UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
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: September 30, 2006
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
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
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.
<Page>
NICHOLAS | APPLEGATE(R) INSTITUTIONAL FUNDS
SEPTEMBER 30, 2006 SEMI-ANNUAL REPORT (UNAUDITED)
CLASS I, II, III & IV SHARES
U.S. MICRO CAP
U.S. EMERGING GROWTH
U.S. SMALL CAP VALUE
U.S. LARGE CAP VALUE
U.S. SYSTEMATIC LARGE CAP GROWTH
U.S. SYSTEMATIC MID CAP GROWTH
U.S. CONVERTIBLE
GLOBAL SELECT
INTERNATIONAL GROWTH
INTERNATIONAL GROWTH OPPORTUNITIES
EMERGING MARKETS
INTERNATIONAL SYSTEMATIC
INTERNATIONAL ALL CAP GROWTH
U.S. HIGH YIELD BOND
[A company of Allianz LOGO]
GLOBAL INVESTORS
<Page>
LETTER TO SHAREHOLDERS
Dear Fellow Shareholder,
Equity markets around the world posted solid gains during the six months ended
September 30, 2006. Despite rising inflationary pressures and monetary
tightening, stock markets advanced amid strength in the global economy, healthy
corporate profits and a retreat in commodity prices.
In this semi-annual report, we review the performance of the financial markets
and our mutual funds from April 1 through September 30. In addition, we share
our thoughts on key themes shaping the investment environment and our outlook
for the months ahead.
In the United States, the broad equity market, as measured by the S&P 500 Index,
gained 4.14% this period. The Federal Reserve continued increasing short-term
interest rates during the spring in efforts to control rising inflation.
However, the central bank held the target funds rate steady at its August and
September meetings on signs that the U.S. economy was cooling. GDP grew at a
2.6% annual rate in the second quarter, following a scorching 5.6% pace in the
first three months of the year. Corporate profits remained robust, with S&P 500
companies reporting 16.3% year-over-year earnings growth in the second quarter
of 2006. This was well ahead of expectations and marked the twelfth consecutive
quarter of double-digit expansion.
In developed countries overseas, the MSCI EAFE Index eked out a 0.86% gain in
local currencies but rose 4.97% in U.S. dollar terms. European markets turned in
some of the best results, with the MSCI Europe Index rising 3.86% in local
currencies. Eurozone economies grew 0.9% in the second quarter (their fastest
pace since 2000 -- and growth in the United Kingdom was also strong). Inflation
climbed above policymakers' targets, prompting the European Central Bank and
Bank of England to raise short-term interest rates. The MSCI Japan Index fell
5.21% in dollar terms and nearly the same in yen on fears that moderating U.S.
economic growth would depress demand for exports. The Japanese economy remains
sensitive to the global cycle, even though domestic fundamentals have improved.
The Bank of Japan raised interest rates in July after five years of a near-zero
interest rate policy, reflecting its confidence in the country's recovery.
After gaining more than 40% in the prior twelve months, emerging market equities
took a breather this period, with the MSCI Emerging Markets Index rising 0.53%
(US$). Global equity markets were volatile in May due to worries about U.S.
inflation that were fueled by hawkish comments from the Fed and an unexpectedly
large rise in core consumer prices. As is common in such environments,
short-term investors took risk off the table and moved into perceived safe
havens, such as stocks in more developed countries. These concerns, along with
tensions in the Middle East, also contributed to the relative performance of
style and capitalization segments. Globally, value stocks outpaced growth stocks
and large caps outperformed smaller caps this period.
Commodity prices have corrected from their highest levels on slower demand
worldwide for oil and raw materials. The Reuters/Jeffries CRB Index, a barometer
of commodity prices, fell 9.4% from April 1 to September 30. The pullback eased
investor concerns about inflation and the need for further monetary tightening
from central banks. Investors were particularly enthusiastic about the
approximately 20% drop in the price of oil from its mid-July peak. This steep
decline was a major factor in the equity market gains realized during the latter
part of the period.
Just as there were several positive developments in the markets, there were a
number of positive developments at Nicholas-Applegate. One we are especially
excited about is the October 2006 opening of our London office, an event we have
been preparing for and anticipating for months. As a global investment firm, our
priority is to capitalize on changes that are taking place around the world.
This new office in Europe's leading financial center will strengthen our ability
to identify and capitalize on investment opportunities in the European markets.
We added several professionals to our traditional and systematic investment
teams this period, evidence of our commitment to providing shareholders with
top-notch talent. In particular, the broadening of our systematic team is
allowing us to pursue new avenues for maintaining the integrity and robustness
of our proprietary stock selection models. We currently have several research
projects underway in the areas of retail and financials, which have
applicability to both our U.S. and non-U.S. systematic funds. This research is
part of a process of continuous refinement and underscores our sensitivity to
the dynamic nature of the financial markets.
Two members of the Nicholas-Applegate family of funds celebrated ten-year
anniversaries this period: the U.S. Large Cap Value Fund and the U.S. High Yield
Bond Fund. The U.S. Large Cap Value Fund gained 12.61% on an annualized basis
from its April 30, 1996 inception through September 30, 2006. Additionally, the
Fund outperformed its benchmark, the Russell 1000 Value Index, which rose
11.17%. The U.S. High Yield Bond Fund gained 8.42% from its July 31, 1996
inception through September 30, 2006, outperforming the 6.69% advance in the
Merrill Lynch High Yield Master II Index. We are proud to say that both funds
ranked in the top 5% of their Lipper style categories during the ten years ended
September 30.
Looking ahead, leading economic indicators in major developed countries outside
of Japan remain positive, despite recent declines. This supports our belief that
the global economy will continue to grow, albeit at a more modest pace. Although
we anticipate further rate increases from the European Central Bank and Bank of
Japan, we think the Fed is done tightening U.S. monetary policy. In addition,
commodity prices have fallen, equity valuations are reasonable, and earnings
growth, while decelerating, should remain at healthy levels in the United States
and abroad. A slowdown in the global economy, tame inflation, attractive
valuations and good earnings growth are an excellent recipe for higher share
prices as we head into 2007.
In this environment, we believe companies that can deliver strong earnings
growth should once again command premium valuations relative to all others. The
market seems to be rotating away from early cyclical companies and sectors into
more stable growth companies, suggesting that many years of value leadership may
be finally coming to an end. We also think this kind of environment is ideal for
security selection, particularly for investing in companies where positive
change is leading to increased earnings estimates. In our ongoing quest to
deliver excess return to shareholders, 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 the trust you have
placed in us.
Best Regards,
/s/ Horacio A. Valeiras
- --------------------------------------
Horacio A. Valeiras, CFA
President and Chief Investment Officer
September 30, 2006
<Page>
TABLE OF CONTENTS
THE FUNDS' REVIEW AND OUTLOOK, PERFORMANCE AND
SCHEDULE OF INVESTMENTS
U.S. Micro Cap 2
U.S. Emerging Growth 7
U.S. Small Cap Value 11
U.S. Large Cap Value 15
U.S. Systematic Large Cap Growth 17
U.S. Systematic Mid Cap Growth 21
U.S. Convertible 25
Global Select 30
International Growth 34
International Growth Opportunities 38
Emerging Markets 42
International Systematic 45
International All Cap Growth 48
U.S. High Yield Bond 52
THE FUNDS':
Financial Highlights 58
Statements of Assets and Liabilities 66
Statement of Operations 68
Statements of Changes in Net Assets 70
Notes to Financial Statements 74
Shareholder Expense Example 79
Supplementary Information 81
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.
<Page>
U.S. MICRO CAP FUND
MANAGEMENT TEAM: JOHN C. MCCRAW, Portfolio Manager; TRAVIS T. PRENTICE,
Portfolio Manager; MONTIE L. WEISENBERGER, Portfolio Manager; K. MATHEW AXLINE,
CFA, Analyst; STEPHEN W. LYFORD, Analyst
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The U.S. Micro Cap Fund seeks to maximize long-term capital appreciation
by investing primarily in U.S. companies with "micro" market capitalizations
that offer superior growth prospects.
MARKET OVERVIEW: Following impressive gains in the first quarter of the year,
U.S. micro-cap stocks declined during the six months ended September 30, 2006.
Losses were precipitated by fears that rising inflation would cause the Federal
Reserve to continue the series of interest rate increases it began in June 2004
and, in turn, dampen economic and earnings growth. The price of oil jumped to
$78.40 a barrel, the Consumer Price Index edged upward and the government
reported that second quarter GDP growth had slowed to an annual pace of 2.6%.
Corporate profits remained strong, however.
Despite posting losses for the full period, micro-cap stocks advanced in August
and September, buoyed by falling oil prices, milder readings on inflation and a
"pause" from the Fed. The central bank held short-term rates steady at each of
its last two policy meetings of the period and stated that it expected inflation
pressures to ease over time.
Within the micro-cap market, sector returns were mixed. Energy and materials
were two of the worst-performing groups, as the price of oil and other
commodities moderated over the course of the period. Industrials were also
notably weak on signs the economy was transitioning to a more mature phase of
its growth. In contrast, stocks in the financials sector generated gains, helped
by the Fed's decision not to raise rates, and improving fundamentals lent
support to shares of telecommunication services companies.
PERFORMANCE: During the six months ended September 30, 2006, the Fund's Class I
shares lost 11.65% and the Russell Microcap Index fell 7.41%.
PORTFOLIO SPECIFICS: Stock selection in the consumer discretionary and
industrials sectors had a major positive effect on results versus the index.
Top-performing positions included Interstate Hotels & Resorts, a hotel
management company; Casual Male Retail Group, an apparel retailer; and Superior
Essex, a manufacturer of communications wire and cable products. Interstate
Hotels & Resorts reported better-than-expected earnings and won a sizeable new
contract. Investors rewarded Casual Male for several initiatives that should
fuel future growth, including a new customer loyalty program. Superior Essex was
positively impacted by a rapid rise in copper prices, which the company was able
to capitalize on through procurement, pricing and hedging activities. Stock
selection in the telecommunication services and energy sectors also benefited
performance versus the index.
On the negative side, the downturn in stock prices this period caused investors
to avoid assets perceived as having higher risk. Consequently, micro-cap value
stocks outperformed their growth counterparts by a wide margin. This hurt the
Fund's relative performance since holdings are concentrated in growth stocks,
while the style-neutral benchmark includes both growth and value names. Other
major areas of relative weakness included stock selection in the information
technology and materials sectors and an underweight in financials.
MARKET OUTLOOK: In the months ahead, a number of factors pave the way for gains
among micro-cap growth stocks, including:
- Expectations that the Fed will hold the target funds rate steady
through the end of 2006
- Healthy corporate profit growth
- Lower gasoline prices, which have bolstered consumer confidence
Risks to our outlook include ongoing cooling in the housing market and resurgent
geopolitical tensions. However, we are confident that we can find companies with
outstanding growth potential for the Fund in any type of investment environment.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN U.S. MICRO CAP FUND
CLASS I AND II SHARES WITH THE RUSSELL 2000 GROWTH INDEX, RUSSELL 2000
GROWTH/RUSSELL MICROCAP INDEX, AND RUSSELL 2000 GROWTH/RUSSELL MICROCAP GROWTH
INDEX.
[CHART]
<Table>
<Caption>
U.S. MICRO RUSSELL 2000 RUSSELL 2000/ RUSSELL 2000/
CAP FUND GROWTH RUSSELL RUSSELL MICROCAP
CLASS I SHARES INDEX MICROCAP INDEX GROWTH INDEX
-------------- ------------ -------------- ----------------
7/12/1995 $ 250,000 $250,000 $250,000 $250,000
7/31/1995 $ 261,400 $258,350 $258,350 $258,350
8/31/1995 $ 266,210 $261,538 $261,538 $261,538
9/30/1995 $ 275,607 $266,923 $266,923 $266,923
10/31/1995 $ 270,205 $253,793 $253,793 $253,793
11/30/1995 $ 278,203 $264,996 $264,996 $264,996
12/31/1995 $ 286,994 $270,868 $270,868 $270,868
1/31/1996 $ 284,584 $268,625 $268,625 $268,625
2/29/1996 $ 301,374 $280,874 $280,874 $280,874
3/31/1996 $ 316,985 $286,427 $286,427 $286,427
4/30/1996 $ 365,199 $308,416 $308,416 $308,416
5/31/1996 $ 408,803 $324,232 $324,232 $324,232
6/30/1996 $ 371,602 $303,163 $303,163 $303,163
7/31/1996 $ 318,983 $266,153 $266,153 $266,153
8/31/1996 $ 340,579 $285,856 $285,856 $285,856
9/30/1996 $ 359,583 $300,578 $300,578 $300,578
10/31/1996 $ 349,191 $287,611 $287,611 $287,611
11/30/1996 $ 361,133 $295,610 $295,610 $295,610
12/31/1996 $ 369,403 $301,374 $301,374 $301,374
1/31/1997 $ 384,696 $308,902 $308,902 $308,902
2/28/1997 $ 358,960 $290,248 $290,248 $290,248
3/31/1997 $ 329,346 $269,765 $269,765 $269,765
4/30/1997 $ 319,630 $266,644 $266,644 $266,644
5/31/1997 $ 374,799 $306,720 $306,720 $306,720
6/30/1997 $ 408,905 $317,121 $317,121 $317,121
7/31/1997 $ 444,848 $333,370 $333,370 $333,370
8/31/1997 $ 477,277 $343,375 $343,375 $343,375
9/30/1997 $ 522,714 $370,776 $370,776 $370,776
10/31/1997 $ 488,215 $348,507 $348,507 $348,507
11/30/1997 $ 483,382 $340,199 $340,199 $340,199
12/31/1997 $ 480,917 $340,390 $340,390 $340,390
1/31/1998 $ 473,366 $335,849 $335,849 $335,849
2/28/1998 $ 510,005 $365,501 $365,501 $365,501
3/31/1998 $ 556,211 $380,834 $380,834 $380,834
4/30/1998 $ 565,555 $383,168 $383,168 $383,168
5/31/1998 $ 533,375 $355,331 $355,331 $355,331
6/30/1998 $ 542,016 $358,962 $358,962 $358,962
7/31/1998 $ 498,709 $328,989 $328,989 $328,989
8/31/1998 $ 371,039 $253,045 $253,045 $253,045
9/30/1998 $ 402,912 $278,701 $278,701 $278,701
10/31/1998 $ 416,691 $293,239 $293,239 $293,239
11/30/1998 $ 459,652 $315,985 $315,985 $315,985
12/31/1998 $ 521,475 $344,579 $344,579 $344,579
1/31/1999 $ 536,650 $360,078 $360,078 $360,078
2/28/1999 $ 472,896 $327,138 $327,138 $327,138
3/31/1999 $ 479,517 $338,790 $338,790 $338,790
4/30/1999 $ 516,488 $368,709 $368,709 $368,709
5/31/1999 $ 495,157 $369,292 $369,292 $369,292
6/30/1999 $ 544,425 $388,746 $388,746 $388,746
7/31/1999 $ 539,688 $376,726 $376,726 $376,726
8/31/1999 $ 560,790 $362,636 $362,636 $362,636
9/30/1999 $ 582,324 $369,632 $369,632 $369,632
10/31/1999 $ 633,977 $379,098 $379,098 $379,098
11/30/1999 $ 750,882 $419,184 $419,184 $419,184
12/31/1999 $ 963,682 $493,065 $493,065 $493,065
1/31/2000 $1,001,747 $488,474 $488,474 $488,474
2/29/2000 $1,347,650 $602,123 $602,123 $602,123
3/31/2000 $1,207,225 $538,828 $538,828 $538,828
4/30/2000 $ 988,114 $484,422 $484,422 $484,422
5/31/2000 $ 853,039 $442,006 $442,006 $442,006
6/30/2000 $1,112,960 $499,104 $499,104 $499,104
7/31/2000 $ 993,205 $456,331 $456,331 $456,331
8/31/2000 $1,094,214 $504,333 $489,780 $503,607
9/30/2000 $1,048,257 $479,277 $474,499 $478,326
10/31/2000 $ 913,451 $440,374 $445,033 $430,541
11/30/2000 $ 728,660 $360,416 $393,231 $349,083
12/31/2000 $ 764,437 $382,470 $414,544 $354,040
1/31/2001 $ 805,029 $413,427 $461,305 $403,004
2/28/2001 $ 688,058 $356,754 $431,781 $348,800
3/31/2001 $ 622,693 $324,318 $413,992 $322,326
4/30/2001 $ 701,152 $364,024 $445,165 $356,782
5/31/2001 $ 748,620 $372,455 $474,635 $378,653
6/30/2001 $ 794,735 $382,612 $505,487 $402,925
7/31/2001 $ 757,541 $349,971 $480,263 $371,174
8/31/2001 $ 725,876 $328,098 $463,982 $346,937
9/30/2001 $ 618,519 $275,143 $402,551 $294,792
10/31/2001 $ 659,774 $301,612 $425,013 $320,026
11/30/2001 $ 690,718 $326,796 $457,059 $346,748
12/31/2001 $ 738,170 $347,156 $487,453 $372,824
1/31/2002 $ 727,836 $334,797 $488,575 $363,019
2/28/2002 $ 689,988 $313,136 $467,126 $335,066
3/31/2002 $ 748,430 $340,347 $506,552 $363,044
4/30/2002 $ 749,777 $332,996 $516,075 $354,730
5/31/2002 $ 720,236 $313,515 $496,567 $333,979
6/30/2002 $ 696,828 $286,929 $488,870 $314,474
7/31/2002 $ 557,881 $242,828 $415,051 $263,530
8/31/2002 $ 550,294 $242,707 $410,195 $263,872
9/30/2002 $ 513,809 $225,183 $379,471 $242,340
10/31/2002 $ 525,524 $236,578 $388,427 $251,210
11/30/2002 $ 559,210 $260,023 $427,852 $279,094
12/31/2002 $ 517,269 $242,081 $408,941 $264,609
1/31/2003 $ 505,579 $235,496 $404,361 $261,751
2/28/2003 $ 492,485 $229,209 $393,767 $253,297
3/31/2003 $ 511,741 $232,670 $398,610 $257,907
4/30/2003 $ 566,088 $254,680 $436,199 $282,872
5/31/2003 $ 644,491 $283,383 $490,069 $322,191
6/30/2003 $ 694,697 $288,852 $512,172 $339,300
7/31/2003 $ 766,250 $310,689 $552,172 $367,496
8/31/2003 $ 812,992 $327,373 $577,241 $384,474
9/30/2003 $ 822,585 $319,091 $585,380 $391,356
10/31/2003 $ 916,113 $346,660 $637,303 $426,461
11/30/2003 $ 955,964 $357,961 $663,178 $442,538
12/31/2003 $ 951,184 $359,572 $680,354 $449,442
1/31/2004 $1,028,896 $378,450 $723,284 $478,521
2/29/2004 $1,032,291 $377,882 $726,105 $475,793
3/31/2004 $1,008,858 $379,658 $724,653 $470,797
4/30/2004 $ 951,050 $360,599 $685,304 $442,691
5/31/2004 $ 960,656 $367,775 $684,071 $440,876
6/30/2004 $ 964,114 $379,985 $711,912 $454,895
7/31/2004 $ 866,450 $345,901 $653,179 $405,721
8/30/2004 $ 827,286 $338,464 $644,623 $397,728
9/30/2004 $ 858,888 $357,181 $672,342 $416,223
10/31/2004 $ 861,637 $365,860 $680,611 $422,133
11/30/2004 $ 954,349 $396,775 $742,003 $461,349
12/31/2004 $1,008,556 $411,020 $776,506 $484,971
1/31/2005 $ 949,253 $392,483 $745,756 $461,837
2/28/2005 $ 964,441 $397,860 $748,068 $461,283
3/31/2005 $ 927,599 $382,940 $718,744 $438,865
4/30/2005 $ 887,156 $358,585 $676,050 $410,646
5/31/2005 $ 931,957 $383,865 $712,963 $436,311
6/30/2005 $ 987,595 $396,264 $741,552 $453,066
7/31/2005 $1,064,924 $423,963 $794,351 $487,952
8/31/2005 $1,055,552 $417,985 $782,912 $481,950
9/30/2005 $1,071,491 $421,287 $786,435 $488,022
10/31/2005 $1,030,989 $405,699 $762,606 $468,697
11/30/2005 $1,098,828 $428,662 $795,475 $493,350
12/31/2005 $1,113,662 $428,019 $796,350 $494,929
1/31/2006 $1,223,915 $469,323 $869,853 $545,016
2/28/2006 $1,208,371 $466,836 $869,505 $544,416
3/31/2006 $1,289,815 $489,524 $908,893 $566,029
4/30/2006 $1,297,167 $488,104 $903,804 $558,841
5/31/2006 $1,206,884 $453,742 $851,022 $518,269
6/30/2006 $1,193,609 $454,014 $847,362 $511,635
7/31/2006 $1,127,721 $430,450 $816,433 $485,798
8/31/2006 $1,132,909 $443,063 $838,314 $498,866
9/30/2006 $1,139,593 $446,076 $841,583 $499,215
</Table>
Annualized Total Returns As of 9/30/06
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Micro Cap Fund Class I 6.35% 13.00% 12.23%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index 5.88% 10.15% 4.03%
- --------------------------------------------------------------------------------
R2000 Growth/RMicrocap Index 7.02% 15.89% 10.85%
- --------------------------------------------------------------------------------
R2000 Growth/RMicrocap Growth Index 2.29% 11.11% 5.20%
- --------------------------------------------------------------------------------
2
<Page>
[CHART]
<Table>
<Caption>
RUSSELL 2000/ RUSSELL 2000/
U.S. MICRO CAP RUSSELL 2000 RUSSELL RUSSELL
FUND CLASS II GROWTH MICROCAP MICROCAP
SHARES INDEX INDEX GROWTH INDEX
-------------- ------------ ------------- -------------
7/12/1995 $ 250,000.00 $250,000.00 $250,000.00 $250,000.00
7/31/1995 $ 261,400.00 $258,350.00 $258,350.00 $258,350.00
8/31/1995 $ 266,209.76 $261,538.04 $261,538.04 $261,538.04
9/30/1995 $ 275,606.96 $266,923.11 $266,923.11 $266,923.11
10/31/1995 $ 270,205.07 $253,793.16 $253,793.16 $253,793.16
11/30/1995 $ 278,203.14 $264,995.59 $264,995.59 $264,995.59
12/31/1995 $ 286,994.36 $270,867.89 $270,867.89 $270,867.89
1/31/1996 $ 284,583.60 $268,625.11 $268,625.11 $268,625.11
2/29/1996 $ 301,374.04 $280,874.41 $280,874.41 $280,874.41
3/31/1996 $ 316,985.21 $286,427.30 $286,427.30 $286,427.30
4/30/1996 $ 365,198.66 $308,416.32 $308,416.32 $308,416.32
5/31/1996 $ 408,803.38 $324,231.91 $324,231.91 $324,231.91
6/30/1996 $ 371,602.28 $303,163.32 $303,163.32 $303,163.32
7/31/1996 $ 318,983.39 $266,153.14 $266,153.14 $266,153.14
8/31/1996 $ 340,578.57 $285,856.46 $285,856.46 $285,856.46
9/30/1996 $ 359,582.85 $300,578.07 $300,578.07 $300,578.07
10/31/1996 $ 349,190.91 $287,611.13 $287,611.13 $287,611.13
11/30/1996 $ 361,133.24 $295,609.60 $295,609.60 $295,609.60
12/31/1996 $ 369,403.19 $301,373.98 $301,373.98 $301,373.98
1/31/1997 $ 384,696.48 $308,902.30 $308,902.30 $308,902.30
2/28/1997 $ 358,960.29 $290,247.69 $290,247.69 $290,247.69
3/31/1997 $ 329,346.06 $269,764.91 $269,764.91 $269,764.91
4/30/1997 $ 319,630.35 $266,643.73 $266,643.73 $266,643.73
5/31/1997 $ 374,798.55 $306,720.29 $306,720.29 $306,720.29
6/30/1997 $ 408,905.22 $317,121.17 $317,121.17 $317,121.17
7/31/1997 $ 444,847.99 $333,370.46 $333,370.46 $333,370.46
8/31/1997 $ 477,277.41 $343,374.91 $343,374.91 $343,374.91
9/30/1997 $ 522,714.22 $370,776.23 $370,776.23 $370,776.23
10/31/1997 $ 488,215.08 $348,507.41 $348,507.41 $348,507.41
11/30/1997 $ 483,381.75 $340,198.99 $340,198.99 $340,198.99
12/31/1997 $ 480,916.50 $340,389.50 $340,389.50 $340,389.50
1/31/1998 $ 473,366.11 $335,848.71 $335,848.71 $335,848.71
2/28/1998 $ 510,004.65 $365,500.79 $365,500.79 $365,500.79
3/31/1998 $ 556,211.07 $380,833.55 $380,833.55 $380,833.55
4/30/1998 $ 565,555.42 $383,168.06 $383,168.06 $383,168.06
5/31/1998 $ 533,375.32 $355,330.90 $355,330.90 $355,330.90
6/30/1998 $ 542,016.00 $358,962.38 $358,962.38 $358,962.38
7/31/1998 $ 498,708.92 $328,989.02 $328,989.02 $328,989.02
8/31/1998 $ 371,039.44 $253,045.19 $253,045.19 $253,045.19
9/30/1998 $ 402,911.72 $278,701.45 $278,701.45 $278,701.45
10/31/1998 $ 416,691.30 $293,238.51 $293,238.51 $293,238.51
11/30/1998 $ 459,652.18 $315,985.03 $315,985.03 $315,985.03
12/31/1998 $ 521,475.39 $344,578.51 $344,578.51 $344,578.51
1/31/1999 $ 536,650.33 $360,077.65 $360,077.65 $360,077.65
2/28/1999 $ 472,896.27 $327,137.75 $327,137.75 $327,137.75
3/31/1999 $ 479,516.82 $338,790.39 $338,790.39 $338,790.39
4/30/1999 $ 516,487.56 $368,708.97 $368,708.97 $368,708.97
5/31/1999 $ 495,156.63 $369,291.53 $369,291.53 $369,291.53
6/30/1999 $ 544,424.71 $388,745.81 $388,745.81 $388,745.81
7/31/1999 $ 539,688.22 $376,725.79 $376,725.79 $376,725.79
8/31/1999 $ 560,790.03 $362,636.25 $362,636.25 $362,636.25
9/30/1999 $ 582,324.36 $369,631.50 $369,631.50 $369,631.50
10/31/1999 $ 633,976.53 $379,097.76 $379,097.76 $379,097.76
11/30/1999 $ 750,881.81 $419,183.56 $419,183.56 $419,183.56
12/31/1999 $ 963,681.71 $493,064.66 $493,064.66 $493,064.66
1/31/2000 $1,001,747.14 $488,474.23 $488,474.23 $488,474.23
2/29/2000 $1,347,650.43 $602,122.65 $602,122.65 $602,122.65
3/31/2000 $1,207,225.25 $538,827.51 $538,827.51 $538,827.51
4/30/2000 $ 988,113.87 $484,422.10 $484,422.10 $484,422.10
5/31/2000 $ 853,038.70 $442,006.10 $442,006.10 $442,006.10
6/30/2000 $1,112,959.60 $499,104.45 $499,104.45 $499,104.45
7/31/2000 $ 993,205.14 $456,331.20 $456,331.20 $456,331.20
8/31/2000 $1,094,214.11 $504,332.68 $489,780.27 $503,607.11
9/30/2000 $1,048,257.11 $479,277.43 $474,499.13 $478,326.03
10/31/2000 $ 913,451.25 $440,374.48 $445,032.73 $430,541.26
11/30/2000 $ 728,660.06 $360,415.69 $393,230.92 $349,082.86
12/31/2000 $ 764,437.27 $382,469.52 $414,544.04 $354,039.83
1/31/2001 $ 805,028.89 $413,426.60 $461,304.61 $403,003.54
2/28/2001 $ 688,058.19 $356,754.09 $431,781.11 $348,799.56
3/31/2001 $ 622,692.66 $324,318.00 $413,991.73 $322,325.68
4/30/2001 $ 701,151.94 $364,024.26 $445,165.31 $356,782.29
5/31/2001 $ 748,619.93 $372,455.06 $474,635.25 $378,653.05
6/30/2001 $ 794,734.91 $382,611.91 $505,486.54 $402,924.71
7/31/2001 $ 757,541.32 $349,971.29 $480,262.76 $371,174.24
8/31/2001 $ 725,876.09 $328,098.08 $463,981.86 $346,936.56
9/30/2001 $ 618,519.02 $275,143.05 $402,550.66 $294,792.00
10/31/2001 $ 659,774.24 $301,611.81 $425,012.99 $320,026.19
11/30/2001 $ 690,717.65 $326,796.40 $457,058.96 $346,748.38
12/31/2001 $ 738,169.95 $347,155.81 $487,453.39 $372,823.86
1/31/2002 $ 727,835.57 $334,797.07 $488,574.53 $363,018.59
2/28/2002 $ 689,988.12 $313,135.70 $467,126.11 $335,066.16
3/31/2002 $ 748,430.11 $340,347.19 $506,551.55 $363,044.18
4/30/2002 $ 749,777.29 $332,995.69 $516,074.72 $354,730.47
5/31/2002 $ 720,236.06 $313,515.44 $496,567.09 $333,978.74
6/30/2002 $ 696,828.39 $286,929.33 $488,870.30 $314,474.38
7/31/2002 $ 557,880.81 $242,828.29 $415,050.89 $263,529.53
8/31/2002 $ 550,293.63 $242,706.88 $410,194.79 $263,872.12
9/30/2002 $ 513,809.16 $225,183.44 $379,471.20 $242,340.15
10/31/2002 $ 525,524.01 $236,577.73 $388,426.72 $251,209.80
11/30/2002 $ 559,210.10 $260,022.58 $427,852.04 $279,094.09
12/31/2002 $ 517,269.34 $242,081.02 $408,940.98 $264,609.11
1/31/2003 $ 505,579.06 $235,496.42 $404,360.84 $261,751.33
2/28/2003 $ 492,484.56 $229,208.66 $393,766.58 $253,296.76
3/31/2003 $ 511,740.71 $232,669.71 $398,609.91 $257,906.76
4/30/2003 $ 566,087.57 $254,680.27 $436,198.83 $282,872.14
5/31/2003 $ 644,490.70 $283,382.73 $490,069.38 $322,191.36
6/30/2003 $ 694,696.52 $288,852.02 $512,171.51 $339,299.73
7/31/2003 $ 766,250.26 $310,689.23 $552,172.11 $367,495.53
8/31/2003 $ 812,991.53 $327,373.25 $577,240.72 $384,473.83
9/30/2003 $ 822,584.83 $319,090.70 $585,379.81 $391,355.91
10/31/2003 $ 916,112.73 $346,660.14 $637,303.00 $426,460.53
11/30/2003 $ 955,963.63 $357,961.26 $663,177.51 $442,538.10
12/31/2003 $ 951,183.81 $359,572.08 $680,353.80 $449,441.69
1/31/2004 $1,028,895.53 $378,449.62 $723,284.13 $478,520.57
2/29/2004 $1,032,290.88 $377,881.94 $726,104.94 $475,793.00
3/31/2004 $1,008,857.88 $379,657.99 $724,652.73 $470,797.17
4/30/2004 $ 951,050.32 $360,599.16 $685,304.08 $442,690.58
5/31/2004 $ 960,655.93 $367,775.08 $684,070.54 $440,875.55
6/30/2004 $ 964,114.29 $379,985.21 $711,912.21 $454,895.39
7/31/2004 $ 866,449.52 $345,900.54 $653,179.45 $405,721.20
8/30/2004 $ 827,286.00 $338,463.68 $644,622.80 $397,728.49
9/30/2004 $ 858,888.32 $357,180.72 $672,341.58 $416,222.87
10/31/2004 $ 862,323.88 $365,860.21 $680,611.38 $422,133.23
11/30/2004 $ 955,109.92 $396,775.40 $742,002.53 $461,349.41
12/31/2004 $1,009,360.17 $411,019.64 $776,505.64 $484,970.50
1/31/2005 $ 950,110.73 $392,482.65 $745,756.02 $461,837.41
2/28/2005 $ 965,312.50 $397,859.66 $748,067.86 $461,283.20
3/31/2005 $ 929,113.28 $382,939.93 $718,743.60 $438,864.84
4/30/2005 $ 888,603.94 $358,584.95 $676,050.23 $410,645.83
5/31/2005 $ 933,389.58 $383,865.19 $712,962.58 $436,311.19
6/30/2005 $ 989,766.31 $396,264.03 $741,552.38 $453,065.54
7/31/2005 $1,067,166.04 $423,962.89 $794,350.91 $487,951.59
8/31/2005 $1,057,774.97 $417,985.01 $782,912.25 $481,949.79
9/30/2005 $1,074,382.04 $421,287.09 $786,435.36 $488,022.35
10/31/2005 $1,033,877.84 $405,699.47 $762,606.37 $468,696.67
11/30/2005 $1,101,700.22 $428,662.06 $795,474.70 $493,350.11
12/31/2005 $1,117,234.20 $428,019.07 $796,349.72 $494,928.83
1/31/2006 $1,228,175.55 $469,322.91 $869,852.80 $545,015.63
2/28/2006 $1,212,577.72 $466,835.50 $869,504.86 $544,416.11
3/31/2006 $1,294,669.24 $489,523.70 $908,893.43 $566,029.43
4/30/2006 $1,302,825.65 $488,104.08 $903,803.63 $558,840.86
5/31/2006 $1,212,539.83 $453,741.55 $851,021.50 $518,269.01
6/30/2006 $1,199,201.90 $454,013.80 $847,362.10 $511,635.17
7/31/2006 $1,132,646.19 $430,450.48 $816,433.39 $485,797.59
8/31/2006 $1,138,535.95 $443,062.68 $838,313.80 $498,865.55
9/30/2006 $1,145,139.46 $446,075.51 $841,583.23 $499,214.76
</Table>
Annualized Total Returns As of 9/30/06
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Micro Cap Fund Class II 6.59% 13.11% 12.28%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index 5.88% 10.15% 4.03%
- --------------------------------------------------------------------------------
R2000 Growth/RMicrocap Index 7.02% 15.89% 10.85%
- --------------------------------------------------------------------------------
R2000 Growth/RMicrocap Growth Index 2.29% 11.11% 5.20%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND COMPARED WITH THE RUSSELL 2000 GROWTH INDEX AND FOR CLASS I SHARES, A
BLENDED INDEX COMPRISED OF THE RUSSELL 2000 GROWTH INDEX/RUSSELL MICROCAP GROWTH
INDEX AND A BLENDED INDEX COMPRISED OF THE RUSSELL 2000 GROWTH INDEX/RUSSELL
MICROCAP INDEX (COLLECTIVELY "BLENDED INDEXES"). THE FUND'S CLASS I AND II
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
AND II SHARES. THE NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS' CLASS I SHARES WERE
FIRST AVAILABLE ON MAY 7, 1999 AND CLASS II SHARES ON SEPTEMBER 30, 2004. THE
HISTORICAL PERFORMANCE OF CLASS II SHARES INCLUDES THE PERFORMANCE OF CLASS I
SHARES FOR PERIODS PRIOR TO THE INCEPTION OF CLASS II. AVERAGE ANNUAL TOTAL
RETURN FIGURES INCLUDE CHANGES IN PRINCIPAL VALUE, REINVESTMENT DIVIDENDS, AND
CAPITAL GAIN DISTRIBUTIONS. 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 GROWTH 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 RUSSELL MICROCAP INDEX INCLUDES THE SMALLEST 1,000 SECURITIES IN THE RUSSELL
2000 INDEX PLUS THE NEXT 1,000 SECURITIES. THE RUSSELL MICROCAP GROWTH INDEX
ISOLATES THE SECURITIES IN THE RUSSELL MICROCAP INDEX WITH PURELY GROWTH
CHARACTERISTICS. THE RUSSELL MICROCAP INDEXES ARE NEWER INDEXES (AUGUST 2000)
AND THEREFORE HAVE LESS PERFORMANCE HISTORY THAN THE FUND'S CLASS I SHARES (JULY
1995). EACH BLENDED INDEX REPRESENTS THE RUSSELL 2000 GROWTH PERFORMANCE UP TO
THE INCEPTION OF THE RUSSELL MICROCAP INDEXES. INDEX PERFORMANCE THEREAFTER IS
THAT OF EACH RESPECTIVE MICROCAP INDEX. IN FUTURE REPORTS TO SHAREHOLDERS, THE
FUND WILL COMPARE ITS PERFORMANCE TO THE BLENDED RUSSELL 2000 GROWTH/RUSSELL
MICROCAP GROWTH INDEX AS THE RUSSELL MICROCAP GROWTH INDEX MORE ACCURATELY
REFLECTS THE COMPOSITION OF THE FUND'S PORTFOLIO.
THE INDEXES DIFFER FROM THE FUND IN COMPOSITION, DO 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.
3
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2006
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 98.0%
ADVERTISING SERVICES - 0.6%
Greenfield Online, Inc.* 48,300 $ 501,837
----------
AEROSPACE/DEFENSE - 1.0%
United Industrial Corp. 14,400 770,400
----------
AEROSPACE/DEFENSE-EQUIPMENT - 0.7%
LMI Aerospace, Inc.* 28,500 527,250
----------
AGRICULTURAL OPERATIONS - 0.3%
The Andersons, Inc. 7,100 242,465
----------
AIR POLLUTION CONTROL EQUIPMENT - 0.8%
Ceco Environmental Corp.* 68,200 630,850
----------
APPAREL MANUFACTURERS - 1.0%
Maidenform Brands, Inc.* 41,000 791,300
----------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL - 1.5%
Amerigon, Inc. Cl. A*, ## 60,400 519,440
Spartan Motors, Inc. ## 34,500 649,635
----------
1,169,075
----------
BEVERAGES-NON-ALCOHOLIC - 0.7%
Jones Soda Co.*, ## 57,800 517,310
----------
BREWERY - 0.9%
Boston Beer Company, Inc. Cl. A* 21,100 693,135
----------
BUILDING & CONSTRUCTION-MISCELLANEOUS - 0.8%
Layne Christensen Co.* 21,700 619,969
----------
BUILDING PRODUCTS-AIR & HEATING - 0.8%
Comfort Systems USA, Inc.## 57,000 653,220
----------
CHEMICALS-FIBERS - 0.5%
Zoltek Cos, Inc.*, ## 16,000 408,800
----------
CHEMICALS-PLASTICS - 0.7%
Landec Corp.*, ## 54,300 586,440
----------
CHEMICALS-SPECIALTY - 0.9%
Stepan Co. ## 23,300 681,059
----------
COMMERCIAL BANKS-CENTRAL US - 0.8%
Capitol Bancorp., Ltd. 15,100 671,950
----------
COMMERCIAL BANKS-EASTERN US - 1.1%
Bancorp, Inc. Cl. A* 34,500 879,405
----------
COMMERCIAL BANKS-SOUTHERN US - 2.7%
Home Bancshares, Inc. ## 17,700 390,816
Iberiabank Corp. ## 10,700 652,700
Intervest Bancshares Corp.* 13,900 605,484
Virginia Commerce Bancorp.* 22,975 510,045
----------
2,159,045
----------
COMMERCIAL BANKS-WESTERN US - 4.8%
Banner Corp. 19,600 804,384
Cascade Bancorp 21,200 796,060
First Regional Bancorp.* 24,400 831,308
First State Bancorp 30,900 802,473
West Coast Bancorp 19,000 580,260
----------
3,814,485
----------
COMMERCIAL SERVICES - 2.3%
HMS Holdings Corp.*, ## 48,200 608,284
ICT Group, Inc.* 10,000 314,700
PeopleSupport, Inc.* 50,900 941,650
----------
1,864,634
----------
COMMUNICATIONS SOFTWARE - 0.5%
Smith Micro Software, Inc.*, ## 30,200 434,276
----------
COMPUTER SERVICES - 1.7%
eLoyalty Corp.*, ## 37,200 $ 673,692
Tyler Technologies, Inc.* 54,500 704,685
----------
1,378,377
----------
COMPUTERS-INTEGRATED SYSTEMS - 0.5%
Cray, Inc.*, ## 37,300 414,776
----------
COMPUTERS-MEMORY DEVICES - 0.9%
Simpletech, Inc.*, ## 76,800 699,648
----------
COMPUTERS-PERIPHERAL EQUIPMENT - 0.7%
Sigma Designs, Inc.*, ## 36,100 539,695
----------
CONSULTING SERVICES - 1.9%
First Consulting Group, Inc.* 65,300 636,675
Huron Consulting Group, Inc.*, ## 21,900 858,480
----------
1,495,155
----------
CONSUMER PRODUCTS-MISCELLANEOUS - 0.8%
WD-40 Co. 18,200 649,194
----------
DECISION SUPPORT SOFTWARE - 0.7%
Interactive Intelligence, Inc.* 47,200 545,632
----------
DISPOSABLE MEDICAL PRODUCTS - 0.7%
Volcano Corp.*, ## 50,200 576,798
----------
DISTRIBUTION/WHOLESALE - 0.6%
Houston Wire & Cable Co.*, ## 24,700 464,360
----------
DIVERSIFIED MANUFACTURING OPERATIONS - 1.8%
Ameron International Corp. 9,600 637,824
AZZ, Inc.* 22,800 832,200
----------
1,470,024
----------
DRUG DELIVERY SYSTEMS - 0.4%
Emisphere Technologies, Inc.*, ## 41,400 349,830
----------
E-COMMERCE/PRODUCTS - 0.9%
FTD Group, Inc.* 41,400 639,630
Shutterfly, Inc.* 4,900 76,195
----------
715,825
----------
EDUCATIONAL SOFTWARE - 1.3%
INVESTools, Inc.* 93,600 994,968
----------
ELECTRONIC COMPONENTS-MISCELLANEOUS - 0.8%
Daktronics, Inc. 30,300 626,907
----------
ELECTRONIC MEASURE INSTRUMENTS - 0.6%
Eagle Test Systems, Inc.*, ## 31,300 517,076
----------
ELECTRONIC PARTS DISTRIBUTION - 0.7%
NU Horizons Electronics Corp.*, ## 42,500 541,450
----------
ENTERPRISE SOFTWARE/SERVICES - 1.5%
Opnet Technologies, Inc.*, ## 41,400 542,754
Ultimate Software Group, Inc.* 28,000 658,840
----------
1,201,594
----------
E-SERVICES/CONSULTING - 0.5%
Access Integrated Technologies, Inc. Cl. A*, ## 40,800 386,376
----------
FINANCE-CONSUMER LOANS - 2.0%
Asta Funding, Inc. ## 20,500 768,545
World Acceptance Corp.* 18,800 826,824
----------
1,595,369
----------
FIREARMS & AMMUNITION - 1.3%
Smith & Wesson Holding Corp.*, ## 72,700 1,009,076
----------
FOOD-RETAIL - 1.2%
Ingles Markets, Inc. Cl. A 12,000 316,560
Wild Oats Markets, Inc.*, ## 37,300 603,141
----------
919,701
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
FOOD-WHOLESALE/DISTRIBUTION - 0.8%
Spartan Stores, Inc. 37,700 $ 637,130
----------
FOOTWEAR & RELATED APPAREL - 0.6%
Iconix Brand Group, Inc.* 29,800 479,780
----------
HOTELS & MOTELS - 1.1%
Interstate Hotels & Resorts, Inc.*, ## 81,400 877,492
----------
HOUSEWARES - 1.1%
National Presto Industries, Inc. 15,700 867,739
----------
HUMAN RESOURCES - 0.6%
Kenexa Corp.*, ## 18,300 461,526
----------
INDUSTRIAL AUTOMATION/ROBOTICS - 1.0%
Gerber Scientific, Inc.*, ## 53,800 805,924
----------
INSTRUMENTS-SCIENTIFIC - 0.8%
OYO Geospace Corp.* 11,100 629,925
----------
INTERNET APPLICATIONS SOFTWARE - 2.1%
Art Technology Group, Inc.* 153,800 393,728
Cybersource Corp.* 58,200 688,506
Vocus, Inc.*, ## 38,600 609,108
----------
1,691,342
----------
INTERNET CONTENT-INFO/NEWS - 1.5%
The Knot, Inc.* 22,900 506,777
TheStreet.com, Inc. 63,900 679,896
----------
1,186,673
----------
LIGHTING PRODUCTS & SYSTEMS - 0.7%
Color Kinetics, Inc.*, ## 35,100 595,998
----------
MACHINERY-FARM - 0.8%
Lindsay Manufacturing Co. ## 21,300 612,375
----------
MACHINERY-GENERAL INDUSTRY - 2.7%
Flow International Corp.*, ## 48,400 627,748
Kadant, Inc.* 32,800 805,568
Robbins & Myers, Inc. 22,300 689,516
----------
2,122,832
----------
MACHINERY-PUMPS - 0.8%
Gorman-Rupp Co. 18,500 604,950
----------
MEDICAL INFORMATION SYSTEMS - 0.8%
Phase Forward, Inc.* 54,700 653,118
----------
MEDICAL INSTRUMENTS - 2.1%
Micrus Endovascular Corp.* 46,600 604,402
Spectranetics Corp.* 52,800 617,760
Stereotaxis, Inc.*, ## 40,600 420,210
----------
1,642,372
----------
MEDICAL PRODUCTS - 0.8%
Luminex Corp.* 34,000 619,820
----------
MEDICAL-BIOMEDICAL/GENETICS - 0.8%
Genomic Health, Inc.*, ## 44,100 637,686
----------
MEDICAL-DRUGS - 1.3%
Advancis Pharmaceuticals* 89,200 533,416
Auxilium Pharmaceuticals, Inc.*, ## 49,000 495,880
----------
1,029,296
----------
MEDICAL-NURSING HOMES - 0.8%
Sun Healthcare Group, Inc.* 60,700 651,918
----------
MEDICAL-OUTPATIENT/HOME MEDICAL CARE - 0.8%
LHC Group, Inc.* 29,200 651,744
----------
METAL PROCESSORS & FABRICATION - 1.8%
Ampco-Pittsburg Corp. 17,000 $ 525,810
LB Foster Co. Cl. A* 4,100 66,010
RBC Bearings, Inc.* 33,500 809,025
----------
1,400,845
----------
NON-FERROUS METALS - 0.8%
Brush Engineered Materials, Inc.*, ## 24,100 599,367
----------
OIL COMPANIES-EXPLORATION & PRODUCTION - 2.4%
Arena Resources, Inc.* 14,700 472,164
Exploration Co. of Delaware, Inc.* 57,700 552,189
Parallel Petroleum Corp.* 19,400 389,164
Vaalco Energy, Inc.* 69,300 497,574
----------
1,911,091
----------
OIL-FIELD SERVICES - 0.9%
Trico Marine Services, Inc.* 22,100 745,875
----------
PRIVATE CORRECTIONS - 0.9%
The Geo Group, Inc.* 16,400 692,900
----------
PROPERTY/CASUALTY INSURANCE - 1.9%
Navigators Group, Inc.* 15,000 720,150
Tower Group, Inc. 24,500 817,075
----------
1,537,225
----------
REITS-APARTMENTS - 0.8%
Associated Estates Realty Corp. ## 41,300 638,911
----------
RETAIL-APPAREL/SHOE - 3.9%
Casual Male Retail Group, Inc.* 54,100 742,793
Mothers Work, Inc.*, ## 15,800 760,296
Shoe Carnival, Inc.* 19,000 479,180
United Retail Group, Inc.*, ## 30,300 553,884
Wet Seal, Inc. Cl. A*, ## 98,300 603,562
----------
3,139,715
----------
RETAIL-COMPUTER EQUIPMENT - 0.9%
Systemax, Inc.*, ## 45,400 727,308
----------
RETAIL-DISCOUNT - 0.7%
Duckwall-ALCO Stores, Inc.* 14,000 521,080
----------
RETAIL-MISCELLANEOUS/DIVERSIFIED - 0.4%
Pricesmart, Inc.* 20,500 309,550
----------
RETAIL-RESTAURANTS - 1.1%
Benihana, Inc. Cl. A* 28,900 838,100
----------
RETIREMENT/AGED CARE - 0.9%
Five Star Quality Care, Inc.*, ## 70,200 755,352
----------
SAVINGS & LOANS/THRIFTS-CENTRAL US - 0.1%
First Place Financial Corp. 4,100 92,906
----------
SEMICONDUCTOR COMPONENTS- INTEGRATED CIRCUITS - 1.2%
Anadigics, Inc.*, ## 47,400 339,384
Techwell, Inc.*, ## 41,300 618,674
----------
958,058
----------
SEMICONDUCTOR EQUIPMENT - 0.7%
FSI International, Inc.*, ## 97,900 562,925
----------
STEEL-SPECIALTY - 0.2%
Universal Stainless & Alloy*, ## 6,900 155,250
----------
TELECOMMUNICATIONS EQUIPMENT - 0.9%
Anaren, Inc.* 35,600 750,092
----------
TELECOMMUNICATIONS EQUIPMENT FIBER OPTICS - 1.4%
Harmonic, Inc.* 67,200 493,920
KVH Industries, Inc.* 49,700 633,675
----------
1,127,595
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 1.6%
Cbeyond Communications, Inc.*, ## 23,800 $ 653,310
Consolidated Communications Holdings, Inc. 34,700 649,237
----------
1,302,547
----------
TEXTILE-APPAREL - 1.0%
Perry Ellis International, Inc.* 25,000 772,000
----------
TRANSPORT-MARINE - 1.0%
Genco Shipping & Trading, Ltd. 34,800 788,568
----------
TRANSPORT-SERVICES - 0.8%
Universal Truckload Services, Inc.* 23,800 618,086
----------
TRANSPORT-TRUCK - 3.5%
Celadon Group, Inc.* 39,250 653,120
Quality Distribution, Inc.* 46,700 687,424
Saia, Inc.* 20,100 655,260
US Xpress Enterprises, Inc. Cl. A*, ## 33,700 780,155
----------
2,775,959
----------
WEB HOSTING/DESIGN - 0.6%
Website Pros, Inc.*, ## 44,000 477,840
----------
WIRE & CABLE PRODUCTS - 0.7%
Superior Essex, Inc.* 16,200 554,850
----------
Total Common Stock (Cost: $69,545,988) 77,922,371
----------
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 21.5%
MONEY MARKET FUNDS - 19.8%
Boston Global Investment Trust -
Enhanced Portfolio, 5.320%** $15,721,500 15,721,500
----------
TIME DEPOSIT - 1.7%
JP Morgan Grand Cayman 4.630%, 10/01/06 1,356,443 1,356,443
- -------------------------------------------------------------------------------
Total Short Term Investments (Cost: $17,077,943) 17,077,943
- -------------------------------------------------------------------------------
Total Investments - 119.5% (Cost: $86,623,931) 95,000,314
- -------------------------------------------------------------------------------
Liabilities In Excess Of Other Assets - (19.5%) (15,505,277)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $ 79,495,037
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/06.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Industrial 23.7%
Consumer, Non-cyclical 19.0
Financial 14.3
Consumer, Cyclical 13.8
Technology 10.6
Communications 10.2
Energy 3.3
Basic Materials 3.1
Short Term Investments 21.5
- --------------------------------------------------------------------------------
Total Investments 119.5%
- --------------------------------------------------------------------------------
Liabilities in excess of other assets (19.5)
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
<Page>
U.S. EMERGING GROWTH FUND
MANAGEMENT TEAM: JOHN C. MCCRAW, Portfolio Manager; TRAVIS T. PRENTICE,
Portfolio Manager; MONTIE L. WEISENBERGER, Portfolio Manager; K. MATHEW AXLINE,
CFA, Analyst; STEPHEN W. LYFORD, 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: From April 1 through September 30, 2006, the Russell 2000
Growth Index gave back some of the 14.36% gain it had posted in the first
quarter of the year. This period's decline in U.S. small-cap growth stocks was
mainly due to:
- Comments from the Federal Reserve in May indicating that monetary
tightening it had begun in June 2004 might not be over
- Evidence that the Fed's interest rate hikes had been successful at
slowing the economy, particularly the housing market
- Soaring oil prices and four consecutive monthly increases of 0.3% in
the core Consumer Price Index, which excludes food and energy prices
While generating losses for the entire six months, small-cap growth stocks
staged a comeback in August and September. The rebound came in response to
several welcome developments, most notably a pause in interest rate increases
from the Fed and a steep drop in oil prices. Acknowledging the economy was
slowing, the Fed decided to take a break from seventeen back-to-back interest
rate increases that had left the target funds rate at 5.25%. The price of oil
fell approximately 20% from its mid-July peak due to a mild Atlantic hurricane
season, rising U.S. distillate inventories and easing geopolitical concerns.
PERFORMANCE: The Fund's Class I shares lost 10.07% during the six months ended
September 30, 2006, compared to an 8.88% decline in the Russell 2000 Growth
Index.
PORTFOLIO SPECIFICS: Stock selection in the consumer discretionary sector had a
large positive impact on results versus the benchmark. Two of the Fund's
best-performing names were Bebe Stores, a women's apparel retailer, and Steven
Madden Ltd., a footwear wholesaler and retailer. Bebe Stores experienced
positive sales momentum attributable to well-received merchandise assortments
and the early success of a new customer loyalty program. Steven Madden Ltd.
reported better-than-expected second quarter earnings, driven by robust revenue
growth in its wholesale business. Unlike the energy stocks in the index, the
Fund's energy holdings delivered solid gains, and positive stock selection in
this sector was another key area of relative strength.
Holdings in the information technology and financials sectors subtracted the
most from relative performance, mainly due to stock selection. An underweight in
financials that resulted from our bottom-up stock selection decisions also
detracted. Financials were generally resilient this period in anticipation of
the end of the tightening cycle.
MARKET OUTLOOK: In the months ahead, a number of factors pave the way for gains
among small-cap growth stocks, including:
- Expectations that the Fed will hold the target funds rate steady
through the end of 2006
- Healthy corporate profit growth
- Lower gasoline prices, which have bolstered consumer confidence
Risks to our outlook include ongoing cooling in the housing market and resurgent
geopolitical tensions. However, we are confident that we can find companies with
exciting growth prospects for the Fund in any type of investment environment.
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.
[CHART]
<Table>
<Caption>
U.S. EMERGING RUSSELL
GROWTH FUND CLASS 2000 GROWTH
I SHARES INDEX
----------------- -----------
10/1/1993 $ 250,000 $250,000
10/31/1993 $ 250,400 $257,230
11/30/1993 $ 237,400 $246,825
12/31/1993 $ 249,920 $256,565
1/31/1994 $ 257,143 $263,395
2/28/1994 $ 255,286 $262,236
3/31/1994 $ 234,855 $246,126
4/30/1994 $ 235,474 $246,503
5/31/1994 $ 229,076 $240,979
6/30/1994 $ 217,519 $230,682
7/31/1994 $ 222,679 $233,969
8/31/1994 $ 237,744 $251,138
9/30/1994 $ 240,633 $252,190
10/31/1994 $ 243,935 $254,876
11/30/1994 $ 231,553 $244,564
12/31/1994 $ 241,147 $250,325
1/31/1995 $ 231,007 $245,226
2/28/1995 $ 243,351 $256,558
3/31/1995 $ 255,254 $264,052
4/30/1995 $ 259,442 $268,024
5/31/1995 $ 261,426 $271,535
6/30/1995 $ 284,571 $290,246
7/31/1995 $ 312,124 $312,868
8/31/1995 $ 313,006 $316,729
9/30/1995 $ 319,619 $323,250
10/31/1995 $ 307,055 $307,350
11/30/1995 $ 320,721 $320,916
12/31/1995 $ 327,708 $328,027
1/31/1996 $ 323,033 $325,311
2/29/1996 $ 342,668 $340,146
3/31/1996 $ 352,952 $346,870
4/30/1996 $ 389,650 $373,500
5/31/1996 $ 411,388 $392,653
6/30/1996 $ 386,378 $367,138
7/31/1996 $ 341,966 $322,318
8/31/1996 $ 372,353 $346,179
9/30/1996 $ 397,130 $364,007
10/31/1996 $ 379,833 $348,304
11/30/1996 $ 383,574 $357,990
12/31/1996 $ 389,595 $364,971
1/31/1997 $ 394,413 $374,088
2/28/1997 $ 351,961 $351,497
3/31/1997 $ 332,993 $326,692
4/30/1997 $ 327,874 $322,912
5/31/1997 $ 379,961 $371,446
6/30/1997 $ 407,660 $384,041
7/31/1997 $ 436,865 $403,720
8/31/1997 $ 445,295 $415,835
9/30/1997 $ 487,145 $449,019
10/31/1997 $ 452,521 $422,051
11/30/1997 $ 435,017 $411,989
12/31/1997 $ 436,748 $412,220
1/31/1998 $ 426,704 $406,721
2/28/1998 $ 464,803 $442,630
3/31/1998 $ 490,779 $461,199
4/30/1998 $ 490,779 $464,026
5/31/1998 $ 452,334 $430,314
6/30/1998 $ 468,959 $434,712
7/31/1998 $ 429,195 $398,414
8/31/1998 $ 325,073 $306,444
9/30/1998 $ 358,956 $337,514
10/31/1998 $ 363,545 $355,119
11/30/1998 $ 401,944 $382,665
12/31/1998 $ 455,854 $417,293
1/31/1999 $ 500,962 $436,063
2/28/1999 $ 447,786 $396,172
3/31/1999 $ 495,828 $410,283
4/30/1999 $ 525,167 $446,515
5/31/1999 $ 504,263 $447,221
6/30/1999 $ 566,975 $470,780
7/31/1999 $ 569,542 $456,224
8/31/1999 $ 564,775 $439,161
9/30/1999 $ 581,645 $447,633
10/31/1999 $ 637,022 $459,096
11/30/1999 $ 720,228 $507,641
12/31/1999 $ 882,812 $597,113
1/31/2000 $ 860,761 $591,554
2/29/2000 $1,159,018 $729,185
3/31/2000 $1,010,263 $652,533
4/30/2000 $ 867,488 $586,647
5/31/2000 $ 762,089 $535,280
6/30/2000 $ 918,319 $604,427
7/31/2000 $ 822,264 $552,628
8/31/2000 $ 942,613 $610,759
9/30/2000 $ 886,924 $580,416
10/31/2000 $ 793,111 $533,304
11/30/2000 $ 611,428 $436,472
12/31/2000 $ 665,221 $463,180
1/31/2001 $ 676,406 $500,669
2/28/2001 $ 563,494 $432,038
3/31/2001 $ 509,701 $392,757
4/30/2001 $ 570,951 $440,842
5/31/2001 $ 573,081 $451,052
6/30/2001 $ 583,733 $463,352
7/31/2001 $ 545,918 $423,824
8/31/2001 $ 509,701 $397,335
9/30/2001 $ 423,420 $333,205
10/31/2001 $ 459,104 $365,259
11/30/2001 $ 495,321 $395,758
12/31/2001 $ 518,223 $420,414
1/31/2002 $ 503,310 $405,447
2/28/2002 $ 471,886 $379,215
3/31/2002 $ 510,766 $412,169
4/30/2002 $ 502,777 $403,266
5/31/2002 $ 476,147 $379,675
6/30/2002 $ 442,593 $347,478
7/31/2002 $ 379,746 $294,071
8/31/2002 $ 378,681 $293,924
9/30/2002 $ 358,442 $272,703
10/31/2002 $ 364,833 $286,501
11/30/2002 $ 382,409 $314,894
12/31/2002 $ 356,844 $293,166
1/31/2003 $ 346,725 $285,192
2/28/2003 $ 336,072 $277,577
3/31/2003 $ 336,605 $281,769
4/30/2003 $ 368,029 $308,424
5/31/2003 $ 400,517 $343,183
6/30/2003 $ 410,637 $349,807
7/31/2003 $ 442,060 $376,252
8/31/2003 $ 469,223 $396,457
9/30/2003 $ 446,854 $386,426
10/31/2003 $ 488,397 $419,814
11/30/2003 $ 500,647 $433,500
12/31/2003 $ 491,593 $435,450
1/31/2004 $ 520,886 $458,312
2/29/2004 $ 511,831 $457,624
3/31/2004 $ 511,299 $459,775
4/30/2004 $ 480,408 $436,694
5/31/2004 $ 485,734 $445,384
6/30/2004 $ 507,038 $460,171
7/31/2004 $ 462,832 $418,894
8/30/2004 $ 444,191 $409,888
9/30/2004 $ 476,147 $432,554
10/31/2004 $ 488,908 $443,065
11/30/2004 $ 528,314 $480,504
12/31/2004 $ 546,435 $497,755
1/31/2005 $ 525,124 $475,306
2/28/2005 $ 538,462 $481,818
3/31/2005 $ 520,370 $463,749
4/30/2005 $ 487,327 $434,255
5/31/2005 $ 520,903 $464,870
6/30/2005 $ 544,344 $479,885
7/31/2005 $ 584,299 $513,429
8/31/2005 $ 588,564 $506,190
9/30/2005 $ 594,450 $510,189
10/31/2005 $ 578,994 $491,312
11/30/2005 $ 606,091 $519,120
12/31/2005 $ 618,334 $518,341
1/31/2006 $ 688,701 $568,361
2/28/2006 $ 698,274 $565,349
3/31/2006 $ 740,938 $592,825
4/30/2006 $ 749,459 $591,106
5/31/2006 $ 705,765 $549,492
6/30/2006 $ 701,531 $549,822
7/31/2006 $ 658,317 $521,286
8/31/2006 $ 665,229 $536,559
9/30/2006 $ 666,293 $540,208
</Table>
Annualized Total Returns As of 9/30/06
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Emerging Growth Fund Class I 12.09% 9.48 5.31%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index 5.88% 10.15 4.03%
- --------------------------------------------------------------------------------
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. THE FUND CALCULATES 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 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. 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.
7
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2006
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 98.1%
ADVERTISING SERVICES - 0.8%
inVentiv Health, Inc.* 2,400 $ 76,872
--------
AEROSPACE/DEFENSE-EQUIPMENT - 3.3%
AAR Corp.* 3,400 81,056
BE Aerospace, Inc.* 2,500 52,725
LMI Aerospace, Inc.*, ## 4,000 74,000
Moog, Inc. Cl. A* 1,600 55,456
Orbital Sciences Corp.* 3,700 69,449
--------
332,686
--------
AGRICULTURAL OPERATIONS - 0.7%
The Andersons, Inc. 1,963 67,036
--------
APPAREL MANUFACTURERS - 0.5%
Phillips-Van Heusen Corp. 1,200 50,124
--------
AUCTION HOUSE/ART DEALER - 0.7%
Sotheby's Cl. A 2,300 74,152
--------
BATTERIES/BATTERY SYSTEMS - 0.6%
EnerSys* 3,800 60,952
--------
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS - 0.6%
NCI Building Systems, Inc.* 1,100 63,987
--------
BUILDING & CONSTRUCTION-MISCELLANEOUS - 0.7%
Layne Christensen Co.* 2,400 68,568
--------
BUILDING PRODUCTS-AIR & HEATING - 0.6%
Comfort Systems USA, Inc. ## 5,300 60,738
--------
BUILDING-HEAVY CONSTRUCTION - 0.8%
Infrasource Services, Inc.* 2,800 49,140
Perini Corp.* 1,700 35,496
--------
84,636
--------
BUILDING-MAINTENANCE & SERVICE - 0.5%
Healthcare Services Group, Inc. 2,200 55,352
--------
CAPACITORS - 0.5%
Kemet Corp.* 6,100 49,227
--------
COMMERCIAL SERVICES - 0.9%
PeopleSupport, Inc.* 4,900 90,650
--------
COMMERCIAL SERVICES-FINANCE - 0.9%
Coinstar, Inc.* 1,800 51,804
Jackson Hewitt Tax Service, Inc. 1,200 36,012
--------
87,816
--------
COMMUNICATIONS SOFTWARE - 0.5%
Smith Micro Software, Inc.*, ## 3,500 50,330
--------
COMPUTER AIDED DESIGN - 0.5%
ANSYS, Inc.* 700 30,926
Aspen Technology, Inc.* 2,200 24,024
--------
54,950
--------
COMPUTERS-INTEGRATED SYSTEMS - 0.7%
Radiant Systems, Inc.* 5,900 71,272
--------
COMPUTERS-MEMORY DEVICES - 0.4%
Komag, Inc.* 1,400 44,744
--------
CONSULTING SERVICES - 0.7%
Watson Wyatt Worldwide, Inc. Cl. A 1,700 69,564
--------
DISPOSABLE MEDICAL PRODUCTS - 0.7%
ICU Medical, Inc.* 1,600 72,768
--------
DISTRIBUTION/WHOLESALE - 1.6%
Brightpoint, Inc.* 5,100 72,522
LKQ Corp.* 4,300 94,471
--------
166,993
--------
DIVERSIFIED MANUFACTURING OPERATIONS - 0.7%
Ameron International Corp. 1,000 $ 66,440
--------
E-COMMERCE/PRODUCTS - 0.4%
Nutri/System, Inc.*, ## 600 37,374
--------
ELECTRIC PRODUCTS-MISCELLANEOUS - 0.9%
Littelfuse, Inc.* 2,500 86,750
--------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 1.6%
Diodes, Inc.* 1,300 56,121
Lattice Semiconductor Corp.* 6,800 46,376
Silicon Image, Inc.* 4,500 57,240
--------
159,737
--------
ELECTRONIC MEASURE INSTRUMENTS - 0.4%
Eagle Test Systems, Inc.* 2,500 41,300
--------
ELECTRONIC PARTS DISTRIBUTION - 0.6%
NU Horizons Electronics Corp.*, ## 4,800 61,152
--------
E-MARKETING/INFORMATION - 0.5%
aQuantive, Inc.* 2,200 51,964
--------
ENERGY-ALTERNATE SOURCES - 1.0%
Evergreen Solar, Inc.*, ## 5,200 43,160
Sunpower Corp. Cl. A*, ## 2,100 58,254
--------
101,414
--------
ENGINEERING/R & D SERVICES - 0.5%
URS Corp.* 1,400 54,446
--------
ENTERPRISE SOFTWARE/SERVICES - 2.6%
Concur Technologies, Inc.*, ## 4,100 59,655
Mantech International Corp. Cl. A* 2,200 72,622
Sybase, Inc.* 2,300 55,752
Ultimate Software Group, Inc.* 3,300 77,649
--------
265,678
--------
ENTERTAINMENT SOFTWARE - 0.8%
THQ, Inc.*,## 2,650 77,300
--------
FINANCE-CONSUMER LOANS - 1.3%
Asta Funding, Inc. 2,200 82,478
World Acceptance Corp.* 1,200 52,776
--------
135,254
--------
FINANCE-INVESTMENT BANKERS/BROKERS - 1.2%
optionsXpress Holdings, Inc. 2,300 64,124
SWS Group, Inc. 2,400 59,736
--------
123,860
--------
FINANCE-OTHER SERVICES - 0.8%
GFI Group, Inc.* 1,400 77,406
--------
FIREARMS & AMMUNITION - 0.8%
Smith & Wesson Holding Corp.*, ## 5,500 76,340
--------
FOOD-RETAIL - 0.6%
Wild Oats Markets, Inc.*, ## 3,700 59,829
--------
FOOD-WHOLESALE/DISTRIBUTION - 0.6%
Performance Food Group Co.* 2,200 61,798
--------
FOOTWEAR & RELATED APPAREL - 2.3%
CROCS, Inc.*, ## 1,700 57,715
Iconix Brand Group, Inc.* 5,400 86,940
Steven Madden, Ltd. ## 2,400 94,176
--------
238,831
--------
GOLF - 0.7%
Callaway Golf Co. 5,400 70,794
--------
HOTELS & MOTELS - 0.7%
Orient-Express Hotels, Ltd. Cl. A 2,000 74,760
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
HUMAN RESOURCES - 0.6%
Kforce, Inc.* 5,100 $ 60,843
--------
INDUSTRIAL AUTOMATION/ROBOTICS - 1.3%
Gerber Scientific, Inc.* 5,200 77,896
Hurco Cos, Inc.* 2,200 52,866
--------
130,762
--------
INSTRUMENTS-SCIENTIFIC - 0.8%
OYO Geospace Corp.* 1,500 85,125
--------
INTERNET APPLICATIONS SOFTWARE - 2.3%
Cybersource Corp* 7,000 82,810
Dealertrack Holdings, Inc.*, ## 4,400 97,284
WebEx Communications, Inc.* 1,400 54,628
--------
234,722
--------
INTERNET CONNECTIVITY SERVICES - 0.4%
Redback Networks, Inc.* 2,600 36,088
--------
INTERNET CONTENT-INFO/NEWS - 1.1%
The Knot, Inc.* 2,500 55,325
TheStreet.com, Inc. 5,300 56,392
--------
111,717
--------
INTERNET INFRASTRUCTURE EQUIPMENT - 0.6%
Avocent Corp.* 2,100 63,252
--------
INTERNET INFRASTRUCTURE SOFTWARE - 0.7%
RADvision, Ltd.* 4,200 69,300
--------
INVESTMENT MANAGEMENT/ADVISOR SERVICES - 0.9%
Affiliated Managers Group, Inc.*, ## 900 90,099
--------
LASERS-SYSTEMS/COMPONENTS - 0.6%
II-VI, Inc.* 2,300 57,316
--------
MACHINERY-GENERAL INDUSTRY - 1.5%
Flow International Corp.*, ## 2,400 31,128
Gardner Denver, Inc.* 1,900 62,852
Kadant, Inc.* 2,400 58,944
--------
152,924
--------
MEDICAL INFORMATION SYSTEMS - 1.3%
Allscripts Healthcare Solutions, Inc.* 3,300 74,085
Phase Forward, Inc.* 5,200 62,088
--------
136,173
--------
MEDICAL INSTRUMENTS - 3.9%
Angiodynamics, Inc.* 2,600 53,846
Arthrocare Corp.* 2,200 103,092
DexCom, Inc.*, ## 2,400 26,712
Micrus Endovascular Corp.* 3,500 45,395
NuVasive, Inc.* 2,500 50,275
Spectranetics Corp.* 4,900 57,330
Stereotaxis, Inc.*, ## 6,200 64,170
--------
400,820
--------
MEDICAL LABS & TESTING SERVICES - 0.8%
Icon PLC - ADR* 1,200 84,696
--------
MEDICAL LASER SYSTEMS - 0.7%
Cutera Inc.* 2,700 71,793
--------
MEDICAL PRODUCTS - 0.6%
Viasys Healthcare, Inc.* 2,400 65,376
--------
MEDICAL-BIOMEDICAL/GENETICS - 1.8%
InterMune, Inc.*, ## 2,800 45,976
Keryx Biopharmaceuticals, Inc.* 5,100 60,333
Lifecell Corp.*, ## 2,500 80,550
--------
186,859
--------
MEDICAL-DRUGS - 1.1%
Collagenex Pharmaceuticals, Inc.*, ## 4,300 $ 55,857
New River Pharmaceuticals*, ## 2,300 59,179
--------
115,036
--------
MEDICAL-HMO - 0.4%
WellCare Health Plans, Inc.* 700 39,641
--------
MEDICAL-OUTPATIENT/HOME MEDICAL CARE - 1.2%
Hythiam, Inc.*, # 6,500 46,930
Matria Healthcare, Inc.* 2,700 75,033
--------
121,963
--------
METAL PROCESSORS & FABRICATION - 0.7%
RBC Bearings, Inc.* 3,000 72,450
--------
OFFICE FURNISHINGS-ORIGINAL - 1.4%
Interface, Inc. Cl. A* 5,400 69,552
Knoll, Inc. 3,400 68,680
--------
138,232
--------
OIL & GAS DRILLING - 0.4%
Bronco Drilling Co., Inc.* 2,100 36,918
--------
OIL COMPANIES-EXPLORATION & PRODUCTION - 0.4%
Goodrich Petroleum Corp*, ## 1,400 42,168
--------
OIL FIELD MACHINERY & EQUIPMENT - 0.8%
Lufkin Industries, Inc.* 900 47,628
Universal Compression Holdings, Inc.* 600 32,070
--------
79,698
--------
OIL-FIELD SERVICES - 2.5%
Basic Energy Services, Inc.* 1,400 34,160
Global Industries, Ltd.*, ## 3,800 59,128
Helix Energy Solutions Group* 1,500 50,100
Hornbeck Offshore Services, Inc.* 2,100 70,350
Oceaneering International, Inc.* 1,300 40,040
--------
253,778
--------
PHARMACY SERVICES - 0.6%
HealthExtras, Inc.* 2,200 62,282
--------
PHYSICAL PRACTICE MANAGEMENT - 0.7%
Healthways, Inc.* 1,500 66,900
--------
PHYSICAL THERAPY/REHABILITATION CENTERS - 0.7%
Psychiatric Solutions, Inc.* 2,200 74,998
--------
PRIVATE CORRECTIONS - 0.7%
The Geo Group, Inc.* 1,800 76,050
--------
PROPERTY/CASUALTY INSURANCE - 2.6%
American Physicians Capital, Inc.* 1,500 72,570
Argonaut Group, Inc.* 1,900 58,957
Navigators Group, Inc.* 1,400 67,214
Ohio Casualty Corp. 2,500 64,675
--------
263,416
--------
REAL ESTATE OPERATION/DEVELOPMENT - 1.0%
Corrections Corp. of America* 2,250 97,313
--------
RENTAL AUTO/EQUIPMENT - 1.0%
Dollar Thrifty Auto Group, Inc.*, ## 1,500 66,855
H&E Equipment Services, Inc.* 1,600 39,024
105,879
--------
RESEARCH & DEVELOPMENT - 0.7%
Parexel International Corp.*, ## 2,000 66,180
--------
RESORTS/THEME PARKS - 0.7%
Vail Resorts, Inc.* 1,700 68,034
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE - 3.5%
Aeropostale, Inc.* 1,700 $ 49,691
Bebe Stores, Inc.* 3,800 94,164
Charlotte Russe Holding, Inc.* 3,200 88,128
Christopher & Banks Corp. 1,900 56,012
DSW, Inc. Cl. A*, ## 2,200 69,300
---------
357,295
---------
RETAIL-ARTS & CRAFTS - 0.5%
AC Moore Arts & Crafts, Inc.* 2,700 51,381
---------
RETAIL-COMPUTER EQUIPMENT - 0.8%
GameStop Corp. Cl. A*, ## 1,800 83,304
---------
RETAIL-JEWELRY - 0.5%
Movado Group, Inc. 2,100 53,382
---------
RETAIL-LEISURE PRODUCTS - 0.5%
MarineMax, Inc.* 2,100 53,445
---------
RETAIL-PETROLEUM PRODUCTS - 0.6%
World Fuel Services Corp. 1,500 60,675
---------
RETAIL-SPORTING GOODS - 0.6%
Hibbett Sporting Goods, Inc.* 2,400 62,832
---------
RUBBER & PLASTICS - 0.2%
PW Eagle, Inc. ## 800 24,008
---------
SAVINGS & LOANS/THRIFTS-SOUTHERN US - 0.6%
BankUnited Financial Corp.Cl. A* 2,300 59,961
---------
SAVINGS & LOANS/THRIFTS-WESTERN US - 0.8%
FirstFed Financial Corp.*, ## 1,400 79,408
---------
SEISMIC DATA COLLECTION - 0.6%
Veritas DGC, Inc.* 900 59,238
---------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS - 1.4%
Anadigics, Inc.* 9,900 70,884
Standard Microsystems Corp.* 2,400 68,208
---------
139,092
---------
SEMICONDUCTOR EQUIPMENT - 0.8%
Brooks Automation, Inc.* 3,000 39,150
Rudolph Technologies, Inc.* 2,100 38,493
---------
77,643
---------
STEEL PIPE & TUBE - 0.6%
Valmont Industries, Inc. 1,100 57,475
---------
TELECOMMUNICATIONS EQUIPMENT - 1.5%
Arris Group, Inc.* 5,400 61,884
CommScope, Inc.* 2,800 92,008
---------
153,892
---------
TELECOMMUNICATIONS EQUIPMENT FIBER OPTICS - 0.6%
Oplink Communications, Inc.* 2,900 57,942
---------
THERAPEUTICS - 0.7%
Medicines Co.* 3,000 67,680
---------
TRANSACTIONAL SOFTWARE - 2.3%
Open Solutions, Inc.* 2,800 80,668
Transaction Systems Architects, Inc. Cl. A* 2,100 72,072
VeriFone Holding, Inc.*, ## 2,900 82,795
---------
235,535
---------
TRANSPORT-AIR FREIGHT - 0.4%
EGL, Inc.* 1,000 36,440
---------
TRANSPORT-MARINE - 0.9%
American Commercial Lines* 1,500 89,175
---------
TRANSPORT-SERVICES - 0.6%
Universal Truckload Services, Inc.* 2,400 $ 62,328
---------
TRANSPORT-TRUCK - 1.2%
Old Dominion Freight Line, Inc.* 1,600 48,048
US Xpress Enterprises, Inc. Cl. A* 3,000 69,450
---------
117,498
---------
VITAMINS & NUTRITION PRODUCTS - 1.0%
Herbalife, Ltd.* 2,700 102,276
---------
WEB PORTALS/ISP - 0.7%
Trizetto Group, Inc.*, ## 5,000 75,700
---------
WIRE & CABLE PRODUCTS - 1.4%
General Cable Corp.* 1,900 72,599
Superior Essex, Inc.* 2,100 71,925
---------
144,524
---------
WIRELESS EQUIPMENT - 1.1%
ID Systems, Inc.*, ## 1,900 44,897
Stratex Networks, Inc.* 15,200 67,488
---------
112,385
- -------------------------------------------------------------------------------
Total Common Stock (Cost: $9,108,893) 9,969,159
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 17.5%
MONEY MARKET FUNDS - 15.7%
Boston Global Investment Trust -
Enhanced Portfolio, 5.320%** $1,593,900 1,593,900
----------
TIME DEPOSIT - 1.8%
Bank of America London
4.630%, 10/01/06 180,059 180,059
- -------------------------------------------------------------------------------
Total Short Term Investments (Cost: $1,773,959) 1,773,959
- -------------------------------------------------------------------------------
Total Investments - 115.6% (Cost: $10,882,852) 11,743,118
- -------------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (15.6%) (1,583,449)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $10,159,669
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/06.
