — 2.6% | |||||
Centennial Cellular Corp. | |||||
10.750%, 12/15/08 | 740,000 | 762,200 | |||
Nextel Communications, Inc. | |||||
7.375%, 08/01/15 | 1,510,000 | 1,594,937 | |||
Nextel Partners, Inc. | |||||
8.125%, 07/01/11 | 2,085,000 | 2,215,312 | |||
4,572,449 | |||||
Chemicals-Diversified — 3.3% | |||||
Huntsman Co. LLC 144A# | |||||
11.625%, 10/15/10 | 1,084,000 | 1,268,280 | |||
Huntsman Co. LLC 144A# | |||||
12.000%, 07/15/12 | 814,000 | 952,380 | |||
Lyondell Chemical Co. | |||||
10.875%, 05/01/09 | 1,410,000 | 1,462,875 | |||
Lyondell Chemical Co. Ser. A | |||||
9.625%, 05/01/07 | 1,905,000 | 2,043,112 | |||
5,726,647 | |||||
Chemicals-Specialty — 0.7% | |||||
Equistar Chemicals LP | |||||
8.750%, 02/15/09 | 1,145,000 | 1,228,012 | |||
Commercial Services — 1.3% | |||||
Ventrue, Inc. | |||||
9.250%, 04/01/14 | 2,270,000 | 2,338,100 | |||
Consumer Products-Miscellaneous — 2.6% | |||||
Central Garden & Pet Co. | |||||
9.125%, 02/01/13 | 1,905,000 | 2,047,875 | |||
Jarden Corp. | |||||
9.750%, 05/01/12 | 2,335,000 | 2,510,125 | |||
4,558,000 | |||||
Dialysis Centers — 1.1% | |||||
Davita, Inc. 144A# | |||||
7.250%, 03/15/15 | $1,985,000 | $1,945,300 | |||
Electric-Generation — 4.8% | |||||
AES Corp. | |||||
9.500%, 06/01/09 | 1,700,000 | 1,859,375 | |||
AES Corp. | |||||
7.750%, 03/01/14 | 1,040,000 | 1,073,800 | |||
Edison Mission Energy | |||||
9.875%, 04/15/11 | 2,050,000 | 2,367,750 | |||
Texas Genco LLC 144A# | |||||
6.875%, 12/15/14 | 3,055,000 | 3,062,637 | |||
8,363,562 | |||||
Electronic Components-Miscellaneous — 2.7% | |||||
Sanmina-SCI Corp. | |||||
10.375%, 01/15/10 | 2,215,000 | 2,480,800 | |||
Stoneridge, Inc. | |||||
11.500%, 05/01/12 | 2,065,000 | 2,286,987 | |||
4,767,787 | |||||
Engineering/R & D Services — 1.0% | |||||
Shaw Group, Inc. | |||||
10.750%, 03/15/10 | 1,575,000 | 1,708,875 | |||
Finance-Other Services — 1.2% | |||||
Alamosa Delaware, Inc. | |||||
11.000%, 07/31/10 | 1,865,000 | 2,121,437 | |||
Funeral Services & Related Items — 1.1% | |||||
Carriage Services, Inc. 144A# | |||||
7.875%, 01/15/15 | 1,890,000 | 1,899,450 | |||
Independent Power Producer — 1.6% | |||||
Calpine Corp. | |||||
8.500%, 02/15/11 | 1,910,000 | 1,346,550 | |||
Reliant Resources, Inc. | |||||
9.500%, 07/15/13 | 1,245,000 | 1,353,938 | |||
2,700,488 | |||||
Intimate Apparel — 1.4% | |||||
Warnaco, Inc. | |||||
8.875%, 06/15/13 | 2,220,000 | 2,380,950 | |||
Machinery-Farm — 1.6% | |||||
Case New Holland, Inc. 144A# | |||||
9.250%, 08/01/11 | 2,630,000 | 2,800,950 | |||
Medical Products — 0.6% | |||||
Hanger Orthopedic Group, Inc. | |||||
11.250%, 06/15/09 | 910,000 | 953,225 | |||
Medical-Hospitals — 1.5% | |||||
HCA, Inc. | |||||
6.375%, 01/15/15 | 2,690,000 | 2,670,207 | |||
Medical-Nursing Homes — 1.7% | |||||
Genesis HealthCare Corp. | |||||
8.000%, 10/15/13 | 2,720,000 | 2,964,800 | |||
MRI/Medical Diagnostic Imaging Centers — 1.1% | |||||
Alliance Imaging, Inc. 144A# | |||||
7.250%, 12/15/12 | 1,885,000 | 1,819,025 | |||
Non-Hazardous Waste Disposal — 1.0% | |||||
Allied Waste North America, Inc. | |||||
9.250%, 09/01/12 | 1,610,000 | 1,722,700 | |||
Oil Companies-Exploration & Production — 5.2% | |||||
Chesapeake Energy Corp. | |||||
6.875%, 01/15/16 | 2,875,000 | 2,903,750 | |||
Energy Partners, Ltd. | |||||
8.750%, 08/01/10 | 1,410,000 | 1,508,700 | |||
Stone Container Corp. | |||||
8.375%, 07/01/12 | 2,600,000 | 2,684,500 | |||
Stone Energy Corp. | |||||
6.750%, 12/15/14 | 2,080,000 | 2,017,600 | |||
9,114,550 |
See Accompanying Notes to Financial Statements.
Principal | |||||
Amount | Value | ||||
CORPORATE BONDS (Continued) | |||||
Paper & Related Products — 1.7% | |||||
Georgia-Pacific Corp. | |||||
9.375%, 02/01/13 | $2,690,000 | $3,006,075 | |||
Pipelines — 3.6% | |||||
El Paso Corp. | |||||
7.375%, 12/15/12 | 950,000 | 919,125 | |||
Sonat, Inc. | |||||
7.625%, 07/15/11 | 3,025,000 | 2,987,188 | |||
Williams Cos., Inc. | |||||
7.625%, 07/15/19 | 2,200,000 | 2,381,500 | |||
6,287,813 | |||||
Poultry — 1.7% | |||||
Pilgrim’s Pride Corp. | |||||
9.250%, 11/15/13 | 1,050,000 | 1,160,250 | |||
Pilgrim’s Pride Corp. | |||||
9.625%, 09/15/11 | 1,720,000 | 1,866,200 | |||
3,026,450 | |||||
Racetracks — 1.0% | |||||
Penn National Gaming, Inc. | |||||
8.875%, 03/15/10 | 1,645,000 | 1,760,150 | |||
Radio — 1.7% | |||||
Salem Communications Holding | |||||
Corp. Ser. B | |||||
9.000%, 07/01/11 | 2,667,000 | 2,907,030 | |||
Recreational Centers — 0.8% | |||||
Equinox Holdings, Inc. | |||||
9.000%, 12/15/09 | 1,370,000 | 1,438,500 | |||
REITS-Hotels — 1.8% | |||||
Host Marriott LP | |||||
7.125%, 11/01/13 | 1,040,000 | 1,046,500 | |||
La Quinta Properties, Inc. | |||||
8.875%, 03/15/11 | 1,870,000 | 2,019,600 | |||
3,066,100 | |||||
Rental Auto/Equipment — 1.4% | |||||
United Rentals North America, Inc. | |||||
7.000%, 02/15/14 | 2,710,000 | 2,506,750 | |||
Retail-Arts&Crafts — 1.9% | |||||
Michaels Stores, Inc. | |||||
9.250%, 07/01/09 | 3,195,000 | 3,374,719 | |||
Retail-Automobile — 1.5% | |||||
United Auto Group | |||||
9.625%, 03/15/12 | 2,515,000 | 2,653,325 | |||
Rubber-Tires — 1.2% | |||||
Goodyear Tire & Rubber Co. | |||||
7.857%, 08/15/11 | 2,200,000 | 2,123,000 | |||
Special Purpose Entity — 3.2% | |||||
AMR Holdings Co. 144A# | |||||
10.000%, 02/15/15 | 1,595,000 | 1,658,800 | |||
MedCath Holdings Corp. | |||||
9.875%, 07/15/12 | 1,820,000 | 1,974,700 | |||
Valor Telecommunications | |||||
Enterprises LLC 144A# | |||||
7.750%, 02/15/15 | 1,865,000 | 1,855,675 | |||
5,489,175 | |||||
Steel-Producers — 3.7% | |||||
AK Steel Corp. | |||||
7.875%, 02/15/09 | 3,110,000 | 3,047,800 | |||
AK Steel Corp. | |||||
7.750%, 06/15/12 | 1,060,000 | 1,020,250 | |||
United States Steel LLC | |||||
10.750%, 08/01/08 | 1,985,000 | 2,282,750 | |||
6,350,800 | |||||
Steel-Specialty — 1.6% | |||||
Oregon Steel Mills, Inc. | |||||
10.000%, 07/15/09 | $2,600,000 | $2,814,500 | |||
Telecommunications Services — 0.5% | |||||
Qwest Corp. 144A# | |||||
7.875%, 09/01/11 | 895,000 | 921,850 | |||
Telephone-Integrated — 3.2% | |||||
AT&T Corp. | |||||
9.050%, 11/15/11 | 1,040,000 | 1,181,700 | |||
MCI, Inc. | |||||
6.908%, 05/01/07 | 2,060,000 | 2,096,050 | |||
Primus Telecommunications | |||||
Group, Inc. | |||||
8.000%, 01/15/14 | 810,000 | 583,200 | |||
Qwest Capital Funding, Inc. | |||||
7.250%, 02/15/11 | 1,905,000 | 1,776,413 | |||
5,637,363 | |||||
Veterinary Diagnostics — 1.3% | |||||
Vicar Operating, Inc. | |||||
9.875%, 12/01/09 | 2,085,000 | 2,257,013 | |||
Vitamins & Nutrition Products — 1.1% | |||||
Leiner Health Products, Inc. | |||||
11.000%, 06/01/12 | 1,690,000 | 1,816,750 | |||
Wireless Equipment — 2.5% | |||||
American Tower Corp. | |||||
7.125%, 10/15/12 | 1,065,000 | 1,059,675 | |||
American Tower Corp. | |||||
9.375%, 02/01/09 | 1,288,000 | 1,352,400 | |||
Crown Castle International Corp. | |||||
10.750%, 08/01/11 | 1,825,000 | 1,948,188 | |||
4,360,263 | |||||
TOTAL CORPORATE BONDS | |||||
(Cost: $144,380,676) | 147,279,428 | ||||
FOREIGN CORPORATE BONDS — 15.2% | |||||
Cellular Telecommunications — 3.0% | |||||
Millicom International Cellular | |||||
S.A. 144A# | |||||
10.000%, 12/01/13 | 3,155,000 | 3,218,100 | |||
Rogers Wireless Communications, Inc. | |||||
8.000%, 12/15/12 | 1,980,000 | 2,034,450 | |||
5,252,550 | |||||
Chemicals-Specialty — 1.4% | |||||
Rhodia S.A. | |||||
10.250%, 06/01/10 | 2,240,000 | 2,441,600 | |||
Electronic Components-Miscellaneous — 1.7% | |||||
Flextronics International, Ltd. | |||||
6.250%, 11/15/14 | 3,075,000 | 2,921,250 | |||
Industrial Audio & Video Products — 1.3% | |||||
Imax Corp. 144A# | |||||
9.625%, 12/01/10 | 2,180,000 | 2,332,600 | |||
Metal-Aluminum — 1.5% | |||||
Novelis, Inc. 144A# | |||||
7.250%, 02/15/15 | 2,735,000 | 2,680,300 | |||
Oil Companies-Exploration & Production — 0.8% | |||||
Paramount Resources, Ltd. | |||||
8.500%, 01/31/13 | 1,311,000 | 1,314,277 | |||
Oil-Field Services — 1.6% | |||||
Petroleum Geo-Services ASA | |||||
10.000%, 11/05/10 | 2,505,000 | 2,811,863 | |||
Resorts/Theme Parks — 0.9% | |||||
Intrawest Corp. | |||||
7.500%, 10/15/13 | 1,550,000 | 1,553,875 |
See Accompanying Notes to Financial Statements.
Principal | |||||
Amount | Value | ||||
FOREIGN CORPORATE BONDS (Continued) | |||||
Satellite Telecommunications — 1.6% | |||||
Intelsat Bermuda, Ltd. 144A# | |||||
8.250%, 01/15/13 | $2,820,000 | $2,848,200 | |||
Telephone-Integrated — 1.4% | |||||
NTL Cable PLC 144A# | |||||
8.750%, 04/15/14 | 2,245,000 | 2,418,988 | |||
TOTAL FOREIGN CORPORATE BONDS | |||||
(Cost: $26,618,051) | 26,575,503 | ||||
SHORT TERM INVESTMENTS — 0.6% | |||||
Time Deposit — 0.6% | |||||
Wells Fargo Bank | |||||
2.290%, 04/01/05 | |||||
(Cost: $1,078,701) | $1,078,701 | $1,078,701 | |||
TOTAL INVESTMENTS — 100.3% | |||||
(Cost: $172,077,428) | 174,933,632 | ||||
LIABILITIES IN EXCESS OF OTHER ASSETS — (0.3%) | (546,992) | ||||
NET ASSETS — 100.0% | $174,386,640 |
# 144A Security. Certain condition for public sale may exist.
The total market value of 144A securities owned at March 31, 2005 was $34,406,647 or 19.73% of net assets.
Schedule of Investments by Industry as of March 31, 2005
Percentage of | |||
Industry | Net Assets | ||
Communications | 20.2% | ||
Consumer, Non-cyclical | 16.5 | ||
Basic Materials | 13.9 | ||
Consumer, Cyclical | 13.8 | ||
Industrial | 11.6 | ||
Energy | 11.2 | ||
Utilities | 6.4% | ||
Financial | 6.1 | ||
Short Term Investments | 0.6 | ||
Liabilities in excess of other assets | (0.3) | ||
NET ASSETS | 100.0% |
Schedule of Investments by Country as of March 31, 2005
Percent of | |||
Country | Net Assets | ||
Bermuda | 1.6% | ||
Canada | 5.7 | ||
France | 1.4 | ||
Luxembourg | 1.8 | ||
Norway | 1.6 | ||
Singapore | 1.7 | ||
United Kingdom | 1.4% | ||
United States | 85.1 | ||
Liabilities in excess of other assets | (0.3) | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
Nicholas-Applegate Institutional Funds
Shareholder Expense Example — (Unaudited)
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (October 1, 2004 to March 31, 2005).
Actual Expenses
The first line of the table below for each fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for a fund under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below for each fund provides information about hypothetical account values and hypothetical expenses based on a fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs and are calculated before expense offset arrangements. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid | ||||||
Beginning Account | Ending Account | During the Period* | ||||
Value | Value | October 1, 2004 to | ||||
October 1, 2004 | March 31, 2005 | March 31, 2005 | ||||
U.S. Mini Cap Growth — Class I | ||||||
Actual | $1,000.00 | $1,039.89 | $7.93 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,017.15 | $7.85 | |||
U.S. Mini Cap Growth — Class II (1) | ||||||
Actual | $1,000.00 | $1,040.74 | $6.67 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,018.40 | $6.59 | |||
U.S. Emerging Growth — Class I | ||||||
Actual | $1,000.00 | $1,046.27 | $7.19 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,017.90 | $7.09 | |||
U.S. Small Cap Value — Class I | ||||||
Actual | $1,000.00 | $1,051.26 | $6.65 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,018.45 | $6.54 | |||
U.S. Small Cap Value — Class II (2) | ||||||
Actual | $1,000.00 | $1,019.26 | $4.71 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,014.78 | $4.70 | |||
U.S. Large Cap Value — Class I | ||||||
Actual | $1,000.00 | $1,047.27 | $4.13 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,020.89 | $4.08 | |||
U.S. Systematic Large Cap Growth — Class I | ||||||
Actual | $1,000.00 | $1,036.20 | $5.63 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,019.40 | $5.59 | |||
U.S. Systematic SMID Growth — Class I | ||||||
Actual | $1,000.00 | $1,063.03 | $6.84 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,018.30 | $6.69 | |||
U.S. Systematic SMID Growth — Class IV (3) | ||||||
Actual | $1,000.00 | $997.17 | $0.83 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,002.86 | $0.84 | |||
U.S. Convertible | ||||||
Actual | $1,000.00 | $1,028.87 | $5.16 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,019.85 | $5.14 | |||
Global Select — Class I | ||||||
Actual | $1,000.00 | $1,063.53 | $5.76 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,019.35 | $5.64 | |||
Global Select — Class II | ||||||
Actual | $1,000.00 | $1,063.18 | $5.50 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,019.60 | $5.39 | |||
International Growth — Class I | ||||||
Actual | $1,000.00 | $1,074.69 | $7.09 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,018.10 | $6.89 | |||
International Growth — Class III | ||||||
Actual | $1,000.00 | $1,075.14 | $5.74 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,019.40 | $5.59 | |||
International Growth — Class IV | ||||||
Actual | $1,000.00 | $1,075.74 | $4.97 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,020.14 | $4.84 | |||
International Growth Opportunities — Class I | ||||||
Actual | $1,000.00 | $1,098.13 | $7.11 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,018.15 | $6.84 | |||
International Growth Opportunities — Class II | ||||||
Actual | $1,000.00 | $1,098.53 | $6.33 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,018.90 | $6.09 | |||
U.S. High Yield Bond — Class I | ||||||
Actual | $1,000.00 | $1,009.37 | $3.16 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,021.79 | $3.18 | |||
U.S. High Yield Bond — Class II | ||||||
Actual | $1,000.00 | $1,009.52 | $2.91 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,022.04 | $2.92 | |||
Emerging Markets Opportunities Fund — Class I (4) | ||||||
Actual | $1,000.00 | $1,090.05 | $9.07 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,016.26 | $8.75 | |||
Emerging Markets Opportunities Fund — Class II (5) | ||||||
Actual | $1,000.00 | $1,000.11 | $0.29 | |||
Hypothetical (5% return before expenses and before offset | ||||||
arrangements) | $1,000.00 | $1,000.67 | $0.29 |
(1) Fund’s Class II beginning account value on 09/30/04 (Class inception date)
(2) Fund’s Class II beginning account value on 11/09/04 (Class inception date)
(3) Fund’s Class IV beginning account value on 03/04/05 (Class inception date)
(4) Fund’s Class I beginning account value on 05/27/04 (Class inception date)
(5) Fund’s Class II beginning account value on 03/24/05 (Class inception date)
* Expenses are equal to the Fund’s annualized expense ratio (show in the table below); multiplied by the average account value over the period.
Annualized | |||
Expense Ratio | |||
U.S. Mini Cap Growth — Class I | 1.56% | ||
U.S. Mini Cap Growth — Class II | 1.31% | ||
U.S. Emerging Growth Class — Class I | 1.41% | ||
U.S. Small Cap Value — Class I | 1.30% | ||
U.S. Small Cap Value — Class II | 1.20% | ||
U.S. Large Cap Value Class — Class I | 0.81% | ||
U.S. Systematic Large Cap Growth — Class I | 1.11% | ||
U.S. Systematic SMID Growth — Class I | 1.33% | ||
U.S. Systematic SMID Growth — Class IV | 1.13% | ||
U.S. Convertible — Class I | 1.02% | ||
Global Select — Class I | 1.12% | ||
Global Select — Class II | 1.07% | ||
International Growth — Class I | 1.37% | ||
International Growth — Class III | 1.11% | ||
International Growth — Class IV | 0.96% | ||
International Growth Opportunities — Class I | 1.36% | ||
International Growth Opportunities — Class II | 1.21% | ||
Emerging Markets Opportunities Fund — Class I | 1.74% | ||
Emerging Markets Opportunities Fund — Class II | 1.52% | ||
U.S. High Yield Bond — Class I | 0.63% | ||
U.S. High Yield Bond — Class II | 0.58% |
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Nicholas-Applegate Institutional Funds
Financial Highlights
For a Class I share outstanding during the period indicated
Distributions from: | ||||||||||||
Net Asset | Net | Net Realized | Total from | Net | Net | |||||||
Value, | Investment | and Unrealized | Investment | Investment | Realized | |||||||
Beginning | Income (Loss) (1) | Gains (Loss) | Operations | Income | Capital Gains | |||||||
U.S. EQUITY FUNDS | ||||||||||||
U.S. MINI CAP GROWTH | ||||||||||||
For the year ended 03/31/05 | $14.69 | $(0.09) | $(1.09) | $(1.18) | $— | $(0.68) | ||||||
For the year ended 03/31/04 | 7.44 | (0.13) | 7.38 | 7.25 | — | — | ||||||
For the year ended 03/31/03 | 10.88 | (0.12) | (3.32) | (3.44) | — | — | ||||||
For the year ended 03/31/02 | 9.05 | (0.13) | 1.96 | 1.83 | — | — | ||||||
For the year ended 03/31/01 | 42.54 | (0.14) | (17.58) | (17.72) | — | (15.77) | ||||||
U.S. EMERGING GROWTH | ||||||||||||
For the year ended 03/31/05 | $9.61 | $(0.07) | $0.23 | $0.16 | $— | $— | ||||||
For the year ended 03/31/04 | 6.32 | (0.09) | 3.38 | 3.29 | — | — | ||||||
For the year ended 03/31/03 | 9.59 | (0.07) | (3.20) | (3.27) | — | — | ||||||
For the year ended 03/31/02 | 9.57 | (0.04) | 0.06 | 0.02 | — | — | ||||||
For the year ended 03/31/01 | 27.03 | (0.01) | (12.37) | (12.38) | — | (5.08) | ||||||
U.S. SMALL CAP VALUE | ||||||||||||
For the year ended 03/31/05 | $17.64 | $0.02 | $2.06 | $2.08 | $(0.01) | $(2.31) | ||||||
For the year ended 03/31/04 | 10.23 | 0.03 | 7.86 | 7.89 | (0.02) | (0.46) | ||||||
For the year ended 03/31/03 | 15.62 | 0.07 | (3.29) | (3.22) | (0.12) | (2.05) | ||||||
For the year ended 03/31/02 | 12.50 | 0.10 | 3.06 | 3.16 | (0.04) | — | ||||||
U.S. LARGE CAP VALUE | ||||||||||||
For the year ended 03/31/05 | $24.40 | $0.43 | $2.24 | $2.67 | $(0.36) | $— | ||||||
For the year ended 03/31/04 | 18.20 | 0.32 | 6.44 | 6.76 | (0.56) | — | ||||||
For the year ended 03/31/03 | 24.46 | 0.25 | (6.20) | (5.95) | (0.31) | — | ||||||
For the year ended 03/31/02 | 23.42 | 0.22 | 1.24 | 1.46 | (0.05) | (0.37) | ||||||
For the year ended 03/31/01 | 21.74 | 0.24 | 1.64 | 1.88 | (0.20) | — | ||||||
U.S. SYSTEMATIC LARGE CAP GROWTH | ||||||||||||
For the year ended 03/31/05 | $15.06 | $0.07 | $0.54 | $0.61 | $— | $— | ||||||
For the year ended 03/31/04 | 12.73 | (0.02) | 2.35 | 2.33 | — | — | ||||||
For the year ended 03/31/03 | 18.08 | (0.05) | (5.30) | (5.35) | — | — | ||||||
For the year ended 03/31/02 | 22.61 | (0.11) | (4.42) | (4.53) | — | — | ||||||
For the year ended 03/31/01 | 49.86 | (0.19) | (26.03) | (26.22) | — | (1.03) | ||||||
U.S. SYSTEMATIC SMID GROWTH | ||||||||||||
For the year ended 03/31/05 | $9.89 | $(0.04) | $0.84 | $0.80 | $— | $— | ||||||
2/27/04 (Commenced) to 03/31/04 | 10.00 | — | (0.11) | (0.11) | — | — | ||||||
U.S. CONVERTIBLE | ||||||||||||
For the year ended 03/31/05 | $23.11 | $0.39 | $0.66 | $1.05 | $(0.45) | $(1.27) | ||||||
For the year ended 03/31/04 | 17.72 | 0.55 | 5.43 | 5.98 | (0.59) | — | ||||||
For the year ended 03/31/03 | 21.35 | 0.63 | (3.55) | (2.92) | (0.71) | — | ||||||
For the year ended 03/31/02 | 23.14 | 0.64 | (1.69) | (1.05) | (0.74) | — | ||||||
For the year ended 03/31/01 | 33.67 | 0.70 | (8.94) | (8.24) | (0.66) | (1.63) | ||||||
GLOBAL EQUITY FUNDS | ||||||||||||
GLOBAL SELECT | ||||||||||||
For the year ended 03/31/05 | $15.58 | $0.06 | $1.37 | $1.43 | $— | $(0.92) | ||||||
For the year ended 03/31/04 | 10.26 | (0.01) | 5.33 | 5.32 | — | — | ||||||
For the year ended 03/31/03 | 13.67 | (0.02) | (3.39) | (3.41) | — | — | ||||||
For the year ended 03/31/02 | 12.86 | (0.06) | 0.87 | 0.81 | — | — | ||||||
For the year ended 03/31/01 | 31.91 | (0.06) | (10.00) | (10.06) | — | (8.99) | ||||||
INTERNATIONAL GROWTH | ||||||||||||
For the year ended 03/31/05 | $19.09 | $0.08 | $1.72 | $1.80 | $— | $(0.42) | ||||||
For the year ended 03/31/04 | 12.83 | 0.30 | 6.00 | 6.30 | (0.04) | — | ||||||
For the year ended 03/31/03 | 17.17 | 0.12 | (4.46) | (4.34) | — | — | ||||||
For the year ended 03/31/02 | 19.21 | 0.06 | (2.10) | (2.04) | — | — | ||||||
For the year ended 03/31/01 | 31.88 | 0.04 | (11.29) | (11.25) | — | (1.42) | ||||||
INTERNATIONAL GROWTH OPPORTUNITIES | ||||||||||||
For the year ended 03/31/05 | $29.43 | $0.32 | $5.35 | $5.67 | $(0.09) | $— | ||||||
For the year ended 03/31/04 | 17.39 | 0.18 | 11.86 | 12.04 | — | — | ||||||
For the year ended 03/31/03 | 22.72 | 0.07 | (5.40) | (5.33) | — | — | ||||||
For the year ended 03/31/02 | 24.38 | 0.09 | (1.75) | (1.66) | — | — | ||||||
For the year ended 03/31/01 | 51.19 | (0.09) | (17.92) | (18.01) | (0.13) | (8.67) | ||||||
EMERGING MARKETS OPPORTUNITIES FUND | ||||||||||||
5/27/04 (Commenced) to 03/31/05 | $10.00 | $0.08 | $2.55 | $2.63 | $(0.01) | $— | ||||||
FIXED INCOME FUNDS | ||||||||||||
U.S. HIGH YIELD BOND | ||||||||||||
For the year ended 03/31/05 | $10.34 | $0.85 | $(0.31) | $0.54 | $(0.84) | $(0.00)(12) | ||||||
For the year ended 03/31/04 | 9.65 | 0.86 | 0.63 | 1.49 | (0.80) | — | ||||||
For the year ended 03/31/03 | 9.88 | 0.83 | (0.23) | 0.60 | (0.83) | — | ||||||
For the year ended 03/31/02 | 10.82 | 0.93 | (0.91) | 0.02 | (0.96) | — | ||||||
For the year ended 03/31/01 | 11.95 | 1.31 | (1.22) | 0.09 | (1.22) | — |
(1) Net investment income per share is calculated by dividing net investment income for the period by the average shares outstanding during the period.
(2) Total returns are not annualized for periods less than one year.
(3) Ratios are annualized for periods of less than one year. Expense reimbursements reflect voluntary reductions to total expenses, as discussed in the notes to financial statements. Such amounts would decrease net investment income (loss) ratios had such reductions not occurred.
(4) Net expenses include certain items not subject to expense reimbursement.
(5) The Board of Trustees approved the amendments to the Expense Limitation Agreement whereby overall operating expenses (excluding taxes, interest, brokerage and extraordinary expenses), of the U.S. Mini Cap Growth, U.S. Large Cap Value, U.S. Systematic Large Cap Growth, Global Select, International Growth, and U.S. High Yield Bond do not exceed 1.56%, 1.00%, 1.00%, 1.20%, 1.40%, and 0.75% for the period 04/01/02 to 06/30/02, 1.56%, 0.85% 0.90%, 1.05%, 1.15%, and 0.75% period 07/01/02 to 01/21/03, 1.40%, 1.00%, 1.00%, 1.10%, 1.15%, and 0.80% for the period 01/22/03 to 03/31/03, respectively. U.S. Emerging Growth, U.S. Small Cap Value, U.S. Equity Growth, Convertible and International Growth Opportunities had rates throughout the year of 1.25%, 1.30%, 1.00%, 1.00% and 1.40% respectively.
(6) On May 18, 2001 the Board of Trustees approved an amendment to the Expense Limitation Agreement whereby overall operating expenses of the U.S. Emerging Growth, excluding taxes, interest, brokerage and extraordinary expenses, do not exceed 1.25% representing a .08% increase in the Fund’s expense cap.
(7) Due to the realignment of the Fund’s portfolio in connection with the combination with Global Technology Fund and Global HealthCare Fund, the cost of purchases of $27,251,277 and proceeds from sales of $35,006,695 have been excluded from the Portfolio Turnover calculation.
See Accompanying Notes to Financial Statements.
Ratios to Average Net Assets (3) | ||||||||||||||||||
Expenses | Expenses Net of | Fund’s | ||||||||||||||||
Net Asset | Net | Expense | Net of | Reimbursement/ | Portfolio | Net Assets, | ||||||||||||
Total | Value, | Total | Investment | Total | (Reimbursements)/ | Reimbursement/ | Recoupment | Turnover | Ending | |||||||||
Distributions | Ending | Return (2) | Income (Loss) | Expenses | Recoupment | Recoupment | Offset (4) | Rate | (in 000’s) | |||||||||
$(0.68) | $12.83 | (8.17%) | (0.72%) | 1.63% | (0.07%) | 1.56% | 1.12% | 266% | $69,246 | |||||||||
— | 14.69 | 97.45% | (1.08%) | 1.64% | (0.07%) | 1.57% | 1.19%(8) | 298% | 68,876 | |||||||||
— | 7.44 | (31.62%) | (1.36%) | 1.75% | (0.16%) | 1.59% | 1.55%(5) | 164% | 35,625 | |||||||||
— | 10.88 | 20.22% | (1.31%) | 1.60% | (0.03%) | 1.57% | 1.57% | 170% | 88,311 | |||||||||
(15.77) | 9.05 | (48.41%) | (0.66%) | 1.62% | (0.04%) | 1.58% | 1.58% | 118% | 47,810 | |||||||||
$— | $9.77 | 1.66% | (0.75%) | 1.63% | (0.17%) | 1.46% | 1.06% | 142% | $12,043 | |||||||||
— | 9.61 | 52.06% | (1.04%) | 1.48% | — | 1.48% | 1.26%(8) | 166% | 32,095 | |||||||||
— | 6.32 | (34.10%) | (0.96%) | 1.45% | (0.17%) | 1.28% | 1.26%(5) | 118% | 36,756 | |||||||||
— | 9.59 | 0.21% | (0.46%) | 1.34% | (0.12%) | 1.22% | 1.22%(6) | 138% | 173,053 | |||||||||
(5.08) | 9.57 | (49.55%) | (0.07%) | 1.30% | (0.12%) | 1.18% | 1.18% | 120% | 138,022 | |||||||||
$(2.32) | $17.40 | 11.91% | 0.11% | 1.33% | (0.03%) | 1.30% | 1.13% | 73% | $86,017 | |||||||||
(0.48) | 17.64 | 77.64% | 0.18% | 1.35% | (0.01%) | 1.34% | 1.19%(8) | 101% | 65,791 | |||||||||
(2.17) | 10.23 | (21.54%) | 0.47% | 1.54% | (0.26%) | 1.28% | 1.25%(5) | 109% | 10,980 | |||||||||
(0.04) | 15.62 | 25.33% | 0.79% | 1.44% | (0.14%) | 1.30% | 1.30% | 84% | 58,833 | |||||||||
$(0.36) | $26.71 | 10.96% | 1.70% | 1.31% | (0.50%) | 0.81% | 0.76% | 42% | $16,948 | |||||||||
(0.56) | 24.40 | 37.44% | 1.38% | 1.27% | (0.45%) | 0.82% | 0.79%(8) | 51% | 12,644 | |||||||||
(0.31) | 18.20 | (24.41%) | 1.24% | 1.28% | (0.34%) | 0.94% | 0.93%(5) | 139% | 27,659 | |||||||||
(0.42) | 24.46 | 6.35% | 0.89% | 1.14% | (0.13%) | 1.01% | 1.01% | 99% | 39,358 | |||||||||
(0.20) | 23.42 | 8.64% | 1.04% | 1.21% | (0.19%) | 1.02% | 1.02% | 120% | 46,672 | |||||||||
$— | $15.67 | 4.05% | 0.45% | 1.66% | (0.54%) | 1.12% | 1.00% | 197% | $780 | |||||||||
— | 15.06 | 18.30% | (0.16%) | 1.33% | (0.20%) | 1.13% | 0.93%(8) | 172% | 3,518 | |||||||||
— | 12.73 | (29.59%) | (0.34%) | 1.27% | (0.30%) | 0.97% | 0.95%(5) | 193% | 18,328 | |||||||||
— | 18.08 | (20.04%) | (0.54%) | 1.09% | (0.09%) | 1.00% | 1.00% | 224% | 57,769 | |||||||||
(1.03) | 22.61 | (53.26%) | (0.51%) | 1.09% | (0.09%) | 1.00% | 1.00% | 160% | 60,882 | |||||||||
$— | $10.69 | 8.09% | (0.36%) | 1.97% | (0.63%) | 1.34% | 1.21% | 146%(10) | $5,566 | |||||||||
— | 9.89 | (1.10%) | (0.43%) | 4.39% | (3.04%) | 1.35% | 1.35%(8) | 14% | 5,347 | |||||||||
$(1.72) | $22.44 | 4.62% | 1.68% | 1.10% | (0.08%) | 1.02% | 0.85% | 102% | $35,397 | |||||||||
(0.59) | 23.11 | 34.15% | 2.57% | 1.10% | (0.06%) | 1.04% | 1.00%(8) | 103% | 50,103 | |||||||||
(0.71) | 17.72 | (13.69%) | 3.17% | 1.16% | (0.15%) | 1.01% | 1.00%(5) | 114% | 44,901 | |||||||||
(0.74) | 21.35 | (4.51%) | 2.87% | 1.05% | (0.05%) | 1.00% | 1.00% | 181% | 120,359 | |||||||||
(2.29) | 23.14 | (25.12%) | 2.40% | 1.04% | (0.03%) | 1.01% | 1.01% | 118% | 126,826 | |||||||||
$(0.92) | $16.09 | 9.27% | 0.41% | 1.15% | (0.01%) | 1.14% | 0.95% | 164% | $66,115 | |||||||||
— | 15.58 | 51.85% | (0.05%) | 1.28% | (0.10%) | 1.18% | 1.01%(8) | 226% | 78,327 | |||||||||
— | 10.26 | (24.95%) | (0.16%) | 1.42% | (0.27%) | 1.15% | 1.13%(5) | 230%(7) | 69,776 | |||||||||
— | 13.67 | 6.30% | (0.43%) | 1.37% | (0.14%) | 1.23% | 1.23% | 401% | 41,219 | |||||||||
(8.99) | 12.86 | (36.33%) | (0.21%) | 1.78% | (0.48%) | 1.30% | 1.30% | 440% | 15,023 | |||||||||
$(0.42) | $20.47 | 9.49% | 0.42% | 1.39% | (0.00%) | 1.39% | 1.08% | 203% | $41,394 | |||||||||
(0.04) | 19.09 | 49.17% | 1.35% | 1.49% | (0.04%) | 1.45% | 1.19%(8) | 186% | 51,450 | |||||||||
— | 12.83 | (25.28%) | 0.76% | 1.46% | (0.21%) | 1.25% | 1.23%(5) | 203% | 88,029 | |||||||||
— | 17.17 | (10.62%) | 0.32% | 1.36% | 0.01% | 1.37% | 1.37% | 232% | 214,920 | |||||||||
(1.42) | 19.21 | (35.99%) | 0.15% | 1.32% | 0.08% | 1.40% | 1.40% | 234% | 215,602 | |||||||||
$(0.09) | $35.01 | 19.28% | 1.05% | 1.42% | — | 1.42% | 1.11% | 110% | $55,462 | |||||||||
— | 29.11 | 69.24% | 0.74% | 1.47% | — | 1.47% | 1.28%(8) | 124% | 54,015 | |||||||||
— | 17.39 | (23.46%) | 0.36% | 1.54% | (0.10%) | 1.44% | 1.42%(5) | 129% | 65,351 | |||||||||
— | 22.72 | (6.81%) | 0.40% | 1.42% | (0.01%) | 1.41% | 1.41% | 168% | 144,429 | |||||||||
(8.80) | 24.38 | (37.80%) | (0.24%) | 1.37% | 0.05% | 1.42% | 1.42% | 160% | 193,934 | |||||||||
$(0.01) | $12.62 | 26.32%(9) | 0.56% | 2.83% | (1.08%) | 1.75% | 1.69% | 59%(11) | $26,517 | |||||||||
$(0.84) | $10.04 | 5.40% | 7.82% | 0.82% | (0.19%) | 0.63% | 0.60% | 123% | $131,677 | |||||||||
(0.80) | 10.34 | 16.67% | 8.43% | 0.87% | (0.23%) | 0.64% | 0.61%(8) | 134% | 102,110 | |||||||||
(0.83) | 9.65 | 6.61% | 8.78% | 1.01% | (0.24%) | 0.77% | 0.77%(5) | 137% | 120,182 | |||||||||
(0.96) | 9.88 | 0.42% | 9.28% | 1.03% | (0.27%) | 0.76% | 0.76% | 113% | 71,369 | |||||||||
(1.22) | 10.82 | 0.78% | 10.75% | 1.29% | (0.53%) | 0.76% | 0.76% | 132% | 42,622 |
(8) The Board of Trustees approved the amendments to the Expenses Limitation Agreement where by overall operating expenses (excluding taxes, interest, brokerage and extraordinary expenses), of the U.S. Mini Cap Growth, U.S. Emerging Growth, U.S. Large Cap Value, U.S. Systematic Large Cap Growth, U.S. Equity Growth, U.S. Convertible, Global Select, International Growth, International Growth Opportunities, and U.S. High Yield Bond do not exceed 1.40%, 1.25%, 0.75%, 1.00%, 1.00%, 1.00%, 1.10%, 1.15%, and 0.60% for the period 04/01/03 to 07/28/03, 1.56%, 1.48%, 0.81%, 1.12%, 1.23%, 1.02%, 1.16%, 1.41%, 1.56%, and 0.63% for the period 07/29/03 to 03/31/04, respectively. U.S. Small Cap Value and Emerging Countries do not exceed 1.30% and 1.65% for the period 04/01/03 to 07/28/03, 1.45% and 1.73% for the period 07/29/03 to 02/23/04, 1.30% and 1.65% for the period 02/24/04 to 03/31/04, respectively. U.S. Systematic SMID Growth did not exceed 1.33% for the period 02/24/04 to 03/31/04.