ADR - AMERICAN DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- ------------------------------------------------------------------------------
Consumer, Non-cyclical 24.1%
Industrial 21.0
Consumer, Cyclical 15.1
Technology 12.9
Communications 11.2
Financial 8.2
Energy 5.6
Short Term Investments 17.5
- ------------------------------------------------------------------------------
Total Investments 115.6%
- ------------------------------------------------------------------------------
Liabilities in excess of other assets (15.6)
- ------------------------------------------------------------------------------
Net Assets 100.0%
- ------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
<Page>
U.S. SMALL CAP VALUE FUND
MANAGEMENT TEAM: MARK W. STUCKELMAN, Portfolio Manager; NELSON SHING, Portfolio
Manager; JAMES FERNANDES, CFA, CPA, Analyst; CHARLES HOEVELER, Analyst
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: After posting double-digit gains in the first quarter of the
year, prices of U.S. small-cap value stocks fell slightly from April 1 through
September 30, 2006. Positive returns throughout much of the six-month period
were offset by losses in May and July. The investment environment was
characterized by:
- Evidence that economic growth was moderating, including softness in
retail sales, business investment and the housing market
- Sharp spike and retreat in oil prices, which hit $78.40 a barrel in
mid-July and subsequently fell by approximately 20%
- Anticipation of the end of the monetary tightening cycle that the
Federal Reserve had initiated in June 2004
Because equity prices were volatile during the period, small-cap value stocks in
defensive sectors turned in some of the best results. Utilities were the clear
winners, rising nearly 10%, followed by consumer staples and financials.
Information technology stocks fared the worst due to their relatively high
sensitivity to movements in the stock market. The energy and materials sectors
also lagged, hurt by falling commodity prices.
PERFORMANCE: From April 1 through September 30, 2006, the Fund's Class I shares
gained 0.20% and the Russell 2000 Value Index lost 0.22%.
PORTFOLIO SPECIFICS: Performance versus the index was helped by positive stock
selection in most sectors. Stock selection was particularly strong in the
industrials and information technology sectors, where top-performing positions
included Corrections Corporation of America, an operator of correctional
facilities, and Varian Semiconductor, a manufacturer of semiconductor processing
equipment. Corrections Corporation of America benefited from a robust demand
environment and a lack of supply of beds in the industry. Varian Semiconductor
benefited from its dominant market share in the ion implantation process of
wafer fabrication to report strong margins and positive guidance for the year.
Stock selection in the health care sector had the largest negative impact on
relative results. Drug manufacturer MGI Pharma was a weak performer, as the
company reduced its 2006 earnings guidance, citing increased generic competition
for an existing product and slow sales of a new product. An overweight position
in materials and an underweight in financials detracted from returns. Sector
allocations are a result of our bottom-up investment decisions.
MARKET OUTLOOK: While oil prices have fallen and investors have started to
speculate about when the Fed might start cutting interest rates, we feel that
economic uncertainty has increased risk. The housing market has cooled
substantially, and consumer and business spending has slowed.
Regardless of the macroeconomic environment, we remain confident that we will
continue to add value to the benchmark through intense, fundamental research and
our diversified, risk-controlled approach to portfolio construction.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN U.S. SMALL CAP VALUE
FUND CLASS I AND II SHARES WITH THE RUSSELL 2000 VALUE INDEX.
[CHART]
<Table>
<Caption>
U.S. SMALL CAP RUSSELL
VALUE FUND CLASS 2000 VALUE
I SHARES INDEX
---------------- ----------
12/30/1997 $250,000 $250,000
12/31/1997 $248,617 $250,504
1/31/1998 $246,355 $245,969
2/28/1998 $267,925 $260,851
3/31/1998 $280,698 $271,441
4/30/1998 $283,771 $272,771
5/31/1998 $274,008 $263,115
6/30/1998 $271,752 $261,642
7/31/1998 $252,912 $241,155
8/31/1998 $209,998 $203,390
9/30/1998 $219,489 $214,882
10/31/1998 $230,594 $221,264
11/30/1998 $242,745 $227,260
12/31/1998 $251,379 $234,396
1/31/1999 $239,838 $229,075
2/28/1999 $224,921 $213,429
3/31/1999 $216,720 $211,658
4/30/1999 $237,553 $230,982
5/31/1999 $247,108 $238,073
6/30/1999 $256,810 $246,692
7/31/1999 $255,260 $240,845
8/31/1999 $246,962 $232,030
9/30/1999 $239,174 $227,389
10/31/1999 $230,648 $222,842
11/30/1999 $236,639 $224,000
12/31/1999 $240,256 $230,877
1/31/2000 $233,732 $224,828
2/29/2000 $230,083 $238,565
3/31/2000 $248,579 $239,687
4/30/2000 $257,324 $241,101
5/31/2000 $255,258 $237,412
6/30/2000 $260,240 $244,344
7/31/2000 $260,563 $252,481
8/31/2000 $277,078 $263,767
9/30/2000 $281,274 $262,263
10/31/2000 $283,121 $261,319
11/30/2000 $275,691 $255,988
12/31/2000 $305,403 $283,507
1/31/2001 $318,153 $291,332
2/28/2001 $318,314 $290,924
3/31/2001 $313,098 $286,269
4/30/2001 $334,350 $299,523
5/31/2001 $354,411 $307,221
6/30/2001 $361,633 $319,572
7/31/2001 $365,110 $312,413
8/31/2001 $361,098 $311,320
9/30/2001 $324,453 $276,950
10/31/2001 $334,350 $284,178
11/30/2001 $351,469 $304,611
12/31/2001 $379,885 $323,253
1/31/2002 $383,641 $327,552
2/28/2002 $384,446 $329,550
3/31/2002 $419,054 $354,234
4/30/2002 $428,175 $366,703
5/31/2002 $415,298 $354,565
6/30/2002 $408,859 $346,729
7/31/2002 $350,106 $295,205
8/31/2002 $347,960 $293,906
9/30/2002 $324,619 $272,921
10/31/2002 $322,473 $277,015
11/30/2002 $348,387 $299,121
12/31/2002 $342,602 $286,348
1/31/2003 $332,317 $278,273
2/28/2003 $322,997 $268,923
3/31/2003 $328,782 $271,801
4/30/2003 $358,028 $297,622
5/31/2003 $399,809 $328,009
6/30/2003 $411,058 $333,552
7/31/2003 $439,340 $350,197
8/31/2003 $464,409 $363,504
9/30/2003 $454,115 $359,324
10/31/2003 $501,037 $388,609
11/30/2003 $524,123 $403,531
12/31/2003 $543,989 $418,139
1/31/2004 $566,835 $432,607
2/29/2004 $581,072 $440,999
3/31/2004 $584,052 $447,085
4/30/2004 $556,571 $423,971
5/31/2004 $568,490 $429,101
6/30/2004 $591,336 $450,899
7/31/2004 $564,848 $430,158
8/30/2004 $559,219 $434,373
9/30/2004 $592,660 $451,575
10/31/2004 $599,950 $458,574
11/30/2004 $650,586 $499,295
12/31/2004 $673,877 $511,179
1/31/2005 $654,334 $491,396
2/28/2005 $662,971 $501,126
3/31/2005 $653,557 $490,803
4/30/2005 $630,290 $465,477
5/31/2005 $659,977 $493,871
6/30/2005 $684,792 $515,700
7/31/2005 $726,496 $545,044
8/31/2005 $706,590 $532,508
9/30/2005 $703,976 $531,602
10/31/2005 $681,801 $518,259
11/30/2005 $721,686 $539,300
12/31/2005 $729,336 $535,148
1/31/2006 $770,324 $579,405
2/28/2006 $768,322 $579,347
3/31/2006 $797,210 $607,445
4/30/2006 $808,053 $609,085
5/31/2006 $786,397 $583,869
6/30/2006 $791,587 $591,051
7/31/2006 $756,678 $582,835
8/31/2006 $789,593 $600,262
9/30/2006 $798,832 $606,144
</Table>
Annualized Total Returns As of 9/30/06
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
U.S. Small Cap Value Fund Class I 13.47% 19.73% 14.19%
- --------------------------------------------------------------------------------
Russell 2000 Value Index 14.01% 16.96% 10.65%
- --------------------------------------------------------------------------------
11
<Page>
[CHART]
<Table>
<Caption>
U.S. SMALL CAP RUSSELL
VALUE FUND CLASS 2000 VALUE
II SHARES INDEX
---------------- -----------
12/30/1997 $250,000.00 $250,000.00
12/31/1997 $248,616.64 $250,503.50
1/31/1998 $246,354.66 $245,969.39
2/28/1998 $267,925.04 $260,850.53
3/31/1998 $280,698.27 $271,441.07
4/30/1998 $283,771.02 $272,771.13
5/31/1998 $274,007.53 $263,115.03
6/30/1998 $271,752.28 $261,641.59
7/31/1998 $252,912.49 $241,155.05
8/31/1998 $209,997.84 $203,390.17
9/30/1998 $219,488.88 $214,881.71
10/31/1998 $230,594.03 $221,263.70
11/30/1998 $242,745.01 $227,259.95
12/31/1998 $251,379.12 $234,395.91
1/31/1999 $239,838.05 $229,075.12
2/28/1999 $224,920.62 $213,429.29
3/31/1999 $216,720.06 $211,657.83
4/30/1999 $237,552.51 $230,982.19
5/31/1999 $247,108.41 $238,073.34
6/30/1999 $256,809.97 $246,691.60
7/31/1999 $255,260.27 $240,845.00
8/31/1999 $246,962.31 $232,030.08
9/30/1999 $239,174.23 $227,389.48
10/31/1999 $230,648.04 $222,841.69
11/30/1999 $236,638.80 $224,000.46
12/31/1999 $240,256.16 $230,877.28
1/31/2000 $233,731.93 $224,828.29
2/29/2000 $230,083.18 $238,565.30
3/31/2000 $248,579.15 $239,686.56
4/30/2000 $257,324.09 $241,100.71
5/31/2000 $255,258.22 $237,411.87
6/30/2000 $260,239.92 $244,344.29
7/31/2000 $260,563.02 $252,480.96
8/31/2000 $277,077.90 $263,766.86
9/30/2000 $281,273.93 $262,263.39
10/31/2000 $283,120.58 $261,319.24
11/30/2000 $275,691.19 $255,988.33
12/31/2000 $305,402.97 $283,507.07
1/31/2001 $318,153.22 $291,331.87
2/28/2001 $318,314.18 $290,924.00
3/31/2001 $313,098.15 $286,269.22
4/30/2001 $334,350.20 $299,523.48
5/31/2001 $354,411.21 $307,221.24
6/30/2001 $361,633.18 $319,571.53
7/31/2001 $365,110.42 $312,413.13
8/31/2001 $361,098.22 $311,319.68
9/30/2001 $324,453.44 $276,949.99
10/31/2001 $334,350.20 $284,178.38
11/30/2001 $351,468.93 $304,610.81
12/31/2001 $379,884.95 $323,252.99
1/31/2002 $383,640.87 $327,552.26
2/28/2002 $384,445.72 $329,550.32
3/31/2002 $419,053.88 $354,233.64
4/30/2002 $428,175.41 $366,702.67
5/31/2002 $415,297.95 $354,564.81
6/30/2002 $408,859.23 $346,728.93
7/31/2002 $350,105.83 $295,205.01
8/31/2002 $347,959.59 $293,906.11
9/30/2002 $324,619.20 $272,921.21
10/31/2002 $322,472.96 $277,015.03
11/30/2002 $348,386.79 $299,120.83
12/31/2002 $342,601.77 $286,348.37
1/31/2003 $332,317.29 $278,273.35
2/28/2003 $322,996.98 $268,923.36
3/31/2003 $328,782.00 $271,800.84
4/30/2003 $358,028.49 $297,621.92
5/31/2003 $399,809.20 $328,009.12
6/30/2003 $411,057.85 $333,552.47
7/31/2003 $439,340.17 $350,196.74
8/31/2003 $464,408.59 $363,504.22
9/30/2003 $454,114.94 $359,323.92
10/31/2003 $501,036.94 $388,608.82
11/30/2003 $524,123.41 $403,531.40
12/31/2003 $543,989.11 $418,139.23
1/31/2004 $566,834.67 $432,606.85
2/29/2004 $581,071.75 $440,999.42
3/31/2004 $584,051.61 $447,085.22
4/30/2004 $556,570.72 $423,970.91
5/31/2004 $568,490.14 $429,100.96
6/30/2004 $591,335.70 $450,899.29
7/31/2004 $564,848.10 $430,157.92
8/30/2004 $559,219.48 $434,373.47
9/30/2004 $592,660.08 $451,574.66
10/31/2004 $599,949.80 $458,574.06
11/30/2004 $650,585.56 $499,295.44
12/31/2004 $673,941.58 $511,178.67
1/31/2005 $654,734.25 $491,396.06
2/28/2005 $663,376.74 $501,125.70
3/31/2005 $653,956.79 $490,802.51
4/30/2005 $630,610.53 $465,477.10
5/31/2005 $660,312.29 $493,871.20
6/30/2005 $685,536.22 $515,700.31
7/31/2005 $727,285.37 $545,043.66
8/31/2005 $707,357.76 $532,507.65
9/30/2005 $704,740.53 $531,602.39
10/31/2005 $682,893.58 $518,259.17
11/30/2005 $722,637.98 $539,300.49
12/31/2005 $730,297.94 $535,147.88
1/31/2006 $771,413.72 $579,404.61
2/28/2006 $769,793.75 $579,346.67
3/31/2006 $798,814.97 $607,444.98
4/30/2006 $809,678.86 $609,085.08
5/31/2006 $787,898.50 $583,868.96
6/30/2006 $793,098.63 $591,050.55
7/31/2006 $758,043.67 $582,834.95
8/31/2006 $791,094.37 $600,261.71
9/30/2006 $800,350.18 $606,144.28
</Table>
Annualized Total Returns As of 9/30/06
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
U.S. Small Cap Value Fund Class II 13.57% 19.79% 14.22%
- --------------------------------------------------------------------------------
Russell 2000 Value Index 14.01% 16.96% 10.65%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I AND II SHARES COMPARED WITH THE RUSSELL 2000 VALUE INDEX FOR THE
PERIODS INDICATED. 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 OFFERING
CLASS I SHARES. THE FUND'S CLASS II SHARES WERE FIRST AVAILABLE ON NOVEMBER 10,
2004. THE HISTORICAL PERFORMANCE OF CLASS II SHARES INCLUDES THE PERFORMANCE OF
CLASS I SHARES FOR PERIODS PRIOR TO THE INCEPTION OF CLASS II. 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.
12
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2006
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 92.9%
AEROSPACE/DEFENSE-EQUIPMENT - 1.5%
AAR Corp.* 89,400 $2,131,296
----------
AUTO/TRUCK PARTS & EQUIPMENT-REPLACEMENT - 0.6%
Aftermarket Technology Corp.* 49,500 879,120
----------
B2B/E-COMMERCE - 1.0%
webMethods, Inc.* 193,400 1,479,510
----------
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS - 1.0%
ElkCorp. 54,700 1,485,105
----------
BUILDING & CONSTRUCTION-MISCELLANEOUS - 1.1%
Dycom Industries, Inc.* 72,800 1,565,200
----------
BUILDING-MOBIL HOME/MANUFACTURED HOUSING - 0.6%
Champion Enterprises, Inc.* 131,000 903,900
----------
CHEMICALS-SPECIALTY - 1.2%
Hercules, Inc.* 114,600 1,807,242
----------
COMMERCIAL BANKS-CENTRAL US - 6.1%
Amcore Financial, Inc. 54,000 1,635,660
Associated Banc-Corp. 50,000 1,625,000
Macatawa Bank Corp.## 63,826 1,460,970
Marshall & Ilsley Corp. 31,540 1,519,597
Mercantile Bank Corp. 34,965 1,382,866
Oak Hill Financial, Inc.+ 47,400 1,173,624
----------
8,797,717
----------
COMMERCIAL BANKS-EASTERN US - 0.6%
Community Bank Systems, Inc. 39,300 870,888
----------
COMMERCIAL BANKS-WESTERN US - 1.1%
Greater Bay Bancorp 57,900 1,633,359
----------
COMMERCIAL SERVICES - 1.1%
PHH Corp.* 57,800 1,583,720
----------
COMMERCIAL SERVICES-FINANCE - 1.0%
TNS, Inc.* 96,100 1,447,266
----------
COMPUTERS-INTEGRATED SYSTEMS - 1.4%
Intergraph Corp.* 45,600 1,955,328
----------
CONSUMER PRODUCTS-MISCELLANEOUS - 1.1%
Prestige Brands Holdings, Inc.* 137,300 1,529,522
----------
CONTAINERS-PAPER/PLASTIC - 1.1%
Packaging Corp. of America 67,200 1,559,040
----------
COSMETICS & TOILETRIES - 0.6%
Elizabeth Arden, Inc.* 54,700 883,952
----------
DIVERSIFIED MANUFACTURING OPERATIONS - 2.2%
ESCO Technologies, Inc.* 33,600 1,546,944
Griffon Corp.* 68,800 1,642,256
----------
3,189,200
----------
ELECTRIC-INTEGRATED - 2.9%
CMS Energy Corp.* 139,500 2,014,380
El Paso Electric Co.* 95,300 2,129,002
----------
4,143,382
----------
ELECTRONIC COMPONENTS-MISCELLANEOUS - 3.4%
Benchmark Electronics, Inc.* 49,200 1,322,496
Methode Electronics, Inc. Cl. A 137,100 1,303,821
Rogers Corp.* 36,800 2,272,400
----------
4,898,717
----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 0.6%
IXYS Corp.* 96,600 810,474
----------
ENERGY-ALTERNATE SOURCES - 1.4%
Covanta Holdings Corp.* 93,300 2,008,749
----------
ENGINEERING/R & D SERVICES - 1.1%
URS Corp.* 40,500 $1,575,045
----------
FINANCE-AUTO LOANS - 0.8%
United PanAm Financial Corp.* 75,500 1,168,740
----------
FINANCE-INVESTMENT BANKERS/BROKERS - 1.0%
Knight Capital Group, Inc. Cl. A* 81,400 1,481,480
----------
FOOD-MISCELLANEOUS/DIVERSIFIED - 1.2%
Ralcorp Holdings, Inc.* 35,900 1,731,457
----------
GAS-DISTRIBUTION - 2.4%
Energen Corp. 33,300 1,394,271
UGI Corp. 82,500 2,017,125
----------
3,411,396
----------
HUMAN RESOURCES - 2.0%
Korn/Ferry International* 76,400 1,599,816
Labor Ready, Inc.* 81,500 1,298,295
----------
2,898,111
----------
INTERNET APPLICATIONS SOFTWARE - 0.9%
Interwoven, Inc.* 114,100 1,258,523
----------
INTIMATE APPAREL - 1.2%
The Warnaco Group, Inc.* 92,200 1,783,148
----------
LASERS-SYSTEMS/COMPONENTS - 0.8%
Rofin-Sinar Technologies, Inc.* 18,100 1,099,937
----------
LIFE/HEALTH INSURANCE - 0.8%
Scottish Re Group, Ltd. 99,600 1,082,652
----------
MACHINERY TOOLS & RELATED PRODUCTS - 1.2%
Kennametal, Inc. 29,900 1,693,835
----------
MACHINERY-GENERAL INDUSTRY - 2.5%
Gardner Denver, Inc.* 51,900 1,716,852
Wabtec Corp. 67,900 1,842,127
----------
3,558,979
----------
MEDICAL-DRUGS - 0.7%
Zymogenetics, Inc.*, ## 56,600 954,842
----------
MEDICAL-HMO - 0.5%
Centene Corp.* 43,800 720,072
----------
METAL PROCESSORS & FABRICATION - 1.7%
Commercial Metals Co. 53,400 1,085,622
Quanex Corp. 47,150 1,431,002
----------
2,516,624
----------
METAL-ALUMINUM - 1.2%
Century Aluminum Co.* 51,500 1,732,975
----------
MOTION PICTURES & SERVICES - 1.2%
Lions Gate Entertainment Corp.*, ## 170,800 1,709,708
----------
MULTIMEDIA - 1.2%
Gemstar - TV Guide International, Inc.* 508,600 1,688,552
----------
NETWORKING PRODUCTS - 2.2%
3Com Corp.* 245,000 1,080,450
Aeroflex, Inc.* 106,100 1,090,708
Foundry Networks, Inc.* 77,100 1,013,865
----------
3,185,023
----------
NON-FERROUS METALS - 1.1%
RTI International Metals, Inc.* 36,700 1,599,386
----------
OIL COMPANIES-EXPLORATION & PRODUCTION - 0.5%
Forest Oil Corp.* 24,200 764,478
----------
OIL REFINING & MARKETING - 0.3%
Holly Corp. 9,300 402,969
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
OIL-FIELD SERVICES - 0.8%
Superior Energy Services* 41,600 $ 1,092,416
------------
POWER CONVERSION/SUPPLY EQUIPMENT - 1.0%
Power-One, Inc.* 208,400 1,508,816
------------
PRIVATE CORRECTIONS - 1.3%
Corrections Corp. of America* 43,400 1,877,050
------------
PROPERTY/CASUALTY INSURANCE - 4.9%
CastlePoint Holdings, Ltd. 144A*#+ 237,400 2,611,400
Navigators Group, Inc.* 41,700 2,002,017
Tower Group, Inc. 74,400 2,481,240
------------
7,094,657
------------
PUBLISHING-NEWSPAPERS - 0.6%
Lee Enterprises, Inc. 33,000 832,920
------------
RADIO - 1.0%
Entercom Communications Corp.* 28,700 723,240
Radio One, Inc. Cl. D* 111,100 694,375
------------
1,417,615
------------
REITS-DIVERSIFIED - 1.6%
Cousins Properties, Inc. 38,600 1,320,506
Washington Real Estate Investment Trust 26,500 1,054,700
------------
2,375,206
------------
REITS-HEALTH CARE - 1.0%
Ventas, Inc. 36,483 1,406,055
------------
REITS-HOTELS - 1.4%
Ashford Hospitality Trust, Inc. 77,600 925,768
DiamondRock Hospitality Co. 144A# 69,700 1,157,717
------------
2,083,485
------------
REITS-MORTGAGE - 5.5%
American Home Mortgage Investment Corp. 22,200 774,114
Fieldstone Investment Corp. 119,600 1,044,108
JER Investors Trust, Inc. 42,000 720,720
JER Investors Trust, Inc. 144A# 63,800 1,094,808
KKR Financial Corp. 89,150 2,187,741
Newcastle Investment Corp. 77,500 2,124,275
------------
7,945,766
------------
REITS-SHOPPING CENTERS - 0.5%
Equity One, Inc. 30,200 723,894
------------
RETAIL-APPAREL/SHOE - 1.0%
Charming Shoppes, Inc.* 95,800 1,368,024
------------
RETAIL-DISCOUNT - 0.9%
Tuesday Morning Corp.* 90,800 1,260,304
------------
RETAIL-RESTAURANTS - 1.2%
Lone Star Steakhouse & Saloon, Inc. 64,600 1,793,942
------------
SAVINGS & LOANS/THRIFTS-CENTRAL US - 0.5%
MAF Bancorp., Inc. 17,000 701,930
------------
SAVINGS & LOANS/THRIFTS-EASTERN US - 1.0%
Brookline Bancorp, Inc. 97,228 1,336,885
First Niagara Financial Group, Inc. 8,900 129,762
------------
1,466,647
------------
SAVINGS & LOANS/THRIFTS-SOUTHERN US - 0.8%
Fidelity Bankshares, Inc. 30,300 1,182,003
------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS - 1.7%
ChipMos Technologies Bermuda, Ltd.* 186,000 1,110,420
Emulex Corp.* 75,700 1,375,469
------------
2,485,889
------------
SEMICONDUCTOR EQUIPMENT - 1.5%
Mattson Technology, Inc.* 117,500 975,250
Varian Semiconductor Equipment Associates, Inc.* 33,700 1,236,790
------------
2,212,040
------------
TELECOMMUNICATIONS EQUIPMENT - 2.1%
Adtran, Inc. 40,300 $ 960,752
Comtech Telecommunications Corp.* 61,100 2,045,628
------------
3,006,380
------------
THERAPEUTICS - 0.6%
MGI Pharma, Inc.* 51,700 889,757
------------
TRANSPORT-AIR FREIGHT - 1.1%
ABX Air, Inc. 280,600 1,576,972
------------
TRANSPORT-MARINE - 1.5%
Quintana Maritime, Ltd.+ 217,400 2,228,350
Quintana Maritime, Ltd. 22,200 0
------------
2,228,350
------------
TRANSPORT-SERVICES - 0.5%
Universal Truckload Services, Inc.* 26,800 695,996
------------
WIRELESS EQUIPMENT - 0.8%
EFJ, Inc.* 155,200 1,151,584
- --------------------------------------------------------------------------------
Total Common Stock (Cost: $117,675,479) 133,958,317
- --------------------------------------------------------------------------------
RIGHTS - 0.2%
TRANSPORT-MARINE - 0.2%
Quintana Maritime, Ltd. (Cost: $0) 88,800 268,636
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 7.9%
MONEY MARKET FUNDS - 2.0%
Boston Global Investment Trust -
Enhanced Portfolio, 5.320%** $2,804,040 2,804,040
------------
TIME DEPOSIT - 5.9%
Wachovia Bank Grand Cayman 4.630%, 10/01/06 8,538,525 8,538,525
- -------------------------------------------------------------------------------
Total Short Term Investments (Cost: $11,342,565) 11,342,565
- -------------------------------------------------------------------------------
Total Investments - 101.0% (Cost: $129,018,044) 145,569,518
- -------------------------------------------------------------------------------
Liabilities In Excess Of Other Assets - (1.0%) (1,472,906)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $144,096,612
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
+ ILLIQUID SECURITIES, VALUED BY THE ADVISOR. THE TOTAL COST OF ILLIQUID
SECURITIES AS OF SEPTEMBER 30, 2006 WAS $5,357,104.
THE TOTAL MARKET VALUE OF ILLIQUID SECURITIES OWNED AT SEPTEMBER 30, 2006
WAS $6,013,374 OR 4.17% OF NET ASSETS.
# 144A SECURITY. CERTAIN CONDITION FOR PUBLIC SALE MAY EXIST.
THE TOTAL MARKET VALUE OF 144A SECURITIES OWNED AT SEPTEMBER 30, 2006 WAS
$4,863,925 OR 3.38% OF NET ASSETS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/06.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Financial 26.0%
Industrial 21.8
Consumer, Non-cyclical 11.9
Communications 9.7
Consumer, Cyclical 6.7
Technology 5.2
Utilities 5.2
Basic Materials 3.6
Energy 3.0
Short Term Investments 7.9
- --------------------------------------------------------------------------------
Total Investments 101.0%
- --------------------------------------------------------------------------------
Liabilities in excess of other assets (1.0)
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<Page>
U.S. LARGE CAP VALUE FUND
MANAGEMENT TEAM: STEPHEN SEXAUER, Portfolio Manager; MARK W. STUCKELMAN,
Portfolio Manager; JAMES FERNANDES, CFA, CPA, Analyst; TODD R. BUECHS, Analyst;
CHARLES HOEVELER, Analyst; GREGORY ISE, Analyst
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: Key U.S. equity indices, including the S&P 500 Index and Dow
Jones Industrial Average, climbed higher during the six months ended September
30, 2006. Within the U.S. stock market, large-cap value stocks produced some of
the best returns.
Throughout much of the period, concerns that rising inflation would prompt the
Federal Reserve to keep raising short-term interest rates weighed on investor
sentiment. Equity returns in August and September were driven by:
- A pause in interest rate increases from the Fed, ending more than two
years of continuous monetary tightening
- A significant drop in the price of gasoline due to weather and fewer
miles driven, which prompted a rebound in consumer confidence
Equities were volatile during the period, and investors sold riskier assets,
which drove the strong performance of large-cap value stocks relative to other
segments of the market. Among large-cap value equities, stocks in all sectors
posted gains except for materials, which was weak in response to falling
commodity prices.
PERFORMANCE: The Fund's Class I shares registered a 5.90% increase during the
six months ended September 30, 2005. The Russell 1000 Value Index rose 6.85%.
PORTFOLIO SPECIFICS: Like the index, the Fund's gain was broad based, with
stocks in most sectors of investment generating positive returns. Modest
underperformance of the benchmark was due to sector allocations that resulted
from our bottom-up investment process. Underweight positions in
telecommunication services and consumer staples were especially unfavorable,
since these were the two best-performing sectors in the index.
On the plus side, our stock selection added value. Stock selection was
particularly strong in the information technology and consumer discretionary
sectors where Freescale Semiconductor and Federated Department Stores were top
performers. Freescale, which had been a longer-term holding, advanced on news
that it was being acquired by a group of private equity investors. Federated
benefited from the successful integration of its August 2005 purchase of May
Department Stores, as well as investor recognition of its strong cash flows and
balance sheet.
Based on our stock-by-stock investment decisions, the Fund's weighting in the
consumer discretionary and materials sectors decreased during the period. We
identified better opportunities elsewhere, particularly in the industrials and
financials sectors.
MARKET OUTLOOK: The Fed's seventeen increases in short-term interest rates have
slowed the pace of growth in the economy and corporate earnings. That said, we
expect earnings growth to remain positive and for price-to-earnings (P/E)
multiples to expand.
We continue to believe there is significant value in owning reasonably priced,
very large corporations that have strong cash flows, limited debt, solid assets
and a catalyst to realize their value. By identifying these types of companies
for the Fund, we are confident that we will deliver superior performance over
time.
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.
[CHART]
<Table>
<Caption>
U.S. LARGE
CAP VALUE
FUND CLASS RUSSELL 1000
I SHARES VALUE INDEX
---------- ------------
4/30/1996 $250,000 $250,000
5/31/1996 $256,600 $253,125
6/30/1996 $263,800 $253,328
7/31/1996 $257,600 $243,752
8/31/1996 $264,800 $250,723
9/30/1996 $278,800 $260,702
10/31/1996 $288,600 $270,791
11/30/1996 $311,581 $290,423
12/31/1996 $310,622 $286,706
1/31/1997 $327,247 $300,611
2/28/1997 $331,246 $305,030
3/31/1997 $316,936 $294,049
4/30/1997 $333,350 $306,399
5/31/1997 $358,183 $323,527
6/30/1997 $369,758 $337,406
7/31/1997 $412,900 $362,779
8/31/1997 $403,430 $349,864
9/30/1997 $428,684 $370,996
10/31/1997 $412,269 $360,645
11/30/1997 $425,854 $376,586
12/31/1997 $436,586 $387,582
1/31/1998 $434,531 $382,078
2/28/1998 $469,924 $407,792
3/31/1998 $500,065 $432,749
4/30/1998 $502,805 $435,648
5/31/1998 $500,750 $429,201
6/30/1998 $511,938 $434,695
7/31/1998 $501,864 $427,000
8/31/1998 $424,288 $363,463
9/30/1998 $448,323 $384,326
10/31/1998 $479,972 $414,111
11/30/1998 $502,997 $433,408
12/31/1998 $524,487 $448,144
1/31/1999 $530,983 $451,729
2/28/1999 $512,743 $445,360
3/31/1999 $522,238 $454,579
4/30/1999 $563,217 $497,037
5/31/1999 $554,472 $491,569
6/30/1999 $570,214 $505,825
7/31/1999 $558,969 $491,004
8/31/1999 $538,979 $472,788
9/30/1999 $516,990 $456,240
10/31/1999 $553,222 $482,520
11/30/1999 $531,483 $478,756
12/31/1999 $571,041 $481,054
1/31/2000 $535,602 $465,372
2/29/2000 $492,372 $430,795
3/31/2000 $546,661 $483,352
4/30/2000 $546,661 $477,745
5/31/2000 $545,656 $482,761
6/30/2000 $521,276 $460,699
7/31/2000 $539,624 $466,458
8/31/2000 $569,784 $492,393
9/30/2000 $578,330 $496,923
10/31/2000 $607,485 $509,147
11/30/2000 $583,226 $490,258
12/31/2000 $615,670 $514,819
1/31/2001 $625,048 $516,827
2/28/2001 $611,868 $502,459
3/31/2001 $593,618 $484,723
4/30/2001 $627,329 $508,474
5/31/2001 $647,607 $519,915
6/30/2001 $637,468 $508,373
7/31/2001 $637,468 $507,305
8/31/2001 $607,052 $486,962
9/30/2001 $559,147 $452,680
10/31/2001 $556,359 $448,787
11/30/2001 $597,010 $474,861
12/31/2001 $609,399 $486,068
1/31/2002 $596,752 $482,325
2/28/2002 $601,140 $483,097
3/31/2002 $631,339 $505,948
4/30/2002 $606,560 $488,594
5/31/2002 $613,529 $491,037
6/30/2002 $568,102 $462,851
7/31/2002 $512,350 $419,806
8/31/2002 $510,027 $422,954
9/30/2002 $446,532 $375,922
10/31/2002 $489,378 $403,778
11/30/2002 $520,218 $429,216
12/31/2002 $498,455 $410,588
1/31/2003 $490,851 $400,652
2/28/2003 $478,003 $389,954
3/31/2003 $477,216 $390,617
4/30/2003 $515,760 $424,991
5/31/2003 $548,798 $452,446
6/30/2003 $554,567 $458,101
7/31/2003 $562,957 $464,927
8/31/2003 $566,104 $472,180
9/30/2003 $562,695 $467,553
10/31/2003 $597,831 $496,167
11/30/2003 $599,439 $502,915
12/31/2003 $635,459 $533,894
1/31/2004 $648,631 $543,291
2/29/2004 $662,071 $554,917
3/31/2004 $657,502 $550,034
4/30/2004 $645,674 $536,613
5/31/2004 $653,201 $542,087
6/30/2004 $662,609 $554,880
7/31/2004 $649,975 $547,056
8/30/2004 $649,706 $554,824
9/30/2004 $664,759 $563,424
10/31/2004 $673,601 $572,777
11/30/2004 $706,540 $601,702
12/31/2004 $723,709 $621,859
1/31/2005 $715,531 $610,852
2/28/2005 $741,719 $631,071
3/31/2005 $727,849 $622,426
4/30/2005 $712,855 $611,284
5/31/2005 $730,819 $626,016
6/30/2005 $739,516 $632,902
7/31/2005 $766,508 $651,193
8/31/2005 $759,993 $648,328
9/30/2005 $760,829 $657,405
10/31/2005 $740,971 $640,707
11/30/2005 $769,869 $661,786
12/31/2005 $768,484 $665,690
1/31/2006 $793,459 $691,519
2/28/2006 $794,015 $695,737
3/31/2006 $813,468 $705,130
4/30/2006 $842,021 $723,040
5/31/2006 $815,666 $704,747
6/30/2006 $823,170 $709,258
7/31/2006 $837,081 $726,493
8/31/2006 $830,719 $738,625
9/30/2006 $861,539 $753,324
</Table>
Annualized Total Returns As of 9/30/2006
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Large Cap Value Fund Class I 13.22% 9.02% 11.93%
- --------------------------------------------------------------------------------
Russell 1000 Value Index 14.61% 10.73% 11.20%
- --------------------------------------------------------------------------------
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. 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. 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.
15
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2006
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 96.3%
AEROSPACE/DEFENSE-EQUIPMENT - 1.6%
United Technologies Corp. 7,700 $ 487,795
-----------
APPLICATIONS SOFTWARE - 3.6%
Microsoft Corp. 39,100 1,068,603
-----------
BUILDING PRODUCTS-CEMENT/AGGREGATE - 1.3%
Martin Marietta Materials, Inc. 4,600 389,252
-----------
CABLE TV - 1.8%
Comcast Corp. Cl. A* 14,700 541,695
-----------
COMMERCIAL BANKS-EASTERN US - 3.2%
North Fork Bancorporation, Inc. 33,850 969,464
-----------
COMPUTERS - 1.3%
International Business Machines Corp. 4,700 385,118
-----------
DIVERSIFIED MANUFACTURING OPERATIONS - 12.5%
3M Co. 8,100 602,802
General Electric Co. 36,200 1,277,860
ITT Corp. 25,900 1,327,893
Textron, Inc. 6,100 533,750
-----------
3,742,305
-----------
ELECTRIC-INTEGRATED - 2.5%
Exelon Corp. 12,300 744,642
-----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 3.5%
Freescale Semiconductor, Inc. Cl. B* 27,740 1,054,397
-----------
FIDUCIARY BANKS - 1.2%
Bank of New York Co., Inc. 10,200 359,652
-----------
FINANCE-CREDIT CARD - 1.5%
Capital One Financial Corp. 5,900 464,094
-----------
FINANCE-INVESTMENT BANKERS/BROKERS - 6.1%
Goldman Sachs Group, Inc. 3,800 642,846
Morgan Stanley 16,400 1,195,724
-----------
1,838,570
-----------
FINANCE-MORTGAGE LOAN/BANKER - 4.4%
Countrywide Financial Corp. 38,100 1,335,024
-----------
MEDICAL-DRUGS - 4.4%
Abbott Laboratories 8,900 432,184
Pfizer, Inc. 30,900 876,324
-----------
1,308,508
-----------
MEDICAL-HMO - 2.1%
WellPoint, Inc.* 8,400 647,220
-----------
MULTI-LINE INSURANCE - 6.6%
Allstate Corp. 9,900 621,027
American International Group, Inc. 20,500 1,358,330
-----------
1,979,357
-----------
MULTIMEDIA - 4.2%
Time Warner, Inc. 51,200 933,376
Walt Disney Co. 10,600 327,646
-----------
1,261,022
-----------
OIL COMPANIES-EXPLORATION & PRODUCTION - 3.9%
Apache Corp. 18,550 1,172,360
-----------
OIL COMPANIES-INTEGRATED - 6.2%
ConocoPhillips 18,720 1,114,402
Marathon Oil Corp. 9,600 738,240
-----------
1,852,642
-----------
OIL REFINING & MARKETING - 2.5%
Valero Energy Corp. 14,400 741,168
-----------
RETAIL-REGIONAL DEPARTMENT STORES - 3.9%
Federated Department Stores, Inc. 27,200 $ 1,175,312
-----------
SAVINGS & LOANS/THRIFTS-WESTERN US - 2.5%
Washington Mutual, Inc. 17,100 743,337
-----------
STEEL-PRODUCERS - 1.2%
United States Steel Corp. 6,100 351,848
-----------
SUPER-REGIONAL BANKS-US - 10.5%
Bank of America Corp. 11,512 616,698
US Bancorp 35,800 1,189,276
Wells Fargo & Co. 37,200 1,345,896
-----------
3,151,870
-----------
TELEPHONE-INTEGRATED - 2.0%
Sprint Nextel Corp. 34,600 593,390
-----------
TOBACCO - 1.8%
Altria Group, Inc. 7,100 543,505
- --------------------------------------------------------------------------------
Total Common Stock (Cost: $23,117,442) 28,902,150
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 4.6%
TIME DEPOSIT - 4.6%
Wells Fargo Grand Cayman
4.630%, 10/01/06
(Cost: $1,368,033) $1,368,033 1,368,033
- -------------------------------------------------------------------------------
Total Investments - 100.9% (Cost: $24,485,475) 30,270,183
- -------------------------------------------------------------------------------
Liabilities In Excess Of Other Assets - (0.9%) (276,469)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $29,993,714
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Financial 36.1%
Industrial 15.4
Energy 12.6
Technology 8.4
Consumer, Non-cyclical 8.2
Communications 8.0
Consumer, Cyclical 3.9
Utilities 2.5
Basic Materials 1.2
Short Term Investments 4.6
- --------------------------------------------------------------------------------
Total Investments 100.9%
- --------------------------------------------------------------------------------
Liabilities in excess of other assets (0.9)
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
<Page>
U.S. SYSTEMATIC LARGE CAP GROWTH FUND
MANAGEMENT TEAM: JAMES LI, Ph.D., CFA, Portfolio Manager; JANE EDMONDSON,
Portfolio Manager; JUNCAI YANG, Analyst
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: U.S. large-cap growth stocks generated essentially flat returns
from April 1 through September 30, 2006. Gains in August and September were
unable to offset losses registered in the prior four months.
Despite strong corporate profit growth, large-cap growth equities were weak
throughout most of the period on concerns about energy prices, interest rates
and the geopolitical climate. The price of oil skyrocketed to $78.40 a barrel in
mid-July on fears that hostilities in southern Lebanon would spread to
neighboring, oil-producing countries. The core Consumer Price Index rose a
worrisome 0.3% in four consecutive months, dashing investors' hopes for an
imminent end to the monetary tightening cycle. In addition to ongoing tensions
in the Middle East, North Korea launched a series of ballistic missiles into the
Sea of Japan in July.
Large-cap growth equities reversed course in August and September, boosted by a
drop in the price of oil and a pause in interest rate hikes from the Federal
Reserve. Crude prices fell nearly 20% as the result of easing concerns about
Iran's nuclear intentions, a tame Atlantic hurricane season and rising U.S.
distillate inventories. The Fed held the target funds rate steady at its August
and September meetings, indicating that a slowdown in the economy had become a
bigger risk than inflation.
PERFORMANCE: The Fund's Class I shares gained 1.96% during the six months ended
September 30, 2006, outperforming the Russell 1000 Growth Index, which declined
0.12%.
PORTFOLIO SPECIFICS: Strong performance versus the index was due to stock
selection, which was positive in a majority of sectors. Stock selection added
the most value in the information technology sector, where computer software
companies Oracle and BEA Systems delivered steep price gains amid improving
business fundamentals. Sun Microsystems, a computer hardware manufacturer, and
Cisco Systems, a networking company, were other top-performing tech names in the
Fund.
Stock selection in the consumer discretionary sector was also a key area of
relative strength, helped by our position in toy manufacturer Mattel. The
company experienced strong sales of toys based on the movies CARS and SUPERMAN
and announced an acquisition that investors viewed positively.
While the Fund outperformed, there were pockets of relative weakness. For
example, stock selection in the materials and energy sectors detracted from
results versus the index.
Consistent with our risk-controlled approach to portfolio construction, we
maintained the Fund's broad diversification throughout the period. As of
September 30, the largest overweight versus the index was in the health care
sector (+2.5%), and the largest underweight was in financials (-5.0%).
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.
Through consistent application of this approach, we believe we will continue to
identify companies with excellent growth potential for the Fund.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN U.S. SYSTEMATIC LARGE
CAP GROWTH FUND CLASS I AND II SHARES WITH THE RUSSELL 1000 GROWTH INDEX.
[CHART]
<Table>
<Caption>
U.S. SYSTEMATIC LARGE RUSSELL 1000
CAP GROWTH FUND GROWTH
CLASS I SHARES INDEX
--------------------- ------------
12/27/1996 $ 250,000.00 $250,000.00
12/31/1996 $ 247,200.00 $246,184.68
1/31/1997 $ 272,400.00 $263,452.07
2/28/1997 $ 267,800.00 $261,668.50
3/31/1997 $ 260,000.00 $247,507.00
4/30/1997 $ 270,000.00 $263,941.47
5/31/1997 $ 300,200.00 $282,990.12
6/30/1997 $ 311,400.00 $294,315.39
7/31/1997 $ 350,200.00 $320,344.64
8/31/1997 $ 342,200.00 $301,594.87
9/30/1997 $ 359,600.00 $316,436.35
10/31/1997 $ 359,200.00 $304,740.87
11/30/1997 $ 354,896.62 $317,683.21
12/31/1997 $ 361,073.21 $321,241.26
1/31/1998 $ 366,477.73 $330,846.38
2/28/1998 $ 400,191.62 $355,732.64
3/31/1998 $ 424,640.63 $369,912.14
4/30/1998 $ 438,280.60 $375,031.73
5/31/1998 $ 427,214.20 $364,388.33
6/30/1998 $ 458,097.16 $386,707.11
7/31/1998 $ 448,284.00 $384,147.11
8/31/1998 $ 373,570.00 $326,494.31
9/30/1998 $ 420,006.82 $351,575.61
10/31/1998 $ 451,656.50 $379,831.74
11/30/1998 $ 494,720.82 $408,725.54
12/31/1998 $ 580,590.04 $445,580.32
1/31/1999 $ 645,964.79 $471,744.80
2/28/1999 $ 632,474.76 $450,195.49
3/31/1999 $ 697,590.09 $473,907.29
4/30/1999 $ 730,134.16 $474,513.89
5/31/1999 $ 735,294.12 $459,932.08
6/30/1999 $ 770,228.70 $492,145.72
7/31/1999 $ 760,111.18 $476,505.33
8/31/1999 $ 755,700.97 $484,291.43
9/30/1999 $ 769,969.27 $474,116.47
10/31/1999 $ 825,745.35 $509,921.74
11/30/1999 $ 920,953.81 $537,432.02
12/31/1999 $1,138,610.22 $593,330.32
1/31/2000 $1,089,838.58 $565,509.06
2/29/2000 $1,248,865.26 $593,156.80
3/31/2000 $1,292,448.42 $635,614.97
4/30/2000 $1,193,089.18 $605,372.41
5/31/2000 $1,117,078.06 $574,885.85
6/30/2000 $1,235,115.80 $618,456.45
7/31/2000 $1,180,636.85 $592,673.00
8/31/2000 $1,334,734.47 $646,333.62
9/30/2000 $1,219,031.54 $585,196.92
10/31/2000 $1,094,248.78 $557,505.40
11/30/2000 $ 883,798.56 $475,323.53
12/31/2000 $ 865,614.50 $460,284.29
1/31/2001 $ 843,954.08 $492,085.33
2/28/2001 $ 698,749.06 $408,544.01
3/31/2001 $ 604,619.83 $364,086.25
4/30/2001 $ 683,506.54 $410,132.24
5/31/2001 $ 652,754.09 $404,095.09
6/30/2001 $ 620,129.76 $394,736.25
7/31/2001 $ 584,563.89 $384,871.79
8/31/2001 $ 518,512.98 $353,389.28
9/30/2001 $ 434,278.02 $318,121.03
10/31/2001 $ 455,938.44 $334,822.38
11/30/2001 $ 511,560.25 $366,998.81
12/31/2001 $ 508,886.13 $366,301.51
1/31/2002 $ 489,365.01 $359,817.98
2/28/2002 $ 457,810.33 $344,885.53
3/31/2002 $ 483,481.93 $356,818.57
4/30/2002 $ 455,403.61 $327,702.17
5/31/2002 $ 442,032.98 $319,771.78
6/30/2002 $ 393,631.31 $290,192.89
7/31/2002 $ 362,611.45 $274,232.28
8/31/2002 $ 364,483.34 $275,054.98
9/30/2002 $ 340,951.03 $246,531.78
10/31/2002 $ 359,402.50 $269,138.74
11/30/2002 $ 373,040.54 $283,752.98
12/31/2002 $ 336,939.84 $264,145.65
1/31/2003 $ 329,987.12 $257,726.91
2/28/2003 $ 329,184.88 $256,541.36
3/31/2003 $ 340,416.21 $261,313.03
4/30/2003 $ 361,809.21 $280,650.20
5/31/2003 $ 372,505.72 $294,654.64
6/30/2003 $ 376,516.90 $298,720.88
7/31/2003 $ 387,213.41 $306,159.03
8/31/2003 $ 396,572.85 $313,782.38
9/30/2003 $ 385,876.34 $310,424.91
10/31/2003 $ 404,060.40 $327,870.79
11/30/2003 $ 408,606.41 $331,280.65
12/31/2003 $ 408,071.59 $342,742.96
1/31/2004 $ 418,768.09 $349,734.92
2/29/2004 $ 415,826.55 $351,973.22
3/31/2004 $ 402,990.75 $345,426.52
4/30/2004 $ 393,631.31 $341,419.57
5/31/2004 $ 403,792.99 $347,769.97
6/30/2004 $ 412,617.60 $352,151.88
7/31/2004 $ 390,957.18 $332,255.30
8/30/2004 $ 385,608.93 $330,627.24
9/30/2004 $ 390,687.77 $333,768.20
10/31/2004 $ 395,766.71 $338,974.99
11/30/2004 $ 419,314.83 $350,635.73
12/31/2004 $ 430,258.95 $364,380.65
1/31/2005 $ 415,544.09 $352,246.77
2/28/2005 $ 424,104.30 $355,980.59
3/31/2005 $ 419,015.05 $349,501.74
4/30/2005 $ 401,081.20 $342,861.21
5/31/2005 $ 421,656.67 $359,421.40
6/30/2005 $ 421,909.66 $358,091.54
7/31/2005 $ 440,093.97 $375,602.22
8/31/2005 $ 432,348.32 $370,756.95
9/30/2005 $ 437,147.38 $372,462.43
10/31/2005 $ 426,174.98 $368,849.55
11/30/2005 $ 446,247.83 $384,746.96
12/31/2005 $ 445,980.08 $383,554.25
1/31/2006 $ 463,105.71 $390,304.80
2/28/2006 $ 464,726.58 $389,680.32
3/31/2006 $ 477,553.04 $395,447.58
4/30/2006 $ 477,839.57 $394,893.96
5/31/2006 $ 462,070.86 $381,507.05
6/30/2006 $ 460,453.61 $380,019.18
7/31/2006 $ 463,400.52 $372,798.81
8/31/2006 $ 478,831.75 $384,430.13
9/30/2006 $ 493,196.71 $395,001.96
</Table>
Annualized Total Returns As of 9/30/06
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
U.S. Systematic Large Cap Growth Fund Class I 11.51% 2.32% 7.07%
- --------------------------------------------------------------------------------
Russell 1000 Growth Index 6.03% 4.42% 4.80%
- --------------------------------------------------------------------------------
17
<Page>
[CHART]
<Table>
<Caption>
U.S. SYSTEMATIC LARGE RUSSELL 1000
CAP GROWTH FUND GROWTH
CLASS II SHARES INDEX
--------------------- ------------
12/27/1996 $ 250,000.00 $250,000.00
12/31/1996 $ 247,200.00 $246,184.68
1/31/1997 $ 272,400.00 $263,452.07
2/28/1997 $ 267,800.00 $261,668.50
3/31/1997 $ 260,000.00 $247,507.00
4/30/1997 $ 270,000.00 $263,941.47
5/31/1997 $ 300,200.00 $282,990.12
6/30/1997 $ 311,400.00 $294,315.39
7/31/1997 $ 350,200.00 $320,344.64
8/31/1997 $ 342,200.00 $301,594.87
9/30/1997 $ 359,600.00 $316,436.35
10/31/1997 $ 359,200.00 $304,740.87
11/30/1997 $ 354,896.62 $317,683.21
12/31/1997 $ 361,073.21 $321,241.26
1/31/1998 $ 366,477.73 $330,846.38
2/28/1998 $ 400,191.62 $355,732.64
3/31/1998 $ 424,640.63 $369,912.14
4/30/1998 $ 438,280.60 $375,031.73
5/31/1998 $ 427,214.20 $364,388.33
6/30/1998 $ 458,097.16 $386,707.11
7/31/1998 $ 448,284.00 $384,147.11
8/31/1998 $ 373,570.00 $326,494.31
9/30/1998 $ 420,006.82 $351,575.61
10/31/1998 $ 451,656.50 $379,831.74
11/30/1998 $ 494,720.82 $408,725.54
12/31/1998 $ 580,590.04 $445,580.32
1/31/1999 $ 645,964.79 $471,744.80
2/28/1999 $ 632,474.76 $450,195.49
3/31/1999 $ 697,590.09 $473,907.29
4/30/1999 $ 730,134.16 $474,513.89
5/31/1999 $ 735,294.12 $459,932.08
6/30/1999 $ 770,228.70 $492,145.72
7/31/1999 $ 760,111.18 $476,505.33
8/31/1999 $ 755,700.97 $484,291.43
9/30/1999 $ 769,969.27 $474,116.47
10/31/1999 $ 825,745.35 $509,921.74
11/30/1999 $ 920,953.81 $537,432.02
12/31/1999 $1,138,610.22 $593,330.32
1/31/2000 $1,089,838.58 $565,509.06
2/29/2000 $1,248,865.26 $593,156.80
3/31/2000 $1,292,448.42 $635,614.97
4/30/2000 $1,193,089.18 $605,372.41
5/31/2000 $1,117,078.06 $574,885.85
6/30/2000 $1,235,115.80 $618,456.45
7/31/2000 $1,180,636.85 $592,673.00
8/31/2000 $1,334,734.47 $646,333.62
9/30/2000 $1,219,031.54 $585,196.92
10/31/2000 $1,094,248.78 $557,505.40
11/30/2000 $ 883,798.56 $475,323.53
12/31/2000 $ 865,614.50 $460,284.29
1/31/2001 $ 843,954.08 $492,085.33
2/28/2001 $ 698,749.06 $408,544.01
3/31/2001 $ 604,619.83 $364,086.25
4/30/2001 $ 683,506.54 $410,132.24
5/31/2001 $ 652,754.09 $404,095.09
6/30/2001 $ 620,129.76 $394,736.25
7/31/2001 $ 584,563.89 $384,871.79
8/31/2001 $ 518,512.98 $353,389.28
9/30/2001 $ 434,278.02 $318,121.03
10/31/2001 $ 455,938.44 $334,822.38
11/30/2001 $ 511,560.25 $366,998.81
12/31/2001 $ 508,886.13 $366,301.51
1/31/2002 $ 489,365.01 $359,817.98
2/28/2002 $ 457,810.33 $344,885.53
3/31/2002 $ 483,481.93 $356,818.57
4/30/2002 $ 455,403.61 $327,702.17
5/31/2002 $ 442,032.98 $319,771.78
6/30/2002 $ 393,631.31 $290,192.89
7/31/2002 $ 362,611.45 $274,232.28
8/31/2002 $ 364,483.34 $275,054.98
9/30/2002 $ 340,951.03 $246,531.78
10/31/2002 $ 359,402.50 $269,138.74
11/30/2002 $ 373,040.54 $283,752.98
12/31/2002 $ 336,939.84 $264,145.65
1/31/2003 $ 329,987.12 $257,726.91
2/28/2003 $ 329,184.88 $256,541.36
3/31/2003 $ 340,416.21 $261,313.03
4/30/2003 $ 361,809.21 $280,650.20
5/31/2003 $ 372,505.72 $294,654.64
6/30/2003 $ 376,516.90 $298,720.88
7/31/2003 $ 387,213.41 $306,159.03
8/31/2003 $ 396,572.85 $313,782.38
9/30/2003 $ 385,876.34 $310,424.91
10/31/2003 $ 404,060.40 $327,870.79
11/30/2003 $ 408,606.41 $331,280.65
12/31/2003 $ 408,071.59 $342,742.96
1/31/2004 $ 418,768.09 $349,734.92
2/29/2004 $ 415,826.55 $351,973.22
3/31/2004 $ 402,990.75 $345,426.52
4/30/2004 $ 393,631.31 $341,419.57
5/31/2004 $ 403,792.99 $347,769.97
6/30/2004 $ 412,617.60 $352,151.88
7/31/2004 $ 390,957.18 $332,255.30
8/30/2004 $ 385,608.93 $330,627.24
9/30/2004 $ 390,687.77 $333,768.20
10/31/2004 $ 395,766.71 $338,974.99
11/30/2004 $ 419,314.83 $350,635.73
12/31/2004 $ 430,258.95 $364,380.65
1/31/2005 $ 415,544.09 $352,246.77
2/28/2005 $ 424,104.30 $355,980.59
3/31/2005 $ 419,015.05 $349,501.74
4/30/2005 $ 401,081.20 $342,861.21
5/31/2005 $ 421,656.67 $359,421.40
6/30/2005 $ 421,909.66 $358,091.54
7/31/2005 $ 440,093.97 $375,602.22
8/31/2005 $ 432,348.32 $370,756.95
9/30/2005 $ 437,147.38 $372,462.43
10/31/2005 $ 426,174.98 $368,849.55
11/30/2005 $ 446,290.44 $384,746.96
12/31/2005 $ 446,290.44 $383,554.25
1/31/2006 $ 463,829.66 $390,304.80
2/28/2006 $ 465,731.36 $389,680.32
3/31/2006 $ 478,399.25 $395,447.58
4/30/2006 $ 478,686.29 $394,893.96
5/31/2006 $ 463,033.25 $381,507.05
6/30/2006 $ 461,412.63 $380,019.18
7/31/2006 $ 458,459.59 $372,798.81
8/31/2006 $ 473,817.99 $384,430.13
9/30/2006 $ 488,079.91 $395,001.96
</Table>
Annualized Total Returns As of 9/30/06
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
U.S. Systematic Large Cap Growth Fund Class II 11.65% 2.36% 7.09%
- --------------------------------------------------------------------------------
Russell 1000 Growth Index 6.03% 4.42% 4.80%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I AND II SHARES COMPARED WITH THE RUSSELL 1000 GROWTH INDEX FOR THE
PERIODS INDICATED. THE FUND'S CLASS I AND II 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 AND II SHARES. THE
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS' CLASS I SHARES WERE FIRST AVAILABLE ON
MAY 7, 1999 AND CLASS II SHARES ON SEPTEMBER 30, 2005. THE HISTORICAL
PERFORMANCE OF CLASS II SHARES INCLUDES THE PERFORMANCE OF CLASS I SHARES FOR
PERIODS PRIOR TO THE INCEPTION OF CLASS II. AVERAGE ANNUAL TOTAL RETURN FIGURES
INCLUDE CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN
DISTRIBUTIONS. 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.
18
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2006
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 99.3%
AEROSPACE/DEFENSE - 4.0%
Boeing Co. 2,200 $173,470
Lockheed Martin Corp. 2,800 240,968
Raytheon Co. 4,200 201,642
--------
616,080
--------
AGRICULTURAL OPERATIONS - 0.7%
Archer-Daniels-Midland Co. 2,700 102,276
--------
AIRLINES - 0.5%
AMR Corp.* 3,500 80,990
--------
APPLICATIONS SOFTWARE - 5.1%
Microsoft Corp. 29,100 795,303
--------
BEVERAGES-NON-ALCOHOLIC - 2.1%
Coca-Cola Co. 7,200 321,696
--------
BREWERY - 1.1%
Anheuser-Busch Cos, Inc. 3,500 166,285
--------
BUILDING PRODUCTS-CEMENT/AGGREGATE - 1.5%
Martin Marietta Materials, Inc. 2,700 228,474
--------
CASINO SERVICES - 0.7%
International Game Technology 2,600 107,900
--------
COMPUTER SERVICES - 0.8%
Electronic Data Systems Corp. 5,300 129,956
--------
COMPUTERS - 5.9%
Hewlett-Packard Co. 7,700 282,513
International Business Machines Corp. 4,800 393,312
Sun Microsystems, Inc.* 46,600 231,602
--------
907,427
--------
COSMETICS & TOILETRIES - 1.6%
Procter & Gamble Co. 3,975 246,371
--------
DIVERSIFIED MANUFACTURING OPERATIONS - 5.5%
General Electric Co. 11,600 409,480
Illinois Tool Works, Inc. 5,100 228,990
Parker-Hannifin Corp. 2,800 217,644
--------
856,114
--------
E-COMMERCE/PRODUCTS - 1.0%
Emdeon Corp.* 12,800 149,888
--------
ELECTRIC PRODUCTS-MISCELLANEOUS - 0.5%
Emerson Electric Co. 900 75,474
--------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 3.5%
Intersil Corp. Cl. A 6,700 164,485
Micron Technology, Inc.* 14,600 254,040
Texas Instruments, Inc. 3,700 123,025
--------
541,550
--------
ELECTRONIC CONNECTORS - 1.0%
Thomas & Betts Corp.* 3,400 162,214
--------
ELECTRONIC MEASURE INSTRUMENTS - 1.1%
Agilent Technologies, Inc.* 5,000 163,450
--------
ENTERPRISE SOFTWARE/SERVICES - 4.0%
BEA Systems, Inc.* 15,900 241,680
Oracle Corp.* 21,700 384,958
--------
626,638
--------
FINANCE-INVESTMENT BANKERS/BROKERS - 3.4%
Goldman Sachs Group, Inc. 1,800 304,506
Morgan Stanley 3,100 226,021
--------
530,527
--------
FOOD-MISCELLANEOUS/DIVERSIFIED - 1.5%
General Mills, Inc. 4,000 $226,400
--------
HEALTH CARE COST CONTAINMENT - 1.6%
McKesson Corp. 4,800 253,056
--------
HOME DECORATION PRODUCTS - 0.8%
Newell Rubbermaid, Inc. 4,200 118,944
--------
HUMAN RESOURCES - 1.1%
Manpower, Inc. 2,900 177,683
--------
LIFE/HEALTH INSURANCE - 0.7%
Cigna Corp. 1,000 116,320
--------
MEDICAL INFORMATION SYSTEMS - 1.0%
IMS Health, Inc. 5,900 157,176
--------
MEDICAL LABS & TESTING SERVICES - 1.3%
Laboratory Corp. of America Holdings* 3,100 203,267
--------
MEDICAL PRODUCTS - 5.5%
Baxter International, Inc. 4,900 222,754
Johnson & Johnson 9,800 636,412
--------
859,166
--------
MEDICAL-BIOMEDICAL/GENETICS - 1.0%
Biogen Idec, Inc.* 3,400 151,912
--------
MEDICAL-DRUGS - 3.0%
Abbott Laboratories 6,200 301,072
Celgene Corp.* 3,800 164,540
--------
465,612
--------
MEDICAL-HMO - 2.9%
Humana, Inc.* 2,500 165,225
--------
UnitedHealth Group, Inc. 5,900 290,280
--------
455,505
--------
MEDICAL-NURSING HOMES - 0.7%
Manor Care, Inc. 2,200 115,016
--------
MEDICAL-WHOLESALE DRUG DISTRIBUTORS - 0.7%
Cardinal Health, Inc. 1,700 111,758
--------
METAL-COPPER - 1.1%
Phelps Dodge Corp. 2,000 169,400
--------
MULTIMEDIA - 1.7%
Walt Disney Co. 8,300 256,553
--------
NETWORKING PRODUCTS - 3.3%
Cisco Systems, Inc.* 22,100 508,300
--------
OIL & GAS DRILLING - 0.9%
Diamond Offshore Drilling, Inc. 2,000 144,740
--------
OIL COMPANIES-EXPLORATION & PRODUCTION - 1.2%
Devon Energy Corp. 2,900 183,135
--------
OIL COMPANIES-INTEGRATED - 0.9%
ConocoPhillips 2,300 136,919
--------
OIL-FIELD SERVICES - 0.8%
Superior Energy Services* 4,700 123,422
--------
PHARMACY SERVICES - 1.1%
Medco Health Solutions, Inc.* 2,900 174,319
--------
RETAIL-APPAREL/SHOE - 1.5%
Ann Taylor Stores Corp.* 5,600 234,416
--------
RETAIL-DISCOUNT - 2.8%
Dollar Tree Stores, Inc.* 7,000 216,720
Wal-Mart Stores, Inc. 4,500 221,940
--------
438,660
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<Page>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------
RETAIL-MAJOR DEPARTMENT STORES - 1.5%
JC Penney Co., Inc. 3,500 $ 239,365
-----------
RETAIL-OFFICE SUPPLIES - 1.2%
Staples, Inc. 7,800 189,774
-----------
RETAIL-REGIONAL DEPARTMENT STORES - 2.9%
Federated Department Stores, Inc. 4,400 190,124
-----------
Kohl's Corp.* 3,900 253,188
-----------
443,312
-----------
RETAIL-RESTAURANTS - 1.1%
McDonald's Corp. 4,300 168,216
-----------
STEEL-PRODUCERS - 1.3%
Nucor Corp. 4,200 207,858
-----------
TELEPHONE-INTEGRATED - 1.4%
Level 3 Communications, Inc.* 39,600 211,860
-----------
TOBACCO - 1.1%
Altria Group, Inc. 2,200 168,410
-----------
TOYS - 1.4%
Mattel, Inc. 10,700 210,790
-----------
TRANSPORT-RAIL - 1.7%
CSX Corp. 8,000 262,640
-----------
TRANSPORT-SERVICES - 1.3%
United Parcel Service, Inc. Cl. B 2,800 201,432
-----------
WEB PORTALS/ISP - 0.8%
Google, Inc. Cl. A* 300 120,570
-----------
WIRELESS EQUIPMENT - 2.5%
Motorola, Inc. 9,900 247,500
QUALCOMM, Inc. 3,800 138,130
-----------
385,630
- -----------------------------------------------------------------------------
Total Common Stock (Cost: $13,766,681) 15,400,149
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 0.6%
TIME DEPOSIT - 0.6%
Brown Brothers Harriman & Co.
4.630%, 10/01/06
(Cost: $94,880) $94,880 94,880
- -----------------------------------------------------------------------------
Total Investments - 99.9% (Cost: $13,861,561) 15,495,029
- -----------------------------------------------------------------------------
Other Assets in Excess of Liabilities - 0.1% 16,297
- -----------------------------------------------------------------------------
Net Assets - 100.0% $15,511,326
- -----------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Consumer, Non-cyclical 24.4%
Technology 22.0
Industrial 16.5
Consumer, Cyclical 15.5
Communications 10.5
Financial 4.2
Energy 3.8
Basic Materials 2.4
Short Term Investments 0.6
- --------------------------------------------------------------------------------
Total Investments 99.9%
- --------------------------------------------------------------------------------
Other assets in excess of liabilities 0.1
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
<Page>
U.S. SYSTEMATIC MID CAP GROWTH FUND
MANAGEMENT TEAM: JANE EDMONDSON, Portfolio Manager; MARK P. ROEMER, Portfolio
Manager
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The U.S. Systematic Mid Cap Growth Fund seeks to maximize long-term
capital appreciation through investments primarily in stocks of mid-sized U.S.
companies. Generally, mid-sized companies are those within the capitalization
range of the Russell Midcap Growth Index, as measured at time of purchase.
MARKET OVERVIEW: Following strong gains in the first quarter of the year, prices
of U.S. mid-cap growth stocks declined during the six months ended September 30,
2006. Losses were concentrated in the spring and early summer when the following
concerns eclipsed robust corporate earnings growth:
- Fears that rising inflation would lead the Federal Reserve to continue
raising short-term interest rates, as it had been doing since June
2004
- Ongoing signs of softening in the housing market, including a record
number of unsold homes on the market in June
- Continued high price of oil, which hit an all-time high of $78.40 a
barrel in mid-July in response to military conflict in the Middle East
The investment landscape brightened considerably toward the end of the period.
The Fed held the target funds rate steady at its August and September meetings,
citing cooling in the economy. The price of oil tumbled approximately 20% due to
easing geopolitical tensions, a mild Atlantic hurricane season and brimming U.S.
energy stockpiles. Gasoline prices also declined, sparking a rebound in consumer
confidence after the nine-month low reached in August.
PERFORMANCE: From April 1 through September 30, 2006, the Fund's Class I shares
declined 5.22% and the Russell Midcap Growth Index fell 3.85%.
PORTFOLIO SPECIFICS: The Fund's underperformance was driven by stock selection,
which was weakest in the financials and materials sectors. In financials, the
portfolio's below-index exposure to real estate investment trusts (REITs) was
unfavorable. REITs are sensitive to interest rates and performed well as
inflation expectations moderated over the course of the period and bond yields
fell. In materials, Eagle Materials, a manufacturer of construction products,
was a notable detractor. The company lowered its 2007 earnings forecast, citing
the decline in housing starts.
On the plus side, stock selection in the consumer discretionary and industrials
sectors had a major, positive impact on relative results. The Fund's
top-performing holdings included Limited Brands, a retailer of apparel and
personal care products that experienced improved profitability in its Express
segment; Office Depot, an office supplies retailer which is implementing
cost-saving programs to help fuel margin expansion; and CSX Corp., a railroad
company that announced a $500 million share buyback program.
The Fund remained well diversified throughout the period. As of September 30,
the largest overweight versus the index was in industrials (+5.1%), and the
largest underweight was in the consumer discretionary sector (-5.4%).
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 Midcap 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 MID
CAP GROWTH FUND CLASS I AND II SHARES WITH THE RUSSELL MIDCAP GROWTH INDEX.
[CHART]
<Table>
<Caption>
U.S. SYSTEMATIC MID CAP GROWTH FUND
CLASS I SHARES RUSSELL MIDCAP GROWTH INDEX
- ------------------------------------------------------------------------------
2/27/2004 $250,000 $250,000
2/29/2004 $250,000 $250,000
3/31/2004 $247,250 $249,500
4/30/2004 $231,995 $242,439
5/31/2004 $238,491 $248,161
6/30/2004 $246,241 $252,106
7/31/2004 $229,990 $235,392
8/30/2004 $223,481 $232,496
9/30/2004 $237,225 $241,192
10/31/2004 $240,214 $249,368
11/30/2004 $259,215 $262,236
12/31/2004 $269,713 $274,823
1/31/2005 $263,213 $267,458
2/28/2005 $272,452 $274,224
3/31/2005 $267,193 $270,221
4/30/2005 $251,696 $259,520
5/31/2005 $267,201 $274,339
6/30/2005 $277,194 $279,441
7/31/2005 $298,926 $295,733
8/31/2005 $299,434 $293,899
9/30/2005 $302,429 $297,690
10/31/2005 $293,416 $288,938
11/30/2005 $306,855 $304,628
12/31/2005 $309,708 $307,979
1/31/2006 $330,242 $326,427
2/28/2006 $328,690 $322,411
3/31/2006 $338,583 $331,407
4/30/2006 $341,191 $332,799
5/31/2006 $323,517 $317,124
6/30/2006 $319,861 $315,824
7/31/2006 $307,131 $304,517
8/31/2006 $312,321 $311,521
9/30/2006 $320,910 $318,624
</Table>
Annualized Total Returns As of 9/30/06
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
U.S. Systematic Mid Cap
Growth Fund Class I 6.20% 10.13%
- --------------------------------------------------------------------------------
Russell Midcap Growth Index 7.03% 9.82%
- --------------------------------------------------------------------------------
21
<Page>
[CHART]
<Table>
<Caption>
U.S. SYSTEMATIC MID CAP GROWTH FUND
CLASS II SHARES RUSSELL MIDCAP GROWTH INDEX
- ------------------------------------------------------------------------------
2/27/2004 $250,000.00 $250,000.00
2/29/2004 $250,000.00 $250,000.00
3/31/2004 $247,250.00 $249,500.00
4/30/2004 $231,994.68 $242,439.15
5/31/2004 $238,490.53 $248,160.71
6/30/2004 $246,241.47 $252,106.47
7/31/2004 $229,989.53 $235,391.81
8/30/2004 $223,480.83 $232,496.49
9/30/2004 $237,224.90 $241,191.86
10/31/2004 $240,213.93 $249,368.26
11/30/2004 $259,214.85 $262,235.67
12/31/2004 $269,713.06 $274,822.98
1/31/2005 $263,212.97 $267,457.72
2/28/2005 $272,451.75 $274,224.40
3/31/2005 $267,193.43 $270,220.73
4/30/2005 $251,696.21 $259,519.99
5/31/2005 $267,200.70 $274,338.58
6/30/2005 $277,194.00 $279,441.27
7/31/2005 $298,926.01 $295,732.70
8/31/2005 $299,434.19 $293,899.16
9/30/2005 $302,428.53 $297,690.46
10/31/2005 $293,416.16 $288,938.36
11/30/2005 $307,353.42 $304,627.71
12/31/2005 $309,965.93 $307,978.62
1/31/2006 $331,012.61 $326,426.53
2/28/2006 $329,456.86 $322,411.49
3/31/2006 $339,604.13 $331,406.77
4/30/2006 $342,219.08 $332,798.68
5/31/2006 $324,286.80 $317,123.86
6/30/2006 $320,914.22 $315,823.65
7/31/2006 $308,173.92 $304,517.16
8/31/2006 $313,382.06 $311,521.06
9/30/2006 $322,219.44 $318,623.74
</Table>
Annualized Total Returns As of 9/30/2006
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
U.S. Systematic MidCap
Growth Fund Class II 6.64% 10.36%
- --------------------------------------------------------------------------------
Russell Midcap Growth Index 8.80% 9.82%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I AND II SHARES COMPARED WITH THE RUSSELL MIDCAP GROWTH INDEX FOR
THE PERIODS INDICATED. THE FUND'S CLASS I SHARES WERE FIRST AVAILABLE ON
FEBRUARY 27, 2004 AND CLASS II SHARES ON SEPTEMBER 30, 2005. THE HISTORICAL
PERFORMANCE OF CLASS II SHARES INCLUDES THE PERFOMANCE OF CLASS I SHARES FOR
PERIODS PRIOR TO THE INCEPTION OF CLASS II. 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. 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 MIDCAP GROWTH INDEX IS AN UNMANAGED INDEX GENERALLY REPRESENTATIVE
OF THE SMALLEST 800 STOCKS IN THE RUSSELL 1000 INDEX AS RANKED BY TOTAL MARKET
CAPITALIZATION. 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 INDEX. RUSSELL GROWTH INDEXES MEASURE THE
PERFORMANCE OF THOSE 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.
22
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2006
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 98.9%
AIRLINES - 2.9%
AMR Corp.* 17,200 $ 398,008
Continental Airlines, Inc. Cl. B* 12,800 362,368
----------
760,376
----------
APPLICATIONS SOFTWARE - 1.5%
Compuware Corp.* 49,500 385,605
----------
ATHLETIC FOOTWEAR - 1.0%
Nike, Inc. Cl. B 3,100 271,622
----------
BEVERAGES-NON-ALCOHOLIC - 0.7%
Hansen Natural Corp.* 5,200 168,896
----------
BUILDING PRODUCTS-CEMENT/AGGREGATE - 1.5%
Eagle Materials, Inc. 7,600 255,968
Martin Marietta Materials, Inc. 1,600 135,392
----------
391,360
----------
BUILDING PRODUCTS-WOOD - 1.1%
Masco Corp. 10,800 296,136
----------
BUILDING-MAINTENANCE & SERVICE - 1.2%
Rollins, Inc. 15,200 320,872
----------
CABLE TV - 1.3%
Cablevision Systems Cl. A 14,400 327,024
----------
CELLULAR TELECOMMUNICATIONS - 0.9%
Leap Wireless International, Inc.* 4,800 232,752
----------
COMMERCIAL BANKS-SOUTHERN US - 1.1%
Synovus Financial Corp. 9,500 279,015
----------
COMMERCIAL SERVICES-FINANCE - 1.3%
Equifax, Inc. 9,200 337,732
----------
COMPUTER SERVICES - 1.6%
Electronic Data Systems Corp. 17,300 424,196
----------
CONSULTING SERVICES - 1.7%
Corporate Executive Board Co. 4,900 440,559
----------
COSMETICS & TOILETRIES - 1.6%
Estee Lauder Cos., Inc. Cl. A 10,100 407,333
----------
DATA PROCESSING/MANAGEMENT - 2.5%
CSG Systems International, Inc.* 9,800 259,014
Dun & Bradstreet Corp.* 5,300 397,447
----------
656,461
----------
DISTRIBUTION/WHOLESALE - 1.4%
Genuine Parts Co. 8,600 370,918
----------
DIVERSIFIED MANUFACTURING OPERATIONS - 4.3%
Dover Corp. 8,600 407,984
ITT Corp. 3,100 158,937
Parker-Hannifin Corp. 3,200 248,736
Teleflex, Inc. 5,300 294,892
----------
1,110,549
----------
DIVERSIFIED OPERATIONS - 1.5%
Leucadia National Corp. 14,400 376,848
----------
E-COMMERCE/PRODUCTS - 1.4%
Emdeon Corp.* 31,200 365,352
----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 6.5%
Advanced Micro Devices, Inc.* 14,900 370,265
Intersil Corp. Cl. A 4,500 110,475
LSI Logic Corp.* 34,200 281,124
MEMC Electronic Materials, Inc.* 10,800 395,604
Micron Technology, Inc.* 30,000 522,000
----------
1,679,468
----------
ELECTRONIC CONNECTORS - 1.4%
Thomas & Betts Corp.* 7,700 $ 367,367
----------
ELECTRONIC MEASURE INSTRUMENTS - 2.2%
Agilent Technologies, Inc.* 11,700 382,473
Tektronix, Inc. 6,800 196,724
----------
579,197
----------
ELECTRONICS-MILITARY - 1.2%
L-3 Communications Holdings, Inc. 4,000 313,320
----------
FINANCE-COMMERCIAL - 0.5%
CIT Group, Inc. 2,600 126,438
----------
FOOD-MISCELLANEOUS/DIVERSIFIED - 1.6%
HJ Heinz Co. 9,600 402,528
----------
FUNERAL SERVICES & RELATED ITEMS - 0.5%
Service Corp. International 14,800 138,232
----------
HUMAN RESOURCES - 0.5%
Hewitt Associates, Inc. Cl. A* 5,000 121,300
----------
INDEPENDENT POWER PRODUCER - 1.2%
Mirant Corp.* 11,200 305,872
----------
INSTRUMENTS-CONTROLS - 1.1%
Mettler Toledo International* 4,300 284,445
----------
INSTRUMENTS-SCIENTIFIC - 0.7%
PerkinElmer, Inc. 9,600 181,728
----------
INVESTMENT MANAGEMENT/ADVISOR SERVICES - 1.5%
Franklin Resources, Inc. 3,700 391,275
----------
LIFE/HEALTH INSURANCE - 1.3%
Cigna Corp.* 2,900 337,328
----------
MEDICAL INFORMATION SYSTEMS - 0.6%
IMS Health, Inc. 5,500 146,520
----------
MEDICAL LABS & TESTING SERVICES - 1.6%
Laboratory Corp. of America Holdings* 6,500 426,205
----------
MEDICAL PRODUCTS - 0.5%
Zimmer Holdings, Inc.* 1,800 121,500
----------
MEDICAL-BIOMEDICAL/GENETICS - 1.8%
Celgene Corp.* 5,600 242,480
Vertex Pharmaceutical, Inc.* 6,500 218,725
----------
461,205
----------
MEDICAL-DRUGS - 1.6%
Forest Laboratories, Inc. Cl. A* 8,300 420,063
----------
MEDICAL-GENERIC DRUGS - 1.1%
Mylan Laboratories, Inc. 14,000 281,820
----------
MEDICAL-HMO - 2.8%
Coventry Health Care, Inc.* 3,925 202,216
Health Net, Inc.* 5,900 256,768
Humana, Inc.* 4,200 277,578
----------
736,562
----------
MEDICAL-HOSPITALS - 0.9%
Universal Health Services, Inc. Cl. B 4,100 245,713
----------
MEDICAL-OUTPATIENT/HOME MEDICAL CARE - 0.4%
Lincare Holdings, Inc.* 2,800 96,992
----------
METAL-COPPER - 1.1%
Phelps Dodge Corp. 3,300 279,510
----------
MULTI-LINE INSURANCE - 2.3%
Assurant, Inc. 6,300 336,483
CNA Financial Corp.* 7,200 259,344
----------
595,827
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
NON-FERROUS METALS - 0.5%
Titanium Metals Corp.* 4,700 $ 118,816
----------
OIL & GAS DRILLING - 4.0%
Diamond Offshore Drilling, Inc. 2,000 144,740
ENSCO International, Inc. 9,900 433,917
Pride International, Inc.* 6,600 180,972
Rowan Cos., Inc. 9,100 287,833
----------
1,047,462
----------
OIL FIELD MACHINERY & EQUIPMENT - 0.8%
Grant Prideco, Inc.* 5,600 212,968
----------
OIL-FIELD SERVICES - 3.0%
Helix Energy Solutions Group* 3,500 116,900
Superior Energy Services* 13,200 346,632
Tidewater, Inc. 7,100 313,749
----------
777,281
----------
PAPER & RELATED PRODUCTS - 0.8%
Temple-Inland, Inc. 4,900 196,490
----------
PRIVATE CORRECTIONS - 1.4%
Corrections Corp. of America* 8,100 350,325
----------
PROPERTY/CASUALTY INSURANCE - 1.6%
WR Berkley Corp. 11,675 413,178
----------
REAL ESTATE MANAGEMENT/SERVICES - 1.1%
CB Richard Ellis Group, Inc. Cl. A* 11,700 287,820
----------
RETAIL-APPAREL/SHOE - 3.0%
Claires Stores, Inc. 8,500 247,860
Ltd. Brands, Inc. 8,800 233,112
Nordstrom, Inc. 6,800 287,640
----------
768,612
----------
RETAIL-AUTO PARTS - 0.8%
Autozone, Inc.* 2,000 206,600
----------
RETAIL-BEDDING - 0.6%
Bed Bath & Beyond, Inc.* 4,000 153,040
----------
RETAIL-OFFICE SUPPLIES - 0.9%
Office Depot, Inc.* 5,800 230,260
----------
RETAIL-RESTAURANTS - 2.0%
Applebee's International, Inc. 8,600 184,986
Brinker International, Inc. 3,200 128,288
CBRL Group, Inc. 4,900 198,107
----------
511,381
----------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS - 0.9%
Atmel Corp.* 36,500 220,460
----------
SEMICONDUCTOR EQUIPMENT - 1.2%
Lam Research Corp.* 6,700 303,711
----------
STEEL-PRODUCERS - 1.9%
Nucor Corp. 6,000 296,940
Steel Dynamics, Inc. 3,700 186,665
----------
483,605
----------
TELEPHONE-INTEGRATED - 1.9%
Level 3 Communications, Inc.* 91,800 491,130
----------
TELEVISION - 1.4%
CBS Corp. Cl. B 13,300 374,661
----------
THERAPEUTICS - 0.9%
Amylin Pharmaceuticals, Inc.* 5,000 220,350
----------
TOOLS-HAND HELD - 1.5%
Black & Decker Corp. 5,000 396,750
----------
TOYS - 1.9%
Mattel, Inc. 24,800 $ 488,560
----------
TRANSPORT-RAIL - 1.4%
CSX Corp. 10,900 357,847
- --------------------------------------------------------------------------------
Total Common Stock (Cost: $24,858,821) 25,575,328
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 1.2%
TIME DEPOSIT - 1.2%
JP Morgan Grand Cayman
4.630%, 10/02/06 (Cost: $295,875) $295,875 295,875
- -------------------------------------------------------------------------------
Total Investments - 100.1% (Cost: $25,154,696) 25,871,203
- -------------------------------------------------------------------------------
Liabilities In Excess Of Other Assets - (0.1%) (16,682)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $25,854,521
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENTAGE OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Consumer, Non-cyclical 22.0%
Industrial 16.5
Technology 14.8
Consumer, Cyclical 14.5
Financial 9.4
Energy 7.9
Communications 6.9
Basic Materials 4.2
Diversified 1.5
Utilities 1.2
Short Term Investments 1.2
- --------------------------------------------------------------------------------
Total Investments 100.1%
- --------------------------------------------------------------------------------
Liabilities in excess of other assets (0.1)
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
<Page>
U.S. CONVERTIBLE FUND
MANAGEMENT TEAM: DOUGLAS G. FORSYTH, CFA, Portfolio Manager; JUSTIN KASS, CFA,
Portfolio Manager; WILLIAM L. STICKNEY, Portfolio Manager; MICHAEL E. YEE,
Portfolio Manager; ELIZABETH LEMESEVSKI, Analyst; JOANNA WILLARS, 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
advanced 2.02% from April 1 through September 30, 2006, adding to gains from
earlier in the year. The S&P 500 Index rose 4.14% and the NASDAQ Composite Index
fell 3.48%.
Like U.S. equities, prices of convertibles were volatile in the first several
months of the period. Market gains and losses were linked to speculation about
when the Federal Reserve would end the monetary tightening cycle. However,
convertibles found their footing as the summer progressed, benefiting from the
broad, positive move in the U.S. equity market. Stocks rallied in response to
the Fed's decision to hold interest rates steady at its August and September
meetings, a retreat in oil prices and continued strength in corporate profits.
Larger-cap convertibles outperformed small caps, and "busted," or bond-like,
issues outperformed total return and more equity-sensitive convertibles.
Telecommunications was the best-performing industry, supported by improving
fundamentals, while energy was the worst due to declining oil prices.
Redemptions outpaced new issuance, as the solid equity returns of the past three
years, and low interest rates, continued to drive calls, redemptions and
tenders.
PERFORMANCE: During the six months ended September 30, 2006, the Fund's Class I
shares gained 0.95% and the Merrill Lynch All Convertibles, All Qualities Index
rose 2.02%.
PORTFOLIO SPECIFICS: The Fund was negatively impacted by positions in cyclical,
industrial companies, which lagged on signs that the economy was entering a more
mature phase of growth. The semiconductor industry was another weak area for the
portfolio due to rising inventory levels and fears of a slowdown in earnings.
Given the drop in oil prices, holdings in energy equipment and services
companies also moved lower on profit concerns.
On the plus side, a number of our insurance positions advanced on
lower-than-expected catastrophe losses and healthy earnings. Select consumer
names rose due to impressive same-store-sales and continued improvement in
operating trends. Robust quarterly profits and investor preferences for
defensive growth industries drove gains in several of our health care holdings.
As of September 30, 2006, the Fund's conversion premium was 20%, compared to the
market's premium of 35%. The Fund continues to be well-positioned to participate
in the upside of an improving economic environment, while not sacrificing
downside protection.
MARKET OUTLOOK: We believe convertible securities remain a compelling asset
class. Although there are potential risks to the U.S. equity market, such as a
further slowdown in housing, the economy is healthy, corporate balance sheets
are solid and defaults are low. Other possible catalysts for equities are
better-than-expected corporate earnings and a lack of additional rate increases
from the Fed that would extend the tightening cycle.
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 AND II SHARES WITH THE MERRILL LYNCH ALL CONVERTIBLES, ALL QUALITIES
INDEX.
[CHART]
<Table>
<Caption>
U.S.
CONVERTIBLE MERRILL LYNCH
FUND ALL CONVERTIBLES
CLASS I ALL QUALITIES
SHARES INDEX
----------- ----------------
4/19/1993 $ 250,000 $250,000
4/30/1993 $ 255,000 $248,560
5/31/1993 $ 265,200 $254,242
6/30/1993 $ 273,686 $255,910
7/31/1993 $ 276,286 $256,862
8/31/1993 $ 292,366 $264,098
9/30/1993 $ 297,658 $266,712
10/31/1993 $ 305,367 $273,263
11/30/1993 $ 298,466 $269,481
12/31/1993 $ 307,599 $273,588
1/31/1994 $ 318,058 $280,728
2/28/1994 $ 314,495 $277,174
3/31/1994 $ 300,437 $265,724
4/30/1994 $ 297,974 $260,511
5/31/1994 $ 295,054 $260,430
6/30/1994 $ 286,733 $257,487
7/31/1994 $ 290,575 $262,057
8/31/1994 $ 296,242 $268,834
9/30/1994 $ 292,805 $265,401
10/31/1994 $ 292,337 $266,335
11/30/1994 $ 283,625 $258,202
12/31/1994 $ 284,249 $257,169
1/31/1995 $ 282,288 $259,015
2/28/1995 $ 285,986 $267,112
3/31/1995 $ 294,394 $274,364
4/30/1995 $ 297,868 $280,087
5/31/1995 $ 303,587 $287,821
6/30/1995 $ 315,214 $297,644
7/31/1995 $ 330,029 $307,710
8/31/1995 $ 335,309 $312,218
9/30/1995 $ 343,089 $316,280
10/31/1995 $ 337,496 $307,681
11/30/1995 $ 344,584 $319,483
12/31/1995 $ 347,547 $320,665
1/31/1996 $ 357,278 $330,551
2/29/1996 $ 367,247 $338,015
3/31/1996 $ 372,976 $341,544
4/30/1996 $ 383,046 $347,893
5/31/1996 $ 394,920 $355,582
6/30/1996 $ 386,153 $350,316
7/31/1996 $ 365,339 $335,392
8/31/1996 $ 387,735 $348,328
9/30/1996 $ 406,075 $357,918
10/31/1996 $ 406,603 $362,234
11/30/1996 $ 417,256 $374,474
12/31/1996 $ 420,594 $371,722
1/31/1997 $ 436,702 $382,554
2/28/1997 $ 430,763 $381,127
3/31/1997 $ 426,585 $372,948
4/30/1997 $ 431,448 $376,338
5/31/1997 $ 453,667 $395,430
6/30/1997 $ 471,723 $407,834
7/31/1997 $ 500,687 $431,117
8/31/1997 $ 494,378 $428,781
9/30/1997 $ 518,554 $448,603
10/31/1997 $ 508,183 $439,963
11/30/1997 $ 509,656 $440,148
12/31/1997 $ 518,626 $444,453
1/31/1998 $ 513,544 $445,822
2/28/1998 $ 537,783 $465,562
3/31/1998 $ 562,198 $482,677
4/30/1998 $ 568,832 $485,708
5/31/1998 $ 555,863 $474,978
6/30/1998 $ 577,597 $478,987
7/31/1998 $ 581,756 $471,381
8/31/1998 $ 497,692 $417,219
9/30/1998 $ 525,712 $425,547
10/31/1998 $ 537,173 $436,539
11/30/1998 $ 571,176 $457,392
12/31/1998 $ 630,407 $484,154
1/31/1999 $ 667,790 $508,038
2/28/1999 $ 634,801 $490,287
3/31/1999 $ 674,349 $510,575
4/30/1999 $ 695,658 $531,299
5/31/1999 $ 684,389 $528,616
6/30/1999 $ 717,103 $548,101
7/31/1999 $ 695,733 $544,599
8/31/1999 $ 701,090 $537,737
9/30/1999 $ 704,245 $541,275
10/31/1999 $ 749,105 $562,493
11/30/1999 $ 817,049 $595,072
12/31/1999 $ 955,212 $675,681
1/31/2000 $ 960,657 $675,519
2/29/2000 $1,122,047 $732,350
3/31/2000 $1,073,463 $731,310
4/30/2000 $1,003,043 $680,879
5/31/2000 $ 938,949 $651,390
6/30/2000 $1,009,558 $684,924
7/31/2000 $ 970,185 $664,602
8/31/2000 $1,070,502 $715,650
9/30/2000 $1,069,753 $692,299
10/31/2000 $1,014,019 $665,216
11/30/2000 $ 865,972 $585,703
12/31/2000 $ 920,269 $608,123
1/31/2001 $ 950,269 $645,949
2/28/2001 $ 856,763 $597,438
3/31/2001 $ 803,986 $571,575
4/30/2001 $ 849,492 $609,933
5/31/2001 $ 834,881 $606,127
6/30/2001 $ 815,344 $596,562
7/31/2001 $ 785,910 $587,978
8/31/2001 $ 763,433 $577,600
9/30/2001 $ 716,253 $543,135
10/31/2001 $ 732,870 $554,302
11/30/2001 $ 757,641 $569,135
12/31/2001 $ 766,051 $581,087
1/31/2002 $ 754,254 $571,906
2/28/2002 $ 742,488 $555,689
3/31/2002 $ 767,658 $575,639
4/30/2002 $ 759,060 $567,230
5/31/2002 $ 750,103 $562,278
6/30/2002 $ 707,422 $531,803
7/31/2002 $ 652,668 $499,948
8/31/2002 $ 661,022 $506,157
9/30/2002 $ 644,100 $488,315
10/31/2002 $ 655,500 $499,205
11/30/2002 $ 676,083 $535,197
12/31/2002 $ 663,373 $531,183
1/31/2003 $ 662,245 $539,735
2/28/2003 $ 655,556 $538,440
3/31/2003 $ 662,636 $547,540
4/30/2003 $ 696,298 $575,161
5/31/2003 $ 733,690 $601,917
6/30/2003 $ 738,972 $605,746
7/31/2003 $ 752,200 $607,469
8/31/2003 $ 765,815 $615,009
9/30/2003 $ 768,112 $622,600
10/31/2003 $ 817,194 $644,944
11/30/2003 $ 835,091 $655,459
12/31/2003 $ 850,707 $675,411
1/31/2004 $ 883,629 $695,901
2/29/2004 $ 884,778 $701,407
3/31/2004 $ 889,025 $704,027
4/30/2004 $ 870,533 $687,053
5/31/2004 $ 875,495 $688,814
6/30/2004 $ 893,093 $700,003
7/31/2004 $ 860,674 $681,136
8/30/2004 $ 849,055 $682,504
9/30/2004 $ 879,111 $694,209
10/31/2004 $ 872,518 $697,293
11/30/2004 $ 922,949 $722,648
12/31/2004 $ 953,037 $740,330
1/31/2005 $ 941,124 $724,129
2/28/2005 $ 953,453 $722,424
3/31/2005 $ 929,998 $705,743
4/30/2005 $ 902,656 $682,453
5/31/2005 $ 928,743 $699,992
6/30/2005 $ 958,184 $714,762
7/31/2005 $ 993,158 $737,563
8/31/2005 $ 992,363 $737,047
9/30/2005 $1,005,264 $744,343
10/31/2005 $ 986,365 $728,563
11/30/2005 $1,013,096 $741,823
12/31/2005 $1,021,403 $747,758
1/31/2006 $1,065,528 $778,565
2/28/2006 $1,066,806 $776,775
3/31/2006 $1,089,316 $787,572
4/30/2006 $1,107,943 $794,266
5/31/2006 $1,076,034 $781,876
6/30/2006 $1,072,053 $781,719
7/31/2006 $1,069,373 $783,517
8/31/2006 $1,082,740 $794,095
9/30/2006 $1,099,631 $803,544
</Table>
Annualized Total Returns As of 9/30/2006
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Convertible Fund Class I 9.40% 8.95% 10.47%
- --------------------------------------------------------------------------------
Merrill Lynch All Convertibles
All Qualities Index 7.94% 8.15% 8.42
- --------------------------------------------------------------------------------
25
<Page>
[CHART]
<Table>
<Caption>
U.S. MERRILL LYNCH
CONVERTIBLE FUND ALL CONVERTIBLES
CLASS II ALL QUALITIES
SHARES INDEX
- ------------------------------------------------
4/19/1993 $ 250,000.00 $250,000.00
4/30/1993 $ 255,000.00 $248,560.00
5/31/1993 $ 265,200.00 $254,242.08
6/30/1993 $ 273,686.40 $255,909.91
7/31/1993 $ 276,286.42 $256,861.89
8/31/1993 $ 292,366.29 $264,097.69
9/30/1993 $ 297,658.12 $266,712.26
10/31/1993 $ 305,367.47 $273,262.71
11/30/1993 $ 298,466.16 $269,480.76
12/31/1993 $ 307,599.23 $273,587.65
1/31/1994 $ 318,057.60 $280,728.28
2/28/1994 $ 314,495.35 $277,174.26
3/31/1994 $ 300,437.41 $265,724.19
4/30/1994 $ 297,973.82 $260,510.69
5/31/1994 $ 295,053.68 $260,429.93
6/30/1994 $ 286,733.17 $257,487.07
7/31/1994 $ 290,575.39 $262,057.46
8/31/1994 $ 296,241.61 $268,834.27
9/30/1994 $ 292,805.21 $265,401.26
10/31/1994 $ 292,336.72 $266,335.47
11/30/1994 $ 283,625.09 $258,201.58
12/31/1994 $ 284,249.06 $257,168.78
1/31/1995 $ 282,287.74 $259,015.25
2/28/1995 $ 285,985.71 $267,112.07
3/31/1995 $ 294,393.69 $274,364.16
4/30/1995 $ 297,867.54 $280,087.39
5/31/1995 $ 303,586.60 $287,820.61
6/30/1995 $ 315,213.96 $297,643.93
7/31/1995 $ 330,029.02 $307,710.24
8/31/1995 $ 335,309.48 $312,218.20
9/30/1995 $ 343,088.66 $316,280.16
10/31/1995 $ 337,496.32 $307,680.50
11/30/1995 $ 344,583.74 $319,483.12
12/31/1995 $ 347,547.16 $320,665.21
1/31/1996 $ 357,278.48 $330,551.32
2/29/1996 $ 367,246.55 $338,015.17
3/31/1996 $ 372,975.60 $341,544.05
4/30/1996 $ 383,045.94 $347,893.35
5/31/1996 $ 394,920.36 $355,581.79
6/30/1996 $ 386,153.13 $350,315.63
7/31/1996 $ 365,339.48 $335,392.18
8/31/1996 $ 387,734.79 $348,328.26
9/30/1996 $ 406,074.64 $357,917.73
10/31/1996 $ 406,602.54 $362,234.22
11/30/1996 $ 417,255.52 $374,474.12
12/31/1996 $ 420,593.57 $371,721.73
1/31/1997 $ 436,702.30 $382,553.70
2/28/1997 $ 430,763.15 $381,126.78
3/31/1997 $ 426,584.75 $372,947.80
4/30/1997 $ 431,447.81 $376,337.89
5/31/1997 $ 453,667.38 $395,429.51
6/30/1997 $ 471,723.34 $407,834.14
7/31/1997 $ 500,687.15 $431,117.39
8/31/1997 $ 494,378.49 $428,780.73
9/30/1997 $ 518,553.60 $448,603.27
10/31/1997 $ 508,182.53 $439,963.17
11/30/1997 $ 509,656.26 $440,147.95
12/31/1997 $ 518,626.21 $444,452.60
1/31/1998 $ 513,543.67 $445,821.51
2/28/1998 $ 537,782.93 $465,562.49
3/31/1998 $ 562,198.28 $482,676.57
4/30/1998 $ 568,832.22 $485,707.77
5/31/1998 $ 555,862.84 $474,978.49
6/30/1998 $ 577,597.08 $478,987.31
7/31/1998 $ 581,755.78 $471,380.99
8/31/1998 $ 497,692.07 $417,219.31
9/30/1998 $ 525,712.13 $425,547.01
10/31/1998 $ 537,172.66 $436,538.89
11/30/1998 $ 571,175.69 $457,392.35
12/31/1998 $ 630,406.61 $484,154.38
1/31/1999 $ 667,789.72 $508,037.72
2/28/1999 $ 634,800.91 $490,286.88
3/31/1999 $ 674,349.00 $510,574.95
4/30/1999 $ 695,658.43 $531,299.19
5/31/1999 $ 684,388.76 $528,616.13
6/30/1999 $ 717,102.55 $548,100.92
7/31/1999 $ 695,732.89 $544,598.55
8/31/1999 $ 701,090.03 $537,736.61
9/30/1999 $ 704,244.94 $541,274.92
10/31/1999 $ 749,105.34 $562,492.89
11/30/1999 $ 817,049.20 $595,072.48
12/31/1999 $ 955,212.22 $675,681.00
1/31/2000 $ 960,656.93 $675,518.84
2/29/2000 $1,122,047.29 $732,350.24
3/31/2000 $1,073,462.64 $731,310.30
4/30/2000 $1,003,043.49 $680,879.14
5/31/2000 $ 938,949.01 $651,390.26
6/30/2000 $1,009,557.98 $684,923.84
7/31/2000 $ 970,185.22 $664,602.15
8/31/2000 $1,070,502.37 $715,650.24
9/30/2000 $1,069,753.02 $692,298.57
10/31/2000 $1,014,018.89 $665,215.85
11/30/2000 $ 865,972.13 $585,702.60
12/31/2000 $ 920,268.58 $608,123.29
1/31/2001 $ 950,269.34 $645,948.56
2/28/2001 $ 856,762.83 $597,437.83
3/31/2001 $ 803,986.24 $571,574.74
4/30/2001 $ 849,491.86 $609,933.12
5/31/2001 $ 834,880.60 $606,127.14
6/30/2001 $ 815,344.40 $596,562.45
7/31/2001 $ 785,910.47 $587,977.92
8/31/2001 $ 763,433.43 $577,600.11
9/30/2001 $ 716,253.24 $543,134.71
10/31/2001 $ 732,870.32 $554,301.56
11/30/2001 $ 757,641.33 $569,134.67
12/31/2001 $ 766,051.15 $581,086.50
1/31/2002 $ 754,253.96 $571,905.85
2/28/2002 $ 742,487.60 $555,689.26
3/31/2002 $ 767,657.93 $575,638.51
4/30/2002 $ 759,060.16 $567,230.42
5/31/2002 $ 750,103.25 $562,278.49
6/30/2002 $ 707,422.38 $531,803.00
7/31/2002 $ 652,667.89 $499,948.00
8/31/2002 $ 661,022.03 $506,157.35
9/30/2002 $ 644,099.87 $488,315.31
10/31/2002 $ 655,500.44 $499,204.74
11/30/2002 $ 676,083.15 $535,197.40
12/31/2002 $ 663,372.79 $531,183.42
1/31/2003 $ 662,245.05 $539,735.47
2/28/2003 $ 655,556.38 $538,440.11
3/31/2003 $ 662,636.39 $547,539.75
4/30/2003 $ 696,298.32 $575,160.51
5/31/2003 $ 733,689.54 $601,917.25
6/30/2003 $ 738,972.10 $605,746.25
7/31/2003 $ 752,199.70 $607,469.18
8/31/2003 $ 765,814.52 $615,008.89
9/30/2003 $ 768,111.96 $622,600.04
10/31/2003 $ 817,194.31 $644,944.03
11/30/2003 $ 835,090.87 $655,459.01
12/31/2003 $ 850,707.07 $675,411.48
1/31/2004 $ 883,629.43 $695,901.41
2/29/2004 $ 884,778.15 $701,407.05
3/31/2004 $ 889,025.09 $704,027.43
4/30/2004 $ 870,533.36 $687,052.78
5/31/2004 $ 875,495.40 $688,814.28
6/30/2004 $ 893,092.86 $700,002.99
7/31/2004 $ 860,673.59 $681,135.70
8/30/2004 $ 849,054.50 $682,503.75
9/30/2004 $ 879,111.03 $694,209.34
10/31/2004 $ 872,517.69 $697,292.60
11/30/2004 $ 922,949.22 $722,647.86
12/31/2004 $ 953,037.36 $740,329.67
1/31/2005 $ 941,124.39 $724,129.06
2/28/2005 $ 953,453.12 $722,424.13
3/31/2005 $ 929,998.18 $705,742.64
4/30/2005 $ 902,656.23 $682,453.13
5/31/2005 $ 928,743.00 $699,992.18
6/30/2005 $ 958,184.15 $714,762.01
7/31/2005 $ 993,157.87 $737,562.92
8/31/2005 $ 992,363.34 $737,046.63
9/30/2005 $1,005,264.07 $744,343.39
10/31/2005 $ 986,365.10 $728,563.31
11/30/2005 $1,013,588.78 $741,823.16
12/31/2005 $1,022,204.28 $747,757.75
1/31/2006 $1,066,363.51 $778,565.37
2/28/2006 $1,067,643.15 $776,774.66
3/31/2006 $1,090,383.94 $787,571.83
4/30/2006 $1,109,029.51 $794,266.19
5/31/2006 $1,077,089.46 $781,875.64
6/30/2006 $1,073,427.36 $781,719.27
7/31/2006 $1,070,743.79 $783,517.22
8/31/2006 $1,084,128.08 $794,094.70
9/30/2006 $1,101,365.72 $803,544.43
</Table>
Annualized Total Returns As of 9/30/06
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Convertible Fund Class II 9.56% 8.99% 10.49%
- --------------------------------------------------------------------------------
Merrill Lynch All Convertibles
All Qualities Index 7.94% 8.15% 8.42%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I AND II SHARES COMPARED WITH THE MERRILL LYNCH ALL CONVERTIBLES,
ALL QUALITIES INDEX FOR THE PERIODS INDICATED. THE FUND'S CLASS I AND II 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 AND II SHARES. THE NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS' CLASS I SHARES WERE
FIRST AVAILABLE ON MAY 7, 1999 AND CLASS II SHARES ON SEPTEMBER 30, 2005. THE
HISTORICAL PERFORMANCE OF CLASS II SHARES INCLUDES THE PERFORMANCE OF CLASS I
SHARES FOR PERIODS PRIOR TO THE INCEPTION OF CLASS II. AVERAGE ANNUAL TOTAL
RETURN FIGURES INCLUDE CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS, AND
CAPITAL GAIN DISTRIBUTIONS. 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.
FOR THE PERIOD FROM THE FUND'S INCEPTION TO DECEMBER 31, 2004, PERFORMANCE IS
COMPARED TO THE CREDIT SUISSE FIRST BOSTON CONVERTIBLE INDEX. FOR THE PERIOD
FROM JANUARY 1, 2005 TO PRESENT, PERFORMANCE IS COMPARED TO THE MERRILL LYNCH
ALL CONVERTIBLES, ALL QUALITIES INDEX. THE CHANGE IN BENCHMARKS WAS PROMPTED BY
THE RETIREMENT OF THE CREDIT SUISSE FIRST BOSTON CONVERTIBLE INDEX IN DECEMBER
2004. GOING FORWARD, THE FUND WILL COMPARE ITS PERFORMANCE TO THE MERRILL LYNCH
ALL CONVERTIBLES, ALL QUALITIES INDEX WHICH THE INVESTMENT ADVISER BELIEVES IS
APPROPRIATE SINCE THE COMPOSITION OF THE FUND CLOSELY MATCHES THE COMPOSITION OF
THE AS IT MERRILL LYNCH ALL CONVERTIBLES, ALL QUALITIES INDEX.
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.
26
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2006
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BOND - 85.2%
ADVERTISING SALES - 1.5%
Lamar Advertising Co.
2.875%, 12/31/10 $ 480,000 $ 570,000
----------
AEROSPACE/DEFENSE - 1.9%
Lockheed Martin Corp.++
4.310%, 08/15/33 540,000 686,394
----------
BROADCAST SERVICES/PROGRAMMING - 3.1%
Liberty Media Corp.
0.750%, 03/30/23 535,000 591,844
Liberty Media Corp.
3.500%, 01/15/31 505,000 559,919
----------
1,151,763
----------
CELLULAR TELECOMMUNICATIONS - 2.7%
Nextel Communications, Inc. Cl. A
5.250%, 01/15/10 590,000 583,363
NII Holdings, Inc.
2.750%, 08/15/25 20,000 28,375
NII Holdings, Inc. 144A#
2.750%, 08/15/25 285,000 404,344
----------
1,016,082
----------
COMMERCIAL SERVICES - 1.8%
Quanta Services, Inc.
4.500%, 10/01/23 220,000 359,700
Quanta Services, Inc. 144A#
3.750%, 04/30/26 275,000 286,344
----------
646,044
----------
COMPUTER SERVICES - 1.5%
Electronic Data Systems Corp.
3.875%, 07/15/23 560,000 566,300
----------
COMPUTERS - 1.8%
Hewlett-Packard Co.
0.000%, 10/14/17 945,000 655,594
----------
DIVERSIFIED MANUFACTURING OPERATIONS - 1.7%
Roper Industries, Inc.++
1.481%, 01/15/34 1,045,000 620,469
----------
E-COMMERCE/PRODUCTS - 1.5%
Priceline.com, Inc.
0.750%, 09/30/13 180,000 192,150
Priceline.com, Inc.
2.250%, 01/15/25 325,000 377,406
----------
569,556
----------
ELECTRONIC COMPONENTS-MISCELLANEOUS - 1.4%
Vishay Intertechnology, Inc.
3.625%, 08/01/23 525,000 530,906
----------
ELECTRONICS-MILITARY - 1.5%
L-3 Communications Corp.
3.000%, 08/01/35 30,000 30,675
L-3 Communications Corp. 144A#
3.000%, 08/01/35 500,000 511,250
----------
541,925
----------
ENGINEERING/R & D SERVICES - 1.5%
Fluor Corp.
1.500%, 02/15/24 395,000 570,775
----------
FINANCE-CONSUMER LOANS - 1.6%
SLM Corp.++
4.150%, 07/25/35 580,000 584,292
----------
FINANCE-INVESTMENT BANKERS/BROKERS - 1.8%
Merrill Lynch & Co., Inc.
0.000%, 03/13/32 $ 550,000 $ 645,480
----------
FOOTWEAR & RELATED APPAREL - 1.6%
Skechers USA, Inc.
4.500%, 04/15/07 565,000 582,656
----------
HOTELS & MOTELS - 1.7%
Hilton Hotels Corp.
3.375%, 04/15/23 475,000 623,437
----------
INSTRUMENTS-SCIENTIFIC - 1.6%
Fisher Scientific International, Inc.
3.250%, 03/01/24 510,000 596,062
----------
INTERNET INFRASTRUCTURE SOFTWARE - 1.0%
Akamai Technologies, Inc.
1.000%, 12/15/33 115,000 377,200
----------
INTERNET SECURITY - 1.5%
Symantec Corp. 144A#
1.000%, 06/15/13 460,000 565,800
----------
INVESTMENT MANAGEMENT/ADVISOR SERVICES - 1.6%
BlackRock, Inc
2.625%, 02/15/35 390,000 590,362
LASERS-SYSTEMS/COMPONENTS - 1.7%
Cymer, Inc.
3.500%, 02/15/09 595,000 618,056
----------
LIFE/HEALTH INSURANCE - 1.5%
Prudential Financial, Inc.++
2.410%, 11/15/35 565,000 562,966
----------
MACHINERY-ELECTRICAL - 1.1%
Regal-Beloit Corp.
2.750%, 03/15/24 235,000 405,963
----------
MEDICAL PRODUCTS - 1.7%
PSS World Medical, Inc.
2.250%, 03/15/24 505,000 641,981
----------
MEDICAL-BIOMEDICAL/GENETICS - 0.9%
Celgene Corp.
1.750%, 06/01/08 95,000 340,812
----------
MEDICAL-DRUGS - 3.1%
Allergan, Inc.
1.500%, 04/01/26 30,000 31,725
Allergan, Inc. 144A#
1.500%, 04/01/26 500,000 528,750
Wyeth++
3.320%, 01/15/24 520,000 569,088
----------
1,129,563
----------
MEDICAL-NURSING HOMES - 1.8%
Manor Care, Inc.++
2.125%, 08/01/35 530,000 652,562
----------
MULTI-LINE INSURANCE - 1.8%
American Financial Group, Inc.
1.486%, 06/02/33 1,170,000 647,888
----------
MULTIMEDIA - 1.6%
Walt Disney Co.
2.125%, 04/15/23 520,000 587,600
----------
NETWORKING PRODUCTS - 1.0%
Anixter International, Inc.
0.000%, 07/07/33 450,000 386,437
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
<Page>
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
OIL & GAS DRILLING - 1.6%
Transocean, Inc.
1.500%, 05/15/21 $540,000 $ 584,550
-----------
OIL-FIELD SERVICES - 2.7%
Hanover Compressor Co.
4.750%, 01/15/14 410,000 574,000
Schlumberger, Ltd.
1.500%, 06/01/23 240,000 416,100
-----------
990,100
-----------
OPTICAL SUPPLIES - 0.6%
Advanced Medical Optics, Inc.
2.500%, 07/15/24 210,000 218,138
-----------
PRINTING-COMMERCIAL - 1.4%
Bowne & Co., Inc.
5.000%, 10/01/33 490,000 527,362
-----------
REAL ESTATE MANAGEMENT/SERVICES - 1.6%
EOP Operating LP 144A#
4.000%, 07/15/26 535,000 573,119
-----------
REITS-DIVERSIFIED - 1.6%
Digital Realty Trust LP 144A#
4.125%, 08/15/26 535,000 584,153
-----------
RETAIL-DISCOUNT - 1.7%
TJX Cos., Inc.
0.000%, 02/13/21 655,000 614,063
-----------
RETAIL-SPORTING GOODS - 1.5%
Dick's Sporting Goods, Inc.++
1.606%, 02/18/24 645,000 552,281
-----------
SUPER-REGIONAL BANKS-US - 1.6%
Wells Fargo & Co.++
4.000%, 05/01/33 575,000 583,798
-----------
TELECOMMUNICATIONS EQUIPMENT - 3.3%
CommScope, Inc.
1.000%, 03/15/24 430,000 681,550
Harris Corp.
3.500%, 08/15/22 265,000 525,694
-----------
1,207,244
-----------
TELECOMMUNICATIONS EQUIPMENT FIBER OPTICS - 1.6%
Ciena Corp.
3.750%, 02/01/08 620,000 601,400
-----------
TELECOMMUNICATIONS SERVICES - 2.7%
Amdocs, Ltd.
0.500%, 03/15/24 590,000 630,563
Time Warner Telecom, Inc.
2.375%, 04/01/26 300,000 372,750
-----------
1,003,313
-----------
TELEPHONE-INTEGRATED - 3.8%
CenturyTel, Inc.
4.750%, 08/01/32 585,000 620,100
Level 3 Communications, Inc.
2.875%, 07/15/10 260,000 263,575
Qwest Communications International, Inc.
3.500%, 11/15/25 315,000 514,238
-----------
1,397,913
-----------
THERAPEUTICS - 2.7%
Amylin Pharmaceuticals, Inc.
2.500%, 04/15/11 $265,000 $ 395,181
Gilead Sciences, Inc. 144A#
0.625%, 05/01/13 555,000 595,237
-----------
990,418
-----------
TOYS - 1.8%
Hasbro, Inc.
2.750%, 12/01/21 575,000 645,437
-----------
TRANSACTIONAL SOFTWARE - 1.0%
Open Solutions, Inc.
1.467%, 02/02/35 605,000 384,175
-----------
TRANSPORT-RAIL - 1.6%
CSX Corp.
0.000%, 10/30/21 510,000 608,175
-----------
WIRELESS EQUIPMENT - 1.9%
American Tower Corp.
3.000%, 08/15/12 375,000 705,000
- --------------------------------------------------------------------------------
Total Convertible Corporate Bond
(Cost: $28,200,336) 31,435,564
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK - 13.2%
AUTO-CARS/LIGHT TRUCKS - 2.6%
Ford Motor Co. Capital Trust II
6.500%, 01/15/32 16,500 554,235
General Motors Corp.
6.250%, 07/15/33 16,915 388,538
-----------
942,773
-----------
ELECTRIC-GENERATION - 1.7%
AES Trust III
6.750%, 10/15/29 12,618 617,020
-----------
ELECTRIC-INTEGRATED - 1.6%
Entergy Corp.
7.625%, 02/17/09 11,055 601,613
-----------
FINANCE-INVESTMENT BANKERS/BROKERS - 3.0%
Citigroup Funding, Inc.
0.000%, 09/27/08 18,345 608,137
E*Trade Financial Corp.
6.125%, 11/18/08 16,040 501,250
-----------
1,109,387
-----------
FINANCIAL GUARANTEE INSURANCE - 1.4%
PMI Group, Inc.
5.875%, 11/15/06 20,770 524,443
-----------
INDEPENDENT POWER PRODUCER - 1.3%
NRG Energy, Inc.
5.750%, 03/16/09 2,020 475,457
-----------
MULTI-LINE INSURANCE - 1.6%
Metlife, Inc.
6.375%, 08/15/06 19,750 586,772
- --------------------------------------------------------------------------------
Total Convertible Preferred Stock
(Cost: $4,257,524) 4,857,465
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
<Page>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 2.9%
TIME DEPOSIT - 2.9%
Bank of America London
4.630%, 10/02/06 (Cost: $1,078,286) $1,078,286 $ 1,078,286
- -------------------------------------------------------------------------------
Total Investments - 101.3% (Cost: $33,536,146) 37,371,315
- -------------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (1.3%) (495,323)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $36,875,992
- -------------------------------------------------------------------------------
# 144A SECURITY. CERTAIN CONDITION FOR PUBLIC SALE MAY EXSIST. THE TOTAL
MARKET VALUE OF 144A SECURITIES OWNED AT SEPTEMBER 30, 2006 WAS $4,048,997
OR 10.98% OF NET ASSETS.
++ THE COUPON RATE SHOWN ON FLOATING RATE SECURITIES REPRESENTS THE RATE AT
SEPTEMBER 30, 2006.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Communications 27.5%
Financial 18.9
Consumer, Non-cyclical 14.0
Industrial 14.0
Consumer, Cyclical 10.7
Utilities 4.6
Technology 4.4
Energy 4.3
Short Term Investments 2.9
- --------------------------------------------------------------------------------
Total Investments 101.3%
- --------------------------------------------------------------------------------
Liabilities in excess of other assets (1.3)
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
<Page>
GLOBAL SELECT FUND
MANAGEMENT TEAM: NICHOLAS MELHUISH, Portfolio Manager; PEDRO V. MARCAL,
Portfolio Manager; CHRISTOPHER A. HERRERA, Portfolio Manager; FLORA KIM,
Analyst; ALAN TRICE, Analyst
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: Global equity markets posted solid gains from April 1 through
September 30, 2006, adding to increases from earlier in the year. The
environment was volatile, with equities rising in April, declining in May and
regaining their footing over the summer. A drop in the price of oil and a
"pause" in U.S. monetary tightening contributed to the rally. Many of the
world's central banks continued to raise interest rates, however.
In the United States, the S&P 500 Index rose 4.14%. After seventeen consecutive
increases, the Federal Reserve held short-term interest rates steady at its
August and September meetings amid signs that U.S. economic growth was
moderating. Corporate profits remained strong, with S&P 500 companies generating
second quarter earnings growth of 16.3% -- the twelfth successive quarter of
double-digit expansion.
Equities in non-U.S. developed countries advanced 4.97%, as measured by the MSCI
EAFE Index. European markets turned in the best results, supported by strong
economic and earnings growth and a thriving market for mergers and acquisitions.
Stocks in developing nations retrenched following impressive gains earlier in
the year. The MSCI EM Index eked out a 0.53% gain, as investors shied away from
riskier assets in the volatile environment.
Increased risk aversion was also evident in returns by style, size and sector.
Globally, value stocks led growth stocks, and large caps outpaced small caps.
Utilities was the best-performing sector; information technology, the worst.
PERFORMANCE: The Fund's Class I shares rose 0.42% and the MSCI All Country World
Index increased 3.96% during the six months ended September 30, 2006.
PORTFOLIO SPECIFICS: Value stock leadership hurt the Fund's relative performance
since holdings are concentrated in growth stocks, while the style-neutral
benchmark includes both growth and value names. Stock selection in the United
States and the financials sector was also particularly unfavorable. During the
first half of the period, for example, select positions in capital markets
companies lagged, as the weak market environment raised concerns about a
slowdown in trading volumes.
Major areas of relative strength included stock selection in Ireland and the
information technology sector, along with an underweight in energy which
underperformed on falling oil prices. Two of the Fund's best-performing stocks
were Ireland-based C&C Group, a food and beverage distributor, and U.S.-based
Freescale Semiconductor, a semiconductor manufacturer.
The Fund was overweight stocks in developed European and emerging Asian
countries at September 30. As the result of our company-specific research, we
have identified many exciting growth opportunities in these markets.
MARKET OUTLOOK: Continued global monetary tightening and the perception of
increased inflationary pressures create near-term challenges for stocks. We
remain optimistic in our outlook for global equities, however, given:
- Oil prices have fallen dramatically
- The global economy appears poised to deliver another year of solid
expansion in 2007
- Corporate profit growth, while slowing, should remain at healthy
levels
As always, we continue to seek out the "best of the best" globally for the Fund,
regardless of country, sector and capitalization range.
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.
[CHART]
<Table>
<Caption>
GLOBAL SELECT MSCI ALL
FUND CLASS COUNTRY WORLD
I SHARES INDEX
- ---------- ------------- -------------
9/30/1997 $250,000 $250,000
10/31/1997 $235,000 $235,125
11/30/1997 $236,200 $238,722
12/31/1997 $247,000 $241,850
1/31/1998 $255,800 $247,170
2/28/1998 $275,000 $264,077
3/31/1998 $296,200 $275,353
4/30/1998 $310,400 $277,941
5/31/1998 $311,200 $272,660
6/30/1998 $325,800 $277,568
7/31/1998 $334,000 $277,651
8/31/1998 $277,000 $238,753
9/30/1998 $286,800 $243,504
10/31/1998 $298,200 $265,736
11/30/1998 $319,687 $281,866
12/31/1998 $361,061 $294,944
1/31/1999 $397,187 $300,961
2/28/1999 $377,610 $293,407
3/31/1999 $413,333 $306,610
4/30/1999 $428,469 $319,856
5/31/1999 $414,745 $308,565
6/30/1999 $463,385 $323,932
7/31/1999 $473,678 $322,603
8/31/1999 $491,842 $322,216
9/30/1999 $507,786 $318,736
10/31/1999 $557,636 $334,864
11/30/1999 $652,092 $345,279
12/31/1999 $828,075 $374,040
1/31/2000 $772,143 $353,880
2/29/2000 $903,653 $355,083
3/31/2000 $870,639 $378,412
4/30/2000 $805,975 $361,421
5/31/2000 $766,140 $352,024
6/30/2000 $816,070 $363,958
7/31/2000 $792,060 $353,257
8/31/2000 $854,814 $364,244
9/30/2000 $789,332 $344,247
10/31/2000 $724,941 $337,499
11/30/2000 $659,497 $316,575
12/31/2000 $702,601 $321,861
1/31/2001 $693,118 $330,004
2/28/2001 $596,133 $302,251
3/31/2001 $554,322 $281,910
4/30/2001 $615,099 $302,433
5/31/2001 $601,737 $299,076
6/30/2001 $594,840 $289,924
7/31/2001 $578,030 $285,343
8/31/2001 $533,201 $272,217
9/30/2001 $472,855 $247,364
10/31/2001 $489,235 $252,608
11/30/2001 $536,218 $268,143
12/31/2001 $559,495 $270,664
1/31/2002 $553,891 $263,248
2/28/2002 $552,598 $261,326
3/31/2002 $589,237 $273,138
4/30/2002 $573,288 $264,479
5/31/2002 $562,081 $264,850
6/30/2002 $515,097 $248,694
7/31/2002 $465,958 $227,828
8/31/2002 $470,269 $228,421
9/30/2002 $437,078 $203,363
10/31/2002 $467,682 $218,331
11/30/2002 $495,269 $230,273
12/31/2002 $454,320 $219,289
1/31/2003 $448,285 $212,886
2/28/2003 $440,096 $209,160
3/31/2003 $442,251 $208,366
4/30/2003 $475,872 $226,973
5/31/2003 $510,787 $240,183
6/30/2003 $522,425 $244,794
7/31/2003 $538,805 $250,228
8/31/2003 $571,564 $256,159
9/30/2003 $561,650 $257,798
10/31/2003 $599,151 $273,447
11/30/2003 $603,461 $277,630
12/31/2003 $632,341 $295,232
1/31/2004 $653,031 $300,281
2/29/2004 $663,807 $305,836
3/31/2004 $671,566 $304,215
4/30/2004 $644,841 $297,218
5/31/2004 $646,134 $299,715
6/30/2004 $659,928 $305,769
7/31/2004 $629,324 $296,076
8/30/2004 $626,738 $298,000
9/30/2004 $650,876 $304,288
10/31/2004 $666,367 $311,804
11/30/2004 $720,542 $328,922
12/31/2004 $737,403 $341,750
1/31/2005 $721,918 $334,573
2/28/2005 $752,455 $346,317
3/31/2005 $733,794 $338,837
4/30/2005 $710,973 $331,552
5/31/2005 $737,848 $337,984
6/30/2005 $752,014 $341,566
7/31/2005 $788,938 $354,273
8/31/2005 $788,938 $357,142
9/30/2005 $815,841 $367,999
10/31/2005 $783,044 $358,174
11/30/2005 $815,227 $371,390
12/31/2005 $847,836 $380,601
1/31/2006 $898,961 $399,402
2/28/2006 $890,691 $398,963
3/31/2006 $923,290 $407,541
4/30/2006 $949,604 $421,316
5/31/2006 $896,046 $405,053
6/30/2006 $888,250 $405,053
7/31/2006 $894,113 $407,929
8/31/2006 $915,035 $418,698
9/30/2006 $927,205 $423,681
Annualized Total Returns As of 9/30/2006
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
Global Select Fund Class I 13.64% 14.41% 15.67%
- --------------------------------------------------------------------------------
MSCI All Country World Index 15.14% 11.37% 6.04%
- --------------------------------------------------------------------------------
30
<Page>
[CHART]
<Table>
<Caption>
GLOBAL SELECT MSCI ALL
FUND CLASS COUNTRY WORLD
II SHARES INDEX
- ---------- ------------- -------------
9/30/1997 $250,000.00 $250,000.00
10/31/1997 $235,000.00 $235,125.00
11/30/1997 $236,200.00 $238,722.41
12/31/1997 $247,000.00 $241,849.68
1/31/1998 $255,800.00 $247,170.37
2/28/1998 $275,000.00 $264,076.82
3/31/1998 $296,200.00 $275,352.90
4/30/1998 $310,400.00 $277,941.22
5/31/1998 $311,200.00 $272,660.34
6/30/1998 $325,800.00 $277,568.22
7/31/1998 $334,000.00 $277,651.49
8/31/1998 $277,000.00 $238,752.52
9/30/1998 $286,800.00 $243,503.69
10/31/1998 $298,200.00 $265,735.58
11/30/1998 $319,686.98 $281,865.73
12/31/1998 $361,060.62 $294,944.30
1/31/1999 $397,186.86 $300,961.16
2/28/1999 $377,610.07 $293,407.04
3/31/1999 $413,332.67 $306,610.36
4/30/1999 $428,469.36 $319,855.92
5/31/1999 $414,745.42 $308,565.01
6/30/1999 $463,384.67 $323,931.55
7/31/1999 $473,677.62 $322,603.43
8/31/1999 $491,841.65 $322,216.30
9/30/1999 $507,785.64 $318,736.37
10/31/1999 $557,635.82 $334,864.43
11/30/1999 $652,092.28 $345,278.71
12/31/1999 $828,075.34 $374,040.43
1/31/2000 $772,142.74 $353,879.65
2/29/2000 $903,652.56 $355,082.84
3/31/2000 $870,638.69 $378,411.78
4/30/2000 $805,975.14 $361,421.09
5/31/2000 $766,140.22 $352,024.15
6/30/2000 $816,070.29 $363,957.76
7/31/2000 $792,060.20 $353,257.41
8/31/2000 $854,813.85 $364,243.71
9/30/2000 $789,331.78 $344,246.73
10/31/2000 $724,941.08 $337,499.49
11/30/2000 $659,496.82 $316,574.53
12/31/2000 $702,601.19 $321,861.32
1/31/2001 $693,118.23 $330,004.41
2/28/2001 $596,133.40 $302,251.04
3/31/2001 $554,322.17 $281,909.55
4/30/2001 $615,099.32 $302,432.56
5/31/2001 $601,736.97 $299,075.56
6/30/2001 $594,840.27 $289,923.85
7/31/2001 $578,029.57 $285,343.05
8/31/2001 $533,201.03 $272,217.27
9/30/2001 $472,854.91 $247,363.83
10/31/2001 $489,234.57 $252,607.95
11/30/2001 $536,218.33 $268,143.34
12/31/2001 $559,494.69 $270,663.88
1/31/2002 $553,891.12 $263,247.69
2/28/2002 $552,597.99 $261,325.98
3/31/2002 $589,236.70 $273,137.92
4/30/2002 $573,288.09 $264,479.45
5/31/2002 $562,080.95 $264,849.72
6/30/2002 $515,097.19 $248,693.89
7/31/2002 $465,958.21 $227,828.47
8/31/2002 $470,268.65 $228,420.82
9/30/2002 $437,078.29 $203,363.06
10/31/2002 $467,682.39 $218,330.58
11/30/2002 $495,269.18 $230,273.26
12/31/2002 $454,320.03 $219,289.23
1/31/2003 $448,285.42 $212,885.98
2/28/2003 $440,095.59 $209,160.48
3/31/2003 $442,250.81 $208,365.67
4/30/2003 $475,872.22 $226,972.72
5/31/2003 $510,786.75 $240,182.53
6/30/2003 $522,424.93 $244,794.04
7/31/2003 $538,804.59 $250,228.47
8/31/2003 $571,563.91 $256,158.88
9/30/2003 $561,649.91 $257,798.30
10/31/2003 $599,150.71 $273,446.65
11/30/2003 $603,461.15 $277,630.39
12/31/2003 $632,341.07 $295,232.15
1/31/2004 $653,031.17 $300,280.62
2/29/2004 $663,807.26 $305,835.82
3/31/2004 $671,566.05 $304,214.89
4/30/2004 $644,841.34 $297,217.94
5/31/2004 $646,134.47 $299,714.57
6/30/2004 $659,927.87 $305,768.81
7/31/2004 $629,323.77 $296,075.94
8/30/2004 $626,737.50 $298,000.43
9/30/2004 $650,875.95 $304,288.24
10/31/2004 $665,976.27 $311,804.16
11/30/2004 $720,120.14 $328,922.21
12/31/2004 $736,970.95 $341,750.17
1/31/2005 $721,494.56 $334,573.42
2/28/2005 $752,013.78 $346,316.95
3/31/2005 $733,363.84 $338,836.50
4/30/2005 $710,996.25 $331,551.52
5/31/2005 $737,871.90 $337,983.62
6/30/2005 $751,965.26 $341,566.24
7/31/2005 $788,886.75 $354,272.51
8/31/2005 $788,886.75 $357,142.11
9/30/2005 $815,787.79 $367,999.23
10/31/2005 $783,401.01 $358,173.66
11/30/2005 $815,598.80 $371,390.26
12/31/2005 $847,733.39 $380,600.74
1/31/2006 $898,851.71 $399,402.42
2/28/2006 $890,582.28 $398,963.08
3/31/2006 $923,177.59 $407,540.78
4/30/2006 $949,949.74 $421,315.66
5/31/2006 $896,372.57 $405,052.88
6/30/2006 $888,574.13 $405,052.88
7/31/2006 $894,438.72 $407,928.75
8/31/2006 $915,368.59 $418,698.07
9/30/2006 $927,542.99 $423,680.58
</Table>
Annualized Total Returns As of 9/30/2006
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
GLOBAL SELECT FUND CLASS II 13.70% 14.41% 15.67%
- --------------------------------------------------------------------------------
MSCI All Country World Index 15.14% 11.37% 6.04%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW 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.
THE FUND'S CLASS I AND II 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 AND II SHARES. THE NICHOLAS-APPLEGATE
INSTITUTIONAL FUNDS' CLASS I SHARES WERE FIRST AVAILABLE ON MAY 7, 1999 AND
CLASS II SHARES ON JUNE 30, 2003. THE HISTORICAL PERFORMANCE OF CLASS II SHARES
INCLUDES THE PERFORMANCE OF CLASS I SHARES FOR PERIODS PRIOR TO THE INCEPTION OF
CLASS II. AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE CHANGES IN PRINCIPAL
VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN DISTRIBUTIONS. 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 IS A MARKET CAPITALIZATION WEIGHTED INDEX COMPOSED OF OVER 2000
COMPANIES. THE MSCI ACWI 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.
31
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2006
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 96.9%
BRAZIL - 0.9%
Vivo Participacoes S.A. - ADR 454,900 $ 1,419,288
------------
FINLAND - 0.8%
Stora Enso OYJ R Shares 78,100 1,183,241
------------
FRANCE - 7.5%
Alcatel S.A. - ADR## 124,600 1,517,628
Axa S.A 64,007 2,357,832
PPR S.A 13,195 1,953,956
SOITEC* 42,090 1,215,639
Total S.A 35,916 2,354,449
Veolia Environnement 39,591 2,387,732
------------
11,787,236
------------
GERMANY - 2.2%
Henkel KGaA 14,272 1,764,335
Schwarz Pharma AG 14,749 1,712,324
------------
3,476,659
------------
GREECE - 1.2%
OPAP S.A 54,760 1,838,232
------------
HONG KONG - 4.1%
Cheung Kong Holdings, Ltd. 194,000 2,082,595
Hutchison Telecommunications
International, Ltd.*, ## 922,000 1,616,288
Jardine Matheson Holdings, Ltd. 83,200 1,522,560
Melco International Development 528,000 1,128,875
------------
6,350,318
------------
INDONESIA - 0.7%
Telekomunikasi Indonesia Tbk PT 1,209,000 1,107,431
------------
IRELAND - 3.2%
C&C Group PLC 141,515 1,919,919
CRH PLC 54,396 1,834,970
ICON PLC - ADR* 17,900 1,263,382
------------
5,018,271
------------
ITALY - 4.4%
Luxottica Group SpA 78,675 2,315,138
Sanpaolo IMI SpA 114,335 2,411,484
UniCredito Italiano SpA 261,447 2,167,625
------------
6,894,247
------------
JAPAN - 10.5%
Aichi Corp. 128,000 1,196,900
Asics Corp. 117,000 1,525,118
Chugai Pharmaceutical Co., Ltd.## 57,200 1,230,576
Hisamitsu Pharmaceutical Co., Inc. 28,000 775,505
Japan Tobacco, Inc. 436 1,695,032
Mitsubishi UFJ Financial Group, Inc. 123 1,583,534
NGK Spark Plug Co., Ltd. 61,000 1,211,578
Nisshinbo Industries, Inc. 106,000 1,119,570
Nitori Co., Ltd. 20,250 917,609
Sumco Corp. 20,300 1,504,468
Sumitomo Mitsui Financial Group, Inc. 209 2,195,062
Takeuchi Manufacturing Co., Ltd. 30,700 1,427,544
------------
16,382,496
------------
NETHERLANDS - 3.9%
ASML Holding NV* 73,182 1,709,449
Philips Electronics NV 72,252 2,532,503
Royal Numico NV 41,628 1,871,996
------------
6,113,948
------------
REPUBLIC OF CHINA - 1.2%
AAC Acoustic Technology Holdings, Inc.* 996,000 1,150,374
Shanghai Real Estate, Ltd. 3,282,000 732,867
------------
1,883,241
------------
SOUTH KOREA - 2.7%
Hynix Semiconductor, Inc.* 18,490 $ 1728,660
LG Electronics, Inc. 18,390 1,185,198
Samsung Electronics Co., Ltd. 3,347 2,348,027
------------
4,261,885
------------
SWEDEN - 1.3%
Assa Abloy AB Cl. B 105,000 1,952,126
------------
SWITZERLAND - 7.2%
Adecco S.A 21,709 1,306,228
Nestle S.A 5,780 2,009,713
Panalpina Welttransport AG 15,388 1,650,533
Roche Holding AG 14,578 2,513,468
UBS AG 48,920 2,918,151
Ypsomed Holding AG ## 9,206 841,347
------------
11,239,440
------------
TAIWAN - 0.7%
United Microelectronics Corp. - ADR* 373,200 1,149,456
------------
UNITED KINGDOM - 3.8%
ARM Holdings PLC* 1,009,791 2,216,331
Bodycote International 233,839 1,037,399
HSBC Holdings PLC 150,932 2,747,441
------------
6,001,171
------------
UNITED STATES - 40.6%
3M Co. 36,100 2,686,562
Affiliated Managers Group, Inc.*, ## 20,800 2,082,288
American International Group, Inc. 45,200 2,994,952
ANSYS, Inc.*, ## 32,000 1,413,760
Capital One Financial Corp. 25,200 1,982,232
Celgene Corp.* 25,700 1,112,810
Cerner Corp.*, ## 38,200 1,734,280
ConocoPhillips 32,500 1,934,725
Corning, Inc.* 99,200 2,421,472
DaVita, Inc.*, ## 24,500 1,417,815
Federated Department Stores, Inc. 64,200 2,774,082
Freescale Semiconductor, Inc.* 79,602 3,025,672
General Dynamics Corp. 32,600 2,336,442
Genzyme Corp.* 19,500 1,315,665
Harman International Industries, Inc. 22,800 1,902,432
Humana, Inc.* 30,000 1,982,700
ITT Corp. 34,700 1,779,069
J.P. Morgan Chase & Co. 42,200 1,981,712
Lexmark International, Inc.* 34,800 2,006,568
Martin Marietta Materials, Inc. 19,900 1,683,938
Morgan Stanley 27,300 1,990,443
Occidental Petroleum Corp. 40,900 1,967,699
Orient Express Hotels, Ltd. Cl. A 41,900 1,566,222
Praxair, Inc. 32,000 1,893,120
Quiksilver, Inc.* 132,800 1,613,520
Raytheon Co. 43,100 2,069,231
TD Ameritrade Holding Corp. 83,600 1,575,860
Tim Hortons, Inc. ## 48,000 1,262,400
United Technologies Corp. 30,000 1,900,500
UnitedHealth Group, Inc. 35,000 1,722,000
Valero Energy Corp. 30,000 1,544,100
Warnaco Group, Inc.* 65,600 1,268,704
XTO Energy, Inc. 45,000 1,895,850
Yahoo!, Inc.* 26,800 677,504
------------
63,516,329
- --------------------------------------------------------------------------------
Total Common Stock (Cost:$131,164,978) 151,575,015
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
EQUITY-LINKED SECURITIES - 1.0%
TAIWAN - 1.0%
Credit Suisse FB Hon Hai Precision
Industry Co., Ltd. - 11/05/07
(Cost: $1,522,154) 229,000 $ 1,673,074
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 5.7%
MONEY MARKET FUNDS - 3.5%
Boston Global Investment Trust -
Enhanced Portfolio, 5.320%** $5,531,959 5,531,959
-----------
TIME DEPOSIT - 2.2%
Bank of America London 4.630%, 10/01/06 3,381,673 3,381,673
- -------------------------------------------------------------------------------
Total Short Term Investments (Cost: $8,913,632) 8,913,632
- -------------------------------------------------------------------------------
Total Investments - 103.6% (Cost: $141,600,764) 162,161,721
- -------------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (3.6%) (5,703,120)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $156,458,601
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/06.
ADR - AMERICAN DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Financial 20.3%
Consumer, Non-cyclical 18.4
Industrial 16.2
Technology 13.2
Consumer, Cyclical 13.0
Energy 6.2
Communications 4.7
Diversified 2.4
Basic Materials 2.0
Utilities 1.5
Short Term Investments 5.7
- --------------------------------------------------------------------------------
Total Investments 103.6%
- --------------------------------------------------------------------------------
Liabilities in excess of other assets (3.6)
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
<Page>
INTERNATIONAL GROWTH FUND
MANAGEMENT TEAM: HORACIO A. VALEIRAS, CFA, Portfolio Manager and Chief
Investment Officer; LINDA Ba, Portfolio Manager; PEDRO V. MARCAL, Portfolio
Manager; MICHAEL J. FREDERICKS, Analyst; FLORA KIM, Analyst; ERIC SAGMEISTER,
Analyst; ALAN TRICE, Assistant Analyst
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: During the six months ended September 30, 2006, stock markets
in developed non-U.S. countries posted increases. The U.S. dollar weakened
against a broad basket of currencies, enhancing returns for U.S.-based
investors.
The period got off to a volatile start, as soaring oil prices and inflationary
pressures prompted a sell-off in May. Equity markets regained their footing over
the summer, however, as waning geopolitical tensions, rising U.S. distillate
inventories and a mild hurricane season sent oil prices sharply lower. In
addition, the Federal Reserve ended more than two years of continuous monetary
tightening, fueling optimism that the U.S. economy was headed for a "soft
landing."
European stock markets led the period's advance, benefiting from record merger
and acquisition activity, falling unemployment and the fastest growth among
manufacturing and services companies in several years. The European Central Bank
and Bank of England raised short-term interest rates in efforts to control
economic growth and inflation in their respective regions. The Bank of Japan
also raised rates, evidence that the country's long battle with deflation was
ending. However, Japanese stocks fell on worries that moderating U.S. economic
growth would hurt exports.
PERFORMANCE: During the six months ended September 30, 2006, the Fund's Class I
shares rose 0.40% and the MSCI EAFE Index increased 4.97%.
PORTFOLIO SPECIFICS: Amid volatile market conditions, investors shied away from
riskier assets, and international value stocks outpaced international growth
stocks. This hurt performance versus the index since the Fund's holdings are
concentrated in growth stocks, while the style-neutral benchmark includes both
growth and value names. Holdings in the United Kingdom and the financials sector
were other major areas of weakness in the portfolio. In the United Kingdom,
relative results were negatively affected by stock selection and underweights in
both the country and pound, which resulted from our bottom-up investment
decisions. In financials, underperformance was driven by stock selection.
On the plus side, stock selection in Ireland, Norway and the information
technology sector bolstered results versus the index. The Fund's top-performing
positions included Ireland-based C&C Group, a food and beverage distributor that
had a successful product launch; Norway-based Telenor Group, a global
telecommunication services provider experiencing rapid subscriber growth in
emerging countries; and Japan-based SUMCO, a silicon wafer manufacturer that
benefited from a favorable pricing environment
MARKET OUTLOOK: As 2006 draws to a close, international equities seem poised for
additional gains. Strong corporate profits and brisk takeover activity in Europe
should continue to offset inflation concerns and rising interest rates. In
Japan, business sentiment is positive, the economy is expanding and reflationary
pressures continue to gather strength. However, the geopolitical climate remains
tense, and the U.S. economic slowdown has weighed on Asian exporters in recent
months.
Against this dynamic backdrop, we are confident that our bottom-up investment
process will identify stocks with strong growth potential for the Fund.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN INTERNATIONAL GROWTH
FUND CLASS I AND II SHARES WITH THE MSCI EAFE INDEX.