(9) Inception to date Return.
(10) Due to the realignment of the Fund’s portfolio in connection with the combination with U.S. Systematic Mid Cap Growth Fund, the cost of purchases of 1,095,903 and proceeds from sales of 1,041,817 have been excluded from the Portfolio Turnover calculation.
(11) Due to the realignment of the Fund’s portfolio in connection with the combination with Emerging Countries Fund, the cost of purchases of $2,958,229 and proceeds from sales of $3,564,155 have been excluded from the Portfolio Turnover calculation.
(12) Less than one penny per share.
(13) At 3/24/05, the expense cap changed to 1.65% from 1.75% in Class I and to 1.50% from 1.60% in Class II.
For a Class II share outstanding during the period indicated
Distributions from: | ||||||||||||
Net Asset | Net | Net Realized | Total from | Net | Net | |||||||
Value, | Investment | and Unrealized | Investment | Investment | Realized | |||||||
Beginning | Income (Loss) (1) | Gains (Loss) | Operations | Income | Capital Gains | |||||||
U.S. EQUITY FUNDS | ||||||||||||
U.S. MINI CAP GROWTH | ||||||||||||
09/30/04 (commenced) to 03/31/05 | $12.49 | $(0.03) | $1.07 | $1.04 | $— | $(0.68) | ||||||
U.S. SMALL CAP VALUE | ||||||||||||
11/09/04 (commenced) to 03/31/05 | $18.82 | $— | $0.93 | $0.93 | $(0.04) | $(2.32) | ||||||
GLOBAL FUNDS | ||||||||||||
GLOBAL SELECT | ||||||||||||
For the year ended 03/31/05 | $15.58 | $0.07 | $1.36 | $1.43 | $— | $(0.92) | ||||||
6/30/03 (Commenced) to 03/31/04 | 12.12 | (0.01) | 3.47 | 3.46 | — | — | ||||||
INTERNATIONAL GROWTH OPPORTUNITIES | ||||||||||||
For the year ended 03/31/05 | $29.47 | $0.38 | $5.32 | $5.70 | $(0.15) | $— | ||||||
6/05/03 (Commenced) to 03/31/04 | 20.85 | 0.14 | 8.48 | 8.62 | — | — | ||||||
EMERGING MARKETS OPPORTUNITIES | ||||||||||||
03/24/05 (Commenced) to 03/31/05 | $12.55 | $— | $0.07 | $0.07 | $— | $— | ||||||
FIXED INCOME FUNDS | ||||||||||||
U.S. HIGH YIELD BOND | ||||||||||||
For the year ended 03/31/05 | $10.33 | $0.85 | $(0.32) | $0.53 | $(0.84) | $(0.00)(6) | ||||||
6/30/03 (Commenced) to 03/31/04 | 10.18 | 0.66 | 0.10 | 0.76 | (0.61) | — |
For a class III share outstanding during the period indicated
Distributions from: | ||||||||||||
Net Asset | Net | Net Realized | Total from | Net | Net | |||||||
Value, | Investment | and Unrealized | Investment | Investment | Realized | |||||||
Beginning | Income (Loss) (1) | Gains (Loss) | Operations | Income | Capital Gains | |||||||
GLOBAL FUNDS | ||||||||||||
INTERNATIONAL GROWTH | ||||||||||||
For the year ended 03/31/05 | $19.09 | $0.12 | $1.72 | $1.84 | $(0.10) | $(0.42) | ||||||
10/01/03 (Commenced) to 03/31/04 | 16.19 | 0.04 | 2.93 | 2.97 | (0.07) | — |
For a class IV share outstanding during the period indicated
Distributions from: | ||||||||||||
Net Asset | Net | Net Realized | Total from | Net | Net | |||||||
Value, | Investment | and Unrealized | Investment | Investment | Realized | |||||||
Beginning | Income (Loss) (1) | Gains (Loss) | Operations | Income | Capital Gains | |||||||
U.S. EQUITY FUNDS | ||||||||||||
U.S. SYSTEMATIC SMID GROWTH | ||||||||||||
03/04/05 (Commenced) to 03/31/05 | $11.10 | $(0.02) | $(0.39) | $(0.41) | $— | $— | ||||||
GLOBAL FUNDS | ||||||||||||
INTERNATIONAL GROWTH | ||||||||||||
For the year ended 03/31/05 | $19.11 | $0.15 | $1.72 | $1.87 | $(0.11) | $(0.42) | ||||||
10/01/03 (Commenced) to 03/31/04 | 16.19 | 0.06 | 2.93 | 2.99 | (0.07) | — |
(1) Net investment income per share is calculated by dividing net investment income for the period by the average shares outstanding during the period.
(2) Total returns are not annualized for periods less than one year.
(3) Ratios are annualized for periods of less than one year. Expense reimbursements reflect voluntary reductions to total expenses, as discussed in the notes to financial statements. Such amounts would decrease net investment income (loss) ratios had such reductions not occurred.
(4) Net expenses include certain items not subject to expense reimbursement.
(5) Inception to date Return.
(6) Less than one penny per share.
See Accompanying Notes to Financial Statements.
Ratios to Average Net Assets (3) | ||||||||||||||||||
Expenses | Expenses Net of | Fund’s | ||||||||||||||||
Net Asset | Net | Expense | Net of | Reimbursement/ | Portfolio | Net Assets, | ||||||||||||
Total | Value, | Total | Investment | Total | (Reimbursements)/ | Reimbursement/ | Recoupment | Turnover | Ending | |||||||||
Distributions | Ending | Return (2) | Income (Loss) | Expenses | Recoupment | Recoupment | Offset (4) | Rate | (in 000’s) | |||||||||
$(0.68) | $12.85 | 8.17%(5) | (0.41%) | 1.37% | (0.06%) | 1.31% | 0.97% | 266% | $15,200 | |||||||||
$(2.36) | $17.39 | 4.95%(5) | 0.33% | 1.26% | (0.06%) | 1.20% | 0.93% | 73% | $17,691 | |||||||||
$(0.92) | $16.09 | 9.27% | 0.44% | 1.10% | (0.01%) | 1.09% | 0.90% | 164% | $69,548 | |||||||||
— | 15.58 | 28.55% | (0.08%) | 1.24% | (0.12%) | 1.12% | 0.94% | 226% | 35,817 | |||||||||
$(0.15) | $35.02 | 19.40% | 1.19% | 1.27% | — | 1.27% | 0.97% | 110% | $35,233 | |||||||||
— | 29.47 | 41.34% | 0.66% | 1.29% | — | 1.29% | 1.11% | 124% | 60,394 | |||||||||
$— | $12.62 | 0.56%(5) | 1.43% | 1.46% | 0.06% | 1.52% | 1.41% | 59% | $9,111 | |||||||||
$(0.84) | $10.02 | 5.36% | 7.88% | 0.77% | (0.19%) | 0.58% | 0.54% | 123% | $42,710 | |||||||||
(0.61) | 10.33 | 8.43% | 8.68% | 0.82% | (0.24%) | 0.58% | 0.57% | 134% | 68,952 |
Ratios to Average Net Assets (3) | ||||||||||||||||||
Expenses | Expenses Net of | Fund’s | ||||||||||||||||
Net Asset | Net | Expense | Net of | Reimbursement/ | Portfolio | Net Assets, | ||||||||||||
Total | Value, | Total | Investment | Total | (Reimbursements)/ | Reimbursement/ | Recoupment | Turnover | Ending | |||||||||
Distributions | Ending | Return (2) | Income (Loss) | Expenses | Recoupment | Recoupment | Offset (4) | Rate | (in 000’s) | |||||||||
$(0.52) | $20.41 | 9.71% | 0.62% | 1.13% | (0.00%) | 1.13% | 0.83% | 203% | $40,405 | |||||||||
(0.07) | 19.09 | 18.37% | 0.40% | 1.11% | 0.05% | 1.16% | 0.94% | 186% | 36,830 |
Ratios to Average Net Assets (3) | ||||||||||||||||||
Expenses | Expenses Net of | Fund’s | ||||||||||||||||
Net Asset | Net | Expense | Net of | Reimbursement/ | Portfolio | Net Assets, | ||||||||||||
Total | Value, | Total | Investment | Total | (Reimbursements)/ | Reimbursement/ | Recoupment | Turnover | Ending | |||||||||
Distributions | Ending | Return (2) | Income (Loss) | Expenses | Recoupment | Recoupment | Offset (4) | Rate | (in 000’s) | |||||||||
$— | $10.69 | (3.69%)(5) | (0.57%) | 1.67% | (0.54%) | 1.13% | 1.12% | 146% | $1,268 | |||||||||
$(0.53) | $20.45 | 9.89% | 0.76% | 0.98% | (0.00%) | 0.98% | 0.68% | 203% | $26,022 | |||||||||
(0.07) | 19.11 | 18.49% | 0.62% | 0.97% | 0.03% | 1.00% | 0.77% | 186% | 23,719 |
Nicholas-applegate institutional funds
Statements of assets and liabilities
March 31, 2005
U.S. Mini Cap | U.S. Emerging | U.S. Small Cap | U.S. Large Cap | U.S. Systematic | ||||||
Growth | Growth | Value | Value | Large Cap Growth | ||||||
ASSETS | ||||||||||
Investments, at value* | $105,255,385 | $17,816,017 | $107,553,525 | $24,836,779 | $10,084,490 | |||||
Foreign currencies, at value** | — | — | — | — | — | |||||
Cash | — | — | 50 | — | — | |||||
Receivables: | ||||||||||
Investment securities sold | 792,432 | 318,849 | 582,689 | — | — | |||||
Capital shares sold | 85,786 | 47,585 | 184,337 | 138,503 | 15,169 | |||||
Dividends | 40,883 | 1,664 | 102,090 | 32,937 | 8,469 | |||||
Foreign taxes receivable | — | — | — | — | — | |||||
Interest | — | — | — | — | — | |||||
From investment advisor | — | — | — | 1,687 | 2,178 | |||||
Expense offset and other | 222,045 | 28,575 | 75,244 | 7,028 | 9,654 | |||||
Other assets | 20,625 | 15,598 | 33,949 | 21,068 | 15,418 | |||||
Total assets | 106,417,156 | 18,228,288 | 108,531,884 | 25,038,002 | 10,135,378 | |||||
LIABILITIES | ||||||||||
Payables: | ||||||||||
Bank overdraft | $— | $— | $— | $— | $— | |||||
Investments purchased | 889,468 | 94,328 | 749,142 | — | — | |||||
Capital shares redeemed | 7,712 | — | 4,747 | — | — | |||||
Collateral on securities loaned | 20,861,800 | 2,346,125 | 3,218,000 | — | — | |||||
Distributions fee | — | 794 | 142 | 1,733 | 2,001 | |||||
To investment advisor | 75,102 | 12,382 | 67,804 | — | — | |||||
Other Liabilites | 136,721 | 50,997 | 125,581 | 41,663 | 34,987 | |||||
Total Liabilities | 21,970,803 | 2,504,626 | 4,165,416 | 43,396 | 36,988 | |||||
NET ASSETS | 84,446,353 | 15,723,662 | 104,366,468 | 24,994,606 | 10,098,390 | |||||
* Investments, at cost | 98,829,502 | 15,465,157 | 94,267,212 | 20,240,208 | 9,358,167 | |||||
** Foreign currencies, at cost | — | — | — | — | — | |||||
NET ASSETS CONSIST OF: | ||||||||||
Paid-in capital | $81,299,632 | $24,552,020 | $88,585,238 | $26,121,505 | $19,201,221 | |||||
Undistributed net investment income (loss) | — | — | — | 363,111 | 26,492 | |||||
Accumulated net realized gain (loss) on investments and foreign currencies | (3,279,162) | (11,179,218) | 2,494,917 | (6,086,581) | (9,855,646) | |||||
Net unrealized appreciation (depreciation) of investments and of other assets and liabilities denominated in foreign currencies | 6,425,883 | 2,350,860 | 13,286,313 | 4,596,571 | 726,323 | |||||
Net Assets applicable to all shares outstanding | $84,446,353 | $15,723,662 | $104,366,468 | $24,994,606 | $10,098,390 | |||||
Net Assets of Class I shares | $69,246,134 | $12,042,764 | $86,017,427 | $16,948,062 | $779,922 | |||||
Net Assets of Class II shares | 15,200,219 | — | 17,690,945 | — | — | |||||
Net Assets of Class III shares | — | — | — | — | — | |||||
Net Assets of Class IV shares | — | — | — | — | — | |||||
Net Assets of Class R shares | — | 3,680,898 | 658,096 | 8,046,544 | 9,318,468 | |||||
Class I Shares outstanding | 5,397,631 | 1,232,991 | 4,942,937 | 634,515 | 49,775 | |||||
Class II Shares outstanding | 1,183,299 | — | 1,017,469 | — | — | |||||
Class III Shares outstanding | — | — | — | — | — | |||||
Class IV Shares outstanding | — | — | — | — | — | |||||
Class R Shares outstanding | — | 381,483 | 37,842 | 302,298 | 602,710 | |||||
Net Asset Value — Class I Share | $12.83 | $9.77 | $17.40 | $26.71 | $15.67 | |||||
Net Asset Value — Class II Share | $12.85 | $— | $17.39 | $— | $— | |||||
Net Asset Value — Class III Share | $— | $— | $— | $— | $— | |||||
Net Asset Value — Class IV Share | $— | $— | $— | $— | $— | |||||
Net Asset Value — Class R Share | $— | $9.65 | $17.39 | $26.62 | $15.46 |
(1) Commenced operations on 5/27/04
See Accompanying Notes to Financial Statements.
U.S. Systematic | Global | International | International Growth | Emerging Markets | U.S. High Yield | |||||||
SMID Growth | U.S. Convertible | Select | Growth | Opportunities | Opportunities (1) | Bond | ||||||
$6,914,778 | $39,150,437 | $142,825,524 | $119,963,916 | $113,330,103 | $35,435,933 | $174,933,632 | ||||||
— | — | 123,929 | 2,182 | 2,099 | 58,719 | — | ||||||
— | — | — | — | — | — | — | ||||||
95,153 | 267,384 | 3,648,800 | 1,376,123 | 32,576,983 | 2,335,022 | 155,709 | ||||||
75 | — | 308,962 | 42,214 | 80,981 | 559 | 87,361 | ||||||
5,094 | 13,950 | 291,352 | 257,906 | 452,766 | 190,047 | — | ||||||
— | — | 8,431 | 7,195 | 9,455 | — | — | ||||||
— | 134,914 | — | — | — | — | 3,817,891 | ||||||
— | — | — | — | — | 9,817 | — | ||||||
82,605 | 23,460 | 90,646 | 145,498 | 113,697 | 29,194 | 32,971 | ||||||
20,523 | 6,809 | 22,627 | 25,425 | 15,903 | 14,946 | 27,450 | ||||||
7,118,228 | 39,596,954 | 147,320,271 | 121,820,459 | 146,581,987 | 38,074,237 | 179,055,014 | ||||||
$60 | $50 | $— | $— | $— | $905,342 | $— | ||||||
133,370 | 524,951 | 3,276,615 | 1,484,904 | 16,364,605 | 864,120 | 576,957 | ||||||
— | 2,016,797 | 6,411 | 439 | 19,745,935 | 229,509 | 3,792,374 | ||||||
110,450 | 1,572,025 | 8,090,290 | 10,497,014 | 19,507,989 | 278,325 | — | ||||||
— | — | — | 384 | — | — | — | ||||||
1,407 | 25,818 | 82,456 | 62,683 | 77,489 | — | 51,006 | ||||||
38,738 | 60,271 | 201,586 | 204,241 | 190,455 | 168,441 | 248,037 | ||||||
284,025 | 4,199,912 | 11,657,358 | 12,249,665 | 55,886,473 | 2,445,737 | 4,668,374 | ||||||
6,834,203 | 35,397,042 | 135,662,913 | 109,570,794 | 90,695,514 | 35,628,500 | 174,386,640 | ||||||
6,471,146 | 33,928,055 | 126,759,310 | 108,624,690 | 94,255,066 | 28,010,147 | 172,077,428 | ||||||
— | — | 123,921 | 2,034 | 1,984 | 54,598 | — | ||||||
$8,761,056 | $39,266,342 | $120,183,342 | $108,325,105 | $130,677,846 | $50,254,660 | $176,774,696 | ||||||
— | 150,974 | 180,559 | (263,355) | 827,487 | (380) | — | ||||||
(2,370,485) | (9,242,656) | (766,540) | (9,830,997) | (59,904,614) | (22,065,448) | (5,244,260) | ||||||
443,632 | 5,222,382 | 16,065,552 | 11,340,041 | 19,094,795 | 7,439,668 | 2,856,204 | ||||||
$6,834,203 | $35,397,042 | $135,662,913 | $109,570,794 | $90,695,514 | $35,628,500 | $174,386,640 | ||||||
$5,566,080 | $35,397,042 | $66,115,100 | $41,394,038 | $55,462,134 | $26,517,376 | $131,676,909 | ||||||
— | — | 69,547,813 | — | 35,233,380 | 9,111,124 | 42,709,731 | ||||||
— | — | — | 40,405,430 | — | — | — | ||||||
1,268,123 | — | — | 26,021,910 | — | — | — | ||||||
— | — | — | 1,749,416 | — | — | — | ||||||
520,544 | 1,577,079 | 4,109,725 | 2,022,406 | 1,584,334 | 2,101,723 | 13,110,933 | ||||||
— | — | 4,321,789 | — | 1,005,997 | 722,105 | 4,261,841 | ||||||
— | — | — | 1,979,233 | — | — | — | ||||||
118,678 | — | — | 1,272,746 | — | — | — | ||||||
— | — | — | 86,662 | — | — | — | ||||||
$10.69 | $22.44 | $16.09 | $20.47 | $35.01 | $12.62 | $10.04 | ||||||
$— | $— | $16.09 | $— | $35.02 | $12.62 | $10.02 | ||||||
$— | $— | $— | $20.41 | $— | $— | $— | ||||||
$10.69 | $— | $— | $20.45 | $— | $— | $— | ||||||
$— | $— | $— | $20.19 | $— | $— | $— |
Statements of operations
Year ended march 31, 2005
U.S. Mini Cap | U.S. Emerging | U.S. Small Cap | U.S. Large Cap | U.S. Systematic | ||||||
Growth | Growth | Value | Value | Large Cap Growth | ||||||
INVESTMENT INCOME | ||||||||||
Dividends, net of foreign taxes* | $293,670 | $45,290 | $948,250 | $554,951 | $181,351 | |||||
Interest | 30,848 | 23,625 | 17 | 109 | 853 | |||||
Total Income | 324,518 | 68,915 | 948,267 | 555,060 | 182,204 | |||||
EXPENSES | ||||||||||
Advisory fee | 789,585 | 190,439 | 568,883 | 101,818 | 57,137 | |||||
Accounting and administration fees | 83,516 | 30,001 | 79,647 | 29,232 | 22,817 | |||||
Custodian fees | 70,338 | 51,672 | 28,232 | 24,238 | 21,452 | |||||
Transfer agent fees and expenses | 29,052 | 24,466 | 27,781 | 23,413 | 23,370 | |||||
Shareholder servicing fees | 92,672 | 42,476 | 96,665 | 50,176 | 43,390 | |||||
Administrative services | 85,543 | 30,470 | 88,549 | 27,151 | 19,046 | |||||
Professional fees | 48,717 | 12,501 | 46,878 | 15,042 | 8,120 | |||||
Shareholder reporting | 23,643 | 7,759 | 21,990 | 10,133 | 13,416 | |||||
Registration fees | 19,242 | 21,012 | 26,890 | 25,920 | 21,147 | |||||
Trustees’fees and expenses | 9,988 | 3,391 | 8,700 | 3,354 | 2,025 | |||||
Interest and credit facility fee | 678 | — | 648 | — | — | |||||
Insurance | 8,186 | 3,812 | 5,942 | 2,239 | 2,018 | |||||
Miscellaneous | 4,601 | 5,208 | 7,382 | 4,211 | 4,382 | |||||
Total Expenses | 1,265,761 | 423,207 | 1,008,187 | 316,927 | 238,320 | |||||
Expense offset | (341,298) | (101,166) | (131,561) | (12,335) | (11,133) | |||||
Expenses (reimbursed)/recouped | (51,712) | (44,599) | (25,796) | (112,644) | (71,475) | |||||
Net Expenses | 872,751 | 277,442 | 850,830 | 191,948 | 155,712 | |||||
NET INVESTMENT INCOME (LOSS) | (548,233) | (208,527) | 97,437 | 363,112 | 26,492 | |||||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||||||||
Realized gain from: | ||||||||||
Securities | (2,416,911) | 3,800,670 | 8,644,160 | 1,535,914 | 1,661,538 | |||||
Foreign currency transactions | — | — | — | — | — | |||||
Net realized gain (loss) | (2,416,911) | 3,800,670 | 8,644,160 | 1,535,914 | 1,661,538 | |||||
Change in unrealized appreciation (depreciation) of: | ||||||||||
Investments | (3,296,868) | (4,281,928) | (1,752,501) | 542,896 | (1,198,653) | |||||
Other assets and liabilities denominated in foreign currencies | — | — | — | — | — | |||||
Net unrealized appreciation (depreciation) | (3,296,868) | (4,281,928) | (1,752,501) | 542,896 | (1,198,653) | |||||
NET GAIN (LOSS) ON INVESTMENTS | (5,713,779) | (481,258) | 6,891,659 | 2,078,810 | 462,885 | |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $(6,262,012) | $(689,785) | $6,989,096 | $2,441,922 | $489,377 | |||||
* Foreign taxes withheld | $— | $— | $— | $— | $— |
(1) Commenced operations on 5/27/04
See Accompanying Notes to Financial Statements.
U.S. Systematic | Global | International | International Growth | Emerging Markets | U.S. High Yield | |||||||
SMID Growth | U.S. Convertible | Select | Growth | Opportunities | Opportunities (1) | Bond | ||||||
$46,499 | $528,768 | $1,657,232 | $1,639,377 | $2,245,666 | $183,515 | $— | ||||||
77 | 531,210 | 632 | 5,517 | 722 | 1,711 | 15,153,117 | ||||||
46,576 | 1,059,978 | 1,657,864 | 1,644,894 | 2,246,388 | 185,226 | 15,153,117 | ||||||
39,483 | 231,137 | 798,321 | 551,614 | 720,988 | 73,646 | 735,619 | ||||||
5,665 | 43,492 | 113,449 | 87,936 | 83,983 | 6,179 | 192,692 | ||||||
13,519 | 22,221 | 113,165 | 177,875 | 181,429 | 70,422 | 45,757 | ||||||
21,425 | 25,503 | 40,224 | 30,573 | 30,666 | 16,675 | 32,594 | ||||||
5,191 | 42,025 | 79,817 | 190,000 | 117,149 | 16,245 | 137,544 | ||||||
5,191 | 42,025 | 73,681 | 178,650 | 111,813 | 16,227 | 122,347 | ||||||
5,028 | 24,796 | 72,960 | 54,079 | 72,378 | 5,891 | 106,974 | ||||||
1,197 | 10,308 | 45,840 | 33,830 | 29,360 | 2,872 | 59,176 | ||||||
5,618 | 5,556 | 13,070 | 18,355 | 11,788 | 14,707 | 15,844 | ||||||
1,221 | 5,259 | 14,395 | 12,094 | 12,685 | 1,121 | 23,942 | ||||||
51 | — | 477 | — | 790 | 358 | 365 | ||||||
865 | 4,540 | 10,940 | 13,446 | 10,176 | 293 | 17,811 | ||||||
5,474 | 5,229 | 4,931 | 121 | 2,394 | 4,482 | 1,782 | ||||||
109,928 | 462,091 | 1,381,270 | 1,348,573 | 1,385,599 | 229,118 | 1,492,447 | ||||||
(7,064) | (72,722) | (239,427) | (343,987) | (313,768) | (4,654) | (61,435) | ||||||
(34,982) | (33,451) | (10,398) | (487) | — | (86,501) | (350,921) | ||||||
67,882 | 355,918 | 1,131,445 | 1,004,099 | 1,071,831 | 137,963 | 1,080,091 | ||||||
(21,306) | 704,060 | 526,419 | 640,795 | 1,174,557 | 47,263 | 14,073,026 | ||||||
770,346 | 3,618,730 | 13,256,878 | 19,372,953 | 23,540,103 | 1,848,615 | 1,308,142 | ||||||
— | — | (205,549) | (635,955) | (213,506) | (25,034) | — | ||||||
770,346 | 3,618,730 | 13,051,329 | 18,736,998 | 23,326,597 | 1,823,581 | 1,308,142 | ||||||
(600,304) | (3,078,628) | (1,035,331) | (10,082,696) | (7,598,206) | 394,316 | (5,352,084) | ||||||
— | — | 1,485 | (18,067) | (33,771) | 12,210 | — | ||||||
(600,304) | (3,078,628) | (1,033,846) | (10,100,763) | (7,631,977) | 406,526 | (5,352,084) | ||||||
170,042 | 540,102 | 12,017,483 | 8,636,235 | 15,694,620 | 2,230,107 | (4,043,942) | ||||||
$148,736 | $1,244,162 | $12,543,902 | $9,277,030 | $16,869,177 | $2,277,370 | $10,029,084 | ||||||
$— | $— | $80,024 | $177,403 | $111,089 | $20,389 | $— |
Statements of changes in net assets
Years ended march 31
U.S. Mini Cap Growth | U.S. Emerging Growth | |||||||
2005 | 2004 | 2005 | 2004 | |||||
INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS: | ||||||||
Net investment income (loss) | $(548,233) | $(831,019) | $(208,527) | $(456,250) | ||||
Net realized gain (loss) | (2,416,911) | 37,785,454 | 3,800,670 | 10,945,194 | ||||
Net unrealized appreciation (depreciation) | (3,296,868) | 7,991,605 | (4,281,928) | 7,023,694 | ||||
Net increase (decrease) in net assets from investment operations | (6,262,012) | 44,946,040 | (689,785) | 17,512,638 | ||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | — | — | — | — | ||||
From net realized gains | (4,336,439) | — | — | — | ||||
Total distributions | (4,336,439) | — | — | — | ||||
FROM CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | ||||||||
Class I | 35,151,206 | 54,475,831 | 1,968,884 | 11,253,913 | ||||
Class II | 14,157,049 | — | — | — | ||||
Class R | — | — | 575,960 | 1,179,622 | ||||
Distributions reinvested | ||||||||
Class I | 3,478,525 | — | — | — | ||||
Class II | 770,144 | — | — | — | ||||
Class R | — | — | — | — | ||||
Cost of shares redeemed | ||||||||
Class I | (27,283,804) | (66,169,978) | (21,275,687) | (32,008,789) | ||||
Class II | (104,807) | — | — | — | ||||
Class IV | — | — | — | — | ||||
Class R | — | — | (898,510) | (1,529,721) | ||||
Net assets received in conjunction with merger agreement | ||||||||
Class IV | — | — | — | — | ||||
Net increase (decrease) in net assets from share transactions | 26,168,313 | (11,694,147) | (19,629,353) | (21,104,975) | ||||
Net Increase (Decrease) in Net Assets | 15,569,862 | 33,251,893 | (20,319,138) | (3,592,337) | ||||
NET ASSETS | ||||||||
Beginning | 68,876,491 | 35,624,598 | 36,042,800 | 39,635,137 | ||||
Ending | $84,446,353 | $68,876,491 | $15,723,662 | $36,042,800 | ||||
Undistributed net investment income (loss), ending | $— | $— | $— | $— | ||||
CLASS I — CAPITAL SHARE ACTIVITY | ||||||||
Shares sold | 2,477,916 | 5,105,054 | 209,252 | 1,534,091 | ||||
Distributions reinvested | 262,332 | — | — | — | ||||
Shares redeemed | (2,031,573) | (5,202,821) | (2,315,669) | (4,012,939) | ||||
Net Class I Share Activity | 708,675 | (97,767) | (2,106,417) | (2,478,848) | ||||
CLASS II — CAPITAL SHARE ACTIVITY | ||||||||
Shares sold | 1,133,021 | — | — | — | ||||
Distributions reinvested | 58,036 | — | — | — | ||||
Shares redeemed | (7,758) | — | — | — | ||||
Net Class II Share Activity | 1,183,299 | — | — | — | ||||
CLASS III — CAPITAL SHARE ACTIVITY | ||||||||
Shares sold | — | — | — | — | ||||
Distributions reinvested | — | — | — | — | ||||
Shares redeemed | — | — | — | — | ||||
Net Class III Share Activity | — | — | — | — | ||||
CLASS IV — CAPITAL SHARE ACTIVITY | ||||||||
Shares received in conjunction with merger agreement | — | — | — | — | ||||
Shares redeemed | — | — | — | — | ||||
Net Class IV Share Activity | — | — | — | — | ||||
CLASS R — CAPITAL SHARE ACTIVITY | ||||||||
Shares sold | — | — | 61,609 | 139,728 | ||||
Distributions reinvested | — | — | — | — | ||||
Shares redeemed | — | — | (94,910) | (183,884) | ||||
Net Class R Share Activity | — | — | (33,301) | (44,156) |
See Accompanying Notes to Financial Statements.
U.S. Systematic | ||||||||||||||
U.S. Small Cap Value | U.S. Large Cap Value | Large Cap Growth | U.S. Systematic SMID Growth | |||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | |||||||
$97,437 | $79,718 | $363,112 | $308,286 | $26,492 | $(63,463) | $(21,306) | $(1,283) | |||||||
8,644,160 | 6,083,730 | 1,535,914 | 2,036,857 | 1,661,538 | 3,077,381 | 770,346 | (4,225) | |||||||
(1,752,501) | 15,123,825 | 542,896 | 6,130,411 | (1,198,653) | 1,280,165 | (600,304) | 19,363 | |||||||
6,989,096 | 21,287,273 | 2,441,922 | 8,475,554 | 489,377 | 4,294,083 | 148,736 | 13,855 | |||||||
(54,300) | (58,291) | (308,287) | (518,008) | — | — | — | — | |||||||
(8,482,337) | (1,558,819) | — | — | — | — | — | — | |||||||
(8,536,637) | (1,617,110) | (308,287) | (518,008) | — | — | — | — | |||||||
64,014,161 | 38,131,382 | 6,528,160 | 7,248,568 | 240,548 | 1,400,861 | 74,485 | 5,333,451 | |||||||
17,909,758 | — | — | — | — | — | — | — | |||||||
670,138 | — | 584,575 | 970,722 | 753,732 | 1,503,639 | — | — | |||||||
8,024,945 | 1,473,567 | 206,894 | 336,468 | — | — | — | — | |||||||
408,836 | — | — | — | — | — | — | — | |||||||
— | — | 101,393 | 181,381 | — | — | — | — | |||||||
(50,897,777) | (4,463,749) | (3,793,816) | (28,279,823) | (3,102,539) | (18,861,142) | (241,493) | — | |||||||
— | — | — | — | — | — | — | — | |||||||
— | — | — | — | — | — | (6,160,891) | — | |||||||
(7,316) | — | (1,814,722) | (1,774,921) | (2,029,789) | (1,969,935) | — | — | |||||||
— | — | — | — | — | — | 7,666,060 | — | |||||||
40,122,745 | 35,141,200 | 1,812,484 | (21,317,605) | (4,138,048) | (17,926,577) | 1,338,161 | 5,333,451 | |||||||
38,575,204 | 54,811,363 | 3,946,119 | (13,360,059) | (3,648,671) | (13,632,494) | 1,486,897 | 5,347,306 | |||||||
65,791,264 | 10,979,901 | 21,048,487 | 34,408,546 | 13,747,061 | 27,379,555 | 5,347,306 | — | |||||||
$104,366,468 | $65,791,264 | $24,994,606 | $21,048,487 | $10,098,390 | $13,747,061 | $6,834,203 | $5,347,306 | |||||||
$— | $55,186 | $363,111 | $308,286 | $26,492 | $— | $— | $— | |||||||
3,657,363 | 2,859,617 | 257,276 | 316,713 | 15,848 | 97,300 | 7,357 | 540,645 | |||||||
464,406 | 93,264 | 7,961 | 15,061 | — | — | — | — | |||||||
(2,909,001) | (295,642) | (148,861) | (1,333,258) | (199,645) | (1,304,016) | (27,458) | — | |||||||
1,212,768 | 2,657,239 | 116,376 | (1,001,484) | (183,797) | (1,206,716) | (20,101) | 540,645 | |||||||
993,783 | — | — | — | — | — | — | — | |||||||
23,686 | — | — | — | — | — | — | — | |||||||
— | — | — | — | — | — | — | — | |||||||
1,017,469 | — | — | — | — | — | — | — | |||||||
— | — | — | — | — | — | — | — | |||||||
— | — | — | — | — | — | — | — | |||||||
— | — | — | — | — | — | — | — | |||||||
— | — | — | — | — | — | — | — | |||||||
— | — | — | — | — | — | 690,636 | — | |||||||
— | — | — | — | — | — | (571,958) | — | |||||||
— | — | — | — | — | — | 118,678 | — | |||||||
38,257 | — | 23,362 | 44,394 | 50,204 | 104,959 | — | — | |||||||
— | — | 3,912 | 8,137 | — | — | — | — | |||||||
(415) | — | (70,407) | (78,872) | (134,105) | (136,216) | — | — | |||||||
37,842 | — | (43,133) | (26,341) | (83,901) | (31,257) | — | — |
U.S. Convertible | Global Select | |||||||
2005 | 2004 | 2005 | 2004 | |||||
INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS: | ||||||||
Net investment income (loss) | $704,060 | $1,217,667 | $526,419 | $(51,745) | ||||
Net realized gain | 3,618,730 | 4,847,891 | 13,051,329 | 21,638,336 | ||||
Net unrealized appreciation (depreciation) | (3,078,628) | 7,377,158 | (1,033,846) | 15,004,322 | ||||
Net increase (decrease)in net assets from investment operations | 1,244,162 | 13,442,716 | 12,543,902 | 36,590,913 | ||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (802,756) | (1,328,041) | — | — | ||||
From net realized gains | (2,016,444) | — | (7,767,831) | — | ||||
Total distributions | (2,819,200) | (1,328,041) | (7,767,831) | — | ||||
FROM CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | ||||||||
Class I | 2,125,817 | 13,773,947 | 24,166,928 | 30,115,574 | ||||
Class II | — | — | 28,492,987 | 29,015,479 | ||||
Class III | — | — | — | — | ||||
Class IV | — | — | — | — | ||||
Class R | — | — | — | — | ||||
Distributions reinvested | ||||||||
Class I | 2,711,864 | 1,094,960 | 3,702,143 | — | ||||
Class II | — | — | 3,494,951 | — | ||||
Class III | — | — | — | — | ||||
Class IV | — | — | — | — | ||||
Class R | — | — | — | — | ||||
Cost of shares redeemed | ||||||||
Class I | (17,968,407) | (21,782,247) | (42,957,378) | (51,140,124) | ||||
Class II | — | — | (156,677) | (213,688) | ||||
Class III | — | — | — | — | ||||
Class IV | — | — | — | — | ||||
Class R | — | — | — | — | ||||
Net assets received in conjunction with merger agreement | ||||||||
Class I | — | — | — | — | ||||
Class II | — | — | — | — | ||||
Net increase (decrease) in net assets from share transactions | (13,130,726) | (6,913,340) | 16,742,954 | 7,777,241 | ||||
Net Increase (Decrease) in Net Assets | (14,705,764) | 5,201,335 | 21,519,025 | 44,368,154 | ||||
NET ASSETS | ||||||||
Beginning | 50,102,806 | 44,901,471 | 114,143,888 | 69,775,734 | ||||
Ending | $35,397,042 | $50,102,806 | $135,662,913 | $114,143,888 | ||||
Undistributed net investment income (loss), ending | $150,974 | $340 | $180,559 | $(140,311) | ||||
CLASS I — CAPITAL SHARE ACTIVITY | ||||||||
Shares sold | 93,699 | 670,048 | 1,574,870 | 2,241,701 | ||||
Distributions reinvested | 120,111 | 52,280 | 233,721 | — | ||||
Shares redeemed | (804,648) | (1,088,105) | (2,726,407) | (4,015,500) | ||||
Shares received in conjunction with merger agreement | — | — | — | — | ||||
Net Class I Share Activity | (590,838) | (365,777) | (917,816) | (1,773,799) | ||||
CLASS II — CAPITAL SHARE ACTIVITY | ||||||||
Shares sold | — | — | 1,811,742 | 2,314,351 | ||||
Distributions reinvested | — | — | 220,641 | — | ||||
Shares redeemed | — | — | (9,803) | (15,142) | ||||
Shares received in conjunction with merger agreement | — | — | — | — | ||||
Net Class II Share Activity | — | — | 2,022,580 | 2,299,209 | ||||
CLASS III — CAPITAL SHARE ACTIVITY | ||||||||
Shares sold | — | — | — | — | ||||
Distributions reinvested | — | — | — | — | ||||
Shares redeemed | — | — | — | — | ||||
Net Class III Share Activity | — | — | — | — | ||||
CLASS IV — CAPITAL SHARE ACTIVITY | ||||||||
Shares sold | — | — | — | — | ||||
Distributions reinvested | — | — | — | — | ||||
Shares redeemed | — | — | — | — | ||||
Net Class IV Share Activity | — | — | — | — | ||||
CLASS R — CAPITAL SHARE ACTIVITY | ||||||||
Shares sold | — | — | — | — | ||||
Distributions reinvested | — | — | — | — | ||||
Shares redeemed | — | — | — | — | ||||
Net Class R Share Activity | — | — | — | — |
(1) Commenced operations on 5/27/04
See Accompanying Notes to Financial Statements.