[CHART]
<Table>
<Caption>
INTERNATIONAL
GROWTH FUND MSCI
CLASS I SHARES EAFE INDEX
-------------- ----------
12/27/1996 $250,000 $250,000
12/31/1996 $252,400 $249,475
1/31/1997 $274,600 $240,744
2/28/1997 $277,200 $244,682
3/31/1997 $282,600 $245,568
4/30/1997 $286,600 $246,871
5/31/1997 $313,200 $262,935
6/30/1997 $331,200 $277,436
7/31/1997 $352,400 $281,924
8/31/1997 $334,000 $260,869
9/30/1997 $358,600 $275,482
10/31/1997 $328,800 $254,307
11/30/1997 $325,131 $251,715
12/31/1997 $329,722 $253,910
1/31/1998 $341,826 $265,523
2/28/1998 $365,199 $282,560
3/31/1998 $386,902 $291,261
4/30/1998 $398,171 $293,566
5/31/1998 $407,979 $292,141
6/30/1998 $412,779 $294,353
7/31/1998 $431,143 $297,337
8/31/1998 $369,373 $260,500
9/30/1998 $351,843 $252,514
10/31/1998 $358,312 $278,836
11/30/1998 $379,862 $293,121
12/31/1998 $400,734 $304,685
1/31/1999 $416,179 $303,785
2/28/1999 $399,064 $296,545
3/31/1999 $411,796 $308,923
4/30/1999 $426,823 $321,440
5/31/1999 $410,335 $304,887
6/30/1999 $442,685 $316,773
7/31/1999 $457,296 $326,189
8/31/1999 $464,392 $327,380
9/30/1999 $471,488 $330,675
10/31/1999 $502,378 $343,061
11/30/1999 $567,497 $354,981
12/31/1999 $677,509 $386,841
1/31/2000 $629,265 $362,261
2/29/2000 $705,704 $372,013
3/31/2000 $665,814 $386,434
4/30/2000 $610,886 $366,099
5/31/2000 $578,515 $357,157
6/30/2000 $609,633 $371,125
7/31/2000 $582,692 $355,566
8/31/2000 $606,083 $358,652
9/30/2000 $566,819 $341,189
10/31/2000 $530,897 $333,129
11/30/2000 $504,920 $320,637
12/31/2000 $521,115 $332,033
1/31/2001 $505,364 $331,862
2/28/2001 $462,991 $306,983
3/31/2001 $426,165 $286,519
4/30/2001 $455,671 $306,430
5/31/2001 $441,029 $295,615
6/30/2001 $423,281 $283,526
7/31/2001 $413,076 $278,367
8/31/2001 $395,994 $271,324
9/30/2001 $364,270 $243,839
10/31/2001 $363,827 $250,081
11/30/2001 $371,147 $259,309
12/31/2001 $375,362 $260,839
1/31/2002 $358,724 $246,989
2/28/2002 $361,164 $248,718
3/31/2002 $380,909 $262,173
4/30/2002 $379,134 $263,904
5/31/2002 $378,690 $267,255
6/30/2002 $365,823 $256,618
7/31/2002 $331,215 $231,290
8/31/2002 $328,109 $230,758
9/30/2002 $296,385 $205,975
10/31/2002 $306,812 $217,036
11/30/2002 $315,242 $226,889
12/31/2002 $303,263 $219,266
1/31/2003 $292,614 $210,122
2/28/2003 $288,399 $205,310
3/31/2003 $284,628 $201,430
4/30/2003 $309,696 $221,412
5/31/2003 $329,219 $235,029
6/30/2003 $334,987 $240,834
7/31/2003 $339,202 $246,710
8/31/2003 $352,734 $252,705
9/30/2003 $352,512 $260,539
10/31/2003 $377,803 $276,797
11/30/2003 $380,771 $282,997
12/31/2003 $405,459 $305,127
1/31/2004 $415,023 $309,460
2/29/2004 $420,138 $316,671
3/31/2004 $424,142 $318,571
4/30/2004 $408,573 $311,626
5/31/2004 $408,350 $312,966
6/30/2004 $413,911 $319,945
7/31/2004 $392,114 $309,611
8/30/2004 $393,226 $311,035
9/30/2004 $404,347 $319,215
10/31/2004 $418,823 $330,132
11/30/2004 $449,020 $352,779
12/31/2004 $466,262 $368,266
1/31/2005 $462,625 $361,527
2/28/2005 $485,571 $377,217
3/31/2005 $464,886 $367,900
4/30/2005 $454,426 $359,659
5/31/2005 $460,106 $360,199
6/30/2005 $468,526 $365,133
7/31/2005 $489,423 $376,343
8/31/2005 $493,974 $385,977
9/30/2005 $526,675 $403,231
10/31/2005 $507,136 $391,497
11/30/2005 $531,174 $401,167
12/31/2005 $575,261 $419,861
1/31/2006 $619,326 $445,682
2/28/2006 $600,437 $444,791
3/31/2006 $621,512 $459,647
4/30/2006 $647,554 $481,940
5/31/2006 $613,039 $463,819
6/30/2006 $606,725 $464,005
7/31/2006 $606,421 $468,645
8/31/2006 $624,190 $481,673
9/30/2006 $623,940 $482,492
</table>
Annualized Total Returns As of 9/30/2006
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
International Growth Fund Class I 18.53% 11.36% 9.82%
- --------------------------------------------------------------------------------
MSCI EAFE Index 19.65% 14.70% 7.16%
- --------------------------------------------------------------------------------
34
<Page>
[CHART]
<Table>
<Caption>
INTERNATIONAL
GROWTH
FUND CLASS II MSCI EAFE
SHARES INDEX
------------- -----------
12/27/1996 $250,000.00 $250,000.00
12/31/1996 $252,400.00 $249,475.00
1/31/1997 $274,600.00 $240,743.95
2/28/1997 $277,200.00 $244,681.59
3/31/1997 $282,600.00 $245,567.58
4/30/1997 $286,600.00 $246,870.63
5/31/1997 $313,200.00 $262,935.44
6/30/1997 $331,200.00 $277,435.63
7/31/1997 $352,400.00 $281,923.94
8/31/1997 $334,000.00 $260,868.66
9/30/1997 $358,600.00 $275,482.21
10/31/1997 $328,800.00 $254,307.32
11/30/1997 $325,131.31 $251,714.87
12/31/1997 $329,722.39 $253,910.40
1/31/1998 $341,826.12 $265,522.67
2/28/1998 $365,198.85 $282,560.07
3/31/1998 $386,902.09 $291,260.55
4/30/1998 $398,171.08 $293,565.96
5/31/1998 $407,979.28 $292,141.10
6/30/1998 $412,779.04 $294,352.73
7/31/1998 $431,143.32 $297,336.99
8/31/1998 $369,372.55 $260,500.11
9/30/1998 $351,843.00 $252,513.68
10/31/1998 $358,312.24 $278,835.82
11/30/1998 $379,862.12 $293,121.00
12/31/1998 $400,733.67 $304,684.52
1/31/1999 $416,178.61 $303,784.86
2/28/1999 $399,063.94 $296,544.90
3/31/1999 $411,795.59 $308,923.20
4/30/1999 $426,823.10 $321,440.33
5/31/1999 $410,334.58 $304,886.56
6/30/1999 $442,685.47 $316,773.24
7/31/1999 $457,295.55 $326,188.82
8/31/1999 $464,391.88 $327,380.02
9/30/1999 $471,488.20 $330,675.28
10/31/1999 $502,378.09 $343,060.99
11/30/1999 $567,497.31 $354,980.55
12/31/1999 $677,509.49 $386,840.61
1/31/2000 $629,265.14 $362,261.27
2/29/2000 $705,704.25 $372,013.32
3/31/2000 $665,813.89 $386,433.97
4/30/2000 $610,886.33 $366,098.53
5/31/2000 $578,514.58 $357,157.09
6/30/2000 $609,633.23 $371,124.90
7/31/2000 $582,691.58 $355,565.62
8/31/2000 $606,082.78 $358,651.89
9/30/2000 $566,818.98 $341,188.51
10/31/2000 $530,896.77 $333,129.01
11/30/2000 $504,920.19 $320,636.55
12/31/2000 $521,114.90 $332,033.10
1/31/2001 $505,363.88 $331,861.84
2/28/2001 $462,991.40 $306,982.95
3/31/2001 $426,165.06 $286,519.22
4/30/2001 $455,670.50 $306,429.96
5/31/2001 $441,028.71 $295,614.88
6/30/2001 $423,281.07 $283,525.60
7/31/2001 $413,076.18 $278,366.88
8/31/2001 $395,994.08 $271,324.20
9/30/2001 $364,270.19 $243,839.06
10/31/2001 $363,826.50 $250,081.34
11/30/2001 $371,147.40 $259,309.34
12/31/2001 $375,362.46 $260,839.26
1/31/2002 $358,724.05 $246,988.70
2/28/2002 $361,164.35 $248,717.62
3/31/2002 $380,908.60 $262,173.24
4/30/2002 $379,133.83 $263,903.59
5/31/2002 $378,690.14 $267,255.16
6/30/2002 $365,823.11 $256,618.41
7/31/2002 $331,215.22 $231,290.17
8/31/2002 $328,109.38 $230,758.20
9/30/2002 $296,385.49 $205,974.77
10/31/2002 $306,812.22 $217,035.62
11/30/2002 $315,242.35 $226,889.03
12/31/2002 $303,262.70 $219,265.56
1/31/2003 $292,614.12 $210,122.19
2/28/2003 $288,399.05 $205,310.39
3/31/2003 $284,627.68 $201,430.02
4/30/2003 $309,696.21 $221,411.88
5/31/2003 $329,218.61 $235,028.71
6/30/2003 $334,986.59 $240,833.92
7/31/2003 $339,201.66 $246,710.27
8/31/2003 $352,734.23 $252,705.33
9/30/2003 $352,512.38 $260,539.19
10/31/2003 $377,802.76 $276,796.84
11/30/2003 $380,771.18 $282,997.09
12/31/2003 $405,459.03 $305,127.46
1/31/2004 $415,022.80 $309,460.27
2/29/2004 $420,138.30 $316,670.69
3/31/2004 $424,141.73 $318,570.72
4/30/2004 $408,572.82 $311,625.88
5/31/2004 $408,350.40 $312,965.87
6/30/2004 $413,910.73 $319,945.01
7/31/2004 $392,114.25 $309,610.78
8/30/2004 $393,226.31 $311,034.99
9/30/2004 $404,346.97 $319,215.21
10/31/2004 $418,822.59 $330,132.37
11/30/2004 $449,019.70 $352,779.45
12/31/2004 $466,262.06 $368,266.47
1/31/2005 $462,625.21 $361,527.20
2/28/2005 $485,571.42 $377,217.48
3/31/2005 $464,886.08 $367,900.20
4/30/2005 $454,426.14 $359,659.24
5/31/2005 $460,106.47 $360,198.73
6/30/2005 $468,526.42 $365,133.45
7/31/2005 $489,422.70 $376,343.05
8/31/2005 $493,974.33 $385,977.43
9/30/2005 $526,675.43 $403,230.62
10/31/2005 $507,135.77 $391,496.61
11/30/2005 $531,174.01 $401,166.58
12/31/2005 $575,261.45 $419,860.94
1/31/2006 $619,326.48 $445,682.39
2/28/2006 $600,684.75 $444,791.02
3/31/2006 $621,768.78 $459,647.04
4/30/2006 $648,069.60 $481,939.92
5/31/2006 $613,851.53 $463,818.98
6/30/2006 $607,835.78 $464,004.51
7/31/2006 $607,835.78 $468,644.56
8/31/2006 $625,645.37 $481,672.87
9/30/2006 $625,645.37 $482,491.72
</Table>
Annualized Total Returns As of 9/30/2006
SINCE
1 YEAR 5 YEARS INCEPTION
- -------------------------------------------------------------------------------
International Growth Fund Class II 18.45% 11.36% 9.64%
- -------------------------------------------------------------------------------
MSCI EAFE Index 19.65% 14.70% 7.16%
- -------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I AND II SHARES COMPARED WITH THE MORGAN STANLEY CAPITAL
INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST INDEX ("MSCI EAFE") OVER THE PERIODS
INDICATED. THE FUND'S CLASS I AND II 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 AND II SHARES. THE
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS' CLASS I SHARES WERE FIRST AVAILABLE ON
MAY 7, 1999 AND CLASS II SHARES ON JANUARY 23, 2006. THE HISTORICAL PERFORMANCE
OF CLASS II SHARES INCLUDES THE PERFORMANCE OF CLASS I SHARES FOR PERIODS PRIOR
TO THE INCEPTION OF CLASS II. AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE
CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN
DISTRIBUTIONS. 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.
35
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2006
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 93.9%
ARGENTINA - 0.7%
Tenaris S.A. - ADR 21,200 $ 750,056
-----------
CANADA - 2.3%
Cameco Corp. 26,800 978,411
Suncor Energy, Inc. 12,800 920,031
Teck Cominco, Ltd. Cl. B 7,500 470,578
-----------
2,369,020
-----------
FINLAND - 0.8%
Nokia Corp. - ADR 44,100 868,329
-----------
FRANCE - 11.6%
Axa S.A 60,063 2,212,546
BNP Paribas 19,126 2,055,734
Lafarge S.A 16,082 2,073,857
SOITEC* 26,561 767,132
Total S.A 23,660 1,551,015
Vallourec S.A 3,795 884,065
Veolia Environnement 39,453 2,379,409
-----------
11,923,758
-----------
GERMANY - 3.5%
Bayerische Motoren Werke AG 16,247 869,337
Hannover Rueckversicherung AG* 29,942 1,258,106
Solarworld AG## 7,652 420,005
Stada Arzneimittel AG 21,720 1,108,531
-----------
3,655,979
-----------
HONG KONG - 2.6%
Foxconn International Holdings, Ltd.* 251,000 776,297
Hutchison Telecommunications
International, Ltd.*,## 1,071,300 1,878,014
-----------
2,654,311
-----------
HUNGARY - 1.0%
Mol Hungarian Oil & Gas PLC 11,549 1,051,011
-----------
IRELAND - 2.6%
Bank of Ireland 55,044 1,075,190
C&C Group PLC 115,555 1,567,722
-----------
2,642,912
-----------
ITALY - 4.6%
Sanpaolo IMI SpA 132,775 2,800,409
UniCredito Italiano SpA 229,030 1,898,860
-----------
4,699,269
-----------
JAPAN - 26.1%
Aoyama Trading Co., Ltd. 14,400 459,815
Asics Corp. 82,000 1,068,886
Calsonic Kansei Corp. 115,000 723,712
Chugai Pharmaceutical Co., Ltd.## 53,700 1,155,279
Fuji Electric Co., Ltd. 202,000 1,041,952
Haseko Corp.*,## 341,000 1,175,514
Hisamitsu Pharmaceutical Co., Inc. 15,600 432,067
Hokuhoku Financial Group, Inc. 225,000 848,050
Japan Steel Works, Ltd.## 68,000 465,371
Japan Tobacco, Inc. 510 1,982,721
Mitsubishi Estate Co, Ltd. 81,600 1,783,153
Mitsubishi UFJ Financial Group, Inc. 140 1,802,397
Mitsui & Co., Ltd. 60,700 772,214
Nippon Electric Glass Co., Ltd. 46,000 1,014,949
Nitori Co., Ltd. 22,150 1,003,706
Okasan Holdings, Inc. 73,000 644,272
Sumco Corp. 24,900 1,845,382
Sumitomo Mitsui Financial Group, Inc. 276 2,898,742
Tokyo Electron, Ltd. 17,700 $ 1,308,779
Toyota Motor Corp. 45,000 2,446,957
Uni-Charm Corp. 21,900 1,216,821
Yakult Honsha Co., Ltd. 26,300 772,973
-----------
26,863,712
-----------
LUXEMBOURG - 0.9%
Millicom International Cellular S.A.* 23,100 945,252
-----------
MEXICO - 1.3%
Fomento Economico Mexicano S.A. de CV 23,600 229,075
Fomento Economico Mexicano S.A. de CV - ADR 11,700 1,134,198
-----------
1,363,273
-----------
NETHERLANDS - 2.4%
ASML Holding NV* 59,051 1,379,365
Royal Numico NV 23,564 1,059,664
-----------
2,439,029
-----------
NORWAY - 2.7%
Acergy S.A.*,## 66,100 1,130,625
Telenor ASA 90,400 1,180,158
TGS Nopec Geophysical Co. ASA* 28,400 449,832
-----------
2,760,615
-----------
PERU - 0.6%
Southern Copper Corp.## 6,200 573,500
-----------
PORTUGAL - 1.0%
Banco Espirito Santo S.A 69,089 1,054,598
-----------
REPUBLIC OF CHINA - 1.3%
AAC Acoustic Technology Holdings, Inc.* 642,000 741,506
Suntech Power Holdings Co., Ltd. - ADR* 24,000 619,920
-----------
1,361,426
-----------
SINGAPORE - 0.6%
SembCorp Marine, Ltd.## 279,000 587,405
-----------
SOUTH KOREA - 2.0%
Daewoo Shipbuilding & Marine Engineering Co., Ltd. 35,910 1,160,957
Kookmin Bank - ADR 12,100 944,163
-----------
2,105,120
-----------
SWEDEN - 1.1%
Modern Times Group AB Cl. B 22,100 1,142,914
-----------
SWITZERLAND - 14.3%
ABB, Ltd. 175,135 2,297,516
Adecco S.A 22,949 1,380,838
Compagnie Financiere Richemont AG Cl. A 22,027 1,057,479
Nestle S.A 6,683 2,323,688
Panalpina Welttransport AG 12,133 1,301,398
Roche Holding AG 14,614 2,519,675
Swiss Reinsurance 16,731 1,276,890
UBS AG 42,375 2,527,732
-----------
14,685,216
-----------
TAIWAN - 0.0%
United Microelectronics Corp. - ADR 1,788 5,507
-----------
UNITED KINGDOM - 9.9%
ARM Holdings PLC* 734,089 1,611,209
AstraZeneca PLC 33,850 2,110,621
Barclays PLC 127,762 1,608,521
British American Tobacco PLC 45,426 1,225,284
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
HSBC Holdings PLC 136,019 $ 2,475,977
Shire PLC 69,065 1,145,609
------------
10,177,221
- --------------------------------------------------------------------------------
Total Common Stock (Cost: $82,206,311) 96,679,433
- --------------------------------------------------------------------------------
PREFERRED STOCK - 1.6%
GERMANY - 1.6%
Henkel KGaA
(Cost: $1,394,498) 12,170 1,690,557
- --------------------------------------------------------------------------------
EQUITY-LINKED SECURITIES - 0.7%
INDIA - 0.7%
Merrill Lynch Bharti Airtel, Ltd. - 3/17/11*
(Cost: $632,852) 72,827 743,491
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 6.9%
MONEY MARKET FUNDS - 3.9%
Boston Global Investment Trust - Enhanced
Portfolio, 5.320%** $4,020,455 4,020,455
------------
TIME DEPOSIT - 3.0%
Wachovia Bank Grand Cayman 4.630%, 10/01/06 3,033,597 3,033,597
- -------------------------------------------------------------------------------
Total Short Term Investments (Cost: $7,054,052) 7,054,052
- -------------------------------------------------------------------------------
Total Investments - 103.1% (Cost: $91,287,713) 106,167,533
- -------------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (3.1%) (3,220,767)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $102,946,766
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/06.
ADR - AMERICAN DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Financial 28.3%
Consumer, Non-cyclical 22.4
Consumer, Cyclical 9.3
Industrial 9..2
Communications 7.3
Technology 6.7
Energy 6.0
Basic Materials 4.7
Utilities 2.3
Short Term Investments 6.9
- --------------------------------------------------------------------------------
Total Investments 103.1%
- --------------------------------------------------------------------------------
Liabilities in excess of other assets (3.1)
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37
<Page>
INTERNATIONAL GROWTH OPPORTUNITIES FUND
MANAGEMENT TEAM: VINCENT WILLYARD, CFA, Portfolio Manager; JOSEPH DEVINE,
Portfolio Manager; STEPHEN DERKASH, Analyst; BARRY KENDALL, Analyst
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 20% of
publicly traded companies as measured by the market capitalization in the
Citigroup World BMI xUS Index.
MARKET OVERVIEW: International small-cap equities rose during the six months
ended September 30, 2006, adding to sizeable gains posted earlier in the year.
The environment was characterized by:
- Higher interest rates from central banks worldwide, including the Bank
of Japan which raised rates for the first time in many years
- Slowing rates of economic growth globally
- Wide swings in stock prices, as investors around the world speculated
about when the U.S. monetary tightening cycle would end
- Decline in the price of oil and other commodities after a multi-year
climb
Among international small-cap markets, returns in most countries were positive
in U.S. dollar terms. U.K. equities did especially well, helped by news that the
country's economy grew at a faster-than-expected rate and strengthening in the
British pound versus the dollar. Continental European markets also performed
well overall amid record merger activity and a stronger euro. Japan was one of
the worst-performing countries, with stocks trading lower on concerns about the
impact that moderating U.S economic growth would have on Japanese exports and a
very weak yen versus European currencies.
PERFORMANCE: During the six months ended September 30, 2006, the Fund's Class I
shares lost 2.53% and the Citigroup World EMI xUS Growth index gained 2.44%.
PORTFOLIO SPECIFICS: Because investors shied away from riskier assets in the
volatile environment, international small-cap value stocks outpaced their growth
counterparts. This negatively affected the Fund's relative performance since
holdings are concentrated in growth stocks, while the style-neutral index
includes both growth and value names. Other key areas of relative weakness were
stock selection in the United Kingdom and the information technology sector, as
well as an overweight in information technology.
On the plus side, stock selection in Ireland, China and the consumer staples
sector had a significant, positive impact on results versus the index. Some of
the Fund's best-performing names were Ireland-based C&C Group, a food and
beverage distributor; Kingspan, a building products manufacturer also based in
Ireland; and China-based AAC Acoustic Technologies, a maker of acoustic
components used primarily in mobile phone handsets.
MARKET OUTLOOK: Our near-term outlook for international stock markets is one of
cautious optimism due to uncertainties about the strength of the global economy.
The European Central Bank has signaled the possibility of further interest rate
increases, and Chinese officials continue to take measures to cool the country's
red-hot economy. On the other hand, falling commodity prices have eased
inflationary pressures, and the Federal Reserve held rates steady at its August
and September meetings.
Regardless of how short-term events unfold, we remain confident in the Fund's
long-term prospects given our focus on investing in small-cap stocks exhibiting
superior earnings growth potential.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN INTERNATIONAL GROWTH
OPPORTUNITIES FUND CLASS I, II, III AND IV SHARES WITH THE CITIGROUP WORLD EMI
xUS GROWTH.
[CHART]
<Table>
<Caption>
INTERNATIONAL CITIGROUP
GROWTH WORLD EMI
OPPORTUNITIES xUS
FUND CLASS I GROWTH
SHARES INDEX
------------- ---------
12/31/1997 $ 250,000 $250,000
1/31/1998 $ 255,925 $260,950
2/28/1998 $ 282,388 $279,295
3/31/1998 $ 312,914 $292,170
4/30/1998 $ 329,717 $294,595
5/31/1998 $ 337,861 $300,752
6/30/1998 $ 338,706 $293,414
7/31/1998 $ 345,785 $292,622
8/31/1998 $ 291,151 $255,547
9/30/1998 $ 287,162 $247,982
10/31/1998 $ 298,562 $264,572
11/30/1998 $ 319,342 $274,626
12/31/1998 $ 340,834 $282,892
1/31/1999 $ 367,760 $284,844
2/28/1999 $ 360,773 $279,034
3/31/1999 $ 369,179 $289,274
4/30/1999 $ 391,219 $303,015
5/31/1999 $ 376,000 $295,136
6/30/1999 $ 417,586 $306,174
7/31/1999 $ 453,582 $318,023
8/31/1999 $ 483,110 $324,829
9/30/1999 $ 497,458 $325,771
10/31/1999 $ 531,385 $325,966
11/30/1999 $ 653,072 $350,121
12/31/1999 $ 777,547 $383,347
1/31/2000 $ 801,962 $376,485
2/29/2000 $1,013,680 $408,712
3/31/2000 $ 900,047 $400,293
4/30/2000 $ 807,882 $371,992
5/31/2000 $ 756,016 $357,782
6/30/2000 $ 815,288 $378,891
7/31/2000 $ 792,215 $365,630
8/31/2000 $ 830,717 $380,986
9/30/2000 $ 779,046 $357,784
10/31/2000 $ 718,904 $328,983
11/30/2000 $ 649,601 $300,394
12/31/2000 $ 683,121 $310,427
1/31/2001 $ 669,322 $314,090
2/28/2001 $ 626,820 $290,533
3/31/2001 $ 559,750 $262,933
4/30/2001 $ 593,727 $283,100
5/31/2001 $ 589,571 $280,297
6/30/2001 $ 560,210 $264,460
7/31/2001 $ 546,205 $254,860
8/31/2001 $ 525,067 $249,891
9/30/2001 $ 471,090 $217,255
10/31/2001 $ 488,520 $230,029
11/30/2001 $ 497,949 $239,599
12/31/2001 $ 504,820 $239,934
1/31/2002 $ 491,291 $232,160
2/28/2002 $ 494,976 $233,275
3/31/2002 $ 521,606 $249,441
4/30/2002 $ 524,109 $250,937
5/31/2002 $ 534,434 $257,788
6/30/2002 $ 509,423 $245,414
7/31/2002 $ 466,478 $222,762
8/31/2002 $ 461,441 $220,713
9/30/2002 $ 418,988 $200,209
10/31/2002 $ 420,371 $205,194
11/30/2002 $ 432,772 $213,340
12/31/2002 $ 427,016 $208,561
1/31/2003 $ 411,643 $202,576
2/28/2003 $ 404,975 $198,747
3/31/2003 $ 399,224 $197,177
4/30/2003 $ 432,280 $216,382
5/31/2003 $ 470,147 $235,250
6/30/2003 $ 479,785 $242,120
7/31/2003 $ 495,618 $248,754
8/31/2003 $ 523,868 $258,903
9/30/2003 $ 533,036 $272,107
10/31/2003 $ 590,178 $291,835
11/30/2003 $ 598,204 $296,037
12/31/2003 $ 633,079 $313,177
1/31/2004 $ 655,111 $323,387
2/29/2004 $ 669,130 $333,962
3/31/2004 $ 675,554 $342,378
4/30/2004 $ 656,706 $332,175
5/31/2004 $ 655,130 $334,666
6/30/2004 $ 680,811 $344,070
7/31/2004 $ 648,676 $328,828
8/30/2004 $ 648,936 $330,834
9/30/2004 $ 673,271 $342,214
10/31/2004 $ 689,362 $352,686
11/30/2004 $ 746,234 $377,797
12/31/2004 $ 778,024 $395,252
1/31/2005 $ 780,592 $398,690
2/28/2005 $ 825,007 $416,273
3/31/2005 $ 805,867 $406,990
4/30/2005 $ 778,951 $394,861
5/31/2005 $ 787,675 $396,836
6/30/2005 $ 805,162 $405,765
7/31/2005 $ 830,685 $420,818
8/31/2005 $ 848,877 $434,032
9/30/2005 $ 902,781 $449,180
10/31/2005 $ 861,524 $432,695
11/30/2005 $ 912,095 $450,435
12/31/2005 $ 997,376 $479,984
1/31/2006 $1,071,082 $516,703
2/28/2006 $1,082,007 $512,879
3/31/2006 $1,155,476 $535,959
4/30/2006 $1,235,666 $564,686
5/31/2006 $1,162,885 $538,541
6/30/2006 $1,116,835 $530,517
7/31/2006 $1,100,864 $524,787
8/31/2006 $1,122,441 $541,843
9/30/2006 $1,126,370 $545,257
</Table>
Annualized Total Returns As of 9/30/2006
SINCE
1 YEAR 5 YEAR INCEPTION
- --------------------------------------------------------------------------------
International Growth Opportunities
Fund Class I 24.75% 19.03% 18.76%
- --------------------------------------------------------------------------------
Citigroup World EMI xUS Growth Index 21.38% 20.20% 9.32%
- --------------------------------------------------------------------------------
38
<Page>
[CHART]
<Table>
<Caption>
INTERNATIONAL CITIGROUP
GROWTH WORLD EMI
OPPORTUNITIES xUS
FUND CLASS II GROWTH
SHARES INDEX
------------- -----------
12/31/1997 $ 250,000.00 $250,000.00
1/31/1998 $ 255,925.00 $260,950.00
2/28/1998 $ 282,387.65 $279,294.79
3/31/1998 $ 312,913.75 $292,170.27
4/30/1998 $ 329,717.22 $294,595.29
5/31/1998 $ 337,861.23 $300,752.33
6/30/1998 $ 338,705.89 $293,413.97
7/31/1998 $ 345,784.84 $292,621.75
8/31/1998 $ 291,150.83 $255,546.58
9/30/1998 $ 287,162.07 $247,982.40
10/31/1998 $ 298,562.40 $264,572.42
11/30/1998 $ 319,342.35 $274,626.17
12/31/1998 $ 340,834.09 $282,892.42
1/31/1999 $ 367,759.98 $284,844.38
2/28/1999 $ 360,772.54 $279,033.55
3/31/1999 $ 369,178.54 $289,274.09
4/30/1999 $ 391,218.50 $303,014.61
5/31/1999 $ 376,000.10 $295,136.23
6/30/1999 $ 417,585.71 $306,174.32
7/31/1999 $ 453,581.60 $318,023.27
8/31/1999 $ 483,109.76 $324,828.96
9/30/1999 $ 497,458.12 $325,770.97
10/31/1999 $ 531,384.76 $325,966.43
11/30/1999 $ 653,071.87 $350,120.54
12/31/1999 $ 777,547.37 $383,346.98
1/31/2000 $ 801,962.36 $376,485.07
2/29/2000 $1,013,680.42 $408,712.19
3/31/2000 $ 900,046.85 $400,292.72
4/30/2000 $ 807,882.05 $371,992.03
5/31/2000 $ 756,016.02 $357,781.93
6/30/2000 $ 815,287.68 $378,891.07
7/31/2000 $ 792,215.04 $365,629.88
8/31/2000 $ 830,716.69 $380,986.33
9/30/2000 $ 779,046.11 $357,784.27
10/31/2000 $ 718,903.75 $328,982.63
11/30/2000 $ 649,601.43 $300,394.04
12/31/2000 $ 683,120.86 $310,427.20
1/31/2001 $ 669,321.82 $314,090.24
2/28/2001 $ 626,819.89 $290,533.48
3/31/2001 $ 559,750.16 $262,932.80
4/30/2001 $ 593,726.99 $283,099.74
5/31/2001 $ 589,570.90 $280,297.05
6/30/2001 $ 560,210.27 $264,460.27
7/31/2001 $ 546,205.02 $254,860.36
8/31/2001 $ 525,066.88 $249,890.58
9/30/2001 $ 471,090.01 $217,254.87
10/31/2001 $ 488,520.34 $230,029.46
11/30/2001 $ 497,948.78 $239,598.69
12/31/2001 $ 504,820.47 $239,934.12
1/31/2002 $ 491,291.28 $232,160.26
2/28/2002 $ 494,975.97 $233,274.63
3/31/2002 $ 521,605.67 $249,440.56
4/30/2002 $ 524,109.38 $250,937.20
5/31/2002 $ 534,434.34 $257,787.79
6/30/2002 $ 509,422.81 $245,413.98
7/31/2002 $ 466,478.47 $222,762.27
8/31/2002 $ 461,440.50 $220,712.85
9/30/2002 $ 418,987.97 $200,208.63
10/31/2002 $ 420,370.63 $205,193.82
11/30/2002 $ 432,771.57 $213,340.02
12/31/2002 $ 427,015.71 $208,561.20
1/31/2003 $ 411,643.14 $202,575.50
2/28/2003 $ 404,974.52 $198,746.82
3/31/2003 $ 399,223.88 $197,176.72
4/30/2003 $ 432,279.62 $216,381.73
5/31/2003 $ 470,147.32 $235,250.22
6/30/2003 $ 479,785.34 $242,119.52
7/31/2003 $ 495,618.25 $248,753.60
8/31/2003 $ 524,066.74 $258,902.75
9/30/2003 $ 533,237.91 $272,106.79
10/31/2003 $ 590,614.31 $291,834.53
11/30/2003 $ 598,646.66 $296,036.95
12/31/2003 $ 633,787.22 $313,177.48
1/31/2004 $ 655,843.01 $323,387.07
2/29/2004 $ 670,074.81 $333,961.83
3/31/2004 $ 676,507.53 $342,377.67
4/30/2004 $ 657,430.01 $332,174.81
5/31/2004 $ 656,049.41 $334,666.12
6/30/2004 $ 681,963.36 $344,070.24
7/31/2004 $ 649,842.89 $328,827.93
8/30/2004 $ 650,102.83 $330,833.78
9/30/2004 $ 674,416.67 $342,214.46
10/31/2004 $ 690,939.88 $352,686.22
11/30/2004 $ 747,942.42 $377,797.48
12/31/2004 $ 779,804.77 $395,251.73
1/31/2005 $ 782,378.12 $398,690.42
2/28/2005 $ 827,130.15 $416,272.66
3/31/2005 $ 808,023.44 $406,989.78
4/30/2005 $ 780,793.05 $394,861.49
5/31/2005 $ 789,772.17 $396,835.80
6/30/2005 $ 807,305.12 $405,764.60
7/31/2005 $ 832,896.69 $420,818.47
8/31/2005 $ 851,387.00 $434,032.17
9/30/2005 $ 905,620.35 $449,179.89
10/31/2005 $ 864,324.06 $432,694.99
11/30/2005 $ 915,059.88 $450,435.48
12/31/2005 $1,000,800.99 $479,984.05
1/31/2006 $1,074,760.19 $516,702.83
2/28/2006 $1,085,615.26 $512,879.23
3/31/2006 $1,159,545.66 $535,958.79
4/30/2006 $1,240,250.04 $564,686.19
5/31/2006 $1,167,447.36 $538,541.22
6/30/2006 $1,121,333.19 $530,516.95
7/31/2006 $1,105,298.13 $524,787.37
8/31/2006 $1,126,851.44 $541,842.96
9/30/2006 $1,131,020.79 $545,256.57
</Table>
Annualized Total Returns As of 9/30/2006
SINCE
1 YEAR 5 YEAR INCEPTION
- --------------------------------------------------------------------------------
International Growth Opportunities
Fund Class II 24.89% 19.14% 18.83%
- --------------------------------------------------------------------------------
Citigroup World EMI xUS Growth Index 21.38% 20.20% 9.32%
- --------------------------------------------------------------------------------
[CHART]
<Table>
<Caption>
INTERNATIONAL CITIGROUP
GROWTH WORLD EMI
OPPORTUNITIES xUS
FUND CLASS GROWTH
III SHARES INDEX
------------- -----------
12/31/1997 $ 250,000.00 $250,000.00
1/31/1998 $ 255,925.00 $260,950.00
2/28/1998 $ 282,387.65 $279,294.79
3/31/1998 $ 312,913.75 $292,170.27
4/30/1998 $ 329,717.22 $294,595.29
5/31/1998 $ 337,861.23 $300,752.33
6/30/1998 $ 338,705.89 $293,413.97
7/31/1998 $ 345,784.84 $292,621.75
8/31/1998 $ 291,150.83 $255,546.58
9/30/1998 $ 287,162.07 $247,982.40
10/31/1998 $ 298,562.40 $264,572.42
11/30/1998 $ 319,342.35 $274,626.17
12/31/1998 $ 340,834.09 $282,892.42
1/31/1999 $ 367,759.98 $284,844.38
2/28/1999 $ 360,772.54 $279,033.55
3/31/1999 $ 369,178.54 $289,274.09
4/30/1999 $ 391,218.50 $303,014.61
5/31/1999 $ 376,000.10 $295,136.23
6/30/1999 $ 417,585.71 $306,174.32
7/31/1999 $ 453,581.60 $318,023.27
8/31/1999 $ 483,109.76 $324,828.96
9/30/1999 $ 497,458.12 $325,770.97
10/31/1999 $ 531,384.76 $325,966.43
11/30/1999 $ 653,071.87 $350,120.54
12/31/1999 $ 777,547.37 $383,346.98
1/31/2000 $ 801,962.36 $376,485.07
2/29/2000 $1,013,680.42 $408,712.19
3/31/2000 $ 900,046.85 $400,292.72
4/30/2000 $ 807,882.05 $371,992.03
5/31/2000 $ 756,016.02 $357,781.93
6/30/2000 $ 815,287.68 $378,891.07
7/31/2000 $ 792,215.04 $365,629.88
8/31/2000 $ 830,716.69 $380,986.33
9/30/2000 $ 779,046.11 $357,784.27
10/31/2000 $ 718,903.75 $328,982.63
11/30/2000 $ 649,601.43 $300,394.04
12/31/2000 $ 683,120.86 $310,427.20
1/31/2001 $ 669,321.82 $314,090.24
2/28/2001 $ 626,819.89 $290,533.48
3/31/2001 $ 559,750.16 $262,932.80
4/30/2001 $ 593,726.99 $283,099.74
5/31/2001 $ 589,570.90 $280,297.05
6/30/2001 $ 560,210.27 $264,460.27
7/31/2001 $ 546,205.02 $254,860.36
8/31/2001 $ 525,066.88 $249,890.58
9/30/2001 $ 471,090.01 $217,254.87
10/31/2001 $ 488,520.34 $230,029.46
11/30/2001 $ 497,948.78 $239,598.69
12/31/2001 $ 504,820.47 $239,934.12
1/31/2002 $ 491,291.28 $232,160.26
2/28/2002 $ 494,975.97 $233,274.63
3/31/2002 $ 521,605.67 $249,440.56
4/30/2002 $ 524,109.38 $250,937.20
5/31/2002 $ 534,434.34 $257,787.79
6/30/2002 $ 509,422.81 $245,413.98
7/31/2002 $ 466,478.47 $222,762.27
8/31/2002 $ 461,440.50 $220,712.85
9/30/2002 $ 418,987.97 $200,208.63
10/31/2002 $ 420,370.63 $205,193.82
11/30/2002 $ 432,771.57 $213,340.02
12/31/2002 $ 427,015.71 $208,561.20
1/31/2003 $ 411,643.14 $202,575.50
2/28/2003 $ 404,974.52 $198,746.82
3/31/2003 $ 399,223.88 $197,176.72
4/30/2003 $ 432,279.62 $216,381.73
5/31/2003 $ 470,147.32 $235,250.22
6/30/2003 $ 479,785.34 $242,119.52
7/31/2003 $ 495,618.25 $248,753.60
8/31/2003 $ 523,868.49 $258,902.75
9/30/2003 $ 533,036.19 $272,106.79
10/31/2003 $ 590,177.67 $291,834.53
11/30/2003 $ 598,204.09 $296,036.95
12/31/2003 $ 633,079.38 $313,177.48
1/31/2004 $ 655,110.55 $323,387.07
2/29/2004 $ 669,129.91 $333,961.83
3/31/2004 $ 675,553.56 $342,377.67
4/30/2004 $ 656,705.62 $332,174.81
5/31/2004 $ 655,129.52 $334,666.12
6/30/2004 $ 680,810.60 $344,070.24
7/31/2004 $ 648,676.34 $328,827.93
8/30/2004 $ 648,935.81 $330,833.78
9/30/2004 $ 673,270.90 $342,214.46
10/31/2004 $ 689,362.08 $352,686.22
11/30/2004 $ 746,234.45 $377,797.48
12/31/2004 $ 778,024.04 $395,251.73
1/31/2005 $ 780,591.52 $398,690.42
2/28/2005 $ 825,007.17 $416,272.66
3/31/2005 $ 805,867.01 $406,989.78
4/30/2005 $ 778,951.05 $394,861.49
5/31/2005 $ 787,675.30 $396,835.80
6/30/2005 $ 805,161.69 $405,764.60
7/31/2005 $ 830,685.32 $420,818.47
8/31/2005 $ 848,877.33 $434,032.17
9/30/2005 $ 902,781.04 $449,179.89
10/31/2005 $ 861,614.22 $432,694.99
11/30/2005 $ 912,190.98 $450,435.48
12/31/2005 $ 997,480.83 $479,984.05
1/31/2006 $1,071,194.67 $516,702.83
2/28/2006 $1,082,120.85 $512,879.23
3/31/2006 $1,155,596.86 $535,958.79
4/30/2006 $1,235,795.28 $564,686.19
5/31/2006 $1,163,006.94 $538,541.22
6/30/2006 $1,116,951.86 $530,516.95
7/31/2006 $1,100,979.45 $524,787.37
8/31/2006 $1,122,558.65 $541,842.96
9/30/2006 $1,126,487.60 $545,256.57
</Table>
Annualized Total Returns As of 9/30/2006
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
International Growth Opportunities
Fund Class III 24.99% 19.09% 18.80%
- --------------------------------------------------------------------------------
Citigroup World EMI xUS Growth Index 21.38% 20.20% 9.32%
- --------------------------------------------------------------------------------
[CHART]
<Table>
<Caption>
INTERNATIONAL CITIGROUP
GROWTH WORLD EMI
OPPORTUNITIES xUS
FUND CLASS IV GROWTH
SHARES INDEX
------------- -----------
12/31/1997 $ 250,000.00 $250,000.00
1/31/1998 $ 255,925.00 $260,950.00
2/28/1998 $ 282,387.65 $279,294.79
3/31/1998 $ 312,913.75 $292,170.27
4/30/1998 $ 329,717.22 $294,595.29
5/31/1998 $ 337,861.23 $300,752.33
6/30/1998 $ 338,705.89 $293,413.97
7/31/1998 $ 345,784.84 $292,621.75
8/31/1998 $ 291,150.83 $255,546.58
9/30/1998 $ 287,162.07 $247,982.40
10/31/1998 $ 298,562.40 $264,572.42
11/30/1998 $ 319,342.35 $274,626.17
12/31/1998 $ 340,834.09 $282,892.42
1/31/1999 $ 367,759.98 $284,844.38
2/28/1999 $ 360,772.54 $279,033.55
3/31/1999 $ 369,178.54 $289,274.09
4/30/1999 $ 391,218.50 $303,014.61
5/31/1999 $ 376,000.10 $295,136.23
6/30/1999 $ 417,585.71 $306,174.32
7/31/1999 $ 453,581.60 $318,023.27
8/31/1999 $ 483,109.76 $324,828.96
9/30/1999 $ 497,458.12 $325,770.97
10/31/1999 $ 531,384.76 $325,966.43
11/30/1999 $ 653,071.87 $350,120.54
12/31/1999 $ 777,547.37 $383,346.98
1/31/2000 $ 801,962.36 $376,485.07
2/29/2000 $1,013,680.42 $408,712.19
3/31/2000 $ 900,046.85 $400,292.72
4/30/2000 $ 807,882.05 $371,992.03
5/31/2000 $ 756,016.02 $357,781.93
6/30/2000 $ 815,287.68 $378,891.07
7/31/2000 $ 792,215.04 $365,629.88
8/31/2000 $ 830,716.69 $380,986.33
9/30/2000 $ 779,046.11 $357,784.27
10/31/2000 $ 718,903.75 $328,982.63
11/30/2000 $ 649,601.43 $300,394.04
12/31/2000 $ 683,120.86 $310,427.20
1/31/2001 $ 669,321.82 $314,090.24
2/28/2001 $ 626,819.89 $290,533.48
3/31/2001 $ 559,750.16 $262,932.80
4/30/2001 $ 593,726.99 $283,099.74
5/31/2001 $ 589,570.90 $280,297.05
6/30/2001 $ 560,210.27 $264,460.27
7/31/2001 $ 546,205.02 $254,860.36
8/31/2001 $ 525,066.88 $249,890.58
9/30/2001 $ 471,090.01 $217,254.87
10/31/2001 $ 488,520.34 $230,029.46
11/30/2001 $ 497,948.78 $239,598.69
12/31/2001 $ 504,820.47 $239,934.12
1/31/2002 $ 491,291.28 $232,160.26
2/28/2002 $ 494,975.97 $233,274.63
3/31/2002 $ 521,605.67 $249,440.56
4/30/2002 $ 524,109.38 $250,937.20
5/31/2002 $ 534,434.34 $257,787.79
6/30/2002 $ 509,422.81 $245,413.98
7/31/2002 $ 466,478.47 $222,762.27
8/31/2002 $ 461,440.50 $220,712.85
9/30/2002 $ 418,987.97 $200,208.63
10/31/2002 $ 420,370.63 $205,193.82
11/30/2002 $ 432,771.57 $213,340.02
12/31/2002 $ 427,015.71 $208,561.20
1/31/2003 $ 411,643.14 $202,575.50
2/28/2003 $ 404,974.52 $198,746.82
3/31/2003 $ 399,223.88 $197,176.72
4/30/2003 $ 432,279.62 $216,381.73
5/31/2003 $ 470,147.32 $235,250.22
6/30/2003 $ 479,785.34 $242,119.52
7/31/2003 $ 495,618.25 $248,753.60
8/31/2003 $ 523,868.49 $258,902.75
9/30/2003 $ 533,036.19 $272,106.79
10/31/2003 $ 590,177.67 $291,834.53
11/30/2003 $ 598,204.09 $296,036.95
12/31/2003 $ 633,079.38 $313,177.48
1/31/2004 $ 655,110.55 $323,387.07
2/29/2004 $ 669,129.91 $333,961.83
3/31/2004 $ 675,553.56 $342,377.67
4/30/2004 $ 656,705.62 $332,174.81
5/31/2004 $ 655,129.52 $334,666.12
6/30/2004 $ 680,810.60 $344,070.24
7/31/2004 $ 648,676.34 $328,827.93
8/30/2004 $ 648,935.81 $330,833.78
9/30/2004 $ 673,270.90 $342,214.46
10/31/2004 $ 689,362.08 $352,686.22
11/30/2004 $ 746,234.45 $377,797.48
12/31/2004 $ 778,024.04 $395,251.73
1/31/2005 $ 780,591.52 $398,690.42
2/28/2005 $ 825,007.17 $416,272.66
3/31/2005 $ 805,867.01 $406,989.78
4/30/2005 $ 778,951.05 $394,861.49
5/31/2005 $ 787,675.30 $396,835.80
6/30/2005 $ 805,161.69 $405,764.60
7/31/2005 $ 830,685.32 $420,818.47
8/31/2005 $ 848,877.33 $434,032.17
9/30/2005 $ 903,120.59 $449,179.89
10/31/2005 $ 861,938.29 $432,694.99
11/30/2005 $ 912,706.45 $450,435.48
12/31/2005 $ 998,227.05 $479,984.05
1/31/2006 $1,072,195.67 $516,702.83
2/28/2006 $1,083,132.07 $512,879.23
3/31/2006 $1,156,893.36 $535,958.79
4/30/2006 $1,237,528.83 $564,686.19
5/31/2006 $1,165,009.64 $538,541.22
6/30/2006 $1,119,108.26 $530,516.95
7/31/2006 $1,103,328.83 $524,787.37
8/31/2006 $1,124,843.75 $541,842.96
9/30/2006 $1,129,005.67 $545,256.57
</Table>
Annualized Total Returns As of 9/30/2006
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
International Growth Opportunities
Fund Class IV 25.01% 19.10% 18.80%
- --------------------------------------------------------------------------------
Citigroup World EMI xUS Growth Index 21.38% 20.20% 9.32%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I THROUGH IV SHARES COMPARED WITH THE CITIGROUP WORLD EMI xUS
GROWTH INDEX INDEX FOR THE PERIODS INDICATED. THE FUND'S CLASS I THROUGH IV
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 THROUGH IV SHARES. THE NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS'
CLASS I SHARES WERE FIRST AVAILABLE ON MAY 7, 1999, CLASS II SHARES COMMENCED
OPERATIONS ON JUNE 5, 2003, CLASS III SHARES ON SEPTEMBER 30, 2005, AND CLASS IV
SHARES ON AUGUST 31, 2005. THE HISTORICAL PERFORMANCE OF CLASS II, III, AND IV
SHARES INCLUDES THE PERFORMANCE OF CLASS I SHARES FOR PERIODS PRIOR TO THE
INCEPTION OF THE RELEVANT CLASS. AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE
CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN
DISTRIBUTIONS. 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 WORLD EMI xUS GROWTH INDEX COVERS ONLY THOSE COMPANIES IN EACH
COUNTRY THAT EXHIBIT GROWTH CHARACTERISTICS RELATIVE TO OTHER COMPANIES IN THE
SAME COUNTRY ACCORDING TO A MULTIVARIABLE FORMULA. THE INDEX IS UNMANAGED AND
DOES NOT INCLUDE NON-EXTRAORDINARY DIVIDENDS. THE UNMANAGED INDEX DIFFERS FROM
THE FUND IN COMPOSITION, DOES NOT PAY MANAGEMENT FEES OR EXPENSES, AND INCLUDES
REINVESTED DIVIDENDS. ONE CAN NOT 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.
39
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2006
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 95.0%
BELGIUM - 2.7%
EVS Broadcasting Equipment S.A. 33,512 $ 1,863,613
Umicore 21,127 3,123,199
-----------
4,986,812
-----------
BRAZIL - 1.0%
Cyrela Brazil Realty S.A. 55,500 945,622
Gafisa S.A.* 71,200 919,926
-----------
1,865,548
-----------
CANADA - 3.7%
Gildan Activewear, Inc. Cl. A* 85,500 4,164,451
Novatel, Inc.* 41,800 1,919,456
Reitman's Canada., Ltd. Cl. A 48,800 838,084
-----------
6,921,991
-----------
DENMARK - 2.8%
Carlsberg A/S Cl. B 22,650 1,902,602
Jyske Bank*, ## 58,600 3,374,510
-----------
5,277,112
-----------
FINLAND - 1.0%
Cargotec Corp. Cl. B 46,160 1,951,250
-----------
FRANCE - 8.1%
Compagnie Generale de Geophysique S.A.*, ## 17,219 2,645,816
Neopost S.A. 45,409 5,412,806
Nexans S.A. 27,382 2,377,735
SOITEC* 63,918 1,846,073
Teleperformance ## 74,051 2,757,841
-----------
15,040,271
-----------
GERMANY - 10.0%
Aareal Bank AG* 82,008 3,633,850
Heidelberger Druckmaschinen ## 63,479 2,614,195
IKB Deutsche Industriebank AG ## 50,032 1,735,291
Interhyp AG*, ## 24,286 2,193,802
IVG Immobilien AG ## 69,835 2,524,748
QSC AG*, ## 289,409 1,708,397
Stada Arzneimittel AG 83,234 4,248,043
-----------
18,658,326
-----------
GREECE - 0.3%
Jumbo S.A. 30,700 465,115
-----------
HONG KONG - 1.4%
Melco International Development 1,241,000 2,653,285
-----------
INDONESIA - 1.7%
Bakrie & Brothers Tbk PT* 77,571,500 1,261,325
United Tractors Tbk PT 2,878,000 1,887,469
-----------
3,148,794
-----------
IRELAND - 5.3%
C&C Group PLC 164,254 2,228,416
FBD Holdings PLC 68,854 3,276,013
Kingspan Group PLC 209,769 4,318,029
-----------
9,822,458
-----------
ITALY - 3.4%
Azimut Holding SpA 187,913 2,142,349
Buzzi Unicem SpA 51,756 1,222,730
Digital Multimedia Technologies SpA* 51,769 3,069,724
-----------
6,434,803
-----------
JAPAN - 18.1%
Asics Corp. 159,000 $ 2,072,596
Disco Corp. 34,600 2,124,677
Haseko Corp.*, ## 1,274,600 4,393,870
Honeys Co., Ltd. 45,700 2,334,062
Hoosiers Corp. ## 1,119 1,573,320
Japan General Estate Co., Ltd. 69,800 1,670,139
Katokichi Co., Ltd. 215,100 1,758,112
KK DaVinci Advisors* 2,052 1,963,969
Komatsu Electronic Metals Co., Ltd. 59,300 2,345,581
Q'Sai Co., Ltd. ## 172,700 2,786,546
Taiheiyo Cement Corp. 421,500 1,560,119
Takeuchi Manufacturing Co., Ltd. ## 47,100 2,190,141
THK Co., Ltd. 67,900 1,604,548
Tokuyama Corp. ## 140,800 1,884,250
Tokyu Land Corp. 369,400 3,504,239
-----------
33,766,169
-----------
NETHERLANDS - 2.5%
SBM Offshore NV 34,103 925,775
Unit 4 Agresso NV* 91,736 1,812,823
USG People NV* 26,958 1,883,320
-----------
4,621,918
-----------
NORWAY - 1.1%
Golden Ocean Group, Ltd.* 1,961,000 2,015,555
-----------
REPUBLIC OF CHINA - 2.7%
AAC Acoustic Technology Holdings, Inc.* 2,889,800 3,337,701
Focus Media Holding, Ltd. ADR* 30,600 1,772,352
-----------
5,110,053
-----------
SINGAPORE - 1.7%
SembCorp Marine, Ltd.## 1,502,000 3,162,305
-----------
SPAIN - 3.8%
Grifols SA* 216,148 2,187,706
Red Electrica de Espana 126,802 4,916,775
-----------
7,104,481
-----------
SWEDEN - 7.0%
Alfa Laval AB 74,200 2,490,697
Meda AB Cl. A## 139,600 3,209,721
Modern Times Group AB Cl. B 68,300 3,532,172
Nobia AB 54,900 1,835,356
Ssab Svenskt Stal AB Cl. A 108,800 2,026,485
-----------
13,094,431
-----------
SWITZERLAND - 2.8%
Panalpina Welttransport AG 10,695 1,147,157
Phonak Holding AG 63,633 4,014,012
-----------
5,161,169
-----------
UNITED KINGDOM - 13.9%
Aberdeen Asset Management PLC 960,154 2,936,888
ARM Holdings PLC 846,381 1,857,672
Big Yellow Group PLC 218,506 1,992,833
Carphone Warehouse PLC 540,511 3,102,142
Charter PLC* 86,977 1,385,858
Debt Free Direct Group PLC 208,589 2,263,772
Homeserve PLC 67,467 2,095,795
Michael Page International PLC 316,964 2,278,000
NDS Group PLC - ADR* 37,200 1,634,196
Raymarine PLC 251,226 1,794,987
RPS Group PLC 522,198 2,233,757
Tullow Oil PLC* 131,774 927,975
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40
<Page>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
Venture Production PLC* 101,239 $ 1,398,464
------------
25,902,339
- -------------------------------------------------------------------------------
Total Common Stock (Cost: $152,210,095) 177,164,185
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 18.3%
MONEY MARKET FUNDS - 11.4%
Boston Global Investment Trust - Enhanced
Portfolio, 5.320%** $21,227,863 21,227,863
------------
TIME DEPOSIT - 6.9%
Bank of America London 4.630%, 10/01/06 12,964,250 12,964,250
- -------------------------------------------------------------------------------
Total Short Term Investments (Cost: $34,192,113) 34,192,113
- -------------------------------------------------------------------------------
Total Investments - 113.3% (Cost: $186,402,208) 211,356,298
- -------------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (13.3%) (24,731,732)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $186,624,566
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/06.
ADR - AMERICAN DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- -------------------------------------------------------------------------------
Industrial 21.7%
Consumer, Non-cyclical 17.6
Financial 14.6
Consumer, Cyclical 12.8
Communications 8.9
Technology 8.4
Basic Materials 3.8
Energy 3.2
Utilities 2.6
Diversified 1.4
Short Term Investments 18.3
- -------------------------------------------------------------------------------
Total Investments 113.3%
- -------------------------------------------------------------------------------
Liabilities in excess of other assets (13.3)
- -------------------------------------------------------------------------------
Net Assets 100.0%
===============================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
41
<Page>
EMERGING MARKETS FUND
MANAGEMENT TEAM: JOSEPH DEVINE, Portfolio Manager; VINCENT WILLYARD, CFA,
Portfolio Manager; STEPHEN DERKASH, Analyst; BARRY KENDALL, Analyst
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The Emerging Markets Fund seeks to maximize long-term capital appreciation
primarily through investments in countries with emerging securities markets.
These markets have yet to reach a level of maturity associated with the
developed foreign stock markets and are, in the opinion of the Investment
Adviser, less sophisticated than more developed markets in terms of
participation, analyst coverage, liquidity and regulation.
MARKET OVERVIEW: From August 18 (the inception date of the Fund) through
September 30, 2006, emerging market equities rose slightly. Gains in a number of
countries were largely offset by losses in others. For example:
- Stocks in India rose more than 9%, buoyed by robust economic
expansion. GDP grew 9.3% in the year ended March 31, 2006 and at an
8.9% annual pace from April through June 2006.
- In Latin America, Mexican equities registered solid gains, boosted by
clarity over the outcome of the July presidential election, while
Brazilian stocks declined amid weak economic data.
- South African equities fell nearly 7%. The country's stock market is
dominated by materials companies, which were hurt by declining
commodity prices.
Telecommunication services stocks turned in the best results on healthy growth,
rising dividend yields and interest from strategic buyers. Energy was the
worst-performing sector due to falling oil prices.
PERFORMANCE: The Fund's Class I shares gained 0.40% from the August 18, 2006
inception of the Fund through September 30, 2006. During the same time period,
the MSCI Emerging Markets Index increased 0.37%.
PORTFOLIO SPECIFICS: Stock selection in South Korea, Hong Kong and the
information technology sector had a significant, positive impact on performance
versus the index. One of the Fund's best-performing holdings was Hengan
International, a Chinese consumer products company whose shares trade on the
Hong Kong Stock Exchange. Hengan reported solid operating results, driven by
strong brand loyalty, new product launches and an improved product mix.
An underweight in Russia that resulted from our bottom-up investment process
also helped relative results, as equities in this oil-producing nation declined
on falling crude prices. Areas of relative weakness included stock selection in
Indonesia and the industrials sector, as well as an underweight in
telecommunication services.
The Fund was well diversified across countries and sectors at September 30. The
largest overweights versus the index were in China (+5.2%) and industrials
(+10.8%). The largest underweights were in Taiwan (-4.5%) and energy (-5.4%).
MARKET OUTLOOK: We are cautiously optimistic in our near-term outlook for
emerging market equities. While global growth should remain strong overall,
there are risks facing the market, such as a greater-than-expected U.S. economic
slowdown or a shift in the geopolitical landscape. Over the long run, however,
we think the prospects for emerging market equities remain bright, as structural
reforms and sounder macroeconomic polices have led to improved fundamentals
among countries and companies.
Both near and long term, we are confident that our research-intensive investment
process will uncover exciting investment opportunities for the Fund.
42
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2006
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCK - 93.9%
ARGENTINA - 0.3%
Tenaris S.A. - ADR 100 $ 3,538
------------
BRAZIL - 12.4%
All America Latina Logistica S.A 4,000 31,138
Cosan S.A. Industria e Comercio* 300 4,843
Cyrela Brazil Realty S.A 900 15,334
Gerdau S.A. - ADR 700 9,485
Localiza Rent A CAR 400 8,310
Lojas Renner S.A 100 5,804
Natura Cosmeticos S.A 600 7,376
Petroleo Brasileiro S.A. - ADR 270 22,634
Tim Participacoes S.A. - ADR 200 5,570
Unibanco - Uniao de Bancos
Brasileiros S.A. - GDR 200 14,800
------------
125,294
------------
EGYPT - 2.2%
Orascom Construction - GDR Reg S 70 6,076
Orascom Telecom Holding SAE 278 15,838
------------
21,914
------------
HONG KONG - 5.7%
Foxconn International Holdings, Ltd.* 7,000 21,650
Hengan International Group Co., Ltd. H 6,000 12,890
Hutchison Telecommunications
International, Ltd.* 5,000 8,765
Melco International Development 2,000 4,276
Shun Tak Holdings, Ltd. 8,000 9,445
------------
57,026
------------
HUNGARY - 0.9%
Gedeon Richter RT 43 8,864
------------
INDIA - 3.9%
ITC, Ltd. - GDR 144A# 2,700 11,032
Reliance Industries, Ltd. GDR 144A# 261 13,180
Satyam Computer Services, Ltd. - ADR 400 15,476
------------
39,688
------------
INDONESIA - 6.1%
Bakrie & Brothers Tbk PT* 613,000 9,967
Bank Niaga Tbk PT 81,000 6,498
Ciputra Surya Tbk PT 75,500 6,138
Kawasan Industri Jababeka Tbk PT 384,500 5,210
Perusahaan Gas Negara PT 10,000 13,062
PT Perusahaan Perkebunan London
Sumatra Indonesia Tbk 15,500 7,435
United Tractors Tbk PT 19,500 12,789
------------
61,099
------------
ISRAEL - 1.0%
Bank Hapoalim BM 2,098 9,912
------------
MALAYSIA - 2.7%
Bumiputra-Commerce Holdings Berhad 7,300 13,163
IOI Corp. Berhad 2,000 8,785
Maxis Communications Berhad 2,000 4,826
------------
26,774
------------
MEXICO - 5.6%
America Movil S.A. de CV - ADR 330 12,992
Consorcio ARA S.A. de CV 1,500 7,363
Corp. GEO S.A. de CV Cl. B* 2,500 10,513
Empresas ICA Sociedad Controladora S.A. de CV* 2,400 8,641
Fomento Economico Mexicano S.A. de CV - ADR 100 $ 9,694
Industrias Penoles SA de CV 900 6,994
------------
56,197
------------
PERU - 2.6%
Credicorp, Ltd. 400 16,792
Southern Copper Corp. 100 9,250
------------
26,042
------------
PHILIPPINES - 0.6%
Robinsons Land Corp. 26,100 6,304
POLAND - 1.7%
Globe Trade Centre S.A.* 862 8,247
Grupa Lotos S.A.* 629 9,288
------------
17,535
------------
REPUBLIC OF CHINA - 6.1%
AAC Acoustic Technology Holdings, Inc.* 14,000 16,170
Celestial Nutrifoods, Ltd. 18,000 17,474
China Hongxing Sports, Ltd. 10,000 10,212
China Shenhua Energy Co., Ltd. 4,500 7,242
Nine Dragons Paper Holdings, Ltd. 8,700 9,870
------------
60,968
------------
RUSSIAN FEDERATION - 7.3%
Evraz Group S.A. - GDR Reg S 569 13,400
Gazprom OAO - ADR 82 3,525
LUKOIL Oil Co. - ADR 230 17,365
OAO Gazprom - ADR Reg S 448 19,229
Surgutneftegaz OJSC - ADR 100 8,750
Unified Energy System - GDR Reg S 160 11,680
------------
73,949
------------
SINGAPORE - 2.7%
Inter-Roller Engineering, Ltd. 19,000 9,941
Midas Holdings, Ltd. 12,000 7,224
Sembawang Kimtrans, Ltd. 25,000 10,480
------------
27,645
------------
SOUTH AFRICA - 6.9%
Ellerine Holdings, Ltd. 1,054 8,853
Impala Platinum Holdings, Ltd. 44 7,278
Imperial Holdings, Ltd. 271 4,509
Kumba Resources, Ltd. 435 7,392
Naspers, Ltd. Cl. N 464 7,144
Pretoria Portland Cement Co., Ltd. 162 7,255
Sasol, Ltd. 426 14,039
Wilson Bayly Holmes-Ovcon, Ltd. 1,583 13,022
------------
69,492
------------
SOUTH KOREA - 14.8%
Cheil Industries, Inc. 150 6,506
Daishin Securities Co., Ltd. 530 11,507
Hynix Semiconductor, Inc.* 420 16,552
Hyundai Engineering & Construction Co., Ltd.* 600 32,266
Industrial Bank of Korea 1,040 17,800
Korea Investment Holdings Co., Ltd. 460 19,902
Korea Zinc Co., Ltd. 70 6,323
NHN Corp. 98 10,281
Shinhan Financial Group Co., Ltd. 410 18,475
STX Pan Ocean Co., Ltd. 18,000 9,588
------------
149,200
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
43
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
TAIWAN - 7.4%
Advanced Semiconductor Engineering, Inc.* 9,000 $ 8,362
ASE Test, Ltd.* 1,300 11,102
Asustek Computer, Inc. 4,000 9,390
Catcher Technology Co., Ltd. 1,000 8,581
Cathay Financial Holding Co., Ltd. 5,000 10,016
Far Eastern Textile, Ltd. 7,000 5,192
Siliconware Precision Industries Co. 10,000 11,919
United Microelectronics Corp. - ADR 3,300 10,164
-------
74,726
-------
THAILAND - 1.1%
Thai Beverage PCL 58,000 10,785
-------
UNITED STATES - 1.9%
NII Holdings, Inc. Cl. B* 300 18,648
- --------------------------------------------------------------------------------
Total Common Stock (Cost: $943,378) 945,600
- --------------------------------------------------------------------------------
EQUITY-LINKED SECURITIES - 2.0%
INDIA - 2.0%
Merrill Lynch Associated Cement Co., Ltd - 7/12/11 380 8,219
UBS AG Sterlite Industries, Ltd. - 6/18/07 1,222 11,618
-------
19,837
- --------------------------------------------------------------------------------
Total Equity-Linked Securities (Cost: $17,966) 19,837
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 1.7%
TIME DEPOSIT - 1.7%
Brown Brothers Harriman & Co. 4.630%,
10/01/06 (Cost: $16,782) $16,782 16,782
- --------------------------------------------------------------------------------
Total Investments - 97.6% (Cost: $978,126) 982,219
- --------------------------------------------------------------------------------
Other Assets in Excess of Liabilities - 2.4% 24,500
- --------------------------------------------------------------------------------
Net Assets - 100.0% $1,006,719
- --------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
# 144A SECURITY. CERTAIN CONDITION FOR PUBLIC SALE MAY EXIST. THE TOTAL
MARKET VALUE OF 144A SECURITIES OWNED AT SEPTEMBER 30, 2006 WAS $24,212 OR
2.41% OF NET ASSETS.
ADR - AMERICAN DEPOSITORY RECEIPT
GDR - GLOBAL DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENTAGE OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Industrial 21.0%
Financial 18.9
Consumer, Non-cyclical 10.7
Communications 10.5
Energy 9.5
Basic Materials 8.0
Technology 7.3
Consumer, Cyclical 4.7
Utilities 4.4
Diversified 0.9
Short Term Investments 1.7
- --------------------------------------------------------------------------------
Total Investments 97.6%
- --------------------------------------------------------------------------------
Other assets in excess of liabilities 2.4
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44
<Page>
INTERNATIONAL SYSTEMATIC FUND
MANAGEMENT TEAM: HORACIO A. VALEIRAS, CFA, Portfolio Manager and Chief
Investment Officer; STEVEN TAEL, PH.D., Portfolio Manager; KUNAL GHOSH,
Portfolio Manager
GOAL: The International Systematic Fund seeks to maximize long-term capital
appreciation through investments primarily in companies located in the developed
countries represented in the MSCI EAFE Index. The Investment Adviser identifies
investment opportunities using a quantitative model that integrates stock,
sector, country and currency selection decisions.
MARKET OVERVIEW: Equities in non-U.S. developed countries climbed higher during
the six months ended September 30, 2006. The U.S. dollar weakened against a
broad basket of currencies, boosting returns for U.S.-based investors.
Positive results from European stocks drove this period's gain. European markets
were supported by a favorable economic and earnings backdrop that trumped
concerns about inflationary pressures and rising interest rates from the
region's central banks. GDP grew at its fastest pace in six years in the
Eurozone countries, and growth in the United Kingdom was also robust. Corporate
earnings were at record highs, fueled by revenue growth and productivity gains.
A torrid pace of merger activity lent further support to stock prices.
Losses in Japan weighed on equity returns in the Asia Pacific region, as
Japanese stocks gave back most of their gains from earlier in 2006. Business
sentiment was positive, unemployment hit an eight-year low and the Bank of Japan
raised interest rates for the first time since 2000 -- strong evidence that
deflation was ending. Despite these positives, investors worried that slowing
U.S. economic growth would depress demand for Japanese exports. Outside of
Japan, equity performance in the Asia Pacific region was strong. Stocks in
Australia, the second-largest market, advanced as tax cuts, the best job market
in thirty years and near-record wage increases buoyed consumer spending.
PERFORMANCE: Between April 1 and September 30, 2006, the Fund's Class I shares
posted a 4.38% increase and the MSCI EAFE Index rose 4.97%.
PORTFOLIO SPECIFICS: Stock selection in France and the information technology
and financials sectors had a major, positive impact on results versus the index.
Top-performing holdings included France-based Vallourec, a steel tube producer;
China-based Foxconn International, an assembler of mobile phone handsets; and
Netherlands-based Fortis, a diversified financial services company. Vallourec
advanced on continued strong global demand for value-added steel products.
Foxconn International benefited from share gains with existing customers and
vertical integration that has helped preserve margins. Fortis reported
better-than-expected earnings, driven by higher net interest income and
increased trading activity.
Stock selection in the consumer discretionary sector weighed on relative
performance, where select automotive components manufacturers were hurt by
increasing global competition. Stock selection in the United Kingdom and the
materials sector was also unfavorable.
The Fund continues to be well diversified across countries and sectors. Based on
the model's bottom-up stock selection recommendations, the Fund's largest
overweights versus the MSCI EAFE Index were Japan (+3.7%) and the information
technology sector (+5.7%). The largest underweights versus the MSCI EAFE Index
were the United Kingdom (-5.3%) and the energy sector (-4.6%).
MARKET OUTLOOK: The Fund's investment process evaluates opportunities on a
relative basis and is required to remain fully invested. The Fund's investment
process neither utilizes, nor results in, a forecast or outlook on the overall
market. Rather, the Fund expects to outperform the MSCI EAFE Index in both up
and down markets. We are confident that the Fund's proprietary stock-selection
model, in conjunction with its risk-controlled approach to portfolio
construction, will continue to add value above the benchmark over time.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN INTERNATIONAL
SYSTEMATIC FUND CLASS I SHARES WITH THE MSCI EAFE INDEX.
[CHART]
<Table>
<Caption>
INTERNATIONAL SYSTEMATIC
FUND CLASS I SHARES MSCI INDEX
- --------------------------------------------------
7/6/2005 $250,000 $250,000
7/31/2005 $262,750 $258,350
8/31/2005 $272,498 $264,964
9/30/2005 $290,755 $276,808
10/31/2005 $280,492 $268,753
11/30/2005 $289,748 $275,391
12/31/2005 $305,713 $288,224
1/31/2006 $332,341 $305,950
2/28/2006 $333,371 $305,338
3/31/2006 $347,306 $315,536
4/30/2006 $369,360 $330,840
5/31/2006 $355,176 $318,400
6/30/2006 $351,873 $318,527
7/31/2006 $355,181 $321,713
8/31/2006 $363,812 $330,656
9/30/2006 $362,538 $331,218
</Table>
Annualized Total Returns As of 9/30/2006
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
International Systematic
Fund Class I 24.68% 35.09%
- --------------------------------------------------------------------------------
MSCI EAFE Index 19.65% 25.55%
- --------------------------------------------------------------------------------
THE GRAPH ABOVE SHOWS THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I SHARES WITH THE MSCI EAFE INDEX FOR THE PERIODS INDICATED.
AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE CHANGES IN PRINCIPAL VALUE,
REINVESTED DIVIDENDS, AND CAPITAL GAIN DISTRIBUTIONS. THE TOTAL RETURNS SHOWN
ABOVE DO NOT SHOW THE EFFECTS OF INCOME TAXES ON AN INDIVIDUALS' 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 COMPRISED 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
REINVESTMENT 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.
45
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2006
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 98.9%
AUSTRALIA - 2.7%
Australia & New Zealand Banking Group, Ltd. 200 $ 4,009
Broken Hill Proprietary, Ltd. 1,400 26,777
Lihir Gold, Ltd.* 14,200 30,625
Multiplex Group 10,000 26,268
Oxiana, Ltd. 19,100 41,335
----------
129,014
----------
BELGIUM - 4.2%
Fortis 700 28,375
Fortis 2,800 113,536
Interbrew 400 22,001
KBC Groep NV 300 31,561
----------
195,473
----------
DENMARK - 0.6%
Dampskibsselskabet Torm A/S 300 15,492
Danske Bank A/S 300 11,785
----------
27,277
----------
FINLAND - 4.7%
Kesko OYJ Cl. B 900 37,805
Nokia OYJ 1,200 23,805
Outokumpu OYJ 4,000 101,999
Rautaruukki OYJ 2,000 57,384
----------
220,993
----------
FRANCE - 9.5%
BNP Paribas 880 94,586
Capgemini S.A 200 10,598
Credit Agricole S.A 1,200 52,656
Groupe Steria SCA 100 5,320
Renault S.A 700 80,204
Sanofi - Aventis S.A 800 71,141
Societe Generale 400 63,591
Total S.A 252 16,520
Vallourec S.A 200 46,591
Vivendi 100 3,601
----------
444,808
----------
GERMANY - 2.9%
Continental AG 100 11,583
DaimlerChrysler AG 100 4,992
Deutsche Bank AG 200 24,109
Hannover Rueckversicherung AG 700 29,413
Thyssenkrupp AG 200 6,732
Volkswagen AG 700 59,570
----------
136,399
----------
GREECE - 0.3%
Alpha Bank A.E 200 5,330
Aluminium of Greece S.A.I.C 400 8,188
----------
13,518
----------
HONG KONG - 3.2%
CLP Holdings, Ltd. 5,000 30,319
Esprit Holdings, Ltd. 2,000 18,133
Foxconn International Holdings, Ltd.* 25,000 77,320
Hong Kong Aircraft Engineering Co., Ltd. 1,000 14,206
Hopewell Holdings, Ltd. 1,000 2,836
Yue Yuen Industrial Holdings 3,000 9,240
----------
152,054
----------
IRELAND - 0.1%
C&C Group PLC 500 6,783
----------
ITALY - 4.7%
Banca Popolare di Verona e Novara Scrl 800 $ 22,082
Banche Popolari Unite Scpa 4,600 123,650
Capitalia SpA 600 4,963
ENI SpA 900 26,644
SanPaolo IMI SpA 200 4,218
Telecom Italia SpA 13,900 39,442
----------
220,999
----------
JAPAN - 27.3%
Astellas Pharma, Inc. 700 28,162
Brother Industries, Ltd. 7,000 88,045
Canon, Inc. 1,900 99,132
Denso Corp. 300 10,545
Fuji Heavy Industries, Ltd. 4,000 22,767
Honda Motor Co., Ltd. 2,500 84,064
Ibiden Co., Ltd. 500 26,426
Isuzu Motors, Ltd. 3,000 9,834
Itochu Corp. 10,000 77,500
Keiyo Co., Ltd. 1,000 6,793
Kobe Steel, Ltd. 6,000 18,854
Konica Minolta Holdings, Inc. 2,000 26,799
Marubeni Corp. 10,000 49,803
Matsushita Electric Industries Co., Ltd. 2,000 42,350
Mazda Motor Corp. 3,000 18,193
Mitsubishi Corp. 800 15,043
Mitsui & Co., Ltd. 5,000 63,609
Mitsui Trust Holdings, Inc. 1,000 11,384
Mizuho Financial Group, Inc. 2 15,517
Nintendo Co., Ltd. 200 41,232
Nippon Electric Glass Co., Ltd. 1,000 22,064
Nippon Suisan Kaisha, Ltd. 2,000 11,011
Nippon Yusen Kabushiki Kaisha 4,000 24,359
Nipro Corp. 1,000 18,253
Nissan Motor Co., Ltd. 500 5,603
Nitto Boseki Co., Ltd. 3,000 9,910
Parco Co., Ltd. 1,000 12,476
Resona Holdings, Inc. 8 23,987
Ricoh Company, Ltd. 1,000 19,904
Seiko Corp. 1,000 7,352
Shinko Electric Industries Co., Ltd. 100 2,787
Star Micronics Co., Ltd. 1,000 19,015
Sumitomo Metal Industries, Ltd. 17,000 65,227
Sumitomo Mitsui Financial Group, Inc. 1 10,503
Suzuken Company, Ltd. 100 3,752
Suzuki Motor Co. 1,100 27,951
TDK Corp. 400 32,050
Tokyo Gas Co., Ltd. 7,000 35,099
Toshiba Corp. 2,000 12,976
Toyota Motor Corp. 1,600 87,003
Yamaha Corp. 3,700 77,877
----------
1,285,211
----------
NETHERLANDS - 3.0%
Heineken Holdings NV 1,500 68,538
ING Groep NV 400 17,577
USG People NV 800 55,889
----------
142,004
----------
NORWAY - 3.1%
DNB NOR ASA 3,200 39,223
Ementor ASA 2,000 9,296
Orkla ASA Cl. A 2,000 95,265
----------
143,784
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
46
<Page>
NUMBER
OF
SHARES VALUE
- --------------------------------------------------------------------------------
REPUBLIC OF CHINA - 0.8%
China Travel International Investment Hong Kong, Ltd. 28,000 $ 6,180
Citic Pacific, Ltd. 4,000 12,320
TPV Technology, Ltd. 20,000 18,993
----------
37,493
----------
SINGAPORE - 0.4%
SembCorp Marine, Ltd. 10,000 21,054
----------
SPAIN - 2.6%
Actividades de Construccion y Servicios S.A. 100 4,738
Banco Bilbao Vizcaya Argentaria S.A. 1,200 27,742
Banco Santander Central Hispano S.A. 500 7,898
Gestevision Telecinco S.A. 300 7,638
Repsol YPF S.A. 1,600 47,569
Telefonica S.A. 1,600 27,706
----------
123,291
----------
SWEDEN - 3.7%
Nordea Bank AB 2,500 32,749
Sandvik AB 6,800 77,942
Skandinaviska Enskilda Banken AB Cl. A 600 16,129
Svenska Handelsbanken AB Cl. A 1,800 48,632
----------
175,452
----------
SWITZERLAND - 6.5%
Nestle S.A. 92 31,989
Novartis AG 500 29,108
Roche Holding AG 789 136,036
Swiss Reinsurance 600 45,791
UBS AG 700 41,756
Zurich Financial Services AG 86 21,072
----------
305,752
----------
UNITED KINGDOM - 18.6%
3i Group PLC 700 12,232
AstraZeneca PLC 440 27,435
Aviva PLC 600 8,776
Barclays PLC 4,200 52,878
Barrat Developments PLC 1,000 19,912
BHP Billiton PLC 3,700 63,723
BP PLC 900 9,784
British Airways PLC* 1,200 9,571
British American Tobacco PLC 1,800 48,552
British Energy Group PLC* 1,000 10,843
BT Group PLC 3,500 17,521
George Wimpey PLC 5,600 54,185
GlaxoSmithKline PLC 5,100 135,467
Greene King PLC 300 5,060
HBOS PLC 1,480 29,221
HSBC Holdings PLC 5,300 96,477
Lonmin PLC 500 23,900
Marks & Spencer Group PLC 2,700 32,404
Morrison Supermarkets 1,000 4,544
Old Mutual PLC 3,500 10,951
Rio Tinto PLC 1,100 51,923
Royal Bank of Scotland Group PLC 1,200 41,222
Royal Dutch Shell PLC Cl. B 500 16,933
Scottish & Newcastle PLC 600 6,388
Taylor Woodrow PLC 6,900 45,723
Vodafone Group PLC 2,013 4,596
Wilson Bowden PLC 1,000 33,193
----------
873,414
- --------------------------------------------------------------------------------
Total Common Stock (Cost: $4,075,919) 4,654,773
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 0.4%
TIME DEPOSIT - 0.4%
Brown Brothers Harriman & Co.
4.630%, 10/01/06 (Cost: $21,210) $21,210 $ 21,210
- --------------------------------------------------------------------------------
Total Investments - 99.3% (Cost: $4,097,129) 4,675,983
- --------------------------------------------------------------------------------
Other Assets In Excess Of Liabilities - 0.7% 30,756
- --------------------------------------------------------------------------------
Net Assets - 100.0% $4,706,739
- --------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENTAGE OF
SECTOR NET ASSETS
- -------------------------------------------------------------------------------
Financial 26.1%
Consumer, Cyclical 22.3
Consumer, Non-cyclical 18.0
Basic Materials 10.6
Industrial 9.1
Communications 4.5
Technology 3.9
Energy 2.5
Utilities 1.6
Diversified 0.3
Short Term Investments 0.4
- -------------------------------------------------------------------------------
Total Investments 99.3%
- -------------------------------------------------------------------------------
Other assets in excess of liabilities 0.7
- -------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47
<Page>
INTERNATIONAL ALL CAP GROWTH FUND
MANAGEMENT TEAM: VINCENT WILLYARD, CFA, Portfolio Manager; JOSEPH DEVINE,
Portfolio Manager; STEPHEN DERKASH, Analyst; BARRY KENDALL, Analyst
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The International All Cap Growth Fund seeks to maximize long-term capital
appreciation. In pursuing this goal, the Fund invests in a diversified portfolio
of equity securities of companies primarily located in developed non-U.S.
markets.
MARKET OVERVIEW: During the six months ended September 30, 2006, growth stocks
in non-U.S. developed countries outside the United States generated modest
increases in U.S. dollar terms. While returns were negative in local currencies,
the U.S. dollar fell against a broad basket of currencies, resulting in gains
for U.S.-based investors.
European growth stocks advanced in local currency terms, despite concerns about
persistent price pressures and rising interest rates. The European Central Bank
increased short-term interest rates twice during the period in efforts to keep
the Eurozone economies from overheating. In a similar vein, the Bank of England
raised its official interest rate in August, acknowledging above-trend economic
growth. A number of positive factors lent support to equity prices, including
strong corporate profits, record takeover activity and falling commodity prices.
In the Asia Pacific region, growth stocks declined in most countries (in local
currencies). Japan was the worst-performing market on fears that moderating U.S.
economic growth and the Bank of Japan's first interest rate increase in many
years would slow the country's economy. In addition, the yen significantly
underperformed its European currency counterparts, which was potentially caused
by declining expectations for higher interest rates and the yen carry trade.
PERFORMANCE: The Fund's Class I shares posted a 0.69% decline during the six
months ended September 30, 2006. The MSCI EAFE Growth Index gained 2.78%.
PORTFOLIO SPECIFICS: Much of this period's underperformance was due to country
and currency weightings relative to the index. These exposures are a function of
our stock selection process that searches for the best growth ideas outside the
United States. The most unfavorable country allocations were underweights in the
United Kingdom and Spain. In terms of currencies, the Fund was underweight the
British pound, which strengthened versus the dollar, and overweight emerging
market currencies, which declined. Stock selection was modestly negative
overall, led by weakness in Norway and China.
On the plus side, stock selection in a number of countries added value,
including Ireland, the United Kingdom and South Korea. Some of the
top-performing names in the Fund were Ireland-based Kingspan Group, a building
products manufacturer with increasing market penetration levels; U.K.-based
AstraZeneca, a pharmaceutical company that investors rewarded for margin
expansion and its pipeline of new drugs; and South Korea-based Hynix
Semiconductor, a semiconductor supplier that benefited from a favorable
environment for NAND Flash and dynamic random access memory (DRAM) chips.
MARKET OUTLOOK: We are cautiously optimistic in our near-term outlook for
international growth stocks given uncertainties surrounding the future strength
of the global economy. Declining energy prices and the pause in U.S. monetary
tightening bode well for economic growth. However, the European Central Bank has
indicated the possibility of further rate hikes, and Chinese policymakers are
also taking steps to control growth in their country.
In this environment, we believe our emphasis on intense fundamental research and
individual stock selection will benefit the Fund.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN INTERNATIONAL ALL CAP
GROWTH FUND CLASS I SHARES WITH THE MSCI EAFE GROWTH INDEX.
[CHART]
<Table>
<Caption>
INTERNATIONAL ALL CAP FUND
CLASS I SHARES MSCI EAFE GROWTH INDEX
-------------------------- ----------------------
6/30/1999 $250,000 $250,000
7/31/1999 $258,000 $254,800
8/31/1999 $263,753 $256,354
9/30/1999 $269,002 $260,456
10/31/1999 $292,997 $274,286
11/30/1999 $382,244 $294,282
12/31/1999 $469,510 $326,976
1/31/2000 $484,769 $308,437
2/29/2000 $630,006 $325,555
3/31/2000 $535,253 $332,001
4/30/2000 $451,486 $310,222
5/31/2000 $419,250 $291,329
6/30/2000 $446,753 $301,730
7/31/2000 $427,274 $282,811
8/31/2000 $445,006 $285,922
9/30/2000 $420,264 $267,051
10/31/2000 $385,004 $254,607
11/30/2000 $343,500 $242,793
12/31/2000 $349,855 $247,260
1/31/2001 $336,841 $246,568
2/28/2001 $307,098 $221,566
3/31/2001 $275,129 $206,344
4/30/2001 $286,657 $220,603
5/31/2001 $282,930 $211,801
6/30/2001 $271,783 $201,550
7/31/2001 $256,155 $196,672
8/31/2001 $247,241 $187,724
9/30/2001 $215,644 $170,002
10/31/2001 $225,304 $176,769
11/30/2001 $242,788 $185,854
12/31/2001 $245,022 $186,932
1/31/2002 $239,827 $176,857
2/28/2002 $236,110 $179,244
3/31/2002 $250,985 $186,145
4/30/2002 $246,517 $187,225
5/31/2002 $249,500 $187,768
6/30/2002 $242,439 $182,961
7/31/2002 $213,444 $163,457
8/31/2002 $208,620 $162,231
9/30/2002 $190,407 $148,150
10/31/2002 $191,892 $156,535
11/30/2002 $198,206 $161,153
12/31/2002 $187,423 $157,446
1/31/2003 $184,068 $149,668
2/28/2003 $181,086 $146,451
3/31/2003 $179,964 $145,015
4/30/2003 $200,408 $157,733
5/31/2003 $215,659 $166,030
6/30/2003 $219,756 $168,969
7/31/2003 $230,920 $171,216
8/31/2003 $244,683 $174,349
9/30/2003 $250,628 $180,277
10/31/2003 $271,456 $190,661
11/30/2003 $268,470 $195,142
12/31/2003 $285,947 $208,567
1/31/2004 $295,984 $212,655
2/29/2004 $298,588 $216,717
3/31/2004 $304,530 $216,955
4/30/2004 $294,481 $211,727
5/31/2004 $289,651 $211,473
6/30/2004 $293,735 $214,222
7/31/2004 $281,105 $205,546
8/30/2004 $281,105 $205,792
9/30/2004 $291,899 $210,896
10/31/2004 $298,584 $217,961
11/30/2004 $324,978 $233,044
12/31/2004 $336,450 $242,925
1/31/2005 $331,975 $237,338
2/28/2005 $352,126 $246,902
3/31/2005 $339,062 $240,952
4/30/2005 $326,381 $236,495
5/31/2005 $330,494 $237,370
6/30/2005 $338,327 $239,340
7/31/2005 $353,281 $246,640
8/31/2005 $368,966 $253,743
9/30/2005 $389,887 $264,476
10/31/2005 $373,083 $257,256
11/30/2005 $393,154 $262,144
12/31/2005 $428,656 $276,037
1/31/2006 $462,649 $293,069
2/28/2006 $460,428 $289,787
3/31/2006 $485,844 $301,146
4/30/2006 $511,642 $314,969
5/31/2006 $482,478 $301,929
6/30/2006 $474,614 $302,382
7/31/2006 $470,864 $303,803
8/31/2006 $485,461 $311,155
9/30/2006 $482,451 $309,475
</Table>
Annualized Total Returns As of 9/30/2006
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
International All Cap Growth Fund Class I 23.75% 17.46% 9.48%
- --------------------------------------------------------------------------------
MSCI EAFE Growth Index 17.02% 12.74% 2.99%
- --------------------------------------------------------------------------------
THE GRAPH ABOVE SHOWS THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I SHARES COMPARED WITH THE MSCI EAFE GROWTH INDEX FOR THE PERIODS
INDICATED. AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE CHANGES IN PRINCIPAL
VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN DISTRIBUTIONS. 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.
ON NOVEMBER 18, 2005, THE FUND BECAME THE SUCCESSOR ENTITY TO THE
NICHOLAS-APPLEGATE INTERNATIONAL ALL CAP GROWTH FUND, A SERIES OF THE
48
<Page>
PROFESSIONALLY MANAGED PORTFOLIOS ("ACQUIRED FUND"). THE ACQUIRED FUND
TRANSFERRED ALL OF ITS ASSETS AND LIABILITIES IN EXCHANGE FOR SHARES OF THE
FUND, AND THE INVESTMENT OBJECTIVES, POLICIES AND LIMITATIONS OF THE FUND ARE
SUBSTANTIALLY SIMILAR TO THOSE OF THE ACQUIRED FUND. THE PERFORMANCE SHOWN ABOVE
INCLUDES THE HISTORICAL PERFORMANCE OF THE ACQUIRED FUND FROM JUNE 30, 1999 TO
NOVEMBER 18, 2005.
THE MSCI EAFE GROWTH INDEX IS AN UNMANAGED INDEX THAT IS A GENERALLY ACCEPTED
BENCHMARK FOR MAJOR OVERSEAS MARKETS. IT CONSISTS OF THE TOP 50% OF THE MSCI
EAFE, THOSE COMPANIES WITH THE HIGHEST PRICE/BOOK VALUE RATIO. THE MSCI EAFE
INDEX CONSISTS OF APPROXIMATELY 900 COMPANIES WITH AVERAGE MARKET CAPITALIZATION
OF U.S. $8.7 BILLION. ITS WEIGHTINGS REPRESENT THE RELATIVE CAPITALIZATION 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 INTO 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.
49
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2006
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 95.4%
AUSTRALIA - 2.4%
AMP, Ltd. 28,389 $ 189,396
CSL, Ltd. 2,679 108,017
Rio Tinto, Ltd. 3,852 201,506
----------
498,919
----------
BELGIUM - 1.0%
InBev NV 3,760 206,809
----------
CANADA - 1.0%
Rogers Communications, Inc. Cl. B 3,900 213,938
----------
DENMARK - 1.0%
Carlsberg A/S Cl. B 2,500 210,000
----------
FRANCE - 9.9%
Alstom RGPT* 4,419 399,401
BNP Paribas 2,069 222,384
Compagnie Generale de Geophysique S.A.* 1,217 187,000
Neopost S.A. 1,735 206,814
Total S.A. 5,460 360,032
Vallourec S.A. 702 163,535
Veolia Environnement 7,894 476,087
----------
2,015,253
----------
GERMANY - 8.6%
Deutsche Postbank AG 2,784 211,069
Hugo Boss AG 817 36,140
Hypo Real Estate Holding AG* 7,372 459,453
IVG Immobilien AG 8,089 292,442
MAN AG 2,659 224,800
Puma AG Rudolf Dassler Sport 560 190,823
Siemens AG 1,250 108,940
Stada Arzneimittel AG 4,512 230,281
----------
1,753,948
----------
GREECE - 1.0%
Piraeus Bank S.A. 8,087 209,392
----------
HONG KONG - 3.1%
Foxconn International Holdings, Ltd.* 48,000 148,455
Hutchison Telecommunications International, Ltd.* 118,000 206,857
Melco International Development 135,000 288,633
----------
643,945
----------
INDIA - 1.1%
Infosys Technologies, Ltd. - ADR 4,500 214,785
----------
INDONESIA - 1.2%
Bakrie & Brothers Tbk PT* 8,237,000 133,935
Perusahaan Gas Negara PT 78,000 101,886
----------
235,821
----------
IRELAND - 3.3%
Anglo Irish Bank Corp. PLC 6,820 111,878
FBD Holdings PLC 2,009 95,586
Kingspan Group PLC 23,073 473,489
----------
680,953
----------
ITALY - 2.0%
UniCredito Italiano SpA 50,042 414,892
----------
JAPAN - 21.8%
Chugai Pharmaceutical Co., Ltd.## 10,400 $ 223,741
Fanuc, Ltd. 1,100 85,902
Haseko Corp.* 83,400 287,501
Honda Motor Co., Ltd. 6,000 201,753
Japan Tobacco, Inc. 109 423,758
Mitsubishi UFJ Financial Group, Inc. 31 399,102
Nippon Electric Glass Co., Ltd. 9,000 198,577
Nomura Holdings, Inc. 11,200 197,315
ORIX Corp. 1,030 284,839
Sumco Corp. 6,400 474,315
Sumitomo Mitsui Financial Group, Inc. 19 199,551
Sumitomo Realty & Development Co., Ltd. 14,000 411,468
Taiheiyo Cement Corp. 41,900 155,087
Tokuyama Corp.## 15,100 202,075
Tokyu Land Corp. 22,000 208,699
Toyota Motor Corp. 3,800 206,632
Yamada Denki Co., Ltd. 2,900 290,823
----------
4,451,138
----------
MEXICO - 1.1%
America Movil S.A. de CV - ADR 5,700 224,409
----------
NETHERLANDS - 3.1%
ASML Holding NV* 8,600 200,208
Koninklijke Royal Philips Electronics NV 6,350 222,313
Royal Numico NV 2,212 99,473
SBM Offshore NV 3,757 101,989
----------
623,983
----------
NORWAY - 1.1%
Telenor ASA 16,800 219,321
----------
REPUBLIC OF CHINA - 1.2%
AAC Acoustic Technology Holdings, Inc.* 204,000 235,619
----------
RUSSIAN FEDERATION - 0.9%
OAO Gazprom - ADR Reg S 4,479 192,249
----------
SINGAPORE - 1.1%
SembCorp Marine, Ltd. 111,000 233,699
----------
SOUTH KOREA - 1.0%
Hynix Semiconductor, Inc.* 5,240 206,500
----------
SPAIN - 1.0%
Red Electrica de Espana 5,450 211,325
----------
SWEDEN - 2.5%
SSAB Svenskt Stal AB Cl. A 11,400 212,334
Swedish Match AB 12,000 195,264
Telefonaktiebolaget LM Ericsson - ADR 3,180 109,551
----------
517,149
----------
SWITZERLAND - 8.9%
ABB, Ltd. 15,766 206,827
Nestle S.A. 595 206,882
Phonak Holding AG 2,253 142,121
Roche Holding AG 3,522 607,246
Syngenta AG 1,342 201,843
UBS AG 7,466 445,358
----------
1,810,277
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
UNITED KINGDOM - 16.1%
ARM Holdings PLC 96,383 $ 211,545
AstraZeneca PLC - ADR 4,790 299,375
Barclays PLC 33,058 416,200
BP PLC - ADR 2,800 183,624
British Land Co. PLC 8,095 206,251
BT Group PLC 87,590 438,485
Carphone Warehouse PLC 40,172 230,558
Diageo PLC 11,001 193,883
HSBC Holdings PLC 16,222 295,292
Intercontinental Hotels Group PLC 11,209 195,874
International Power PLC 72,704 425,077
Reckitt Benckiser PLC 4,968 205,459
-----------
3,301,623
-----------
- --------------------------------------------------------------------------------
Total Common Stock (Cost: $16,620,482) 19,525,947
- --------------------------------------------------------------------------------
PREFERRED STOCK - 0.7%
GERMANY - 0.7%
Hugo Boss AG (Cost: $109,757) 3,235 139,330
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 5.8%
MONEY MARKET FUNDS - 2.1%
Boston Global Investment Trust - Enhanced
Portfolio, 5.320%** $422,450 422,450
-----------
TIME DEPOSIT - 3.7%
Bank of America London 4.630%, 10/01/06 756,942 756,942
- -------------------------------------------------------------------------------
Total Short Term Investments (Cost: $1,179,392) 1,179,392
- -------------------------------------------------------------------------------
Total Investments - 101.9% (Cost: $17,909,631) 20,844,669
- -------------------------------------------------------------------------------
Liabilities In Excess Of Other Assets - (1.9%) (386,868)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $20,457,801
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/06.
ADR - AMERICAN DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENTAGE OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Financial 25.7%
Consumer, Non-cyclical 16.4
Industrial 13.9
Consumer, Cyclical 8.7
Communications 7.6
Technology 7.4
Utilities 6.9
Energy 4.1
Basic Materials 4.0
Diversified 1.4
Short Term Investments 5.8
- --------------------------------------------------------------------------------
Total Investments 101.9%
- --------------------------------------------------------------------------------
Liabilities in excess of other assets (1.9)
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
51
<Page>
U.S. HIGH YIELD BOND FUND
MANAGEMENT TEAM: DOUGLAS G. FORSYTH, CFA, Portfolio Manager; JUSTIN KASS, CFA,
Portfolio Manager; WILLIAM L. STICKNEY, Portfolio Manager; MICHAEL E. YEE,
Portfolio Manager; ELIZABETH LEMESEVSKI, Analyst; JOANNA WILLARS, 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 a solid return during the
six months ended September 30, 2006, adding to gains from earlier in the year.
The Merrill Lynch High Yield Master II Index rose 4.26%, exceeding the 4.14%
increase in the S&P 500 Index, as well as the 3.80% advance in the ten-year
Treasury. The solid performance of high-yield securities is even more evident
when compared to the 4.61% decline in small-cap stocks, as measured by the
Russell 2000 Index.
This period's strong results were driven by continued investor confidence in the
core fundamentals of issuers across the market. Refinancing over the past three
years has generally created lower interest expense obligations and extended bond
maturities. Corporate balance sheets are healthy, and the default rate is low
and not expected to change in the near future. Only six defaults occurred during
the first nine months of 2006, the lowest level in twenty-five years.
Auto manufacturers posted the strongest gains, led by Ford and GM, two credits
that together represent 11% of the Merrill Lynch Master II Index. The weakest
industries were health care, building materials and real estate.
PERFORMANCE: During the six months ended September 30, 2006, the Fund's Class I
shares gained 3.44% and the Merrill Lynch High Yield Master II Index rose 4.26%.
PORTFOLIO SPECIFICS: Numerous issues in the Fund made significant, positive
contributions to return. Among them were Ford and GM bonds, as well as the
securities of an operator of resort properties that entered into discussions to
be acquired. Portfolio performance reacted to similar forces that moved the
market. Treasury rates fell, as many investors concluded that the Federal
Reserve's work was mostly behind it, and quarterly earnings held few negative
surprises.
The Fund's modest underperformance of its benchmark was mainly due to our
underweight in Ford and GM. In contrast, the Fund's relative results benefited
from our early July sale of bonds issued by a health care facilities company
that we thought might enter into a leveraged buyout. When the deal was announced
in late July, the prices of the bonds declined. The Fund continued to be
rewarded for our credit research, as the ratio of upgrades to downgrades in the
portfolio was positive.
During the period, we found ample opportunity to invest in new ideas in both the
primary and secondary markets. We purchased more than a dozen issues across a
broad range of industries, including media, energy and chemicals.
MARKET OUTLOOK: We believe high-yield securities remain a compelling area of
investment relative to other fixed-income options. While there are risks facing
the market, such as the possibility that companies' guidance on future earnings
will disappoint, the economy is healthy, balance sheets are solid and defaults
are low. High-yield spreads versus Treasuries should not widen materially
against this positive fundamental backdrop, which bodes well for the market in
the months ahead.
Recognizing that the long-term driver of total return in a high-yield portfolio
is company fundamentals, we remain focused on intensive credit analysis, which
is the cornerstone of our approach.
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.
[CHART]
<Table>
<Caption>
U.S. HIGH YIELD BOND MERRILL LYNCH HIGH YIELD
FUND CLASS I SHARES MASTER II INDEX
- ------------------------------------------------------------
7/31/1996 $250,000 $250,000
8/31/1996 $256,780 $253,100
9/30/1996 $265,702 $258,997
10/31/1996 $268,927 $261,251
11/30/1996 $273,926 $266,502
12/31/1996 $278,314 $268,714
1/31/1997 $283,685 $270,729
2/28/1997 $289,776 $274,898
3/31/1997 $284,740 $271,132
4/30/1997 $285,969 $274,603
5/31/1997 $298,355 $280,397
6/30/1997 $305,705 $284,743
7/31/1997 $315,198 $292,289
8/31/1997 $318,279 $291,938
9/30/1997 $331,438 $297,193
10/31/1997 $332,537 $298,708
11/30/1997 $336,209 $301,516
12/31/1997 $337,882 $304,411
1/31/1998 $349,162 $309,251
2/28/1998 $353,474 $310,519
3/31/1998 $357,326 $313,469
4/30/1998 $360,503 $314,817
5/31/1998 $361,564 $316,706
6/30/1998 $363,444 $318,352
7/31/1998 $366,798 $320,390
8/31/1998 $346,504 $304,210
9/30/1998 $338,199 $305,001
10/31/1998 $329,809 $298,474
11/30/1998 $349,778 $313,965
12/31/1998 $353,159 $313,400
1/31/1999 $361,234 $317,631
2/28/1999 $360,705 $315,471
3/31/1999 $363,377 $319,130
4/30/1999 $374,002 $324,970
5/31/1999 $369,987 $321,981
6/30/1999 $372,230 $321,176
7/31/1999 $374,483 $321,593
8/31/1999 $371,599 $318,184
9/30/1999 $371,449 $316,912
10/31/1999 $372,224 $315,200
11/30/1999 $380,164 $319,298
12/31/1999 $386,897 $321,214
1/31/2000 $387,057 $319,993
2/29/2000 $390,727 $320,665
3/31/2000 $386,070 $315,951
4/30/2000 $389,146 $315,951
5/31/2000 $385,409 $311,970
6/30/2000 $395,091 $317,991
7/31/2000 $397,567 $319,708
8/31/2000 $397,746 $322,842
9/30/2000 $391,185 $320,065
10/31/2000 $380,829 $309,887
11/30/2000 $363,795 $297,987
12/31/2000 $373,720 $304,782
1/31/2001 $395,712 $324,074
2/28/2001 $400,493 $329,000
3/31/2001 $389,078 $322,420
4/30/2001 $385,667 $318,035
5/31/2001 $388,021 $323,633
6/30/2001 $378,357 $315,121
7/31/2001 $383,154 $320,226
8/31/2001 $385,571 $322,756
9/30/2001 $362,546 $300,453
10/31/2001 $375,106 $310,068
11/30/2001 $387,099 $320,982
12/31/2001 $384,991 $318,447
1/31/2002 $385,179 $320,198
2/28/2002 $383,435 $315,971
3/31/2002 $390,696 $323,934
4/30/2002 $395,842 $329,117
5/31/2002 $395,842 $326,583
6/30/2002 $384,206 $301,305
7/31/2002 $380,163 $289,614
8/31/2002 $385,460 $296,855
9/30/2002 $380,946 $292,224
10/31/2002 $381,201 $289,769
11/30/2002 $400,056 $307,880
12/31/2002 $400,266 $312,375
1/31/2003 $402,378 $321,746
2/28/2003 $405,796 $326,090
3/31/2003 $416,531 $334,698
4/30/2003 $435,321 $354,144
5/31/2003 $435,110 $358,217
6/30/2003 $448,232 $368,247
7/31/2003 $446,464 $363,239
8/31/2003 $450,461 $367,888
9/30/2003 $460,276 $377,858
10/31/2003 $468,138 $385,680
11/30/2003 $471,537 $391,002
12/31/2003 $482,499 $400,269
1/31/2004 $487,775 $406,753
2/29/2004 $484,768 $406,306
3/31/2004 $485,937 $409,028
4/30/2004 $485,699 $406,329
5/31/2004 $478,128 $399,949
6/30/2004 $483,852 $405,748
7/31/2004 $488,168 $411,226
8/30/2004 $495,902 $418,710
9/30/2004 $502,722 $424,530
10/31/2004 $511,067 $432,724
11/30/2004 $515,206 $437,224
12/31/2004 $521,647 $443,826
1/31/2005 $521,542 $443,383
2/28/2005 $526,445 $449,723
3/31/2005 $512,125 $437,445
4/30/2005 $507,926 $432,765
5/31/2005 $516,916 $440,511
6/30/2005 $524,825 $448,881
7/31/2005 $532,750 $455,928
8/31/2005 $533,922 $457,570
9/30/2005 $531,946 $452,994
10/31/2005 $529,446 $449,687
11/30/2005 $533,841 $451,846
12/31/2005 $539,339 $455,957
1/31/2006 $544,355 $463,162
2/28/2006 $548,819 $466,080
3/31/2006 $550,026 $469,016
4/30/2006 $553,491 $471,830
5/31/2006 $551,388 $471,736
6/30/2006 $550,451 $469,943
7/31/2006 $555,075 $474,971
8/31/2006 $561,402 $482,666
9/30/2006 $568,925 $488,892
</Table>
Annualized Total Returns As of 9/30/2006
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. High Yield Bond Fund Class I 6.96% 9.43% 7.91%
- --------------------------------------------------------------------------------
Merrill Lynch High Yield
Master II Index 7.93% 10.23% 6.47%
- --------------------------------------------------------------------------------
52
<Page>
[CHART]
<Table>
<Caption>
U.S. HIGH YIELD BOND MERRILL LYNCH HIGH YIELD
FUND CLASS II SHARES MASTER II INDEX
- ------------------------------------------------------------
7/31/1996 $250,000.00 $250,000.00
8/31/1996 $256,780.00 $253,100.00
9/30/1996 $265,701.85 $258,997.23
10/31/1996 $268,926.78 $261,250.51
11/30/1996 $273,926.48 $266,501.64
12/31/1996 $278,313.50 $268,713.60
1/31/1997 $283,685.20 $270,728.96
2/28/1997 $289,776.34 $274,898.18
3/31/1997 $284,739.55 $271,132.08
4/30/1997 $285,969.10 $274,602.57
5/31/1997 $298,355.30 $280,396.68
6/30/1997 $305,704.82 $284,742.83
7/31/1997 $315,197.53 $292,288.52
8/31/1997 $318,278.57 $291,937.77
9/30/1997 $331,437.95 $297,192.65
10/31/1997 $332,536.76 $298,708.33
11/30/1997 $336,208.54 $301,516.19
12/31/1997 $337,881.57 $304,410.75
1/31/1998 $349,161.58 $309,250.88
2/28/1998 $353,473.83 $310,518.81
3/31/1998 $357,326.30 $313,468.73
4/30/1998 $360,502.68 $314,816.65
5/31/1998 $361,563.77 $316,705.55
6/30/1998 $363,444.19 $318,352.42
7/31/1998 $366,798.21 $320,389.87
8/31/1998 $346,503.88 $304,210.19
9/30/1998 $338,199.43 $305,001.13
10/31/1998 $329,808.97 $298,474.11
11/30/1998 $349,777.75 $313,964.91
12/31/1998 $353,159.03 $313,399.78
1/31/1999 $361,234.10 $317,630.67
2/28/1999 $360,705.26 $315,470.79
3/31/1999 $363,377.04 $319,130.25
4/30/1999 $374,002.22 $324,970.33
5/31/1999 $369,987.45 $321,980.60
6/30/1999 $372,229.78 $321,175.65
7/31/1999 $374,482.50 $321,593.18
8/31/1999 $371,598.97 $318,184.29
9/30/1999 $371,448.84 $316,911.55
10/31/1999 $372,224.38 $315,200.23
11/30/1999 $380,164.47 $319,297.84
12/31/1999 $386,897.20 $321,213.62
1/31/2000 $387,057.46 $319,993.01
2/29/2000 $390,727.39 $320,665.00
3/31/2000 $386,069.53 $315,951.22
4/30/2000 $389,146.42 $315,951.22
5/31/2000 $385,409.43 $311,970.24
6/30/2000 $395,091.29 $317,991.26
7/31/2000 $397,567.20 $319,708.41
8/31/2000 $397,746.02 $322,841.56
9/30/2000 $391,184.82 $320,065.12
10/31/2000 $380,828.60 $309,887.05
11/30/2000 $363,794.96 $297,987.39
12/31/2000 $373,720.04 $304,781.50
1/31/2001 $395,712.23 $324,074.17
2/28/2001 $400,493.19 $329,000.09
3/31/2001 $389,078.13 $322,420.09
4/30/2001 $385,667.09 $318,035.18
5/31/2001 $388,020.92 $323,632.60
6/30/2001 $378,356.86 $315,121.06
7/31/2001 $383,154.42 $320,226.02
8/31/2001 $385,570.76 $322,755.81
9/30/2001 $362,545.51 $300,453.38
10/31/2001 $375,105.59 $310,067.89
11/30/2001 $387,098.52 $320,982.28
12/31/2001 $384,991.36 $318,446.52
1/31/2002 $385,178.78 $320,197.97
2/28/2002 $383,435.19 $315,971.36
3/31/2002 $390,695.74 $323,933.84
4/30/2002 $395,842.05 $329,116.78
5/31/2002 $395,842.05 $326,582.58
6/30/2002 $384,205.54 $301,305.09
7/31/2002 $380,162.50 $289,614.45
8/31/2002 $385,459.92 $296,854.81
9/30/2002 $380,946.11 $292,223.88
10/31/2002 $381,200.84 $289,769.20
11/30/2002 $400,055.75 $307,879.77
12/31/2002 $400,265.65 $312,374.82
1/31/2003 $402,378.08 $321,746.06
2/28/2003 $405,796.20 $326,089.63
3/31/2003 $416,530.91 $334,698.40
4/30/2003 $435,321.25 $354,144.38
5/31/2003 $435,109.71 $358,217.04
6/30/2003 $448,231.61 $368,247.11
7/31/2003 $446,483.50 $363,238.95
8/31/2003 $450,367.91 $367,888.41
9/30/2003 $460,230.97 $377,858.19
10/31/2003 $468,100.92 $385,679.85
11/30/2003 $471,049.95 $391,002.24
12/31/2003 $482,025.42 $400,268.99
1/31/2004 $487,809.72 $406,753.35
2/29/2004 $484,834.08 $406,305.92
3/31/2004 $486,046.17 $409,028.17
4/30/2004 $485,365.70 $406,328.58
5/31/2004 $477,794.00 $399,949.22
6/30/2004 $483,527.53 $405,748.49
7/31/2004 $487,879.27 $411,226.09
8/30/2004 $495,636.55 $418,710.41
9/30/2004 $502,476.34 $424,530.48
10/31/2004 $510,867.69 $432,723.92
11/30/2004 $515,056.81 $437,224.25
12/31/2004 $521,546.52 $443,826.33
1/31/2005 $520,920.67 $443,382.51
2/28/2005 $526,338.24 $449,722.88
3/31/2005 $512,021.84 $437,445.44
4/30/2005 $507,823.26 $432,764.78
5/31/2005 $516,354.69 $440,511.27
6/30/2005 $524,822.91 $448,880.98
7/31/2005 $532,800.22 $455,928.41
8/31/2005 $534,025.66 $457,569.75
9/30/2005 $531,569.14 $452,994.06
10/31/2005 $529,070.77 $449,687.20
11/30/2005 $534,044.03 $451,845.70
12/31/2005 $539,064.05 $455,957.49
1/31/2006 $544,077.34 $463,161.62
2/28/2006 $549,137.26 $466,079.54
3/31/2006 $550,400.28 $469,015.84
4/30/2006 $553,317.40 $471,829.94
5/31/2006 $551,823.44 $471,735.57
6/30/2006 $550,333.52 $469,942.97
7/31/2006 $555,011.35 $474,971.36
8/31/2006 $561,948.99 $482,665.90
9/30/2006 $568,973.36 $488,892.29
</Table>
Annualized Total Returns As of 9/30/2006
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. High Yield Bond Fund Class II 7.04% 9.44% 7.91%
- --------------------------------------------------------------------------------
Merrill Lynch High Yield
Master II Index 7.93% 10.23% 6.47%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW 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. THE FUND'S CLASS I AND II 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 AND II SHARES.
THE NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS' CLASS I SHARES WERE FIRST AVAILABLE
ON MAY 7, 1999 AND CLASS II SHARES ON JUNE 30, 2003. THE HISTORICAL PERFORMANCE
OF CLASS II SHARES INCLUDES THE PERFORMANCE OF CLASS I SHARES FOR PERIODS PRIOR
TO THE INCEPTION OF CLASS II. AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE
CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN
DISTRIBUTIONS. 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 UNTIL 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.
53
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS - 90.7%
ADVERTISING SALES - 2.7%
Lamar Media Corp. 144A#
6.625%, 08/15/15 1,395,000 $ 1,337,456
RH Donnelley Corp.
8.875%, 01/15/16 1,950,000 1,954,875
------------
3,292,331
------------
AEROSPACE/DEFENSE-EQUIPMENT - 1.8%
BE Aerospace, Inc.
8.875%, 05/01/11 2,075,000 2,158,000
------------
APPAREL MANUFACTURERS - 6.0%
Levi Strauss & Co.
9.750%, 01/15/15 1,775,000 1,841,562
Oxford Industries, Inc.
8.875%, 06/01/11 1,360,000 1,387,200
Phillips-Van Heusen
8.125%, 05/01/13 1,930,000 2,012,025
Quiksilver, Inc.
6.875%, 04/15/15 2,195,000 2,079,762
------------
7,320,549
------------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL - 0.7%
Tenneco, Inc.
8.625%, 11/15/14 875,000 864,063
------------
CABLE TV - 6.2%
CCH I LLC
11.000%, 10/01/15 755,000 687,050
Echostar DBS Corp.
5.750%, 10/01/08 1,190,000 1,179,588
Echostar DBS Corp. 144A
7.125%, 02/01/16# 1,425,000 1,376,906
Lodgenet Entertainment Corp.
9.500%, 06/15/13 2,115,000 2,263,050
Mediacom Broadband LLC 144A
8.500%, 10/15/15# 1,260,000 1,252,125
Mediacom Capital Corp.
9.500%, 01/15/13 780,000 797,550
------------
7,556,269
------------
CASINO HOTELS - 2.6%
Caesars Entertainment, Inc.
8.875%, 09/15/08 1,380,000 1,445,550
MGM Mirage, Inc.
6.000%, 10/01/09 125,000 123,438
Wynn Las Vegas Corp. LLC
6.625%, 12/01/14 1,675,000 1,624,750
------------
3,193,738
------------
CELLULAR TELECOMMUNICATIONS - 0.7%
Nextel Partners, Inc.
8.125%, 07/01/11 795,000 834,750
------------
CHEMICALS-DIVERSIFIED - 3.1%
Georgia Gulf Corp. 144A
9.500%, 10/15/14# 1,575,000 1,569,094
Lyondell Chemical Co.
10.875%, 05/01/09 730,000 746,425
Lyondell Chemical Co.
8.250%, 09/15/16 1,405,000 1,426,075
------------
3,741,594
------------
CHEMICALS-SPECIALTY - 1.8%
OM Group, Inc.
9.250%, 12/15/11 2,050,000 2,132,000
------------
COMMERCIAL SERVICES - 1.4%
Vertrue, Inc.
9.250%, 04/01/14 1,645,000 $ 1,710,800
------------
COMPUTER SERVICES - 1.3%
Unisys Corp.
8.000%, 10/15/12 1,735,000 1,622,225
------------
CONSUMER PRODUCTS-MISCELLANEOUS - 3.3%
Central Garden & Pet Co.
9.125%, 02/01/13 1,985,000 2,059,438
Jarden Corp.
9.750%, 05/01/12 1,805,000 1,904,275
------------
3,963,713
------------
CONTAINERS-METAL/GLASS - 1.5%
Crown Americas
7.750%, 11/15/15 1,845,000 1,868,062
------------
DIALYSIS CENTERS - 1.8%
DaVita, Inc.
7.250%, 03/15/15 2,270,000 2,230,275
------------
ELECTRIC-GENERATION - 2.0%
AES Corp.
9.500%, 06/01/09 125,000 133,437
AES Corp.
7.750%, 03/01/14 945,000 982,800
Allegheny Energy Supply 144A
8.250%, 04/15/12# 1,210,000 1,318,900
------------
2,435,137
------------
ELECTRIC-INTEGRATED - 0.6%
PSEG Energy Holdings LLC
10.000%, 10/01/09 610,000 666,425
------------
ELECTRONIC COMPONENTS-MISCELLANEOUS - 0.6%
Stoneridge, Inc.
11.500%, 05/01/12 795,000 769,162
------------
ELECTRONIC MEASURE INSTRUMENTS - 1.3%
Itron, Inc.
7.750%, 05/15/12 1,545,000 1,591,350
------------
ENERGY-ALTERNATE SOURCES - 0.5%
VeraSun Energy Corp.
9.875%, 12/15/12 575,000 600,875
------------
FINANCE-AUTO LOANS - 5.2%
Ford Motor Credit Co.
9.875%, 08/10/11 1,560,000 1,614,307
Ford Motor Credit Co.
7.000%, 10/01/13 1,605,000 1,489,180
General Motors Acceptance Corp.
8.000%, 11/01/31 805,000 841,693
General Motors Acceptance Corp.
6.750%, 12/01/14 2,435,000 2,377,181
------------
6,322,361
------------
FINANCE-INVESTMENT BANKERS/BROKERS - 1.8%
E*Trade Financial Corp.
8.000%, 06/15/11 2,135,000 2,209,725
------------
FINANCE-OTHER SERVICES - 0.6%
Alamosa Delaware, Inc.
11.000%, 07/31/10 660,000 721,050
------------
FUNERAL SERVICES & RELATED ITEMS - 0.4%
Service Corp. International 144A
7.000%, 06/15/17# 515,000 493,112
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCER - 1.6%
NRG Energy, Inc.
7.375%, 02/01/16 2,015,000 $ 2,002,406
------------
MACHINERY-FARM - 1.2%
Case New Holland, Inc.
9.250%, 08/01/11 1,415,000 1,499,900
------------
MEDICAL-HOSPITALS - 1.6%
Triad Hospitals, Inc.
7.000%, 05/15/12 780,000 772,200
Triad Hospitals, Inc.
7.000%, 11/15/13 1,160,000 1,126,650
------------
1,898,850
------------
MEDICAL-OUTPATIENT/HOME MEDICAL CARE - 1.6%
Res-Care, Inc.
7.750%, 10/15/13 1,960,000 1,955,100
------------
NETWORKING PRODUCTS - 0.9%
Anixter International, Inc.
5.950%, 03/01/15 1,220,000 1,131,550
------------
NON-FERROUS METALS - 0.9%
PNA Group, Inc. 144A
10.750%, 09/01/16# 1,010,000 1,037,775
------------
NON-HAZARDOUS WASTE DISPOSAL - 0.4%
WCA Waste Corp. 144A
9.250%, 06/15/14# 475,000 492,813
------------
OIL COMPANIES-EXPLORATION & PRODUCTION - 0.3%
Energy Partners, Ltd.
8.750%, 08/01/10 410,000 421,275
------------
PAPER & RELATED PRODUCTS - 1.2%
Neenah Paper, Inc.
7.375%, 11/15/14 1,610,000 1,509,375
------------
PHYSICAL THERAPY/REHABILITATION CENTERS - 1.8%
Psychiatric Solutions, Inc.
7.750%, 07/15/15 2,210,000 2,154,750
------------
PIPELINES - 3.2%
Copano Energy LLC
8.125%, 03/01/16 1,745,000 1,766,812
Sonat, Inc.
7.625%, 07/15/11 2,065,000 2,116,625
------------
3,883,437
------------
PRINTING-COMMERCIAL - 1.4%
Cenveo Corp.
7.875%, 12/01/13 1,780,000 1,686,550
------------
PRIVATE CORRECTIONS - 0.3%
Cornell Cos., Inc.
10.750%, 07/01/12 340,000 360,400
------------
REITS-HOTELS - 0.8%
Host Marriott LP
7.125%, 11/01/13 940,000 951,750
------------
RENTAL AUTO/EQUIPMENT - 2.7%
H&E Equipment Services, Inc. 144A
8.375%, 07/15/16# 1,270,000 1,301,750
United Rentals North America, Inc.
7.000%, 02/15/14 1,245,000 1,170,300
Williams Scotsman, Inc.
8.500%, 10/01/15 780,000 797,550
------------
3,269,600
------------
RETAIL-APPAREL/SHOE - 0.8%
Brown Shoe Co., Inc.
8.750%, 05/01/12 985,000 $ 1,029,325
------------
RETAIL-COMPUTER EQUIPMENT - 0.6%
GSC Holdings Corp.
8.000%, 10/01/12 670,000 690,100
------------
RETAIL-CONVENIENCE STORE - 0.9%
Pantry, Inc.
7.750%, 02/15/14 1,100,000 1,102,750
------------
RETAIL-PROPANE DISTRIBUTION - 3.1%
Inergy Finance Corp. LP
8.250%, 03/01/16 2,125,000 2,199,375
Star Gas Partners LP
10.250%, 02/15/13 1,555,000 1,601,650
------------
3,801,025
------------
RETAIL-REGIONAL DEPARTMENT STORES - 2.9%
Bon-Ton Stores, Inc.
10.250%, 03/15/14 1,515,000 1,473,338
Neiman-Marcus Group, Inc.
10.375%, 10/15/15 1,870,000 2,019,600
------------
3,492,938
------------
RUBBER-TIRES - 0.7%
Goodyear Tire & Rubber Co.
9.000%, 07/01/15 780,000 791,700
------------
SPECIAL PURPOSE ENTITY - 5.3%
AMR HoldCo., Inc.
10.000%, 02/15/15 1,890,000 2,012,850
Hughes Network Systems LLC 144A
9.500%, 04/15/14# 1,135,000 1,169,050
MedCath Holdings Corp.
9.875%, 07/15/12 1,320,000 1,405,800
Sensus Meter Systems, Inc.
8.625%, 12/15/13 1,900,000 1,847,750
------------
6,435,450
------------
TELECOMMUNICATIONS SERVICES - 2.1%
Qwest Corp.
7.875%, 09/01/11 830,000 871,500
Time Warner Telecom Holdings, Inc.
9.250%, 02/15/14 1,615,000 1,699,788
------------
2,571,288
------------
TELEPHONE-INTEGRATED - 5.4%
Level 3 Financing, Inc.
10.750%, 10/15/11 820,000 857,925
Level 3 Financing, Inc.
12.250%, 03/15/13 590,000 657,850
Qwest Capital Funding, Inc.
7.250%, 02/15/11 1,935,000 1,935,000
Valor Telecommunications Enterprises LLC/Finance
Corp. 7.750%, 02/15/15 1,215,000 1,293,975
Windstream Corp. 144A
8.625%, 08/01/16# 1,745,000 1,867,150
------------
6,611,900
------------
TRANSPORT-SERVICES - 1.1%
PHI, Inc. 144A
7.125%, 04/15/13# 1,355,000 1,283,863
- --------------------------------------------------------------------------------
Total Corporate Bonds (Cost: $108,817,531) 110,363,436
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
<Page>
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FOREIGN CORPORATE BONDS - 8.3%
CELLULAR TELECOMMUNICATIONS - 3.3%
Rogers Wireless, Inc.
8.000%, 12/15/12 $1,825,000 $ 1,939,062
Millicom International Cellular S.A.
10.000%, 12/01/13 1,885,000 2,024,019
------------
3,963,081
------------
ELECTRONIC COMPONENTS-MISCELLANEOUS - 0.5%
Solectron Global Finance, Ltd.
8.000%, 03/15/16 625,000 618,750
------------
INDUSTRIAL AUDIO & VIDEO PRODUCTS - 1.1%
Imax Corp.
9.625%, 12/01/10 1,360,000 1,295,400
------------
PAPER & RELATED PRODUCTS - 1.4%
Domtar, Inc.
7.125%, 08/15/15 1,815,000 1,687,950
------------
RESORTS/THEME PARKS - 0.5%
Intrawest Corp.
7.500%, 10/15/13 540,000 579,825
------------
SATELLITE TELECOMMUNICATIONS - 1.5%
Intelsat Subsidiary Holding Co., Ltd.
8.250%, 01/15/13 1,870,000 1,893,375
- --------------------------------------------------------------------------------
Total Foreign Corporate Bonds (Cost: $9,841,054) 10,038,381
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 2.2%
TIME DEPOSIT - 2.2%
Bank of America London 4.630%,
10/02/06 (Cost: $2,702,503) $2,702,503 $ 2,702,503
- -------------------------------------------------------------------------------
Total Investments - 101.2% (Cost: $121,361,088) 123,104,320
- -------------------------------------------------------------------------------
Liabilities In Excess Of Other Assets - (1.2%) (1,464,458)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $121,639,862
- -------------------------------------------------------------------------------
# 144A SECURITY. CERTAIN CONDITION FOR PUBLIC SALE MAY EXIST. THE TOTAL
MARKET VALUE OF 144A SECURITIES OWNED AT SEPTEMBER 30, 2006 WAS $15,343,794
OR 12.61% OF NET ASSETS.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 (Unaudited)
PERCENTAGE OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Communications 22.9%
Consumer, Cyclical 18.8
Consumer, Non-cyclical 16.2
Financial 13.7
Industrial 9.5
Basic Materials 8.3
Utilities 4.2
Energy 4.0
Technology 1.4
Short Term Investments 2.2
- --------------------------------------------------------------------------------
Total Investments 101.2%
- --------------------------------------------------------------------------------
Liabilities in excess of other assets (1.2)
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
56
<Page>
(This page intentionally left blank)
57
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS
For a Class I share outstanding during the period indicated
<Table>
<Caption>
DISTRIBUTIONS FROM:
-------------------------
NET ASSET NET NET REALIZED TOTAL FROM NET NET
VALUE, INVESTMENT AND UNREALIZED INVESTMENT INVESTMENT REALIZED
BEGINNING INCOME (LOSS) (2) GAINS (LOSS) OPERATIONS INCOME CAPITAL GAINS
- --------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. MICRO CAP
For the period ended 09/30/06 (1) $17.43 $(0.06) $(1.97) $(2.03) $ -- $ --
For the year ended 03/31/06 12.83 (0.11) 5.06 4.95 -- (0.35)
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 -- --
U.S. EMERGING GROWTH
For the period ended 09/30/06 (1) $13.90 $(0.04) $(1.36) $(1.40) $ -- $ --
For the year ended 03/31/06 9.77 (0.11) 4.25 4.14 -- (0.01)
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 -- --
U.S. SMALL CAP VALUE
For the period ended 09/30/06 (1) $19.85 $ 0.04 $0.00 $0.04 $ -- $ --
For the year ended 03/31/06 17.40 0.11 3.58 3.69 (0.06) (1.18)
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 period ended 09/30/06 (1) $29.32 $ 0.19 $1.54 $1.73 $ -- $ --
For the year ended 03/31/06 26.71 0.34 2.77 3.11 (0.50) --
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)
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/06 (1) $17.86 $ 0.01 $0.34 $0.35 $ -- $ --
For the year ended 03/31/06 15.67 0.03 2.16 2.19 -- --
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) -- --
U.S. SYSTEMATIC MID CAP GROWTH
For the period ended 09/30/06 (1) $13.02 $(0.03) $(0.65) $(0.68) $ -- $ --
For the year ended 03/31/06 10.69 (0.04) 2.85 2.81 -- (0.48)
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 period ended 09/30/06 (1) $24.57 $ 0.09 $0.14 $0.23 $(0.24) $ --
For the year ended 03/31/06 22.44 0.27 3.45 3.72 (0.55) (1.04)
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) --
</Table>
(1) UNAUDITED.
(2) NET INVESTMENT INCOME PER SHARE IS CALCULATED BY DIVIDING NET INVESTMENT
INCOME FOR THE PERIOD BY THE AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
(3) TOTAL RETURNS ARE NOT ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
(4) 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.
(5) NET EXPENSES INCLUDE CERTAIN ITEMS NOT SUBJECT TO EXPENSE REIMBURSEMENT.
(6) 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. MICRO CAP, 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% FOR THE 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, CONVERTIBLE AND
INTERNATIONAL GROWTH OPPORTUNITIES HAD RATES THROUGHOUT THE YEAR OF 1.25%,
1.30%, 1.00% AND 1.40% RESPECTIVELY.
(7) 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.
(8) 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.
(9) 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. MICRO CAP, U.S. EMERGING
GROWTH, U.S. LARGE CAP VALUE, U.S. SYSTEMATIC LARGE CAP GROWTH, U.S.
CONVERTIBLE, GLOBAL SELECT, INTERNATIONAL GROWTH, INTERNATIONAL GROWTH
OPPORTUNITIES, AND U.S. HIGH YIELD BOND DO NOT EXCEED
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
58
<Page>
<Table>
<Caption>
NET ASSET NET ASSETS,
TOTAL VALUE, TOTAL ENDING
DISTRIBUTIONS ENDING RETURN (3) (IN 000'S)
- ----------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. MICRO CAP
For the period ended 09/30/06 (1) $ -- $15.40 (11.65%) $ 76,013
For the year ended 03/31/06 (0.35) 17.43 39.04% 78,058
For the year ended 03/31/05 (0.68) 12.83 (8.17%) 69,246
For the year ended 03/31/04 -- 14.69 97.45% 68,876
For the year ended 03/31/03 -- 7.44 (31.62%) 35,625
For the year ended 03/31/02 -- 10.88 20.22% 88,311
U.S. EMERGING GROWTH
For the period ended 09/30/06 (1) $ -- $12.50 (10.07%) $ 7,024
For the year ended 03/31/06 (0.01) 13.90 42.38% 6,721
For the year ended 03/31/05 -- 9.77 1.66% 12,043
For the year ended 03/31/04 -- 9.61 52.06% 32,095
For the year ended 03/31/03 -- 6.32 (34.10%) 36,756
For the year ended 03/31/02 -- 9.59 0.21% 173,053
U.S. SMALL CAP VALUE
For the period ended 09/30/06 (1) $ -- $19.89 0.20% $114,001
For the year ended 03/31/06 (1.24) 19.85 21.97% 120,104
For the year ended 03/31/05 (2.32) 17.40 11.91% 86,017
For the year ended 03/31/04 (0.48) 17.64 77.64% 65,791
For the year ended 03/31/03 (2.17) 10.23 (21.54%) 10,980
For the year ended 03/31/02 (0.04) 15.62 25.33% 58,833
U.S. LARGE CAP VALUE
For the period ended 09/30/06 (1) $ -- $31.05 5.90% $ 25,475
For the year ended 03/31/06 (0.50) 29.32 11.75% 21,650
For the year ended 03/31/05 (0.36) 26.71 10.96% 16,948
For the year ended 03/31/04 (0.56) 24.40 37.44% 12,644
For the year ended 03/31/03 (0.31) 18.20 (24.41%) 27,659
For the year ended 03/31/02 (0.42) 24.46 6.35% 39,358
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/06 (1) $ -- $18.21 1.96% $ 711
For the year ended 03/31/06 -- 17.86 13.98% 667
For the year ended 03/31/05 -- 15.67 4.05% 780
For the year ended 03/31/04 -- 15.06 18.30% 3,518
For the year ended 03/31/03 -- 12.73 (29.59%) 18,328
For the year ended 03/31/02 -- 18.08 (20.04%) 57,769
U.S. SYSTEMATIC MID CAP GROWTH
For the period ended 09/30/06 (1) $ -- $12.34 (5.22%) $ 2,858
For the year ended 03/31/06 (0.48) 13.02 26.73% 3,348
For the year ended 03/31/05 -- 10.69 8.09% 5,566
2/27/04 (Commenced) to 03/31/04 -- 9.89 (1.10%) 5,347
U.S. CONVERTIBLE
For the period ended 09/30/06 (1) $(0.24) $24.56 0.95% $ 33,249
For the year ended 03/31/06 (1.59) 24.57 17.15% 31,627
For the year ended 03/31/05 (1.72) 22.44 4.62% 35,397
For the year ended 03/31/04 (0.59) 23.11 34.15% 50,103
For the year ended 03/31/03 (0.71) 17.72 (13.69%) 44,901
For the year ended 03/31/02 (0.74) 21.35 (4.51%) 120,359
<Caption>
RATIOS TO AVERAGE NET ASSETS (4)
---------------------------------------------------------------------------
EXPENSES EXPENSES NET OF FUND'S
NET EXPENSE NET OF REIMBURSEMENT/ PORTFOLIO
INVESTMENT TOTAL (REIMBURSEMENTS)/ REIMBURSEMENT/ RECOUPMENT TURNOVER
INCOME (LOSS) EXPENSES RECOUPMENT RECOUPMENT OFFSET (5) RATE
- -----------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. MICRO CAP
For the period ended 09/30/06 (1) (0.77%) 1.57% --(16) 1.57% 1.16% 72%
For the year ended 03/31/06 (0.78%) 1.64% (0.07%) 1.57% 1.10%(14) 180%
For the year ended 03/31/05 (0.72%) 1.63% (0.07%) 1.56% 1.12% 266%
For the year ended 03/31/04 (1.08%) 1.64% (0.07%) 1.57% 1.19%(9) 298%
For the year ended 03/31/03 (1.36%) 1.75% (0.16%) 1.59% 1.55%(6) 164%
For the year ended 03/31/02 (1.31%) 1.60% (0.03%) 1.57% 1.57% 170%
U.S. EMERGING GROWTH
For the period ended 09/30/06 (1) (0.65%) 1.24% --(16) 1.24% 0.84% 63%
For the year ended 03/31/06 (1.04%) 1.89% (0.39%) 1.50% 1.17%(14) 128%
For the year ended 03/31/05 (0.75%) 1.63% (0.17%) 1.46% 1.06% 142%
For the year ended 03/31/04 (1.04%) 1.48% (0.00%) 1.48% 1.26%(9) 166%
For the year ended 03/31/03 (0.96%) 1.45% (0.17%) 1.28% 1.26%(6) 118%
For the year ended 03/31/02 (0.46%) 1.34% (0.12%) 1.22% 1.22%(7) 138%
U.S. SMALL CAP VALUE
For the period ended 09/30/06 (1) 0.38% 1.31% --(16) 1.31% 1.02% 22%
For the year ended 03/31/06 0.60% 1.31% (0.01%) 1.30% 0.98%(14) 53%
For the year ended 03/31/05 0.11% 1.33% (0.03%) 1.30% 1.13% 73%
For the year ended 03/31/04 0.18% 1.35% (0.01%) 1.34% 1.19%(9) 101%
For the year ended 03/31/03 0.47% 1.54% (0.26%) 1.28% 1.25%(6) 109%
For the year ended 03/31/02 0.79% 1.44% (0.14%) 1.30% 1.30% 84%
U.S. LARGE CAP VALUE
For the period ended 09/30/06 (1) 1.30% 0.83% --(16) 0.83% 0.67% 22%
For the year ended 03/31/06 1.24% 1.21% (0.40%) 0.81% 0.70%(14) 44%
For the year ended 03/31/05 1.70% 1.31% (0.50%) 0.81% 0.76% 42%
For the year ended 03/31/04 1.38% 1.27% (0.45%) 0.82% 0.79%(9) 51%
For the year ended 03/31/03 1.24% 1.28% (0.34%) 0.94% 0.93%(6) 139%
For the year ended 03/31/02 0.89% 1.14% (0.13%) 1.01% 1.01% 99%
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/06 (1) 0.13% 1.13% --(16) 1.13% 1.00% 41%
For the year ended 03/31/06 0.19% 1.67% (0.53%) 1.14% 1.04%(14) 147%
For the year ended 03/31/05 0.45% 1.66% (0.54%) 1.12% 1.00% 197%
For the year ended 03/31/04 (0.16%) 1.33% (0.20%) 1.13% 0.93%(9) 172%
For the year ended 03/31/03 (0.34%) 1.27% (0.30%) 0.97% 0.95%(6) 193
For the year ended 03/31/02 (0.54%) 1.09% (0.09%) 1.00% 1.00% 224%
U.S. SYSTEMATIC MID CAP GROWTH
For the period ended 09/30/06 (1) (0.53%) 1.34% --(16) 1.34% 1.22% 65%
For the year ended 03/31/06 (0.33%) 2.15% (0.81%) 1.34% 1.01%(14) 160%
For the year ended 03/31/05 (0.36%) 1.97% (0.63%) 1.34% 1.21% 146%(11)
2/27/04 (Commenced) to 03/31/04 (0.43%) 4.39% (3.04%) 1.35% 1.35%(9) 14%
U.S. CONVERTIBLE
For the period ended 09/30/06 (1) 0.73% 1.03% --(16) 1.03% 0.77% 59%
For the year ended 03/31/06 1.02% 1.14% (0.11%) 1.03% 0.87%(14) 92%
For the year ended 03/31/05 1.68% 1.10% (0.08%) 1.02% 0.85% 102%
For the year ended 03/31/04 2.57% 1.10% (0.06%) 1.04% 1.00%(9) 103%
For the year ended 03/31/03 3.17% 1.16% (0.15%) 1.01% 1.00%(6) 114%
For the year ended 03/31/02 2.87% 1.05% (0.05%) 1.00% 1.00% 181%
</Table>
1.40%, 1.25%, 0.75%, 1.00%, 1.00%, 1.10%, 1.15%, 1.40% AND 0.60% FOR THE
PERIOD 04/01/03 TO 07/28/03, 1.56%, 1.48%, 0.81%, 1.12%, 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 DID NOT EXCEED 1.30% FOR THE PERIOD 04/01/03 TO
07/28/03, 1.45% FOR THE PERIOD 07/29/03 TO 02/23/04, 1.30% FOR THE PERIOD
02/24/04 TO 03/31/04. U.S. SYSTEMATIC MID CAP GROWTH DID NOT EXCEED 1.33%
FOR THE PERIOD 02/24/04 TO 03/31/04.
(10) INCEPTION TO DATE RETURN.
(11) 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.
(12) LESS THAN ONE PENNY PER SHARE.
(13) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSES LIMITATION
AGREEMENT WHERE BY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES), INTERNATIONAL SYSTEMATIC FUND DO NOT
EXCEED 1.75% FOR THE PERIOD 07/06/05 TO 07/31/05 AND 1.20% FOR THE PERIOD
08/01/05 TO 09/30/05, RESPECTIVELY.
(14) 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, GLOBAL
SELECT, INTERNATIONAL GROWTH, INTERNATIONAL GROWTH OPPORTUNITIES, AND
INTERNATIONAL ALL CAP GROWTH DO NOT EXCEED 1.20%, 1.15%, 1.39%, 1.42% AND
1.15% FOR THE PERIOD 01/24/06 TO 03/31/06 RESPECTIVELY. U.S. MICRO CAP,
U.S. SMALL CAP VALUE, U.S. LARGE CAP VALUE, U.S. SYSTEMATIC LARGE CAP
GROWTH, U.S. SYSTEMATIC MID CAP GROWTH, U.S. CONVERTIBLE AND U.S. HIGH
YIELD BOND HAD RATES THROUGHOUT THE YEAR OF 1.56%, 1.30%, 0.81%, 1.12%,
1.33%, 1.02% AND 0.63% RESPECTIVELY.
(15) FOR THE YEAR ENDED MARCH 31, 2003 RATIOS INCLUDE12B-1 FEES FROM CLASS R
WHICH WERE EXCHANGED TO CLASS I SHARES ON SEPTEMBER 30, 2002. HAD THOSE
FEES NOT BEEN INCLUDED, THE EXPENSE AND NET INVESTMENT INCOME LOSS RATIOS
WOULD HAVE BEEN 1.48% AND (1.38%) RESPECTIVELY.
(16) THE EXPENSE REIMBURSEMENT WAS TERMINATED ON JANUARY 23, 2006.
59
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
DISTRIBUTIONS FROM:
--------------------------
NET ASSET NET REALIZED TOTAL FROM NET
VALUE, NET INVESTMENT AND UNREALIZED INVESTMENT INVESTMENT NET REALIZED
BEGINNING INCOME (LOSS) (2) GAINS (LOSS) OPERATIONS INCOME CAPITAL GAINS
----------------------------------------------------------------------------------------
GLOBAL EQUITY FUNDS
GLOBAL SELECT
For the period ended 09/30/06 (1) $18.96 $ 0.07 $ 0.02 $ 0.09 $ -- $ --
For the year ended 03/31/06 16.09 0.03 3.97 4.00 (0.03) (1.10)
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 -- --
INTERNATIONAL GROWTH
For the period ended 09/30/06 (1) $22.69 $ 0.09 $ 0.01 $ 0.10 $ -- $ --
For the year ended 03/31/06 20.47 0.16 6.05 6.21 -- (3.99)
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) -- --
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/06 (1) $49.86 $ 0.18 $(1.43) $(1.25) $ -- $ --
For the year ended 03/31/06 35.01 (0.01) 15.10 15.09 (0.24) --
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) -- --
EMERGING MARKETS
8/18/06 (Commenced) to 09/30/06 (1) $10.00 $(0.00)(12) $ 0.04 $ 0.04 $ -- $ --
INTERNATIONAL SYSTEMATIC
For the period ended 09/30/06 (1) $13.70 $ 0.15 $ 0.44 $ 0.59 $ -- $ --
7/06/05 (Commenced) to 03/31/06 10.00 0.06 3.81 3.87 (0.01) (0.16)
INTERNATIONAL ALL CAP GROWTH
For the period ended 09/30/06 (1) $13.00 $ 0.07 $(0.16) $(0.09) $ -- $ --
For the year ended 03/31/06 9.08 0.01 3.92 3.93 (0.01) --
For the year ended 03/31/05 8.19 0.01 0.92 0.93 -- (0.04)
For the year ended 03/31/04 4.84 (0.01) 3.36 3.35 -- --
For the year ended 03/31/03 6.74 (0.03) (1.87) (1.90) -- --
For the year ended 03/31/02 7.40 (0.08) (0.58) (0.66) -- --
FIXED INCOME FUNDS
U.S. HIGH YIELD BOND
For the period ended 09/30/06 (1) $10.00 $ 0.39 $(0.05) $ 0.34 $(0.38) $ --
For the year ended 03/31/06 10.04 0.70 0.02 0.72 (0.76) --
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) --
</Table>
(1) UNAUDITED.
(2) NET INVESTMENT INCOME PER SHARE IS CALCULATED BY DIVIDING NET INVESTMENT
INCOME FOR THE PERIOD BY THE AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
(3) TOTAL RETURNS ARE NOT ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
(4) 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.
(5) NET EXPENSES INCLUDE CERTAIN ITEMS NOT SUBJECT TO EXPENSE REIMBURSEMENT.
(6) 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. MICRO CAP, 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% FOR THE 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, CONVERTIBLE AND
INTERNATIONAL GROWTH OPPORTUNITIES HAD RATES THROUGHOUT THE YEAR OF 1.25%,
1.30%, 1.00% AND 1.40% RESPECTIVELY.
(7) 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.
(8) 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.
(9) 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. MICRO CAP, U.S. EMERGING
GROWTH, U.S. LARGE CAP VALUE, U.S. SYSTEMATIC LARGE CAP GROWTH, U.S.
CONVERTIBLE, GLOBAL SELECT, INTERNATIONAL GROWTH, INTERNATIONAL GROWTH
OPPORTUNITIES, AND U.S. HIGH YIELD BOND DO NOT EXCEED
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60
<Page>
<Table>
<Caption>
NET NET
ASSET ASSETS,
TOTAL VALUE, TOTAL ENDING
DISTRIBUTIONS ENDING RETURN (3) (IN 000'S)
----------------------------------------------
GLOBAL EQUITY FUNDS
GLOBAL SELECT
For the period ended 09/30/06 (1) $ -- $19.05 0.47% $ 74,390
For the year ended 03/31/06 (1.13) 18.96 25.76% 77,225
For the year ended 03/31/05 (0.92) 16.09 9.27% 66,115
For the year ended 03/31/04 -- 15.58 51.85% 78,327
For the year ended 03/31/03 -- 10.26 (24.95%) 69,776
For the year ended 03/31/02 -- 13.67 6.30% 41,219
INTERNATIONAL GROWTH
For the period ended 09/30/06 (1) $ -- $22.79 0.44% $ 44,267
For the year ended 03/31/06 (3.99) 22.69 33.63% 45,889
For the year ended 03/31/05 (0.42) 20.47 9.49% 41,394
For the year ended 03/31/04 (0.04) 19.09 49.17% 51,450
For the year ended 03/31/03 -- 12.83 (25.28%) 88,029
For the year ended 03/31/02 -- 17.17 (10.62%) 214,920
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/06 (1) $ -- $48.61 (2.53%) $ 97,664
For the year ended 03/31/06 (0.24) 49.86 43.34% 107,749
For the year ended 03/31/05 (0.09) 35.01 19.28% 55,462
For the year ended 03/31/04 -- 29.43 69.24% 54,015
For the year ended 03/31/03 -- 17.39 (23.46%) 65,351
For the year ended 03/31/02 -- 22.72 (6.81%) 144,429
EMERGING MARKETS
8/18/06 (Commenced) to 09/30/06 (1) $ -- $10.04 0.40%(10) 1,007
INTERNATIONAL SYSTEMATIC
For the period ended 09/30/06 (1) $ -- $14.29 4.38% $ 4,707
7/06/05 (Commenced) to 03/31/06 (0.17) 13.70 38.92%(10) 4,662
INTERNATIONAL ALL CAP GROWTH
For the period ended 09/30/06 (1) $ -- $12.91 (0.69%) $ 20,458
For the year ended 03/31/06 (0.01) 13.00 43.28% 20,562
For the year ended 03/31/05 (0.04) 9.08 11.34% 33,900
For the year ended 03/31/04 -- 8.19 69.21% 28,700
For the year ended 03/31/03 -- 4.84 (28.19%) 19,700
For the year ended 03/31/02 -- 6.74 (8.92%) 33,000
FIXED INCOME FUNDS
U.S. HIGH YIELD BOND
For the period ended 09/30/06 (1) $(0.38) $ 9.96 3.44% $ 79,223
For the year ended 03/31/06 (0.76) 10.00 7.40% 81,187
For the year ended 03/31/05 (0.84) 10.04 5.40% 131,677
For the year ended 03/31/04 (0.80) 10.34 16.67% 102,110
For the year ended 03/31/03 (0.83) 9.65 6.61% 120,182
For the year ended 03/31/02 (0.96) 9.88 0.42% 71,369
<Caption>
RATIOS TO AVERAGE NET ASSETS (4)
-----------------------------------------------------------------------
EXPENSES
NET EXPENSES NET OF FUND'S
INVESTMENT EXPENSE NET OF REIMBURSEMENT/ PORTFOLIO
INCOME TOTAL (REIMBURSEMENTS)/ REIMBURSEMENT/ RECOUPMENT TURNOVER
(LOSS) EXPENSES RECOUPMENT RECOUPMENT OFFSET (5) RATE
---------- -------- ----------------- -------------- -------------- ---------
GLOBAL EQUITY FUNDS
GLOBAL SELECT
For the period ended 09/30/06 (1) 0.71% 1.16% --(16) 1.16% 1.00% 48%
For the year ended 03/31/06 0.16% 1.13% (0.00%) 1.13% 0.88%(14) 139%
For the year ended 03/31/05 0.41% 1.15% (0.01%) 1.14% 0.95% 164%
For the year ended 03/31/04 (0.05%) 1.28% (0.10%) 1.18% 1.01%(9) 226%
For the year ended 03/31/03 (0.16%) 1.42% (0.27%) 1.15% 1.13%(6) 230%(8)
For the year ended 03/31/02 (0.43%) 1.37% (0.14%) 1.23% 1.23% 401%
INTERNATIONAL GROWTH
For the period ended 09/30/06 (1) 0.77% 1.40% --(16) 1.40% 1.18% 50%
For the year ended 03/31/06 0.73% 1.37% (0.00%) 1.37% 0.99%(14) 167%
For the year ended 03/31/05 0.42% 1.39% (0.00%) 1.39% 1.08% 203%
For the year ended 03/31/04 1.35% 1.49% (0.04%) 1.45% 1.19%(9) 186%
For the year ended 03/31/03 0.76% 1.46% (0.21%) 1.25% 1.23%(6) 203%
For the year ended 03/31/02 0.32% 1.36% 0.01% 1.37% 1.37% 232%
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/06 (1) 0.72% 1.43% --(16) 1.43% 1.13% 74%
For the year ended 03/31/06 (0.02%) 1.38% (0.00%) 1.38% 1.07%(14) 168%
For the year ended 03/31/05 1.05% 1.42% (0.00%) 1.42% 1.11% 110%
For the year ended 03/31/04 0.74% 1.47% (0.00%) 1.47% 1.28%(9) 124%
For the year ended 03/31/03 0.36% 1.54% (0.10%) 1.44% 1.42%(6) 129%
For the year ended 03/31/02 0.40% 1.42% (0.01%) 1.41% 1.41% 168%
EMERGING MARKETS
8/18/06 (Commenced) to 09/30/06 (1) 2.72% 2.12% --(16) 2.12% 1.84% 6%
INTERNATIONAL SYSTEMATIC
For the period ended 09/30/06 (1) 2.16% 1.05% --(16) 1.05% 0.76% 61%
7/06/05 (Commenced) to 03/31/06 0.78% 2.94% (1.69%) 1.25% 1.11%(13) 103%
INTERNATIONAL ALL CAP GROWTH
For the period ended 09/30/06 (1) 1.10% 1.18% --(16) 1.18% 1.04% 68%
For the year ended 03/31/06 0.08% 1.89% (0.47%) 1.42% 1.39% 196%
For the year ended 03/31/05 (0.42%) 2.07% (0.59%) 1.48% 1.48% 166%
For the year ended 03/31/04 (0.87%) 2.25% (0.77%) 1.48% 1.48% 153%
For the year ended 03/31/03 (1.37%) 2.47% (0.98%) 1.49% 1.49%(15) 190%
For the year ended 03/31/02 (1.47%) 2.39% (0.91%) 1.48% 1.48% 259%
FIXED INCOME FUNDS
U.S. HIGH YIELD BOND
For the period ended 09/30/06 (1) 7.88% 0.64% --(16) 0.64% 0.51% 44%
For the year ended 03/31/06 6.70% 0.82% (0.18%) 0.64% 0.56%(14) 112%
For the year ended 03/31/05 7.82% 0.82% (0.19%) 0.63% 0.60% 123%
For the year ended 03/31/04 8.43% 0.87% (0.23%) 0.64% 0.61%(9) 134%
For the year ended 03/31/03 8.78% 1.01% (0.24%) 0.77% 0.77%(6) 137%
For the year ended 03/31/02 9.28% 1.03% (0.27%) 0.76% 0.76% 113%
</Table>
1.40%, 1.25%, 0.75%, 1.00%, 1.00%, 1.10%, 1.15%, 1.40% AND 0.60% FOR THE
PERIOD 04/01/03 TO 07/28/03, 1.56%, 1.48%, 0.81%, 1.12%, 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 DID NOT EXCEED 1.30% FOR THE PERIOD 04/01/03 TO
07/28/03, 1.45% FOR THE PERIOD 07/29/03 TO 02/23/04, 1.30% FOR THE PERIOD
02/24/04 TO 03/31/04. U.S. SYSTEMATIC MID CAP GROWTH DID NOT EXCEED 1.33%
FOR THE PERIOD 02/24/04 TO 03/31/04.
(10) INCEPTION TO DATE RETURN.
(11) 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.
(12) LESS THAN ONE PENNY PER SHARE.
(13) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSES LIMITATION
AGREEMENT WHERE BY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES), INTERNATIONAL SYSTEMATIC FUND DO NOT
EXCEED 1.75% FOR THE PERIOD 07/06/05 TO 07/31/05 AND 1.20% FOR THE PERIOD
08/01/05 TO 09/30/05, RESPECTIVELY.
(14) 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, GLOBAL
SELECT, INTERNATIONAL GROWTH, INTERNATIONAL GROWTH OPPORTUNITIES AND
INTERNATIONAL ALL CAP GROWTH DO NOT EXCEED 1.20%, 1.15%, 1.39%, 1.42% AND
1.15% FOR THE PERIOD 01/24/06 TO 03/31/06 RESPECTIVELY. U.S. MICRO CAP,
U.S. SMALL CAP VALUE, U.S. LARGE CAP VALUE, U.S. SYSTEMATIC LARGE CAP
GROWTH, U.S. SYSTEMATIC MID CAP GROWTH, U.S. CONVERTIBLE AND U.S. HIGH
YIELD BOND HAD RATES THROUGHOUT THE YEAR OF 1.56%, 1.30%, 0.81%, 1.12%,
1.33%, 1.02% AND 0.63% RESPECTIVELY.
(15) FOR THE YEAR ENDED MARCH 31, 2003 RATIOS INCLUDE12B-1 FEES FROM CLASS R
WHICH WERE EXCHANGED TO CLASS I SHARES ON SEPTEMBER 30, 2002. HAD THOSE
FEES NOT BEEN INCLUDED, THE EXPENSE AND NET INVESTMENT INCOME LOSS RATIOS
WOULD HAVE BEEN 1.48% AND (1.38%) RESPECTIVELY.
(16) THE EXPENSE REIMBURSEMENT WAS TERMINATED ON JANUARY 23, 2006.
61
<Page>
For a Class II share outstanding during the period indicated
<Table>
<Caption>
DISTRIBUTIONS FROM:
-------------------------
NET ASSET NET NET REALIZED TOTAL FROM NET NET
VALUE, INVESTMENT AND UNREALIZED INVESTMENT INVESTMENT REALIZED
BEGINNING INCOME (LOSS) (2) GAINS (LOSS) OPERATIONS INCOME CAPITAL GAINS
- -------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. MICRO CAP
For the period ended 09/30/06 (1) $17.50 $(0.04) $(1.98) $(2.02) $ -- $ --
For the year ended 03/31/06 12.85 (0.09) 5.09 5.00 -- (0.35)
09/30/04 (commenced) to 03/31/05 12.49 (0.03) 1.07 1.04 -- (0.68)
U.S. SMALL CAP VALUE
For the period ended 09/30/06 (1) $19.83 $ 0.05 $(0.01) $ 0.04 $ -- $ --
For the year ended 03/31/06 17.39 0.13 3.57 3.70 (0.08) (1.18)
11/10/04 (commenced) to 03/31/05 18.82 -- 0.93 0.93 (0.04) (2.32)
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/06 (1) $17.75 $ 0.03 $ 0.33 $ 0.36 $ -- $ --
09/30/05 (Commenced) to 03/31/06 16.35 0.02 1.51 1.53 (0.13) --
U.S. SYSTEMATIC MID CAP GROWTH
For the period ended 09/30/06 (1) $13.07 $(0.02) $(0.65) $(0.67) $ -- $ --
09/30/05 (Commenced) to 03/31/06 12.10 (0.01) 1.46 1.45 -- (0.48)
U.S. CONVERTIBLE
For the period ended 09/30/06 (1) $24.58 $ 0.12 $ 0.12 $ 0.24 $(0.25) $ --
09/30/05 (Commenced) to 03/31/06 23.97 0.30 1.63 1.93 (0.28) (1.04)
GLOBAL FUNDS
GLOBAL SELECT
For the period ended 09/30/06 (1) $18.97 $ 0.08 $ 0.01 $ 0.09 $ -- $ --
For the year ended 03/31/06 16.09 0.04 3.98 4.02 (0.04) (1.10)
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
For the period ended 09/30/06 (1) $22.71 $ 0.14 $ 0.00 $ 0.14 $ -- $ --
1/23/06 (Commenced) to 03/31/06 21.64 1.85 (0.78) 1.07 -- --
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/06 (1) $50.01 $ 0.19 $(1.41) $(1.22) $ -- $ --
For the year ended 03/31/06 35.02 0.13 15.06 15.19 (0.20) --
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 -- --
FIXED INCOME FUNDS
U.S. HIGH YIELD BOND
For the period ended 09/30/06 (1) $ 9.98 $ 0.39 $(0.06) 0.33 $(0.38) $ --
For the year ended 03/31/06 10.02 0.69 0.03 0.72 (0.76) --
For the year ended 03/31/05 10.33 0.85 (0.32) 0.53 (0.84) (0.00)(7)
6/30/03 (Commenced) to 03/31/04 10.18 0.66 0.10 0.76 (0.61) --
</Table>
(1) UNAUDITED
(2) NET INVESTMENT INCOME PER SHARE IS CALCULATED BY DIVIDING NET INVESTMENT
INCOME FOR THE PERIOD BY THE AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
(3) TOTAL RETURNS ARE NOT ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
(4) 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.
(5) NET EXPENSES INCLUDE CERTAIN ITEMS NOT SUBJECT TO EXPENSE REIMBURSEMENT.
(6) INCEPTION TO DATE RETURN.