Emerging | ||||||||||||
Markets | ||||||||||||
International Growth | International Growth Opportunities | Opportunities(1) | U.S. High Yield Bond | |||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2005 | 2004 | ||||||
$640,795 | $1,027,876 | $1,174,557 | $677,805 | $47,263 | $14,073,026 | $13,227,071 | ||||||
18,736,998 | 23,403,242 | 23,326,597 | 18,676,597 | 1,823,581 | 1,308,142 | 5,562,753 | ||||||
(10,100,763) | 22,572,455 | (7,631,977) | 27,083,117 | 406,526 | (5,352,084) | 5,159,984 | ||||||
9,277,030 | 47,003,573 | 16,869,177 | 46,437,519 | 2,277,370 | 10,029,084 | 23,949,808 | ||||||
(327,979) | (484,596) | (378,002) | — | (10,112) | (14,966,784) | (13,664,562) | ||||||
(2,360,474) | — | — | — | — | (83,400) | — | ||||||
(2,688,453) | (484,596) | (378,002) | — | (10,112) | (15,050,184) | (13,664,562) | ||||||
6,031,712 | 25,196,139 | 11,251,408 | 24,025,571 | 8,419,651 | 79,787,315 | 30,593,692 | ||||||
— | 34,143,763 | 26,839 | 47,089,441 | 21,697 | 20,007,367 | 70,435,949 | ||||||
— | 36,914,124 | — | — | — | — | — | ||||||
— | 19,914,459 | — | — | — | — | — | ||||||
431,257 | 1,493,312 | — | — | — | — | — | ||||||
991,479 | 102,636 | 122,273 | — | 10,106 | 11,194,655 | 8,139,916 | ||||||
— | 145,987 | 241,302 | — | — | 24,462 | 2,972,685 | ||||||
995,381 | 152,119 | — | — | — | — | — | ||||||
658,803 | 81,263 | — | — | — | — | — | ||||||
39,004 | 2,197 | — | — | — | — | — | ||||||
(19,994,044) | (87,368,940) | (18,459,658) | (68,433,518) | (465,382) | (57,720,694) | (65,318,322) | ||||||
(15,355,579) | (25,552,940) | (33,387,515) | (60,135) | — | (44,946,652) | (6,230,020) | ||||||
— | (7,096,631) | — | — | — | — | — | ||||||
(34,895) | (42,831) | — | — | — | — | — | ||||||
(7,774,143) | (3,483,853) | — | — | — | — | — | ||||||
— | — | — | — | 16,335,599 | — | — | ||||||
— | — | — | — | 9,039,571 | — | — | ||||||
(34,011,025) | (5,399,196) | (40,205,351) | 2,621,359 | 33,361,242 | 8,346,453 | 40,593,900 | ||||||
(27,422,448) | 41,119,781 | (23,714,176) | 49,058,878 | 35,628,500 | 3,325,353 | 50,879,146 | ||||||
136,993,242 | 95,873,461 | 114,409,690 | 65,350,812 | — | 171,061,287 | 120,182,141 | ||||||
$109,570,794 | $136,993,242 | $90,695,514 | $114,409,690 | $35,628,500 | $174,386,640 | $171,061,287 | ||||||
$(263,355) | $(16,421) | $827,487 | $244,443 | $(380) | $— | $144,172 | ||||||
309,079 | 1,541,651 | 362,089 | 1,090,972 | 836,364 | 7,724,084 | 3,014,621 | ||||||
50,049 | 6,030 | 3,766 | — | 801 | 1,093,440 | 795,718 | ||||||
(1,031,238) | (5,715,622) | (616,612) | (3,013,366) | (37,075) | (5,581,872) | (6,392,009) | ||||||
— | — | — | — | 1,301,633 | — | — | ||||||
(672,110) | (4,167,941) | (250,757) | (1,922,394) | 2,101,723 | 3,235,652 | (2,581,670) | ||||||
— | 2,225,984 | 898 | 2,051,592 | 1,731 | 1,927,496 | 6,980,951 | ||||||
— | 8,587 | 7,429 | — | — | 2,379 | 288,626 | ||||||
(825,784) | (1,408,787) | (1,051,601) | (2,321) | — | (4,345,722) | (591,889) | ||||||
— | — | — | — | 720,374 | — | — | ||||||
(825,784) | 825,784 | (1,043,274) | 2,049,271 | 722,105 | (2,415,847) | 6,677,688 | ||||||
— | 2,315,001 | — | — | — | — | — | ||||||
50,425 | 8,943 | — | — | — | — | — | ||||||
— | (395,136) | — | — | — | — | — | ||||||
50,425 | 1,928,808 | — | — | — | — | — | ||||||
— | 1,238,937 | — | — | — | — | — | ||||||
33,340 | 4,777 | — | — | — | — | — | ||||||
(1,793) | (2,515) | — | — | — | — | — | ||||||
31,547 | 1,241,199 | — | — | — | — | — | ||||||
22,903 | 90,775 | — | — | — | — | — | ||||||
1,994 | 130 | — | — | — | — | — | ||||||
(426,253) | (219,722) | — | — | — | — | — | ||||||
(401,356) | (128,817) | — | — | — | — | — |
Nicholas-Applegate Institutional Funds
Notes to Financial Statements
Note A —Organization
Nicholas-Applegate Institutional Funds (formerly Nicholas-Applegate Investment Trust) (the “Trust”) is an open-end investment management company. The Trust was established as a Delaware business trust on December 17, 1992 and consists of twelve separate portfolios (collectively the “Funds” and each a “Fund”). Each Fund’s investment objectives, strategies and risks are discussed in the Funds’ current prospectuses. All of the Funds have issued Class I shares (“Class I”), six Funds have issued Class II shares (“Class II”), one Fund has issued Class III shares (“Class III”), two Funds have issued Class IV shares (“Class IV”) and five Funds have issued Retirement shares (“Class R”). No shares have a sales charge. Class R has a distribution fee. All Funds have a shareholder services fee. The Funds offering Class I, Class II, Class III and Class IV shares are covered in this report.
On March 4, 2005 the U.S. Systematic SMID Growth Fund (“the SMID Fund”) acquired all the assets and assumed all the liabilities of the U.S. Systematic Mid Cap Growth Fund. Pursuant to the terms of the agreement governing the acquisition, the U.S. Systematic Mid Cap Growth Fund shareholders became entitled to receive an equivalent dollar amount of full and fractional shares of common stock of the SMID Fund. Based on the net asset values of the U.S. Systematic Mid Cap Growth Fund as of March 4, 2005 ($5.25), the conversion ratio was 0.4730 shares of the SMID Fund for each share of U.S. Systematic Mid Cap Growth Fund Class IV. Based upon the opinion of SMID Fund counsel, the reorganization qualified as tax-free for Federal income tax purposes, with no gain or loss recognized to the Funds or their shareholders. The U.S. Systematic Mid Cap Growth Fund net assets, including unrealized appreciation of $1,024,573 were combined with the SMID Fund for total net assets after the acquisition of $13,445,710.
On March 24, 2005 the Emerging Markets Opportunities Fund (“the EMO Fund”) acquired all the assets and assumed all the liabilities of the Emerging Countries Fund. Pursuant to the terms of the agreement governing the acquisition, the Emerging Countries Fund shareholders became entitled to receive an equivalent dollar amount of full and fractional shares of common stock of the EMO Fund. Based on the net asset values of the Emerging Countries Fund as of March 24, 2005 (Class I was $15.52 and Class II was $15.61), the conversion ratio for Class I was 1.2372 shares of the EMO Fund for each share of the Emerging Countries Fund Class I shares and the conversion ratio for Class II was 1.2438 shares of the EMO Fund for each share of the Emerging Countries Fund Class II shares. Based upon the opinion of Fund counsel, the reorganization qualified as tax-free for Federal income tax purposes, with no gain or loss recognized to the Funds or their shareholders. The Emerging Countries Fund net assets, including unrealized appreciation of $7,033,142 were combined with the EMO Fund for total net assets after the acquisition of $35,868,367.
On April 19, 2004 the name of the following Fund was changed to more accurately reflect its investment policies.
Old | New | |
U.S. Large Cap Select Growth | U.S. Systematic Large Cap Growth |
Note B —Significant Accounting Policies
Significant accounting policies consistently followed by the Funds in preparing these financial statements are described below. The policies conform with accounting principles generally accepted in the United States.
Security Valuations
Equity securities, including ADRs and GDRs, that are traded on a stock exchange or on the NASDAQ National Market System are valued at the last sale price as of the close of business on the New York Stock Exchange (normally 4:00 p.m. New York time) on the day the securities are being valued, or lacking any sales, at the mean between the closing bid and asked prices. Securities listed or traded on certain non-U.S. exchanges whose operations are similar to the United States over-the-counter market are valued at the price within the limits of the latest available current bid and asked prices deemed by the Investment Adviser best to reflect fair value. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security by the Investment Adviser. The Investment Adviser has determined the Xetra is the primary market in Germany.
The Funds value long-term debt obligations, including high quality and high yield corporate securities, municipal securities, asset-backed securities, collateralized mortgage obligations and US Government and Agency issues, at the quoted bid price provided by an approved bond pricing service. Convertible securities are normally priced at the mean between the bids and ask prices. Short-term debt instruments, (e.g., commercial paper, bankers acceptances, U.S. Treasury Bills, etc.) having a maturity of less than 60 days will be valued at amortized cost. If a fixed income security has a maturity of greater than 60 days, it will be valued at market price.
Securities or other assets for which reliable market quotations are not readily available or for which the pricing agent or principal market maker does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser does not represent fair value (Fair Value Securities), are valued by the Pricing Committee overseen by the Board of Trustees in consultation as applicable, with the Investment Adviser’s portfolio managers, traders, and research and credit analysts and legal and compliance personnel. Fair Value Securities may include, but are not limited to, the following: certain private placements and restricted securities that do not have an active trading market; securities whose trading has been suspended or for which there is no current market; securities whose prices are stale; securities denominated in currencies that are restricted, untraded, or for which exchange rates are disrupted; securities affected by significant events; and securities that the Investment Adviser or Pricing Committee believe were priced incorrectly. A “significant event” (which includes, but is not limited to, an extraordinarily political or market event) is an event that the Investment Adviser or Pricing Committee believes with a reasonably high degree of certainty has caused the closing market prices of a Fund’s portfolio securities to no longer reflect their value at the time of the Fund’s NAV calculation.
Security Transactions and Investment Income
Security transactions are accounted for as of trade date. Realized gains and losses from security transactions are determined on an identified-cost basis.
Dividend income is recorded on the ex-dividend date or, for certain non-U.S. securities, when the information becomes available to the Funds. Interest income is recorded on an accrual basis. Discounts and premiums on debt securities are accreted and amortized on the yield to maturity basis.
Non-U.S. Currency Transactions
At each net asset valuation date, the value of assets and liabilities denominated in non-U.S. currencies are translated into U.S. dollars using the current exchange rate at the spot rate at 11:00 a.m. Eastern Time against the U.S. dollar, as provided by an approved pricing service. Security transactions, income and expenses are converted at the prevailing exchange rate on the day of the event. The effect of changes in exchange rates on securities denominated in a non-U.S. currency is included with the net realized and unrealized gain or loss of the associated security. Other Non-U.S. currency gains or losses are reported separately.
Certain Funds may use forward non-U.S. currency contracts to reduce their exposure to currency fluctuations of their non-U.S. securities. These contracts are commitments to purchase or sell a non-U.S. currency at a specified rate on a future date. When the contract is fulfilled or closed, gains or losses are realized. Until then, the gain or loss is included in unrealized appreciation or depreciation of investments. The contract commitment is fully collateralized by cash or securities of the Fund. Non-U.S. denominated assets and forward currency contracts may involve more risks than U.S. transactions, including currency risk, political and economic risk, regulatory and market risk. Evaluating and monitoring such risk exposure is a part of the Funds’ management strategy. There were no such forward non-U.S. currency contracts at March 31, 2005.
Futures Contracts
Each Fund may enter into futures contracts involving non-U.S. currency, interest rates, securities, and securities indices, for hedging purposes only. A futures contract obligates the seller of the contract to deliver and the purchaser of the contract to take delivery of the type of non-U.S. currency, financial instrument or security called for in the contract at a specified future time for a specified price. Upon entering into such a contract, a Fund is required to deposit and maintain as collateral such initial margin as required by the exchange on which the contract is traded. Pursuant to the contract, a Fund agrees to receive from or pay to the broker an amount equal to the daily fluctuations in the value of the contract. Such receipts or payments are known as variation margin and are recorded as unrealized gains or losses by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. There were no such futures contracts throughout the year.
Options Contracts
The Funds may: (a) buy call options on non-U.S. currency in anticipation of an increase in the value of the underlying asset; (b) buy put options on non-U.S. currency, portfolio securities, and futures in anticipation of a decrease in the value of the underlying asset; and (c) write call options on portfolio securities and futures to generate income from premiums, and in anticipation of a decrease or only limited increase in the value of the underlying asset. If a call written by a Fund is exercised, the Fund foregoes any possible profit from an increase in the market price of the underlying asset over the exercise price plus the premium received. When a Fund writes options on futures contracts, it will be subject to margin requirements similar to those applied to futures contracts.
Equity-Linked Securities
Certain Funds may purchase equity-linked securities, also known as participation notes, equity swaps, and zero strike calls and warrants. Equity-linked securities are primarily used by a Fund as an alternative means to more efficiently and effectively access the securities market of what is generally an emerging country. The Fund deposits an amount of cash with its custodian (or broker, if legally permitted) in an amount near or equal to the selling price of the underlying security in exchange for an equity linked security. Upon sale, the Fund receives cash from the broker or custodian equal to the value of the underlying security. Aside from market risk of the underlying securities, there is a risk of default by the other party to the transaction. In the event of insolvency of the other party, the Fund might be unable to obtain its expected benefit. In addition, while a Fund will seek to enter into such transactions only with parties which are capable of entering into closing transactions with the Fund, there can be no assurance that the Fund will be able to close out such a transaction with the other party or obtain an offsetting position with any other party, at any time prior to the end of the term of the underlying agreement. This may impair the Fund’s ability to enter into other transactions at a time when doing so might be advantageous.
Securities Lending
In order to generate expense offset credits, each of the Funds may lend portfolio securities, on a short-term or a long-term basis, up to 30% of a Fund’s total assets to broker/dealers, banks, or other institutional borrowers of securities. A Fund will only enter into loan arrangements with broker/dealers, banks, or other institutions which the Investment Adviser has determined are creditworthy and under the guidelines established by the Board of Trustees and will receive collateral in the form of cash or U.S. government securities equal to at least 102% of the value of the securities loaned on U.S. securities and 105% on non-U.S. securities.
There is the risk that when lending portfolio securities, the securities may not be available to the Fund on a timely basis and the Fund may, therefore, loose the opportunity to sell securities at a desirable price. In addition, in the event that a borrower of securities would file for bankruptcy or become insolvent, disposition of the securities may be delayed pending court action. The value of securities on loan and the related collateral at the period ended March 31, 2005 were:
Fund | Value | Collateral | |||
U.S. Mini Cap Growth | $20,259,214 | $20,861,800 | |||
U.S. Emerging Growth | 2,284,894 | 2,346,125 | |||
U.S. Small Cap Value | 3,110,088 | 3,218,000 | |||
U.S. Systematic SMID Growth | 108,051 | 110,450 | |||
U.S. Convertible | 1,537,168 | 1,572,025 | |||
Global Select | 7,718,864 | 8,090,290 | |||
International Growth | 9,978,756 | 10,497,014 | |||
International Growth Opportunities | 18,404,452 | 19,507,989 | |||
Emerging Markets Opportunities | 247,564 | 278,325 |
Credit Facility
The Trust has a $15 million credit facility available to fund temporary or emergency borrowing expiring in January 2006. Each Fund pays its pro-rata share of an annual commitment fee plus interest on its specific borrowings. For the period ended March 31, 2005, the Funds did not borrow against the line of credit.
Commitments and Contingencies
The Funds may enter into contracts and agreements that contain a variety of representations and warranties which provide general indemnifications. The maximum exposure to the Funds under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risks of loss to be remote.
Fund Expenses and Multi-Class Allocations
Each Fund bears expenses incurred specifically on its behalf plus an allocation of its share of Trust level expenses. Each share offered by a Fund has equal rights to assets but incurs certain Class specific expenses. The Funds allocate income, gains and losses, both realized and unrealized, and expenses, except for Class specific expenses, based on the relative net assets of each share class.
Many of the brokers with whom the Investment Adviser places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund. In addition, through arrangements with the Funds’ custodian, credits realized as a result of uninvested cash balances were used to reduce the Funds expenses. During the period, the credits used to reduce the Funds expenses were:
Credit | Direct | Security | |||||
Interest | Brokerage | Lending | |||||
Fund | Offset | Offset | Offset | ||||
U.S. Mini Cap Growth | 13,883 | 205,190 | 122,225 | ||||
U.S. Emerging Growth | 6,152 | 39,090 | 55,924 | ||||
U.S. Small Cap Value | 73,228 | 38,291 | 20,042 | ||||
U.S. Large Cap Value | 7,345 | 4,990 | — | ||||
U.S. Systematic Large Cap Growth | 806 | 9,770 | 557 | ||||
U.S. Systematic SMID Growth | 1,674 | 5,390 | — | ||||
U.S. Convertible | 14,635 | 165 | 57,922 | ||||
Global Select | 21,021 | 170,785 | 47,621 | ||||
International Growth | 20,288 | 220,985 | 102,714 | ||||
International Growth Opportunities | 19,712 | 150,855 | 143,201 | ||||
Emerging Markets Opportunities | 1,024 | 3,630 | — | ||||
U.S. High Yield Bond | 61,435 | — | — |
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
Note C —Federal Income Taxes
The Funds intend to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their taxable income to shareholders. Accordingly, no provision for federal income taxes is required. A Fund investing in foreign securities records any foreign taxes on income and gains on such investments in accordance with the applicable tax rules. The Funds’ tax accounting treatment of loss deferrals, accretion, passive foreign investment companies and expiration of capital loss carryforwards are different from the financial statement recognition of income and gains.
Capital loss carryforwards may be used to offset current or future capital gains until expiration.
Distributions to Shareholders
The Funds record distributions to shareholders on the ex-dividend date. Distributions are determined in accordance with income tax regulations that may differ from generally accepted accounting principles. Accordingly, the Funds’ capital accounts are periodically reclassified to reflect income and gains available for distribution under income tax regulations. The Funds make income and capital gain distributions at least annually. Funds with income objectives make distributions either quarterly or monthly in accordance with the prospectuses.
The tax characters of distributions paid during the fiscal year ended March 31, 2005 were as follows:
Distribution paid from: | |||||||||||
Net | Total | Total | |||||||||
Ordinary | long term | taxable | Tax return | distributions | |||||||
Fund | Income | capital gain | distributions | of capital | paid (1) | ||||||
U.S. Mini Cap Growth | 1,735,886 | 2,600,553 | 4,336,439 | — | 4,336,439 | ||||||
U.S. Emerging Growth | — | — | — | — | — | ||||||
U.S. Small Cap Value | 4,987,214 | 3,549,423 | 8,536,637 | — | 8,536,637 | ||||||
U.S. Large Cap Value | 308,287 | — | 308,287 | — | 308,287 | ||||||
U.S. Systematic Large Cap Growth | — | — | — | — | — | ||||||
U.S. Systematic SMID Growth | — | — | — | — | — | ||||||
U.S. Convertible | 2,819,200 | — | 2,819,200 | — | 2,819,200 | ||||||
Global Select | 4,719,987 | 3,047,844 | 7,767,831 | — | 7,767,831 | ||||||
International Growth | 327,979 | 2,360,474 | 2,688,453 | — | 2,688,453 | ||||||
International Growth Opportunities | 378,002 | — | 378,002 | — | 378,002 | ||||||
Emerging Markets Opportunities | 10,112 | — | 10,112 | — | 10,112 | ||||||
U.S. High Yield Bond | 14,966,784 | 83,400 | 15,050,184 | — | 15,050,184 |
The tax characters of distributions paid during the fiscal year ended March 31, 2004 were as follows:
Distribution paid from: | |||||||||||
Net | Total | Total | |||||||||
Ordinary | long term | taxable | Tax return | distributions | |||||||
Fund | Income | capital gain | distributions | of capital | paid (1) | ||||||
U.S. Small Cap Value | 1,430,416 | 186,694 | 1,617,110 | — | 1,617,110 | ||||||
U.S. Large Cap Value | 518,008 | — | 518,008 | — | 518,008 | ||||||
U.S. Convertible | 1,328,041 | — | 1,328,041 | — | 1,328,041 | ||||||
International Growth | 484,596 | — | 484,596 | — | 484,596 | ||||||
U.S. High Yield Bond | 13,664,562 | — | 13,664,562 | — | 13,664,562 |
As of March 31, 2005 the components of accumulated earnings/(deficit) on a tax basis were as follows:
Components of accumulated earnings/(deficit): | |||||||||||||||
Undistributed | Undistributed | Accumulated | Unrealized | Total | |||||||||||
ordinary | Distribution | long-term | Accumulated | capital and | appreciation/ | accumulated | |||||||||
Fund | income | Payable | capital gains | earnings | other losses | (depreciation) | earning/(deficit) | ||||||||
U.S. Mini Cap Growth | — | — | — | — | (3,188,791)(2) | 6,335,512(3) | 3,146,721 | ||||||||
U.S. Emerging Growth | — | — | — | — | (11,033,225)(2) | 2,204,867(3) | (8,828,358) | ||||||||
U.S. Small Cap Value | 748,070 | — | 1,833,838 | 2,581,908 | — | 13,199,322(5) | 15,781,230 | ||||||||
U.S. Large Cap Value | 363,111 | — | — | 363,111 | (5,910,341)(2) | 4,420,331(3) | (1,126,899) | ||||||||
U.S. Systematic Large Cap Growth | 26,492 | — | — | 26,492 | (9,749,949)(2) | 620,626(3) | (9,102,831) | ||||||||
U.S. Systematic SMID Growth | 467,012 | — | 263,933 | 730,945 | (3,035,400)(2) | (646,971)(3) | (2,951,426) | ||||||||
U.S. Convertible | 151,299 | (325) | 1,660,235 | 1,811,209 | (10,853,252)(2) | 5,172,743(3) | (3,869,300) | ||||||||
Global Select | 4,352,370 | — | 5,645,501 | 9,997,871 | (10,170,086)(2) | 15,651,786(4) | 15,479,571 | ||||||||
International Growth | 7,292,666 | — | 7,788,127 | 15,080,793 | (24,887,165)(2) | 11,052,061(3) | 1,245,689 | ||||||||
International Growth Opportunities | 909,436 | — | — | 909,436 | (59,706,994)(2) | 18,815,226(4) | (39,982,332) | ||||||||
Emerging Markets Opportunities | 20,634 | — | — | 20,634 | (21,864,670)(2) | 7,217,876(3) | (14,626,160) | ||||||||
U.S. High Yield Bond | — | — | — | — | (5,212,910)(2) | 2,824,854(3) | (2,388,056) |
(1) Total distributions paid differ from the Statement of Changes in Net Assets because for the tax purposes dividends are recognized when actually paid.
(2) The following Funds had net capital loss carryforwards of approximately:
Net | |||||||
Capital Loss | Post October | ||||||
CarryForward | Losses | ||||||
(in 000’s) | Expiration | (in 000’s) | |||||
U.S. Mini Cap Growth | $3,189 | March 31, 2013 | $— | ||||
U.S. Emerging Growth | 1,030 | March 31, 2011 | — | ||||
10,003 | March 31, 2010 | — | |||||
U.S. Large Cap Value | 5,910 | March 31, 2011 | — | ||||
U.S. Systematic Large Cap Growth | 321 | March 31. 2012 | 81 | ||||
2,665 | March 31, 2011 | — | |||||
6,683 | March 31, 2010 | — | |||||
U.S. Systematic SMID Growth | 506 | March 31, 2010 | — | ||||
2,530 | March 31, 2009 | — | |||||
U.S. Convertible | 6,792 | March 31, 2011 | — | ||||
4,061 | March 31, 2010 | — | |||||
Global Select | 4,730 | March 31, 2010 | — | ||||
3,819 | March 31, 2009 | — | |||||
1,621 | March 31, 2008 | — | |||||
International Growth | 10,739 | March 31, 2011 | 263 | ||||
13,885 | March 31, 2010 | — | |||||
International Growth Opportunities | 25,562 | March 31, 2011 | — | ||||
34,145 | March 31, 2010 | — | |||||
Emerging Markets Opportunities | 3,947 | March 31, 2010 | 21 | ||||
3,947 | March 31, 2009 | — | |||||
13,949 | March 31, 2008 | — | |||||
U.S. High Yield Bond | 2,948 | March 31, 2011 | — | ||||
2,265 | March 31, 2010 | — |
To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. The availability of loss carryforwards to any future years may be substantially limited a result of past or future ownership changes as determined under Internal Revenue Code Section 382.
Net capital losses incurred after October 31, and within the taxable year are deemed to arise on the first business day of the Fund’s next taxable year. For the year ended March 31, 2005, the Fund deferred to April 1, 2005, post October capital and currency losses.
(3) The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales.
(4) The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales, and mark to market on PFICs.
(5) The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and REIT adjustments.
Note D —Transactions With Affiliates
The Investment Adviser receives the following annual fees payable monthly based on the average daily net assets of each Fund.
Advisory | |||
Fund | Fee | ||
U.S. Mini Cap Growth | 1.00% | ||
U.S. Emerging Growth | 0.75% | ||
U.S. Small Cap Value | 0.75% | ||
U.S. Large Cap Value | 0.45% | ||
U.S. Systematic Large Cap Growth | 0.45% | ||
U.S. Systematic SMID Growth | 0.70% | ||
U.S. Convertible | 0.55% | ||
Global Select | 0.65% | ||
International Growth | 0.50% | ||
International Growth Opportunities | 0.70% | ||
Emerging Markets Opportunities | 0.90% | ||
U.S. High Yield Bond | 0.40% |
Pursuant to the Administrative Services agreement the Investment Adviser provides operational support services to the Funds and receives the following annual fees payable monthly based on average daily net assets of each Fund.
Administrative Services Fee | |||||||||
Fund | Class I | Class II | Class III | Class IV | |||||
U.S. Mini Cap Growth | 0.12% | 0.05% | — | — | |||||
U.S. Emerging Growth | 0.12% | — | — | — | |||||
U.S. Small Cap Value | 0.12% | 0.07% | — | — | |||||
U.S. Large Cap Value | 0.12% | — | — | — | |||||
U.S. Systematic Large Cap Growth | 0.15% | — | — | — | |||||
U.S. Systematic SMID Growth | 0.10% | — | — | — | |||||
U.S. Convertible | 0.10% | — | — | — | |||||
Global Select | 0.07% | 0.05% | — | — | |||||
International Growth | 0.25% | — | 0.12% | 0.05% | |||||
International Growth Opportunities | 0.15% | 0.07% | — | — | |||||
Emerging Markets Opportunities | 0.20% | 0.12% | — | — | |||||
U.S. High Yield Bond | 0.07% | 0.05% | — | — |
Pursuant to the Shareholder Services agreement the Investment Adviser provides account servicing to the Funds and receives the following annual fees payable monthly based on the average daily net assets of each Fund.
Shareholder Services Fee | |||||||||
Fund | Class I | Class II | Class III | Class IV | |||||
U.S. Mini Cap Growth | 0.13% | 0.05% | — | — | |||||
U.S. Emerging Growth | 0.13% | — | — | — | |||||
U.S. Small Cap Value | 0.13% | 0.08% | — | — | |||||
U.S. Large Cap Value | 0.13% | — | — | — | |||||
U.S. Systematic Large Cap Growth | 0.15% | — | — | — | |||||
U.S. Systematic SMID Growth | 0.10% | — | — | — | |||||
U.S. Convertible | 0.10% | — | — | — | |||||
Global Select | 0.08% | 0.05% | — | — | |||||
International Growth | 0.25% | — | 0.13% | 0.05% | |||||
International Growth Opportunities | 0.15% | 0.08% | — | — | |||||
Emerging Markets Opportunities | 0.20% | 0.13% | — | — | |||||
U.S. High Yield Bond | 0.08% | 0.05% | — | — |
The Investment Adviser has agreed to waive its fees and absorb other operating expenses of the Funds so that total operating expenses are limited to certain levels through March 31, 2006. The Investment Adviser will recover expense reimbursements paid to the Funds to the extent of the difference between the Funds’ actual expenses (exclusive of taxes, interest, brokerage and the expenses incurred from the operation of the Mauritius Company) when they fall below the limit in the year such reimbursement is paid.
The Funds reduce expenses by offsets to custodial and other fees based upon the amount of securities lent to third parties, brokerage commissions recaptured and cash maintained with its custodian. These offset arrangements will have no effect on the amount of fees that the Investment Adviser must waive or expenses that it must otherwise reimburse under the Expense Limitation Agreement.
The following table presents expense limitations for the Funds for the period ended March 31, 2005.
Class I | Class II | Class III | Class IV | ||||||
4/1/04 to | 4/1/04 to | 4/1/04 to | 4/1/04 to | ||||||
Fund | 3/31/05 | 3/31/05 | 3/31/05 | 3/31/05 | |||||
U.S. Mini Cap Growth | 1.56% | 1.31% | — | — | |||||
U.S. Emerging Growth | 1.48% | — | — | — | |||||
U.S. Small Cap Value | 1.30% | 1.20% | — | — | |||||
U.S. Large Cap Value | 0.81% | — | — | — | |||||
U.S. Systematic Large Cap Growth | 1.12% | — | — | — | |||||
U.S. Systematic SMID Growth | 1.33% | — | — | 1.13% | |||||
U.S. Convertible | 1.02% | — | — | — | |||||
Global Select | 1.16% | 1.11% | — | — | |||||
International Growth | 1.41% | — | 1.16% | 1.01% | |||||
International Growth Opportunities | 1.56% | 1.41% | — | — | |||||
Emerging Market Opportunities# | 1.65% | 1.50% | — | — | |||||
U.S. High Yield Bond | 0.63% | 0.58% | — | — |
# At 3/24/05, the expense cap changed to 1.65% from 1.75% in Class I and to 1.50% from 1.60% in Class II.
Trustee Compensation
Certain officers of the Trust are also officers of the Investment Adviser and Distributor. The Trustees who are not affiliated with the Investment Adviser receive annual compensation of approximately $35,000 each from the Trust.
Allianz Dresdner Daily Asset Fund
The Funds may invest securities lending collateral in affiliated Allianz Dresdner Daily Asset Fund. The Allianz Dresdner Daily Asset Fund is an investment company managed by Drezdner Advisor, LLC, an affiliate of Nicholas-Applegate Capital Management.
Broker Commission
Certain of the Funds placed a portion of their portfolio transactions with the brokers Kleinworth Benson and Dresdner Kleinwort Wasserstein, each of which are affiliates of the investment adviser and the Trust.
Note E — Investment Transactions
The following table presents purchases and sales of securities, excluding short-term investments, during the period ended March 31, 2005 to indicate the volume of transactions in each Fund. The tax cost of securities held at March 31, 2005, and the related gross and net unrealized appreciation and depreciation, provide aggregate information on a tax basis against which future gains and losses on these investments are measured for distribution purposes.