(7) LESS THAN ONE PENNY PER SHARE.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
62
<Page>
<Table>
<Caption>
NET NET
ASSET ASSETS,
TOTAL VALUE, TOTAL ENDING
DISTRIBUTIONS ENDING RETURN (3) (IN 000'S)
- -------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. MICRO CAP
For the period ended 09/30/06 (1) $ -- $15.48 (11.54%) $ 3,482
For the year ended 03/31/06 (0.35) 17.50 39.37% 5,875
09/30/04 (commenced) to 03/31/05 (0.68) 12.85 8.17%(6) 15,200
U.S. SMALL CAP VALUE
For the period ended 09/30/06 (1) $ -- $19.87 0.20% $ 29,334
For the year ended 03/31/06 (1.26) 19.83 22.15% 43,365
11/10/04 (commenced) to 03/31/05 (2.36) 17.39 4.95%(6) 17,691
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/06 (1) $ -- $18.11 2.03% $ 9,013
09/30/05 (Commenced) to 03/31/06 (0.13) 17.75 9.43%(6) 3,743
U.S. SYSTEMATIC MID CAP GROWTH
For the period ended 09/30/06 (1) $ -- $12.40 (5.13%) $ 22,999
09/30/05 (Commenced) to 03/31/06 (0.48) 13.07 12.39%(6) 21,937
U.S. CONVERTIBLE
For the period ended 09/30/06 (1) $(0.25) $24.57 1.00% $ 3,627
09/30/05 (Commenced) to 03/31/06 (1.32) 24.58 8.47%(6) 3,634
GLOBAL FUNDS
GLOBAL SELECT
For the period ended 09/30/06 (1) $ -- $19.06 0.47% $ 82,068
For the year ended 03/31/06 (1.14) 18.97 25.90% 100,610
For the year ended 03/31/05 (0.92) 16.09 9.27% 69,548
6/30/03 (Commenced) to 03/31/04 -- 15.58 28.55% 35,817
INTERNATIONAL GROWTH
For the period ended 09/30/06 (1) $ -- $22.85 0.62% $ 56,913
1/23/06 (Commenced) to 03/31/06 -- 22.71 4.94%(6) 56,501
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/06 (1) $ -- $48.79 (2.46%) $ 52,021
For the year ended 03/31/06 (0.20) 50.01 43.55% 32,565
For the year ended 03/31/05 (0.15) 35.02 19.40% 35,233
6/05/03 (Commenced) to 03/31/04 -- 29.47 41.34% 60,394
FIXED INCOME FUNDS
U.S. HIGH YIELD BOND
For the period ended 09/30/06 (1) (0.38) $ 9.93 3.37% $ 42,417
For the year ended 03/31/06 (0.76) 9.98 7.48% 42,648
For the year ended 03/31/05 (0.84) 10.02 5.36% 42,710
6/30/03 (Commenced) to 03/31/04 (0.61) 10.33 8.43% 68,952
<Caption>
RATIOS TO AVERAGE NET ASSETS (4)
-------------------------------------------------------------------------
NET EXPENSES EXPENSES NET OF FUND'S
INVESTMENT EXPENSE NET OF REIMBURSEMENT/ PORTFOLIO
INCOME TOTAL (REIMBURSEMENTS)/ REIMBURSEMENT/ RECOUPMENT TURNOVER
(LOSS) EXPENSES RECOUPMENT RECOUPMENT OFFSET (5) RATE
- -------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. MICRO CAP
For the period ended 09/30/06 (1) (0.50%) 1.31% --(9) 1.31% 0.88% 72%
For the year ended 03/31/06 (0.56%) 1.40% (0.09%) 1.31% 0.85%(8) 180%
09/30/04 (commenced) to 03/31/05 (0.41%) 1.37% (0.06%) 1.31% 0.97% 266%
U.S. SMALL CAP VALUE
For the period ended 09/30/06 (1) 0.47% 1.21% --(9) 1.21% 0.90% 22%
For the year ended 03/31/06 0.76% 1.21% (0.01%) 1.20% 0.87%(8) 53%
11/10/04 (commenced) to 03/31/05 0.33% 1.26% (0.06%) 1.20% 0.93% 73%
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/06 (1) 0.30% 0.99% --(9) 0.99% 0.85% 41%
09/30/05 (Commenced) to 03/31/06 0.27% 1.37% (0.37%) 1.00% 0.94%(8) 147%
U.S. SYSTEMATIC MID CAP GROWTH
For the period ended 09/30/06 (1) (0.32%) 1.14% --(9) 1.14% 1.02% 65%
09/30/05 (Commenced) to 03/31/06 0.25% 2.82% (0.62%) 2.20% 1.92%(8) 160%
U.S. CONVERTIBLE
For the period ended 09/30/06 (1) 1.02% 0.93% --(9) 0.93% 0.67% 59%
09/30/05 (Commenced) to 03/31/06 2.26% 1.01% (0.09%) 0.92% 0.77%(8) 92%
GLOBAL FUNDS
GLOBAL SELECT
For the period ended 09/30/06 (1) 0.83% 1.11% --(9) 1.11% 0.94% 48%
For the year ended 03/31/06 0.21% 1.08% (0.00%) 1.08% 0.83%(8) 139%
For the year ended 03/31/05 0.44% 1.10% (0.01%) 1.09% 0.90% 164%
6/30/03 (Commenced) to 03/31/04 (0.08%) 1.24% (0.12%) 1.12% 0.94% 226%
INTERNATIONAL GROWTH
For the period ended 09/30/06 (1) 1.27% 1.00% --(9) 1.00% 0.78% 50%
1/23/06 (Commenced) to 03/31/06 1.21% 0.99% (0.00%) 0.99% 0.73%(8) 167%
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/06 (1) 0.80% 1.29% --(9) 1.29% 0.98% 74%
For the year ended 03/31/06 0.36% 1.22% (0.00%) 1.22% 0.91%(8) 168%
For the year ended 03/31/05 1.19% 1.27% -- 1.27% 0.97% 110%
6/05/03 (Commenced) to 03/31/04 0.66% 1.29% -- 1.29% 1.11% 124%
FIXED INCOME FUNDS
U.S. HIGH YIELD BOND
For the period ended 09/30/06 (1) 7.93% 0.59% --(9) 0.59% 0.46% 44%
For the year ended 03/31/06 6.76% 0.76% (0.17%) 0.59% 0.50%(8) 112%
For the year ended 03/31/05 7.88% 0.77% (0.19%) 0.58% 0.54% 123%
6/30/03 (Commenced) to 03/31/04 8.68% 0.82% (0.24%) 0.58% 0.57% 134%
</Table>
(8) 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. SYSTEMATIC LARGE CAP
GROWTH CLASS II, U.S. SYSTEMATIC MID CAP GROWTH CLASS II, GLOBAL SELECT
CLASS II, INTERNATIONAL GROWTH CLASS II AND INTERNATIONAL GROWTH
OPPORTUNITIES CLASS II DO NOT EXCEED 0.97%, 1.13%, 1.10%, 0.99% AND 1.27%
FOR THE PERIOD 01/24/06 TO 03/31/06 RESPECTIVELY. U.S. MICRO CAP CLASS II,
U.S. SMALL CAP VALUE CLASS II, AND U.S. HIGH YIELD BOND CLASS II HAD RATES
THROUGHOUT THE YEAR OF 1.31%, 1.20% AND 0.58% RESPECTIVELY. U.S.
CONVERTIBLE FUND CLASS II HAD RATE OF 0.92% SINCE INCEPTION 09.30.05.
(9) THE EXPENSE REIMBURSEMENT WAS TERMINATED ON JANUARY 23, 2006.
63
<Page>
For a class III share outstanding during the period indicated
<Table>
<Caption>
DISTRIBUTIONS FROM:
-------------------------
NET NET REALIZED TOTAL
NET ASSET INVESTMENT AND FROM NET NET
VALUE, INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED
BEGINNING (LOSS) (2) GAINS (LOSS) OPERATIONS INCOME CAPITAL GAINS
- -----------------------------------------------------------------------------------------------------------------
GLOBAL FUNDS
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/06 (1) $49.87 $ 0.30 $(1.50) $(1.20) $ -- $--
09/30/05 (Commenced) to 03/31/06 39.26 (0.10) 11.03 10.93 (0.32) --
</Table>
For a class IV share outstanding during the period indicated
<Table>
<Caption>
DISTRIBUTIONS FROM:
-------------------------
NET NET REALIZED TOTAL
NET ASSET INVESTMENT AND FROM NET NET
VALUE, INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED
BEGINNING (LOSS) (2) GAINS (LOSS) OPERATIONS INCOME CAPITAL GAINS
- -----------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/06 (1) $49.90 $ 0.23 $(1.43) $(1.20) $ -- $--
08/31/05 (Commenced) to 03/31/06 36.91 (0.07) 13.38 13.31 (0.32) --
</Table>
(1) UNAUDITED
(2) NET INVESTMENT INCOME PER SHARE IS CALCULATED BY DIVIDING NET INVESTMENT
INCOME FOR THE PERIOD BY THE AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
(3) TOTAL RETURNS ARE NOT ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
(4) 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.
(5) NET EXPENSES INCLUDE CERTAIN ITEMS NOT SUBJECT TO EXPENSE REIMBURSEMENT.
(6) INCEPTION TO DATE RETURN.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64
<Page>
<Table>
<Caption>
NET ASSET NET ASSETS,
TOTAL VALUE, TOTAL ENDING
DISTRIBUTIONS ENDING RETURN (3) (IN 000'S)
- -------------------------------------------------------------------------------------------
GLOBAL FUNDS
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/06 (1) $ -- $48.67 (2.41%) $5,656
09/30/05 (Commenced) to 03/31/06 (0.32) 49.87 28.05%(6) 6,771
<Caption>
RATIOS TO AVERAGE NET ASSETS (4)
---------------------------------------------------------------------------
EXPENSES EXPENSES NET OF FUND'S
NET EXPENSE NET OF REIMBURSEMENT/ PORTFOLIO
INVESTMENT TOTAL (REIMBURSEMENTS)/ REIMBURSEMENT/ RECOUPMENT TURNOVER
INCOME (LOSS) EXPENSES RECOUPMENT RECOUPMENT OFFSET (5) RATE
- ----------------------------------------------------------------------------------------------------------------------------
GLOBAL FUNDS
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/06 (1) 1.21% 1.23% --(9) 1.23% 0.94% 74%
09/30/05 (Commenced) to 03/31/06 (0.46%) 1.18% (0.00%) 1.18% 0.87%(7) 168%
</Table>
<Table>
<Caption>
NET ASSET NET ASSETS,
TOTAL VALUE, TOTAL ENDING
DISTRIBUTIONS ENDING RETURN (3) (IN 000'S)
- -----------------------------------------------------------------------------------------
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/06 (1) $ -- $48.70 (2.40%) $31,284
08/31/05 (Commenced) to 03/31/06 (0.32) 49.90 36.29%(6) 34,255
<Caption>
RATIOS TO AVERAGE NET ASSETS (4)
---------------------------------------------------------------------------
EXPENSES EXPENSES NET OF FUND'S
NET EXPENSE NET OF REIMBURSEMENT/ PORTFOLIO
INVESTMENT TOTAL (REIMBURSEMENTS)/ REIMBURSEMENT/ RECOUPMENT TURNOVER
INCOME (LOSS) EXPENSES RECOUPMENT RECOUPMENT OFFSET (5) RATE
- ----------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/06 (1) 0.92% 1.18% --(9) 1.18% 0.88% 74%
08/31/05 (Commenced) to 03/31/06 (0.28%) 1.13% (0.00%) 1.13% 0.84%(8) 168%
</Table>
(7) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSES LIMITATION
AGREEMENT WHERE BY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES), INTERNATIONAL GROWTH OPPORTUNITIES
FUND CLASS III DO NOT EXCEED 1.22% FOR THE PERIOD 01/24/06 TO 03/31/06.
(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), INTERNATIONAL GROWTH OPPORTUNITIES
FUND CLASS IV DO NOT EXCEED 1.17% FOR THE PERIOD 01/24/06 TO 03/31/06.
(9) THE EXPENSE REIMBURSEMENT WAS TERMINATED ON JANUARY 23, 2006.
65
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
<Table>
<Caption>
U.S. SYSTEMATIC U.S. SYSTEMATIC
U.S. MICRO U.S. EMERGING U.S. SMALL U.S. LARGE LARGE CAP MID CAP
SEPTEMBER 30, 2006 (UNAUDITED) CAP GROWTH CAP VALUE CAP VALUE GROWTH GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Assets
Investments, at value* $95,000,314 $11,743,118 $145,569,518 $30,270,183 $15,495,029 $25,871,203
Foreign currencies, at value** -- -- -- -- -- --
Cash -- -- -- -- -- --
Receivables:
Investment securities sold 1,222,389 152,257 1,331,081 -- -- --
Capital shares sold 463,154 12,441 188,261 7,633 15,015 3,919
Dividends 17,446 -- 193,948 43,530 13,333 18,497
Foreign taxes receivable -- -- -- -- -- --
Interest -- -- -- -- -- --
Other 60,147 6,778 77,002 4,366 6,045 10,028
Other assets -- -- -- -- -- --
----------- ----------- ------------ ----------- ----------- -----------
Total assets 96,763,450 11,914,594 147,359,810 30,325,712 15,529,422 25,903,647
----------- ----------- ------------ ----------- ----------- -----------
Liabilities
Payables:
Bank overdraft $ 152 $ 65 $ 16,981 $ 171 $ 11 $ 52
Investments purchased 1,017,178 119,902 263,051 307,475 -- --
Capital shares redeemed 423,823 30,501 29,929 4,348 4,014 24,887
Collateral on securities loaned 15,721,500 1,593,900 2,804,040 -- -- --
Dividends -- -- -- -- -- --
Distributions fee -- -- -- -- -- --
To investment advisor 62,209 6,051 85,108 10,237 5,467 14,289
Accrued Expenses and other liabilities 43,551 4,506 64,089 9,767 8,604 9,898
----------- ----------- ------------ ----------- ----------- -----------
Total Liabilities 17,268,413 1,754,925 3,263,198 331,998 18,096 49,126
----------- ----------- ------------ ----------- ----------- -----------
NET ASSETS 79,495,037 10,159,669 144,096,612 29,993,714 15,511,326 25,854,521
=========== =========== ============ =========== =========== ===========
* Investments, at cost 86,623,931 10,882,852 129,018,044 24,485,475 13,861,561 25,154,696
=========== =========== ============ =========== =========== ===========
** Foreign currencies, at cost -- -- -- -- -- --
=========== =========== ============ =========== =========== ===========
Net Assets Consist of:
Paid-in capital $64,017,977 $15,891,539 $110,445,117 $27,292,718 $22,774,594 $26,540,545
Undistributed net investment income
(loss) (305,505) (36,404) 511,915 435,661 8,591 (43,702)
Accumulated net realized gain (loss)
on investments and foreign
currencies 7,406,182 (6,555,732) 16,588,106 (3,519,373) (8,905,327) (1,358,829)
Net unrealized appreciation
(depreciation) of investments and
of other assets and liabilities
denominated in foreign currencies 8,376,383 860,266 16,551,474 5,784,708 1,633,468 716,507
----------- ----------- ------------ ----------- ----------- -----------
Net Assets applicable to all shares
outstanding $79,495,037 $10,159,669 $144,096,612 $29,993,714 $15,511,326 $25,854,521
=========== =========== ============ =========== =========== ===========
Net Assets of Class I shares $76,012,580 $ 7,023,587 $114,000,592 $25,474,670 $ 710,594 $ 2,857,763
Net Assets of Class II shares 3,482,457 -- 29,334,250 -- 9,013,239 22,999,446
Net Assets of Class III shares -- -- -- -- -- --
Net Assets of Class IV shares -- -- -- -- -- (2,688)
Net Assets of Class R shares -- 3,136,082 761,770 4,519,044 5,787,493 --
=========== =========== ============ =========== =========== ===========
Class I Shares outstanding 4,935,504 561,842 5,731,433 820,467 39,020 231,559
Class II Shares outstanding 224,939 -- 1,475,980 -- 497,722 1,855,083
Class III Shares outstanding -- -- -- -- -- --
Class IV Shares outstanding -- -- -- -- -- --
Class R Shares outstanding -- 255,047 38,373 145,564 323,080 --
=========== =========== ============ =========== =========== ===========
Net Asset Value -- Class I Share $ 15.40 $ 12.50 $ 19.89 $ 31.05 $ 18.21 $ 12.34
Net Asset Value -- Class II Share $ 15.48 $ -- $ 19.87 $ -- $ 18.11 $ 12.40
Net Asset Value -- Class III Share $ -- $ -- $ -- $ -- $ -- $ --
Net Asset Value -- Class IV Share $ -- $ -- $ -- $ -- $ -- $ --
Net Asset Value -- Class R Share $ -- $ 12.30 $ 19.85 $ 31.05 $ 17.91 $ --
=========== =========== ============ =========== =========== ===========
</Table>
(1) COMMENCED OPERATIONS ON 8/18/06
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
66
<Page>
<Table>
<Caption>
INTERNATIONAL
U.S. GLOBAL INTERNATIONAL GROWTH EMERGING
SEPTEMBER 30, 2006 (UNAUDITED) CONVERTIBLE SELECT GROWTH OPPORTUNITIES MARKETS (1)
- -----------------------------------------------------------------------------------------------------------------
Assets
Investments, at value* $37,371,315 $162,161,721 $106,167,533 $211,356,298 $ 982,219
Foreign currencies, at value** -- 1 1,540 1,619 27,353
Cash -- 12,163 8,692 26,873 --
Receivables:
Investment securities sold -- 1,996,872 2,377,675 3,820,815 5,489
Capital shares sold -- 45,439 67,070 10,288,862 25
Dividends 13,406 178,802 124,667 151,034 305
Foreign taxes receivable -- 15,397 13,903 16,828 --
Interest 169,819 -- -- -- --
Other 6,670 47,848 42,027 53,752 3,462
Other assets -- -- -- -- --
----------- ------------ ------------ ------------ -------------
Total assets 37,561,210 164,458,243 108,803,107 225,716,081 1,018,853
----------- ------------ ------------ ------------ -------------
Liabilities
Payables:
Bank overdraft $ 116 $ -- $ -- $ -- $ 29
Investments purchased 649,775 2,293,486 1,704,651 7,433,710 10,984
Capital shares redeemed -- 45,119 33,206 10,229,680 --
Collateral on securities loaned -- 5,531,959 4,020,455 21,227,863 --
Dividends -- -- -- -- --
Distributions fee -- -- -- -- --
To investment advisor 16,157 79,993 40,613 102,298 718
Accrued Expenses and other liabilities 19,170 49,084 57,416 97,964 403
----------- ------------ ------------ ------------ -------------
Total Liabilities 685,218 7,999,64 5,856,341 39,091,515 12,134
----------- ------------ ------------ ------------ -------------
NET ASSETS 36,875,992 156,458,601 102,946,766 186,624,566 1,006,719
=========== ============ ============ ============ =============
* Investments, at cost 33,536,146 141,600,764 91,287,713 186,402,208 978,126
=========== ============ ============ ============ =============
** Foreign currencies, at cost -- 1 1,485 1,619 27,581
=========== ============ ============ ============ =============
Net Assets Consist of:
Paid-in capital $37,525,742 $115,154,719 $ 89,692,488 $178,675,957 $ 1,003,012
Undistributed net investment income
(loss) (122,695) 667,721 965,048 713,510 (487)
Accumulated net realized gain (loss)
on investments and foreign
currencies (4,362,224) 20,076,397 (2,589,376) (17,714,351) 352
Net unrealized appreciation
(depreciation) of investments and
of other assets and liabilities
denominated in foreign currencies 3,835,169 20,559,764 14,878,606 24,949,450 3,842
----------- ------------ ------------ ------------ -------------
Net Assets applicable to all shares
outstanding $36,875,992 $156,458,601 $102,946,766 $186,624,566 $ 1,006,719
=========== ============ ============ ============ =============
Net Assets of Class I shares $33,249,411 $ 74,390,489 $ 44,266,565 $ 97,663,597 $ 1,006,719
Net Assets of Class II shares 3,626,581 82,068,112 56,912,654 52,021,059
Net Assets of Class III shares -- -- -- 5,655,817 --
Net Assets of Class IV shares -- -- (2,897) 31,284,093 --
Net Assets of Class R shares -- -- 1,770,444 -- --
=========== ============ ============ ============ =============
Class I Shares outstanding 1,353,680 3,904,945 1,942,147 2,009,316 100,297
Class II Shares outstanding 147,597 4,305,655 2,490,211 1,066,237
Class III Shares outstanding -- -- -- 116,218 --
Class IV Shares outstanding -- -- -- 642,361 --
Class R Shares outstanding -- -- 79,312 -- --
=========== ============ ============ ============ =============
Net Asset Value -- Class I Share $ 24.56 $ 19.05 $ 22.79 $ 48.61 $ 10.04
Net Asset Value -- Class II Share $ 24.57 $ 19.06 $ 22.85 $ 48.79 $ --
Net Asset Value -- Class III Share $ -- $ -- $ -- $ 48.67 $ --
Net Asset Value -- Class IV Share $ -- $ -- $ -- $ 48.70 $ --
Net Asset Value -- Class R Share $ -- $ -- $ 22.32 $ -- $ --
=========== ============ ============ ============ =============
<Caption>
INTERNATIONAL INTERNATIONAL U.S. HIGH
SEPTEMBER 30, 2006 (UNAUDITED) SYSTEMATIC ALL CAP GROWTH YIELD BOND
- --------------------------------------------------------------------------------------
Assets
Investments, at value* $4,675,983 $20,844,669 $123,104,320
Foreign currencies, at value** 6,497 2,451 --
Cash -- 916 8,617
Receivables:
Investment securities sold 579,525 -- 3,377,638
Capital shares sold -- -- 59,753
Dividends 12,387 29,964 --
Foreign taxes receivable 2,006 16,306 --
Interest -- -- 2,676,660
Other 2,115 924 28,751
Other assets -- 11,643 --
---------- ----------- ------------
Total assets 5,278,513 20,906,873 129,255,739
---------- ----------- ------------
Liabilities
Payables:
Bank overdraft $ 880 $ $ --
Investments purchased 567,048 -- 3,177,971
Capital shares redeemed -- 4,305,984
Collateral on securities loaned -- 422,450 --
Dividends -- -- --
Distributions fee -- -- 10
To investment advisor 1,857 13,725 37,791
Accrued Expenses and other liabilities 1,989 12,897 94,121
---------- ----------- ------------
Total Liabilities 571,774 449,072 7,615,877
---------- ----------- ------------
NET ASSETS 4,706,739 20,457,801 121,639,862
========== =========== ============
* Investments, at cost 4,097,129 17,909,631 121,361,088
========== =========== ============
** Foreign currencies, at cost 6,551 2,453 --
========== =========== ============
Net Assets Consist of:
Paid-in capital $3,420,701 $22,377,156 $125,372,909
Undistributed net investment income
(loss) 65,560 82,400 318,903
Accumulated net realized gain (loss)
on investments and foreign
currencies 641,706 (4,936,251) (5,795,182)
Net unrealized appreciation
(depreciation) of investments and
of other assets and liabilities
denominated in foreign currencies 578,772 2,934,496 1,743,232
---------- ----------- ------------
Net Assets applicable to all shares
outstanding $4,706,739 $20,457,801 $121,639,862
========== =========== ============
Net Assets of Class I shares $4,706,739 $20,457,801 $ 79,222,942
Net Assets of Class II shares -- -- 42,416,920
Net Assets of Class III shares -- -- --
Net Assets of Class IV shares -- -- --
Net Assets of Class R shares -- -- --
========== =========== ============
Class I Shares outstanding 329,296 1,585,122 7,957,354
Class II Shares outstanding -- -- 4,270,902
Class III Shares outstanding -- -- --
Class IV Shares outstanding -- -- --
Class R Shares outstanding -- -- --
========== =========== ============
Net Asset Value -- Class I Share $ 14.29 $ 12.91 $ 9.96
Net Asset Value -- Class II Share $ -- $ -- $ 9.93
Net Asset Value -- Class III Share $ -- $ -- $ --
Net Asset Value -- Class IV Share $ -- $ -- $ --
Net Asset Value -- Class R Share $ -- $ -- $ --
========== =========== ============
</Table>
67
<Page>
STATEMENTS OF OPERATIONS
<Table>
<Caption>
U.S. U.S.
SYSTEMATIC SYSTEMATIC
PERIOD ENDED U.S. MICRO U.S. EMERGING U.S. SMALL U.S. LARGE LARGE CAP MID CAP
SEPTEMBER 30, 2006 (UNAUDITED) CAP GROWTH CAP VALUE CAP VALUE GROWTH GROWTH
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Income
Dividends, net of foreign taxes* $ 159,024 $ 9,907 $ 1,053,988 $ 256,733 $ 75,981 $ 89,681
Interest -- 59 18 96 5 --
------------ ----------- ----------- ---------- --------- -----------
Total Income 159,024 9,966 1,054,006 256,829 75,986 89,681
------------ ----------- ----------- ---------- --------- -----------
Expenses
Advisory fees 407,618 37,880 567,553 58,723 30,132 89,626
Administration fees 222,106 22,706 397,399 46,929 39,571 57,986
Shareholder servicing fees -- 3,960 923 5,660 7,112 --
Professional fees 2,708 348 4,834 921 489 873
Trustees' fees and expenses 2,458 298 4,647 756 384 750
Interest and credit facility fees -- 1,185 -- 556 105 33
Miscellaneous -- -- -- -- -- --
------------ ----------- ----------- ---------- --------- -----------
Total Expenses 634,890 66,377 975,356 113,545 77,793 149,268
Expense offset (170,361) (20,007) (225,301) (20,340) (9,021) (15,885)
------------ ----------- ----------- ---------- --------- -----------
Net Expenses 464,529 46,370 750,055 93,205 68,772 133,383
------------ ----------- ----------- ---------- --------- -----------
Net Investment Income (Loss) (305,505) (36,404) 303,951 163,624 7,214 (43,702)
------------ ----------- ----------- ---------- --------- -----------
Net Realized and Unrealized
Gain (Loss) on Investments
Realized gain from:
Securities (781,965) 660,587 7,221,639 699,183 155,119 (33,722)
Foreign currency transactions -- -- -- -- -- --
Advisor reimbursement for administrative
error -- -- -- -- -- --
------------ ----------- ----------- ---------- --------- -----------
Net realized gain (loss) (781,965) 660,587 7,221,639 699,183 155,119 (33,722)
------------ ----------- ----------- ---------- --------- -----------
Change in unrealized appreciation
(depreciation) of:
Investments (9,505,110) (1,732,217) (8,001,635) 742,558 214,810 (1,326,804)
Other assets and liabilities denominated in
foreign currencies -- -- -- -- -- --
------------ ----------- ----------- ---------- --------- -----------
Net unrealized appreciation (depreciation) (9,505,110) (1,732,217) (8,001,635) 742,558 214,810 (1,326,804)
------------ ----------- ----------- ---------- --------- -----------
Net Gain (Loss) on Investments (10,287,075) (1,071,630) (779,996) 1,441,741 369,929 (1,360,526)
------------ ----------- ----------- ---------- --------- -----------
Net Increase (Decrease) In Net
Assets Resulting From Operations $(10,592,580) $(1,108,034) $ (476,045) $1,605,365 $377,143 $(1,404,228)
============ =========== =========== ========== ========= ===========
*Foreign taxes withheld $ -- $ -- $ -- $ -- $ -- $ --
------------ ----------- ----------- ---------- --------- -----------
</Table>
(1) COMMENCED OPERATIONS ON 8/18/06
(2) DUE TO ADMINISTRATIVE ERROR DURING THE INITIAL START UP OF THE FUND, THE
ADVISOR REIMBURSED THE FUND FOR THE COST OF THE ERROR.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68
<Page>
<Table>
<Caption>
INTERNATIONAL
PERIOD ENDED U.S. GLOBAL INTERNATIONAL GROWTH EMERGING
SEPTEMBER 30, 2006 (UNAUDITED) CONVERTIBLE SELECT GROWTH OPPORTUNITIES MARKETS (1)
- ------------------------------------------------------------------------------------------------------------------------
Investment Income
Dividends, net of foreign taxes* $ 144,89 $ 1,383,938 $ 1,000,393 $ 1,671,370 $ 1,529
Interest 123,448 -- -- -- --
----------- ----------- ----------- ----------- --------
Total Income 268,343 1,383,938 1,000,393 1,671,370 1,529
----------- ----------- ----------- ----------- --------
Expenses
Advisory fees 96,899 516,679 256,134 637,372 989
Administration fees 80,962 375,804 344,172 583,229 492
Shareholder servicing fees -- -- 2,178 -- --
Professional fees 1,261 5,366 3,617 6,147 36
Trustees' fees and expenses 1,033 4,549 2,967 5,339 10
Interest and credit facility fees -- 256 575 438 --
Miscellaneous -- -- -- -- 800
----------- ----------- ----------- ----------- --------
Total Expenses 180,155 902,655 609,643 1,232,525 2,327
Expense offset (45,877) (133,321) (113,020) (274,665) (311)
----------- ----------- ----------- ----------- --------
Net Expenses 134,278 769,334 496,623 957,860 2,016
----------- ----------- ----------- ----------- --------
Net Investment Income (Loss) 134,065 614,604 503,770 713,510 (487)
----------- ----------- ----------- ----------- --------
Net Realized and Unrealized
Gain (Loss) on Investments
Realized gain from:
Securities 1,372,029 8,380,577 2,838,565 11,036,961 (4,842)
Foreign currency transactions -- (34,797) 1,563,458 1,954,662 1,719
Advisor reimbursement for administrative
error -- -- -- -- 3,475(2)
Net realized gain (loss) ----------- ----------- ----------- ----------- --------
Change in unrealized appreciation 1,372,029 8,345,780 4,402,023 12,991,623 352
(depreciation) of: ----------- ----------- ----------- ----------- --------
Investments (1,123,793) (9,721,173) (4,260,287) (19,919,602) 14,588
Other assets and liabilities denominated in
foreign currencies -- 745,244 (107,436) 955,859 (10,746)
----------- ----------- ----------- ----------- --------
Net unrealized appreciation (depreciation) (1,123,793) (8,975,929) (4,367,723) (18,963,743) 3,842
----------- ----------- ----------- ----------- --------
Net Gain (Loss) on Investments (248,236) (630,149) 34,300 (5,972,120) 4,194
----------- ----------- ----------- ----------- --------
Net Increase (Decrease) In Net
Assets Resulting From Operations $ 382,301 $ (15,545) $ 538,070 $(5,258,610) $ 3,707
=========== =========== =========== =========== ========
*Foreign taxes withheld $ -- $ 145,662 $ 132,974 $ 150,976 $ 89
----------- ----------- ----------- ----------- --------
<Caption>
INTERNATIONAL
PERIOD ENDED INTERNATIONAL ALL CAP U.S. HIGH
SEPTEMBER 30, 2006 (UNAUDITED) SYSTEMATIC GROWTH YIELD BOND
- --------------------------------------------------------------------------------------------
Investment Income
Dividends, net of foreign taxes* $ 68,159 $ 216,762 $ --
Interest 31 838 5,000,561
--------- ----------- -----------
Total Income 68,190 217,600 5,000,561
--------- ----------- -----------
Expenses
Advisory fees 11,699 86,421 238,454
Administration fees 11,694 30,468 126,375
Shareholder servicing fees -- -- --
Professional fees 164 1,289 4,126
Trustees' fees and expenses 138 589 3,581
Interest and credit facility fees 80 1,337 1,042
Miscellaneous 800 -- --
--------- ----------- -----------
Total Expenses 24,575 120,104 373,578
Expense offset (6,810) (14,556) (81,992)
--------- ----------- -----------
Net Expenses 17,765 105,548 291,586
--------- ----------- -----------
Net Investment Income (Loss) 50,425 112,052 4,708,975
--------- ----------- -----------
Net Realized and Unrealized
Gain (Loss) on Investments
Realized gain from:
Securities 358,809 1,746,878 (1,313,063)
Foreign currency transactions (980) 168,630 --
Advisor reimbursement for administrative
error -- -- --
--------- ----------- -----------
Net realized gain (loss) 357,829 1,915,508 (1,313,063)
--------- ----------- -----------
Change in unrealized appreciation
(depreciation) of:
Investments (262,763) (2,136,274) 207,988
Other assets and liabilities denominated in
foreign currencies 50,171 (35,104) --
--------- ----------- -----------
Net unrealized appreciation (depreciation) (212,592) (2,171,378) 207,988
--------- ----------- -----------
Net Gain (Loss) on Investments 145,237 (255,870) (1,105,075)
--------- ----------- -----------
Net Increase (Decrease) In Net
Assets Resulting From Operations $ 195,662 $ (143,818) $ 3,603,900
========= =========== ===========
*Foreign taxes withheld $ 9,795 $ 29,374 $ --
--------- ----------- -----------
</Table>
69
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
U.S. MICRO CAP U.S. EMERGING GROWTH
---------------------------- ---------------------------
SEPTEMBER 30, SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2006 2006 MARCH 31, 2006 MARCH 31,
AND MARCH 31, 2006 (UNAUDITED) 2006 (UNAUDITED) 2006
- ----------------------------------------------------------------------------------------------------------
Increase (Decrease) In Net Assets
From Investment Operations:
Net investment income (loss) $ (305,505) $ (576,352) $ (36,404) $ (131,488)
Net realized gain (loss) (781,965) 13,711,832 660,587 3,962,899
Net unrealized appreciation (depreciation) (9,505,110) 11,455,610 (1,732,217) 241,623
------------ ------------ ----------- -----------
Net increase (decrease) in net assets from
investment operations (10,592,580) 24,591,090 (1,108,034) 4,073,034
------------ ------------ ----------- -----------
Distributions to Shareholders:
From net investment income -- -- -- --
From net realized gains -- (1,668,172) -- (7,167)
------------ ------------ ----------- -----------
Total distributions -- (1,668,172) -- (7,167)
------------ ------------ ----------- -----------
From Capital Share Transactions:
Proceeds from shares sold
Class I 11,829,755 8,572,354 1,697,245 1,499,847
Class II 412,154 38,388 -- --
Class IV -- -- -- --
Class R -- -- 984,224 350,928
Distributions reinvested
Class I -- 1,439,456 -- 5,184
Class II -- 165,230 -- --
Class IV -- -- -- --
Class R -- -- -- 1,983
Cost of shares redeemed
Class I (4,085,444) (22,059,033) (661,395) (9,948,897)
Class II (2,001,779) (11,592,735) -- --
Class IV -- -- -- --
Class R -- -- (646,802) (1,804,143)
------------ ------------ ----------- -----------
Net increase (decrease) in net assets
from share transactions 6,154,686 (23,436,340) 1,373,272 (9,895,098)
------------ ------------ ----------- -----------
Net Increase (Decrease) in Net Assets (4,437,894) (513,422) 265,238 (5,829,231)
Net Assets
Beginning 83,932,931 84,446,353 9,894,431 15,723,662
------------ ------------ ----------- -----------
Ending $ 79,495,037 $ 83,932,931 $10,159,669 $ 9,894,431
============ ============ =========== ===========
Undistributed net investment income
(loss), ending $ (305,505) $ -- $ (36,404) $ --
============ ============ =========== ===========
Class I -- Capital Share Activity
Shares sold 712,730 583,935 128,982 129,381
Distributions reinvested -- 97,656 -- 460
Shares redeemed (256,030) (1,600,418) (50,793) (879,179)
============ ============ =========== ===========
Net Class I Share Activity 456,700 (918,827) 78,189 (749,338)
============ ============ =========== ===========
Class II -- Capital Share Activity
Shares sold 26,512 2,726 -- --
Distributions reinvested -- 11,172 -- --
Shares redeemed (137,289) (861,481) -- --
============ ============ =========== ===========
Net Class II Share Activity (110,777) (847,583) -- --
============ ============ =========== ===========
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 -- -- 75,647 31,266
Distributions reinvested -- -- -- 178
Shares redeemed -- -- (52,310) (181,217)
============ ============ =========== ===========
Net Class R Share Activity -- -- 23,337 (149,773)
============ ============ =========== ===========
<Caption>
U.S. SMALL CAP VALUE
----------------------------
SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2006 2006 MARCH 31,
AND MARCH 31, 2006 (UNAUDITED) 2006
- -----------------------------------------------------------------------------
Increase (Decrease) In Net Assets
From Investment Operations:
Net investment income (loss) $ 303,951 $ 795,961
Net realized gain (loss) 7,221,639 14,420,355
Net unrealized appreciation (depreciation) (8,001,635) 11,266,796
------------ ------------
Net increase (decrease) in net assets from
investment operations (476,045) 26,483,112
------------ ------------
Distributions to Shareholders:
From net investment income -- (415,210)
From net realized gains -- (7,768,635)
------------ ------------
Total distributions -- (8,183,845)
------------ ------------
From Capital Share Transactions:
Proceeds from shares sold
Class I 9,121,726 33,364,315
Class II 250 20,190,331
Class IV -- --
Class R 29,712 70,738
Distributions reinvested
Class I -- 6,277,485
Class II -- 1,741,176
Class IV -- --
Class R -- 43,447
Cost of shares redeemed
Class I (15,219,256) (19,888,795)
Class II (13,560,291) (128,724)
Class IV -- --
Class R (24,322) (110,870)
------------ ------------
Net increase (decrease) in net assets
from share transactions (19,652,181) 41,559,103
------------ ------------
Net Increase (Decrease) in Net Assets (20,128,226) 59,858,370
Net Assets
Beginning 164,224,838 104,366,468
------------ ------------
Ending $144,096,612 $164,224,838
============ ============
Undistributed net investment income
(loss), ending $ 511,915 $164,224,838
============ ============
Class I -- Capital Share Activity
Shares sold 465,903 1,831,695
Distributions reinvested -- 350,697
Shares redeemed (784,253) (1,075,546)
============ ============
Net Class I Share Activity (318,350) 1,106,846
============ ============
Class II -- Capital Share Activity
Shares sold 13 1,079,112
Distributions reinvested -- 97,436
Shares redeemed (711,079) (6,971)
============ ============
Net Class II Share Activity (711,066) 1,169,577
============ ============
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 1,503 38,257
Distributions reinvested -- --
Shares redeemed (1,228) (415)
============ ============
Net Class R Share Activity 275 37,842
============ ============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70
<Page>
<Table>
<Caption>
U.S. SYSTEMATIC LARGE CAP
U.S. LARGE CAP VALUE GROWTH
--------------------------- ---------------------------
SEPTEMBER 30, SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2006 2006 MARCH 31, 2006 MARCH 31,
AND MARCH 31, 2006 (UNAUDITED) 2006 (UNAUDITED) 2006
- ------------------------------------------------------------------------------------------------------------
Increase (Decrease) In Net Assets
From Investment Operations:
Net investment income (loss) $ 163,624 $ 272,042 $ 7,214 $ 1,377
Net realized gain (loss) 699,183 1,864,853 155,119 795,200
Net unrealized appreciation (depreciation) 742,558 445,579 214,810 692,335
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from
investment operations 1,605,365 2,582,474 377,143 1,488,912
----------- ----------- ----------- -----------
Distributions to Shareholders:
From net investment income -- -- (26,492)
From net realized gains -- (363,116) --
----------- ----------- ----------- -----------
Total distributions -- (363,116) -- (26,492)
----------- ----------- ----------- -----------
From Capital Share Transactions:
Proceeds from shares sold
Class I 4,513,631 6,081,743 70,195 3,132,257
Class II -- -- 5,009,374 3,424,053
Class IV -- -- -- --
Class R 127,423 253,866 195,096 501,618
Distributions reinvested
Class I -- 313,005 -- --
Class II -- -- -- 26,492
Class IV -- -- -- --
Class R -- 50,110 -- --
Cost of shares redeemed
Class I (2,041,265) (3,449,778) (39,256) (3,624,807)
Class II -- -- (4,014) --
Class IV -- -- -- --
Class R (448,394) (4,225,956) (562,542) (4,555,093)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from share transactions 2,151,395 (977,010) 4,668,853 (1,095,480)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets 3,756,760 1,242,348 5,045,996 366,940
Net Assets
Beginning 26,236,954 24,994,606 10,465,330 10,098,390
----------- ----------- ----------- -----------
Ending $29,993,714 $26,236,954 $15,511,326 $10,465,330
=========== =========== =========== ===========
Undistributed net investment income
(loss), ending $ 435,661 $ 272,037 $ 8,591 $ 1,377
=========== =========== =========== ===========
Class I -- Capital Share Activity
Shares sold 150,232 218,484 3,959 208,507
Distributions reinvested -- 11,215 -- --
Shares redeemed (68,194) (125,785) (2,300) (220,921)
=========== =========== =========== ===========
Net Class I Share Activity 82,038 103,914 1,659 (12,414)
=========== =========== =========== ===========
Class II -- Capital Share Activity
Shares sold -- -- 287,078 209,270
Distributions reinvested -- -- -- 1,596
Shares redeemed -- -- (222) --
=========== =========== =========== ===========
Net Class II Share Activity -- -- 286,856 210,866
=========== =========== =========== ===========
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 4,239 9,217 11,336 398,538
Distributions reinvested -- 1,792 -- --
Shares redeemed (14,938) (157,044) (32,445) (1,817,930)
=========== =========== =========== ===========
Net Class R Share Activity (10,699) (146,035) (21,109) (1,419,392)
=========== =========== =========== ===========
<Caption>
U.S. SYSTEMATIC
MID CAP GROWTH U.S. CONVERTIBLE
--------------------------- ---------------------------
SEPTEMBER 30, SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2006 2006 MARCH 31, 2006 MARCH 31,
AND MARCH 31, 2006 (UNAUDITED) 2006 (UNAUDITED) 2006
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) In Net Assets
From Investment Operations:
Net investment income (loss) $ (43,702) $ (23,484) $ 134,065 $ 409,204
Net realized gain (loss) (33,722) 1,932,084 1,372,029 5,286,535
Net unrealized appreciation (depreciation) (1,326,804) 1,599,679 (1,123,793) (263,420)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from
investment operations (1,404,228) 3,508,279 382,301 5,432,319
----------- ----------- ----------- -----------
Distributions to Shareholders:
From net investment income -- -- (353,691) (776,075)
From net realized gains -- (863,189) -- (1,442,402)
----------- ----------- ----------- -----------
Total distributions -- (863,189) (353,691) (2,218,477)
----------- ----------- ----------- -----------
From Capital Share Transactions:
Proceeds from shares sold
Class I 1,079 474,215 2,000,300 3,537,830
Class II 3,229,724 21,772,058 21,289 3,353,900
Class IV -- 1,054,818 -- --
Class R -- -- -- --
Distributions reinvested
Class I -- 106,463 311,116 2,002,954
Class II -- 661,945 36,828 178,843
Class IV -- 94,576 -- --
Class R -- -- -- --
Cost of shares redeemed
Class I (317,119) (3,604,980) (741,248) 12,423,302)
Class II (940,558) (1,978,651) (41,683) (329)
Class IV -- (2,774,114) -- --
Class R -- -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from share transactions 1,973,126 15,806,330 1,586,602 (3,350,104)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets 568,898 18,451,420 1,615,212 (136,262)
Net Assets
Beginning 25,285,623 6,834,203 35,260,780 35,397,042
----------- ----------- ----------- -----------
Ending $25,854,521 $25,285,623 $36,875,992 $35,260,780
=========== =========== =========== ===========
Undistributed net investment income
(loss), ending $ (43,702) $ -- $ (122,695) $ 96,931
=========== =========== =========== ===========
Class I -- Capital Share Activity
Shares sold 88 37,339 83,906 154,320
Distributions reinvested -- 9,043 12,838 86,189
Shares redeemed (25,652) (309,803) (30,325) (530,327)
=========== =========== =========== ===========
Net Class I Share Activity (25,564) (263,421) 66,419 (289,818)
=========== =========== =========== ===========
Class II -- Capital Share Activity
Shares sold 252,830 1,778,810 -- 140,172
Distributions reinvested -- 56,144 1,520 7,706
Shares redeemed (76,563) (156,138) (1,787) (14)
=========== =========== =========== ===========
Net Class II Share Activity 176,267 1,678,816 (267) 147,864
=========== =========== =========== ===========
Class III -- Capital Share Activity
Shares sold -- -- -- --
Distributions reinvested -- -- -- --
Shares redeemed -- -- -- --
=========== =========== =========== ===========
Net Class III Share Activity -- -- -- --
=========== =========== =========== ===========
Class IV -- Capital Share Activity
Shares sold -- 98,798 -- --
Distributions reinvested -- 8,021 -- --
Shares redeemed -- (225,497) -- --
=========== =========== =========== ===========
Net Class IV Share Activity -- (118,678) -- --
=========== =========== =========== ===========
Class R -- Capital Share Activity
Shares sold -- -- -- --
Distributions reinvested -- -- -- --
Shares redeemed -- -- -- --
========== =========== ========== ===========
Net Class R Share Activity -- -- -- --
========== =========== ========== ===========
</Table>
71
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
GLOBAL SELECT INTERNATIONAL GROWTH
--------------------------- ---------------------------
SEPTEMBER 30, SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2006 2006 MARCH 31, 2006 MARCH 31,
AND MARCH 31, 2006 (UNAUDITED) 2006 (UNAUDITED) 2006
- --------------------------------------------------------------------------------------------------------------
Increase (Decrease) In Net Assets
From Investment Operations:
Net investment income $ 614,604 $ 277,046 $ 503,770 $ 1,005,448
Net realized gain (loss) 8,345,780 22,090,673 4,402,023 19,987,251
Net unrealized appreciation (depreciation) (8,975,929) 13,470,141 (4,367,723) 7,906,288
------------ ------------ ------------ ------------
Net increase (decrease) in net assets from
investment operations (15,545) 35,837,860 538,070 28,898,987
------------ ------------ ------------ ------------
Distributions to Shareholders:
From net investment income -- (297,555) -- --
From net realized gains -- (9,700,448) -- (15,080,798)
------------ ------------ ------------ ------------
Total distributions -- (9,998,003) -- (15,080,798)
------------ ------------ ------------ ------------
From Capital Share Transactions:
Proceeds from shares sold
Class I 1,210,085 20,080,568 1,723,985 6,546,866
Class II 12,245 21,725,096 50,000 53,840,583
Class III -- -- -- --
Class IV -- -- -- 45,381,290
Class R -- -- 202,902 670,079
Distributions reinvested
Class I -- 4,052,988 -- 6,615,202
Class II -- 5,377,960 -- --
Class III -- -- -- --
Class IV -- -- -- 8,221,384
Class R -- -- -- 216,270
Cost of shares redeemed
Class I (4,331,803) (24,718,526) (3,528,449) (13,487,399)
Class II (18,250,829) (10,186,408) -- --
Class III -- -- -- (43,546,717)
Class IV -- -- -- (82,681,011)
Class R -- -- (206,117) (999,155)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
from share transactions (21,360,302) 16,331,678 (1,757,679) (19,222,608)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets (21,375,847) 42,171,535 (1,219,609) (5,404,419)
Net Assets
Beginning 177,834,448 135,662,913 104,166,375 109,570,794
------------ ------------ ------------ ------------
Ending $156,458,601 $177,834,448 $102,946,766 $104,166,375
============ ============ ============ ============
Undistributed net investment income
(loss), ending $ 667,721 $ 53,117 $ 965,048 $104,166,375
============ ============ ============ ============
Class I -- Capital Share Activity
Shares sold 64,738 1,183,767 77,236 305,670
Distributions reinvested -- 241,393 -- 340,639
Shares redeemed (231,925) (1,462,753) (157,182) (646,622)
============ ============ ============ ============
Net Class I Share Activity (167,187) (37,593) (79,946) (313)
============ ============ ============ ============
Class II -- Capital Share Activity
Shares sold 659 1,283,290 2,199 2,488,012
Distributions reinvested -- 320,307 -- --
Shares redeemed (998,877) (621,513) -- --
============ ============ ============ ============
Net Class II Share Activity (998,218) 982,084 2,199 2,488,012
============ ============ ============ ============
Class III -- Capital Share Activity
Shares sold -- -- -- --
Distributions reinvested -- -- -- --
Shares redeemed -- -- -- (1,979,233)
============ ============ ============ ============
Net Class III Share Activity -- -- -- (1,979,233)
============ ============ ============ ============
Class IV -- Capital Share Activity
Shares sold -- -- -- 2,059,584
Distributions reinvested -- -- -- 422,693
Shares redeemed -- -- -- (3,755,023)
============ ============ ============ ============
Net Class IV Share Activity -- -- -- (1,272,746)
============ ============ ============ ============
Class R -- Capital Share Activity
Shares sold -- -- 9,071 30,959
Distributions reinvested -- -- -- 11,347
Shares redeemed -- -- (9,557) (49,170)
============ ============ ============ ============
Net Class R Share Activity -- -- (486) (6,864)
============ ============ ============ ============
<Caption>
INTERNATIONAL
GROWTH OPPORTUNITIES
---------------------------
SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2006 2006 MARCH 31,
AND MARCH 31, 2006 (UNAUDITED) 2006
- -------------------------------------------------------------------------------
Increase (Decrease) In Net Assets
From Investment Operations:
Net investment income $ 713,510 $ 38,102
Net realized gain (loss) 12,991,623 28,684,670
Net unrealized appreciation (depreciation) (18,963,743) 24,818,398
------------ ------------
Net increase (decrease) in net assets from
investment operations (5,258,610) 53,541,170
------------ ------------
Distributions to Shareholders:
From net investment income -- (909,444)
From net realized gains -- --
------------ ------------
Total distributions -- (909,444)
------------ ------------
From Capital Share Transactions:
Proceeds from shares sold
Class I 17,296,068 36,863,789
Class II 20,219,088 10,543,685
Class III 13,150 6,971,235
Class IV 11,213 33,326,621
Class R 670,079 -- --
Distributions reinvested
Class I -- 456,359
Class II -- 132,879
Class III -- 56,269
Class IV -- 215,598
Class R -- --
Cost of shares redeemed
Class I (23,956,752) (15,469,116)
Class II (6,945) (24,544,547)
Class III (1,000,000) (2,000,000)
Class IV (2,032,658) (8,540,000)
Class R -- --
------------ ------------
Net increase (decrease) in net assets
from share transactions 10,543,164 38,012,772
------------ ------------
Net Increase (Decrease) in Net Assets 5,284,554 90,644,498
Net Assets
Beginning 181,340,012 90,695,514
------------ ------------
Ending $186,624,566 $181,340,012
============ ============
Undistributed net investment income
(loss), ending $ 713,510 $ --
============ ============
Class I -- Capital Share Activity
Shares sold 343,137 927,308
Distributions reinvested -- 11,669
Shares redeemed (494,839) (362,293)
============ ============
Net Class I Share Activity (151,702) 576,684
============ ============
Class II -- Capital Share Activity
Shares sold 415,170 301,249
Distributions reinvested -- 3,389
Shares redeemed (142) (659,426)
============ ============
Net Class II Share Activity 415,028 (354,788)
============ ============
Class III -- Capital Share Activity
Shares sold 270 177,565
Distributions reinvested -- 1,440
Shares redeemed (19,814) (43,243)
============ ============
Net Class III Share Activity (19,544) 135,762
============ ============
Class IV -- Capital Share Activity
Shares sold 232 902,575
Distributions reinvested -- 5,513
Shares redeemed (44,314) (221,645)
============ ============
Net Class IV Share Activity (44,082) 686,443
============ ============
Class R -- Capital Share Activity
Shares sold -- --
Distributions reinvested -- --
Shares redeemed -- --
============ ============
Net Class R Share Activity -- --
============ ============
</Table>
(1) COMMENCED OPERATIONS ON 8/18/06
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72
<Page>
<Table>
<Caption>
EMERGING INTERNATIONAL
MARKETS (1) INTERNATIONAL SYSTEMATIC ALL CAP GROWTH
------------- ------------------------- ---------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2006 2006 2006 MARCH 31, 2006 MARCH 31,
AND MARCH 31, 2006 (UNAUDITED) (UNAUDITED) 2006 (UNAUDITED) 2006
- ---------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) In Net Assets
From Investment Operations:
Net investment income $ (487) $ 50,425 $ 19,149 $ 112,052 $ 22,275
Net realized gain (loss) 352 357,829 336,900 1,915,508 6,808,745
Net unrealized appreciation (depreciation) 3,842 (212,592) 791,364 (2,171,378) 781,523
---------- ---------- ---------- ----------- ------------
Net increase (decrease) in net assets from
investment operations 3,707 195,662 1,147,413 (143,818) 7,612,543
---------- ---------- ---------- ----------- ------------
Distributions to Shareholders:
From net investment income -- -- (4,289) -- (13,020)
From net realized gains -- -- (52,748) -- --
---------- ---------- ---------- ----------- ------------
Total distributions -- -- (57,037) -- (13,020)
---------- ---------- ---------- ----------- ------------
From Capital Share Transactions:
Proceeds from shares sold
Class I 1,004,009 9,084 3,608,886 80,324 262,832
Class II -- -- -- -- --
Class III -- -- -- -- --
Class IV -- -- -- -- --
Class R -- -- -- -- --
Distributions reinvested
Class I -- -- 57,037 -- 13,020
Class II -- -- -- -- --
Class III -- -- -- -- --
Class IV -- -- -- -- --
Class R -- -- -- -- --
Cost of shares redeemed
Class I (997) (160,141) (94,165) (40,736) (21,173,301)
Class II -- -- -- -- --
Class III -- -- -- -- --
Class IV -- -- -- -- --
Class R -- -- -- -- --
---------- ---------- ---------- ----------- ------------
Net increase (decrease) in net assets
from share transactions 1,003,012 (151,057) 3,571,758 39,588 (20,897,449)
---------- ---------- ---------- ----------- ------------
Net Increase (Decrease) in Net Assets 1,006,719 44,605 4,662,134 (104,230) (13,297,926)
Net Assets
Beginning -- 4,662,134 -- 20,562,031 33,859,957
---------- ---------- ---------- ----------- ------------
Ending $1,006,719 $4,706,739 $4,662,134 $20,457,801 $ 20,562,031
========== ========== ========== =========== ============
Undistributed net investment income
(loss), ending $ (487) $ 65,560 $ 15,135 $ 82,400 $ (29,652)
========== ========== ========== =========== ============
Class I -- Capital Share Activity
Shares sold 100,397 642 342,323 6,028 1,672,171
Distributions reinvested -- -- 4,694 -- 1,238
Shares redeemed 100 (11,539) (6,824) (3,177) (3,820,232)
========== ========== ========== =========== ============
Net Class I Share Activity 100,297 (10,897) 340,193 2,851 (2,146,823)
========== ========== ========== =========== ============
Class II -- Capital Share Activity
Shares sold -- -- -- -- --
Distributions reinvested -- -- -- -- --
Shares redeemed -- -- -- -- --
========== ========== ========== =========== ============
Net Class II Share Activity -- -- -- -- --
========== ========== ========== =========== ============
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 -- -- -- -- --
========== ========== ========== =========== ============
<Caption>
U.S. HIGH YIELD BOND
---------------------------
SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2006 2006 MARCH 31,
AND MARCH 31, 2006 (UNAUDITED) 2006
- -------------------------------------------------------------------------------
Increase (Decrease) In Net Assets
From Investment Operations:
Net investment income $ 4,708,975 $ 10,031,173
Net realized gain (loss) (1,313,063) 1,896,197
Net unrealized appreciation (depreciation) 207,988 (1,320,960)
------------ ------------
Net increase (decrease) in net assets from
investment operations 3,603,900 10,606,410
------------ ------------
Distributions to Shareholders:
From net investment income (4,518,589) (10,900,316)
From net realized gains -- --
------------ ------------
Total distributions (4,518,589) (10,900,316)
------------ ------------
From Capital Share Transactions:
Proceeds from shares sold
Class I 14,156,964 18,574,415
Class II 8,000 108,109
Class III -- --
Class IV -- --
Class R -- --
Distributions reinvested
Class I 2,570,333 6,754,819
Class II 7,088 13,019
Class III -- --
Class IV -- --
Class R -- --
Cost of shares redeemed
Class I (17,979,762) (75,706,764)
Class II (43,337) (1,067)
Class III -- --
Class IV -- --
Class R -- --
------------ ------------
Net increase (decrease) in net assets
from share transactions (1,280,714) (50,257,469)
------------ ------------
Net Increase (Decrease) in Net Assets (2,195,403) (50,551,375)
Net Assets
Beginning 123,835,265 174,386,640
------------ ------------
Ending $121,639,862 $123,835,265
============ ============
Undistributed net investment income
(loss), ending $ 318,903 $ 128,517
============ ============
Class I -- Capital Share Activity
Shares sold 1,390,508 1,854,714
Distributions reinvested 260,026 674,088
Shares redeemed (1,809,645) (7,523,270)
============ ============
Net Class I Share Activity (159,111) (4,994,468)
============ ============
Class II -- Capital Share Activity
Shares sold 801 10,737
Distributions reinvested 719 1,302
Shares redeemed (4,391) (107)
============ ============
Net Class II Share Activity (2,871) 11,932
============ ============
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 -- --
============ ============
</Table>
73
<Page>
NOTES TO FINANCIAL STATEMENTS -- (Unaudited)
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
fourteen 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"),
nine Funds have issued Class II shares ("Class II"), one Fund has issued Class
III shares ("Class III"), one Fund has issued Class IV shares ("Class IV") and
five Funds have issued Retirement shares ("Class R"). No shares have a sales
charge. Class R shares have a distribution fee. The Funds offering Class I,
Class II, Class III and Class IV shares are covered in this report.
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, 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 September 30, 2006.
74
<Page>
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 at
September 30, 2006.
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 securities market. 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 September 30, 2006 were:
FUND MARKET VALUE COLLATERAL
- --------------------------------------------------------------------------------
U.S. Micro Cap $15,298,135 $15,721,500
U.S. Emerging Growth 1,552,799 1,593,900
U.S. Small Cap Value 2,739,971 2,804,040
Global Select 5,339,846 5,531,959
International Growth 3,783,241 4,020,455
International Growth Opportunities 19,994,468 21,227,863
International All Cap Growth 398,897 422,450
- --------------------------------------------------------------------------------
CREDIT FACILITY
The Trust has a $15 million credit facility available to fund temporary or
emergency borrowing expiring in March 2007. Each Fund pays its pro-rata share of
an annual commitment fee plus interest on its specific borrowings. For the
period ended September 30, 2006, the Funds did not borrow against the line of
credit.
COMMITMENTS AND CONTINGENCIES
In the normal course of business, 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,
75
<Page>
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 Funds provided services to the Funds in addition to trade execution. These
services included payments of certain expenses on behalf of the Funds. 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. Micro Cap 40,507 33,119 96,735
U.S. Emerging Growth 11,530 1,735 6,742
U.S. Small Cap Value 193,315 15,532 16,455
U.S. Large Cap Value 14,857 496 4,987
U.S. Systematic Large Cap Growth 3,098 936 4,987
U.S. Systematic Mid Cap Growth 10,658 240 4,987
U.S. Convertible -- 40,891 4,987
Global Select 68,883 38,508 25,930
International Growth 58,604 19,013 35,403
International Growth Opportunities 175,646 35,692 63,327
Emerging Markets 311 -- --
International Systematic 1,701 5,109 --
International All Cap Growth 11,893 1,705 958
U.S. High Yield Bond 81,992 -- --
- --------------------------------------------------------------------------------
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.
76
<Page>
NOTE D -- FEES AND TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Nicholas-Applegate Capital Management LLC ("NACM") serves as Investment Adviser
(the "Investment Adviser") to the Trust. The Investment Adviser receives a
monthly fee at an annual rate based on the average daily net assets of the
Funds. The investment advisory fee rates for each of the Funds are listed in the
table below.
ADMINISTRATIVE & SHAREHOLDER SERVICES FEE
On January 24, 2006, the Funds entered into a new Administration Agreement
whereby the Funds pay for the administrative services they require under what is
essentially an all-in fee structure. Class I, II, III & IV shareholders of the
Funds pay an administrative fee to the Investment Adviser computed as a
percentage of the Funds' assets attributable in the aggregate to Class I, II,
III & IV shares, the Investment Adviser, in turn, provides or procures
administrative and shareholder services for Class I, II, III & IV shareholders
and also bears the costs of most third-party administrative services required by
the Funds, including audit, custodial, portfolio accounting, legal, transfer
agency and printing costs. The administrative fees paid to the Investment
Adviser may exceed the related costs. Generally, this may not be the case for
relatively small funds. The Funds do bear other expenses which are not covered
under the administrative fee which may vary and affect the total level of
expenses paid by Class I, II, III & IV shareholders, such as brokerage fees,
taxes, commissions and other transaction expenses, costs of borrowing money,
including interest expenses, extraordinary expenses (such as litigation and
indemnification expenses) and fees and expenses of the independent Trustees of
the Trust and their counsel.
The investment advisory and administrative services fees are charged at the
following annual rates:
<Table>
<Caption>
ADMINISTRATION FEE*
FUND ADVISORY FEE CLASS I CLASS II CLASS III CLASS IV
- ---------------------------------------------------------------------------------------------
U.S. Micro Cap 1.00% 0.54% 0.29% -- --
U.S. Emerging Growth 0.75% 0.41% -- -- --
U.S. Small Cap Value 0.75% 0.52% 0.42% -- --
U.S. Large Cap Value 0.45% 0.33% -- -- --
U.S. Systematic Large Cap Growth 0.45% 0.64% 0.49% -- --
U.S. Systematic Mid Cap Growth 0.70% 0.61% 0.41% -- --
U.S. Convertible 0.55% 0.44% 0.34% -- --
Global Select 0.65% 0.47% 0.42% -- --
International Growth 0.50% 0.86% 0.46% -- --
International Growth Opportunities 0.70% 0.69% 0.54% 0.49% 0.44%
Emerging Markets 0.90% 0.42% -- -- --
International Systematic 0.50% 0.48% -- -- --
International All Cap Growth 0.85% 0.27% -- -- --
U.S. High Yield Bond 0.40% 0.20% 0.15% -- --
- ---------------------------------------------------------------------------------------------
</Table>
* EXCLUDES TRUSTEES' FEES AND EXPENSES, TAX, BROKERAGE AND INTEREST EXPENSES,
AND EXTRAORDINARY EXPENSES.
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, except
for the chairman of the Trust who will receive annual compensation of
approximately $42,000 from the Trust.
77
<Page>
NOTE E -- INVESTMENT TRANSACTIONS
The following table presents purchases and sales of securities, excluding
short-term investments, during the period ended September 30, 2006 to indicate
the volume of transactions in each Fund. The tax cost of securities held at
September 30, 2006, 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.
<Table>
<Caption>
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. Micro Cap 62,776 58,681 86,624 10,580 (2,204) 8,376
U.S. Emerging Growth 8,740 7,032 10,883 1,238 (378) 860
U.S. Small Cap Value 32,115 42,496 129,018 23,880 (7,329) 16,551
U.S. Large Cap Value 7,681 5,684 24,485 5,935 (150) 5,785
U.S. Systematic Large Cap Growth 10,002 5,361 13,862 1,755 (122) 1,633
U.S. Systematic Mid Cap Growth 18,590 16,354 25,155 1,678 (961) 717
U.S. Convertible 22,094 20,496 33,536 3,431 404 3,835
Global Select 76,888 99,959 141,601 23,470 (2,909) 20,561
International Growth 51,095 56,422 91,288 16,852 (1,972) 14,880
International Growth Opportunities 135,322 130,627 186,402 29,044 4,090 24,954
Emerging Markets 1,028 62 978 41 (37) 4
International Systematic 2,836 3,050 4,097 639 (60) 579
International All Cap Growth 13,658 1,418 17,910 3,286 (351) 2,935
U.S. High Yield Bond 59,350 51,391 121,361 2,372 (629) 1,743
- ------------------------------------------------------------------------------------------------------------------------
</Table>
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
The Funds may be 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. For the period ended September 30, 2006 the Funds were not party to
any such agreements.
NOTE G -- SHAREHOLDER ACTIONS
The Trust held a special meeting of the shareholders of the Emerging Markets
Opportunities Fund on August 16, 2006. Shareholders of the Emerging Markets
Opportunities Fund approved the reorganization and tax free merger into the
Allianz Emerging Markets Opportunities Fund as described in the proxy statement
mailed to shareholders of record as of June 30, 2006 on July 14, 2006.
In the matter approving the reorganization and termination of the Fund there
were the following votes either present or represented by proxy:
FOR AGAINST ABSTAIN
- ------------------------------
948,204.06 0.00 0.00
- ------------------------------
NOTE H -- PROXY VOTING
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'
78
<Page>
SHAREHOLDER EXPENSE EXAMPLE -- (Unaudited)
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.
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 (April 1, 2006 to September 30, 2006).
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 if 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. 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.
<Table>
<Caption>
EXPENSES PAID
BEGINNING ACCOUNT ENDING ACCOUNT DURING THE PERIOD* ANNUALIZED
VALUE VALUE APRIL 1, 2006 TO EXPENSE
APRIL 1, 2006 SEPTEMBER 30, 2006 SEPTEMBER 30, 2006 RATIO
- -----------------------------------------------------------------------------------------------------------------------
U.S. MICRO CAP -- CLASS I
Actual $1,000.00 $ 883.50 $7.37 1.57%
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,017.10 $7.90 1.57%
- -----------------------------------------------------------------------------------------------------------------------
U.S. MICRO CAP -- CLASS II
Actual $1,000.00 $ 884.60 $6.16 1.32%
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.40 $6.59 1.32%
- -----------------------------------------------------------------------------------------------------------------------
U.S. EMERGING GROWTH -- CLASS I
Actual $1,000.00 $ 899.30 $5.87 1.21%
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.75 $6.24 1.21%
- -----------------------------------------------------------------------------------------------------------------------
U.S. SMALL CAP VALUE -- CLASS I
Actual $1,000.00 $1,002.00 $6.54 1.31%
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.40 $6.59 1.31%
- -----------------------------------------------------------------------------------------------------------------------
U.S. SMALL CAP VALUE -- CLASS II
Actual $1,000.00 $1,002.00 $6.04 1.21%
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.90 $6.09 1.21%
- -----------------------------------------------------------------------------------------------------------------------
U.S. LARGE CAP VALUE -- CLASS I
Actual $1,000.00 $1,059.00 $4.26 0.82%
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.79 $4.18 0.82%
- -----------------------------------------------------------------------------------------------------------------------
U.S. SYSTEMATIC LARGE CAP GROWTH -- CLASS I
Actual $1,000.00 $1,019.60 $5.69 1.13%
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.30 $5.69 1.13%
- -----------------------------------------------------------------------------------------------------------------------
U.S. SYSTEMATIC LARGE CAP GROWTH -- CLASS II
Actual $1,000.00 $1,020.30 $4.99 0.99%
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.00 $4.99 0.99%
- -----------------------------------------------------------------------------------------------------------------------
U.S. SYSTEMATIC MID CAP GROWTH -- CLASS I
Actual $1,000.00 $ 947.80 $6.51 1.34%
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.25 $6.74 1.34%
- -----------------------------------------------------------------------------------------------------------------------
</Table>
79
<Page>
<Table>
<Caption>
BEGINNING EXPENSES PAID
ACCOUNT ENDING ACCOUNT DURING THE PERIOD* ANNUALIZED
VALUE VALUE APRIL 1, 2006 TO EXPENSE
APRIL 1, 2006 SEPTEMBER 30, 2006 SEPTEMBER 30, 2006 RATIO
- ----------------------------------------------------------------------------------------------------------------------
U.S. SYSTEMATIC MID CAP GROWTH -- CLASS II
Actual $1,000.00 $ 948.70 $5.54 1.14%
Hypothetical (5% return before expenses) $1,000.00 $1,019.25 $5.74 1.14%
- ----------------------------------------------------------------------------------------------------------------------
U.S. CONVERTIBLE -- CLASS I
Actual $1,000.00 $1,009.50 $5.16 1.03%
Hypothetical (5% return before expenses) $1,000.00 $1,019.80 $5.19 1.03%
- ----------------------------------------------------------------------------------------------------------------------
U.S. CONVERTIBLE -- CLASS II
Actual $1,000.00 $1,010.00 $4.66 0.93%
Hypothetical (5% return before expenses) $1,000.00 $1,020.29 $4.68 0.93%
- ----------------------------------------------------------------------------------------------------------------------
GLOBAL SELECT -- CLASS I
Actual $1,000.00 $1,004.70 $5.80 1.16%
Hypothetical (5% return before expenses) $1,000.00 $1,019.15 $5.84 1.16%
- ----------------------------------------------------------------------------------------------------------------------
GLOBAL SELECT -- CLASS II
Actual $1,000.00 $1,004.70 $5.55 1.11%
Hypothetical (5% return before expenses) $1,000.00 $1,019.40 $5.59 1.11%
- ----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH -- CLASS I
Actual $1,000.00 $1,004.40 $7.00 1.40%
Hypothetical (5% return before expenses) $1,000.00 $1,017.95 $7.04 1.40%
- ----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH -- CLASS II
Actual $1,000.00 $1,006.20 $5.00 1.00%
Hypothetical (5% return before expenses) $1,000.00 $1,019.95 $5.04 1.00%
- ----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH OPPORTUNITIES -- CLASS I
Actual $1,000.00 $ 974.70 $7.04 1.43%
Hypothetical (5% return before expenses) $1,000.00 $1,017.80 $7.19 1.43%
- ----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH OPPORTUNITIES -- CLASS II
Actual $1,000.00 $ 975.40 $6.35 1.29%
Hypothetical (5% return before expenses) $1,000.00 $1,018.50 $6.49 1.29%
- ----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH OPPORTUNITIES -- CLASS III
Actual $1,000.00 $ 975.90 $6.06 1.23%
Hypothetical (5% return before expenses) $1,000.00 $1,018.80 $6.19 1.23%
- ----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH OPPORTUNITIES -- CLASS IV
Actual $1,000.00 $ 976.00 $5.18 1.18%
Hypothetical (5% return before expenses) $1,000.00 $1,019.05 $5.94 1.18%
- ----------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS -- CLASS I (1)
Actual $1,000.00 $1,004.00 $2.33 1.39%
Hypothetical (5% return before expenses) $1,000.00 $1,003.16 $2.33 1.39%
- ----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL SYSTEMATIC FUND -- CLASS I
Actual $1,000.00 $1,043.80 $5.35 1.01%
Hypothetical (5% return before expenses) $1,000.00 $1,019.70 $5.29 1.01%
- ----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL ALL CAP GROWTH -- CLASS I
Actual $1,000.00 $ 993.10 $8.05 1.17%
Hypothetical (5% return before expenses) $1,000.00 $1,016.85 $8.15 1.17%
- ----------------------------------------------------------------------------------------------------------------------
U.S. HIGH YIELD BOND -- CLASS I
Actual $1,000.00 $1,034.40 $3.25 0.64%
Hypothetical (5% return before expenses) $1,000.00 $1,021.74 $3.23 0.64%
- ----------------------------------------------------------------------------------------------------------------------
U.S. HIGH YIELD BOND -- CLASS II
Actual $1,000.00 $1,033.70 $2.99 0.59%
Hypothetical (5% return before expenses) $1,000.00 $1,021.99 $2.97 0.59%
- ----------------------------------------------------------------------------------------------------------------------
</Table>
(1) EMERGING MARKETS FUND'S CLASS I BEGINNING ACCOUNT VALUE ON 08/18/06
(COMMENCED DATE)
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO; MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD.
80
<Page>
SUPPLEMENTARY INFORMATION -- (Unaudited)
QUARTERLY FILING
The Funds provide a complete list of portfolio holdings four times in each
fiscal year, at the end of each calendar quarter. For the second and fourth
quarters, the portfolio holdings appear in the Funds' semiannual and annual
reports to shareholders. For the first and third quarters, the Funds file their
portfolio holdings 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.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
interpretation 48 ("FIN 48"), "ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES." This
standard defines the threshold for recognizing the benefits of tax-return
positions in the financial statements as "more-likely-than-not" to be sustained
by the taxing authority and requires measurement of a tax position meeting the
more-likely-than-not criterion, based on the largest benefit that is more than
50 percent likely to be realized. FIN 48 is effective as of the beginning of the
first fiscal year beginning after December 15, 2006. At adoption, companies must
adjust their financial statements to reflect only those tax positions that are
more-likely-than-not to be sustained as of the adoption date. As of September
30, 2006, the Funds have not evaluated the impact that will result from adopting
FIN 48.
TRUSTEE APPROVAL OF INVESTMENT ADVISORY AGREEMENT
On May 9, 2006, the Board of Trustees unanimously approved the Investment
Advisory Agreement between the Trust and the Investment Adviser (the
"Agreement") for the Emerging Countries Series of the Trust, a newly formed
Series of the Trust. In approving the Agreement, the Board of Trustees evaluated
information provided by the Investment Adviser, including expense data of other
funds with similar investment objectives and policies. The independent Trustees
assisted by independent legal counsel discussed the factors they felt were
relevant. The factors included:
1. comparative fee and expense data for the Fund and other funds with similar
investment objectives and policies; and to a relevant index;
2. the nature, extent and quality of investment advisory services to be
rendered by the Investment Adviser;
3. marketing and sales efforts to be committed to the Fund;
4. payments received by the Investment Adviser;
5. costs to be born by the Investment Adviser;
6. Investment Adviser's policies and practices regarding allocation of
portfolio transactions, best price and execution of portfolio transactions,
and soft dollar arrangements;
7. fall-out benefits, such as research received pursuant to Section 28(e) of
the Securities Exchange Act of 1934;
8. fees that the Investment Adviser charges its other clients with similar
investment objectives and policies and expense offset arrangements between
the Fund and its service providers;
9. experience and qualifications of each of the members of the Fund's
portfolio management team; and
10. risks inherent to securities of issuers located in emerging markets.
The Trustees also considered the nature and quality of the services provided by
the Investment Adviser, their confidence in the Investment Adviser's integrity
and competence, and its responsiveness to questions and issues raised by the
Trustees, including its ongoing willingness to consider and implement changes
designed to improve investment and operational results.
The Trustees determined that the fees of the Investment Advisory Agreement
between the Fund and the Investment Adviser were fair and reasonable in light of
the services performed, expenses incurred and such other matters as the Trustees
considered relevant to the exercise of their reasonable judgment. The Trustees
also separately discussed the material factors and conclusions that formed the
basis for the approval of the Investment Advisory Agreement for the Fund.
NATURE, EXTENT AND QUALITY OF THE SERVICES PROVIDED BY THE INVESTMENT ADVISER
The Trustees noted that the Investment Adviser will manage the portfolio of the
Fund under the direction of the Board consistent with the Fund's investment
objective and policies. The Trustees considered the scope and quality of
services provided by the Investment Adviser and its research capabilities and
other services to be provided to the Fund. The Trustees concluded that the
nature, extent and quality of the services to be provided by the investment
Adviser to the Fund is appropriate and consistent with the terms of the
Investment Advisory Agreement and that the Fund will benefit from the services
provided under the agreement with the Investment Adviser.