Net | |||||||||||||
Gross | Gross | Unrealized | |||||||||||
Unrealized | Unrealized | Appreciation | |||||||||||
Purchases | Sales | Tax Cost | Appreciation | Depreciation | (Depreciation) | ||||||||
Fund | (in 000’s) | (in 000’s) | (in 000’s) | (in 000’s) | (in 000’s) | (in 000’s) | |||||||
U.S. Mini Cap Growth | $211,087 | $204,815 | $98,920 | $10,258 | $(3,923) | $6,335 | |||||||
U.S. Emerging Growth | 35,505 | 55,588 | 15,611 | 2,723 | (518) | 2,205 | |||||||
U.S. Small Cap Value | 78,717 | 52,659 | 94,391 | 15,374 | (2,212) | 13,162 | |||||||
U.S. Large Cap Value | 10,886 | 9,186 | 20,416 | 4,702 | (282) | 4,420 | |||||||
U.S. Systematic Large Cap Growth | 24,709 | 28,789 | 9,464 | 1,061 | (441) | 620 | |||||||
U.S. Systematic SMID Growth | 9,330 | 15,042 | 6,537 | 710 | (332) | 378 | |||||||
U.S. Convertible | 41,820 | 54,331 | 33,978 | 5,553 | (381) | 5,172 | |||||||
Global Select | 209,041 | 200,946 | 127,173 | 18,900 | (3,247) | 15,653 | |||||||
International Growth | 219,921 | 255,332 | 108,913 | 12,497 | (1,446) | 11,051 | |||||||
International Growth Opportunities | 110,993 | 148,192 | 94,535 | 20,069 | (1,274) | 18,795 | |||||||
Emerging Markets Opportunities | 21,446 | 7,241 | 28,232 | 8,048 | (844) | 7,204 | |||||||
U.S. High Yield Bond | 288,783 | 215,491 | 172,109 | 4,686 | (1,861) | 2,825 |
Gains and losses resulting from the redemptions-in-kind are included in the realized gain/loss from securities and non-U.S. currency transactions. During the period, the Emerging Markets Opportunities Fund had a redemption-in-kind valued at $70,393,275.
Note F —FINANCIAL INSTRUMENTS
During the period, several of the Funds have been party to financial instruments with off-balance sheet risks, including forward non-U.S. currency contracts, primarily in an attempt to minimize the risk to the Fund, in respect of its portfolio transactions. These instruments involve market and/or credit risk in excess of the amount recognized in the Statement of Assets and Liabilities. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from unexpected movement in currencies, securities values and interest rates. The contract amounts indicate the extent of the Funds’ involvement in such contracts.
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
Nicholas-Applegate Institutional Funds
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and changes in net assets and the financial highlights present fairly, in all material respects, the financial position of each of the portfolios comprising the Nicholas-Applegate Institutional Funds (collectively, the “Funds”) at March 31, 2005, and the results of each of their operations for the year then ended, the changes in each of their net assets for the two years in the period then ended and each of their financial highlights for the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights of the Funds for years ended March 31, 2002 and 2001 were audited by other independent accountants whose report dated May 1, 2002 expressed an unqualified opinion on those financial highlights.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Los Angeles, California
May 25, 2005
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
SUPPLEMENTARY INFORMATION — (UNAUDITED)
ADDITIONAL FEDERAL TAX INFORMATIONS (unaudited)
The Funds intend to distribute the maximum amount of qualified dividend income allowable. The amount of qualified dividend income distributed by each Fund will be reported to shareholders on the 2005 Form 1099-DIV.
The amounts which represent income derived from sources within, and taxes paid to non-U.S. countries or possessions of the United States are as follows:
Foreign | |||||
Fund | Source Income | FTC Total: | |||
International Growth | $1,797,390 | $173,830 | |||
International Growth Opportunities | 2,352,746 | 107,880 | |||
Emerging Markets Opportunities | 213,861 | 21,995 |
The percentage of ordinary dividends paid by the Funds during the year ended March 31, 2005, which qualify for the Dividends Received Deduction available to corporate shareholders was:
Fund | Percentage: | ||
U.S. Mini Cap Growth | 16.95% | ||
U.S. Small Cap Value | 14.04 | ||
U.S. Large Cap Value | 100.00 | ||
U.S. Convertible | 17.72 | ||
Global Select | 17.35 | ||
International Growth Opportunities | 2.87 |
The Funds hereby designate the following approximate amounts as capital gains distributions for the purpose of the Dividends Paid Deduction:
Fund | Amounts: | ||
U.S. Mini Cap Growth | $2,600,553 | ||
U.S. Small Cap Value | 3,549,423 | ||
Global Select | 3,047,844 | ||
International Growth | 2,360,474 | ||
U.S. High Yield Bond | 83,400 |
QUARTERLY FILING (unaudited)
The Funds provide a complete list of their holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds’ semiannual and annual reports to shareholders. For the first and third quarters, the Funds file the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the Funds’ Form N-Q on the SEC’s website at www.sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. To find out more about this public service, call the SEC at 1-202-942-8090.
TRUSTEE APPROVAL OF MANAGEMENT FEE (unaudited)
Based upon the recommendation of the Contract Committee of the Board of Trustees, a Committee comprised of all of the independent Trustees, the Trustees unanimously approved the continuance of the Investment Advisory Agreement between the Funds and Nicholas-Applegate at a meeting held November 11, 2004.
In approving the Investment Advisory Agreement, the Trustees, through its Contract Committee, evaluated a comprehensive package of materials, including performance and expense data for other funds with similar investment objectives/policies that had been provided by an independent organization. Prior to making its recommendation, the Contract Committee reviewed the proposed continuance of the Investment Advisory Agreement with representatives of Nicholas-Applegate and with independent legal counsel who prepared a legal memorandum outlining the legal guidelines for review of the Investment Advisory Agreement. Members of the Contract Committee also met privately with independent legal counsel to discuss the factors they felt were relevant. The factors included:
1. comparative performance data for each of the Funds and other funds with similar investment objectives/policies and to a relevant index;
2. payments received by Nicholas-Applegate; and costs incurred by Nicholas-Applegate and their profit margins in connection with its relationship to the Funds;
3. comparative fee and expense data for each of the Funds and other funds with similar investment objectives/policies;
4. Implementation of Nicholas-Applegate’s compliance policies and practices including policies and practices regarding allocation of portfolio transactions, best price and execution of portfolio transactions, and soft dollar arrangements;
5. portfolio turnover rates;
6. fall-out benefits, such as research received pursuant to Section 28(e) of the Securities Exchange Act of 1934;
7. fees that Nicholas-Applegate charges its other clients with similar investment objectives/policies;
8. experience and qualifications of each of the members of the portfolio management teams;
The Contract Committee also considered the nature and quality of the services provided by Nicholas-Applegate, their confidence in Nicholas-Applegate’s integrity and competence, and Nicholas-Applegate’s responsiveness to questions and issues raised by the Trustees, including its willingness to consider and implement changes designed to improve investment and operational results.
In their deliberations, the Contract Committee did not identify any particular information that was controlling, and each member of the Contract Committee may have attributed different weights to the various factors.
The Contract Committee noted that some of the Funds appeared to be too small for optimum portfolio management. The Trustees considered it important that the adviser put additional effort and resources to enhance size of the Funds.
The Contract Committee determined that the fees of the Investment Advisory Agreement between each of the Funds and Nicholas-Applegate were fair and reasonable in light of the services performed, expenses incurred and such other matters as the Contract Committee considered relevant in the exercise of their reasonable judgment.
The Contract Committee also separately discussed the material factors and conclusions that formed the basis for the Contract Committee to recommend to the Board of Trustees approval of the Investment Advisory Agreement for each of the Funds.
Nature, extent and quality of the services provided by Nicholas-Applegate
The Contract Committee noted that Nicholas-Applegate manages the portfolios of each of the Funds under the direction of the Board of Trustees. Nicholas-Applegate manages each Fund consistent with each Fund’s objectives and policies. Nicholas-Applegate provides each Fund with office space and such other services and personnel as are necessary for its operations.
The Contract Committee considered the scope and quality of services provided by Nicholas-Applegate under the Investment Advisory Agreement. The Contract Committee considered the quality of the investment research capabilities of Nicholas-Applegate and the other resources that it has dedicated to performing services for the Funds. Although the Contract Committee noted that investment performance in 5 of the Funds fell below expectations in terms of both performance and expenses, following a report by Nicholas-Applegate’s Chief Investment Officer on changes being implemented to improve performance, the Committee expressed confidence in Nicholas-Applegate and the portfolio management teams. Accordingly, the Contract Committee concluded that, overall, it was satisfied with the efforts being made by Nicholas-Applegate to maintain and enhance the nature, extent and quality of services provided to each of the Funds.
Cost of Services
The Contract Committee noted the Funds’ assets had decreased over time, resulting in lower revenues to Nicholas-Applegate. With this factor combined with an increase in expenses necessary to expand the quality of investment personnel, respond to regulatory change, and retain key personnel, Nicholas-Applegate’s profitability from its arrangements with the Funds has declined over time and is expected to continue to decline until assets increase. In these circumstances, “profitability” was considered but not given significant weight by the Contract Committee.
Economies of Scale
The Contract Committee noted that the investment advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels. However, the Contract Committee did note that overall fees paid to Nicholas-Applegate (investment advisory, administration, and shareholder service) contain the functional equivalent of breakpoints through four to five different share classes that reduce the fees paid to Nicholas-Applegate based on the asset level of the account. The Contract Committee recognized that the existing fee structure is consistent with the institutional nature of the Funds and of Nicholas-Applegate’s business, which caters to large institutional investors (e.g. pension plans, endowments, public funds). Having taken these factors into consideration, the Contract Committee believed the Funds’ current multiple share class fee structure establishes a reasonable basis for realizing economies of scale for certain of the Funds’ expenses which may exist when account size increases. At current asset levels, the Contract Committee also noted that the Funds have not realized any economies of scale in respect to other fund expenses.
Investment Results, Fees and Expenses
The Contract Committee considered the investment result of each of the Funds as compared to investment companies with similar investment objectives and policies as determined by an independent organization and with a relevant securities index. In addition to the information received by the Contract Committee for their meeting, Nicholas-Applegate provides detailed performance information for each Fund at each regular meeting of the Board of Trustees during the year. At the meeting of the Contract Committee, the members reviewed information showing absolute and relative performance of each Fund over 1-year, 3-year, and 5-year periods.
The Contract Committee considered the investment advisory fee paid by each Fund. The Contract Committee recognized that it is difficult to make comparisons of investment advisory fees paid by others because there are variations in the services that are included in the fees paid by those funds.
The Contract Committee also considered the fees that Nicholas-Applegate charges other clients with similar investment objectives/policies. These included management fees and performance fees charged. Nicholas-Applegate acts as sub-adviser to several open-end and closed-end registered investment companies, non-US investment companies, and investment adviser for separately managed institutional investor accounts. For funds where Nicholas-Applegate acts as sub-adviser, the investment advisory fee for those funds is lower. For separately managed accounts where Nicholas-Applegate acts as investment adviser, the investment advisory fee is comparable and in some cases higher. Representatives of Nicholas-Applegate reviewed with the Contract Committee the significant differences in the scope of services provided and financial commitments and risks involved in managing the various types of accounts.
The Contract Committee also considered the total expense ratio for each Fund in comparison to its peer group.
U.S. Mini Cap Growth Fund. The Contract Committee reviewed the information showing performance of the Fund compared to its peer group and the Russell 2000 Growth Index. The comparative information showed the Fund had outperformed the Index for the 5-year period, and outperformed its peer group and Index for the 3-year period. Based on their review, the Contract Committee concluded the Fund’s relative performance over time had been satisfactory.
The Contract Committee also reviewed comparable fees and expenses. The peer group consisted of funds with net assets, on average, of $203 million compared with $76 million for the Fund. The information showed that the Fund’s investment advisory fee was identical to its peer group, its gross expenses were approximately the same, and its net expenses were slightly higher (5 basis points) than its peer group median. Nicholas-Applegate explained that gross expenses were comparable to the peer group but other advisers had waived and/or reimbursed more than Nicholas-Applegate. Nicholas-Applegate advised the Board that due to the loss of revenues, it was not in a position to offer waivers similar to the larger fund complexes. Based on this, the Board concluded the waiver was appropriate. The Contract Committee concluded that the Fund’s expense ratio was acceptable in light of the quality of services offered and other factors considered.
U.S. Emerging Growth Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the Russell 2000 Growth Index. The comparative information showed the Fund had underperformed its peer group and Index for the 1-year, 3-year, and 5-year periods. The Contract Committee considered Nicholas-Applegate’s change in the portfolio management team’s approach to portfolio analysis whereby the portfolio management team is working with the risk management and quantative analytics team in the development of a quantitative screening tool to improve research and risk measurement abilities. Based on their review, the Contract Committee concluded that, although the Fund’s relative performance over time had compared unfavorably to its peers and Index, Nicholas-Applegate was addressing the Trustees concerns about investment performance and retained confidence in Nicholas-Applegate’s overall capabilities to manage the Fund.
The Contract Committee also reviewed comparable fees and expenses. The $43 million of assets for the Fund was equal to the average of its peer group. The information showed that the Fund’s investment advisory fee was less than the peer group median, gross expense ratio lower than the peer group average, and net expense ratio higher than the peer group median although it was not the highest one in the group. Nicholas-Applegate explained the gross expense ratio was very favorable to that of the peer group but the other advisers had waiver and/or reimbursed more than Nicholas-Applegate. The Contract Committee concluded that the Fund’s expense ratio was acceptable in light of quality of services and other factors considered.
U.S. Small Cap Value Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the Russell 2000 Value Index. The comparative information showed the Fund had substantially outperformed both the peer group and the Index for the 1-year and 3-year periods. Based on their review, the Contract Committee concluded the Fund’s relative performance over time had been satisfactory.
The Contract Committee also reviewed comparable fees and expenses. The peer group consisted of funds with net assets, on average, of $130 million compared with $44 million for the Fund. The information showed that the Fund’s investment advisory fee about the same as its peer group median and its net and gross expense ratio was higher than its peer group median but it was not the highest in the group. Nicholas-Applegate explained that the Fund’s higher than average expense ratio was a product of its lower than average net asset base and that it expected the expense ratio to decrease as assets increased. The Contract Committee expressed the need to focus on distribution efforts and Nicholas-Applegate expressed optimism concerning its efforts to distribute shares of the Fund. The Contract Committee concluded that the expense ratio was acceptable in light of the quality of services offered and other factors considered. It also concluded that the expense ratio would decrease as assets in the Fund increased.
U.S. Large Cap Value Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the Russell 1000 Value Index. The comparative information showed the Fund was best in its peer group for 5-year performance and slightly below the peer group average for 1-year and 3-year periods. Based on their review, the Contract Committee concluded the Fund’s relative investment performance over time had been satisfactory. The Trustees voiced the expectation would take appropriate steps to enhance future performance over its 1 and 3-year performance.
The Contract Committee also reviewed comparable fees and expenses. The peer group consisted of funds with net assets, on average, of $36 million compared with $24 million for the Fund. The information showed that the Fund’s investment advisory fee was lower than its peer group and its net expense ratio was slightly lower (3 basis points) to its peer group median.
U.S. Systematic Large Cap Growth Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the Russell 1000 Growth Index. The comparative information showed the Fund had underperformed its peer group and Index for the 1-year, 3-year, and 5-year periods. In early 2004, Nicholas-Applegate changed portfolio manager teams from one focusing on a traditional approach to one that followed a quantitative approach that relied on analytical investment models prepared by the team. Since that time, the Fund had outperformed the Index. The Contract Committee considered Nicholas-Applegate’s change in the Fund’s portfolio management team and the relative performance of the Fund since the change. Based on their review, the Contract Committee concluded that, although the Fund’s relative performance over time had compared unfavorably to its peers and Index, Nicholas-Applegate was addressing the Trustees concerns about investment performance and retained confidence in Nicholas-Applegate’s overall capabilities to manage the Fund.
The Contract Committee also reviewed comparable fees and expenses. The peer group consisted of funds with net assets, on average, of $21 million compared with $24 million for the Fund. The information showed that the Fund’s investment advisory fee was below the peer group median, gross expenses were below the peer group median, and net expenses were higher (9 basis points) than the peer group median. Nicholas-Applegate explained that the Fund’s gross expense ratio was favorable to that of the peer group but other advisers had waived and/or reimbursed more than Nicholas-Applegate. The Contract Committee concluded that the Fund’s expense ratio was acceptable in light of the quality of services and other factors considered.
U.S. Systematic SMID Growth Fund. The Fund had been in operation less than one-year at the date of the Contract Committee meeting so there was no performance information. However, the Contract Committee reviewed comparative expense ratio information. The comparative information showed that the Fund had a lower investment advisory fee than its peers but had higher overall net expenses. The Contract Committee considered the Fund’s average assets of approximately $3.6 million compared to the peer group average of approximately $47.3 million. Based on their review, the Contract Committee concluded that, although the Fund’s net expense ratio exceeded the peer group average, expenses would decrease to more favorable levels as assets increased.
U.S. Convertible Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the Merrill Lynch All Convertible All Qualities Index. The comparative information showed that the Fund had outperformed its peer group and Index for the 1-year period. Based on their review, the Contract Committee concluded that, although the Fund’s relative performance for the 3-year and 5-year periods had compared not as favorably as the 1-year, Nicholas-Applegate was improving Fund investment performance and retained confidence in Nicholas-Applegate’s overall capabilities to manage the Fund.
The Contract Committee also reviewed comparable fees and expenses. The peer group consisted of funds with net assets, on average, of $385 million compared with $47 million for the Fund. The information showed that the Fund’s investment advisory fee was in line with the peer group’s median but had higher overall total expenses. The Contract Committee considered the Fund’s smaller average asset size compared to a much larger peer group. Based on their review, the Contract Committee concluded that, although the Fund’s net expense ratio exceeded that of the peer group, the Contract Committee concluded the expense ratio was reasonable in light of the size of the Fund, quality of services, and other factors considered.
Global Select Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the MSCI EAFE Index. The comparative information showed the Fund had outperformed both the Index and its peers for the 3-year, and 5-year periods, and its peers for the 1-year period. Based on this review, the Contract Committee concluded the Fund’s relative investment performance over time had been satisfactory.
The Contract Committee also reviewed comparable fees and expenses. The peer group consisted of funds with net assets, on average, of $119 million compared to $100 million for the Fund. The information showed that the Fund’s investment advisory fee and net expense ratio was better than its peer group median and average.
International Growth Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the MSCI EAFE Index. The comparative information showed the Fund had underperformed the Index and its peer group for the 1-year, 3-year, and 5-year periods. The Contract Committee considered the change in Lead Portfolio Managers, the addition of two new analysts, and enhancement of its investment process. Based on their review, the Contract Committee concluded that, although the Fund’s relative investment performance over time had compared unfavorably to its peers and Index, Nicholas-Applegate was addressing the Trustee’s concerns about investment performance and retained confidence in Nicholas-Applegate’s overall capabilities to manage the Fund.
The Contract Committee also reviewed comparable fees and expenses. The peer group consisted of funds with net assets, on average, of $175 million compared to $153 million for the Fund. The information showed that the Fund’s investment advisory fee was lower than its peer group and its net expense ratio was higher than the peer group average although it was not the highest in the group. Nicholas-Applegate explained that the Fund’s gross expense ratio was comparable to the peer group average but other advisers had elected to waive and/or reimburse more than Nicholas-Applegate. The Contract Committee concluded that that the Fund’s expense ratio was acceptable in light of the quality of services offered and other factors considered. In view of Nicholas-Applegate’s declining revenues from the Funds’ operations, the Trustees concluded that Nicholas-Applegate’s waiver was appropriate.
International Growth Opportunities Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the MSCI EAFE Index. The comparative information showed that the Fund had outperformed the Index for the 1-year, 3-year, and 5-year periods, and its peer group for the 1-year period. Based on this review, the Contract Committee concluded the Fund’s relative investment performance over time had been satisfactory.
The Contract Committee also reviewed comparable fees and expenses. The peer group consisted of funds with net assets, on average, of $92 million compared to $100 million for the Fund. The information showed that the Fund’s investment advisory fee was lower than the median investment advisory fee in its peer group median and its net expense ratio was about equal to the peer group average and slightly higher than the median (6 basis points).
Emerging Markets Opportunities Fund. The Fund has been in operation less than 1-year and therefore no performance comparisons were available. However, the Contract Committee reviewed information showing the expense ratios of the Fund compared with its peers. The comparative information showed the Fund had a lower investment advisory fee and a lower net expense ratio than its peers. Based on their review, the Contract Committee concluded to approve the Investment Advisory Agreement.
U.S. High Yield Bond Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the Merrill Lynch High Yield Master II Index. The comparative information showed that the Fund had outperformed its peer group for the 5-year period. The Contract Committee considered the Fund’s relative performance for the 1-year and 3-year periods had been adversely affected by Nicholas-Applegate’s decision to avoid the risk of investing in distressed and lower rated high yield bonds (CCC or below). Based on their review, the Contract Committee concurred with Nicholas-Applegate strategic decision and retained confidence in Nicholas-Applegate’s overall capabilities to manage the Fund.
The Contract Committee also reviewed comparable fees and expenses. The peer group consisted of funds with net assets, on average, of $171 million compared to $174 million for the Fund. The information showed that the Fund’s investment advisory fee, gross expenses, and net expenses were below the peer group’s average.
PROXY VOTING (unaudited)
The Investment Adviser votes proxies on behalf of the Funds pursuant to written policies and procedures adopted by the Funds. To obtain free information on how your Funds’ securities were voted, please call the Funds at 1-800-551-8043 or visit the Funds’ website at www.nacm.com. You may also view how the Fund’s securities were voted by visiting the Securities & Exchange Commission’s website at www.sec.gov.
PROXY VOTING RESULTS (unaudited)
A meeting of the shareholders of the Nicholas-Applegate Institutional Funds (the “Trust”) was held at 600 W. Broadway, San Diego, CA, on February 24, 2005. Following are the voting results of the meeting.
Proposed Plan of Reorganization and Termination for the U.S. Systematic Mid Cap Growth Series of the Trust
RESOLVED that the Plan of Reorganization and Termination for the Fund is approved.
For | Against | Abstain | |||
1,221,397.937 | 15,726.95 | 194.42 |
A meeting of the shareholders of the Nicholas-Applegate Institutional Funds (the “Trust”) was held at 600 W. Broadway, San Diego, CA, on March 24, 2005. Following are the voting results of the meeting.
Proposed Plan of Reorganization and Termination for the Emerging Countries Series of the Trust
RESOLVED that the Plan of Reorganization and Termination for the Fund is approved.
For | Against | Abstain | |||
637,323.099 | 399,795.52 | 0 |
CORPORATE GOVERNANCE (unaudited)
Number of | ||||||||||
Term of | Portfolios in | |||||||||
Position(s) | Office and | Fund Complex | ||||||||
Name, Address (1) | Held with | Length of Time | Principal Occupation(s) | Overseen by | Other Directorships | |||||
and Age | Fund | Served (2) | During Past 5 Years | Trustee | Held by Trustee | |||||
Disinterested Trustees: | ||||||||||
George F. Keane (76) | Chairman & Trustee | Since August 2004 | President Emeritus and founding Chief Executive Officer, The Common Fund (1971-1993); and Endowment Advisors (1987-1999) (organizations that provide investment management programs for colleges and universities). | 12 | Director, Bramwell Funds (since 1994); Director, Longview Oil & Gas (since 2000); Director, Security Capital U.S. Real Estate (since 1997); Director, The Universal Bond Fund (since 1997); Director, Universal Stainless & Alloy Products Inc. (since 1994); Director, United Water Services and affiliated companies (1996-2000); Director, and former Chairman of the Board, Trigen Energy Corporation (1994-2000); Trustee, Nicholas-Applegate Mutual Funds (1994-1999). | |||||
Walter E. Auch (84) | Trustee | Since May 1999 | Retired; prior thereto, Chairman and CEO of Chicago Board of Options Exchange (1979-1986); Senior Executive Vice President PaineWebber, Inc. | 12 | Trustee, LLBS Funds (since 1994 and Brinson Supplementary Trust (since 1997); Director, Thompson Asset Management Corp (1987-1999; Director, Smith Barney Trak Fund (since 1992) and Smith Barney Advisors (since 1992); Director, PIMCO Advisors L.P (since 1994); Director, Banyon Realty Trust (1988-2002), Banyon Mortgage Investment Fund (1989-2002) and Banyon Land Fund II (since 1988); Director, Express America Holdings Corp (1992-1999); Director, Legend Properties, Inc. (1987-1999); Director, Senele Group (since 1988); Director, Fort Dearborn Income Securities, Inc. (1987-1995); Trustee, Nicholas-Applegate Mutual Funds (1994-1999); Director, Geotek Industries, Inc. (1987-1998). | |||||
Darlene DeRemer (49) | Trustee | Since May 1999 | Partner, Grail Partners LLC, and Advisor Merchant Bank (since 2005) Managing Director, Putnam Lovell NBF Private Equity (2004-Feb 2005); Managing Director, NewRiver E-Business Advisory Services Division (2000-2003); Prior to, President and Founder, DeRemer Associates, a strategic and marketing consulting firm for the financial services industry (1987-2003); Vice President and Director, Asset Management Division, State Street Bank and Trust Company, now referred to as State Street Global Advisers, (1982-1987); Vice President, T. Rowe Price & Associates (1979-1982); Member, Boston Club (since 1998); Member, Financial Women’s Association Advisory Board (since 1995); Founder, Mutual Fund Cafe Website. | 12 | Trustee, Bramwell Funds (since 2003), Board of Directors Independent Directors Council (IDC) (since 2004); Founding Member and Director, National Defined Contribution Council (since 1997); Trustee, Boston Alzheimer’s Association (since 1998); Director, King’s Wood Montessori School (since 1995); Editorial Board, National Association of Variable Annuities (since 1997); Director, Nicholas- Applegate Strategic Opportunities, Ltd. (1994-1997); Trustee, Nicholas-Applegate Mutual Funds (1994-1999); Director, Jurika & Voyles Fund Group (1994-2000); Director, Nicholas-Applegate Southeast Asia Fund, Ltd. (since 2004). | |||||
Interested Trustees: | ||||||||||
Horacio A. Valeiras (46) | President & Trustee | Since August 2004 | Managing Director (since 2004) and Chief Investment Officer. Nicholas-Applegate Capital Management, Nicholas-Applegate Securities (since 2002); Managing Director of Morgan Stanley Investment Management, London (1997-2002); Head of International Equity and Asset Allocation, Miller Anderson & Sherred; Director and Chief of Investment Strategies, Credit Suisse First Boston. | 12 | Trustee, The Bishops School (since 2002); Trustee, San Diego Rowing Club (since 2002). | |||||
Officers: | ||||||||||
Charles H. Field, Jr. (49) | Secretary | Since May 2002 | General Counsel, Chief Compliance Officer, Nicholas- Applegate Capital Management, LLC (since 2004); Deputy General Counsel (1996-2004). | 12 | NA | |||||
Thomas Muscarella (49) | Treasurer | Since May 2005 | Director, Mutual Fund Operations, Nicholas-Applegate Capital Management LLC (since 1998) | 12 | NA |
(1) Unless otherwise noted, the address of the Trustees and Officers is c/o: Nicholas-Applegate Capital Management, 600 West Broadway, 32nd Floor, San Diego, California 92101.
(2) Each Trustee serves for an indefinite term, until her or his successor is elected.#
TRUSTEES OF NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
George F. Keane, Chairman
Walter E. Auch
Darlene T. DeRemer
Horacio A. Valeiras
OFFICERS
Horacio A. Valeiras, President
Charles H. Field, Jr., Secretary
Thomas Muscarella, Treasurer
INVESTMENT ADVISER
Nicholas-Applegate Capital Management
DISTRIBUTOR
Nicholas-Applegate Securities
CUSTODIAN
Brown Brothers Harriman & Co., Private Bankers
TRANSFER AGENT
UMB Fund Services Group, Inc.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
[Logo NICHOLAS APPLEGATE INSTITUTIONAL FUNDS](Registered_Trademark)
INSTITUTIONAL FUNDS
600 West Broadway
San Diego, California 92101
800 - 551 - 8643
Nicholas-Applegate Securities, Distributor
ANN0305INST
[Logo NICHOLAS APPLEGATE INSTITUTIONAL FUNDS](Registered_Trademark)
Annual Report
Class R Shares
March 31, 2005
Letter to Shareholders
Dear Fellow Shareholder,
Equity markets around the world turned in solid performance between April 1, 2004 and March 31, 2005. While ending the fiscal year in positive territory, the markets lacked a clear direction. Stock prices ebbed and flowed as both positive and negative factors shaped the investment landscape.
In this annual report, we review the performance of the financial markets and your investments during the fiscal year. We also share our outlook for the months ahead.
In the United States, broad equity indexes rose modestly, including the S&P 500 Index, which gained 6.69%. At levels near 20%, year-over-year quarterly earnings growth reported by companies during the period was as consistently strong as it had been in decades. The economy grew at a steady pace, with GDP expanding 4.4% in 2004 — the fastest growth since 1999. However, reports on the health of the economy were mixed, causing investors to question its underlying strength. In addition, volatile oil prices, a pickup in inflation and rising interest rates weighed on market sentiment. The Federal Reserve began the process of normalizing monetary policy by increasing the target funds rate by 0.25% on seven separate occasions. Despite these increases, rates remained low by historical standards.
In developed markets overseas, the MSCI EAFE Index rose an impressive 15.49% in U.S. dollar terms. Returns were more subdued in local currencies, as the dollar fell over 4% against a basket of currencies. From a macroeconomic perspective, growth in many countries was uninspiring: GDP grew by 2.6% in Japan and by 2% in the twelve euro nations in 2004. However, strong corporate earnings helped stock prices advance. Profits were close to a 25-year high as a percentage of GDP in Japan and Europe, driven in large part by companies’ restructuring efforts.
Equities delivered the strongest gains in developing markets, with the MSCI Emerging Markets Index rising 17.02% (in U.S. dollars). Economies in emerging countries worldwide experienced rapid growth, fueled by strong global demand for oil and other commodities. The Commodity Research Bureau (CRB) Index rose 11.3% during the period. In addition, policy reforms and debt restructuring have made many countries — and companies — more capable of sustaining growth.
Against this backdrop, the majority of our funds produced increases and outpaced their benchmarks. For the full year, the U.S. Systematic Large Cap Growth Fund delivered the strongest relative performance. In managing the Fund, we leverage a proprietary stock selection model in conjunction with traditional, fundamental analysis and portfolio construction tools that control unintended risks.
Nicholas-Applegate continues to place strong emphasis on controlling unintended risks in all of our mutual funds. We are constantly engaged in developing and using new techniques that help us analyze the portfolios’ exposures. For example, we recently implemented new risk management software that provides us with a different way of looking at the country and regional allocations in non-U.S. portfolios.
We also continue to enhance our fundamental research process. During the period, we welcomed several highly qualified analysts to our U.S. and international investment teams. In addition, we’ve fine-tuned how the analysts research mid- and large-cap stocks by geographically broadening coverage by sector, where appropriate. For instance, we now have one analyst following the energy sector on a global basis, rather than one covering U.S. energy companies and another covering non-U.S energy companies. We continue to apply regional expertise to domestically focused industries, such as retail.
We believe this combination of sector and regional specialists provides us with the best perspective for identifying companies poised to outperform.
In the new world of Regulation Fair Disclosure (Reg. FD), having a well-resourced, well-organized investment team is more important than ever. Reg. FD, which was passed in October 2000, requires that all material information about a company be disseminated publicly. All investors have simultaneous access to the news, and therefore, a more level playing field on which to analyze companies. Reg. FD has made our jobs as research analysts more challenging because we must now piece together mosaics of information rather than receive material information directly from companies. At the same time, Reg. FD has opened up greater opportunity to firms that are able to meet the challenges of conducting rigorous research. Nicholas-Applegate is one of those firms.
Looking forward, we expect the choppy market conditions that investors experienced in 2004 and early 2005 to continue. Economic activity is robust in many parts of the world, but there are signs of weakness. Inflationary pressures and higher interest rates in the United States have the potential to slow consumer spending and dampen investor sentiment. Economic data for Japan continues to deteriorate, and growth in Continental Europe remains tepid. That said, healthy corporate profits and increased business spending in the United States and many other markets paves the way for continued stock price appreciation.
In this environment, we believe that companies that can deliver strong earnings growth should once again command a premium valuation relative to others. Value stocks continued to outpace growth stocks during the fiscal year, and the valuation difference between growth and value globally is at its lowest level since the early 1990s. We also think this kind of environment is ideal for stock selection, particularly for investing in companies where positive change is leading to increased earnings estimates. We continue to search out those companies in all of our funds.
On behalf of everyone at Nicholas-Applegate, thank you for your participation in the Nicholas-Applegate Institutional Funds. We appreciate your business and look forward to serving your investment needs throughout the coming years.
Best Regards,
![Horacio A. Laleiras Signatire](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/valeiras_sign.jpg)
Horacio A. Valeiras, CFA
President and Chief Investment Officer
March 31, 2005
Table of Contents
Page | ||
The Funds’ Review and Outlook, Performance and Schedule of Investments | ||
U.S. Emerging Growth | 1 | |
U.S. Small Cap Value | 6 | |
U.S. Large Cap Value | 10 | |
U.S. Systematic Large Cap Growth | 14 | |
International Growth | 18 | |
The Funds’: | ||
Shareholder Expense Example | 22 | |
Financial Highlights | 24 | |
Statements of Assets and Liabilities | 26 | |
Statements of Operations | 27 | |
Statements of Changes in Net Assets | 28 | |
Notes to Financial Statements | 31 | |
Report of Independent Registered Public Accounting Firm | 36 | |
Supplementary Information | 37 |
This report is authorized for distribution to shareholders and to others only when preceded or accompanied by a currently effective prospectus for Nicholas-Applegate Institutional Funds Class R Shares. Distributor: Nicholas-Applegate Securities.
U.S. Emerging Growth Fund
Management Team: John C. McCraw, Lead Portfolio Manager; Travis T. Prentice, Portfolio Manager; K. Matthew Axline, Investment Analyst; Michael P. Giggie, Investment Analyst; Montie L. Weisenberger, Investment Analyst
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The U.S. Emerging Growth Fund seeks to maximize long-term capital appreciation through investments primarily in U.S. companies with market capitalizations similar to the Russell 2000 Growth Index at time of purchase.
Market Overview: The U.S. stock market, as measured by the S&P 500 Index, rose 6.69% during the fiscal year ended March 31, 2005. Gains were concentrated in the fourth quarter of 2004 when a short-lived drop in oil prices, a pickup in merger activity and a decisive outcome to the presidential election boosted investor enthusiasm.
While corporate profits remained strong, equities languished during much of the period due to:
· Surging oil prices, which hit a record high of more than $57 a barrel in mid-March
· Tighter monetary policy, as the Federal Reserve began raising interest rates midyear 2004
· Mixed economic indicators, which obscured the solid rate of economic expansion
Within the universe of equities, performance was mixed. Value stocks posted solid gains across market capitalizations, while growth stocks — with the exception of mid caps — struggled to stay in positive territory. Value stocks have had a good run through this stage of the economic cycle due to historically low interest rates and robust demand for basic materials and commodities. At period-end, valuations of small-cap growth stocks were well below historical norms relative to small-cap value.
Performance: The Fund’s Class R shares gained 1.37% during the twelve months ended March 31, 2005 versus a 0.87% increase in the Russell 2000 Growth Index.
Portfolio Specifics: Except for information technology, the Fund’s holdings in every sector of investment generated positive returns. Positions in the energy sector produced the strongest gains.
On a comparative basis, the Fund outperformed the Russell 2000 Growth Index by a modest amount. Stock selection in the health care sector had the largest positive impact on relative results. Within health care, some of the best-performing names were Immucor, a manufacturer of blood-testing systems; Intuitive Surgical, a maker of products used in minimally invasive surgical techniques; and OSI Pharmaceuticals, a biotechnology firm specializing in oncology treatments.
Relative performance was also helped by an overweight in energy stocks and issue selection among energy, industrials and materials companies. Carpenter Technology, a maker of specialty metals, was a top performer in the industrials sector on strong demand from all of its end markets, particularly the aerospace industry.
Stock selection in the information technology sector was the main detractor from relative performance, where holdings in the Internet software and services industry were especially weak. Issue selection and an overweight in consumer discretionary stocks was also unfavorable.
Market Outlook: The outlook for small-cap stocks has moderated to some extent in recent months. While earnings growth expectations for smaller companies remain strong, the prospect of the Fed raising interest rates more aggressively to curb inflation is weighing on market sentiment.
A focus on individual stock selection remains critical in this environment. We are confident that our bottom-up investment approach will continue to lead us to small, rapidly growing companies with strong fundamentals.
Comparison of Change in Value of a $250,000 Investment in U.S. Emerging Growth Fund Class R Shares with the Russell 2000 Growth Index.
Annualized Total Returns
As of 3/31/05
1 Year | 5 Years | 10 Years | ||
1.37% | - 12.65% | 7.24% |
![U.S. Emerging Growth Cl. R](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/emerg_growthr.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund compared with the Russell 2000 Growth Index for the periods indicated. The Fund’s Class R shares were first available on May 21, 1999. Performance prior to the introduction of Class R shares reflects the historical performance of the Fund’s Class I Shares. Class I shares have no sales charge or distribution fee, but have a shareholder service fee of up to .25% of their average daily net assets. Class R shares have distribution and shareholder services fees of up to .25% of their average daily net assets. Historical performance returns of the Class I shares do not reflect the shareholder servicing fee prior to the adoption of the shareholder services plan in 2003 and distribution fee applicable to class R shares which would have made returns slightly lower. The Fund’s Class I shares calculate their performance based upon the historical performance of a corresponding series of Nicholas-Applegate Mutual Funds (renamed ING Mutual Funds), adjusted to reflect all fees and expenses applicable to the Fund’s Class I shares. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment. In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
The Russell 2000 Growth Index is an unmanaged index comprised of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index. The unmanaged Index differs from the Fund in composition, does not pay management fees or expenses and includes reinvested dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
U.S. Emerging Growth Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 96.3% | |||||
Advanced Materials/Products — 0.6% | |||||
Hexcel Corp.* ## | 6,400 | $99,264 | |||
Advertising Services — 0.6% | |||||
Ventiv Health, Inc.* | 4,000 | 92,000 | |||
Aerospace/Defense — 1.8% | |||||
Armor Holdings, Inc.* | 1,700 | 63,053 | |||
Esterline Technologies Corp.* | 3,100 | 107,105 | |||
Titan Corp.* | 6,200 | 112,592 | |||
282,750 | |||||
Aerospace/Defense-Equipment — 0.7% | |||||
BE Aerospace, Inc.* | 9,700 | 116,400 | |||
Apparel Manufacturers — 2.0% | |||||
Carter’s, Inc.* ## | 3,400 | 135,150 | |||
Oshkosh B’Gosh, Inc. Cl. A | 3,600 | 109,800 | |||
Quiksilver, Inc.* | 2,500 | 72,575 | |||
317,525 | |||||
Applications Software — 0.7% | |||||
Serena Software, Inc.* ## | 4,800 | 114,048 | |||
Auto/Truck Parts & Equipment-Original — 0.2% | |||||
Tenneco Automotive, Inc.* ## | 2,900 | 36,134 | |||
Auto-Medium & Heavy Duty Trucks — 0.6% | |||||
A. S. V., Inc.* ## | 2,500 | 99,112 | |||
Building & Construction Products-Miscellaneous — 1.4% | |||||
NCI Building Systems, Inc.* | 3,700 | 142,820 | |||
Simpson Manufacturing Co., Inc. | 2,300 | 71,070 | |||
213,890 | |||||
Building Products-Cement/Aggregate — 0.3% | |||||
Texas Industries, Inc. | 1,000 | 53,750 | |||
Building Products-Light Fixtures — 0.8% | |||||
Genlyte Group, Inc.* | 1,400 | 125,958 | |||
Building-Mobil Home/Manufactured Housing — 0.4% | |||||
Champion Enterprises, Inc.* | 7,300 | 68,620 | |||
Building-Residential/Commercial — 0.5% | |||||
Levitt Corp. Cl. A | 3,100 | 79,484 | |||
Cellular Telecommunications — 0.4% | |||||
Alamosa Holdings, Inc.* ## | 5,300 | 61,851 | |||
Coal — 0.5% | |||||
Foundation Coal Holdings, Inc. | 3,000 | 70,530 | |||
Commercial Banks-Western US — 0.6% | |||||
Silicon Valley Bancshares* | 2,300 | 101,338 | |||
Commercial Services-Finance — 0.7% | |||||
Euronet Worldwide, Inc.* ## | 3,800 | 108,490 | |||
Computer Aided Design — 0.6% | |||||
ANSYS, Inc.* | 2,700 | 92,367 | |||
Computer Services — 0.5% | |||||
Anteon International Corp.* | 2,200 | 85,646 | |||
Computers-Integrated Systems — 0.4% | |||||
Brocade Communications Systems, Inc.* | 9,800 | 58,016 | |||
Computers-Memory Devices — 0.6% | |||||
Komag, Inc.* ## | 4,400 | 98,340 | |||
Consulting Services — 0.9% | |||||
Charles River Associates, Inc.* ## | 1,600 | 78,960 | |||
Navigant Consulting, Inc.* | 2,500 | 68,075 | |||
147,035 | |||||
Consumer Products-Miscellaneous — 1.3% | |||||
Jarden Corp.* | 4,300 | 197,284 | |||
Cosmetics & Toiletries — 0.7% | |||||
Chattem, Inc.* ## | 2,400 | $106,728 | |||
Data Processing/Management — 0.9% | |||||
CSG Systems International, Inc.* | 5,000 | 81,450 | |||
eFunds Corp.* | 2,400 | 53,568 | |||
135,018 | |||||
Diagnostic Equipment — 1.9% | |||||
Cytyc Corp.* | 3,400 | 78,234 | |||
Gen-Probe, Inc.* | 1,800 | 80,208 | |||
Immucor, Inc.* | 4,825 | 145,667 | |||
304,109 | |||||
Diversified Manufacturing Operations — 1.2% | |||||
Esco Technologies, Inc.* | 1,200 | 96,420 | |||
Jacuzzi Brands, Inc.* | 8,700 | 84,912 | |||
181,332 | |||||
Drug Delivery Systems — 0.5% | |||||
Conor Medsystems, Inc.* | 4,800 | 78,192 | |||
E-Commerce/Products — 0.4% | |||||
Stamps.Com, Inc.* | 4,100 | 68,060 | |||
Electronic Components-Miscellaneous — 0.8% | |||||
Nam Tai Electronics, Inc.## | 5,000 | 133,000 | |||
Electronic Components-Semiconductors — 1.1% | |||||
Microsemi Corp.* | 5,100 | 83,079 | |||
MIPS Technologies, Inc. Cl. A* | 8,400 | 96,600 | |||
179,679 | |||||
Electronic Connectors — 0.6% | |||||
Thomas & Betts Corp.* ## | 3,000 | 96,900 | |||
Electronic Design Automation — 0.4% | |||||
Magma Design Automation* ## | 5,400 | 64,098 | |||
Electronic Measure Instruments — 1.9% | |||||
Itron, Inc.* ## | 5,500 | 163,020 | |||
Measurement Specialties, Inc.* ## | 2,500 | 57,500 | |||
Trimble Navigation, Ltd.* | 2,100 | 71,001 | |||
291,521 | |||||
Electronic Security Devices — 0.6% | |||||
American Science & Engineering, Inc.* | 2,100 | 93,891 | |||
E-Marketing/Information — 0.5% | |||||
Digital River, Inc.* | 2,600 | 81,016 | |||
Energy-Alternate Sources — 1.1% | |||||
Headwaters, Inc.* ## | 2,400 | 78,768 | |||
Syntroleum Corp.* | 8,200 | 100,368 | |||
179,136 | |||||
Engineering/R & D Services — 0.6% | |||||
URS Corp.* | 3,400 | 97,750 | |||
Enterprise Software/Services — 0.5% | |||||
Mantech International Corp. Cl. A* | 3,300 | 76,131 | |||
Entertainment Software — 0.5% | |||||
The 9, Ltd. — ADR* | 4,600 | 78,982 | |||
Finance-Credit Card — 0.5% | |||||
Metris Companies, Inc.* | 7,400 | 85,766 | |||
Finance-Investment Bankers/Brokers — 0.8% | |||||
GFI Group, Inc.* | 2,000 | 53,660 | |||
Investment Technology Group, Inc.* | 4,300 | 75,250 | |||
128,910 | |||||
Food-Wholesale/Distribution — 2.0% | |||||
Performance Food Group Co.* | 5,000 | 138,400 | |||
United Natural Foods, Inc.* | 6,300 | 180,369 | |||
318,769 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
Hotels & Motels — 0.7% | |||||
Orient Express Hotels, Ltd. Cl. A | 4,000 | $104,400 | |||
Human Resources — 3.3% | |||||
Heidrick & Struggles International, Inc.* | 4,300 | 158,111 | |||
Hudson Highland Group, Inc.* | 8,000 | 136,720 | |||
Korn/Ferry International* | 6,100 | 116,083 | |||
Labor Ready, Inc.* | 5,800 | 108,170 | |||
519,084 | |||||
Internet Content-Info/News — 0.6% | |||||
Cnet Networks, Inc.* ## | 10,000 | 94,400 | |||
Internet Infrastructure Software — 1.2% | |||||
Openwave Systems, Inc.* ## | 6,600 | 80,454 | |||
RADWARE, Ltd.* | 4,600 | 107,962 | |||
188,416 | |||||
Lasers-Systems/Components — 1.1% | |||||
Cymer, Inc.* | 3,300 | 88,341 | |||
Electro Scientific Industries, Inc.* | 4,300 | 83,377 | |||
171,718 | |||||
Machinery-Thermal Process — 0.5% | |||||
Global Power Equipment Group, Inc.* | 8,500 | 81,430 | |||
Machinery-Construction & Mining — 0.9% | |||||
Bucyrus International, Inc. Cl. A | 1,800 | 70,308 | |||
JLG Industries, Inc. | 3,300 | 71,115 | |||
141,423 | |||||
Machinery-General Industry — 1.6% | |||||
Gardner Denver, Inc.* | 1,800 | 71,118 | |||
Manitowoc Co., Inc. | 2,000 | 80,780 | |||
Wabtec Corp. | 4,800 | 98,352 | |||
250,250 | |||||
Medical Information Systems — 1.6% | |||||
Allscripts Healthcare Solutions, Inc.* ## | 10,200 | 145,860 | |||
Quality Systems, Inc. | 2,600 | 110,084 | |||
255,944 | |||||
Medical Instruments — 1.7% | |||||
Angiodynamics, Inc.* | 3,500 | 64,050 | |||
Intuitive Surgical, Inc.* | 1,300 | 59,111 | |||
Symmetry Medical, Inc.* | 3,500 | 66,570 | |||
Ventana Medical Systems, Inc.* ## | 1,900 | 71,174 | |||
260,905 | |||||
Medical Laser Systems — 1.5% | |||||
Intralase Corp.* ## | 4,700 | 78,678 | |||
Laserscope* ## | 4,700 | 149,178 | |||
227,856 | |||||
Medical Products — 0.6% | |||||
West Pharmaceutical Services | 3,700 | 88,430 | |||
Medical-Biomedical/Genetics — 1.9% | |||||
Keryx Biopharmaceuticals, Inc.* ## | 8,800 | 117,568 | |||
Northfield Laboratories, Inc.* ## | 4,800 | 54,000 | |||
Serologicals Corp.* ## | 5,500 | 134,420 | |||
305,988 | |||||
Medical-Drugs — 1.0% | |||||
Prestige Brand Holdings, Inc.* | 6,500 | 114,725 | |||
Vaxgen, Inc.* ## | 2,800 | 34,944 | |||
149,669 | |||||
Medical-Outpatient/Home Medical Care — 1.3% | |||||
Amedisys, Inc.* | 3,200 | 96,800 | |||
Option Care, Inc. | 4,700 | 96,773 | |||
193,573 | |||||
Motion Pictures & Services — 0.7% | |||||
Lions Gate Entertainment Corp.* | 9,500 | $104,975 | |||
Multilevel Direct Selling — 0.5% | |||||
Nu Skin Enterprises, Inc. Cl. A | 3,300 | 74,283 | |||
Networking Products — 1.1% | |||||
Aeroflex, Inc.* | 8,700 | 81,171 | |||
Ixia* | 5,200 | 92,508 | |||
173,679 | |||||
Non-Hazardous Waste Disposal — 0.4% | |||||
Waste Connections, Inc.* | 2,000 | 69,500 | |||
Oil & Gas Drilling — 1.8% | |||||
Grey Wolf, Inc.* ## | 15,300 | 100,674 | |||
Pioneer Drilling Co.* | 6,600 | 90,882 | |||
Todco Cl. A* | 3,600 | 93,024 | |||
284,580 | |||||
Oil Companies-Exploration & Production — 2.4% | |||||
Cheniere Energy, Inc.* | 700 | 45,157 | |||
Range Resources Corp. | 3,900 | 91,104 | |||
Swift Energy Co.* ## | 3,200 | 91,008 | |||
Toreador Resources Corp.* | 3,500 | 63,525 | |||
Unit Corp.* | 1,800 | 81,306 | |||
372,100 | |||||
Oil-Field Services — 3.5% | |||||
Core Laboratories NV* | 4,000 | 102,680 | |||
Cal Dive International, Inc.* | 1,300 | 58,890 | |||
Global Industries, Ltd.* | 9,200 | 86,480 | |||
Oceaneering International, Inc.* | 2,400 | 90,000 | |||
Superior Energy Services, Inc.* | 6,000 | 103,200 | |||
Tetra Technologies, Inc.* | 3,800 | 108,072 | |||
549,322 | |||||
Pharmacy Services — 0.4% | |||||
Healthextras, Inc.* | 3,800 | 63,270 | |||
Physical Practice Management — 1.6% | |||||
American Healthways, Inc.* ## | 4,200 | 138,684 | |||
Matria Healthcare, Inc.* ## | 3,700 | 113,627 | |||
252,311 | |||||
Physical Therapy/Rehabilitation Centers — 0.8% | |||||
Psychiatric Solutions, Inc.* | 2,800 | 128,800 | |||
Property/Casualty Insurance — 0.6% | |||||
Ohio Casualty Corp.* | 4,200 | 96,516 | |||
Real Estate Management/Services — 2.2% | |||||
Jones Lang LaSalle, Inc.* | 3,400 | 158,610 | |||
Tarragon Corp.* ## | 3,300 | 66,627 | |||
Trammell Crow Co.* | 5,700 | 117,249 | |||
342,486 | |||||
Real Estate Operation/Development — 0.3% | |||||
Corrections Corp. of America* | 1,200 | 46,320 | |||
Research & Development — 0.9% | |||||
SFBC International, Inc.* | 3,800 | 133,912 | |||
Resorts/Theme Parks — 1.3% | |||||
Great Wolf Resorts, Inc.* | 4,800 | 119,760 | |||
Vail Resorts, Inc.* ## | 3,300 | 83,325 | |||
203,085 | |||||
Respiratory Products — 0.7% | |||||
Respironics, Inc.* | 2,000 | 116,540 | |||
Retail-Apparel/Shoe — 1.6% | |||||
Children’s Place Retail Stores, Inc.* | 3,200 | 152,800 | |||
Jos A Bank Clothiers, Inc.* ## | 3,225 | 94,492 | |||
247,292 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
Retail-Leisure Products — 0.6% | |||||
MarineMax, Inc.* | 3,000 | $93,540 | |||
Retail-Pawn Shops — 0.5% | |||||
Cash America International, Inc. | 3,900 | 85,527 | |||
Retail-Restaurants — 1.8% | |||||
Buffalo Wild Wings, Inc.* ## | 3,300 | 124,839 | |||
CKE Restaurants, Inc.* ## | 5,500 | 87,175 | |||
McCormick & Schmick’s Seafood | |||||
Restaurants, Inc.* | 4,100 | 68,552 | |||
280,566 | |||||
Seismic Data Collection — 0.6% | |||||
Veritas DGC, Inc.* | 3,300 | 98,868 | |||
Semiconductor Components-Integrated Circuits — 0.8% | |||||
Sigmatel, Inc.* | 1,500 | 56,145 | |||
Standard Microsystems Corp.* | 4,000 | 69,440 | |||
125,585 | |||||
Semiconductor Equipment — 4.5% | |||||
Brooks Automation, Inc.* | 6,900 | 104,742 | |||
Credence Systems Corp.* ## | 15,200 | 120,232 | |||
Entegris, Inc.* | 11,300 | 111,757 | |||
Photronics, Inc.* | 4,900 | 88,690 | |||
Rudolph Technologies, Inc.* ## | 4,800 | 72,288 | |||
Tessera Technologies, Inc.* ## | 2,000 | 86,460 | |||
Varian Semiconductor Equipment | |||||
Associates, Inc.* | 3,200 | 121,632 | |||
705,801 | |||||
Steel Pipe &Tube — 1.5% | |||||
Maverick Tube Corp.* | 2,500 | 81,275 | |||
NS Group, Inc.* | 4,700 | 147,627 | |||
228,902 | |||||
Steel-Producers — 0.9% | |||||
AK Steel Holding Corp.* | 6,400 | 70,784 | |||
Carpenter Technology Corp. | 1,300 | 77,233 | |||
148,017 | |||||
Superconductor Products & Systems — 1.0% | |||||
Intermagnetics General Corp.* | 6,150 | 149,691 | |||
Telecommunications Equipment Fiber Optics — 0.6% | |||||
Harmonic, Inc.* ## | 9,900 | 94,644 | |||
Telecommunications Services — 0.6% | |||||
Premiere Global Services, Inc.* | 8,200 | 92,824 | |||
Therapeutics — 2.4% | |||||
Bone Care International, Inc.* | 4,400 | 114,136 | |||
Eyetech Pharmaceuticals, Inc.* | 2,700 | 74,250 | |||
Nabi Biopharmaceuticals* | 8,600 | 107,328 | |||
NitroMed, Inc.* ## | 2,900 | 50,199 | |||
United Therapeutics Corp.* | 700 | 31,987 | |||
377,900 | |||||
Transactional Software — 0.4% | |||||
Open Solutions, Inc.* ## | 3,200 | $63,456 | |||
Transport-Equipment & Leasing — 0.8% | |||||
Greenbrier Cos, Inc. | 3,700 | 129,833 | |||
Transport-Marine — 1.2% | |||||
Arlington Tankers, Ltd. | 3,300 | 77,550 | |||
Diana Shipping, Inc.* | 7,000 | 115,780 | |||
193,330 | |||||
Transport-Services — 1.0% | |||||
Hub Group, Inc. Cl. A* | 2,400 | 150,408 | |||
Transport-Truck — 0.5% | |||||
Arkansas Best Corp. | 2,000 | 75,560 | |||
Vitamins & Nutrition Products — 0.6% | |||||
Usana Health Sciences, Inc. | 2,000 | 94,600 | |||
Wire & Cable Products — 0.6% | |||||
General Cable Corp.* | 7,200 | 86,904 | |||
Wireless Equipment — 0.5% | |||||
RF Micro Devices, Inc.* | 14,900 | 77,778 | |||
TOTAL COMMON STOCK | |||||
(Cost: $12,794,151) | 15,145,011 | ||||
Principal | |||||
Amount | |||||
SHORT TERM INVESTMENTS — 17.0% | |||||
Money Market Funds — 14.9% | |||||
Allianz Dresdner Daily Asset Fund** ^ | $2,346,125 | 2,346,125 | |||
Time Deposit — 2.1% | |||||
Brown Brothers Harriman & Co. | |||||
2.290%, 04/01/05 | 324,881 | 324,881 | |||
TOTAL SHORT TERM INVESTMENTS | |||||
(Cost: $2,671,006) | 2,671,006 | ||||
TOTAL INVESTMENTS — 113.3% | |||||
(Cost: $15,465,157) | 17,816,017 | ||||
LIABILITIES IN EXCESS OF | |||||
OTHER ASSETS — (13.3%) | (2,092,355) | ||||
NET ASSETS — 100.0% | $15,723,662 |
* Non-income producing securities.
** All of the security is purchased with cash collateral proceeds from securities loans.
^ Affiliated institutional money market fund.
## All or a portion of the Fund’s holdings in this security was on loan as of 03/31/05.
ADR — American Depository Receipt
Schedule of Investments by Industry as of March 31, 2005
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 0.9% | ||
Communications | 6.5 | ||
Consumer, Cyclical | 11.4 | ||
Consumer, Non-cyclical | 26.5 | ||
Energy | 9.9 | ||
Financial | 5.1 | ||
Industrial | 22.4% | ||
Technology | 13.6 | ||
Short Term Investments | 17.0 | ||
Liabilities in excess of other assets | (13.3) | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
U.S. Small Cap Value Fund
Management Team: Mark W. Stuckelman, Lead Portfolio Manager; Stephen Sexauer, Portfolio Manager; Charles Hoeveler, Investment Analyst; John Mazur, Investment Analyst; Nelson W. Shing, Investment Analyst; Aerus Tran, Investment Analyst; Mark P. Roemer, Portfolio Specialist
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The U.S. Small Cap Value Fund seeks to maximize long-term capital appreciation through investments primarily in smaller U.S. companies with market capitalizations corresponding to the Russell 2000 Value Index that, in the opinion of the Investment Adviser, are undervalued in the marketplace.
Market Overview: From April 1, 2004 through March 31, 2005, U.S. equities posted gains across most style and capitalization segments. Large-cap stocks modestly outpaced small caps, while value outperformed growth by a wide margin.
During the first six months of the period, the stock market struggled to advance as investors confronted rising oil prices, three interest-rate hikes from the Federal Reserve and a potential slowdown in the booming Chinese economy. Near the end of 2004, however, equity prices climbed sharply higher, buoyed by a decisive outcome to the presidential election, a drop in oil prices and strengthening in the U.S. economy. Stocks gave back some of their prior months’ gains in early 2005, as rising interest rates, record-high oil prices and disappointing job growth clouded the outlook for corporate profits.
Among small-cap value stocks, returns in most sectors were positive. Energy companies were the best performers, driven by rising oil and natural gas prices and strong refining margins. Industrials and materials also did notably well due to strong demand from China and improvement in the U.S. economy. In contrast, prices of information technology stocks declined amid lackluster growth in IT spending.
Performance: From inception on December 2, 2004 through March 31, 2005, the Fund’s Class R shares lost 2.43%, outperforming the Russell 2000 Value Index, which declined 7.75%.
Portfolio Specifics: Holdings in most sectors of investment added value relative to the index, led by financials, information technology and industrials. Solid performance in these and other groups offset pockets of relative weakness, such as an underweight in energy companies.
In financials, positive stock selection was the primary driver of outperformance. One of the Fund’s best-performing positions was Navigators Group, a property and casualty insurer poised to deliver strong premium growth through 2005 and 2006. An underweight in financials was also favorable given these stocks lagged the broad small-cap value market amid rising interest rates.
In the information technology and industrials sectors, stock selection positively impacted results versus the index. Top-performing holdings included M-Systems, a maker of flash memory that benefited from robust demand for its products, and Joy Global, a manufacturer of coal and copper mining equipment that benefited from strong copper and coal prices. An underweight in information technology and an overweight in industrials contributed to strong relative performance in these sectors.
Market Outlook: The solid pace of earnings growth and economic expansion provides a favorable backdrop for continued stock price appreciation. That said, stubbornly high oil prices and concerns that the Fed will raise rates more aggressively to stem inflation may create a headwind for equities over the remainder of 2005.
Regardless of how events unfold, we remain confident that our diversified approach to small-cap value investing will produce excess return in any market environment.
Effective as of February 7, 2005 the Fund is closed to new investors. The Fund will continue to accept additional investments from existing shareholders.
Schedule of Investments as of March 31, 2005
U.S. Small Cap Value Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 91.2% | |||||
Aerospace/Defense-Equipment — 1.4% | |||||
AAR Corp.* | 106,200 | $1,444,320 | |||
Apparel Manufacturers — 0.7% | |||||
Kellwood Co. | 26,500 | 762,935 | |||
Broadcast Services/Programming — 1.1% | |||||
UnitedGlobalCom, Inc. Cl. A* | 121,832 | 1,152,531 | |||
Building & Construction-Miscellaneous — 1.1% | |||||
Dycom Industries, Inc.* | 48,800 | 1,121,912 | |||
Building Products-Cement/Aggregate — 1.7% | |||||
Florida Rock Industries, Inc. | 16,700 | 982,294 | |||
Texas Industries, Inc. | 15,600 | 838,500 | |||
1,820,794 | |||||
Chemicals-Diversified — 1.0% | |||||
Lyondell Chemical Co. | 39,330 | 1,098,094 | |||
Chemicals-Plastics — 0.9% | |||||
Spartech Corp. | 47,600 | 944,860 | |||
Chemicals-Specialty — 1.1% | |||||
OM Group, Inc.* | 36,100 | 1,098,162 | |||
Coal — 0.3% | |||||
Foundation Coal Holdings, Inc. | 13,900 | 326,789 | |||
Commercial Banks-Central US — 3.8% | |||||
Amcore Financial, Inc. | 10,200 | 288,150 | |||
Associated Banc Corp. | 37,650 | 1,175,809 | |||
First Financial Bancorp | 46,200 | 843,150 | |||
Gold Banc Corp., Inc. | 79,500 | 1,115,385 | |||
Macatawa Bank Corp. | 16,505 | 554,155 | |||
3,976,649 | |||||
Commercial Banks-Eastern US — 0.9% | |||||
Community Bank Systems, Inc.## | 39,300 | 900,363 | |||
Commercial Banks-Western US — 1.1% | |||||
Greater Bay Bancorp | 46,500 | 1,135,065 | |||
Commercial Services — 1.1% | |||||
Sourcecorp, Inc.* | 55,100 | 1,109,714 | |||
Computer Services — 0.2% | |||||
Manhattan Associates, Inc.* | 8,800 | 179,256 | |||
Computers-Integrated Systems — 1.0% | |||||
MTS Systems Corp. | 20,100 | 583,503 | |||
Radisys Corp.* | 33,300 | 471,528 | |||
1,055,031 | |||||
Diversified Manufacturing Operations — 5.2% | |||||
Actuant Corp. Cl. A* | 18,400 | 826,528 | |||
Ameron International Corp. | 18,300 | 658,800 | |||
Carlisle Cos, Inc. | 14,600 | 1,018,642 | |||
ESCO Technologies, Inc.* | 13,400 | 1,076,690 | |||
The Brink’s Co. | 32,800 | 1,134,880 | |||
Tredegar Corp. | 42,200 | 711,492 | |||
5,427,032 | |||||
Electric-Integrated — 0.7% | |||||
Aquila, Inc.* ## | 187,700 | 718,891 | |||
Electronic Components-Miscellaneous — 1.8% | |||||
Methode Electronics, Inc. Cl. A | 98,600 | 1,194,046 | |||
Rogers Corp.* | 17,100 | 684,000 | |||
1,878,046 | |||||
Finance-Auto Loans — 1.1% | |||||
AmeriCredit Corp.* | 49,000 | 1,148,560 | |||
Finance-Investment Bankers/Brokers — 0.9% | |||||
Knight Trading Group, Inc.* | 96,400 | 929,296 | |||
Financial Guarantee Insurance — 1.1% | |||||
Assured Guaranty, Ltd. | 63,100 | 1,132,645 | |||
Funeral Services & Related Items — 1.1% | |||||
Stewart Enterprises, Inc. Cl. A* | 187,700 | $1,154,355 | |||
Garden Products — 1.0% | |||||
Toro Co. | 12,200 | 1,079,700 | |||
Gas-Distribution — 2.5% | |||||
Energen Corp. | 20,000 | 1,332,000 | |||
UGI Corp. | 28,650 | 1,301,283 | |||
2,633,283 | |||||
Hotels & Motels — 0.6% | |||||
Jameson Inns, Inc.* | 420,000 | 617,400 | |||
Index Fund-Small Cap — 4.9% | |||||
iShares Russell 2000 Value | |||||
Index Fund* | 28,000 | 5,159,000 | |||
Internet Applications Software — 1.0% | |||||
MatrixOne, Inc.* | 120,100 | 572,877 | |||
S1 Corp. | 68,200 | 473,308 | |||
1,046,185 | |||||
Internet Infrastructure Software — 0.6% | |||||
TIBCO Software, Inc.* | 81,300 | 605,685 | |||
Lasers-Systems/Components — 0.6% | |||||
Rofin-Sinar Technologies, Inc.* | 18,100 | 581,734 | |||
Machinery Tools & Related Products — 1.0% | |||||
Kennametal, Inc. | 22,700 | 1,078,023 | |||
Machinery-Construction & Mining — 1.1% | |||||
Joy Global, Inc. | 34,050 | 1,193,793 | |||
Machinery-General Industry — 2.2% | |||||
Albany International Corp. Cl. A | 33,800 | 1,043,744 | |||
Gardner Denver, Inc.* | 31,700 | 1,252,467 | |||
2,296,211 | |||||
Medical Laser Systems — 1.1% | |||||
Candela Corp.* | 125,900 | 1,123,028 | |||
Medical-Biomedical/Genetics — 1.1% | |||||
Applera Corp. - Celera | |||||
Genomics Group* | 51,000 | 522,750 | |||
Nektar Therapeutics* | 42,400 | 591,056 | |||
1,113,806 | |||||
Medical-Hospitals — 1.2% | |||||
LifePoint Hospitals, Inc.* ## | 28,800 | 1,262,592 | |||
Medical-Nursing Homes — 0.9% | |||||
Kindred Healthcare, Inc.* | 26,800 | 940,680 | |||
Metal-Aluminum — 1.2% | |||||
Century Aluminum Co.* | 40,000 | 1,210,400 | |||
Motion Pictures & Services — 1.0% | |||||
Lions Gate Entertainment Corp.* | 96,800 | 1,069,640 | |||
Oil Companies-Exploration & Production — 0.6% | |||||
Forest Oil Corp.* | 14,500 | 587,250 | |||
Physical Practice Management — 1.0% | |||||
Pediatrix Medical Group, Inc.* | 15,400 | 1,056,286 | |||
Pollution Control — 0.5% | |||||
Duratek, Inc.* | 26,300 | 524,685 | |||
Poultry — 1.1% | |||||
Gold Kist, Inc.* | 72,500 | 1,152,750 | |||
Power Conversion/Supply Equipment — 0.6% | |||||
Artesyn Technologies, Inc.* | 68,000 | 592,280 | |||
Private Corrections — 1.1% | |||||
Corrections Corp. of America* | 30,900 | 1,192,740 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
Property/Casualty Insurance — 3.9% | |||||
Meadowbrook Insurance Group, Inc.* | 197,300 | $1,035,825 | |||
Navigators Group, Inc.* | 31,200 | 1,034,124 | |||
Quanta Capital Holdings, Ltd.* | 136,300 | 1,090,400 | |||
Tower Group, Inc. | 67,100 | 895,114 | |||
4,055,463 | |||||
Publishing-Newspapers — 1.0% | |||||
Lee Enterprises, Inc. | 22,900 | 993,860 | |||
Radio — 1.1% | |||||
Entercom Communications | |||||
Corp. Cl. A* | 15,600 | 554,112 | |||
Radio One, Inc. Cl. D* | 40,300 | 594,425 | |||
1,148,537 | |||||
Recycling — 0.6% | |||||
Aleris International, Inc.* | 26,261 | 655,212 | |||
REITS-Diversified — 4.3% | |||||
Capital Automotive## | 23,600 | 781,632 | |||
Equity Lifestyle Properties, Inc. | 22,900 | 807,225 | |||
People’s Choice Financial | |||||
Corp. 144A#*† | 104,700 | 1,047,000 | |||
Provident Senior Living Trust 144A#*† | 64,600 | 1,043,290 | |||
Washington Real Estate | |||||
Investment Trust | 27,700 | 796,375 | |||
4,475,522 | |||||
REITS-Hotels — 1.9% | |||||
Ashford Hospitality Trust, Inc.## | 85,900 | 876,180 | |||
Diamondrock Hospitality Co. 144A#*† | 101,300 | 1,078,845 | |||
1,955,025 | |||||
REITS-Mortgage — 3.8% | |||||
ECC Capital Corp. | 150,200 | 901,200 | |||
Fieldstone Investment Corp. | 48,500 | 704,220 | |||
Jer Investors Trust, Inc. 144A#*† | 86,100 | 1,291,500 | |||
Newcastle Investment Corp. | 35,500 | 1,050,800 | |||
3,947,720 | |||||
REITS-Shopping Centers — 0.7% | |||||
Equity One, Inc. | 37,900 | 780,361 | |||
Retail-Apparel/Shoe — 2.1% | |||||
Charming Shoppes, Inc.* | 147,200 | 1,196,736 | |||
Claires Stores, Inc. | 42,200 | 972,288 | |||
2,169,024 | |||||
Retail-Regional Department Stores — 0.9% | |||||
Neiman-Marcus Group, Inc. Cl. A | 9,800 | 896,798 | |||
Retail-Restaurants — 0.6% | |||||
Lone Star Steakhouse & Saloon, Inc. | 21,600 | 624,348 | |||
Retail-Sporting Goods — 1.1% | |||||
Hibbett Sporting Goods, Inc.* | 37,600 | 1,129,504 | |||
Rubber-Tires — 1.1% | |||||
Cooper Tire & Rubber Co. | 61,600 | 1,130,976 | |||
Savings & Loans/Thrifts-Central US — 1.1% | |||||
MAF Bancorp, Inc. | 26,600 | 1,104,964 | |||
Savings & Loans/Thrifts-Eastern US — 2.7% | |||||
Brookline Bancorp, Inc. | 74,028 | 1,103,017 | |||
First Niagara Financial Group, Inc. | 90,300 | 1,192,863 | |||
Parkvale Financial Corp. | 17,000 | 472,600 | |||
2,768,480 | |||||
Schools — 0.4% | |||||
Concorde Career Colleges, Inc.* | 25,100 | 426,700 | |||
Semiconductor Equipment — 1.1% | |||||
Mattson Technology, Inc.* | 71,500 | $567,710 | |||
Photronics, Inc.* | 30,700 | 555,670 | |||
1,123,380 | |||||
Telecommunications Equipment — 0.8% | |||||
Comtech Telecommunications Corp* | 16,500 | 859,650 | |||
Telecommunications Services — 0.5% | |||||
Premiere Global Services, Inc. | 50,600 | 572,792 | |||
Theaters — 0.9% | |||||
Carmike Cinemas, Inc. | 26,600 | 991,648 | |||
Therapeutics — 1.2% | |||||
CV Therapeutics, Inc.* | 25,800 | 525,288 | |||
Medarex, Inc.* | 102,500 | 730,825 | |||
1,256,113 | |||||
Transport-Rail — 1.1% | |||||
Genesee & Wyoming, Inc. Cl. A* | 45,950 | 1,190,565 | |||
Transport-Services — 0.3% | |||||
Laidlaw International, Inc.* | 14,800 | 307,840 | |||
Transport-Truck — 0.8% | |||||
Old Dominion Freight Line, Inc.* | 28,200 | 878,430 | |||
Venture Capital — 1.0% | |||||
Kohlberg Kravis | |||||
Roberts Corp. 144A#*† | 98,900 | 1,038,450 | |||
TOTAL COMMON STOCK | |||||
(Cost: $81,827,500) | 95,113,813 | ||||
Principal | |||||
Amount | |||||
SHORT TERM INVESTMENTS — 11.9% | |||||
Money Market Funds — 3.1% | |||||
Allianz Dresdner Daily Asset Fund** ^ | $3,218,000 | 3,218,000 | |||
Time Deposit — 8.8% | |||||
Wells Fargo Bank | |||||
2.290%, 04/01/05 | 9,221,712 | 9,221,712 | |||
TOTAL SHORT TERM INVESTMENTS | |||||
(Cost: $12,439,712) | 12,439,712 | ||||
TOTAL INVESTMENTS — 103.1% | |||||
(Cost: $94,267,212) | 107,553,525 | ||||
LIABILITIES IN EXCESS OF | |||||
OTHER ASSETS — (3.1%) | (3,187,057) | ||||
NET ASSETS — 100.0% | $104,366,468 |
* Non-income producing securities.
** All of the security is purchased with cash collateral proceeds from securities loans.
† Illiquid securities. Total cost of illiquid securities as of March 31, 2005 was $5,335,125. Total market value of illiquid securities owned at March 31, 2005 was $5,499,085 at 5.27% of net assets.
# 144A Security. Fair value private placement security exempt from registration under rule 144A. The total value at March 31, 2005 was 5,499,085 or 5.27% of net assets.
^ Affiliated institutional money market fund.
## All or a portion of the Fund’s holdings in this security was on loan as of 03/31/05.
See Accompanying Notes to Financial Statements.