COST OF SERVICES
The Trustees examined the fee and expense information for the Fund in comparison
to information from other comparable funds. The Trustees agreed that overall the
Fund's management fees and expense ratio was reasonable in relation to the
management fees and expense ratios of the Fund's peer group. The Trustees also
reviewed the Investment Adviser's management fees for its institutional separate
accounts. In most instances institutional separate account fees are lower than
the Fund's management fee. However, the Trustees noted that the Investment
Adviser will perform significant other services to the Fund that it does not
provide
81
<Page>
to its institutional separate account clients, including administrative
services, oversight of the Fund's other service providers, trustee support,
regulatory compliance and numerous other services. The Trustees reviewed the
profitability analysis for the Fund and discussed the methodology used by the
Investment Adviser to assess profitability. The Trustees noted that the fees and
projected expenses of the Fund were structured for competitiveness thereby
positioning the Fund for growth in the institutional marketplace.
The Trustees concluded that the management fee and other compensation to be paid
by the Fund to the Investment Adviser was reasonable in relation to the nature
and quality of the services to be provided, taking into account the fees charged
by other advisers for managing comparable mutual funds with similar strategies
and the fees that the Investment Adviser charges to other clients, and that the
estimated overall expense ratio of the Fund, taking into account offset
arrangements with the Fund's brokers, custodian and third party services
providers, was comparable to or more favorable than the mean or median expense
ratios of their peers.
Having taken the relevant factors into consideration, the Trustees concluded
that the Investment Advisory Agreement to be fair and reasonable and in the best
interest of the Fund and its shareholders.
82
<Page>
<Table>
<Caption>
NAME, ADDRESS (1)
AGE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
POSITION(S) HELD WITH FUND OTHER DIRECTORSHIP HELD BY TRUSTEE
LENGTH OF TIME SERVED (2) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES:
GEORGE F. KEANE PRINCIPAL OCCUPATIONS: President Emeritus and founding Chief Executive Officer, The Common
(76) Fund (1971-1993); and Endowment Advisors (1987-1999) (organizations that provide investment
Chairman of the Board & management programs for colleges and universities)
Trustee
Since August 2004 OTHER DIRECTORSHIPS HELD: 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).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 14
WALTER E. AUCH PRINCIPAL OCCUPATIONS: Retired; prior thereto, Chairman and CEO of Chicago Board of Options
(85) Exchange (1979-1986); Senior Executive Vice President PaineWebber, Inc.
Trustee Since May 1999
OTHER DIRECTORSHIPS HELD: 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).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 14
DARLENE DEREMER PRINCIPAL OCCUPATIONS: Managing Director, Putnam Lovell NBF Private Equity (Since 2004);
(50) Managing Director, NewRiver E-Business Advisory Services Division (2000-2003); Prior to,
Trustee President and Founder, DeRemer Associates, a strategic and marketing consulting firm for
Since May 1999 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.
OTHER DIRECTORSHIPS HELD: 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 (since 1994-2000); Director, Nicholas-Applegate Southeast Asia Fund, Ltd.
(since 2004).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 14
JOHN J. MURPHY PRINCIPAL OCCUPATIONS: Founder and senior principal, Murphy Capital Management
(62)
Trustee OTHER DIRECTORSHIPS HELD: Director, Smith Barney Multiple Discipline Trust; Director,
Since September 2005 Barclays International Funds Group Ltd. and affiliated companies.
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 14
- ------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES: PRINCIPAL OCCUPATIONS: Managing Director (since 2004) and Chief Investment Officer.
HORACIO A. VALEIRAS Nicholas-Applegate Capital Management, Nicholas-Applegate Securities (since 2002); Managing
(47) Director of Morgan Stanley Investment Management, London (1997-2002); Head of International
President & Trustee Equity and Asset Allocation, Miller Anderson & Sherred; Director and Chief of Investment
Since August 2004 Strategies, Credit Suisse First Boston.
OTHER DIRECTORSHIPS HELD: Trustee, The Bishops School (since 2002); Trustee, San Diego
Rowing Club (since 2002).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 14
- ------------------------------------------------------------------------------------------------------------------------
</Table>
83
<Page>
<Table>
<Caption>
NAME, ADDRESS (1)
AGE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
POSITION(S) HELD WITH FUND OTHER DIRECTORSHIP HELD BY TRUSTEE
LENGTH OF TIME SERVED (2) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------
OFFICERS:
CHARLES H. FIELD, JR. PRINCIPAL OCCUPATIONS: General Counsel, Nicholas-Applegate Capital Management,
(51) Nicholas-Applegate Securities LLC, Nicholas-Applegate Holdings LLC (since February 2004),
Secretary and Chief Deputy General Counsel, Nicholas-Applegate Capital Management, LLC (1996-2004).
Compliance Officer
Since May 2002 OTHER DIRECTORSHIPS HELD: Director, Nicholas-Applegate U.S. Convertible Fund, LLC (since
2006).
NUMBER OF PORTFOLIOS OVERSEEN BY OFFICER: 14
DEBORAH A. WUSSOW PRINCIPAL OCCUPATIONS: Vice President and Director, Nicholas-Applegate Capital Management,
(46) LLC (Since 2005), and previously Manager, Legal and Compliance, Nicholas-Applegate Capital
Treasurer and Assistant Management, LLC (since 1995)
Secretary
Since August 2006 OTHER DIRECTORSHIPS HELD: NA
NUMBER OF PORTFOLIOS OVERSEEN BY OFFICER: 14
- ------------------------------------------------------------------------------------------------------------------------
</Table>
(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.
84
<Page>
TRUSTEES OF NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
George F. Keane, CHAIRMAN
Walter E. Auch
Darlene T. DeRemer
John J. Murphy
Horacio A. Valeiras
OFFICERS
Horacio A. Valeiras, PRESIDENT
Charles H. Field, Jr., SECRETARY
Deborah A. Wussow, 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
<Page>
[NICHOLAS | APPLEGATE(R) LOGO] SAR0906INST
INSTITUTIONAL FUNDS
Nicholas-Applegate Securities, Distributor
600 West Broadway
[A company of Allianz LOGO] San Diego, California 92101
Global Investors 800.551.8043
<Page>
NICHOLAS | APPLEGATE(R)
INSTITUTIONAL FUNDS
SEPTEMBER 30, 2006 SEMI-ANNUAL REPORT (UNAUDITED)
CLASS R SHARES
U.S. EMERGING GROWTH
U.S. SMALL CAP VALUE
U.S. LARGE CAP VALUE
U.S. SYSTEMATIC LARGE CAP GROWTH
INTERNATIONAL GROWTH
[A company of Allianz LOGO]
Global Investors
<Page>
LETTER TO SHAREHOLDERS
Dear Fellow Shareholder,
Equity markets around the world posted solid gains during the six months ended
September 30, 2006. Despite rising inflationary pressures and monetary
tightening, stock markets advanced amid strength in the global economy, healthy
corporate profits and a retreat in commodity prices.
In this semi-annual report, we review the performance of the financial markets
and our mutual funds from April 1 through September 30. In addition, we share
our thoughts on key themes shaping the investment environment and our outlook
for the months ahead.
In the United States, the broad equity market, as measured by the S&P 500 Index,
gained 4.14% this period. The Federal Reserve continued increasing short-term
interest rates during the spring in efforts to control rising inflation.
However, the central bank held the target funds rate steady at its August and
September meetings on signs that the U.S. economy was cooling. GDP grew at a
2.6% annual rate in the second quarter, following a scorching 5.6% pace in the
first three months of the year. Corporate profits remained robust, with S&P 500
companies reporting 16.3% year-over-year earnings growth in the second quarter
of 2006. This was well ahead of expectations and marked the twelfth consecutive
quarter of double-digit expansion.
In developed countries overseas, the MSCI EAFE Index eked out a 0.86% gain in
local currencies but rose 4.97% in U.S. dollar terms. European markets turned in
some of the best results, with the MSCI Europe Index rising 3.86% in local
currencies. Eurozone economies grew 0.9% in the second quarter (their fastest
pace since 2000) and growth in the United Kingdom was also strong. Inflation
climbed above policymakers' targets, prompting the European Central Bank and
Bank of England to raise short-term interest rates. The MSCI Japan Index fell
5.21% in dollar terms and nearly the same in yen on fears that moderating U.S.
economic growth would depress demand for exports. The Japanese economy remains
sensitive to the global cycle, even though domestic fundamentals have improved.
The Bank of Japan raised interest rates in July after five years of a near-zero
interest rate policy, reflecting its confidence in the country's recovery.
After gaining more than 40% in the prior twelve months, emerging market equities
took a breather this period, with the MSCI Emerging Markets Index rising 0.53%
(US$). Global equity markets were volatile in May due to worries about U.S.
inflation that were fueled by hawkish comments from the Fed and an unexpectedly
large rise in core consumer prices. As is common in such environments,
short-term investors took risk off the table and moved into perceived safe
havens, such as stocks in more developed countries. These concerns, along with
tensions in the Middle East, also contributed to the relative performance of
style and capitalization segments. Globally, value stocks outpaced growth stocks
and large caps outperformed smaller caps this period.
Commodity prices have corrected from their highest levels on slower demand
worldwide for oil and raw materials. The Reuters/Jeffries CRB Index, a barometer
of commodity prices, fell 9.4% from April 1 to September 30. The pullback eased
investor concerns about inflation and the need for further monetary tightening
from central banks. Investors were particularly enthusiastic about the
approximately 20% drop in the price of oil from its mid-July peak. This steep
decline was a major factor in the equity market gains realized during the latter
part of the period.
Just as there were several positive developments in the markets, there were a
number of positive developments at Nicholas-Applegate. One we are especially
excited about is the October 2006 opening of our London office, an event we have
been preparing for and anticipating for months. As a global investment firm, our
priority is to capitalize on changes that are taking place around the world.
This new office in Europe's leading financial center will strengthen our ability
to identify and capitalize on investment opportunities in the European markets.
We added several professionals to our traditional and systematic investment
teams this period, evidence of our commitment to providing shareholders with
top-notch talent. In particular, the broadening of our systematic team is
allowing us to pursue new avenues for maintaining the integrity and robustness
of our proprietary stock selection models. We currently have several research
projects underway in the areas of retail and financials, which have
applicability to both our U.S. and non-U.S. systematic funds. This research is
part of a process of continuous refinement and underscores our sensitivity to
the dynamic nature of the financial markets.
We're pleased to report that the U.S. Large Cap Value Fund celebrated its
ten-year anniversary this period. The Fund gained 12.41% on an annualized basis
from its April 30, 1996 inception through September 30, 2006, outperforming its
Russell 1000 Value benchmark, which rose 11.17%. The Fund also has a strong
competitive track record, ranking in the top 5% of its Lipper style category
during the ten years ended September 30.
Looking ahead, leading economic indicators in major developed countries outside
of Japan remain positive, despite recent declines. This supports our belief that
the global economy will continue to grow, albeit at a more modest pace. Although
we anticipate further rate increases from the European Central Bank and Bank of
Japan, we think the Fed is done tightening U.S. monetary policy. In addition,
commodity prices have fallen, equity valuations are reasonable, and earnings
growth, while decelerating, should remain at healthy levels in the United States
and abroad. A slowdown in the global economy, tame inflation, attractive
valuations and good earnings growth are an excellent recipe for higher share
prices as we head into 2007.
In this environment, we believe companies that can deliver strong earnings
growth should once again command premium valuations relative to all others. The
market seems to be rotating away from early cyclical companies and sectors into
more stable growth companies, suggesting that many years of value leadership may
be finally coming to an end. We also think this kind of environment is ideal for
security selection, particularly for investing in companies where positive
change is leading to increased earnings estimates. In our ongoing quest to
deliver excess return to shareholders, 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 the trust you have
placed in us.
Best Regards,
/s/ Horacio A. Valeiras
- ---------------------------------------
Horacio A. Valeiras, CFA
President and Chief Investment Officer
September 30, 2006
<Page>
TABLE OF CONTENTS
THE FUNDS' REVIEW AND OUTLOOK, PERFORMANCE AND SCHEDULE OF INVESTMENTS
U.S. Emerging Growth 1
U.S. Small Cap Value 5
U.S. Large Cap Value 8
U.S. Systematic Large Cap Growth 10
International Growth 13
THE FUNDS':
Financial Highlights 16
Statements of Assets and Liabilities 18
Statements of Operations 19
Statements of Changes in Net Assets 20
Notes to Financial Statements 22
Shareholder Expense Example 26
Supplementary Information 27
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.
<Page>
U.S. EMERGING GROWTH FUND
MANAGEMENT TEAM: JOHN C. MCCRAW, Portfolio Manager; TRAVIS T. PRENTICE,
Portfolio Manager; MONTIE L. WEISENBERGER, Portfolio Manager; K. MATHEW AXLINE,
CFA, Analyst; STEPHEN W. LYFORD, 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: From April 1 through September 30, 2006, the Russell 2000
Growth Index gave back some of the 14.36% gain it had posted in the first
quarter of the year. This period's decline in U.S. small-cap growth stocks was
mainly due to:
- Comments from the Federal Reserve in May indicating that monetary
tightening it had begun in June 2004 might not be over
- Evidence that the Fed's interest rate hikes had been successful at
slowing the economy, particularly the housing market
- Soaring oil prices and four consecutive monthly increases of 0.3% in
the core Consumer Price Index, which excludes food and energy prices
While generating losses for the entire six months, small-cap growth stocks
staged a comeback in August and September. The rebound came in response to
several welcome developments, most notably a pause in interest rate increases
from the Fed and a steep drop in oil prices. Acknowledging the economy was
slowing, the Fed decided to take a break from seventeen back-to-back interest
rate increases that had left the target funds rate at 5.25%. The price of oil
fell approximately 20% from its mid-July peak due to a mild Atlantic hurricane
season, rising U.S. distillate inventories and easing geopolitical concerns.
PERFORMANCE: The Fund's Class R shares lost 10.15% during the six months ended
September 30, 2006, compared to an 8.88% decline in the Russell 2000 Growth
Index.
PORTFOLIO SPECIFICS: Stock selection in the consumer discretionary sector had a
large positive impact on results versus the benchmark. Two of the Fund's
best-performing names were Bebe Stores, a women's apparel retailer, and Steven
Madden Ltd., a footwear wholesaler and retailer. Bebe Stores experienced
positive sales momentum attributable to well-received merchandise assortments
and the early success of a new customer loyalty program. Steven Madden Ltd.
reported better-than-expected second quarter earnings, driven by robust revenue
growth in its wholesale business. Unlike the energy stocks in the index, the
Fund's energy holdings delivered solid gains, and positive stock selection in
this sector was another key area of relative strength.
Holdings in the information technology and financials sectors subtracted the
most from relative performance, mainly due to stock selection. An underweight in
financials that resulted from our bottom-up stock selection decisions also
detracted. Financials were generally resilient this period in anticipation of
the end of the tightening cycle.
MARKET OUTLOOK: In the months ahead, a number of factors pave the way for gains
among small-cap growth stocks, including:
- Expectations that the Fed will hold the target funds rate steady
through the end of 2006
- Healthy corporate profit growth
- Lower gasoline prices, which have bolstered consumer confidence
Risks to our outlook include ongoing cooling in the housing market and resurgent
geopolitical tensions. However, we are confident that we can find companies with
exciting growth prospects for the Fund in any type of investment environment.
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.
[CHART]
<Table>
<Caption>
U.S. EMERGING
GROWTH FUND RUSSELL 2000
CLASS R SHARES GROWTH INDEX
-------------- ------------
1-Oct-93 $ 250,000.00 $250,000.00
31-Oct-93 $ 250,400.00 $257,230.00
30-Nov-93 $ 237,400.00 $246,825.05
31-Dec-93 $ 249,920.00 $256,564.76
31-Jan-94 $ 257,143.12 $263,394.52
28-Feb-94 $ 255,285.75 $262,235.58
31-Mar-94 $ 234,854.63 $246,126.45
30-Apr-94 $ 235,473.76 $246,503.02
31-May-94 $ 229,076.14 $240,978.89
30-Jun-94 $ 217,519.14 $230,681.86
31-Jul-94 $ 222,678.51 $233,969.08
31-Aug-94 $ 237,743.88 $251,137.73
30-Sep-94 $ 240,633.13 $252,190.00
31-Oct-94 $ 243,935.13 $254,875.82
30-Nov-94 $ 231,552.63 $244,563.54
31-Dec-94 $ 241,146.93 $250,325.46
31-Jan-95 $ 231,007.29 $245,226.33
28-Feb-95 $ 243,351.19 $256,558.24
31-Mar-95 $ 255,254.24 $264,052.31
30-Apr-95 $ 259,442.35 $268,023.65
31-May-95 $ 261,426.19 $271,534.76
30-Jun-95 $ 284,571.01 $290,246.22
31-Jul-95 $ 312,124.36 $312,868.01
31-Aug-95 $ 313,006.06 $316,728.81
30-Sep-95 $ 319,618.87 $323,250.25
31-Oct-95 $ 307,054.54 $307,349.57
30-Nov-95 $ 320,721.00 $320,915.98
31-Dec-95 $ 327,708.03 $328,027.48
31-Jan-96 $ 323,033.16 $325,311.41
29-Feb-96 $ 342,667.60 $340,145.61
31-Mar-96 $ 352,952.30 $346,870.29
30-Apr-96 $ 389,649.99 $373,499.52
31-May-96 $ 411,388.11 $392,652.58
30-Jun-96 $ 386,377.58 $367,138.02
31-Jul-96 $ 341,966.37 $322,317.81
31-Aug-96 $ 372,352.99 $346,178.99
30-Sep-96 $ 397,129.77 $364,007.21
31-Oct-96 $ 379,832.77 $348,303.94
30-Nov-96 $ 383,573.74 $357,990.27
31-Dec-96 $ 389,595.30 $364,971.08
31-Jan-97 $ 394,412.55 $374,088.06
28-Feb-97 $ 351,960.52 $351,496.88
31-Mar-97 $ 332,992.58 $326,691.75
30-Apr-97 $ 327,874.25 $322,911.92
31-May-97 $ 379,960.80 $371,445.59
30-Jun-97 $ 407,660.00 $384,041.31
31-Jul-97 $ 436,864.59 $403,719.58
31-Aug-97 $ 445,294.78 $415,835.21
30-Sep-97 $ 487,144.67 $449,018.86
31-Oct-97 $ 452,520.66 $422,050.79
30-Nov-97 $ 435,016.67 $411,989.09
31-Dec-97 $ 436,748.43 $412,219.81
31-Jan-98 $ 426,704.25 $406,720.80
28-Feb-98 $ 464,802.85 $442,630.18
31-Mar-98 $ 490,779.16 $461,198.51
30-Apr-98 $ 490,779.16 $464,025.66
31-May-98 $ 452,334.22 $430,314.19
30-Jun-98 $ 468,959.06 $434,712.00
31-Jul-98 $ 468,959.06 $398,413.55
31-Aug-98 $ 325,072.58 $306,443.77
30-Sep-98 $ 358,956.36 $337,514.10
31-Oct-98 $ 363,544.79 $355,118.84
30-Nov-98 $ 401,943.53 $382,665.41
31-Dec-98 $ 455,853.84 $417,292.80
31-Jan-99 $ 500,962.47 $436,062.63
28-Feb-99 $ 447,785.63 $396,171.62
31-Mar-99 $ 495,828.16 $410,283.25
30-Apr-99 $ 525,167.10 $446,515.37
31-May-99 $ 504,263.10 $447,220.86
30-Jun-99 $ 567,341.83 $470,780.45
31-Jul-99 $ 569,542.25 $456,223.92
31-Aug-99 $ 564,774.67 $439,161.15
30-Sep-99 $ 581,644.57 $447,632.57
31-Oct-99 $ 636,288.35 $459,096.44
30-Nov-99 $ 719,417.04 $507,641.29
31-Dec-99 $ 881,444.55 $597,113.07
31-Jan-00 $ 860,164.44 $591,553.95
29-Feb-00 $1,157,339.30 $729,184.89
31-Mar-00 $1,009,871.87 $652,532.98
30-Apr-00 $ 866,884.47 $586,646.72
31-May-00 $ 761,230.59 $535,279.93
30-Jun-00 $ 917,284.73 $604,427.40
31-Jul-00 $ 820,964.23 $552,627.97
31-Aug-00 $ 940,804.85 $610,758.90
30-Sep-00 $ 885,177.90 $580,416.40
31-Oct-00 $ 791,097.41 $533,304.00
30-Nov-00 $ 609,448.07 $436,472.00
31-Dec-00 $ 663,207.24 $463,179.72
31-Jan-01 $ 674,384.89 $500,669.48
28-Feb-01 $ 562,076.12 $432,037.71
31-Mar-01 $ 508,316.95 $392,756.84
30-Apr-01 $ 568,995.62 $440,842.06
31-May-01 $ 571,124.69 $451,051.96
30-Jun-01 $ 581,237.81 $463,352.15
31-Jul-01 $ 543,978.97 $423,823.58
31-Aug-01 $ 507,252.41 $397,334.61
30-Sep-01 $ 421,557.09 $333,204.80
31-Oct-01 $ 456,686.85 $365,259.10
30-Nov-01 $ 492,881.14 $395,758.24
31-Dec-01 $ 515,236.44 $420,413.97
31-Jan-02 $ 500,865.18 $405,447.24
28-Feb-02 $ 469,461.31 $379,214.80
31-Mar-02 $ 507,784.68 $412,168.57
30-Apr-02 $ 499,800.64 $403,265.73
31-May-02 $ 473,187.19 $379,674.68
30-Jun-02 $ 439,654.24 $347,478.27
31-Jul-02 $ 377,378.76 $294,070.86
31-Aug-02 $ 376,314.22 $293,923.82
30-Sep-02 $ 355,555.73 $272,702.52
31-Oct-02 $ 361,942.96 $286,501.27
30-Nov-02 $ 379,507.84 $314,893.55
31-Dec-02 $ 353,958.92 $293,165.89
31-Jan-03 $ 343,845.81 $285,191.78
28-Feb-03 $ 333,200.43 $277,577.16
31-Mar-03 $ 333,732.70 $281,768.57
30-Apr-03 $ 365,136.57 $308,423.88
31-May-03 $ 397,604.98 $343,183.25
30-Jun-03 $ 407,185.83 $349,806.69
31-Jul-03 $ 438,057.43 $376,252.08
31-Aug-03 $ 465,203.15 $396,456.81
30-Sep-03 $ 442,847.85 $386,426.45
31-Oct-03 $ 483,832.57 $419,813.70
30-Nov-03 $ 496,074.76 $433,499.63
31-Dec-03 $ 487,026.18 $435,450.37
31-Jan-04 $ 515,768.71 $458,311.52
29-Feb-04 $ 506,720.14 $457,624.05
31-Mar-04 $ 506,720.14 $459,774.89
30-Apr-04 $ 475,848.53 $436,694.19
31-May-04 $ 480,638.96 $445,384.40
30-Jun-04 $ 501,397.45 $460,171.16
31-Jul-04 $ 457,751.39 $418,893.81
30-Aug-04 $ 439,654.24 $409,887.59
30-Sep-04 $ 470,525.84 $432,554.38
31-Oct-04 $ 483,135.93 $443,065.45
30-Nov-04 $ 522,076.69 $480,504.48
31-Dec-04 $ 539,983.92 $497,754.59
31-Jan-05 $ 518,924.55 $475,305.86
28-Feb-05 $ 532,105.23 $481,817.55
31-Mar-05 $ 514,226.49 $463,749.39
30-Apr-05 $ 481,573.11 $434,254.93
31-May-05 $ 514,753.50 $464,869.90
30-Jun-05 $ 537,917.41 $479,885.20
31-Jul-05 $ 577,400.54 $513,429.17
31-Aug-05 $ 581,615.57 $506,189.82
30-Sep-05 $ 587,431.72 $510,188.72
31-Oct-05 $ 572,158.50 $491,311.74
30-Nov-05 $ 598,935.52 $519,119.98
31-Dec-05 $ 611,034.01 $518,341.30
31-Jan-06 $ 680,569.68 $568,361.24
28-Feb-06 $ 690,029.60 $565,348.92
31-Mar-06 $ 732,190.41 $592,824.88
30-Apr-06 $ 740,610.60 $591,105.69
31-May-06 $ 697,433.00 $549,491.85
30-Jun-06 $ 693,248.41 $549,821.54
31-Jul-06 $ 650,544.30 $521,285.81
31-Aug-06 $ 657,375.02 $536,559.48
30-Sep-06 $ 641,538 $540,208.08
</Table>
Annualized Total Returns As of 9/30/06
1 YEAR 5 YEARS 10 YEARS
- -------------------------------------------------------
U.S. Emerging Growth Fund
Class R Shares 11.79% 9.22% 5.04%
- -------------------------------------------------------
Russell 2000 Growth Index 5.88% 10.15% 4.03%
- -------------------------------------------------------
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. THIS PERFORMANCE HAS BEEN RESTATED TO REFLECT SHAREHOLDER
SERVICES FEES OF 0.25% APPLICABLE TO CLASS R SHARES, BUT NOT CLASS I SHARES OF
THE FUND. 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. 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.
1
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2006
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCK - 98.1%
ADVERTISING SERVICES - 0.8%
inVentiv Health, Inc.* 2,400 $ 76,872
--------
AEROSPACE/DEFENSE-EQUIPMENT - 3.3%
AAR Corp.* 3,400 81,056
BE Aerospace, Inc.* 2,500 52,725
LMI Aerospace, Inc.*, ## 4,000 74,000
Moog, Inc. Cl. A* 1,600 55,456
Orbital Sciences Corp.* 3,700 69,449
--------
332,686
--------
AGRICULTURAL OPERATIONS - 0.7%
The Andersons, Inc. 1,963 67,036
--------
APPAREL MANUFACTURERS - 0.5%
Phillips-Van Heusen Corp. 1,200 50,124
--------
AUCTION HOUSE/ART DEALER - 0.7%
Sotheby's Cl. A 2,300 74,152
--------
BATTERIES/BATTERY SYSTEMS - 0.6%
EnerSys* 3,800 60,952
--------
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS - 0.6%
NCI Building Systems, Inc.* 1,100 63,987
--------
BUILDING & CONSTRUCTION-MISCELLANEOUS - 0.7%
Layne Christensen Co.* 2,400 68,568
--------
BUILDING PRODUCTS-AIR & HEATING - 0.6%
Comfort Systems USA, Inc.## 5,300 60,738
--------
BUILDING-HEAVY CONSTRUCTION - 0.8%
Infrasource Services, Inc.* 2,800 49,140
Perini Corp.* 1,700 35,496
--------
84,636
--------
BUILDING-MAINTENANCE & SERVICE - 0.5%
Healthcare Services Group, Inc. 2,200 55,352
--------
CAPACITORS - 0.5%
Kemet Corp.* 6,100 49,227
--------
COMMERCIAL SERVICES - 0.9%
PeopleSupport, Inc.* 4,900 90,650
--------
COMMERCIAL SERVICES-FINANCE - 0.9%
Coinstar, Inc.* 1,800 51,804
Jackson Hewitt Tax Service, Inc. 1,200 36,012
--------
87,816
--------
COMMUNICATIONS SOFTWARE - 0.5%
Smith Micro Software, Inc.*, ## 3,500 50,330
--------
COMPUTER AIDED DESIGN - 0.5%
ANSYS, Inc.* 700 30,926
Aspen Technology, Inc.* 2,200 24,024
--------
54,950
--------
COMPUTERS-INTEGRATED SYSTEMS - 0.7%
Radiant Systems, Inc.* 5,900 71,272
--------
COMPUTERS-MEMORY DEVICES - 0.4%
Komag, Inc.* 1,400 44,744
--------
CONSULTING SERVICES - 0.7%
Watson Wyatt Worldwide, Inc. Cl. A 1,700 69,564
--------
DISPOSABLE MEDICAL PRODUCTS - 0.7%
ICU Medical, Inc.* 1,600 72,768
--------
DISTRIBUTION/WHOLESALE - 1.6%
Brightpoint, Inc.* 5,100 72,522
LKQ Corp.* 4,300 94,471
--------
166,993
--------
DIVERSIFIED MANUFACTURING OPERATIONS - 0.7%
Ameron International Corp. 1,000 $ 66,440
--------
E-COMMERCE/PRODUCTS - 0.4%
Nutri/System, Inc.*, ## 600 37,374
--------
ELECTRIC PRODUCTS-MISCELLANEOUS - 0.9%
Littelfuse, Inc.* 2,500 86,750
--------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 1.6%
Diodes, Inc.* 1,300 56,121
Lattice Semiconductor Corp.* 6,800 46,376
Silicon Image, Inc.* 4,500 57,240
--------
159,737
--------
ELECTRONIC MEASURE INSTRUMENTS - 0.4%
Eagle Test Systems, Inc.* 2,500 41,300
--------
ELECTRONIC PARTS DISTRIBUTION - 0.6%
NU Horizons Electronics Corp.*, ## 4,800 61,152
--------
E-MARKETING/INFORMATION - 0.5%
aQuantive, Inc.* 2,200 51,964
--------
ENERGY-ALTERNATE SOURCES - 1.0%
Evergreen Solar, Inc.*, ## 5,200 43,160
Sunpower Corp. Cl. A*, ## 2,100 58,254
--------
101,414
--------
ENGINEERING/R & D SERVICES - 0.5%
URS Corp.* 1,400 54,446
--------
ENTERPRISE SOFTWARE/SERVICES - 2.6%
Concur Technologies, Inc.*, ## 4,100 59,655
Mantech International Corp. Cl. A* 2,200 72,622
Sybase, Inc.* 2,300 55,752
Ultimate Software Group, Inc.* 3,300 77,649
--------
265,678
--------
ENTERTAINMENT SOFTWARE - 0.8%
THQ, Inc.*, ## 2,650 77,300
--------
FINANCE-CONSUMER LOANS - 1.3%
Asta Funding, Inc. 2,200 82,478
World Acceptance Corp.* 1,200 52,776
--------
135,254
--------
FINANCE-INVESTMENT BANKERS/BROKERS - 1.2%
optionsXpress Holdings, Inc. 2,300 64,124
SWS Group, Inc. 2,400 59,736
--------
123,860
--------
FINANCE-OTHER SERVICES - 0.8%
GFI Group, Inc.* 1,400 77,406
--------
FIREARMS & AMMUNITION - 0.8%
Smith & Wesson Holding Corp.*, ## 5,500 76,340
--------
FOOD-RETAIL - 0.6%
Wild Oats Markets, Inc.*, ## 3,700 59,829
--------
FOOD-WHOLESALE/DISTRIBUTION - 0.6%
Performance Food Group Co.* 2,200 61,798
--------
FOOTWEAR & RELATED APPAREL - 2.3%
CROCS, Inc.*, ## 1,700 57,715
Iconix Brand Group, Inc.* 5,400 86,940
Steven Madden, Ltd.## 2,400 94,176
--------
238,831
--------
GOLF - 0.7%
Callaway Golf Co. 5,400 70,794
--------
HOTELS & MOTELS - 0.7%
Orient-Express Hotels, Ltd. Cl. A 2,000 74,760
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
2
<Page>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
HUMAN RESOURCES - 0.6%
Kforce, Inc.* 5,100 $ 60,843
--------
INDUSTRIAL AUTOMATION/ROBOTICS - 1.3%
Gerber Scientific, Inc.* 5,200 77,896
Hurco Cos, Inc.* 2,200 52,866
--------
130,762
--------
INSTRUMENTS-SCIENTIFIC - 0.8%
OYO Geospace Corp.* 1,500 85,125
--------
INTERNET APPLICATIONS SOFTWARE - 2.3%
Cybersource Corp* 7,000 82,810
Dealertrack Holdings, Inc.*, ## 4,400 97,284
WebEx Communications, Inc.* 1,400 54,628
--------
234,722
--------
INTERNET CONNECTIVITY SERVICES - 0.4%
Redback Networks, Inc.* 2,600 36,088
--------
INTERNET CONTENT-INFO/NEWS - 1.1%
The Knot, Inc.* 2,500 55,325
TheStreet.com, Inc. 5,300 56,392
--------
111,717
--------
INTERNET INFRASTRUCTURE EQUIPMENT - 0.6%
Avocent Corp.* 2,100 63,252
--------
INTERNET INFRASTRUCTURE SOFTWARE - 0.7%
RADvision, Ltd.* 4,200 69,300
--------
INVESTMENT MANAGEMENT/ADVISOR SERVICES - 0.9%
Affiliated Managers Group, Inc.*, ## 900 90,099
--------
LASERS-SYSTEMS/COMPONENTS - 0.6%
II-VI, Inc.* 2,300 57,316
--------
MACHINERY-GENERAL INDUSTRY - 1.5%
Flow International Corp.*, ## 2,400 31,128
Gardner Denver, Inc.* 1,900 62,852
Kadant, Inc.* 2,400 58,944
--------
152,924
--------
MEDICAL INFORMATION SYSTEMS - 1.3%
Allscripts Healthcare Solutions, Inc.* 3,300 74,085
Phase Forward, Inc.* 5,200 62,088
--------
136,173
--------
MEDICAL INSTRUMENTS - 3.9%
Angiodynamics, Inc.* 2,600 53,846
Arthrocare Corp.* 2,200 103,092
DexCom, Inc.*, ## 2,400 26,712
Micrus Endovascular Corp.* 3,500 45,395
NuVasive, Inc.* 2,500 50,275
Spectranetics Corp.* 4,900 57,330
Stereotaxis, Inc.*, ## 6,200 64,170
--------
400,820
--------
MEDICAL LABS & TESTING SERVICES - 0.8%
Icon PLC - ADR* 1,200 84,696
--------
MEDICAL LASER SYSTEMS - 0.7%
Cutera Inc.* 2,700 71,793
--------
MEDICAL PRODUCTS - 0.6%
Viasys Healthcare, Inc.* 2,400 65,376
--------
MEDICAL-BIOMEDICAL/GENETICS - 1.8%
InterMune, Inc.*, ## 2,800 45,976
Keryx Biopharmaceuticals, Inc.* 5,100 60,333
Lifecell Corp.*, ## 2,500 80,550
--------
186,859
--------
MEDICAL-DRUGS - 1.1%
Collagenex Pharmaceuticals, Inc.*, ## 4,300 $ 55,857
New River Pharmaceuticals*, ## 2,300 59,179
--------
115,036
--------
MEDICAL-HMO - 0.4%
WellCare Health Plans, Inc.* 700 39,641
--------
MEDICAL-OUTPATIENT/HOME MEDICAL CARE - 1.2%
Hythiam, Inc.*, ## 6,500 46,930
Matria Healthcare, Inc.* 2,700 75,033
--------
121,963
--------
METAL PROCESSORS & FABRICATION - 0.7%
RBC Bearings, Inc.* 3,000 72,450
--------
OFFICE FURNISHINGS-ORIGINAL - 1.4%
Interface, Inc. Cl. A* 5,400 69,552
Knoll, Inc. 3,400 68,680
--------
138,232
--------
OIL & GAS DRILLING - 0.4%
Bronco Drilling Co., Inc.* 2,100 36,918
--------
OIL COMPANIES-EXPLORATION & PRODUCTION - 0.4%
Goodrich Petroleum Corp*, ## 1,400 42,168
--------
OIL FIELD MACHINERY & EQUIPMENT - 0.8%
Lufkin Industries, Inc.* 900 47,628
Universal Compression Holdings, Inc.* 600 32,070
--------
79,698
--------
OIL-FIELD SERVICES - 2.5%
Basic Energy Services, Inc.* 1,400 34,160
Global Industries, Ltd.*, ## 3,800 59,128
Helix Energy Solutions Group* 1,500 50,100
Hornbeck Offshore Services, Inc.* 2,100 70,350
Oceaneering International, Inc.* 1,300 40,040
--------
253,778
--------
PHARMACY SERVICES - 0.6%
HealthExtras, Inc.* 2,200 62,282
--------
PHYSICAL PRACTICE MANAGEMENT - 0.7%
Healthways, Inc.* 1,500 66,900
--------
PHYSICAL THERAPY/REHABILITATION CENTERS - 0.7%
Psychiatric Solutions, Inc.* 2,200 74,998
--------
PRIVATE CORRECTIONS - 0.7%
The Geo Group, Inc.* 1,800 76,050
--------
PROPERTY/CASUALTY INSURANCE - 2.6%
American Physicians Capital, Inc.* 1,500 72,570
Argonaut Group, Inc.* 1,900 58,957
Navigators Group, Inc.* 1,400 67,214
Ohio Casualty Corp. 2,500 64,675
--------
263,416
--------
REAL ESTATE OPERATION/DEVELOPMENT - 1.0%
Corrections Corp. of America* 2,250 97,313
--------
RENTAL AUTO/EQUIPMENT - 1.0%
Dollar Thrifty Auto Group, Inc.*, ## 1,500 66,855
H&E Equipment Services, Inc.* 1,600 39,024
--------
105,879
--------
RESEARCH & DEVELOPMENT - 0.7%
Parexel International Corp.*, ## 2,000 66,180
--------
RESORTS/THEME PARKS - 0.7%
Vail Resorts, Inc.* 1,700 68,034
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE - 3.5%
Aeropostale, Inc.* 1,700 $ 49,691
Bebe Stores, Inc.* 3,800 94,164
Charlotte Russe Holding, Inc.* 3,200 88,128
Christopher & Banks Corp. 1,900 56,012
DSW, Inc. Cl. A*, ## 2,200 69,300
-----------
357,295
-----------
RETAIL-ARTS & CRAFTS - 0.5%
AC Moore Arts & Crafts, Inc.* 2,700 51,381
-----------
RETAIL-COMPUTER EQUIPMENT - 0.8%
GameStop Corp. Cl. A*, ## 1,800 83,304
-----------
RETAIL-JEWELRY - 0.5%
Movado Group, Inc. 2,100 53,382
-----------
RETAIL-LEISURE PRODUCTS - 0.5%
MarineMax, Inc.* 2,100 53,445
-----------
RETAIL-PETROLEUM PRODUCTS - 0.6%
World Fuel Services Corp. 1,500 60,675
-----------
RETAIL-SPORTING GOODS - 0.6%
Hibbett Sporting Goods, Inc.* 2,400 62,832
-----------
RUBBER & PLASTICS - 0.2%
PW Eagle, Inc.## 800 24,008
-----------
SAVINGS & LOANS/THRIFTS-SOUTHERN US - 0.6%
BankUnited Financial Corp.Cl. A* 2,300 59,961
-----------
SAVINGS & LOANS/THRIFTS-WESTERN US - 0.8%
FirstFed Financial Corp.*, ## 1,400 79,408
-----------
SEISMIC DATA COLLECTION - 0.6%
Veritas DGC, Inc.* 900 59,238
-----------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS - 1.4%
Anadigics, Inc.* 9,900 70,884
Standard Microsystems Corp.* 2,400 68,208
-----------
139,092
-----------
SEMICONDUCTOR EQUIPMENT - 0.8%
Brooks Automation, Inc.* 3,000 39,150
Rudolph Technologies, Inc.* 2,100 38,493
-----------
77,643
-----------
STEEL PIPE & TUBE - 0.6%
Valmont Industries, Inc. 1,100 57,475
-----------
TELECOMMUNICATIONS EQUIPMENT - 1.5%
Arris Group, Inc.* 5,400 61,884
CommScope, Inc.* 2,800 92,008
-----------
153,892
-----------
TELECOMMUNICATIONS EQUIPMENT FIBER OPTICS - 0.6%
Oplink Communications, Inc.* 2,900 57,942
-----------
THERAPEUTICS - 0.7%
Medicines Co.* 3,000 67,680
-----------
TRANSACTIONAL SOFTWARE - 2.3%
Open Solutions, Inc.* 2,800 80,668
Transaction Systems Architects, Inc. Cl. A* 2,100 72,072
VeriFone Holding, Inc.*, ## 2,900 82,795
-----------
235,535
-----------
TRANSPORT-AIR FREIGHT - 0.4%
EGL, Inc.* 1,000 36,440
-----------
TRANSPORT-MARINE - 0.9%
American Commercial Lines* 1,500 89,175
-----------
TRANSPORT-SERVICES - 0.6%
Universal Truckload Services, Inc.* 2,400 $ 62,328
-----------
TRANSPORT-TRUCK - 1.2%
Old Dominion Freight Line, Inc.* 1,600 48,048
US Xpress Enterprises, Inc. Cl. A* 3,000 69,450
-----------
117,498
-----------
VITAMINS & NUTRITION PRODUCTS - 1.0%
Herbalife, Ltd.* 2,700 102,276
-----------
WEB PORTALS/ISP - 0.7%
Trizetto Group, Inc.*, ## 5,000 75,700
-----------
WIRE & CABLE PRODUCTS - 1.4%
General Cable Corp.* 1,900 72,599
Superior Essex, Inc.* 2,100 71,925
-----------
144,524
-----------
WIRELESS EQUIPMENT - 1.1%
ID Systems, Inc.*, ## 1,900 44,897
Stratex Networks, Inc.* 15,200 67,488
-----------
112,385
-----------
- -------------------------------------------------------------------------------
Total Common Stock (Cost: $9,108,893) 9,969,159
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 17.5%
MONEY MARKET FUNDS - 15.7%
Boston Global Investment Trust - Enhanced
Portfolio, 5.320%** $1,593,900 1,593,900
-----------
TIME DEPOSIT - 1.8%
Bank of America London
4.630%, 10/01/06 180,059 180,059
- -------------------------------------------------------------------------------
Total Short Term Investments (Cost: $1,773,959) 1,773,959
- -------------------------------------------------------------------------------
Total Investments - 115.6% (Cost: $10,882,852) 11,743,118
- -------------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (15.6%) (1,583,449)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $10,159,669
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/06.
ADR - AMERICAN DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 - Unaudited
PERCENT OF
SECTOR NET ASSETS
- -------------------------------------------------------------------------------
Consumer, Non-cyclical 24.1%
Industrial 21.0
Consumer, Cyclical 15.1
Technology 12.9
Communications 11.2
Financial 8.2
Energy 5.6
Short Term Investments 17.5
- -------------------------------------------------------------------------------
Total Investments 115.6%
- -------------------------------------------------------------------------------
Liabilities in excess of other assets (15.6)
- -------------------------------------------------------------------------------
Net Assets 100.0%
- -------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
<Page>
U.S. SMALL CAP VALUE FUND
MANAGEMENT TEAM: MARK W. STUCKELMAN, Portfolio Manager; NELSON SHING, Portfolio
Manager; JAMES FERNANDES, CFA, CPA, Analyst; CHARLES HOEVELER, Analyst
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: After posting double-digit gains in the first quarter of the
year, prices of U.S. small-cap value stocks fell slightly from April 1 through
September 30, 2006. Positive returns throughout much of the six-month period
were offset by losses in May and July. The investment environment was
characterized by:
- Evidence that economic growth was moderating, including softness in
retail sales, business investment and the housing market
- Sharp spike and retreat in oil prices, which hit $78.40 a barrel in
mid-July and subsequently fell by approximately 20%
- Anticipation of the end of the monetary tightening cycle that the
Federal Reserve had initiated in June 2004
Because equity prices were volatile during the period, small-cap value stocks in
defensive sectors turned in some of the best results. Utilities were the clear
winners, rising nearly 10%, followed by consumer staples and financials.
Information technology stocks fared the worst due to their relatively high
sensitivity to movements in the stock market. The energy and materials sectors
also lagged, hurt by falling commodity prices.
PERFORMANCE: From April 1 through September 30, 2006, the Fund's Class R shares
gained 0.05% and the Russell 2000 Value Index lost 0.22%.
PORTFOLIO SPECIFICS: Performance versus the index was helped by positive stock
selection in most sectors. Stock selection was particularly strong in the
industrials and information technology sectors, where top-performing positions
included Corrections Corporation of America, an operator of correctional
facilities, and Varian Semiconductor, a manufacturer of semiconductor processing
equipment. Corrections Corporation of America benefited from a robust demand
environment and a lack of supply of beds in the industry. Varian Semiconductor
benefited from its dominant market share in the ion implantation process of
wafer fabrication to report strong margins and positive guidance for the year.
Stock selection in the health care sector had the largest negative impact on
relative results. Drug manufacturer MGI Pharma was a weak performer, as the
company reduced its 2006 earnings guidance, citing increased generic competition
for an existing product and slow sales of a new product. An overweight position
in materials and an underweight in financials detracted from returns. Sector
allocations are a result of our bottom-up investment decisions.
MARKET OUTLOOK: While oil prices have fallen and investors have started to
speculate about when the Fed might start cutting interest rates, we feel that
economic uncertainty has increased risk. The housing market has cooled
substantially, and consumer and business spending has slowed.
Regardless of the macroeconomic environment, we remain confident that we will
continue to add value to the benchmark through intense, fundamental research and
our diversified, risk-controlled approach to portfolio construction.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN U.S. SMALL CAP VALUE
FUND CLASS R SHARES WITH THE RUSSELL 2000 VALUE INDEX.
[CHART]
<Table>
<Caption>
U.S. SMALL CAP
VALUE FUND RUSSELL 2000
CLASS R SHARES VALUE INDEX
-------------- ------------
12/30/1997 $250,000 $250,000
12/31/1997 $248,615 $250,504
1/31/1998 $246,290 $245,969
2/28/1998 $267,794 $260,851
3/31/1998 $280,490 $271,441
4/30/1998 $283,491 $272,771
5/31/1998 $273,667 $263,115
6/30/1998 $271,348 $261,642
7/31/1998 $252,473 $241,155
8/31/1998 $209,580 $203,390
9/30/1998 $218,998 $214,882
10/31/1998 $230,020 $221,264
11/30/1998 $242,081 $227,260
12/31/1998 $250,628 $234,396
1/31/1999 $239,061 $229,075
2/28/1999 $224,141 $213,429
3/31/1999 $215,914 $211,658
4/30/1999 $236,611 $230,982
5/31/1999 $246,067 $238,073
6/30/1999 $255,665 $246,692
7/31/1999 $254,058 $240,845
8/31/1999 $245,736 $232,030
9/30/1999 $237,929 $227,389
10/31/1999 $229,389 $222,842
11/30/1999 $235,289 $224,000
12/31/1999 $238,825 $230,877
1/31/2000 $232,281 $224,828
2/29/2000 $228,601 $238,565
3/31/2000 $246,935 $239,687
4/30/2000 $255,577 $241,101
5/31/2000 $253,482 $237,412
6/30/2000 $258,374 $244,344
7/31/2000 $258,632 $252,481
8/31/2000 $274,978 $263,767
9/30/2000 $279,074 $262,263
10/31/2000 $280,835 $261,319
11/30/2000 $273,398 $255,988
12/31/2000 $302,786 $283,507
1/31/2001 $315,347 $291,332
2/28/2001 $315,435 $290,924
3/31/2001 $310,187 $286,269
4/30/2001 $331,161 $299,523
5/31/2001 $350,941 $307,221
6/30/2001 $358,004 $319,572
7/31/2001 $361,354 $312,413
8/31/2001 $357,292 $311,320
9/30/2001 $320,955 $276,950
10/31/2001 $330,661 $284,178
11/30/2001 $347,505 $304,611
12/31/2001 $375,966 $323,253
1/31/2002 $379,586 $327,552
2/28/2002 $380,295 $329,550
3/31/2002 $414,424 $354,234
4/30/2002 $423,323 $366,703
5/31/2002 $410,470 $354,565
6/30/2002 $403,990 $346,729
7/31/2002 $345,834 $295,205
8/31/2002 $343,612 $293,906
9/30/2002 $320,471 $272,921
10/31/2002 $318,257 $277,015
11/30/2002 $344,152 $299,121
12/31/2002 $338,326 $286,348
1/31/2003 $328,072 $278,273
2/28/2003 $318,807 $268,923
3/31/2003 $324,421 $271,801
4/30/2003 $353,160 $297,622
5/31/2003 $394,223 $328,009
6/30/2003 $405,191 $333,552
7/31/2003 $432,905 $350,197
8/31/2003 $457,432 $363,504
9/30/2003 $447,152 $359,324
10/31/2003 $493,167 $388,609
11/30/2003 $516,305 $403,531
12/31/2003 $535,670 $418,139
1/31/2004 $557,954 $432,607
2/29/2004 $571,801 $440,999
3/31/2004 $574,514 $447,085
4/30/2004 $547,303 $423,971
5/31/2004 $558,815 $429,101
6/30/2004 $581,081 $450,899
7/31/2004 $554,847 $430,158
8/30/2004 $549,132 $434,373
9/30/2004 $581,750 $451,575
10/31/2004 $588,681 $458,574
11/30/2004 $638,130 $499,295
12/31/2004 $660,975 $511,179
1/31/2005 $641,807 $491,396
2/28/2005 $650,279 $501,126
3/31/2005 $641,045 $490,803
4/30/2005 $618,224 $465,477
5/31/2005 $647,342 $493,871
6/30/2005 $671,682 $515,700
7/31/2005 $712,587 $545,044
8/31/2005 $693,063 $532,508
9/30/2005 $690,498 $531,602
10/31/2005 $668,748 $518,259
11/30/2005 $707,869 $539,300
12/31/2005 $715,373 $535,148
1/31/2006 $755,577 $579,405
2/28/2006 $753,612 $579,347
3/31/2006 $781,948 $607,445
4/30/2006 $792,582 $609,085
5/31/2006 $771,341 $583,869
6/30/2006 $776,432 $591,051
7/31/2006 $742,191 $582,835
8/31/2006 $774,477 $600,262
9/30/2006 $783,538 $606,144
</Table>
Annualized Total Returns As of 9/30/06
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------
U.S. Small Cap Value Fund
Class R Shares 13.21% 19.43% 13.88%
- --------------------------------------------------------
Russell 2000 Value Index 14.01% 16.96% 10.65%
- --------------------------------------------------------
THE GRAPH ABOVE SHOWS THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND COMPARED WITH THE RUSSELL 2000 VALUE INDEX FOR THE PERIODS INDICATED.
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 DECEMBER 2, 2004. PERFORMANCE PRIOR TO THE
DECEMBER 3, 2004 INCEPTION OF CLASS R SHARES REFLECTS THE HISTORICAL PERFORMANCE
OF THE FUND'S CLASS I SHARES. THIS PERFORMANCE HAS BEEN RESTATED TO REFLECT
SHAREHOLDER SERVICES FEES OF 0.25% APPLICABLE TO CLASS R SHARES, BUT NOT CLASS I
SHARES OF THE FUND. 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.
5
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2006
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCK - 92.9%
AEROSPACE/DEFENSE-EQUIPMENT - 1.5%
AAR Corp.* 89,400 $2,131,296
----------
AUTO/TRUCK PARTS & EQUIPMENT-REPLACEMENT - 0.6%
Aftermarket Technology Corp.* 49,500 879,120
----------
B2B/E-COMMERCE - 1.0%
webMethods, Inc.* 193,400 1,479,510
----------
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS - 1.0%
ElkCorp. 54,700 1,485,105
----------
BUILDING & CONSTRUCTION-MISCELLANEOUS - 1.1%
Dycom Industries, Inc.* 72,800 1,565,200
----------
BUILDING-MOBIL HOME/MANUFACTURED HOUSING - 0.6%
Champion Enterprises, Inc.* 131,000 903,900
----------
CHEMICALS-SPECIALTY - 1.2%
Hercules, Inc.* 114,600 1,807,242
----------
COMMERCIAL BANKS-CENTRAL US - 6.1%
Amcore Financial, Inc. 54,000 1,635,660
Associated Banc-Corp. 50,000 1,625,000
Macatawa Bank Corp.## 63,826 1,460,970
Marshall & Ilsley Corp. 31,540 1,519,597
Mercantile Bank Corp. 34,965 1,382,866
Oak Hill Financial, Inc.+ 47,400 1,173,624
----------
8,797,717
----------
COMMERCIAL BANKS-EASTERN US - 0.6%
Community Bank Systems, Inc. 39,300 870,888
----------
COMMERCIAL BANKS-WESTERN US - 1.1%
Greater Bay Bancorp. 57,900 1,633,359
----------
COMMERCIAL SERVICES - 1.1%
PHH Corp.* 57,800 1,583,720
----------
COMMERCIAL SERVICES-FINANCE - 1.0%
TNS, Inc.* 96,100 1,447,266
----------
COMPUTERS-INTEGRATED SYSTEMS - 1.4%
Intergraph Corp.* 45,600 1,955,328
----------
CONSUMER PRODUCTS-MISCELLANEOUS - 1.1%
Prestige Brands Holdings, Inc.* 137,300 1,529,522
----------
CONTAINERS-PAPER/PLASTIC - 1.1%
Packaging Corp. of America 67,200 1,559,040
----------
COSMETICS & TOILETRIES - 0.6%
Elizabeth Arden, Inc.* 54,700 883,952
----------
DIVERSIFIED MANUFACTURING OPERATIONS - 2.2%
ESCO Technologies, Inc.* 33,600 1,546,944
Griffon Corp.* 68,800 1,642,256
----------
3,189,200
----------
ELECTRIC-INTEGRATED - 2.9%
CMS Energy Corp.* 139,500 2,014,380
El Paso Electric Co.* 95,300 2,129,002
----------
4,143,382
----------
ELECTRONIC COMPONENTS-MISCELLANEOUS - 3.4%
Benchmark Electronics, Inc.* 49,200 1,322,496
Methode Electronics, Inc. Cl. A 137,100 1,303,821
Rogers Corp.* 36,800 2,272,400
----------
4,898,717
----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 0.6%
IXYS Corp.* 96,600 810,474
----------
ENERGY-ALTERNATE SOURCES - 1.4%
Covanta Holdings Corp.* 93,300 2,008,749
----------
ENGINEERING/R & D SERVICES - 1.1%
URS Corp.* 40,500 1,575,045
----------
FINANCE-AUTO LOANS - 0.8%
United PanAm Financial Corp.* 75,500 $1,168,740
----------
FINANCE-INVESTMENT BANKERS/BROKERS - 1.0%
Knight Capital Group, Inc. Cl. A* 81,400 1,481,480
----------
FOOD-MISCELLANEOUS/DIVERSIFIED - 1.2%
Ralcorp Holdings, Inc.* 35,900 1,731,457
----------
GAS-DISTRIBUTION - 2.4%
Energen Corp. 33,300 1,394,271
UGI Corp. 82,500 2,017,125
----------
3,411,396
----------
HUMAN RESOURCES - 2.0%
Korn/Ferry International* 76,400 1,599,816
Labor Ready, Inc.* 81,500 1,298,295
----------
2,898,111
----------
INTERNET APPLICATIONS SOFTWARE - 0.9%
Interwoven, Inc.* 114,100 1,258,523
----------
INTIMATE APPAREL - 1.2%
The Warnaco Group, Inc.* 92,200 1,783,148
----------
LASERS-SYSTEMS/COMPONENTS - 0.8%
Rofin-Sinar Technologies, Inc.* 18,100 1,099,937
----------
LIFE/HEALTH INSURANCE - 0.8%
Scottish Re Group, Ltd. 99,600 1,082,652
----------
MACHINERY TOOLS & RELATED PRODUCTS - 1.2%
Kennametal, Inc. 29,900 1,693,835
----------
MACHINERY-GENERAL INDUSTRY - 2.5%
Gardner Denver, Inc.* 51,900 1,716,852
Wabtec Corp. 67,900 1,842,127
----------
3,558,979
----------
MEDICAL-DRUGS - 0.7%
Zymogenetics, Inc.* , ## 56,600 954,842
----------
MEDICAL-HMO - 0.5%
Centene Corp.* 43,800 720,072
----------
METAL PROCESSORS & FABRICATION - 1.7%
Commercial Metals Co. 53,400 1,085,622
Quanex Corp. 47,150 1,431,002
----------
2,516,624
----------
METAL-ALUMINUM - 1.2%
Century Aluminum Co.* 51,500 1,732,975
----------
MOTION PICTURES & SERVICES - 1.2%
Lions Gate Entertainment Corp.* , ## 170,800 1,709,708
----------
MULTIMEDIA - 1.2%
Gemstar - TV Guide International, Inc.* 508,600 1,688,552
----------
NETWORKING PRODUCTS - 2.2%
3Com Corp.* 245,000 1,080,450
Aeroflex, Inc.* 106,100 1,090,708
Foundry Networks, Inc.* 77,100 1,013,865
----------
3,185,023
----------
NON-FERROUS METALS - 1.1%
RTI International Metals, Inc.* 36,700 1,599,386
----------
OIL COMPANIES-EXPLORATION & PRODUCTION - 0.5%
Forest Oil Corp.* 24,200 764,478
----------
OIL REFINING & MARKETING - 0.3%
Holly Corp. 9,300 402,969
----------
OIL-FIELD SERVICES - 0.8%
Superior Energy Services* 41,600 1,092,416
----------
POWER CONVERSION/SUPPLY EQUIPMENT - 1.0%
Power-One, Inc.* 208,400 1,508,816
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
<Page>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
PRIVATE CORRECTIONS - 1.3%
Corrections Corp. of America* 43,400 $ 1,877,050
------------
PROPERTY/CASUALTY INSURANCE - 4.9%
CastlePoint Holdings, Ltd. 144A* # + 237,400 2,611,400
Navigators Group, Inc.* 41,700 2,002,017
Tower Group, Inc. 74,400 2,481,240
------------
7,094,657
------------
PUBLISHING-NEWSPAPERS - 0.6%
Lee Enterprises, Inc. 33,000 832,920
------------
RADIO - 1.0%
Entercom Communications Corp.* 28,700 723,240
Radio One, Inc. Cl. D* 111,100 694,375
------------
1,417,615
------------
REITS-DIVERSIFIED - 1.6%
Cousins Properties, Inc. 38,600 1,320,506
Washington Real Estate Investment Trust 26,500 1,054,700
------------
2,375,206
------------
REITS-HEALTH CARE - 1.0%
Ventas, Inc. 36,483 1,406,055
------------
REITS-HOTELS - 1.4%
Ashford Hospitality Trust, Inc. 77,600 925,768
DiamondRock Hospitality Co. 144A# 69,700 1,157,717
------------
2,083,485
------------
REITS-MORTGAGE - 5.5%
American Home Mortgage Investment Corp. 22,200 774,114
Fieldstone Investment Corp. 119,600 1,044,108
JER Investors Trust, Inc. 42,000 720,720
JER Investors Trust, Inc. 144A# 63,800 1,094,808
KKR Financial Corp. 89,150 2,187,741
Newcastle Investment Corp. 77,500 2,124,275
------------
7,945,766
------------
REITS-SHOPPING CENTERS - 0.5%
Equity One, Inc. 30,200 723,894
------------
RETAIL-APPAREL/SHOE - 1.0%
Charming Shoppes, Inc.* 95,800 1,368,024
------------
RETAIL-DISCOUNT - 0.9%
Tuesday Morning Corp.* 90,800 1,260,304
------------
RETAIL-RESTAURANTS - 1.2%
Lone Star Steakhouse & Saloon, Inc. 64,600 1,793,942
------------
SAVINGS & LOANS/THRIFTS-CENTRAL US - 0.5%
MAF Bancorp., Inc. 17,000 701,930
------------
SAVINGS & LOANS/THRIFTS-EASTERN US - 1.0%
Brookline Bancorp, Inc. 97,228 1,336,885
First Niagara Financial Group, Inc. 8,900 129,762
------------
1,466,647
------------
SAVINGS & LOANS/THRIFTS-SOUTHERN US - 0.8%
Fidelity Bankshares, Inc. 30,300 1,182,003
------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS - 1.7%
ChipMos Technologies Bermuda, Ltd.* 186,000 1,110,420
Emulex Corp.* 75,700 1,375,469
------------
2,485,889
------------
SEMICONDUCTOR EQUIPMENT - 1.5%
Mattson Technology, Inc.* 117,500 975,250
Varian Semiconductor Equipment Associates,
Inc.* 33,700 1,236,790
------------
2,212,040
------------
TELECOMMUNICATIONS EQUIPMENT - 2.1%
Adtran, Inc. 40,300 960,752
Comtech Telecommunications Corp.* 61,100 2,045,628
------------
3,006,380
------------
THERAPEUTICS - 0.6%
MGI Pharma, Inc.* 51,700 $ 889,757
------------
TRANSPORT-AIR FREIGHT - 1.1%
ABX Air, Inc. 280,600 1,576,972
------------
TRANSPORT-MARINE - 1.5%
Quintana Maritime, Ltd.+ 217,400 2,228,350
Quintana Maritime, Ltd. 22,200 0
------------
2,228,350
------------
TRANSPORT-SERVICES - 0.5%
Universal Truckload Services, Inc.* 26,800 695,996
------------
WIRELESS EQUIPMENT - 0.8%
EFJ, Inc.* 155,200 1,151,584
- -------------------------------------------------------------------------------
Total Common Stock (Cost: $117,675,479) 133,958,317
- -------------------------------------------------------------------------------
RIGHTS - 0.2%
TRANSPORT-MARINE - 0.2%
Quintana Maritime, Ltd. (Cost: $0) 88,800 268,636
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 7.9%
MONEY MARKET FUNDS - 2.0%
Boston Global Investment Trust - Enhanced
Portfolio, 5.320%** $2,804,040 2,804,040
------------
TIME DEPOSIT - 5.9%
Wachovia Bank Grand Cayman 4.630%, 10/01/06 8,538,525 8,538,525
- -------------------------------------------------------------------------------
Total Short Term Investments (Cost: $11,342,565) 11,342,565
- -------------------------------------------------------------------------------
Total Investments - 101.0% (Cost: $129,018,044) 145,569,518
- -------------------------------------------------------------------------------
Liabilities In Excess Of Other Assets - (1.0%) (1,472,906)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $144,096,612
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
+ ILLIQUID SECURITIES, VALUED BY THE ADVISOR. THE TOTAL COST OF ILLIQUID
SECURITIES AS OF SEPTEMBER 30, 2006 WAS $5,357,104. THE TOTAL MARKET VALUE
OF ILLIQUID SECURITIES OWNED AT SEPTEMBER 30, 2006 WAS $6,013,374 OR 4.17%
OF NET ASSETS.
# 144A SECURITY. CERTAIN CONDITION FOR PUBLIC SALE MAY EXIST. THE TOTAL
MARKET VALUE OF 144A SECURITIES OWNED AT SEPTEMBER 30, 2006 WAS $4,863,925
OR 3.38% OF NET ASSETS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/06.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 - Unaudited
PERCENT OF
SECTOR NET ASSETS
- -------------------------------------------------------------------------------
Financial 26.0%
Industrial 21.8
Consumer, Non-cyclical 11.9
Communications 9.7
Consumer, Cyclical 6.7
Technology 5.2
Utilities 5.2
Basic Materials 3.6
Energy 3.0
Short Term Investments 7.9
- -------------------------------------------------------------------------------
Total Investments 101.0%
- -------------------------------------------------------------------------------
Liabilities in excess of other assets (1.0)
- -------------------------------------------------------------------------------
Net Assets 100.0%
===============================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
<Page>
U.S. LARGE CAP VALUE FUND
MANAGEMENT TEAM: STEPHEN SEXAUER, Portfolio Manager; MARK W. STUCKELMAN,
Portfolio Manager; JAMES FERNANDES, CFA, CPA, Analyst; TODD R. BUECHS, Analyst;
CHARLES HOEVELER, Analyst; GREGORY ISE, Analyst
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: Key U.S. equity indices, including the S&P 500 Index and Dow
Jones Industrial Average, climbed higher during the six months ended September
30, 2006. Within the U.S. stock market, large-cap value stocks produced some of
the best returns.
Throughout much of the period, concerns that rising inflation would prompt the
Federal Reserve to keep raising short-term interest rates weighed on investor
sentiment. Equity returns in August and September were driven by:
- A pause in interest rate increases from the Fed, ending more than two
years of continuous monetary tightening
- A significant drop in the price of gasoline due to weather and less
miles driven, which prompted a rebound in consumer confidence
Equities were volatile during the period, and investors sold riskier assets,
which drove the strong performance of large-cap value stocks relative to other
segments of the market. Among large-cap value equities, stocks in all sectors
posted gains except for materials, which was weak in response to falling
commodity prices.
PERFORMANCE: The Fund's Class R shares registered a 5.79% increase during the
six months ended September 30, 2005. The Russell 1000 Value Index rose 6.85%.
PORTFOLIO SPECIFICS: Like the index, the Fund's gain was broad based, with
stocks in most sectors of investment generating positive returns. Modest
underperformance of the benchmark was due to sector allocations that resulted
from our bottom-up investment process. Underweight positions in
telecommunication services and consumer staples were especially unfavorable,
since these were the two best-performing sectors in the index.
On the plus side, our stock selection added value. Stock selection was
particularly strong in the information technology and consumer discretionary
sectors where Freescale Semiconductor and Federated Department Stores were top
performers. Freescale, which had been a longer-term holding, advanced on news
that it was being acquired by a group of private equity investors. Federated
benefited from the successful integration of its August 2005 purchase of May
Department Stores, as well as investor recognition of its strong cash flows and
balance sheet.
Based on our stock-by-stock investment decisions, the Fund's weighting in the
consumer discretionary and materials sectors decreased during the period. We
identified better opportunities elsewhere, particularly in the industrials and
financials sectors.
MARKET OUTLOOK: The Fed's seventeen increases in short-term interest rates have
slowed the pace of growth in the economy and corporate earnings. That said, we
expect earnings growth to remain positive and for price-to-earnings (P/E)
multiples to expand.
We continue to believe there is significant value in owning reasonably priced,
very large corporations that have strong cash flows, limited debt, solid assets
and a catalyst to realize their value. By identifying these types of companies
for the Fund, we are confident that we will deliver superior performance over
time.
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.
[CHART]
<Table>
<Caption>
U.S. LARGE CAP
VALUE FUND RUSSELL 1000
CLASS R SHARES VALUE INDEX
--------------- ------------
30-Apr-96 $250,000.00 $250,000.00
31-May-96 $256,600.00 $253,125.00
30-Jun-96 $263,800.00 $253,327.50
31-Jul-96 $257,600.00 $243,751.72
31-Aug-96 $264,800.00 $250,723.02
30-Sep-96 $278,800.00 $260,701.80
31-Oct-96 $288,600.00 $270,790.96
30-Nov-96 $311,580.76 $290,423.30
31-Dec-96 $310,622.05 $286,705.88
31-Jan-97 $327,247.49 $300,611.12
28-Feb-97 $331,246.01 $305,030.10
31-Mar-97 $316,935.51 $294,049.02
30-Apr-97 $333,350.49 $306,399.08
31-May-97 $358,183.42 $323,526.78
30-Jun-97 $369,758.09 $337,406.08
31-Jul-97 $412,900.04 $362,779.02
31-Aug-97 $403,429.86 $349,864.09
30-Sep-97 $428,683.68 $370,995.88
31-Oct-97 $412,268.70 $360,645.09
30-Nov-97 $425,854.22 $376,585.61
31-Dec-97 $436,586.20 $387,581.91
31-Jan-98 $434,531.14 $382,078.24
28-Feb-98 $469,923.85 $407,792.11
31-Mar-98 $500,064.74 $432,748.99
30-Apr-98 $502,804.82 $435,648.40
31-May-98 $500,749.76 $429,200.81
30-Jun-98 $511,938.43 $434,694.58
31-Jul-98 $501,864.37 $427,000.48
31-Aug-98 $424,288.37 $363,462.81
30-Sep-98 $448,322.65 $384,325.58
31-Oct-98 $479,971.75 $414,110.81
30-Nov-98 $502,997.40 $433,408.37
31-Dec-98 $524,486.61 $448,144.26
31-Jan-99 $530,983.34 $451,729.41
28-Feb-99 $512,742.51 $445,360.03
31-Mar-99 $522,237.74 $454,578.98
30-Apr-99 $563,217.16 $497,036.66
31-May-99 $554,721.42 $491,569.25
30-Jun-99 $570,213.64 $505,824.76
31-Jul-99 $558,719.42 $491,004.10
31-Aug-99 $538,729.45 $472,787.84
30-Sep-99 $516,740.50 $456,240.27
31-Oct-99 $546,225.69 $482,519.71
30-Nov-99 $530,983.34 $478,756.05
31-Dec-99 $570,488.00 $481,054.08
31-Jan-00 $534,848.18 $465,371.72
29-Feb-00 $491,678.83 $430,794.60
31-Mar-00 $545,640.52 $483,351.54
30-Apr-00 $545,640.52 $477,744.67
31-May-00 $544,636.58 $482,760.98
30-Jun-00 $520,291.08 $460,698.81
31-Jul-00 $538,361.97 $466,457.54
31-Aug-00 $568,229.14 $492,392.58
30-Sep-00 $576,511.63 $496,922.59
31-Oct-00 $605,625.84 $509,146.89
30-Nov-00 $581,408.50 $490,257.54
31-Dec-00 $613,498.41 $514,819.44
31-Jan-01 $622,847.44 $516,827.24
28-Feb-01 $609,455.59 $502,459.44
31-Mar-01 $591,010.21 $484,722.62
30-Apr-01 $624,616.18 $508,474.03
31-May-01 $644,830.29 $519,914.70
30-Jun-01 $634,470.56 $508,372.59
31-Jul-01 $634,470.56 $507,305.01
31-Aug-01 $604,149.38 $486,962.08
30-Sep-01 $556,140.86 $452,679.95
31-Oct-01 $553,361.42 $448,786.90
30-Nov-01 $593,536.91 $474,861.42
31-Dec-01 $605,623.67 $486,068.15
31-Jan-02 $593,022.58 $482,325.42
28-Feb-02 $597,394.39 $483,097.14
31-Mar-02 $627,225.53 $505,947.64
30-Apr-02 $602,537.69 $488,593.63
31-May-02 $609,223.98 $491,036.60
30-Jun-02 $563,962.93 $462,851.10
31-Jul-02 $508,672.45 $419,805.95
31-Aug-02 $506,100.80 $422,954.49
30-Sep-02 $443,095.37 $375,921.95
31-Oct-02 $485,270.43 $403,777.77
30-Nov-02 $516,011.09 $429,215.77
31-Dec-02 $494,130.76 $410,587.81
31-Jan-03 $486,576.83 $400,651.58
28-Feb-03 $473,813.31 $389,954.18
31-Mar-03 $473,031.87 $390,617.11
30-Apr-03 $510,801.48 $424,991.41
31-May-03 $543,101.02 $452,445.86
30-Jun-03 $549,092.06 $458,101.43
31-Jul-03 $557,166.94 $464,927.14
31-Aug-03 $560,292.70 $472,180.00
30-Sep-03 $556,645.98 $467,552.64
31-Oct-03 $591,289.84 $496,166.86
30-Nov-03 $592,708.49 $502,914.73
31-Dec-03 $628,404.19 $533,894.28
31-Jan-04 $641,190.71 $543,290.82
29-Feb-04 $654,510.01 $554,917.24
31-Mar-04 $648,383.13 $550,033.97
30-Apr-04 $637,727.70 $536,613.14
31-May-04 $645,186.50 $542,086.60
30-Jun-04 $654,510.01 $554,879.84
31-Jul-04 $641,723.48 $547,056.03
30-Aug-04 $641,457.10 $554,824.23
30-Sep-04 $656,108.32 $563,424.00
31-Oct-04 $664,834.56 $572,776.84
30-Nov-04 $697,344.97 $601,702.07
31-Dec-04 $714,290.45 $621,859.09
31-Jan-05 $706,218.97 $610,852.19
28-Feb-05 $732,066.59 $631,071.39
31-Mar-05 $718,376.94 $622,425.72
30-Apr-05 $703,578.38 $611,284.30
31-May-05 $721,308.55 $626,016.25
30-Jun-05 $729,892.12 $632,902.43
31-Jul-05 $756,533.18 $651,193.31
31-Aug-05 $750,102.65 $648,328.06
30-Sep-05 $750,927.77 $657,404.65
31-Oct-05 $731,328.55 $640,706.57
30-Nov-05 $759,850.36 $661,785.82
31-Dec-05 $758,482.63 $665,690.35
31-Jan-06 $783,133.32 $691,519.14
28-Feb-06 $783,681.51 $695,737.41
31-Mar-06 $802,881.71 $705,129.86
30-Apr-06 $831,062.86 $723,040.16
31-May-06 $805,050.59 $704,747.24
30-Jun-06 $812,457.06 $709,257.63
31-Jul-06 $826,187.58 $726,492.59
31-Aug-06 $819,908.55 $738,625.01
30-Sep-06 $831,076.00 $753,323.65
</Table>
Annualized Total Returns As of 9/30/06
1 YEAR 5 YEARS 10 YEARS
- -------------------------------------------------------
U.S. Large Cap Value Fund
Class R Shares 12.96% 9.03% 11.94%
- -------------------------------------------------------
Russell 1000 Value Index 14.61% 10.73% 11.20%
- -------------------------------------------------------
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. THIS PERFORMANCE HAS BEEN RESTATED TO REFLECT SHAREHOLDER
SERVICES FEES OF 0.25% APPLICABLE TO CLASS R SHARES, BUT NOT CLASS I SHARES OF
THE FUND. 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.