Schedule of Investments by Industry as of March 31, 2005
U.S. Small Cap Value Fund
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 4.3% | ||
Communications | 6.1 | ||
Consumer, Cyclical | 10.0 | ||
Consumer, Non-cyclical | 11.3 | ||
Energy | 0.9 | ||
Financial | 28.1 | ||
Funds | 4.9 | ||
Industrial | 20.1% | ||
Technology | 2.3 | ||
Utilities | 3.2 | ||
Short Term Investments | 11.9 | ||
Liabilities in excess of other assets | (3.1) | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
U.S. Large Cap Value Fund
Management Team: Stephen Sexauer, Lead Portfolio Manager; Mark W. Stuckelman, Portfolio Manager; Charles Hoeveler, Investment Analyst; John Mazur, Investment Analyst; Nelson W. Shing, Investment Analyst; Aerus Tran, Investment Analyst; Mark P. Roemer, Portfolio Specialist
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The U.S. Large Cap Value Fund seeks long-term capital appreciation through investments in a diversified portfolio comprised predominantly of U.S. companies with larger market capitalizations that, in the opinion of the Investment Adviser, are undervalued relative to other market measures.
Market Overview: Driven by gains in the fourth quarter of 2004, U.S. equity indexes finished the fiscal year ended March 31, 2005 in positive territory. Value stocks outperformed growth stocks by a substantial margin, and large-cap companies outpaced small caps.
Both positive and negative themes influenced the investment environment, including:
· Soaring oil prices, which climbed nearly 55% and touched an all-time high of over $57 a barrel in mid-March 2005
· Rising interest rates, as the Federal Reserve increased the target fed funds rate by 1.75% on seven separate occasions beginning midyear 2004
· Healthy economic expansion, with GDP advancing by 4.4% in 2004 and expectations for continued steady growth in 2005
A consistent bright spot during the period was strength in company fundamentals. Many corporations have used record-high cash flows to reduce debt, purchase their own shares and increase dividends.
Performance: The Fund’s Class R shares gained 10.69% from April 1, 2004 through March 31, 2005. The Russell 1000 Value Index rose 13.17%.
Portfolio Specifics: The Fund’s double-digit increase was driven by impressive returns from energy stocks, which benefited from strong global demand for oil. Oil and gas producers Apache, ConocoPhillips and ExxonMobil were on the list of top-performing names. Materials and industrials holdings also performed well on robust demand for steel and construction materials and strength in the manufacturing sector of the economy.
Versus the benchmark, modest underperformance was largely due to stock selection among financials. Insurer American International Group (AIG) was notably weak on the announcement of a broad range of accounting issues and the chairman’s resignation. We continued to hold the stock at period-end and believe the current difficulties that the company is facing are being resolved and will not materially affect its earnings potential. An overweight in information technology and an underweight in consumer staples also hurt the Fund.
Stock selection in several areas helped relative performance, including the materials, industrials and information technology sectors. Praxair, a producer of industrial gases; Raytheon, a defense contractor; and Texas Instruments, an electronics manufacturer, were top performers in these groups.
Market Outlook: The outlook for U.S. equities remains positive for the remainder of 2005. The combination of a steadily expanding economy and healthy corporate earnings growth provides a potent catalyst for capital appreciation. Despite a favorable outlook, investors are likely to balance their enthusiasm with concerns about rising interest rates, inflation and high oil prices.
Nicholas-Applegate is confident that our research-intensive investment process will be rewarded in the current environment, which bodes well for the Fund.
Comparison of Change in Value of a $250,000 Investment in U.S. Large Cap Value Fund Class R Shares with the Russell 1000 Value Index.
Annualized Total Returns
As of 3/31/05
Since | ||||
1 Year | 5 Years | Inception | ||
10.69% | 5.63% | 12.55% |
![U.S. Large Cap Value Cl. R](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/large_capr.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund compared with the Russell 1000 Value Index for the periods indicated. The Fund’s Class R shares were first available on May 21, 1999. Performance prior to the introduction of Class R shares reflects the historical performance of the Fund’s Class I Shares. Class I shares have no sales charge or distribution fee, but have a shareholder service fee of up to .25% of their average daily net assets. Class R shares have distribution and shareholder services fees up to .25% of their average daily net assets. Historical performance returns of the Class I shares do not reflect the shareholder servicing fee prior to the adoption of the shareholder services plan in 2003 or distribution fees applicable to Class R Shares, which would have made returns slightly lower. The Fund’s Class I Shares calculate their performance based upon the historical performance of a corresponding series of Nicholas-Applegate Mutual Funds (renamed ING Mutual Funds). Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment. In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The unmanaged index differs from the Fund in composition, does not pay management fees or expenses and includes reinvested dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
U.S. Large Cap Value Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 97.9% | |||||
Aerospace/Defense — 0.9% | |||||
Raytheon Co. | 5,900 | $228,330 | |||
Applications Software — 3.2% | |||||
Microsoft Corp. | 32,600 | 787,942 | |||
Beverages-non-Alcoholic — 1.2% | |||||
PepsiCo, Inc. | 5,400 | 286,362 | |||
Cable TV — 2.0% | |||||
Comcast Corp. Cl. A* | 14,800 | 499,944 | |||
Commercial Banks-Eastern US — 1.9% | |||||
North Fork Bancorp., Inc. | 17,050 | 472,967 | |||
Computers — 1.7% | |||||
Hewlett-Packard Co. | 19,300 | 423,442 | |||
Consumer Products-Miscellaneous — 1.6% | |||||
Fortune Brands, Inc. | 5,100 | 411,213 | |||
Diversified Manufacturing Operations — 12.0% | |||||
General Electric Co. | 26,500 | 955,590 | |||
ITT Industries, Inc. | 12,000 | 1,082,880 | |||
Textron, Inc. | 7,200 | 537,264 | |||
Tyco International, Ltd. | 12,200 | 412,360 | |||
2,988,094 | |||||
Electric-Integrated — 1.0% | |||||
Public Services Enterprise Group, Inc. | 4,800 | 261,072 | |||
Electronic Components-Semiconductors — 4.4% | |||||
Freescale Semiconductor, Inc.* | 27,640 | 476,790 | |||
PPL Corp. | 5,300 | 286,147 | |||
Texas Instuments, Inc. | 13,600 | 346,664 | |||
1,109,601 | |||||
Fiduciary Banks — 2.2% | |||||
Bank of New York Co., Inc. | 18,600 | 540,330 | |||
Finance-Investment Bankers/Brokers — 4.4% | |||||
Morgan Stanley Dean Witter & Co. | 19,400 | 1,110,650 | |||
Finance-Mortgage Loan/Banker — 1.0% | |||||
Countrywide Credit Industries, Inc. | 7,700 | 249,942 | |||
Financial Guarantee Insurance — 1.9% | |||||
Ambac Financial Group, Inc. | 6,500 | 485,875 | |||
Industrial Gases — 2.4% | |||||
Praxair, Inc. | 12,700 | 607,822 | |||
Medical-Drugs — 3.7% | |||||
Abbott Laboratories | 8,900 | 414,918 | |||
Pfizer, Inc. | 19,500 | 512,265 | |||
927,183 | |||||
Medical-HMO — 2.1% | |||||
Wellpoint, Inc.* | 4,200 | 526,470 | |||
Multi-line Insurance — 5.2% | |||||
Allstate Corp. | 7,900 | 427,074 | |||
American International Group, Inc. | 15,800 | 875,478 | |||
1,302,552 | |||||
Multimedia — 5.4% | |||||
Time Warner, Inc.* | 42,400 | $744,120 | |||
Viacom, Inc. Cl. B | 8,700 | 303,021 | |||
Walt Disney Co. | 10,700 | 307,411 | |||
1,354,552 | |||||
Oil Companies-Exploration & Production — 2.3% | |||||
Apache Corp. | 9,250 | 566,378 | |||
Oil Companies-Integrated — 11.2% | |||||
ChevronTexaco Corp. | 8,300 | 483,973 | |||
ConocoPhillips | 10,510 | 1,133,398 | |||
Exxon Mobil Corp. | 19,700 | 1,174,120 | |||
2,791,491 | |||||
Property/Casualty Insurance — 2.5% | |||||
St. Paul Travelers Cos., Inc. | 17,288 | 634,988 | |||
Retail-Regional Department Stores — 4.4% | |||||
Federated Department Stores, Inc. | 17,100 | 1,088,244 | |||
Savings & Loans/Thrifts-Western US — 4.0% | |||||
Washington Mutual, Inc. | 25,100 | 991,450 | |||
Steel-Producers — 2.1% | |||||
United States Steel Corp. | 10,400 | 528,840 | |||
Super-Regional Banks-US — 8.3% | |||||
Bank of America Corp. | 16,112 | 710,539 | |||
US Bancorp. | 18,400 | 530,288 | |||
Wells Fargo & Co. | 13,900 | 831,220 | |||
2,072,047 | |||||
Telephone-Integrated — 3.0% | |||||
Sprint Corp. | 10,500 | 238,875 | |||
Verizon Communications, Inc. | 14,300 | 507,650 | |||
746,525 | |||||
Tobacco — 1.9% | |||||
Altria Group, Inc. | 7,300 | 477,347 | |||
TOTAL COMMON STOCK | |||||
(Cost: $19,875,082) | 24,471,653 | ||||
Principal | |||||
Amount | |||||
SHORT TERM INVESTMENTS — 1.5% | |||||
Time Deposit — 1.5% | |||||
Citibank Nassau | |||||
2.290%, 04/01/05 | |||||
(Cost: $365,126) | $365,126 | 365,126 | |||
TOTAL INVESTMENTS — 99.4% | |||||
(Cost: $20,240,208) | 24,836,779 | ||||
OTHER ASSETS IN EXCESS OF | |||||
LIABILITIES — 0.6% | 157,827 | ||||
NET ASSETS — 100.0% | $24,994,606 |
* Non-income producing securities.
See Accompanying Notes to Financial Statements.
Schedule of Investments by Industry as of March 31, 2005
U.S. Large Cap Value Fund
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 4.6% | ||
Communications | 10.4 | ||
Consumer, Cyclical | 4.4 | ||
Consumer, Non-cyclical | 10.5 | ||
Energy | 13.4 | ||
Financial | 31.4 | ||
Industrial | 12.9% | ||
Technology | 9.3 | ||
Utilities | 1.0 | ||
Short Term Investments | 1.5 | ||
Other assets in excess of liabilities | 0.6 | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
U.S. Systematic Large Cap Growth Fund
Management Team: David J. Pavan, CFA, Portfolio Manager; Stacey R. Nutt, Ph.D., Portfolio Manager; Zhuanxin Ding, Ph.D., Investment Analyst; Jane Edmonson, Investment Analyst; Frank Feng, Ph.D., Investment Analyst; James Li, Ph.D., CFA, Investment Analyst; Aerus Tran, Investment Analyst; Mark P. Roemer, Portfolio Specialist
Chief Investment Officer: Horacio A. Valeiras, CFA
Goal: The U.S. Systematic Large Cap Growth Fund seeks to maximize long-term capital appreciation by investing primarily in stocks from a universe of large U.S. companies with market capitalizations similar to the upper 90% of the Russell 1000 Growth Index at time of purchase.
Market Overview: The broad U.S. stock market, as measured by the S&P 500 Index, rose 6.69% during the twelve months ended March 31, 2005, with gains concentrated in the fourth quarter of 2004. Value stocks outpaced growth stocks, and large-cap companies outperformed their small-cap counterparts.
In the first half of the fiscal year, equity returns were generally flat as a number of investor concerns overshadowed strong company fundamentals. The price of oil skyrocketed on surging global demand and worries about the amount of excess production capacity. In June, the Federal Reserve began raising short-term interest rates for the first time in four years, creating anxiety about the speed and magnitude of further rate hikes. The war in Iraq continued, and reports indicated that the economy had hit a soft spot in late spring.
Toward the end of 2004, however, investors bid stock prices sharply higher in response to a steep drop in oil prices, signs the economy had regained traction and a decisive conclusion to the U.S. presidential race. The rally ended in early 2005 as oil prices resumed their upward trend, interest rates kept rising and the pace of corporate profit growth, while healthy, continued to slow.
Performance: The Fund’s Class R shares gained 3.76% during the fiscal year ended March 31, 2005, outperforming the Russell 1000 Growth Index, which rose 1.17%.
Portfolio Specifics: Positions in nearly every sector of investment had a favorable impact on performance versus the index. The Fund’s health care holdings made the largest contribution to relative results, mainly due to strong stock selection. For example, UnitedHealth Group and Aetna were among the Fund’s best-performing positions. Shares of these health insurance companies benefited from positive trends in enrollment and medical costs.
In the materials and industrials sectors, stock selection was also a major source of relative strength. Top performers included United States Steel, a steel manufacturer; Norfolk Southern, a railroad operator; and Textron, a diversified industrial company.
While the Fund’s performance versus the index was favorable overall, there were pockets of weakness. Stock selection in the information technology sector was the primary detractor from relative results. In addition, issue selection among telecommunications services and consumer discretionary companies was modestly negative.
We maintained the Fund’s well-diversified structure throughout the fiscal year. As of March 31, 2005, the largest overweight versus the benchmark was in the industrials sector (+5.0%) and the largest underweight was in financials (-5.8%).
Market Outlook: Our process evaluates investment opportunities on a relative basis and is required to remain fully invested. As such, the process neither utilizes nor results in a forecast or outlook on the overall market, but expects to perform equally well versus the Russell 1000 Growth Index in both up and down markets.
We are confident that our proprietary stock-selection model, in conjunction with our risk-controlled approach to portfolio construction, will continue to add value to the benchmark over time.
Comparison of Change in Value of a $250,000 Investment in U.S. Systematic Large Cap Growth Fund Class R Shares with the Russell 1000 Growth Index.
Annualized Total Returns
As of 3/31/05
Since | ||||
1 Year | 5 Years | Inception | ||
3.76% | - 20.36% | 6.28% |
![U.S. Systematic Large Cap Growth Cl. R](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/syst_larger.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund compared with the Russell 1000 Growth Index for the periods indicated. The Fund’s Class R shares were first available on May 21, 1999. Performance prior to the introduction of Class R shares reflects the historical performance of the Fund’s Class I Shares. Class I shares have no sales charge or distribution fee, but have a shareholder service fee of up to .25% of their average daily net assets. Class R Shares have distribution and shareholder services fees up to .25% of their daily net assets. Historical performance returns of the Class I shares do not reflect the shareholder servicing fee prior to the adoption of the shareholder services plan in 2003 and distribution fees applicable to Class R Shares which would have made returns slightly lower. The Fund’s Class I Shares calculate their performance based upon the historical performance of a corresponding series of Nicholas-Applegate Mutual Funds (renamed ING Mutual Funds), adjusted to reflect all fees and expenses applicable to the Fund’s Class I shares. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment. In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Index consists of the 1,000 largest securities in the Russell 3000 Index, which represents approximately 90% of the total market capitalization of the Russell 3000 Index. It is a large-cap, market-oriented index and is highly correlated with the S&P 500 Index. The unmanaged Index differs from the Fund in composition, does not pay management fees or expenses and includes reinvested dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
U.S. Systematic Large Cap Growth Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 99.5% | |||||
Aerospace/Defense — 2.8% | |||||
Lockheed Martin Corp. | 2,200 | $134,332 | |||
Raytheon Co. | 3,800 | 147,060 | |||
281,392 | |||||
Apparel Manufacturers — 1.1% | |||||
V F Corp. | 1,800 | 106,452 | |||
Applications Software — 4.0% | |||||
Intuit, Inc.* | 2,800 | 122,556 | |||
Microsoft Corp. | 11,800 | 285,206 | |||
407,762 | |||||
Audio/Video Products — 1.3% | |||||
Harman International Industries, Inc. | 1,500 | 132,690 | |||
Beverages-Wine/Spirits — 1.5% | |||||
Brown-Forman Corp. Cl. B | 2,800 | 153,300 | |||
Cable TV — 0.9% | |||||
Cablevision Systems Corp. Cl. A* | 3,100 | 86,955 | |||
Chemicals-Diversified — 1.3% | |||||
Lyondell Chemical Co. | 1,600 | 44,672 | |||
PPG Industries, Inc. | 1,200 | 85,824 | |||
130,496 | |||||
Computer Aided Design — 1.4% | |||||
Autodesk, Inc.* | 4,800 | 142,848 | |||
Computer Services — 0.8% | |||||
Electronic Data Systems Corp. | 3,900 | 80,613 | |||
Computers — 8.3% | |||||
Apple Computer, Inc.* | 3,800 | 158,346 | |||
Dell, Inc.* | 7,800 | 299,676 | |||
International Business Machines Corp. | 3,600 | 328,968 | |||
Sun Microsystems, Inc.* | 13,400 | 54,136 | |||
841,126 | |||||
Computers-Memory Devices — 2.5% | |||||
EMC Corp.* | 13,300 | 163,856 | |||
Network Appliance, Inc.* | 3,100 | 85,746 | |||
249,602 | |||||
Cosmetics & Toiletries — 6.9% | |||||
Kimberly-Clark Corp. | 2,300 | 151,179 | |||
Procter & Gamble Co. | 6,400 | 339,200 | |||
The Gillette Co. | 4,000 | 201,920 | |||
�� | 692,299 | ||||
Distribution/Wholesale — 1.3% | |||||
WW Grainger, Inc. | 2,100 | 130,767 | |||
Diversified Manufacturing Operations — 1.1% | |||||
Textron, Inc. | 1,500 | 111,930 | |||
Diversified Operations/Commercial Services — 1.2% | |||||
Cendant Corp. | 5,900 | 121,186 | |||
E-Commerce/Services — 1.5% | |||||
eBay, Inc.* | 4,100 | 152,766 | |||
Electric Products-Miscellaneous — 1.4% | |||||
Emerson Electric Co. | 2,200 | 142,846 | |||
Electronic Components-Miscellaneous — 0.6% | |||||
Solectron Corp.* | 18,100 | 62,807 | |||
Electronic Components-Semiconductors — 2.9% | |||||
Intel Corp. | 12,600 | 292,698 | |||
Finance-Consumer Loans — 1.3% | |||||
First Marblehead Corp.* | 2,300 | 132,319 | |||
Food-Miscellaneous/Diversified — 0.6% | |||||
Kraft Foods, Inc. Cl. A | 1,800 | 59,490 | |||
Home Decoration Products — 1.0% | |||||
Newell Rubbermaid, Inc. | 4,500 | $98,730 | |||
Industrial Automation/Robotics — 1.3% | |||||
Rockwell Automation, Inc. | 2,400 | 135,936 | |||
Instruments-Controls — 1.3% | |||||
Parker-Hannifin Corp. | 1,500 | 91,380 | |||
Thermo Electron Corp.* | 1,400 | 35,406 | |||
126,786 | |||||
Instruments-Scientific — 1.3% | |||||
PerkinElmer, Inc. | 6,300 | 129,969 | |||
Internet Security — 3.1% | |||||
CheckFree Corp.* | 2,100 | 85,596 | |||
Symantec Corp.* | 5,100 | 108,783 | |||
VeriSign, Inc.* | 4,000 | 114,800 | |||
309,179 | |||||
Medical Labs & Testing Services — 1.6% | |||||
Covance, Inc.* | 3,400 | 161,874 | |||
Medical Products — 5.4% | |||||
Becton Dickinson & Co. | 2,500 | 146,050 | |||
Johnson & Johnson | 5,900 | 396,244 | |||
542,294 | |||||
Medical-Biomedical/Genetics — 1.5% | |||||
Amgen, Inc.* | 1,000 | 58,210 | |||
Invitrogen Corp.* | 1,300 | 89,960 | |||
148,170 | |||||
Medical-Drugs — 4.0% | |||||
Abbott Laboratories | 1,000 | 46,620 | |||
Pfizer, Inc. | 13,600 | 357,272 | |||
403,892 | |||||
Medical-HMO — 5.9% | |||||
Aetna, Inc. | 1,800 | 134,910 | |||
Humana, Inc.* | 3,400 | 108,596 | |||
UnitedHealth Group, Inc. | 2,900 | 276,602 | |||
Wellpoint, Inc.* | 600 | 75,210 | |||
595,318 | |||||
Multimedia — 1.7% | |||||
Gemstar - TV Guide International, Inc.* | 21,000 | 91,350 | |||
Time Warner, Inc.* | 4,300 | 75,465 | |||
166,815 | |||||
Networking Products — 2.1% | |||||
Cisco Systems, Inc.* | 12,100 | 216,469 | |||
Oil & Gas Drilling — 2.9% | |||||
Diamond Offshore Drilling | 3,800 | 189,620 | |||
Transocean Sedco Forex, Inc.* | 2,100 | 108,066 | |||
297,686 | |||||
Oil Companies-Integrated — 1.6% | |||||
ConocoPhillips | 1,500 | 161,760 | |||
Oil Field Machinery & Equipment — 1.1% | |||||
Grant Prideco, Inc.* | 4,800 | 115,968 | |||
Optical Supplies — 1.7% | |||||
Alcon, Inc. | 1,900 | 169,651 | |||
Property/Casualty Insurance — 1.4% | |||||
Chubb Corp. | 1,800 | 142,686 | |||
Retail-Apparel/Shoe — 2.1% | |||||
Abercrombie & Fitch Co. Cl. A | 2,100 | 120,204 | |||
American Eagle Outfitters, Inc. | 3,200 | 94,560 | |||
214,764 | |||||
Retail-Discount — 0.9% | |||||
Wal-Mart Stores, Inc. | 1,900 | 95,209 |
See Accompanying Notes to Financial Statements.
Number | |||||
of Shares | Value | ||||
COMMON STOCK (Continued) | |||||
Retail-Office Supplies — 1.0% | |||||
Staples, Inc. | 3,200 | $100,576 | |||
Retail-Regional Department Stores — 1.1% | |||||
Federated Department Stores, Inc. | 1,700 | 108,188 | |||
Telecommunications Equipment — 1.9% | |||||
QUALCOMM, Inc. | 5,100 | 186,915 | |||
Telephone-Integrated — 3.5% | |||||
AT&T Corp. | 8,100 | 151,875 | |||
Bellsouth Corp. | 3,400 | 89,386 | |||
Verizon Communications, Inc. | 3,300 | 117,150 | |||
358,411 | |||||
Transport-Air Freight — 1.4% | |||||
CNF, Inc. | 3,100 | 145,049 | |||
Transport-Rail — 2.8% | |||||
Burlington Northern Santa Fe Corp. | 2,600 | 140,218 | |||
Norfolk Southern Corp. | 3,900 | 144,495 | |||
284,713 | |||||
Web Portals/ISP — 1.2% | |||||
Yahoo!, Inc.* | 3,500 | 118,650 | |||
TOTAL COMMON STOCK | |||||
(Cost: $9,321,679) | 10,048,002 | ||||
SHORT TERM INVESTMENTS — 0.4% | |||||
Principal | |||||
Amount | Value | ||||
Time Deposit — 0.4% | |||||
Brown Brothers Harriman & Co. | |||||
2.290%, 04/01/05 | |||||
(Cost: $36,488) | $36,488 | $36,488 | |||
TOTAL INVESTMENTS — 99.9% | |||||
(Cost: $9,358,167) | 10,084,490 | ||||
OTHER ASSETS IN EXCESS OF | |||||
LIABILITIES — 0.1% | 13,900 | ||||
NET ASSETS — 100.0% | $10,098,390 |
* Non-income producing securities.
Schedule of Investments by Industry as of March 31, 2005
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 1.3% | ||
Communications | 15.8 | ||
Consumer, Cyclical | 9.8 | ||
Consumer, Non-cyclical | 30.2 | ||
Energy | 5.7 | ||
Financial | 2.7 | ||
Industrial | 14.1% | ||
Technology | 19.9 | ||
Short Term Investments | 0.4 | ||
Other assets in excess of liabilities | 0.1 | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
International Growth Fund
Management Team: Horacio A. Valeiras, CFA, Lead Portfolio Manager and Chief Investment Officer; Linda Ba, Portfolio Manager; Jason Campbell, Portfolio Manager; Rebecca K. Hagstrom, CFA, Investment Analyst; Flora Kim, Investment Analyst; Karl Richtenburg, Investment Analyst; Eric Sagmeister, Investment Analyst; Scott R. Williams, Investment Analyst; Michael J. Fredericks, Portfolio Specialist
Goal: The International Growth Fund seeks to maximize long-term capital appreciation through investments primarily in companies located outside the United States with market capitalizations predominantly in the top 75% of publicly traded companies as measured by stock market capitalizations within each country.
Market Overview: Equities in developed non-U.S. markets posted strong increases during the twelve months ended March 31, 2005. Gains were widespread, as stock prices climbed higher in most countries in local currency terms. The U.S. dollar weakened relative to a broad basket of currencies, enhancing returns for U.S.-based investors.
During the first half of the period, equity performance was flat. Negative factors, such as rising oil prices and interest rates, were offset by expectations that slowing economic growth would keep central bankers from boosting rates as quickly as investors had originally thought. However, in the fourth quarter of 2004, the markets rallied on a steep drop in oil prices. Equities continued to advance in early 2005 (in local currency terms), yet at a more moderate pace.
Among the larger markets, Japan produced a solid gain but trailed the MSCI EAFE Index on weaker-than-expected economic data. Alternatively, stock markets in Australia and Spain performed especially well. In Australia, domestic demand remained brisk, and exports of metals and coal to China have risen 45% since 2001. In Spain, a boom in the housing market drove strength in consumer spending.
Performance: Between April 1, 2004 and March 31, 2005, the Fund’s Class R shares posted a 9.05% increase. The MSCI EAFE Index gained 15.49%.
Portfolio Specifics: Investors favored international value stocks over their growth counterparts during the fiscal year. This hurt the Fund’s relative performance since, consistent with our philosophy, holdings were concentrated in growth issues while the style-neutral benchmark is a blend of growth and value names. Stock selection in the United Kingdom, France and among financials also detracted from performance versus the index, as did an overweight in the information technology sector.
On a brighter note, issue selection in Canada, Hong Kong and the telecommunications services and consumer discretionary sectors helped relative results. The Fund’s best-performing holdings included Canada-based Precision Drilling, a contract drilling company; Hong-Kong based Esprit Holdings, a specialty retailer; and Telecom Italia Mobile, a wireless services provider based in Italy.
As a result of our stock-by-stock investment decisions, the Fund was underweight European markets at March 31, 2005. We found better opportunities elsewhere, particularly in emerging Asia where many companies are benefiting from high end-market demand and expanding operating margins.
Market Outlook: Near term, the outlook for international equities is mixed. Economic growth in Continental Europe has been weak, and economic indicators for Japan continue to deteriorate. On the other hand, corporate profits in Japan remain robust, and the European retail sector has been quite strong. In addition, there is still room for companies to increase margins through balance sheet restructuring and productivity gains.
Against this challenging backdrop, individual stock selection remains critical. We are confident our bottom-up investment process will uncover attractive opportunities for the Fund.
Comparison of Change in Value of a $250,000 Investment in International Growth Fund Class R Shares with the MSCI EAFE Index.
Annualized Total Returns
As of 3/31/05
Since | ||||
1 Year | 5 Years | Inception | ||
9.05% | - 7.20% | 7.59% |
[![International Growth Cl. R](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/int_growthr.jpg)
![International Growth Cl. R](https://capedge.com/proxy/N-CSRA/0001003715-05-000236/int_growthr.jpg)
The graph above shows the value of a hypothetical $250,000 investment in the Fund compared with the Morgan Stanley Capital International Europe, Australasia, Far East Index (“MSCI EAFE”) over the periods indicated. The Fund’s Class R shares were first available on May 21, 1999. Performance prior to the introduction of Class R shares reflects the historical performance of the Fund’s Class I Shares. Class I shares have no sales charge or distribution fee, but have a shareholder service fee of up to .25% of their average daily net assets. Class R Shares have distribution and shareholder services fees of up to .25% of their average daily net assets. Historical performance returns of the Class I shares do not reflect the shareholder servicing fee prior to the adoption of the shareholder services plan in 2003 and distribution fees applicable to the Class R Shares, which would have made returns slightly lower. The Fund’s Class I Shares calculate their performance based upon the historical performance of a corresponding series of Nicholas-Applegate Mutual Funds (renamed ING Mutual Funds), adjusted to reflect all fees and expenses applicable to the Fund’s Class I shares. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Absent expense limitations, total returns would have been slightly lower. The total returns shown above do not show the effects of income taxes on an individual’s investment. In most cases, taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Past performance cannot guarantee future results.
The MSCI EAFE Index is an unmanaged index of over 900 companies, and is a generally accepted benchmark for major overseas markets. Index weightings represent the relative capitalizations of the major overseas markets included in the index on a U.S. dollar adjusted basis. The unmanaged Index differs from the Fund in composition, does not pay management fees or expenses and includes reinvested dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, currency volatility and the social, economic and political climates of countries where the Fund invests. You may have a gain or loss when you sell your shares.
Schedule of Investments as of March 31, 2005
International Growth Fund
Number | |||||
of Shares | Value | ||||
COMMON STOCK — 95.9% | |||||
Belgium — 2.1% | |||||
KBC Groupe S.A. | 27,128 | $2,293,462 | |||
Canada — 6.0% | |||||
ATI Technologies, Inc.* | 61,200 | 1,056,312 | |||
Cameco Corp. | 46,100 | 2,041,226 | |||
Canadian Pacific Railway, Ltd. | 34,100 | 1,233,107 | |||
Fording Canadian Coal Trust | 11,700 | 1,074,996 | |||
Precision Drilling Corp.* | 15,700 | 1,172,162 | |||
6,577,803 | |||||
Egypt — 1.4% | |||||
Orascom Telecom SAE — GDR* | 43,818 | 1,542,394 | |||
France — 8.1% | |||||
Accor S.A. | 25,095 | 1,231,532 | |||
Lagardere S.C.A* | 15,085 | 1,144,945 | |||
Pinault Printemps Redoute S.A.* ## | 20,561 | 2,204,574 | |||
Publicis Groupe* ## | 55,997 | 1,723,348 | |||
Sanofi — Synthelabo S.A. | 29,825 | 2,521,472 | |||
8,825,871 | |||||
Germany — 7.9% | |||||
Adidas Salomon AG | 11,529 | 1,834,300 | |||
Bayer AG | 46,759 | 1,547,820 | |||
Bayerische Motoren Werke AG | 39,112 | 1,781,658 | |||
HeidelbergCement AG* | 17,437 | 1,099,787 | |||
Merck KGaA* ## | 33,235 | 2,375,663 | |||
8,639,228 | |||||
Greece — 1.0% | |||||
Hellenic Telecommunications | |||||
Organization S.A. | 60,200 | 1,059,355 | |||
Indonesia — 1.0% | |||||
PT Indosat — ADR | 42,600 | 1,101,210 | |||
Israel — 0.7% | |||||
Machteshim-Agan Industries, Ltd. | 144,425 | 807,256 | |||
Italy — 4.8% | |||||
ENI SpA | 102,987 | 2,680,956 | |||
Mediobanca SpA* | 98,579 | 1,715,503 | |||
Saipem SpA | 64,535 | 820,277 | |||
5,216,736 | |||||
Japan — 18.1% | |||||
Asahi Glass Co., Ltd. | 128,300 | 1,355,451 | |||
Canon, Inc. | 26,300 | 1,413,846 | |||
Fuji Photo Film Co., Ltd. | 37,700 | 1,381,675 | |||
Japan Tobacco, Inc. | 187 | 2,080,497 | |||
Mitsubishi Estate## | 170,000 | 1,980,366 | |||
Mitsubishi Tokyo Financial Group, Inc. | 239 | 2,078,067 | |||
Shin-Etsu Chemical Co., Ltd. | 38,000 | 1,442,408 | |||
SMC Corp. | 11,200 | 1,270,157 | |||
Sumitomo Corp. | 160,000 | 1,374,720 | |||
Sumitomo Mitsui Financial Group* | 407 | 2,762,547 | |||
Tokyo Gas Co., Ltd. | 345,000 | 1,393,418 | |||
Toppan Printing Co., Ltd. | 121,000 | 1,328,104 | |||
19,861,256 | |||||
Luxembourg — 2.1% | |||||
Millicom International Cellular S.A.* | 53,800 | 1,090,526 | |||
Stolt Offshores S.A.* | 160,800 | 1,245,268 | |||
2,335,794 | |||||
Mexico — 1.5% | |||||
America Movil S.A. de CV - | |||||
Ser L — ADR | 31,700 | 1,635,720 | |||
Netherlands — 2.6% | |||||
Royal Numico NV* ## | 70,502 | 2,891,777 | |||
Republic Of China — 6.4% | |||||
China Telecom Corp. Ltd. — ADR* | 31,700 | $1,104,428 | |||
Esprit Holdings, Ltd. | 445,000 | 3,038,234 | |||
Foxconn International Holdings, Ltd. | 2,245,000 | 1,216,143 | |||
PetroChina Co., Ltd. Ser. H | 2,694,000 | 1,675,255 | |||
7,034,060 | |||||
Singapore — 1.4% | |||||
Singapore Telecommunications Ltd. | 952,000 | 1,489,214 | |||
South Korea — 2.2% | |||||
Daewoo Shipbuilding & Marine | |||||
Engineering Co., Ltd. | 70,080 | 1,318,097 | |||
LG Electronics, Inc. | 16,100 | 1,079,675 | |||
2,397,772 | |||||
Spain — 2.8% | |||||
Banco Bilbao Vizcaya Argentaria S.A. | 95,292 | 1,555,509 | |||
Gestevision Telecinco S.A.* | 64,960 | 1,514,589 | |||
3,070,098 | |||||
Switzerland — 7.9% | |||||
Adecco SA-Reg | 25,692 | 1,416,196 | |||
Roche Holding AG-Genusschein | 19,178 | 2,062,773 | |||
Straumann AG## | 5,300 | 1,151,691 | |||
Swiss Life Holding* | 11,369 | 1,715,032 | |||
UBS AG## | 27,304 | 2,313,704 | |||
8,659,396 | |||||
Thailand — 2.1% | |||||
Italian - Thai Development PLC* | 4,316,100 | 1,136,542 | |||
TelecomAsia Corp. Public Co., Ltd.* | 4,994,700 | 1,155,619 | |||
2,292,161 | |||||
United Kingdom — 15.8% | |||||
Arm Holdings PLC | 984,315 | 1,957,610 | |||
Diageo PLC | 78,309 | 1,103,876 | |||
easyJET PLC* | 209,923 | 855,817 | |||
Man Group PLC | 82,937 | 2,153,302 | |||
Morrison Supermarkets | 820,616 | 3,039,247 | |||
Premier Farnell PLC | 311,711 | 999,843 | |||
Royal Bank of Scotland Group PLC* | 61,512 | 1,957,365 | |||
Shire Pharmaceuticals Group PLC* | 88,915 | 1,015,643 | |||
Taylor Woodrow PLC | 149,624 | 865,152 | |||
Vodafone Group PLC | 1,263,934 | 3,355,603 | |||
17,303,458 | |||||
TOTAL COMMON STOCK | |||||
(Cost: $93,686,887) | 105,034,021 | ||||
EQUITY-LINKED SECURITIES — 2.0% | |||||
United Kingdom — 2.0% | |||||
UBS AG Far EasTone | |||||
Telecommunications | |||||
Co., Ltd — 03/10/06 | 1,764,000 | 2,233,224 | |||
TOTAL EQUITY-LINKED SECURITIES — 2.0% | |||||
(Cost: $2,241,132) | 2,233,224 | ||||
Principal | |||||
Amount | |||||
SHORT TERM INVESTMENTS — 11.6% | |||||
Money Market Funds — 9.6% | |||||
Allianz Dresdner Daily Asset Fund** ^ | $10,497,014 | 10,497,014 | |||
Time Deposits — 2.0% | |||||
Wachovia Bank GC | |||||
2.290%, 04/01/05 | 2,199,657 | 2,199,657 | |||
TOTAL SHORT TERM INVESTMENTS | |||||
(Cost: $12,696,671) | 12,696,671 |
See Accompanying Notes to Financial Statements.
Value | |||
TOTAL INVESTMENTS — 109.5% | |||
(Cost: $108,624,690) | $119,963,916 | ||
LIABILITIES IN EXCESS OF | |||
OTHER ASSETS — (9.5%) | (10,393,122) | ||
NET ASSETS — 100.0% | $109,570,794 |
* Non-income producing securities.
** All of the security is purchased with cash collateral proceeds from securities loans.
^ Affiliated institutional money market fund.
## All or a portion of the Fund’s holdings in this security was on loan as of 03/31/05.
ADR — American Depository Receipt
Schedule of Investments by Industry as of March 31, 2005
Percentage of | |||
Industry | Net Assets | ||
Basic Materials | 5.3% | ||
Communications | 19.5 | ||
Consumer, Cyclical | 11.3 | ||
Consumer, Non-cyclical | 19.2 | ||
Energy | 7.9 | ||
Financial | 18.7 | ||
Industrial | 10.7 | ||
Technology | 4.0% | ||
Utilities | 1.3 | ||
Short Term Investments | 11.6 | ||
Liabilities in excess of other assets | (9.5) | ||
NET ASSETS | 100.0% |
See Accompanying Notes to Financial Statements.