8
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2006
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 96.3%
AEROSPACE/DEFENSE-EQUIPMENT - 1.6%
United Technologies Corp. 7,700 $ 487,795
-----------
APPLICATIONS SOFTWARE - 3.6%
Microsoft Corp. 39,100 1,068,603
-----------
BUILDING PRODUCTS-CEMENT/AGGREGATE - 1.3%
Martin Marietta Materials, Inc. 4,600 389,252
-----------
CABLE TV - 1.8%
Comcast Corp. Cl. A* 14,700 541,695
-----------
COMMERCIAL BANKS-EASTERN US - 3.2%
North Fork Bancorporation, Inc. 33,850 969,464
-----------
COMPUTERS - 1.3%
International Business Machines Corp. 4,700 385,118
-----------
DIVERSIFIED MANUFACTURING OPERATIONS - 12.5%
3M Co. 8,100 602,802
General Electric Co. 36,200 1,277,860
ITT Corp. 25,900 1,327,893
Textron, Inc. 6,100 533,750
-----------
3,742,305
-----------
ELECTRIC-INTEGRATED - 2.5%
Exelon Corp. 12,300 744,642
-----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 3.5%
Freescale Semiconductor, Inc. Cl. B* 27,740 1,054,397
-----------
FIDUCIARY BANKS - 1.2%
Bank of New York Co., Inc. 10,200 359,652
-----------
FINANCE-CREDIT CARD - 1.5%
Capital One Financial Corp. 5,900 464,094
-----------
FINANCE-INVESTMENT BANKERS/BROKERS - 6.1%
Goldman Sachs Group, Inc. 3,800 642,846
Morgan Stanley 16,400 1,195,724
-----------
1,838,570
-----------
FINANCE-MORTGAGE LOAN/BANKER - 4.4%
Countrywide Financial Corp. 38,100 1,335,024
-----------
MEDICAL-DRUGS - 4.4%
Abbott Laboratories 8,900 432,184
Pfizer, Inc. 30,900 876,324
-----------
1,308,508
-----------
MEDICAL-HMO - 2.1%
WellPoint, Inc.* 8,400 647,220
-----------
MULTI-LINE INSURANCE - 6.6%
Allstate Corp. 9,900 621,027
American International Group, Inc. 20,500 1,358,330
-----------
1,979,357
-----------
MULTIMEDIA - 4.2%
Time Warner, Inc. 51,200 933,376
Walt Disney Co. 10,600 327,646
-----------
1,261,022
-----------
OIL COMPANIES-EXPLORATION & PRODUCTION - 3.9%
Apache Corp. 18,550 1,172,360
-----------
OIL COMPANIES-INTEGRATED - 6.2%
ConocoPhillips 18,720 1,114,402
Marathon Oil Corp. 9,600 738,240
-----------
1,852,642
-----------
OIL REFINING & MARKETING - 2.5%
Valero Energy Corp. 14,400 741,168
-----------
RETAIL-REGIONAL DEPARTMENT STORES - 3.9%
Federated Department Stores, Inc. 27,200 $ 1,175,312
-----------
SAVINGS & LOANS/THRIFTS-WESTERN US - 2.5%
Washington Mutual, Inc. 17,100 743,337
-----------
STEEL-PRODUCERS - 1.2%
United States Steel Corp. 6,100 351,848
-----------
SUPER-REGIONAL BANKS-US - 10.5%
Bank of America Corp. 11,512 616,698
US Bancorp 35,800 1,189,276
Wells Fargo & Co. 37,200 1,345,896
-----------
3,151,870
-----------
TELEPHONE-INTEGRATED - 2.0%
Sprint Nextel Corp. 34,600 593,390
-----------
TOBACCO - 1.8%
Altria Group, Inc. 7,100 543,505
- -------------------------------------------------------------------------------
Total Common Stock (Cost: $23,117,442) 28,902,150
- -------------------------------------------------------------------------------
Principal
Amount
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 4.6%
TIME DEPOSIT - 4.6%
Wells Fargo Grand Cayman 4.630%, 10/01/06
(Cost: $1,368,033) $1,368,033 1,368,033
- -------------------------------------------------------------------------------
Total Investments - 100.9% (Cost: $24,485,475) 30,270,183
- -------------------------------------------------------------------------------
Liabilities In Excess Of Other Assets - (0.9%) (276,469)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $29,993,714
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 - Unaudited
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Financial 36.1%
Industrial 15.4
Energy 12.6
Technology 8.4
Consumer, Non-cyclical 8.2
Communications 8.0
Consumer, Cyclical 3.9
Utilities 2.5
Basic Materials 1.2
Short Term Investments 4.6
- -------------------------------------------------------------------------------
Total Investments 100.9%
- -------------------------------------------------------------------------------
Liabilities in excess of other assets (0.9)
- -------------------------------------------------------------------------------
Net Assets 100.0%
- -------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<Page>
U.S. SYSTEMATIC LARGE CAP GROWTH FUND
MANAGEMENT TEAM: JAMES LI, PH.D., CFA, Portfolio Manager; JANE EDMONDSON,
Portfolio Manager; JUNCAI YANG, Analyst
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: U.S. large-cap growth stocks generated essentially flat returns
from April 1 through September 30, 2006. Gains in August and September were
unable to offset losses registered in the prior four months.
Despite strong corporate profit growth, large-cap growth equities were weak
throughout most of the period on concerns about energy prices, interest rates
and the geopolitical climate. The price of oil skyrocketed to $78.40 a barrel in
mid-July on fears that hostilities in southern Lebanon would spread to
neighboring, oil-producing countries. The core Consumer Price Index rose a
worrisome 0.3% in four consecutive months, dashing investors' hopes for an
imminent end to the monetary tightening cycle. In addition to ongoing tensions
in the Middle East, North Korea launched a series of ballistic missiles into the
Sea of Japan in July.
Large-cap growth equities reversed course in August and September, boosted by a
drop in the price of oil and a pause in interest rate hikes from the Federal
Reserve. Crude prices fell nearly 20% as the result of easing concerns about
Iran's nuclear intentions, a tame Atlantic hurricane season and rising U.S.
distillate inventories. The Fed held the target funds rate steady at its August
and September meetings, indicating that a slowdown in the economy had become a
bigger risk than inflation.
PERFORMANCE: The Fund's Class R shares gained 1.82% during the six months ended
September 30, 2006, outperforming the Russell 1000 Growth Index, which declined
0.12%.
PORTFOLIO SPECIFICS: Strong performance versus the index was due to stock
selection, which was positive in a majority of sectors. Stock selection added
the most value in the information technology sector, where computer software
companies Oracle and BEA Systems delivered steep price gains amid improving
business fundamentals. Sun Microsystems, a computer hardware manufacturer, and
Cisco Systems, a networking company, were other top-performing tech names in the
Fund.
Stock selection in the consumer discretionary sector was also a key area of
relative strength, helped by our position in toy manufacturer Mattel. The
company experienced strong sales of toys based on the movies CARS and SUPERMAN
and announced an acquisition that investors viewed positively.
While the Fund outperformed, there were pockets of relative weakness. For
example, stock selection in the materials and energy sectors detracted from
results versus the index.
Consistent with our risk-controlled approach to portfolio construction, we
maintained the Fund's broad diversification throughout the period. As of
September 30, the largest overweight versus the index was in the health care
sector (+2.5%), and the largest underweight was in financials (-5.0%).
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.
Through consistent application of this approach, we believe we will continue to
identify companies with excellent growth potential for the Fund.
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.
[CHART]
<Table>
<Caption>
U.S. SYSTEMATIC
LARGE CAP
GROWTH FUND RUSSELL 1000
CLASS R SHARES GROWTH INDEX
---------------- ------------
27-Dec-96 $ 250,000.00 $250,000.00
31-Dec-96 $ 247,420.02 $246,184.68
31-Jan-97 $ 272,445.82 $263,452.07
28-Feb-97 $ 267,801.86 $261,668.50
31-Mar-97 $ 260,061.92 $247,507.00
30-Apr-97 $ 269,865.84 $263,941.47
31-May-97 $ 300,051.60 $282,990.12
30-Jun-97 $ 311,145.51 $294,315.39
31-Jul-97 $ 349,845.20 $320,344.64
31-Aug-97 $ 341,847.27 $301,594.87
30-Sep-97 $ 359,133.13 $316,436.35
31-Oct-97 $ 358,617.13 $304,740.87
30-Nov-97 $ 354,231.17 $317,683.21
31-Dec-97 $ 360,423.12 $321,241.26
31-Jan-98 $ 365,583.08 $330,846.38
28-Feb-98 $ 399,122.81 $355,732.64
31-Mar-98 $ 423,632.61 $369,912.14
30-Apr-98 $ 437,048.50 $375,031.73
31-May-98 $ 425,954.59 $364,388.33
30-Jun-98 $ 456,656.35 $386,707.11
31-Jul-98 $ 446,852.43 $384,147.11
31-Aug-98 $ 372,291.02 $326,494.31
30-Sep-98 $ 418,472.65 $351,575.61
31-Oct-98 $ 449,690.40 $379,831.74
30-Nov-98 $ 492,518.06 $408,725.54
31-Dec-98 $ 577,915.38 $445,580.32
31-Jan-99 $ 642,930.86 $471,744.80
28-Feb-99 $ 629,256.97 $450,195.49
31-Mar-99 $ 694,014.45 $473,907.29
30-Apr-99 $ 730,134.16 $474,513.89
31-May-99 $ 735,294.12 $459,932.08
30-Jun-99 $ 766,253.87 $492,145.72
31-Jul-99 $ 755,933.95 $476,505.33
31-Aug-99 $ 751,289.99 $484,291.43
30-Sep-99 $ 765,479.88 $474,116.47
31-Oct-99 $ 820,691.43 $509,921.74
30-Nov-99 $ 915,118.68 $537,432.02
31-Dec-99 $1,131,320.95 $593,330.32
31-Jan-00 $1,082,301.34 $565,509.06
29-Feb-00 $1,240,196.08 $593,156.80
31-Mar-00 $1,283,281.73 $635,614.97
30-Apr-00 $1,184,726.52 $605,372.41
31-May-00 $1,109,133.13 $574,885.85
30-Jun-00 $1,226,006.19 $618,456.45
31-Jul-00 $1,171,568.63 $592,673.00
31-Aug-00 $1,324,045.41 $646,333.62
30-Sep-00 $1,208,978.33 $585,196.92
31-Oct-00 $1,085,139.32 $557,505.40
30-Nov-00 $ 876,102.27 $475,323.53
31-Dec-00 $ 858,016.37 $460,284.29
31-Jan-01 $ 836,206.90 $492,085.33
28-Feb-01 $ 692,051.64 $408,544.01
31-Mar-01 $ 598,962.45 $364,086.25
30-Apr-01 $ 676,625.43 $410,132.24
31-May-01 $ 646,304.95 $404,095.09
30-Jun-01 $ 613,856.72 $394,736.25
31-Jul-01 $ 578,482.83 $384,871.79
31-Aug-01 $ 513,054.42 $353,389.28
30-Sep-01 $ 429,540.12 $318,121.03
31-Oct-01 $ 453,308.83 $334,822.38
30-Nov-01 $ 508,668.67 $366,998.81
31-Dec-01 $ 505,726.84 $366,301.51
31-Jan-02 $ 486,203.81 $359,817.98
28-Feb-02 $ 454,913.46 $344,885.53
31-Mar-02 $ 480,320.15 $356,818.57
30-Apr-02 $ 452,239.07 $327,702.17
31-May-02 $ 438,867.13 $319,771.78
30-Jun-02 $ 390,728.14 $290,192.89
31-Jul-02 $ 359,972.68 $274,232.28
31-Aug-02 $ 361,577.31 $275,054.98
30-Sep-02 $ 338,310.13 $246,531.78
31-Oct-02 $ 356,495.97 $269,138.74
30-Nov-02 $ 369,867.91 $283,752.98
31-Dec-02 $ 334,031.11 $264,145.65
31-Jan-03 $ 327,345.14 $257,726.91
28-Feb-03 $ 326,007.94 $256,541.36
31-Mar-03 $ 337,240.37 $261,313.03
30-Apr-03 $ 358,635.48 $280,650.20
31-May-03 $ 368,798.16 $294,654.64
30-Jun-03 $ 372,809.74 $298,720.88
31-Jul-03 $ 383,507.29 $306,159.03
31-Aug-03 $ 392,600.21 $313,782.38
30-Sep-03 $ 381,902.66 $310,424.91
31-Oct-03 $ 399,821.06 $327,870.79
30-Nov-03 $ 404,367.52 $331,280.65
31-Dec-03 $ 403,565.21 $342,742.96
31-Jan-04 $ 414,262.76 $349,734.92
29-Feb-04 $ 411,053.49 $351,973.22
31-Mar-04 $ 398,483.87 $345,426.52
30-Apr-04 $ 389,390.95 $341,419.57
31-May-04 $ 399,286.18 $347,769.97
30-Jun-04 $ 408,111.67 $352,151.88
31-Jul-04 $ 386,181.68 $332,255.30
30-Aug-04 $ 381,100.34 $330,627.24
30-Sep-04 $ 385,914.24 $333,768.20
31-Oct-04 $ 390,931.13 $338,974.99
30-Nov-04 $ 414,191.53 $350,635.73
31-Dec-04 $ 425,001.93 $364,380.65
31-Jan-05 $ 410,466.86 $352,246.77
28-Feb-05 $ 418,922.48 $355,980.59
31-Mar-05 $ 413,895.41 $349,501.74
30-Apr-05 $ 396,180.68 $342,861.21
31-May-05 $ 416,504.75 $359,421.40
30-Jun-05 $ 416,754.66 $358,091.54
31-Jul-05 $ 434,716.78 $375,602.22
31-Aug-05 $ 427,065.77 $370,756.95
30-Sep-05 $ 431,806.20 $372,462.43
31-Oct-05 $ 420,967.86 $368,849.55
30-Nov-05 $ 440,795.45 $384,746.96
31-Dec-05 $ 440,530.97 $383,554.25
31-Jan-06 $ 457,447.36 $390,304.80
28-Feb-06 $ 459,048.42 $389,680.32
31-Mar-06 $ 471,718.16 $395,447.58
30-Apr-06 $ 472,001.19 $394,893.96
31-May-06 $ 456,425.15 $381,507.05
30-Jun-06 $ 454,827.66 $380,019.18
31-Jul-06 $ 457,738.56 $372,798.81
31-Aug-06 $ 472,981.26 $384,430.13
30-Sep-06 $ 490,456.00 $395,001.96
</Table>
Annualized Total Returns As of 9/30/06
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------
U.S. Systematic Large Cap Growth Fund
Class R Shares 11.17% 2.10% 6.57%
- --------------------------------------------------------------------
Russell 1000 Growth Index 6.03% 4.42% 4.80%
- --------------------------------------------------------------------
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. THIS PERFORMANCE HAS BEEN RESTATED TO REFLECT SHAREHOLDER
SERVICES FEES OF 0.25% APPLICABLE TO CLASS R SHARES, BUT NOT CLASS I SHARES OF
THE FUND. 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.
10
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2006
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 99.3%
AEROSPACE/DEFENSE - 4.0%
Boeing Co. 2,200 $173,470
Lockheed Martin Corp. 2,800 240,968
Raytheon Co. 4,200 201,642
--------
616,080
--------
AGRICULTURAL OPERATIONS - 0.7%
Archer-Daniels-Midland Co. 2,700 102,276
--------
AIRLINES - 0.5%
AMR Corp.* 3,500 80,990
--------
APPLICATIONS SOFTWARE - 5.1%
Microsoft Corp. 29,100 795,303
--------
BEVERAGES-NON-ALCOHOLIC - 2.1%
Coca-Cola Co. 7,200 321,696
--------
BREWERY - 1.1%
Anheuser-Busch Cos, Inc. 3,500 166,285
--------
BUILDING PRODUCTS-CEMENT/AGGREGATE - 1.5%
Martin Marietta Materials, Inc. 2,700 228,474
--------
CASINO SERVICES - 0.7%
International Game Technology 2,600 107,900
--------
COMPUTER SERVICES - 0.8%
Electronic Data Systems Corp. 5,300 129,956
--------
COMPUTERS - 5.9%
Hewlett-Packard Co. 7,700 282,513
International Business Machines Corp. 4,800 393,312
Sun Microsystems, Inc.* 46,600 231,602
--------
907,427
--------
COSMETICS & TOILETRIES - 1.6%
Procter & Gamble Co. 3,975 246,371
--------
DIVERSIFIED MANUFACTURING OPERATIONS - 5.5%
General Electric Co. 11,600 409,480
Illinois Tool Works, Inc. 5,100 228,990
Parker-Hannifin Corp. 2,800 217,644
--------
856,114
--------
E-COMMERCE/PRODUCTS - 1.0%
Emdeon Corp.* 12,800 149,888
--------
ELECTRIC PRODUCTS-MISCELLANEOUS - 0.5%
Emerson Electric Co. 900 75,474
--------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 3.5%
Intersil Corp. Cl. A 6,700 164,485
Micron Technology, Inc.* 14,600 254,040
Texas Instruments, Inc. 3,700 123,025
--------
541,550
--------
ELECTRONIC CONNECTORS - 1.0%
Thomas & Betts Corp.* 3,400 162,214
--------
ELECTRONIC MEASURE INSTRUMENTS - 1.1%
Agilent Technologies, Inc.* 5,000 163,450
--------
ENTERPRISE SOFTWARE/SERVICES - 4.0%
BEA Systems, Inc.* 15,900 241,680
Oracle Corp.* 21,700 384,958
--------
626,638
--------
FINANCE-INVESTMENT BANKERS/BROKERS - 3.4%
Goldman Sachs Group, Inc. 1,800 304,506
Morgan Stanley 3,100 226,021
--------
530,527
--------
FOOD-MISCELLANEOUS/DIVERSIFIED - 1.5%
General Mills, Inc. 4,000 $226,400
--------
HEALTH CARE COST CONTAINMENT - 1.6%
McKesson Corp. 4,800 253,056
--------
HOME DECORATION PRODUCTS - 0.8%
Newell Rubbermaid, Inc. 4,200 118,944
--------
HUMAN RESOURCES - 1.1%
Manpower, Inc. 2,900 177,683
--------
LIFE/HEALTH INSURANCE - 0.7%
Cigna Corp. 1,000 116,320
--------
MEDICAL INFORMATION SYSTEMS - 1.0%
IMS Health, Inc. 5,900 157,176
--------
MEDICAL LABS & TESTING SERVICES - 1.3%
Laboratory Corp. of America Holdings* 3,100 203,267
--------
MEDICAL PRODUCTS - 5.5%
Baxter International, Inc. 4,900 222,754
Johnson & Johnson 9,800 636,412
--------
859,166
--------
MEDICAL-BIOMEDICAL/GENETICS - 1.0%
Biogen Idec, Inc.* 3,400 151,912
--------
MEDICAL-DRUGS - 3.0%
Abbott Laboratories 6,200 301,072
Celgene Corp.* 3,800 164,540
--------
465,612
--------
MEDICAL-HMO - 2.9%
Humana, Inc.* 2,500 165,225
--------
UnitedHealth Group, Inc. 5,900 290,280
--------
455,505
--------
MEDICAL-NURSING HOMES - 0.7%
Manor Care, Inc. 2,200 115,016
--------
MEDICAL-WHOLESALE DRUG DISTRIBUTORS - 0.7%
Cardinal Health, Inc. 1,700 111,758
--------
METAL-COPPER - 1.1%
Phelps Dodge Corp. 2,000 169,400
--------
MULTIMEDIA - 1.7%
Walt Disney Co. 8,300 256,553
--------
NETWORKING PRODUCTS - 3.3%
Cisco Systems, Inc.* 22,100 508,300
--------
OIL & GAS DRILLING - 0.9%
Diamond Offshore Drilling, Inc. 2,000 144,740
--------
OIL COMPANIES-EXPLORATION & PRODUCTION - 1.2%
Devon Energy Corp. 2,900 183,135
--------
OIL COMPANIES-INTEGRATED - 0.9%
ConocoPhillips 2,300 136,919
--------
OIL-FIELD SERVICES - 0.8%
Superior Energy Services* 4,700 123,422
--------
PHARMACY SERVICES - 1.1%
Medco Health Solutions, Inc.* 2,900 174,319
--------
RETAIL-APPAREL/SHOE - 1.5%
Ann Taylor Stores Corp.* 5,600 234,416
--------
RETAIL-DISCOUNT - 2.8%
Dollar Tree Stores, Inc.* 7,000 216,720
Wal-Mart Stores, Inc. 4,500 221,940
--------
438,660
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<Page>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
RETAIL-MAJOR DEPARTMENT STORES - 1.5%
JC Penney Co., Inc. 3,500 $ 239,365
-----------
RETAIL-OFFICE SUPPLIES - 1.2%
Staples, Inc. 7,800 189,774
-----------
RETAIL-REGIONAL DEPARTMENT STORES - 2.9%
Federated Department Stores, Inc. 4,400 190,124
-----------
Kohl's Corp.* 3,900 253,188
-----------
443,312
-----------
RETAIL-RESTAURANTS - 1.1%
McDonald's Corp. 4,300 168,216
-----------
STEEL-PRODUCERS - 1.3%
Nucor Corp. 4,200 207,858
-----------
TELEPHONE-INTEGRATED - 1.4%
Level 3 Communications, Inc.* 39,600 211,860
-----------
TOBACCO - 1.1%
Altria Group, Inc. 2,200 168,410
-----------
TOYS - 1.4%
Mattel, Inc. 10,700 210,790
-----------
TRANSPORT-RAIL - 1.7%
CSX Corp. 8,000 262,640
-----------
TRANSPORT-SERVICES - 1.3%
United Parcel Service, Inc. Cl. B 2,800 201,432
-----------
WEB PORTALS/ISP - 0.8%
Google, Inc. Cl. A* 300 120,570
-----------
WIRELESS EQUIPMENT - 2.5%
Motorola, Inc. 9,900 247,500
QUALCOMM, Inc. 3,800 138,130
-----------
385,630
- -------------------------------------------------------------------------------
Total Common Stock (Cost: $13,766,681) 15,400,149
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 0.6%
TIME DEPOSIT - 0.6%
Brown Brothers Harriman & Co.
4.630%, 10/01/06
(Cost: $94,880) $94,880 94,880
- -------------------------------------------------------------------------------
Total Investments - 99.9% (Cost: $13,861,561) 15,495,029
- -------------------------------------------------------------------------------
Other Assets in Excess of Liabilities - 0.1% 16,297
- -------------------------------------------------------------------------------
Net Assets - 100.0% $15,511,326
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 - Unaudited
PERCENT OF
SECTOR NET ASSETS
- -------------------------------------------------------------------------------
Consumer, Non-cyclical 24.4%
Technology 22.0
Industrial 16.5
Consumer, Cyclical 15.5
Communications 10.5
Financial 4.2
Energy 3.8
Basic Materials 2.4
Short Term Investments 0.6
- -------------------------------------------------------------------------------
Total Investments 99.9%
- -------------------------------------------------------------------------------
Other assets in excess of liabilities 0.1
- -------------------------------------------------------------------------------
Net Assets 100.0%
===============================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<Page>
INTERNATIONAL GROWTH FUND
MANAGEMENT TEAM: HORACIO A. VALEIRAS, CFA, Portfolio Manager and Chief
Investment Officer; LINDA Ba, Portfolio Manager; PEDRO V. MARCAL, Portfolio
Manager; MICHAEL J. FREDERICKS, Analyst; FLORA KIM, Analyst; ERIC SAGMEISTER,
Analyst; ALAN TRICE, Assistant Analyst
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: During the six months ended September 30, 2006, stock markets
in developed non-U.S. countries posted increases. The U.S. dollar weakened
against a broad basket of currencies, enhancing returns for U.S.-based
investors.
The period got off to a volatile start, as soaring oil prices and inflationary
pressures prompted a sell-off in May. Equity markets regained their footing over
the summer, however, as waning geopolitical tensions, rising U.S. distillate
inventories and a mild hurricane season sent oil prices sharply lower. In
addition, the Federal Reserve ended more than two years of continuous monetary
tightening, fueling optimism that the U.S. economy was headed for a "soft
landing."
European stock markets led the period's advance, benefiting from record merger
and acquisition activity, falling unemployment and the fastest growth among
manufacturing and services companies in several years. The European Central Bank
and Bank of England raised short-term interest rates in efforts to control
economic growth and inflation in their respective regions. The Bank of Japan
also raised rates, evidence that the country's long battle with deflation was
ending. However, Japanese stocks fell on worries that moderating U.S. economic
growth would hurt exports.
PERFORMANCE: During the six months ended September 30, 2006, the Fund's Class R
shares rose 0.27% and the MSCI EAFE Index increased 4.97%.
PORTFOLIO SPECIFICS: Amid volatile market conditions, investors shied away from
riskier assets, and international value stocks outpaced international growth
stocks. This hurt performance versus the index since the Fund's holdings are
concentrated in growth stocks, while the style-neutral benchmark includes both
growth and value names. Holdings in the United Kingdom and the financials sector
were other major areas of weakness in the portfolio. In the United Kingdom,
relative results were negatively affected by stock selection and underweights in
both the country and pound, which resulted from our bottom-up investment
decisions. In financials, underperformance was driven by stock selection.
On the plus side, stock selection in Ireland, Norway and the information
technology sector bolstered results versus the index. The Fund's top-performing
positions included Ireland-based C&C Group, a food and beverage distributor that
had a successful product launch; Norway-based Telenor Group, a global
telecommunication services provider experiencing rapid subscriber growth in
emerging countries; and Japan-based SUMCO, a silicon wafer manufacturer that
benefited from a favorable pricing environment
MARKET OUTLOOK: As 2006 draws to a close, international equities seem poised for
additional gains. Strong corporate profits and brisk takeover activity in Europe
should continue to offset inflation concerns and rising interest rates. In
Japan, business sentiment is positive, the economy is expanding and reflationary
pressures continue to gather strength. However, the geopolitical climate remains
tense, and the U.S. economic slowdown has weighed on Asian exporters in recent
months.
Against this dynamic backdrop, we are confident that our bottom-up investment
process will identify stocks with strong growth potential 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.
[CHART]
<Table>
<Caption>
INTERNATIONAL
GROWTH FUND MSCI EAFE
CLASS R SHARES INDEX
-------------- -----------
27-Dec-96 $250,000.00 $250,000.00
31-Dec-96 $252,400.00 $249,475.00
31-Jan-97 $274,600.00 $240,743.95
28-Feb-97 $277,200.00 $244,681.59
31-Mar-97 $282,600.00 $245,567.58
30-Apr-97 $286,600.00 $246,870.63
31-May-97 $313,200.00 $262,935.44
30-Jun-97 $331,200.00 $277,435.63
31-Jul-97 $352,400.00 $281,923.94
31-Aug-97 $334,000.00 $260,868.66
30-Sep-97 $358,600.00 $275,482.21
31-Oct-97 $328,800.00 $254,307.32
30-Nov-97 $325,131.31 $251,714.87
31-Dec-97 $329,722.39 $253,910.40
31-Jan-98 $341,826.12 $265,522.67
28-Feb-98 $365,198.85 $282,560.07
31-Mar-98 $386,902.09 $291,260.55
30-Apr-98 $398,171.08 $293,565.96
31-May-98 $407,979.28 $292,141.10
30-Jun-98 $412,779.04 $294,352.73
31-Jul-98 $431,143.32 $297,336.99
31-Aug-98 $369,372.55 $260,500.11
30-Sep-98 $351,843.00 $252,513.68
31-Oct-98 $358,312.24 $278,835.82
30-Nov-98 $379,862.12 $293,121.00
31-Dec-98 $400,733.67 $304,684.52
31-Jan-99 $416,178.61 $303,784.86
28-Feb-99 $399,063.94 $296,544.90
31-Mar-99 $411,795.59 $308,923.20
30-Apr-99 $426,823.10 $321,440.33
31-May-99 $410,543.29 $304,886.56
30-Jun-99 $442,894.19 $316,773.24
31-Jul-99 $457,086.84 $326,188.82
31-Aug-99 $464,183.16 $327,380.02
30-Sep-99 $471,070.77 $330,675.28
31-Oct-99 $501,960.66 $343,060.99
30-Nov-99 $566,871.17 $354,980.55
31-Dec-99 $676,523.01 $386,840.61
31-Jan-00 $628,304.31 $362,261.27
29-Feb-00 $704,494.04 $372,013.32
31-Mar-00 $664,624.89 $386,433.97
30-Apr-00 $609,726.54 $366,098.53
31-May-00 $577,163.26 $357,157.09
30-Jun-00 $608,056.63 $371,124.90
31-Jul-00 $581,129.30 $355,565.62
31-Aug-00 $604,299.33 $358,651.89
30-Sep-00 $565,265.14 $341,188.51
31-Oct-00 $529,362.04 $333,129.01
30-Nov-00 $503,189.97 $320,636.55
31-Dec-00 $519,378.98 $332,033.10
31-Jan-01 $503,411.74 $331,861.84
28-Feb-01 $461,054.19 $306,982.95
31-Mar-01 $424,240.82 $286,519.22
30-Apr-01 $453,735.86 $306,429.96
31-May-01 $439,099.22 $295,614.88
30-Jun-01 $421,136.07 $283,525.60
31-Jul-01 $410,934.78 $278,366.88
31-Aug-01 $393,858.70 $271,324.20
30-Sep-01 $362,367.74 $243,839.06
31-Oct-01 $361,924.21 $250,081.34
30-Nov-01 $369,020.76 $259,309.34
31-Dec-01 $373,234.34 $260,839.26
31-Jan-02 $356,601.79 $246,988.70
28-Feb-02 $358,819.47 $248,717.62
31-Mar-02 $378,556.76 $262,173.24
30-Apr-02 $376,560.85 $263,903.59
31-May-02 $376,117.32 $267,255.16
30-Jun-02 $363,254.81 $256,618.41
31-Jul-02 $328,880.88 $231,290.17
31-Aug-02 $325,554.37 $230,758.20
30-Sep-02 $294,285.19 $205,974.77
31-Oct-02 $304,264.71 $217,035.62
30-Nov-02 $312,691.87 $226,889.03
31-Dec-02 $300,716.44 $219,265.56
31-Jan-03 $290,071.61 $210,122.19
28-Feb-03 $285,858.03 $205,310.39
31-Mar-03 $282,087.99 $201,430.02
30-Apr-03 $306,925.92 $221,411.88
31-May-03 $326,219.68 $235,028.71
30-Jun-03 $331,763.86 $240,833.92
31-Jul-03 $335,977.44 $246,710.27
31-Aug-03 $349,061.71 $252,705.33
30-Sep-03 $348,839.94 $260,539.19
31-Oct-03 $373,899.64 $276,796.84
30-Nov-03 $376,888.20 $282,997.09
31-Dec-03 $401,067.60 $305,127.46
31-Jan-04 $410,384.44 $309,460.27
29-Feb-04 $415,486.52 $316,670.69
31-Mar-04 $419,479.45 $318,570.72
30-Apr-04 $403,729.56 $311,625.88
31-May-04 $403,507.73 $312,965.87
30-Jun-04 $408,166.15 $319,945.01
31-Jul-04 $386,648.89 $309,610.78
30-Aug-04 $387,536.01 $311,034.99
30-Sep-04 $398,405.65 $319,215.21
31-Oct-04 $412,668.57 $330,132.37
30-Nov-04 $442,421.98 $352,779.45
31-Dec-04 $459,410.98 $368,266.47
31-Jan-05 $455,827.57 $361,527.20
28-Feb-05 $478,436.62 $377,217.48
31-Mar-05 $458,055.22 $367,900.20
30-Apr-05 $447,748.98 $359,659.24
31-May-05 $453,345.84 $360,198.73
30-Jun-05 $461,642.07 $365,133.45
31-Jul-05 $482,231.31 $376,343.05
31-Aug-05 $486,716.06 $385,977.43
30-Sep-05 $518,936.66 $403,230.62
31-Oct-05 $499,684.11 $391,496.61
30-Nov-05 $523,369.14 $401,166.58
31-Dec-05 $566,808.78 $419,860.94
31-Jan-06 $610,226.33 $445,682.39
28-Feb-06 $591,614.43 $444,791.02
31-Mar-06 $612,380.09 $459,647.04
30-Apr-06 $638,038.82 $481,939.92
31-May-06 $604,031.35 $463,818.98
30-Jun-06 $597,809.83 $464,004.51
31-Jul-06 $597,510.92 $468,644.56
31-Aug-06 $615,017.99 $481,672.87
30-Sep-06 $618,402.00 $482,491.72
</Table>
Annualized Total Returns As of 9/30/06
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------
International Growth Fund
Class R Shares 18.19% 11.04% 9.41%
- --------------------------------------------------------
MSCI EAFE Index 19.65% 14.70% 7.16%
- --------------------------------------------------------
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. THIS PERFORMANCE HAS BEEN RESTATED TO REFLECT SHAREHOLDER
SERVICES FEES OF 0.25% APPLICABLE TO CLASS R SHARES, BUT NOT CLASS I SHARES OF
THE FUND. 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.
13
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2006
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCK - 93.9%
ARGENTINA - 0.7%
Tenaris S.A. - ADR 21,200 $ 750,056
-----------
CANADA - 2.3%
Cameco Corp. 26,800 978,411
Suncor Energy, Inc. 12,800 920,031
Teck Cominco, Ltd. Cl. B 7,500 470,578
-----------
2,369,020
-----------
FINLAND - 0.8%
Nokia Corp. - ADR 44,100 868,329
-----------
FRANCE - 11.6%
Axa S.A. 60,063 2,212,546
BNP Paribas 19,126 2,055,734
Lafarge S.A. 16,082 2,073,857
SOITEC* 26,561 767,132
Total S.A. 23,660 1,551,015
Vallourec S.A. 3,795 884,065
Veolia Environnement 39,453 2,379,409
-----------
11,923,758
-----------
GERMANY - 3.5%
Bayerische Motoren Werke AG 16,247 869,337
Hannover Rueckversicherung AG* 29,942 1,258,106
Solarworld AG## 7,652 420,005
Stada Arzneimittel AG 21,720 1,108,531
-----------
3,655,979
-----------
HONG KONG - 2.6%
Foxconn International Holdings, Ltd.* 251,000 776,297
Hutchison Telecommunications International,
Ltd.* , ## 1,071,300 1,878,014
-----------
2,654,311
-----------
HUNGARY - 1.0%
Mol Hungarian Oil & Gas PLC 11,549 1,051,011
-----------
IRELAND - 2.6%
Bank of Ireland 55,044 1,075,190
C&C Group PLC 115,555 1,567,722
-----------
2,642,912
-----------
ITALY - 4.6%
Sanpaolo IMI SpA 132,775 2,800,409
UniCredito Italiano SpA 229,030 1,898,860
-----------
4,699,269
-----------
JAPAN - 26.1%
Aoyama Trading Co., Ltd. 14,400 459,815
Asics Corp. 82,000 1,068,886
Calsonic Kansei Corp. 115,000 723,712
Chugai Pharmaceutical Co., Ltd.## 53,700 1,155,279
Fuji Electric Co., Ltd. 202,000 1,041,952
Haseko Corp.* , ## 341,000 1,175,514
Hisamitsu Pharmaceutical Co., Inc. 15,600 432,067
Hokuhoku Financial Group, Inc. 225,000 848,050
Japan Steel Works, Ltd.## 68,000 465,371
Japan Tobacco, Inc. 510 1,982,721
Mitsubishi Estate Co, Ltd. 81,600 1,783,153
Mitsubishi UFJ Financial Group, Inc. 140 1,802,397
Mitsui & Co., Ltd. 60,700 772,214
Nippon Electric Glass Co., Ltd. 46,000 1,014,949
Nitori Co., Ltd. 22,150 1,003,706
Okasan Holdings, Inc. 73,000 644,272
Sumco Corp. 24,900 1,845,382
Sumitomo Mitsui Financial Group, Inc. 276 2,898,742
Tokyo Electron, Ltd. 17,700 $ 1,308,779
Toyota Motor Corp. 45,000 2,446,957
Uni-Charm Corp. 21,900 1,216,821
Yakult Honsha Co., Ltd. 26,300 772,973
-----------
26,863,712
-----------
LUXEMBOURG - 0.9%
Millicom International Cellular S.A.* 23,100 945,252
-----------
MEXICO - 1.3%
Fomento Economico Mexicano S.A. de CV 23,600 229,075
Fomento Economico Mexicano S.A. de CV - ADR 11,700 1,134,198
-----------
1,363,273
-----------
NETHERLANDS - 2.4%
ASML Holding NV* 59,051 1,379,365
Royal Numico NV 23,564 1,059,664
-----------
2,439,029
-----------
NORWAY - 2.7%
Acergy S.A.* , ## 66,100 1,130,625
Telenor ASA 90,400 1,180,158
TGS Nopec Geophysical Co. ASA* 28,400 449,832
-----------
2,760,615
-----------
PERU - 0.6%
Southern Copper Corp.## 6,200 573,500
-----------
PORTUGAL - 1.0%
Banco Espirito Santo S.A. 69,089 1,054,598
-----------
REPUBLIC OF CHINA - 1.3%
AAC Acoustic Technology Holdings, Inc.* 642,000 741,506
Suntech Power Holdings Co., Ltd. - ADR* 24,000 619,920
-----------
1,361,426
-----------
SINGAPORE - 0.6%
SembCorp Marine, Ltd.## 279,000 587,405
-----------
SOUTH KOREA - 2.0%
Daewoo Shipbuilding & Marine Engineering Co., Ltd. 35,910 1,160,957
Kookmin Bank - ADR 12,100 944,163
-----------
2,105,120
-----------
SWEDEN - 1.1%
Modern Times Group AB Cl. B 22,100 1,142,914
-----------
SWITZERLAND - 14.3%
ABB, Ltd. 175,135 2,297,516
Adecco S.A. 22,949 1,380,838
Compagnie Financiere Richemont AG Cl. A 22,027 1,057,479
Nestle S.A. 6,683 2,323,688
Panalpina Welttransport AG 12,133 1,301,398
Roche Holding AG 14,614 2,519,675
Swiss Reinsurance 16,731 1,276,890
UBS AG 42,375 2,527,732
-----------
14,685,216
-----------
TAIWAN - 0.0%
United Microelectronics Corp. - ADR 1,788 5,507
-----------
UNITED KINGDOM - 9.9%
ARM Holdings PLC* 734,089 1,611,209
AstraZeneca PLC 33,850 2,110,621
Barclays PLC 127,762 1,608,521
British American Tobacco PLC 45,426 1,225,284
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<Page>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
HSBC Holdings PLC 136,019 $ 2,475,977
Shire PLC 69,065 1,145,609
------------
10,177,221
- -------------------------------------------------------------------------------
Total Common Stock (Cost: $82,206,311) 96,679,433
- -------------------------------------------------------------------------------
PREFERRED STOCK - 1.6%
GERMANY - 1.6%
Henkel KGaA
(Cost: $1,394,498) 12,170 1,690,557
- -------------------------------------------------------------------------------
EQUITY-LINKED SECURITIES - 0.7%
INDIA - 0.7%
Merrill Lynch Bharti Airtel, Ltd. - 3/17/11*
(Cost: $632,852) 72,827 743,491
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 6.9%
MONEY MARKET FUNDS - 3.9%
Boston Global Investment Trust - Enhanced
Portfolio, 5.320%** $4,020,455 4,020,455
------------
TIME DEPOSIT - 3.0%
Wachovia Bank Grand Cayman
4.630%, 10/01/06 3,033,597 3,033,597
- -------------------------------------------------------------------------------
Total Short Term Investments (Cost: $7,054,052) 7,054,052
- -------------------------------------------------------------------------------
Total Investments - 103.1% (Cost: $91,287,713) 106,167,533
- -------------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (3.1%) (3,220,767)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $102,946,766
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/06.
ADR - AMERICAN DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2006 - Unaudited
PERCENT OF
SECTOR NET ASSETS
- -------------------------------------------------------------------------------
Financial 28.3%
Consumer, Non-cyclical 22.4
Consumer, Cyclical 9.3
Industrial 9.2
Communications 7.3
Technology 6.7
Energy 6.0
Basic Materials 4.7
Utilities 2.3
Short Term Investments 6.9
- -------------------------------------------------------------------------------
Total Investments 103.1%
- -------------------------------------------------------------------------------
Liabilities in excess of other assets (3.1)
- -------------------------------------------------------------------------------
Net Assets 100.0%
===============================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS
For a Class R share outstanding during the period indicated
<Table>
<Caption>
DISTRIBUTIONS FROM:
NET NET REALIZED --------------------------
NET ASSET INVESTMENT AND TOTAL FROM NET NET
VALUE, INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED
BEGINNING (LOSS) (2) GAINS (LOSS) OPERATIONS INCOME CAPITAL GAINS
- ----------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. EMERGING GROWTH
For the period ended 09/30/06 (1) $13.69 $(0.06) $(1.33) $(1.39) $ -- $ --
For the year ended 03/31/06 9.65 (0.14) 4.18 4.04 -- --
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) -- --
U.S. SMALL CAP VALUE
For the period ended 09/30/06 (1) $19.84 $ 0.01 $ 0.00 $ 0.01 $ -- $ --
For the year ended 03/31/06 17.39 0.06 3.58 3.64 (0.01) (1.18)
12/03/04 (commenced) to 03/31/05 17.53 (0.00)(9) (0.14) (0.14) -- --
U.S. LARGE CAP VALUE
For the period ended 09/30/06 (1) $29.35 $ 0.16 $ 1.54 $ 1.70 $ -- $ --
For the year ended 03/31/06 26.62 0.27 2.77 3.04 (0.31) --
For the year ended 03/31/05 24.33 0.36 2.23 2.59 (0.30) --
For the year ended 03/31/04 18.15 0.24 6.45 6.69 (0.51) --
For the year ended 03/31/03 24.39 0.21 (6.20) (5.99) (0.25) --
For the year ended 03/31/02 23.39 0.15 1.26 1.41 (0.04) (0.37)
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/06 (1) $17.59 $(0.01) $ 0.33 $ 0.32 $ -- $ --
For the year ended 03/31/06 15.46 (0.02) 2.15 2.13 -- --
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) -- --
GLOBAL EQUITY FUNDS
INTERNATIONAL GROWTH
For the period ended 09/30/06 (1) $22.26 $ 0.06 $(0.00) $ 0.06 $ -- $ --
For the year ended 03/31/06 20.19 0.12 5.94 6.06 -- (3.99)
For the year ended 03/31/05 18.93 0.15 1.53 1.68 -- (0.42)
For the year ended 03/31/04 12.72 0.12 6.10 6.22 (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) -- --
</Table>
(1) UNAUDITED
(2) NET INVESTMENT INCOME PER SHARE IS CALCULATED BY DIVIDING NET INVESTMENT
INCOME FOR THE PERIOD BY THE AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
(3) TOTAL RETURNS ARE NOT ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
(4) 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.
(5) THIS CALCULATION INCLUDES EXPENSES NOT PART OF THE EXPENSE REIMBURSEMENT
CALCULATION.
(6) 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.
(7) 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%.
(8) 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.
(9) AMOUNT LESS THAN ONE PENNY.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
<Page>
<Table>
<Caption>
NET ASSET NET ASSETS,
TOTAL VALUE, TOTAL ENDING
DISTRIBUTIONS ENDING RETURN (3) (IN 000'S)
- -----------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. EMERGING GROWTH
For the period ended 09/30/06 (1) $ -- $12.30 (10.15%) $ 3,136
For the year ended 03/31/06 -- 13.69 41.98% 3,173
For the year ended 03/31/05 -- 9.65 1.37% 3,681
For the year ended 03/31/04 -- 9.52 51.83% 3,948
For the year ended 03/31/03 -- 6.27 (34.28%) 2,879
For the year ended 03/31/02 -- 9.54 (0.10%) 4,597
U.S. SMALL CAP VALUE
For the period ended 09/30/06 (1) $ -- $19.85 0.05% $ 762
For the year ended 03/31/06 (1.19) 19.84 21.68% 756
12/03/04 (commenced) to 03/31/05 -- 17.39 (0.80%)(10) 658
U.S. LARGE CAP VALUE
For the period ended 09/30/06 (1) $ -- $31.05 5.79% $ 4,519
For the year ended 03/31/06 (0.31) 29.35 11.47% 4,587
For the year ended 03/31/05 (0.30) 26.62 10.69% 8,047
For the year ended 03/31/04 (0.51) 24.33 37.09% 8,405
For the year ended 03/31/03 (0.25) 18.15 24.58% 6,749
For the year ended 03/31/02 (0.41) 24.39 6.13% 11,423
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/06 (1) $ -- $17.91 1.82% $ 5,787
For the year ended 03/31/06 -- 17.59 13.78% 6,055
For the year ended 03/31/05 -- 15.46 3.76% 9,318
For the year ended 03/31/04 -- 14.90 18.16% 10,229
For the year ended 03/31/03 -- 12.61 (29.79%) 9,052
For the year ended 03/31/02 -- 17.96 (20.25%) 38,386
GLOBAL EQUITY FUNDS
INTERNATIONAL GROWTH
For the period ended 09/30/06 (1) $ -- $22.32 0.27% $ 1,770
For the year ended 03/31/06 (3.99) 22.26 33.34% 1,776
For the year ended 03/31/05 (0.42) 20.19 8.94% 1,749
For the year ended 03/31/04 (0.01) 18.93 48.86% 9,236
For the year ended 03/31/03 -- 12.72 (25.48%) 7,845
For the year ended 03/31/02 -- 17.07 (10.77%) 11,199
<Caption>
RATIOS TO AVERAGE NET ASSETS (4)
------------------------------------------------------------------------------
EXPENSES
EXPENSES NET OF FUND'S
NET EXPENSE NET OF REIMBURSEMENT/ PORTFOLIO
INVESTMENT TOTAL (REIMBURSEMENTS)/ REIMBURSEMENT/ RECOUPMENT TURNOVER
INCOME (LOSS) EXPENSES RECOUPMENT RECOUPMENT OFFSET (5) RATE
- ------------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. EMERGING GROWTH
For the period ended 09/30/06 (1) (0.88%) 1.49% --(12) 1.49% 1.09% 63%
For the year ended 03/31/06 (1.27%) 2.09% (0.36%) 1.73% 1.42%(11) 128%
For the year ended 03/31/05 (1.06%) 1.89% (0.20%) 1.69% 1.26% 142%
For the year ended 03/31/04 (1.28%) 1.73% --(12) 1.73% 1.51%(6) 166%
For the year ended 03/31/03 (1.20%) 1.74% (0.20%) 1.54% 1.50%(7) 118%
For the year ended 03/31/02 (0.73%) 1.59% (0.11%) 1.48% 1.48%(8) 138%
U.S. SMALL CAP VALUE
For the period ended 09/30/06 (1) 0.13% 1.56% --(12) 1.56% 1.27% 22%
For the year ended 03/31/06 (0.34%) 1.57% (0.01%) 1.56% 1.23%(11) 53%
12/03/04 (commenced) to 03/31/05 (0.02%) 1.59% (0.03%) 1.56% 1.29% 73%
U.S. LARGE CAP VALUE
For the period ended 09/30/06 (1) 1.05% 1.07% --(12) 1.07% 0.92% 22%
For the year ended 03/31/06 0.96% 1.50% (0.43%) 1.07% 0.96%(11) 44%
For the year ended 03/31/05 1.44% 1.56% (0.50%) 1.06% 1.01% 42%
For the year ended 03/31/04 1.10% 1.52% (0.45%) 1.07% 1.04%(6) 51%
For the year ended 03/31/03 1.03% 1.54% (0.34%) 1.20% 1.19%(7) 139%
For the year ended 03/31/02 0.63% 1.39% (0.13%) 1.26% 1.26% 99%
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/06 (1) (0.13%) 1.38% --(12) 1.38% 1.25% 41%
For the year ended 03/31/06 (0.11%) 1.86% (0.48%) 1.38% 1.29%(11) 147%
For the year ended 03/31/05 0.14% 1.94% (0.57%) 1.37% 1.29% 197%
For the year ended 03/31/04 (0.41%) 1.58% (0.20%) 1.38% 1.18%(6) 172%
For the year ended 03/31/03 (0.59%) 1.51% (0.30%) 1.21% 1.20%(7) 193%
For the year ended 03/31/02 (0.79%) 1.35% (0.10%) 1.25% 1.25% 224%
GLOBAL EQUITY FUNDS
INTERNATIONAL GROWTH
For the period ended 09/30/06 (1) 0.53% 1.65% --(12) 1.65% 1.45% 50%
For the year ended 03/31/06 0.57% 1.62% (0.00%) 1.62% 1.24%(11) 167%
For the year ended 03/31/05 0.80% 1.66% (0.02%) 1.64% 1.32% 203%
For the year ended 03/31/04 0.71% 1.74% (0.04%) 1.70% 1.44%(6) 186%
For the year ended 03/31/03 0.65% 1.72% (0.21%) 1.51% 1.48%(7) 203%
For the year ended 03/31/02 (0.09%) 1.61% 0.01% 1.60% 1.62% 232%
</Table>
(10) INCEPTION TO DATE RETURN.
(11) 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 AND
INTERNATIONAL GROWTH, DO NOT EXCEED 1.45% AND 1.64%, FOR THE PERIOD
01/24/06 TO 03/31/06 RESPECTIVELY. U.S. SMALL CAP VALUE, U.S. LARGE CAP
VALUE AND U.S. SYSTEMATIC LARGE CAP GROWTH HAD RATES THROUGHOUT THE YEAR OF
1.55%, 1.06% AND 1.37% RESPECTIVELY.
(12) THE EXPENSE REIMBURSEMENT WAS TERMINATED ON JANUARY 23, 2006.
17
<Page>
STATEMENTS OF ASSETS AND LIABILITIES
<Table>
<Caption>
U.S. SYSTEMATIC
U.S. EMERGING U.S. SMALL CAP U.S. LARGE CAP LARGE CAP INTERNATIONAL
SEPTEMBER 30, 2006 (UNAUDITED) GROWTH VALUE VALUE GROWTH GROWTH
- ----------------------------------------------------------------------------------------------------------------------
Assets
Investments, at value* $11,743,118 $145,569,518 $30,270,183 $15,495,029 $106,167,533
Foreign currencies, at value** -- -- -- -- 1,540
Cash -- -- -- -- 8,692
Receivables:
Investment securities sold 152,257 1,331,081 -- -- 2,377,675
Capital shares sold 12,441 188,261 7,633 15,015 67,070
Dividends -- 193,948 43,530 13,333 124,667
Foreign taxes receivable -- -- -- -- 13,903
Other 6,778 77,002 4,366 6,045 42,027
----------- ------------ ----------- ----------- ------------
Total assets 11,914,594 147,359,810 30,325,712 15,529,422 108,803,107
----------- ------------ ----------- ----------- ------------
Liabilities
Payables:
Bank overdraft $ 65 $ 16,981 $ 171 $ 11 $ --
Investments purchased 119,902 263,051 307,475 -- 1,704,651
Capital shares redeemed 30,501 29,929 4,348 4,014 33,206
Collateral on securities
loaned 1,593,900 2,804,040 -- -- 4,020,455
To investment advisor 6,051 85,108 10,237 5,467 40,613
Accrued Expenses and other
liabilities 4,506 64,089 9,767 8,604 57,416
----------- ------------ ----------- ----------- ------------
Total Liabilities 1,754,925 3,263,198 331,998 18,096 5,856,341
----------- ------------ ----------- ----------- ------------
NET ASSETS 10,159,669 144,096,612 29,993,714 15,511,326 102,946,766
=========== ============ =========== =========== ============
* Investments, at cost 10,882,852 129,018,044 24,485,475 13,861,561 91,287,713
=========== ============ =========== =========== ============
** Foreign currencies, at cost -- -- -- -- 1,485
=========== ============ =========== =========== ============
Net Assets Consist of:
Paid-in capital $15,891,539 $110,445,117 $27,292,718 $22,774,594 $ 89,692,488
Undistributed net investment
income (loss) (36,404) 511,915 435,661 8,591 965,048
Accumulated net realized gain
(loss) on investments and
foreign currencies (6,555,732) 16,588,106 (3,519,373) (8,905,327) (2,589,376)
Net unrealized appreciation
(depreciation) of investments
and of other assets and
liabilities denominated in
foreign currencies 860,266 16,551,474 5,784,708 1,633,468 14,878,606
Net Assets applicable to all ----------- ------------ ----------- ----------- ------------
shares outstanding $10,159,669 $144,096,612 $29,993,714 $15,511,326 $102,946,766
=========== ============ =========== =========== ============
Net Assets of Class I shares $ 7,023,587 $114,000,592 $25,474,670 $ 710,594 $ 44,266,565
Net Assets of Class II shares -- 29,334,250 -- 9,013,239 56,912,654
Net Assets of Class III shares -- -- -- -- --
Net Assets of Class IV shares -- -- -- -- (2,897)
Net Assets of Class R shares 3,136,082 761,770 4,519,044 5,787,493 1,770,444
=========== ============ =========== =========== ============
Class I Shares outstanding 561,842 5,731,433 820,467 39,020 1,942,147
Class II Shares outstanding -- 1,475,980 -- 497,722 2,490,211
Class III Shares outstanding -- -- -- -- --
Class IV Shares outstanding -- -- -- -- --
Class R Shares outstanding 255,047 38,373 145,564 323,080 79,312
=========== ============ =========== =========== ============
Net Asset Value -- Class I Share $ 12.50 $ 19.89 $ 31.05 $ 18.21 $ 22.79
Net Asset Value -- Class II Share $ -- $ 19.87 $ -- $ 18.11 $ 22.85
Net Asset Value -- Class III Share $ -- $ -- $ -- $ -- $ --
Net Asset Value -- Class IV Share $ -- $ -- $ -- $ -- $ --
Net Asset Value -- Class R Share $ 12.30 $ 19.85 $ 31.05 $ 17.91 $ 22.32
=========== ============ =========== =========== ============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
<Page>
STATEMENTS OF OPERATIONS
<Table>
<Caption>
U.S. SYSTEMATIC
PERIOD ENDED U.S. EMERGING U.S. SMALL CAP U.S. LARGE CAP LARGE CAP INTERNATIONAL
SEPTEMBER 30, 2006 (UNAUDITED) GROWTH VALUE VALUE GROWTH GROWTH
- ----------------------------------------------------------------------------------------------------------------------
Investment Income
Dividends, net of foreign taxes* $ 9,907 $ 1,053,988 $ 256,733 $ 75,981 $ 1,000,393
Interest 59 18 96 5 --
----------- ----------- ---------- -------- -----------
Total Income 9,966 1,054,006 256,829 75,986 1,000,393
----------- ----------- ---------- -------- -----------
Expenses
Advisory fees 37,880 567,553 58,723 30,132 256,134
Administration fees 22,706 397,399 46,929 39,571 344,172
Shareholder servicing fees 3,960 923 5,660 7,112 2,178
Professional fees 348 4,834 921 489 3,617
Trustees' fees and expenses 298 4,647 756 384 2,967
Interest and credit facility
fees 1,185 -- 556 105 575
----------- ----------- ---------- -------- -----------
Total Expenses 66,377 975,356 113,545 77,793 609,643
Expense offset (20,007) (225,301) (20,340) (9,021) (113,020)
----------- ----------- ---------- -------- -----------
Net Expenses 46,370 750,055 93,205 68,772 496,623
----------- ----------- ---------- -------- -----------
Net Investment Income (Loss) (36,404) 303,951 163,624 7,214 503,770
----------- ----------- ---------- -------- -----------
Net Realized and Unrealized Gain
(Loss) on Investments Realized
gain from:
Securities 660,587 7,221,639 699,183 155,119 2,838,565
Foreign currency transactions -- -- -- -- 1,563,458
----------- ----------- ---------- -------- -----------
Net realized gain (loss) 660,587 7,221,639 699,183 155,119 4,402,023
----------- ----------- ---------- -------- -----------
Change in unrealized appreciation
(depreciation) of:
Investments (1,732,217) (8,001,635) 742,558 214,810 (4,260,287)
Other assets and liabilities
denominated in foreign
currencies -- -- -- -- (107,436)
----------- ----------- ---------- -------- -----------
Net unrealized appreciation
(depreciation) (1,732,217) (8,001,635) 742,558 214,810 (4,367,723)
----------- ----------- ---------- -------- -----------
Net Gain (Loss) on Investments (1,071,630) (779,996) 1,441,741 369,929 34,300
----------- ----------- ---------- -------- -----------
Net Increase (Decrease) In Net
Assets Resulting From
Operations $(1,108,034) $ (476,045) $1,605,365 $377,143 $ 538,070
=========== =========== ========== ======== ===========
*Foreign taxes withheld $ -- $ -- $ -- $ -- $ 132,974
----------- ----------- ---------- -------- -----------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
U.S. EMERGING GROWTH U.S. SMALL CAP VALUE
---------------------------- ----------------------------
SEPTEMBER 30, SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2006 2006 MARCH 31, 2006 MARCH 31,
AND MARCH 31, 2006 (UNAUDITED) 2006 (UNAUDITED) 2006
- ------------------------------------- ------------- ------------ ------------- ------------
Increase (Decrease) In Net Assets
from Investment Operations:
Net investment income (loss) $ (36,404) $ (131,488) $ 303,951 $ 795,961
Net realized gain (loss) 660,587 3,962,899 7,221,639 14,420,355
Net unrealized appreciation
(depreciation) (1,732,217) 241,623 (8,001,635) 11,266,796
----------- ------------ ------------ ------------
Net increase (decrease) in net
assets from investment operations (1,108,034) 4,073,034 (476,045) 26,483,112
----------- ------------ ------------ ------------
Distributions to Shareholders:
From net investment income -- -- -- (415,210)
From net realized gains -- (7,167) -- (7,768,635)
----------- ------------ ------------ ------------
Total distributions -- (7,167) -- (8,183,845)
----------- ------------ ------------ ------------
From Capital Share Transactions:
Proceeds from shares sold
Class I 1,697,245 1,499,847 9,121,726 33,364,315
Class II -- -- 250 20,190,331
Class IV -- -- -- --
Class R 984,224 350,928 29,712 70,738
Distributions reinvested
Class I -- 5,184 -- 6,277,485
Class II -- -- -- 1,741,176
Class IV -- -- -- --
Class R -- 1,983 -- 43,447
Cost of shares redeemed
Class I (661,395) (9,948,897) (15,219,256) (19,888,795)
Class II -- -- (13,560,291) (128,724)
Class III
Class IV -- -- -- --
Class R (646,802) (1,804,143) (24,322) (110,870)
----------- ------------ ------------ ------------
Net increase (decrease) in net
assets from share transactions 1,373,272 (9,895,098) (19,652,181) 41,559,103
----------- ------------ ------------ ------------
Net Increase (Decrease) in Net Assets 265,238 (5,829,231) (20,128,226) 59,858,370
Net Assets
Beginning 9,894,431 15,723,662 164,224,838 104,366,468
----------- ------------ ------------ ------------
Ending $10,159,669 $ 9,894,431 $144,096,612 $164,224,838
=========== ============ ============ ============
Undistributed net investment
income (loss), ending $ (36,404) $ -- $ 511,915 $164,224,838
=========== ============ ============ ============
Class I -- Capital Share Activity
Shares sold 128,982 129,381 465,903 1,831,695
Distributions reinvested -- 460 -- 350,697
Shares redeemed (50,793) (879,179) (784,253) (1,075,546)
=========== ============ ============ ============
Net Class I Share Activity 78,189 (749,338) (318,350) 1,106,846
=========== ============ ============ ============
Class II -- Capital Share Activity
Shares sold -- -- 13 1,079,112
Distributions reinvested -- -- -- 97,436
Shares redeemed -- -- (711,079) (6,971)
=========== ============ ============ ============
Net Class II Share Activity -- -- (711,066) 1,169,577
=========== ============ ============ ============
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 75,647 31,266 1,503 38,257
Distributions reinvested -- 178 -- --
Shares redeemed (52,310) (181,217) (1,228) (415)
=========== ============ ============ ============
Net Class R Share Activity 23,337 (149,773) 275 37,842
=========== ============ ============ ============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
<Page>
<Table>
<Caption>
U.S. SYSTEMATIC
U.S. LARGE CAP VALUE LARGE CAP GROWTH INTERNATIONAL GROWTH
--------------------------- --------------------------- ----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2006 2006 MARCH 31, 2006 MARCH 31, 2006 MARCH 31,
AND MARCH 31, 2006 (UNAUDITED) 2006 (UNAUDITED) 2006 (UNAUDITED) 2006
- ------------------------------------- ------------- ----------- ------------- ----------- ------------- ------------
Increase (Decrease) In Net Assets
from Investment Operations:
Net investment income (loss) $ 163,624 $ 272,042 $ 7,214 $ 1,377 $ 503,770 $ 1,005,448
Net realized gain (loss) 699,183 1,864,853 155,119 795,200 4,402,023 19,987,251
Net unrealized appreciation
(depreciation) 742,558 445,579 214,810 692,335 (4,367,723) 7,906,288
----------- ----------- ----------- ----------- ------------ ------------
Net increase (decrease) in net
assets from investment operations 1,605,365 2,582,474 377,143 1,488,912 538,070 28,898,987
----------- ----------- ----------- ----------- ------------ ------------
Distributions to Shareholders:
From net investment income -- -- (26,492) -- --
From net realized gains -- (363,116) -- -- (15,080,798)
----------- ----------- ----------- ----------- ------------ ------------
Total distributions -- (363,116) -- (26,492) -- (15,080,798)
----------- ----------- ----------- ----------- ------------ ------------
From Capital Share Transactions:
Proceeds from shares sold
Class I 4,513,631 6,081,743 70,195 3,132,257 1,723,985 6,546,866
Class II -- -- 5,009,374 3,424,053 50,000 53,840,583
Class IV -- -- -- -- -- 45,381,290
Class R 127,423 253,866 195,096 501,618 202,902 670,079
Distributions reinvested
Class I -- 313,005 -- -- -- 6,615,202
Class II -- -- -- 26,492 -- --
Class IV -- -- -- -- -- 8,221,384
Class R -- 50,110 -- -- -- 216,270
Cost of shares redeemed
Class I (2,041,265) (3,449,778) (39,256) (3,624,807) (3,528,449) (13,487,399)
Class II -- -- (4,014) -- -- --
Class III -- (43,546,717)
Class IV -- -- -- -- -- (82,681,011)
Class R (448,394) (4,225,956) (562,542) (4,555,093) (206,117) (999,155)
----------- ----------- ----------- ----------- ------------ ------------
Net increase (decrease) in net
assets from share transactions 2,151,395 (977,010) 4,668,853 (1,095,480) (1,757,679) (19,222,608)
----------- ----------- ----------- ----------- ------------ ------------
Net Increase (Decrease) in Net Assets 3,756,760 1,242,348 5,045,996 366,940 (1,219,609) (5,404,419)
Net Assets
Beginning 26,236,954 24,994,606 10,465,330 10,098,390 104,166,375 109,570,794
----------- ----------- ----------- ----------- ------------ ------------
Ending $29,993,714 $26,236,954 $15,511,326 $10,465,330 $102,946,766 $104,166,375
=========== =========== =========== =========== ============ ============
Undistributed net investment
income (loss), ending $ 435,661 $ 272,037 $ 8,591 $ 1,377 $ 965,048 $104,166,375
=========== =========== =========== =========== ============ ============
Class I -- Capital Share Activity
Shares sold 150,232 218,484 3,959 208,507 77,236 305,670
Distributions reinvested -- 11,215 -- -- -- 340,639
Shares redeemed (68,194) (125,785) (2,300) (220,921) (157,182) (646,622)
=========== =========== =========== =========== ============ ============
Net Class I Share Activity 82,038 103,914 1,659 (12,414) (79,946) (313)
=========== =========== =========== =========== ============ ============
Class II -- Capital Share Activity
Shares sold -- -- 287,078 209,270 2,199 2,488,012
Distributions reinvested -- -- -- 1,596 -- --
Shares redeemed -- -- (222) -- -- --
=========== =========== =========== =========== ============ ============
Net Class II Share Activity -- -- 286,856 210,866 2,199 2,488,012
=========== =========== =========== =========== ============ ============
Class III -- Capital Share Activity
Shares sold -- -- -- -- -- --
Distributions reinvested -- -- -- -- -- --
Shares redeemed -- -- -- -- -- (1,979,233)
=========== =========== =========== =========== ============ ============
Net Class III Share Activity -- -- -- -- -- (1,979,233)
=========== =========== =========== =========== ============ ============
Class IV -- Capital Share Activity
Shares sold -- -- -- -- -- 2,059,584
Distributions reinvested -- -- -- -- -- 422,693
Shares redeemed -- -- -- -- -- (3,755,023)
=========== =========== =========== =========== ============ ============
Net Class IV Share Activity -- -- -- -- -- (1,272,746)
=========== =========== =========== =========== ============ ============
Class R -- Capital Share Activity
Shares sold 4,239 9,217 11,336 398,538 9,071 30,959
Distributions reinvested -- 1,792 -- -- -- 11,347
Shares redeemed (14,938) (157,044) (32,445) (1,817,930) (9,557) (49,170)
=========== =========== =========== =========== ============ ============
Net Class R Share Activity (10,699) (146,035) (21,109) (1,419,392) (486) (6,864)
=========== =========== =========== =========== ============ ============
</Table>
21
<Page>
NOTES TO FINANCIAL STATEMENTS -- (Unaudited)
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
fourteen 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"),
nine Funds have issued Class II shares ("Class II"), one Fund has issued Class
III shares ("Class III"), one Fund has issued Class IV shares ("Class IV") and
five Funds have issued Retirement shares ("Class R"). No shares have a sales
charge. Class R shares have a distribution fee. The Funds offering Class R
shares are covered in this report.
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 September 30, 2006.
22
<Page>
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 at
September 30, 2006.
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 securities market. 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 September 30, 2006 were:
FUND MARKET VALUE COLLATERAL
- ------------------------------------------------
U.S. Emerging Growth $1,552,799 $1,593,900
U.S. Small Cap Value 2,739,971 2,804,040
International Growth 3,783,241 4,020,455
CREDIT FACILITY
The Trust has a $15 million credit facility available to fund temporary or
emergency borrowing expiring in March 2007. Each Fund pays its pro-rata share of
an annual commitment fee plus interest on its specific borrowings. For the
period ended September 30, 2006, the Funds did not borrow against the line of
credit.
COMMITMENTS AND CONTINGENCIES
In the normal course of business, 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 Funds provided services to the Funds in addition to trade execution. These
services included payments of certain expenses on behalf of the Funds. In
23
<Page>
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 11,530 1,735 6742
U.S. Small Cap Value 193,315 15,532 16,455
U.S. Large Cap Value 14,857 496 4,987
U.S. Systematic Large Cap Growth 3,098 936 4,987
International Growth 58,604 19,013 35,403
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.
NOTE D -- FEES AND TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Nicholas-Applegate Capital Management LLC ("NACM") serves as Adviser (the
"Adviser") to the Trust. The Adviser receives a monthly fee at an annual rate
based on the average daily net assets of the Funds. The investment Advisory Fee
rates for each of the Funds are listed in the table below.
ADMINISTRATIVE & SHAREHOLDER SERVICES FEE
On January 24, 2006, the Funds entered into a new Administration Agreement, the
Funds pay for the administrative services they require under what is essentially
an all-in fee structure. Class R shareholders of the Funds pay an administrative
fee to the Investment Adviser computed as a percentage of the Funds' assets
attributable in the aggregate to Class R shares, the Investment Adviser, in
turn, provides or procures administrative and shareholder services for Class R
shareholders and also bears the costs of most third-party administrative
services required by the Funds, including audit, custodial, portfolio
accounting, legal, transfer agency and printing costs. The administrative fees
paid to the Investment Adviser may exceed the related costs. Generally, this may
not be the case for relatively small funds. The Funds do bear other expenses
which are not covered under the administrative fee which may vary and affect the
total level of expenses paid by Class R shareholders, such as brokerage fees,
taxes, commissions and other transaction expenses, costs of borrowing money,
including interest expenses, extraordinary expenses (such as litigation and
indemnification expenses) and fees and expenses of the disinterested Trustees of
the Trust and their counsel.
The Investment Advisory, Administrative Services and Distribution Fees are
charged at the following annual rates:
ADVISORY ADMINISTRATION
FUND FEE FEE*
- ------------------------------------------------------------
U.S. Emerging Growth 0.75% 0.41%
U.S. Small Cap Value 0.75% 0.52%
U.S. Large Cap Value 0.45% 0.33%
U.S. Systematic Large Cap Growth 0.45% 0.64%
International Growth 0.50% 0.86%
* EXCLUDES TRUSTEES' FEES AND EXPENSES, TAX, BROKERAGE AND INTEREST EXPENSES,
AND EXTRAORDINARY EXPENSES.
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, except
for the chairman of the Trust who will receive annual compensation of
approximately $42,000 from the Trust.
24
<Page>
NOTE E -- INVESTMENT TRANSACTIONS
The following table presents purchases and sales of securities, excluding
short-term investments, during the period ended September 30, 2006 to indicate
the volume of transactions in each Fund. The tax cost of securities held at
September 30, 2006, 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.
<Table>
<Caption>
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 8,740 7,032 10,883 1,238 (378) 860
U.S. Small Cap Value 32,115 42,496 129,018 23,880 (7,329) 16,551
U.S. Large Cap Value 7,681 5,684 24,485 5,935 (150) 5,785
U.S. Systematic Large Cap Growth 10,002 5,361 13,862 1,755 (122) 1,633
International Growth 51,095 56,422 91,288 16,852 (1,972) 14,880
- ----------------------------------------------------------------------------------------------------------------------
</Table>
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
The Funds may be 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. For the period ended September 30, 2006 the Funds were not party to
any such agreements.
NOTE G -- PROXY VOTING
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.
25
<Page>
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 (April 1, 2006 to September 30, 2006).
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 if 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. 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.
<Table>
<Caption>
EXPENSES PAID DURING
BEGINNING ACCOUNT ENDING ACCOUNT THE PERIOD* ANNUALIZED
VALUE VALUE APRIL 1, 2006 TO EXPENSE
APRIL 1, 2006 SEPTEMBER 30, 2006 SEPTEMBER 30, 2006 RATIO
- ------------------------------------------------------------------------------------------------------------------------
U.S. EMERGING GROWTH -- CLASS R
Actual $1,000.00 $ 898.50 $7.05 1.46%
- ------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,017.50 $7.49 1.46%
- ------------------------------------------------------------------------------------------------------------------------
U.S. SMALL CAP VALUE -- CLASS R
Actual $1,000.00 $1,000.50 $7.78 1.56%
- ------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,017.15 $7.85 1.56%
- ------------------------------------------------------------------------------------------------------------------------
U.S. LARGE CAP VALUE -- CLASS R
Actual $1,000.00 $1,057.90 $5.49 1.07%
- ------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.60 $5.39 1.07%
- ------------------------------------------------------------------------------------------------------------------------
U.S. SYSTEMATIC LARGE CAP GROWTH -- CLASS R
Actual $1,000.00 $1,018.20 $6.94 1.38%
- ------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.05 $6.94 1.38%
- ------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH -- CLASS R
Actual $1,000.00 $1,002.70 $8.24 1.65%
- ------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.70 $8.30 1.65%
- ------------------------------------------------------------------------------------------------------------------------
</Table>
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO; MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD.
26
<Page>
SUPPLEMENTARY INFORMATION -- (Unaudited)
QUARTERLY FILING
The Funds provide a complete list of portfolio holdings four times in each
fiscal year, at the end of each calendar quarter. For the second and fourth
quarters, the portfolio holdings appear in the Funds' semiannual and annual
reports to shareholders. For the first and third quarters, the Funds file their
portfolio holdings 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.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
interpretation 48 ("FIN 48"), "ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES." This
standard defines the threshold for recognizing the benefits of tax-return
positions in the financial statements as "more-likely-than-not" to be sustained
by the taxing authority and requires measurement of a tax position meeting the
more-likely-than-not criterion, based on the largest benefit that is more than
50 percent likely to be realized. FIN 48 is effective as of the beginning of the
first fiscal year beginning after December 15, 2006. At adoption, companies must
adjust their financial statements to reflect only those tax positions that are
more-likely-than-not to be sustained as of the adoption date. As of September
30, 2006, the Funds have not evaluated the impact that will result from adopting
FIN 48.
27
<Page>
CORPORATE GOVERNANCE
NAME, ADDRESS (1) AGE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
POSITION(S) HELD WITH FUND OTHER DIRECTORSHIP HELD BY TRUSTEE NUMBER OF
LENGTH OF TIME SERVED (2) PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE
- ------------------------------ -----------------------------------------------
DISINTERESTED TRUSTEES:
GEORGE F. KEANE (76) PRINCIPAL OCCUPATIONS: President Emeritus and
Chairman of the Board & founding Chief Executive Officer, The Common
Trustee Since August 2004 Fund (1971-1993); and Endowment Advisors
(1987-1999) (organizations that provide
investment management programs for colleges and
universities)
OTHER DIRECTORSHIPS HELD: 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).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 14
WALTER E. AUCH (85) PRINCIPAL OCCUPATIONS: Retired; prior thereto,
Trustee Since May 1999 Chairman and CEO of Chicago Board of Options
Exchange (1979-1986); Senior Executive Vice
President PaineWebber, Inc.
OTHER DIRECTORSHIPS HELD: 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).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 14
DARLENE DEREMER (50) PRINCIPAL OCCUPATIONS: Managing Director,
Trustee Since May 1999 Putnam Lovell NBF Private Equity (Since 2004);
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.
OTHER DIRECTORSHIPS HELD: 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 (since 1994-2000); Director,
Nicholas-Applegate Southeast Asia Fund, Ltd.
(since 2004).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 14
JOHN J. MURPHY (62) PRINCIPAL OCCUPATIONS: Founder and senior
Trustee Since September 2005 principal, Murphy Capital Management
OTHER DIRECTORSHIPS HELD: Director, Smith
Barney Multiple Discipline Trust; Director,
Barclays International Funds Group Ltd. and
affiliated companies.
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 14
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES:
HORACIO A. VALEIRAS (47) PRINCIPAL OCCUPATIONS: Managing Director (since
President & Trustee Since 2004) and Chief Investment Officer.
August 2004 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.
OTHER DIRECTORSHIPS HELD: Trustee, The Bishops
School (since 2002); Trustee, San Diego Rowing
Club (since 2002).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 14
- --------------------------------------------------------------------------------
28
<Page>
CORPORATE GOVERNANCE
NAME, ADDRESS (1) AGE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
POSITION(S) HELD WITH FUND OTHER DIRECTORSHIP HELD BY TRUSTEE NUMBER OF
LENGTH OF TIME SERVED (2) PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE
- ------------------------------ -----------------------------------------------
OFFICERS:
CHARLES H. FIELD, JR. (51) PRINCIPAL OCCUPATIONS: General Counsel,
Secretary and Chief Compliance Nicholas-Applegate Capital Management,
Officer Since May 2002 Nicholas-Applegate Securities LLC,
Nicholas-Applegate Holdings LLC (since February
2004), Deputy General Counsel,
Nicholas-Applegate Capital Management, LLC
(1996-2004).
OTHER DIRECTORSHIPS HELD: Director,
Nicholas-Applegate U.S. Convertible Fund, LLC
(since 2006).
NUMBER OF PORTFOLIOS OVERSEEN BY OFFICER: 14
DEBORAH A. WUSSOW (46) PRINCIPAL OCCUPATIONS: Vice President and
Treasurer and Assistant Director, Nicholas-Applegate Capital
Secretary Since August 2006 Management, LLC (Since 2005), and previously
Manager, Legal and Compliance,
Nicholas-Applegate Capital Management, LLC
(since 1995)
OTHER DIRECTORSHIPS HELD: NA
NUMBER OF PORTFOLIOS OVERSEEN BY OFFICER: 14
- --------------------------------------------------------------------------------
(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.
29
<Page>
(This page intentionally left blank)
<Page>
TRUSTEES OF NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
George F. Keane, CHAIRMAN
Walter E. Auch
Darlene T. DeRemer
John J. Murphy
Horacio A. Valeiras
OFFICERS
Horacio A. Valeiras, PRESIDENT
Charles H. Field, Jr., SECRETARY
Deborah A. Wussow, 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
<Page>
SAR0906RET
NICHOLAS | APPLEGATE(R)
INSTITUTIONAL FUNDS
Nicholas-Applegate Securities, Distributor
[A company of Allianz LOGO] 600 West Broadway
Global Investors San Diego, California 92101
800.551.8043
ITEM 2. CODE OF ETHICS.
Not required for this semi-annual report on Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required for this semi-annual report on Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required for this semi-annual report on Form N-CSR.
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) Not required for this semi-annual report on Form N-CSR.
(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
-------------------------------------
By (Signature and Title)
/s/ Horacio A. Valeiras
=======================
Horacio A. Valeiras
Title: Chief Executive Officer and President
Date: December 12, 2006
By (Signature and Title)
/s/ Deborah A. Wussow
=======================
Deborah A. Wussow
Title: Chief Financial Officer and Treasurer
Date: December 12, 2006
* Print name and title of each signing officer under his or her signature.