Nicholas-Applegate Institutional Funds
Shareholder Expense Example — (Unaudited)
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (October 1, 2004 to March 31, 2005).
Actual Expenses
The first line of the table below for each fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for a fund under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below for each fund provides information about hypothetical account values and hypothetical expenses based on a fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs and are calculated before expense offset arrangements. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid | |||||||
Beginning Account | Ending Account | During the Period* | |||||
Value | Value | October 1, 2004 to | |||||
October 1, 2004 | March 31, 2005 | March 31, 2005 | |||||
U.S. Emerging Growth — Class R | |||||||
Actual | $1,000.00 | $1,045.67 | $8.42 | ||||
Hypothetical (5% return before expenses and before offset | |||||||
arrangements) | $1,000.00 | $1,016.70 | $8.30 | ||||
U.S. Small Cap Value — Class R (1) | |||||||
Actual | $1,000.00 | $997.39 | $5.05 | ||||
Hypothetical (5% return before expenses and before offset | |||||||
arrangements) | $1,000.00 | $1,011.25 | $5.08 | ||||
U.S. Large Cap Value — Class R | |||||||
Actual | $1,000.00 | $1,046.57 | $5.41 | ||||
Hypothetical (5% return before expenses and before offset | |||||||
arrangements) | $1,000.00 | $1,019.65 | $5.34 | ||||
U.S. Systematic Large Cap Growth — Class R | |||||||
Actual | $1,000.00 | $1,035.60 | $6.90 | ||||
Hypothetical (5% return before expenses and before offset | |||||||
arrangements) | $1,000.00 | $1,018.15 | $6.84 | ||||
International Growth — Class R | |||||||
Actual | $1,000.00 | $1,073.90 | $8.38 | ||||
Hypothetical (5% return before expenses and before offset | |||||||
arrangements) | $1,000.00 | $1,016.85 | $8.15 |
(1) Fund’s Class R beginning account value on 12/02/04 (Class inception date)
* Expenses are equal to the Fund’s annualized expense ratio (show in the table below); multiplied by the average account value over the period.
Annualized | |||
Expense Ratio | |||
U.S. Emerging Growth Class R | 1.65% | ||
U.S. Small Cap Value R | 1.55% | ||
U.S. Large Cap Value Class R | 1.06% | ||
U.S. Systematic Large Cap Select Growth — Class R | 1.36% | ||
International Growth — Class R | 1.62% |
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Nicholas-Applegate Institutional Funds
Financial Highlights
For a Class R share outstanding during the period indicated
Net | Distributions from: | ||||||||||||||
Net Asset | Investment | Net Realized | Total from | Net | Net | ||||||||||
Value, | Income | and Unrealized | Investment | Investment | Realized | Total | |||||||||
Beginning | (Loss) (1) | Gains (Loss) | Operations | Income | Capital Gains | Distributions | |||||||||
U.S. EQUITY FUNDS | |||||||||||||||
U.S. EMERGING GROWTH | |||||||||||||||
For the year ended 03/31/05 | $9.52 | $(0.10) | $0.23 | $0.13 | $— | $— | $— | ||||||||
For the year ended 03/31/04 | 6.27 | (0.11) | 3.36 | 3.25 | — | — | — | ||||||||
For the year ended 03/31/03 | 9.54 | (0.09) | (3.18) | (3.27) | — | — | — | ||||||||
For the year ended 03/31/02 | 9.55 | (0.07) | 0.06 | (0.01) | — | — | — | ||||||||
For the year ended 03/31/01 | 27.05 | (0.06) | (12.36) | (12.42) | — | (5.08) | (5.08) | ||||||||
U.S. SMALL CAP VALUE | |||||||||||||||
12/02/04 (commenced) to 03/31/05 | $17.53 | $(0.00)(8) | $(0.14) | $(0.14) | $— | $— | $— | ||||||||
U.S. LARGE CAP VALUE | |||||||||||||||
For the year ended 03/31/05 | $24.33 | $0.36 | $2.23 | $2.59 | $(0.30) | $— | $(0.30) | ||||||||
For the year ended 03/31/04 | 18.15 | 0.24 | 6.45 | 6.69 | (0.51) | — | (0.51) | ||||||||
For the year ended 03/31/03 | 24.39 | 0.21 | (6.20) | (5.99) | (0.25) | — | (0.25) | ||||||||
For the year ended 03/31/02 | 23.39 | 0.15 | 1.26 | 1.41 | (0.04) | (0.37) | (0.41) | ||||||||
For the year ended 03/31/01 | 21.74 | 0.18 | 1.63 | 1.81 | (0.16) | — | (0.16) | ||||||||
U.S. SYSTEMATIC LARGE CAP GROWTH | |||||||||||||||
For the year ended 03/31/05 | $14.90 | $0.02 | $0.54 | $0.56 | $— | $— | $— | ||||||||
For the year ended 03/31/04 | 12.61 | (0.06) | 2.35 | 2.29 | — | — | — | ||||||||
For the year ended 03/31/03 | 17.96 | (0.08) | (5.27) | (5.35) | — | — | — | ||||||||
For the year ended 03/31/02 | 22.52 | (0.16) | (4.40) | (4.56) | — | — | — | ||||||||
For the year ended 03/31/01 | 49.77 | (0.32) | (25.90) | (26.22) | — | (1.03) | (1.03) | ||||||||
GLOBAL EQUITY FUNDS | |||||||||||||||
INTERNATIONAL GROWTH | |||||||||||||||
For the year ended 03/31/05 | $18.93 | $0.15 | $1.53 | $1.68 | $— | $(0.42) | $(0.42) | ||||||||
For the year ended 03/31/04 | 12.72 | 0.12 | 6.10 | 6.22 | (0.01) | — | (0.01) | ||||||||
For the year ended 03/31/03 | 17.07 | 0.10 | (4.45) | (4.35) | — | — | — | ||||||||
For the year ended 03/31/02 | 19.13 | 0.02 | (2.08) | (2.06) | — | — | — | ||||||||
For the year ended 03/31/01 | 31.84 | (0.03) | (11.26) | (11.29) | — | (1.42) | (1.42) |
(1) Net investment income per share is calculated by dividing net investment income for the period by the average shares outstanding during the period.
(2) Total returns are not annualized for periods less than one year.
(3) Ratios are annualized for periods of less than one year. Expense reimbursements reflect voluntary reductions to total expenses, as discussed in the notes to financial statements. Such amounts would decrease net investment income (loss) ratios had such reductions not occurred.
(4) This calculation includes expenses not part of the expense reimbursement calculation.
(5) The Board of Trustees approved the amendments to the Expense Limitation Agreement whereby overall operating expenses (excluding taxes, interest, brokerage and extraordinary expenses) of the U.S. Emerging Growth, U.S. Large Cap Value, U.S. Systematic Large Cap Growth and International Growth do not exceed 1.25%, 1.00%, 1.00% and 1.15%, for the period 4/1/03 to 7/28/03, 1.48%, 0.81%, 1.12% and 1.41% for the period 7/29/03 to 3/31/04, respectively.
(6) The Board of Trustees approved an amendment to the Expense Limitation Agreement whereby overall operating expenses (excluding taxes, interest, brokerage and extraordinary expense) of U.S. Large Cap Value, U.S. Systematic Large Cap Growth, and International Growth excluding taxes, interest, brokerage and extraordinary expenses, do not exceed 1.25%, 1.25% and 1.65% for the period 4/1/02 to 6/30/02. 1.10%, 1.15% and 1.40% for the period 7/1/02 to 1/21/03, 1.25%, 1.25% and 1.40% for the period 1/22/03 to 3/31/03, respectively. Emerging Growth had rates throughout the year of 1.50%.
(7) On May 18, 2001 the Board of Trustees approved an amendment to the Expense Limitation Agreement whereby overall operating expenses of the Emerging Growth, excluding taxes, interest, brokerage and extraordinary expenses, do not exceed 1.50% representing a .08% increase in the Fund’s expense cap.
(8) Amount less than one penny.
(9) Inception to date return.
See Accompanying Notes to Financial Statements.
Ratios to Average Net Assets (3) | |||||||||||||||||
Expenses | Expenses Net of | Fund’s | |||||||||||||||
Net Asset | Net | Expense | Net of | Reimbursement/ | Portfolio | Net Assets, | |||||||||||
Value, | Total | Investment | Total | (Reimbursements)/ | Reimbursement/ | Recoupment | Turnover | Ending | |||||||||
Ending | Return (2) | Income (Loss) | Expenses | Recoupment | Recoupment | Offset (4) | Rate | (in 000’s) | |||||||||
$9.65 | 1.37% | (1.06%) | 1.89% | (0.20%) | 1.69% | 1.26% | 142% | $3,681 | |||||||||
9.52 | 51.83% | (1.28%) | 1.73% | — | 1.73% | 1.51%(5) | 166% | 3,948 | |||||||||
6.27 | (34.28%) | (1.20%) | 1.74% | (0.20%) | 1.54% | 1.50%(6) | 118% | 2,879 | |||||||||
9.54 | (0.10%) | (0.73%) | 1.59% | (0.11%) | 1.48% | 1.48%(7) | 138% | 4,597 | |||||||||
9.55 | (49.67%) | (0.32%) | 1.55% | (0.12%) | 1.43% | 1.43% | 120% | 3,577 | |||||||||
$17.39 | (0.80%)(9) | (0.02%) | 1.59% | (0.03%) | 1.56% | 1.29% | 73% | $658 | |||||||||
$26.62 | 10.69% | 1.44% | 1.56% | (0.50%) | 1.06% | 1.01% | 42% | $8,047 | |||||||||
24.33 | 37.09% | 1.10% | 1.52% | (0.45%) | 1.07% | 1.04%(5) | 51% | 8,405 | |||||||||
18.15 | 24.58% | 1.03% | 1.54% | (0.34%) | 1.20% | 1.19%(6) | 139% | 6,749 | |||||||||
24.39 | 6.13% | 0.63% | 1.39% | (0.13%) | 1.26% | 1.26% | 99% | 11,423 | |||||||||
23.39 | 8.31% | 0.78% | 1.47% | (0.20%) | 1.27% | 1.27% | 120% | 9,838 | |||||||||
$15.46 | 3.76% | 0.14% | 1.94% | (0.57%) | 1.37% | 1.29% | 197% | $9,318 | |||||||||
14.90 | 18.16% | (0.41%) | 1.58% | (0.20%) | 1.38% | 1.18%(5) | 172% | 10,229 | |||||||||
12.61 | (29.79%) | (0.59%) | 1.51% | (0.30%) | 1.21% | 1.20%(6) | 193% | 9,052 | |||||||||
17.96 | (20.25%) | (0.79%) | 1.35% | (0.10%) | 1.25% | 1.25% | 224% | 38,386 | |||||||||
22.52 | (53.35%) | (0.80%) | 1.32% | (0.07%) | 1.25% | 1.25% | 160% | 41,730 | |||||||||
$20.19 | 8.94% | 0.80% | 1.66% | (0.02%) | 1.64% | 1.32% | 203% | $1,749 | |||||||||
18.93 | 48.86% | 0.71% | 1.74% | (0.04%) | 1.70% | 1.44%(5) | 186% | 9,236 | |||||||||
12.72 | (25.48%) | 0.65% | 1.72% | (0.21%) | 1.51% | 1.48%(6) | 203% | 7,845 | |||||||||
17.07 | (10.77%) | (0.09%) | 1.61% | 0.01% | 1.62% | 1.62% | 232% | 11,199 | |||||||||
19.13 | (36.17%) | (0.13%) | 1.58% | 0.08% | 1.66% | 1.66% | 234% | 11,216 |
See Accompanying Notes to Financial Statements.
Nicholas-Applegate Institutional Funds
Statements of Assets and Liabilities
March 31, 2005
U.S. Emerging | U.S. Small Cap | U.S. Large Cap | U.S. Systematic | International | |||||||
Growth | Value | Value | Large Cap Growth | Growth | |||||||
ASSETS | |||||||||||
Investments, at value* | $17,816,017 | $107,553,525 | $24,836,779 | $10,084,490 | $119,963,916 | ||||||
Foreign currencies, at value** | — | — | — | — | 2,182 | ||||||
Cash | — | 50 | — | — | — | ||||||
Receivables: | |||||||||||
Investment securities sold | 318,849 | 582,689 | — | — | 1,376,123 | ||||||
Capital shares sold | 47,585 | 184,337 | 138,503 | 15,169 | 42,214 | ||||||
Dividends | 1,664 | 102,090 | 32,937 | 8,469 | 257,906 | ||||||
Foreign taxes receivable | — | — | — | — | 7,195 | ||||||
Interest | — | — | — | — | — | ||||||
From investment advisor | — | — | 1,687 | 2,178 | — | ||||||
Expense offset and other | 28,575 | 75,244 | 7,028 | 9,654 | 145,498 | ||||||
Other assets | 15,598 | 33,949 | 21,068 | 15,418 | 25,425 | ||||||
Total assets | 18,228,288 | 108,531,884 | 25,038,002 | 10,135,378 | 121,820,459 | ||||||
LIABILITIES | |||||||||||
Payables: | |||||||||||
Bank overdraft | $— | $— | $— | $— | $— | ||||||
Investments purchased | 94,328 | 749,142 | — | — | 1,484,904 | ||||||
Capital shares redeemed | — | 4,747 | — | — | 439 | ||||||
Collateral on securities loaned | 2,346,125 | 3,218,000 | — | — | 10,497,014 | ||||||
Distributions fee | 794 | 142 | 1,733 | 2,001 | 384 | ||||||
To investment advisor | 12,382 | 67,804 | — | — | 62,683 | ||||||
Other Liabilites | 50,997 | 125,581 | 41,663 | 34,987 | 204,241 | ||||||
Total Liabilities | 2,504,626 | 4,165,416 | 43,396 | 36,988 | 12,249,665 | ||||||
NET ASSETS | 15,723,662 | 104,366,468 | 24,994,606 | 10,098,390 | 109,570,794 | ||||||
* Investments, at cost | 15,465,157 | 94,267,212 | 20,240,208 | 9,358,167 | 108,624,690 | ||||||
** Foreign currencies, at cost | — | — | — | — | 2,034 | ||||||
NET ASSETS CONSIST OF: | |||||||||||
Paid-in capital | $24,552,020 | $88,585,238 | $26,121,505 | $19,201,221 | $108,325,105 | ||||||
Undistributed net investment income (loss) | — | — | 363,111 | 26,492 | (263,355) | ||||||
Accumulated net realized gain (loss) on | |||||||||||
investments and foreign currencies | (11,179,218) | 2,494,917 | (6,086,581) | (9,855,646) | (9,830,997) | ||||||
Net unrealized appreciation (depreciation) of | |||||||||||
investments and of other assets and liabilities | |||||||||||
denominated in foreign currencies | 2,350,860 | 13,286,313 | 4,596,571 | 726,323 | 11,340,041 | ||||||
Net Assets applicable to all shares outstanding | $15,723,662 | $104,366,468 | $24,994,606 | $10,098,390 | $109,570,794 | ||||||
Net Assets of Class R shares | $3,680,898 | $658,096 | $8,046,544 | $9,318,468 | $1,749,416 | ||||||
Net Assets of Class I shares | 12,042,764 | 86,017,427 | 16,948,062 | 779,922 | 41,394,038 | ||||||
Net Assets of Class II shares | — | 17,690,945 | — | — | — | ||||||
Net Assets of Class III shares | — | — | — | — | 40,405,430 | ||||||
Net Assets of Class IV shares | — | — | — | — | 26,021,910 | ||||||
Class R Shares outstanding | 381,483 | 37,842 | 302,298 | 602,710 | 86,662 | ||||||
Class I Shares outstanding | 1,232,991 | 4,942,937 | 634,515 | 49,775 | 2,022,406 | ||||||
Class II Shares outstanding | — | 1,017,469 | — | — | — | ||||||
Class III Shares outstanding | — | — | — | — | 1,979,233 | ||||||
Class IV Shares outstanding | — | — | — | — | 1,272,746 | ||||||
Net Asset Value — Class R Share | $9.65 | $17.39 | $26.62 | $15.46 | $20.19 | ||||||
Net Asset Value — Class I Share | $9.77 | $17.40 | $26.71 | $15.67 | $20.47 | ||||||
Net Asset Value — Class II Share | $— | $17.39 | $— | $— | $— | ||||||
Net Asset Value — Class III Share | $— | $— | $— | $— | $20.41 | ||||||
Net Asset Value — Class IV Share | $— | $— | $— | $— | $20.45 |
See Accompanying Notes to Financial Statements.
Nicholas-Applegate Institutional Funds
Statements of Operations
Year Ended March 31, 2005
U.S. Emerging | U.S. Small Cap | U.S. Large Cap | U.S. Systematic | International | |||||||
Growth | Value | Value | Large Cap Growth | Growth | |||||||
INVESTMENT INCOME | |||||||||||
Dividends, net of foreign taxes* | $45,290 | $948,250 | $554,951 | $181,351 | $1,639,377 | ||||||
Interest | 23,625 | 17 | 109 | 853 | 5,517 | ||||||
Total Income | 68,915 | 948,267 | 555,060 | 182,204 | 1,644,894 | ||||||
EXPENSES | |||||||||||
Advisory fee | 190,439 | 568,883 | 101,818 | 57,137 | 551,614 | ||||||
Accounting and administration fees | 30,001 | 79,647 | 29,232 | 22,817 | 87,936 | ||||||
Custodian fees | 51,672 | 28,232 | 24,238 | 21,452 | 177,875 | ||||||
Transfer agent fees and expenses | 24,466 | 27,781 | 23,413 | 23,370 | 30,573 | ||||||
Shareholder servicing fees | 42,476 | 96,665 | 50,176 | 43,390 | 190,000 | ||||||
Administrative services | 30,470 | 88,549 | 27,151 | 19,046 | 178,650 | ||||||
Professional fees | 12,501 | 46,878 | 15,042 | 8,120 | 54,079 | ||||||
Shareholder reporting | 7,759 | 21,990 | 10,133 | 13,416 | 33,830 | ||||||
Registration fees | 21,012 | 26,890 | 25,920 | 21,147 | 18,355 | ||||||
Trustees’ fees and expenses | 3,391 | 8,700 | 3,354 | 2,025 | 12,094 | ||||||
Interest and credit facility fee | — | 648 | — | — | — | ||||||
Insurance | 3,812 | 5,942 | 2,239 | 2,018 | 13,446 | ||||||
Miscellaneous | 5,208 | 7,382 | 4,211 | 4,382 | 121 | ||||||
Total Expenses | 423,207 | 1,008,187 | 316,927 | 238,320 | 1,348,573 | ||||||
Expense offset | (101,166) | (131,561) | (12,335) | (11,133) | (343,987) | ||||||
Expenses (reimbursed)/recouped | (44,599) | (25,796) | (112,644) | (71,475) | (487) | ||||||
Net Expenses | 277,442 | 850,830 | 191,948 | 155,712 | 1,004,099 | ||||||
NET INVESTMENT INCOME (LOSS) | (208,527) | 97,437 | 363,112 | 26,492 | 640,795 | ||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | |||||||||||
ON INVESTMENTS | |||||||||||
Realized gain from: | |||||||||||
Securities | 3,800,670 | 8,644,160 | 1,535,914 | 1,661,538 | 19,372,953 | ||||||
Foreign currency transactions | — | — | — | — | (635,955) | ||||||
Net realized gain (loss) | 3,800,670 | 8,644,160 | 1,535,914 | 1,661,538 | 18,736,998 | ||||||
Change in unrealized appreciation (depreciation) of: | |||||||||||
Investments | (4,281,928) | (1,752,501) | 542,896 | (1,198,653) | (10,082,696) | ||||||
Other assets and liabilities denominated in | |||||||||||
foreign currencies | — | — | — | — | (18,067) | ||||||
Net unrealized appreciation (depreciation) | (4,281,928) | (1,752,501) | 542,896 | (1,198,653) | (10,100,763) | ||||||
NET GAIN (LOSS) ON INVESTMENTS | (481,258) | 6,891,659 | 2,078,810 | 462,885 | 8,636,235 | ||||||
NET INCREASE (DECREASE) IN NET ASSETS | |||||||||||
RESULTING FROM OPERATIONS | $(689,785) | $6,989,096 | $2,441,922 | $489,377 | $9,277,030 | ||||||
* Foreign taxes withheld | $— | $— | $— | $— | $177,403 |
See Accompanying Notes to Financial Statements.
Nicholas-Applegate Institutional Funds
Statements of Changes in Net Assets
Years Ended March 31
U.S. Emerging Growth | U.S. Small Cap Value | ||||||||
2005 | 2004 | 2005 | 2004 | ||||||
INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS: | |||||||||
Net investment income (loss) | $(208,527) | $(456,250) | $97,437 | $79,718 | |||||
Net realized gain (loss) | 3,800,670 | 10,945,194 | 8,644,160 | 6,083,730 | |||||
Net unrealized appreciation (depreciation) | (4,281,928) | 7,023,694 | (1,752,501) | 15,123,825 | |||||
Net increase (decrease) in net assets from investment operations | (689,785) | 17,512,638 | 6,989,096 | 21,287,273 | |||||
DISTRIBUTIONS TO SHAREHOLDERS: | |||||||||
From net investment income | — | — | (54,300) | (58,291) | |||||
From net realized gains | — | — | (8,482,337) | (1,558,819) | |||||
Total distributions | — | — | (8,536,637) | (1,617,110) | |||||
FROM CAPITAL SHARE TRANSACTIONS: | |||||||||
Proceeds from shares sold | |||||||||
Class R | 575,960 | 1,179,622 | 670,138 | — | |||||
Class I | 1,968,884 | 11,253,913 | 64,014,161 | 38,131,382 | |||||
Class II | — | — | 17,909,758 | — | |||||
Distributions reinvested | |||||||||
Class R | — | — | — | — | |||||
Class I | — | — | 8,024,945 | 1,473,567 | |||||
Class II | — | — | 408,836 | — | |||||
Cost of shares redeemed | |||||||||
Class R | (898,510) | (1,529,721) | (7,316) | — | |||||
Class I | (21,275,687) | (32,008,789) | (50,897,777) | (4,463,749) | |||||
Class II | — | — | — | — | |||||
Class IV | — | — | — | — | |||||
Net assets received in conjunction with merger agreement | |||||||||
Class IV | — | — | — | — | |||||
Net increase (decrease) in net assets from share transactions | (19,629,353) | (21,104,975) | 40,122,745 | 35,141,200 | |||||
Net Increase (Decrease) in Net Assets | (20,319,138) | (3,592,337) | 38,575,204 | 54,811,363 | |||||
NET ASSETS | |||||||||
Beginning | 36,042,800 | 39,635,137 | 65,791,264 | 10,979,901 | |||||
Ending | $15,723,662 | $36,042,800 | $104,366,468 | $65,791,264 | |||||
Undistributed net investment income (loss), ending | $— | $— | $— | $55,186 | |||||
CLASS R — CAPITAL SHARE ACTIVITY | |||||||||
Shares sold | 61,609 | 139,728 | 38,257 | — | |||||
Distributions reinvested | — | — | — | — | |||||
Shares redeemed | (94,910) | (183,884) | (415) | — | |||||
Net Class R Share Activity | (33,301) | (44,156) | 37,842 | — | |||||
CLASS I — CAPITAL SHARE ACTIVITY | |||||||||
Shares sold | 209,252 | 1,534,091 | 3,657,363 | 2,859,617 | |||||
Distributions reinvested | — | — | 464,406 | 93,264 | |||||
Shares redeemed | (2,315,669) | (4,012,939) | (2,909,001) | (295,642) | |||||
Net Class I Share Activity | (2,106,417) | (2,478,848) | 1,212,768 | 2,657,239 | |||||
CLASS II — CAPITAL SHARE ACTIVITY | |||||||||
Shares sold | — | — | 993,783 | — | |||||
Distributions reinvested | — | — | 23,686 | — | |||||
Shares redeemed | — | — | — | — | |||||
Net Class II Share Activity | — | — | 1,017,469 | — | |||||
CLASS III — CAPITAL SHARE ACTIVITY | |||||||||
Shares sold | — | — | — | — | |||||
Distributions reinvested | — | — | — | — | |||||
Shares redeemed | — | — | — | — | |||||
Net Class III Share Activity | — | — | — | — | |||||
CLASS IV — CAPITAL SHARE ACTIVITY | |||||||||
Shares received in conjunction with merger agreement | — | — | — | — | |||||
Shares redeemed | — | — | — | — | |||||
Net Class IV Share Activity | — | — | — | — |
See Accompanying Notes to Financial Statements.
U.S. Large Cap Value | U.S. Systematic Large Cap Growth | ||||||
2005 | 2004 | 2005 | 2004 | ||||
$363,112 | $308,286 | $26,492 | $(63,463) | ||||
1,535,914 | 2,036,857 | 1,661,538 | 3,077,381 | ||||
542,896 | 6,130,411 | (1,198,653) | 1,280,165 | ||||
2,441,922 | 8,475,554 | 489,377 | 4,294,083 | ||||
(308,287) | (518,008) | — | — | ||||
— | — | — | — | ||||
(308,287) | (518,008) | — | — | ||||
584,575 | 970,722 | 753,732 | 1,503,639 | ||||
6,528,160 | 7,248,568 | 240,548 | 1,400,861 | ||||
— | — | — | — | ||||
101,393 | 181,381 | — | — | ||||
206,894 | 336,468 | — | — | ||||
— | — | — | — | ||||
(1,814,722) | (1,774,921) | (2,029,789) | (1,969,935) | ||||
(3,793,816) | (28,279,823) | (3,102,539) | (18,861,142) | ||||
— | — | — | — | ||||
— | — | — | — | ||||
— | — | — | — | ||||
1,812,484 | (21,317,605) | (4,138,048) | (17,926,577) | ||||
3,946,119 | (13,360,059) | (3,648,671) | (13,632,494) | ||||
21,048,487 | 34,408,546 | 13,747,061 | 27,379,555 | ||||
$24,994,606 | $21,048,487 | $10,098,390 | $13,747,061 | ||||
$363,111 | $308,286 | $26,492 | $— | ||||
23,362 | 44,394 | 50,204 | 104,959 | ||||
3,912 | 8,137 | — | — | ||||
(70,407) | (78,872) | (134,105) | (136,216) | ||||
(43,133) | (26,341) | (83,901) | (31,257) | ||||
257,276 | 316,713 | 15,848 | 97,300 | ||||
7,961 | 15,061 | — | — | ||||
(148,861) | (1,333,258) | (199,645) | (1,304,016) | ||||
116,376 | (1,001,484) | (183,797) | (1,206,716) | ||||
— | — | — | — | ||||
— | — | — | — | ||||
— | — | — | — | ||||
— | — | — | — | ||||
— | — | — | — | ||||
— | — | — | — | ||||
— | — | — | — | ||||
— | — | — | — | ||||
— | — | — | — | ||||
— | — | — | — | ||||
— | — | — | — |
International Growth | |||||
2005 | 2004 | ||||
INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS: | |||||
Net investment income | $640,795 | $1,027,876 | |||
Net realized gain | 18,736,998 | 23,403,242 | |||
Net unrealized appreciation (depreciation) | (10,100,763) | 22,572,455 | |||
Net increase (decrease)in net assets from investment operations | 9,277,030 | 47,003,573 | |||
DISTRIBUTIONS TO SHAREHOLDERS: | |||||
From net investment income | (327,979) | (484,596) | |||
From net realized gains | (2,360,474) | — | |||
Total distributions | (2,688,453) | (484,596) | |||
FROM CAPITAL SHARE TRANSACTIONS: | |||||
Proceeds from shares sold | |||||
Class R | 431,257 | 1,493,312 | |||
Class I | 6,031,712 | 25,196,139 | |||
Class II | — | 34,143,763 | |||
Class III | — | 36,914,124 | |||
Class IV | — | 19,914,459 | |||
Distributions reinvested | |||||
Class R | 39,004 | 2,197 | |||
Class I | 991,479 | 102,636 | |||
Class II | — | 145,987 | |||
Class III | 995,381 | 152,119 | |||
Class IV | 658,803 | 81,263 | |||
Cost of shares redeemed | |||||
Class R | (7,774,143) | (3,483,853) | |||
Class I | (19,994,044) | (87,368,940) | |||
Class II | (15,355,579) | (25,552,940) | |||
Class III | — | (7,096,631) | |||
Class IV | (34,895) | (42,831) | |||
Net assets received in conjunction with merger agreement | |||||
Class I | — | — | |||
Class II | — | — | |||
Net increase (decrease) in net assets from share transactions | (34,011,025) | (5,399,196) | |||
Net Increase (Decrease) in Net Assets | (27,422,448) | 41,119,781 | |||
NET ASSETS | |||||
Beginning | 136,993,242 | 95,873,461 | |||
Ending | $109,570,794 | $136,993,242 | |||
Undistributed net investment income (loss), ending | $(263,355) | $(16,421) | |||
CLASS R — CAPITAL SHARE ACTIVITY | |||||
Shares sold | 22,903 | 90,775 | |||
Distributions reinvested | 1,994 | 130 | |||
Shares redeemed | (426,253) | (219,722) | |||
Net Class R Share Activity | (401,356) | (128,817) | |||
CLASS I — CAPITAL SHARE ACTIVITY | |||||
Shares sold | 309,079 | 1,541,651 | |||
Distributions reinvested | 50,049 | 6,030 | |||
Shares redeemed | (1,031,238) | (5,715,622) | |||
Shares received in conjunction with merger agreement | — | — | |||
Net Class I Share Activity | (672,110) | (4,167,941) | |||
CLASS II — CAPITAL SHARE ACTIVITY | |||||
Shares sold | — | 2,225,984 | |||
Distributions reinvested | — | 8,587 | |||
Shares redeemed | (825,784) | (1,408,787) | |||
Shares received in conjunction with merger agreement | — | — | |||
Net Class II Share Activity | (825,784) | 825,784 | |||
CLASS III — CAPITAL SHARE ACTIVITY | |||||
Shares sold | — | 2,315,001 | |||
Distributions reinvested | 50,425 | 8,943 | |||
Shares redeemed | — | (395,136) | |||
Net Class III Share Activity | 50,425 | 1,928,808 | |||
CLASS IV — CAPITAL SHARE ACTIVITY | |||||
Shares sold | — | 1,238,937 | |||
Distributions reinvested | 33,340 | 4,777 | |||
Shares redeemed | (1,793) | (2,515) | |||
Net Class IV Share Activity | 31,547 | 1,241,199 |
See Accompanying Notes to Financial Statements.
Nicholas-Applegate Institutional Funds
Notes to Financial Statements
Note A — Organization
Nicholas-Applegate Institutional Funds (formerly Nicholas-Applegate Investment Trust) (the “Trust”) is an open-end investment management company. The Trust was established as a Delaware business trust on December 17, 1992 and consists of twelve separate portfolios (collectively the “Funds” and each a “Fund”). Each Fund’s investment objectives, strategies and risks are discussed in the Funds’ current prospectuses. All of the Funds have issued Class I shares (“Class I”), six Funds have issued Class II shares (“Class II”), one Fund has issued Class III shares (“Class III”), two Funds have issued Class IV shares (“Class IV”) and five Funds have issued Retirement shares (“Class R”). No shares have a sales charge. Class R has a distribution fee. All Funds have a shareholder services fee. The Funds offering Class R shares are covered in this report.
On April 19, 2004 the name of the following Fund was changed to more accurately reflect its investment policy.
Old | New | |
U.S. Large Cap Select | U.S. Systematic Large Cap | |
Growth | Growth |
Note B — Significant Accounting Policies
Significant accounting policies consistently followed by the Funds in preparing these financial statements are described below. The policies conform with accounting principles generally accepted in the United States.
Security Valuations
Equity securities, including ADRs and GDRs, that are traded on a stock exchange or on the NASDAQ National Market System are valued at the last sale price as of the close of business on the New York Stock Exchange (normally 4:00 p.m. New York time) on the day the securities are being valued, or lacking any sales, at the mean between the closing bid and asked prices. Securities listed or traded on certain non-U.S. exchanges whose operations are similar to the United States over-the-counter market are valued at the price within the limits of the latest available current bid and asked prices deemed by the Investment Adviser best to reflect fair value. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security by the Investment Adviser. The Investment Adviser has determined the Xetra is the primary market in Germany.
The Funds value long-term debt obligations, including high quality and high yield corporate securities, municipal securities, asset-backed securities, collateralized mortgage obligations and US Government and Agency issues, at the quoted bid price provided by an approved bond pricing service. Convertible securities are normally priced at the mean between the bid and ask prices. Short-term debt instruments, (e.g., commercial paper, bankers acceptances, U.S. Treasury Bills, etc.) having a maturity of less than 60 days will be valued at amortized cost. If a fixed income security has a maturity of greater than 60 days, it will be valued at market price.
Securities or other assets for which reliable market quotations are not readily available or for which the pricing agent or principal market maker does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser does not represent fair value (Fair Value Securities), are valued by the Pricing Committee overseen by the Board of Trustees in consultation as applicable, with the Investment Adviser’s portfolio managers, traders, and research and credit analysts and legal and compliance personnel. Fair Value Securities may include, but are not limited to, the following: certain private placements and restricted securities that do not have an active trading market; securities whose trading has been suspended or for which there is no current market; securities whose prices are stale; securities denominated in currencies that are restricted, untraded, or for which exchange rates are disrupted; securities affected by significant events; and securities that the Investment Adviser or Pricing Committee believe were priced incorrectly. A “significant event” (which includes, but is not limited to, an extraordinarily political or market event) is an event that the Investment Adviser or Pricing Committee believes with a reasonably high degree of certainty has caused the closing market prices of a Fund’s portfolio securities to no longer reflect their value at the time of the Fund’s NAV calculation.
Security Transactions and Investment Income
Security transactions are accounted for as of trade date. Realized gains and losses from security transactions are determined on an identified-cost basis.
Dividend income is recorded on the ex-dividend date or, for certain non-U.S. securities, when the information becomes available to the Funds. Interest income is recorded on an accrual basis. Discounts and premiums on debt securities are accreted and amortized on the yield to maturity basis.
Non-U.S. Currency Transactions
At each net asset valuation date, the value of assets and liabilities denominated in non-U.S. currencies are translated into U.S. dollars using the current exchange rate at the spot rate at 11:00 a.m. Eastern Time against the U.S. dollar, as provided by an approved pricing service. Security transactions, income and expenses are converted at the prevailing exchange rate on the day of the event. The effect of changes in exchange rates on securities denominated in a non-U.S. currency is included with the net realized and unrealized gain or loss of the associated security. Other Non-U.S. currency gains or losses are reported separately.
Certain Funds may use forward non-U.S. currency contracts to reduce their exposure to currency fluctuations of their non-U.S. securities. These contracts are commitments to purchase or sell a non-U.S. currency at a specified rate on a future date. When the contract is fulfilled or closed, gains or losses are realized. Until then, the gain or loss is included in unrealized appreciation or depreciation of investments. The contract commitment is fully collateralized by cash or securities of the Fund. Non-U.S. denominated assets and forward currency contracts may involve more risks than U.S. transactions, including currency risk, political and economic risk, regulatory and market risk. Evaluating and monitoring such risk exposure is a part of the Funds’ management strategy. There were no such forward non-U.S. currency contracts throughout year.
Futures Contracts
Each Fund may enter into futures contracts involving non-U.S. currency, interest rates, securities, and securities indices, for hedging purposes only. A futures contract obligates the seller of the contract to deliver and the purchaser of the contract to take delivery of the type of non-U.S. currency, financial instrument or security called for in the contract at a specified future time for a specified price. Upon entering into such a contract, a Fund is required to deposit and maintain as collateral such initial margin as required by the exchange on which the contract is traded. Pursuant to the contract, a Fund agrees to receive from or pay to the broker an amount equal to the daily fluctuations in the value of the contract. Such receipts or payments are known as variation margin and are recorded as unrealized gains or losses by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. There were no such futures contracts March 31, 2005.
Options Contracts
The Funds may: (a) buy call options on non-U.S. currency in anticipation of an increase in the value of the underlying asset; (b) buy put options on non-U.S. currency, portfolio securities, and futures in anticipation of a decrease in the value of the underlying asset; and (c) write call options on portfolio securities and futures to generate income from premiums, and in anticipation of a decrease or only limited increase in the value of the underlying asset. If a call written by a Fund is exercised, the Fund foregoes any possible profit from an increase in the market price of the underlying asset over the exercise price plus the premium received. When a Fund writes options on futures contracts, it will be subject to margin requirements similar to those applied to futures contracts.
Equity-Linked Securities
Certain Funds may purchase equity-linked securities, also known as participation notes, equity swaps, and zero strike calls and warrants. Equity-linked securities are primarily used by a Fund as an alternative means to more efficiently and effectively access the securities market of what is generally an emerging country. The Fund deposits an amount of cash with its custodian (or broker, if legally permitted) in an amount near or equal to the selling price of the underlying security in exchange for an equity linked security. Upon sale, the Fund receives cash from the broker or custodian equal to the value of the underlying security. Aside from market risk of the underlying securities, there is a risk of default by the other party to the transaction. In the event of insolvency of the other party, the Fund might be unable to obtain its expected benefit. In addition, while a Fund will seek to enter into such transactions only with parties which are capable of entering into closing transactions with the Fund, there can be no assurance that the Fund will be able to close out such a transaction with the other party or obtain an offsetting position with any other party, at any time prior to the end of the term of the underlying agreement. This may impair the Fund’s ability to enter into other transactions at a time when doing so might be advantageous.
Securities Lending
In order to generate expense offset credits, each of the Funds may lend portfolio securities, on a short-term or a long-term basis, up to 30% of a Fund’s total assets to broker/dealers, banks, or other institutional borrowers of securities. A Fund will only enter into loan arrangements with broker/dealers, banks, or other institutions which the Investment Adviser has determined are creditworthy and under the guidelines established by the Board of Trustees and will receive collateral in the form of cash or U.S. government securities equal to at least 102% of the value of the securities loaned on U.S. securities and 105% on non-U.S. securities.
There is the risk that when lending portfolio securities, the securities may not be available to the Fund on a timely basis and the Fund may, therefore, loose the opportunity to sell securities at a desirable price. In addition, in the event that a borrower of securities would file for bankruptcy or become insolvent, disposition of the securities may be delayed pending court action. The market value of securities on loan and the related collateral at the period ended March 31, 2005 were:
Fund | Value | Collateral | |||
U.S. Emerging Growth | $2,284,894 | $2,346,125 | |||
U.S. Small Cap Value | 3,110,088 | 3,218,000 | |||
International Growth | 9,978,756 | 10,497,014 |
Credit Facility
The Trust has a $15 million credit facility available to fund temporary or emergency borrowing expiring in January 2006. Each Fund pays its pro-rata share of an annual commitment fee plus interest on its specific borrowings. For the period ended March 31, 2005, the Funds did not borrow against the line of credit.
Commitments and Contingencies
The Funds may enter into contracts and agreements that contain a variety of representations and warranties which provide general indemnifications. The maximum exposure to the Funds under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risks of loss to be remote.
Fund Expenses and Multi-Class Allocations
Each Fund bears expenses incurred specifically on its behalf plus an allocation of its share of Trust level expenses. Each share offered by a Fund has equal rights to assets but incurs certain Class specific expenses. The Funds allocate income, gains and losses, both realized and unrealized, and expenses, except for Class specific expenses, based on the relative net assets of each share class.
Many of the brokers with whom the Investment Adviser places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund. In addition, through arrangements with the Funds custodian, credits realized as a result of uninvested cash balances were used to reduce the Funds expenses. During the period, the credits used to reduce the Funds expenses were:
Credit | Direct | Security | |||||
Interest | Brokerage | Lending | |||||
Fund | Offset | Offset | Offset | ||||
U.S. Emerging Growth | 6,152 | 39,090 | 55,924 | ||||
U.S. Small Cap Value | 73,228 | 38,291 | 20,042 | ||||
U.S. Large Cap Value | 7,345 | 4,990 | — | ||||
U.S. Systematic Large Cap Growth | 806 | 9,770 | 557 | ||||
International Growth | 20,288 | 220,985 | 102,714 |
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
Note C Federal Income Taxes
The Funds intend to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their taxable income to shareholders. Accordingly, no provision for federal income taxes is required. A Fund investing in foreign securities records any foreign taxes on income and gains on such investments in accordance with the applicable tax rules. The Funds’ tax accounting treatment of loss deferrals, accretion, passive foreign investment companies and expiration of capital loss carryforwards are different from the financial statement recognition of income and gains.
Capital loss carryforwards may be used to offset current or future capital gains until expiration.
Distributions to Shareholders
The Funds record distributions to shareholders on the ex-dividend date. Distributions are determined in accordance with income tax regulations that may differ from generally accepted accounting principles. Accordingly, the Funds’ capital accounts are periodically reclassified to reflect income and gains available for distribution under income tax regulations. The Funds make income and capital gain distributions at least annually. Funds with income objectives make distributions either quarterly or monthly in accordance with the prospectuses.
The tax characters of distributions paid during the fiscal year ended March 31, 2005 were as follows:
Distribution paid from: | |||||||||||
Net | Total | Total | |||||||||
Ordinary | long term | taxable | Tax return | distributions | |||||||
Fund | Income | capital gain | distributions | of capital | paid (1) | ||||||
U.S. Small Cap Value | 4,987,214 | 3,549,423 | 8,536,637 | — | 8,536,637 | ||||||
U.S. Large Cap Value | 308,287 | — | 308,287 | — | 308,287 | ||||||
International Growth | 327,979 | 2,360,474 | 2,688,453 | — | 2,688,453 |
The tax characters of distributions paid during the fiscal year ended March 31, 2004 were as follows:
Distribution paid from: | |||||||||||
Net | Total | Total | |||||||||
Ordinary | long term | taxable | Tax return | distributions | |||||||
Fund | Income | capital gain | distributions | of capital | paid (1) | ||||||
U.S. Small Cap Value | 1,430,416 | 186,694 | 1,617,110 | — | 1,617,110 | ||||||
U.S. Large Cap Value | 518,008 | — | 518,008 | — | 518,008 | ||||||
International Growth | 484,596 | — | 484,596 | — | 484,596 |
As of March 31, 2005 the components of accumulated earnings/(deficit) on a tax basis were as follows:
Components of accumulated earnings/(deficit): | |||||||||||||
Undistributed | Undistributed | Accumulated | Unrealized | Total | |||||||||
ordinary | long-term | Accumulated | capital and | appreciation/ | accumulated | ||||||||
Fund | income | capital gains | earnings | other losses (2) | (depreciation) | earning/(deficit) | |||||||
U.S. Emerging Growth | — | — | — | (11,033,225) | 2,204,867(3) | (8,828,358) | |||||||
U.S. Small Cap Value | 748,070 | 1,833,838 | 2,581,908 | — | 13,199,322(4) | 15,781,230 | |||||||
U.S. Large Cap Value | 363,111 | — | 363,111 | (5,910,341) | 4,420,331(3) | (1,126,899) | |||||||
U.S. Systematic Large Cap Growth | 26,492 | — | 26,492 | (9,749,949) | 620,626(3) | (9,102,831) | |||||||
International Growth | 7,292,666 | 7,788,127 | 15,080,793 | (24,887,165) | 11,052,061(3) | 1,245,689 |
(2) The following Funds had net capital loss carryforwards of approximately:
Capital Loss | Post October | ||||||
CarryForward | Expiration | Losses | |||||
Fund | (in 000’s) | Date | (in 000’s) | ||||
U.S. Emerging Growth | $1,030 | March 31, 2011 | $— | ||||
10,003 | March 31, 2010 | — | |||||
U.S. Large Cap Value | 5,910 | March 31, 2011 | — | ||||
U.S. Systematic Large Cap Growth | 321 | March 31, 2012 | 81 | ||||
2,665 | March 31, 2011 | — | |||||
6,683 | March 31, 2010 | — | |||||
International Growth | 10,739 | March 31, 2011 | 263 | ||||
13,885 | March 31, 2010 | — |
To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. The availability of loss carryforwards to any future years may be substantially limited a result of past or future ownership changes as determined under Internal Revenue Code Section 382. Net capital losses incurred after October 31, and within the taxable year are deemed to arise on the first business day of the Fund’s next taxable year. For the year ended March 31, 2005, the Fund deferred to April 1, 2005, post October capital and currency losses.
(3) The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales.
(4) The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and REIT adjustments.
Note D — Transactions with Affiliates
The Investment Adviser receives the following annual fees payable monthly based on the average daily net assets of each Fund.
Fund | Advisory Fee | ||
U.S. Emerging Growth | 0.75% | ||
U.S. Small Cap Value | 0.75% | ||
U.S. Large Cap Value | 0.45% | ||
U.S. Systematic Large Cap Growth | 0.45% | ||
International Growth | 0.50% |
Pursuant to the Administrative Services agreement the Investment Adviser provides operational support services to the Funds and receives the following annual fees payable monthly based on average daily net assets of each Fund.
Administrative | |||
Fund | Services Fee | ||
U.S. Emerging Growth | 0.12% | ||
U.S. Small Cap Value | 0.12% | ||
U.S. Large Cap Value | 0.12% | ||
U.S. Systematic Large Cap Growth | 0.15% | ||
International Growth | 0.25% |
Pursuant to the Shareholder Services agreement the Investment Adviser provides account servicing to the Funds and receives the following annual fees payable monthly based on the average daily net assets of each Fund.
Shareholder | |||
Fund | Services Fee | ||
U.S. Emerging Growth | 0.13% | ||
U.S. Small Cap Value | 0.13% | ||
U.S. Large Cap Value | 0.13% | ||
U.S. Systematic Large Cap Growth | 0.15% | ||
International Growth | 0.25% |
The Investment Adviser has agreed to waive its fees and absorb other operating expenses of the Funds so that total operating expenses are limited to certain levels through March 31, 2006. The Investment Adviser will recover expense reimbursements paid to the Funds to the extent of the difference between the Funds’ actual expenses (exclusive of taxes, interest, brokerage and the expenses incurred from the operation of the Mauritius Company ) when they fall below the limit in the year such reimbursement is paid.
The Funds reduce expenses by offsets to custodial and other fees based upon the amount of securities lent to third parties, brokerage commissions recaptured and cash maintained with its custodian. These offset arrangements will have no effect on the amount of fees that the Investment Adviser must waive or expenses that it must otherwise reimburse under the Expense Limitation Agreement.
The following table presents expense limitations for the Funds for the period ended March 31, 2005.
Class R | |||
Fund | 4/1/04 to 03/31/05 | ||
U.S. Emerging Growth | 1.73% | ||
U.S. Small Cap Value | 1.55% | ||
U.S. Large Cap Value | 1.06% | ||
U.S. Systematic Large Cap Growth | 1.37% | ||
International Growth | 1.66% |
Shareholder Services Agreement
Each of the Funds has entered into a Shareholder Services Agreement with the Distributor under which each Fund will pay the distributor up to 0.25% of the average daily assets of each of the Funds to pay financial institutions, including the Investment Adviser, for certain personal services for shareholders and for the maintenance of shareholder accounts.
Distribution Plan
Each Fund has adopted a distribution plan in accordance with Rule 12b-1 under the Investment Company Act. Class R shares may pay a fee to the Distributor in an amount computed at an annual rate of up to 0.25% of the average daily net assets to finance any activity which is principally intended to result in the sale of shares. The schedule of such fees and the basis upon which such fees will be determined from time to time by the Distributor. Over time, these fees will increase the cost of your shares and may cost you more than paying other types of sales charges.
Trustee Compensation
Certain officers of the Trust are also officers of the Investment Adviser and Distributor. The Trustees who are not affiliated with the Investment Adviser receive annual compensation of approximately $35,000 each from the Trust.
Allianz Dresdner Daily Asset Fund
The Funds may invest securities lending collateral in affiliated Allianz Dresdner Daily Assets Fund. The Allianz Dresdner Daily Asset Fund is an investment company managed by Drezdner Advisor, LLC, an affiliate of Nicholas-Applegate Capital Management.
Broker Commission
Certain of the Funds placed a portion of their portfolio transactions with the brokers Kleinwort Benson and Dresdner Kleinwort Wasserstein, each of which are affiliates of the investment adviser and the Trust.
Note E — Investment Transactions
The following table presents purchases and sales of securities, excluding short-term investments, during the year ended March 31, 2005 to indicate the volume of transactions in each Fund. The tax cost of securities held at March 31, 2005, and the related gross and net unrealized appreciation and depreciation, provide aggregate information on a tax basis against which future gains and losses on these investments are measured for distribution purposes.
Net | |||||||||||||
Gross | Gross | Unrealized | |||||||||||
Unrealized | Unrealized | Appreciation | |||||||||||
Purchases | Sales | Tax Cost | Appreciation | Depreciation | (Depreciation) | ||||||||
Fund | (in 000’s) | (in 000’s) | (in 000’s) | (in 000’s) | (in 000’s) | (in 000’s) | |||||||
U.S. Emerging Growth | $35,505 | $55,588 | $15,611 | $2,723 | $(518) | $2,205 | |||||||
U.S. Small Cap Value | 78,717 | 52,659 | 94,391 | 15,374 | (2,212) | 13,162 | |||||||
U.S. Large Cap Value | 10,886 | 9,186 | 20,416 | 4,702 | (282) | 4,420 | |||||||
U.S. Systematic Large Cap Growth | 24,709 | 28,789 | 9,464 | 1,061 | (441) | 620 | |||||||
International Growth | $219,921 | 255,332 | 108,913 | 12,497 | (1,446) | 11,051 |
Gains and losses resulting from the redemptions-in-kind are included in the realized gain/loss from securities and non-U.S. currency transactions. During the period, the Funds did not have any redemptions-in-kind.
Note F — Financial Instruments
During the period, several of the Funds have been party to financial instruments with off-balance sheet risks, including forward non-U.S. currency contracts, primarily in an attempt to minimize the risk to the Fund, in respect of its portfolio transactions. These instruments involve market and/or credit risk in excess of the amount recognized in the Statement of Assets and Liabilities. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from unexpected movement in currencies, securities values and interest rates. The contract amounts indicate the extent of the Funds’ involvement in such contracts.
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
Nicholas-Applegate Institutional Funds
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and changes in net assets and the financial highlights present fairly, in all material respects, the financial position of each of the portfolios comprising the Nicholas-Applegate Institutional Funds (collectively, the “Funds”) at March 31, 2005, and the results of each of their operations for the year then ended, the changes in each of their net assets for the two years in the period then ended and each of their financial highlights for the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights of the Funds for years ended March 31, 2002 and 2001 were audited by other independent accountants whose report dated May 1, 2002 expressed an unqualified opinion on those financial highlights.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Los Angeles, California
May 25, 2005
Nicholas-Applegate Institutional Funds
Supplementary Information — (Unaudited)
Proxy Voting (unaudited)
The Investment Adviser votes proxies on behalf of the Funds pursuant to written policies and procedures adopted by the Funds. To obtain free information on how your Funds’ securities were voted, please call the Funds at 1-800-551-8043. You may also view how the Fund’s securities were voted by visiting the Securities & Exchange Commission’s website at www.sec.gov.
Additional Federal Tax Information (unaudited)
The Funds intend to distribute the maximum amount of qualified dividend income allowable. The amount of qualified dividend income distributed by each Fund will be reported to shareholders on the 2005 Form 1099-DIV.
The amounts which represent income derived from sources within, and taxes paid to non-U.S. countries or possessions of the United States are as follows:
Foreign | |||||
Fund | Source Income | FTC Total: | |||
International Growth | $1,797,390 | $173,830 |
The percentage of ordinary dividends paid by the Funds during the year ended March 31, 2005, which qualify for the Dividends Received Deduction available to corporate shareholders was:
Fund | Percentage: | ||
U.S. Small Cap Value | 14.04% | ||
U.S. Large Cap Value | 100.00% |
The Funds hereby designate the following approximate amounts as capital gains distributions for the purpose of the Dividends Paid Deduction:
Fund | Amounts: | ||
U.S. Small Cap Value | $3,549,423 | ||
International Growth | 2,360,474 |
Quarterly Filing (unaudited)
The Funds provide a complete list of their holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds’ semiannual and annual reports to shareholders. For the first and third quarters, the Funds file the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the Funds’ Form N-Q on the SEC’s website at www.sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. To find out more about this public service, call the SEC at 1-202-942-8090.
Trustee Approval of Management Fee (unaudited)
Based upon the recommendation of the Contract Committee of the Board of Trustees, a Committee comprised of all of the independent Trustees, the Trustees unanimously approved the continuance of the Investment Advisory Agreement between the Funds and Nicholas-Applegate at a meeting held November 11, 2004.
In approving the Investment Advisory Agreement, the Trustees, through its Contract Committee, evaluated a comprehensive package of materials, including performance and expense data for other funds with similar investment objectives/policies that had been provided by an independent organization. Prior to making its recommendation, the Contract Committee reviewed the proposed continuance of the Investment Advisory Agreement with representatives of Nicholas-Applegate and with independent legal counsel who prepared a legal memorandum outlining the legal guidelines for review of the Investment Advisory Agreement. Members of the Contract Committee also met privately with independent legal counsel to discuss the factors they felt were relevant. The factors included:
1. comparative performance data for each of the Funds and other funds with similar investment objectives/policies and to a relevant index;
2. payments received by Nicholas-Applegate; and costs incurred by Nicholas-Applegate and their profit margins in connection with its relationship to the Funds;
3. comparative fee and expense data for each of the Funds and other funds with similar investment objectives/policies;
4. Implementation of Nicholas-Applegate’s compliance policies and practices including policies and practices regarding allocation of portfolio transactions, best price and execution of portfolio transactions, and soft dollar arrangements;
5. portfolio turnover rates;
6. fall-out benefits, such as research received pursuant to Section 28(e) of the Securities Exchange Act of 1934;
7. fees that Nicholas-Applegate charges its other clients with similar investment objectives/policies;
8. experience and qualifications of each of the members of the portfolio management teams;
The Contract Committee also considered the nature and quality of the services provided by Nicholas-Applegate, their confidence in Nicholas-Applegate’s integrity and competence, and Nicholas-Applegate’s responsiveness to questions and issues raised by the Trustees, including its willingness to consider and implement changes designed to improve investment and operational results.
In their deliberations, the Contract Committee did not identify any particular information that was controlling, and each member of the Contract Committee may have attributed different weights to the various factors.
The Contract Committee noted that some of the Funds appeared to be too small for optimum portfolio management. The Trustees considered it important that the adviser put additional effort and resources to enhance size of the Funds.
The Contract Committee determined that the fees of the Investment Advisory Agreement between each of the Funds and Nicholas-Applegate were fair and reasonable in light of the services performed, expenses incurred and such other matters as the Contract Committee considered relevant in the exercise of their reasonable judgment.
The Contract Committee also separately discussed the material factors and conclusions that formed the basis for the Contract Committee to recommend to the Board of Trustees approval of the Investment Advisory Agreement for each of the Funds.
Nature, extent and quality of the services provided by Nicholas-Applegate
The Contract Committee noted that Nicholas-Applegate manages the portfolios of each of the Funds under the direction of the Board of Trustees. Nicholas-Applegate manages each Fund consistent with each Fund’s objectives and policies. Nicholas-Applegate provides each Fund with office space and such other services and personnel as are necessary for its operations.
The Contract Committee considered the scope and quality of services provided by Nicholas-Applegate under the Investment Advisory Agreement. The Contract Committee considered the quality of the investment research capabilities of Nicholas-Applegate and the other resources that it has dedicated to performing services for the Funds. Although the Contract Committee noted that investment performance in 5 of the Funds fell below expectations in terms of both performance and expenses, following a report by Nicholas-Applegate’s Chief Investment Officer on changes being implemented to improve performance, the Committee expressed confidence in Nicholas-Applegate and the portfolio management teams. Accordingly, the Contract Committee concluded that, overall, it was satisfied with the efforts being made by Nicholas-Applegate to maintain and enhance the nature, extent and quality of services provided to each of the Funds.
Cost of Services
The Contract Committee noted the Funds’ assets had decreased over time, resulting in lower revenues to Nicholas-Applegate. With this factor combined with an increase in expenses necessary to expand the quality of investment personnel, respond to regulatory change, and retain key personnel, Nicholas-Applegate’s profitability from its arrangements with the Funds has declined over time and is expected to continue to decline until assets increase. In these circumstances, “profitability” was considered but not given significant weight by the Contract Committee.
Economies of Scale
The Contract Committee noted that the investment advisory fee schedules for the Funds do not contain breakpoints that reduce the fee rate on assets above specified levels. However, the Contract Committee did note that overall fees paid to Nicholas-Applegate (investment advisory, administration, and shareholder service) contain the functional equivalent of breakpoints through four to five different share classes that reduce the fees paid to Nicholas-Applegate based on the asset level of the account. The Contract Committee recognized that the existing fee structure is consistent with the institutional nature of the Funds and of Nicholas-Applegate’s business, which caters to large institutional investors (e.g. pension plans, endowments, public funds). Having taken these factors into consideration, the Contract Committee believed the Funds’ current multiple share class fee structure establishes a reasonable basis for realizing economies of scale for certain of the Funds’ expenses which may exist when account size increases. At current asset levels, the Contract Committee also noted that the Funds have not realized any economies of scale in respect to other fund expenses.
Investment Results, Fees and Expenses
The Contract Committee considered the investment result of each of the Funds as compared to investment companies with similar investment objectives and policies as determined by an independent organization and with a relevant securities index. In addition to the information received by the Contract Committee for their meeting, Nicholas-Applegate provides detailed performance information for each Fund at each regular meeting of the Board of Trustees during the year. At the meeting of the Contract Committee, the members reviewed information showing absolute and relative performance of each Fund over 1-year, 3-year, and 5-year periods.
The Contract Committee considered the investment advisory fee paid by each Fund. The Contract Committee recognized that it is difficult to make comparisons of investment advisory fees paid by others because there are variations in the services that are included in the fees paid by those funds.
The Contract Committee also considered the fees that Nicholas-Applegate charges other clients with similar investment objectives/policies. These included management fees and performance fees charged. Nicholas-Applegate acts as sub-adviser to several open-end and closed-end registered investment companies, non-US investment companies, and investment adviser for separately managed institutional investor accounts. For funds where Nicholas-Applegate acts as sub-adviser, the investment advisory fee for those funds is lower. For separately managed accounts where Nicholas-Applegate acts as investment adviser, the investment advisory fee is comparable and in some cases higher. Representatives of Nicholas-Applegate reviewed with the Contract Committee the significant differences in the scope of services provided and financial commitments and risks involved in managing the various types of accounts.
The Contract Committee also considered the total expense ratio for each Fund in comparison to its peer group.
U.S. Emerging Growth Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the Russell 2000 Growth Index. The comparative information showed the Fund had underperformed its peer group and Index for the 1-year, 3-year, and 5-year periods.
The Contract Committee also reviewed comparable fees and expenses. The $43 million of assets for the Fund was equal to the average of its peer group. The information showed that the Fund’s investment advisory fee was less than the peer group median, gross expense ratio lower than the peer group average, and net expense ratio higher than the peer group median although it was not the highest one in the group. Nicholas-Applegate explained the gross expense ratio was very favorable to that of the peer group but the other advisers had waiver and/or reimbursed more than Nicholas-Applegate. The Contract Committee concluded that the Fund’s expense ratio was acceptable in light of quality of services and other factors considered.
U.S. Small Cap Value Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the Russell 2000 Value Index. The comparative information showed the Fund had substantially outperformed both the peer group and the Index for the 1-year and 3-year periods. Based on their review, the Contract Committee concluded the Fund’s relative performance over time had been satisfactory.
The Contract Committee also reviewed comparable fees and expenses. The peer group consisted of funds with net assets, on average, of $130 million compared with $44 million for the Fund. The information showed that the Fund’s investment advisory fee about the same as its peer group median and its net and gross expense ratio was higher than its peer group median but it was not the highest in the group. Nicholas-Applegate explained that the Fund’s higher than average expense ratio was a product of its lower than average net asset base and that it expected the expense ratio to decrease as assets increased. The Contract Committee expressed the need to focus on distribution efforts and Nicholas-Applegate expressed optimism concerning its efforts to distribute shares of the Fund. The Contract Committee concluded that the expense ratio was acceptable in light of the quality of services offered and other factors considered. It also concluded that the expense ratio would decrease as assets in the Fund increased.
U.S. Large Cap Value Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the Russell 1000 Value Index. The comparative information showed the Fund was best in its peer group for 5-year performance and slightly below the peer group average for 1-year and 3-year periods. Based on their review, the Contract Committee concluded the Fund’s relative investment performance over time had been satisfactory. The Trustees voiced the expectation would take appropriate steps to enhance future performance over its 1 and 3-year performance.
The Contract Committee also reviewed comparable fees and expenses. The peer group consisted of funds with net assets, on average, of $36 million compared with $24 million for the Fund. The information showed that the Fund’s investment advisory fee was lower than its peer group and its net expense ratio was slightly lower (3 basis points) to its peer group median.
U.S. Systematic Large Cap Growth Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the Russell 1000 Growth Index. The comparative information showed the Fund had underperformed its peer group and Index for the 1-year, 3-year, and 5-year periods. In early 2004, Nicholas-Applegate changed portfolio manager teams from one focusing on a traditional approach to one that followed a quantitative approach that relied on analytical investment models prepared by the team. Since that time, the Fund had outperformed the Index. The Contract Committee considered Nicholas-Applegate’s change in the Fund’s portfolio management team and the relative performance of the Fund since the change. Based on their review, the Contract Committee concluded that, although the Fund’s relative performance over time had compared unfavorably to its peers and Index, Nicholas-Applegate was addressing the Trustees concerns about investment performance and retained confidence in Nicholas-Applegate’s overall capabilities to manage the Fund.
The Contract Committee also reviewed comparable fees and expenses. The peer group consisted of funds with net assets, on average, of $21 million compared with $24 million for the Fund. The information showed that the Fund’s investment advisory fee was below the peer group median, gross expenses were below the peer group median, and net expenses were higher (9 basis points) than the peer group median. Nicholas-Applegate explained that the Fund’s gross expense ratio was favorable to that of the peer group but other advisers had waived and/or reimbursed more than Nicholas-Applegate. The Contract Committee concluded that the Fund’s expense ratio was acceptable in light of the quality of services and other factors considered.
International Growth Fund. The Contract Committee reviewed information showing performance of the Fund compared to its peer group and the MSCI EAFE Index. The comparative information showed the Fund had underperformed the Index and its peer group for the 1-year, 3-year, and 5-year periods. The Contract Committee considered the change in Lead Portfolio Managers, the addition of two new analysts, and enhancement of its investment process. Based on their review, the Contract Committee concluded that, although the Fund’s relative investment performance over time had compared unfavorably to its peers and Index, Nicholas-Applegate was addressing the Trustee’s concerns about investment performance and retained confidence in Nicholas-Applegate’s overall capabilities to manage the Fund.
The Contract Committee also reviewed comparable fees and expenses. The peer group consisted of funds with net assets, on average, of $175 million compared to $153 million for the Fund. The information showed that the Fund’s investment advisory fee was lower than its peer group and its net expense ratio was higher than the peer group average although it was not the highest in the group. Nicholas-Applegate explained that the Fund’s gross expense ratio was comparable to the peer group average but other advisers had elected to waive and/or reimburse more than Nicholas-Applegate. The Contract Committee concluded that that the Fund’s expense ratio was acceptable in light of the quality of services offered and other factors considered. In view of Nicholas-Applegate’s declining revenues from the Funds’ operations, the Trustees concluded that Nicholas-Applegate’s waiver was appropriate.
Corporate Governance (unaudited)
Number of | ||||||||||
Term of | Portfolios in | |||||||||
Position(s) | Office and | Fund Complex | ||||||||
Name, Address (1) | Held with | Length of Time | Principal Occupation(s) | Overseen by | Other Directorships | |||||
and Age | Fund | Served (2) | During Past 5 Years | Trustee | Held by Trustee | |||||
Disinterested Trustees: | ||||||||||
George F. Keane (76) | Chairman | Since August 2004 | President Emeritus and founding Chief Executive Officer, The Common Fund (1971-1993); and Endowment Advisors (1987-1999) (organizations that provide investment management programs for colleges and universities) ; | 12 | Director, Bramwell Funds (since 1994); Director, Longview Oil & Gas (since 2000); Director, Security Capital U.S. Real Estate (since 1997); Director, The Universal Bond Fund (since 1997); Director, Universal Stainless & Alloy Products Inc. (since 1994); Director, United Water Services and affiliated companies (1996-2000); Director, and former Chairman of the Board, Trigen Energy Corporation (1994-2000); Trustee, Nicholas-Applegate Mutual Funds (1994-1999). | |||||
Walter E. Auch (84) | Trustee | Since May 1999 | Retired; prior thereto, Chairman and CEO of Chicago Board of Options Exchange (1979-1986); Senior Executive Vice President PaineWebber, Inc. | 12 | Trustee, LLBS Funds (since 1994 and Brinson Supplementary Trust (since 1997); Director, Thompson Asset Management Corp (1987-1999; Director, Smith Barney Trak Fund (since 1992) and Smith Barney Advisors (since 1992); Director, PIMCO Advisors L.P (since 1994); Director, Banyon Realty Trust (1988-2002), Banyon Mortgage Investment Fund (1989-2002) and Banyon Land Fund II (since 1988); Director, Express America Holdings Corp (1992-1999); Director, Legend Properties, Inc. (1987-1999); Director, Senele Group (since 1988); Director, Fort Dearborn Income Securities, Inc. (1987-1995); Trustee, Nicholas-Applegate Mutual Funds (1994-1999); Director, Geotek Industries, Inc. (1987-1998). | |||||
Darlene DeRemer (49) | Trustee | Since May 1999 | Partner, Grail Partners LLC, and Advisor Merchant Bank (since 2005) Managing Director, Putnam Lovell NBF Private Equity (2004-Feb 2005); Managing Director, NewRiver E-Business Advisory Services Division (2000-2003); Prior to, President and Founder, DeRemer Associates, a strategic and marketing consulting firm for the financial services industry (1987-2003); Vice President and Director, Asset Management Division, State Street Bank and Trust Company, now referred to as State Street Global Advisers, (1982-1987); Vice President, T. Rowe Price & Associates (1979-1982); Member, Boston Club (since 1998); Member, Financial Women’s Association Advisory Board (since 1995); Founder, Mutual Fund Cafe Website. | 12 | Trustee, Bramwell Funds (since 2003), Board of Directors Independent Directors Council (IDC) (since 2004); Founding Member and Director, National Defined Contribution Council (since 1997); Trustee, Boston Alzheimer’s Association (since 1998); Director, King’s Wood Montessori School (since 1995); Editorial Board, National Association of Variable Annuities (since 1997); Director, Nicholas- Applegate Strategic Opportunities, Ltd. (1994-1997); Trustee, Nicholas-Applegate Mutual Funds (1994-1999); Director, Jurika & Voyles Fund Group (1994-2000); Director, Nicholas-Applegate Southeast Asia Fund, Ltd. (since 2004). | |||||
Interested Trustees: | ||||||||||
Horacio A. Valeiras (46) | President & Trustee | Since August 2004 | Managing Director (Since 2004) and Chief Investment Officer, Nicholas-Applegate Capital Management, Nicholas-Applegate Securities (since 2002); Managing Director of Morgan Stanley Investment Management, London (1997-2002); Head of International Equity and Asset Allocation, Miller Anderson & Sherred; Director and Chief of International Strategies, Credit Suisse First Boston. | 12 | Trustee, The Bishops School (Since 2002); Trustee, San Diego Rowing Club (Since 2002). | |||||
Officers: | ||||||||||
Charles H. Field, Jr. (49) | Secretary | Since May 2002 | General Counsel, Nicholas- Applegate Capital Management, LLC (since 2004); Chief Compliance Officer (since ); Deputy General Counsel (1996-2004). | 12 | NA | |||||
Thomas Muscarella (49) | Treasurer | Since May 2005 | Director, Mutual Fund Operations, Nicholas-Applegate Capital Management LLC (since 1998) | 12 | NA |
(1) Unless otherwise noted, the address of the Trustees and Officers is c/o: Nicholas-Applegate Capital Management, 600 West Broadway, 32nd Floor, San Diego, California 92101.
(2) Each Trustee serves for an indefinite term, until her or his successor is elected.
TRUSTEES OF NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
George F. Keane, Chairman
Walter E. Auch
Darlene T. DeRemer
Horacio A. Valeiras
OFFICERS
Horacio A. Valeiras, President
Charles H. Field, Jr., Secretary
Thomas Muscarella, Treasurer
INVESTMENT ADVISER
Nicholas-Applegate Capital Management
DISTRIBUTOR
Nicholas-Applegate Securities
CUSTODIAN
Brown Brothers Harriman & Co., Private Bankers
TRANSFER AGENT
UMB Fund Services Group, Inc.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
[Logo NICHOLAS APPLEGATE INSTITUTIONAL FUNDS](Registered_Trademark)
600 West Broadway
San Diego, California 92101
800 - 551 - 8643
Nicholas-Applegate Securities, Distributor
ANN305RET
ITEM 2. CODE OF ETHICS.
(a) | The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. |
(b) | There have been no amendments, during the period covered by this Report, to a provision of the code of ethics that applies to the |
registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing
similar functions, regardless of weather these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description.
(c) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
(d) | A copy of the code of ethics referenced in Item 2(a) of this Form N-CSR is filed as Exhibit 12(a) (1) of this Form N-CSR. |
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant’s Board of Trustees has determined that the registrant has at least one audit committee financial expert serving on its audit committee.
(2) The following Trustees have been designated as audit committee financial experts by the Board of Trustees: George F. Keane, Walter E. Auch and Darlene T. De Remer. Messrs. Keane and Auch and Ms. DeRemer are “independent” as defined in Item 3(a) (2) of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $251,300.00 for 2005 and $222,650.00 for 2004.
(b) AUDIT-RELATED FEES
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this item are $0 for 2005 and $0 for 2004.
(c) Tax Fees
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advise and tax planning are $29,670.50 for 2005 and $20,000.00 for 2004. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state, local and Mauritius entity tax planning, advice
and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification.
(d) All Other Fees
The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 for 2005 and $0 for 2004. These services consisted of (i) review of SEC regulatory filings(ii) Consulting related to the Mauritius Entity
(e) (1) The registrant has adopted pre-approval policies and procedures consistent with Rule 2-01(c) (7) of Regulation S-X. The policies and procedures allow for the pre-approval of the following non-audit services: consultations on GAAP and/or financial statement disclosure matters not exceeding $25,000/year; consultations on tax accounting matters not exceeding $25,000/year; review of annual excise distribution provisions not exceeding $15,000/year; and, various regulatory and tax filings in foreign jurisdictions (such as India, Taiwan and Venezuela) not exceeding $25,000/year. The policies and procedures require quarterly reporting to the Audit Committee of all such services performed and related fees billed pursuant to the policies and procedures.
(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(c) of Rule 2-01 of Regulation S-X are as follows:
(b) Not applicable.
(c) 100%
(d) Not applicable.
(f) If greater than 50% The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was 0%
(g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was 0 for 2005 and $0 for 2004.
(h) | The registrant’s Audit Committee has considered whether the provision of non-audit services that were rendered to the registrant’s investment advisor (not including any subadvisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 9. PURCHASE OF EQUITY SECURITIES BY CLOSE-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
Item 11(a) The registrant’s principal executive and financial officers have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) are effective, as of a date within 90 days of the filing date of the report, that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1933, as amended.
Item 11(b) There were no changes in the registrant's internal controls over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) The registrant’s code of ethics that is the subject of the disclosure required by Item 2 is filed as Exhibit 12(a) (1)
(a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2) is filed as Exhibit 12(a) (2).
(b) The certifications required by Rule 30a-2(b) under the Act and Section 1350 of Chapter 63 of Title 18 of the United States Code are attached as exhibit 12(b).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nicholas-Applegate Institutional Funds
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By (Signature and Title)
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/s/ Horacio A. Valeiras
Horacio A. Valeiras
Title: President
Date: August 24, 2005
By (Signature and Title)
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/s/ Thomas Muscarella
Thomas Muscarella
Title: Treasurer
Date: August 24, 2005
* Print name and title of each signing officer under his or her signature.