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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ / Pre-Effective Amendment No.__ / / Post-Effective Amendment No.__
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
(Exact Name of Registrant as Specified in Charter)
600 West Broadway
San Diego, California 92101
(Address of Principal Executive Offices)
(619) 652-5422
(Registrant's Area Code and Telephone Number)
Charles H. Field, Jr.
C/O Nicholas-Applegate Capital Management
600 West Broadway, 32nd Floor
San Diego, California 92101
(Name And Address Of Agent For Service)
Copy To:
Deborah A. Wussow
C/O Nicholas-Applegate Capital Management
600 West Broadway, 32nd Floor
San Diego, California 92101
Approximate Date of Proposed Public Offering: as soon as practicable after
this Registration Statement becomes effective under the Securities Act of 1933.
The title of securities being registered is common stock, par value $0.01 per
share.
It is proposed that this filing will go effective on January 19, 2005
pursuant to Rule 488.
No filing fee is required because of Registrant's reliance on Section 24(f)
under the Investment Company Act of 1940, as amended.
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NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
Form N-14
Cross Reference Sheet
Pursuant to Rule 481(a) Under the Securities Act of 1933
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<Caption>
FORM N-14 PROSPECTUS/PROXY
ITEM NO. STATEMENT CAPTION
- ------------ -----------------
PART A
- ------
Item 1. Beginning of Registration Statement and Outside Cover Page
Front Cover Page of Prospectus
Item 2. Beginning and Outside Back Cover Page of Cover Page
Prospectus
Item 3. Synopsis Information and Risk Factors Synopsis
Item 4. Information About the Transaction Letter to Shareholders; Questions and Answers;
Synopsis; Reasons for the Reorganization;
Information about the Reorganization
Item 5. Information About the Registrant Letter to Shareholders; Questions and Answers;
Synopsis; Reasons for the Reorganization;
Information about the Reorganization;
Additional Information about the Acquiring
Fund and the Fund
Item 6. Information About the Fund Being Acquired Letter to Shareholders; Questions and Answers;
Synopsis; Reasons
</Table>
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<Table>
<Caption>
for the Reorganization; Information about the
Reorganization; Additional Information about the
Acquiring Fund and the Fund
Item 7. Voting Information Letter to Shareholders; Questions and Answers;
Cover Page; Voting Information
Item 8. Interest of Certain Persons and Experts Not Applicable
Item 9. Additional Information Required for Reoffering Not Applicable
by Persons Deemed to be Underwriters
<Caption>
STATEMENT OF ADDITIONAL
PART B INFORMATION CAPTION
- ------ -----------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Not Applicable
Item 12. Additional Information About Registrant Statement of Additional Information of
Nicholas-Applegate Institutional Funds
date July 30, 2004 (1);
Statement of Additional Information of US
Systematic Mid Cap Growth and US Systematic
SMID Growth Funds dated February____, 2004
Item 13. Additional Information About the Fund Being Statement of Additional Information of
Acquired Nicholas-Applegate Institutional Funds
date July 30, 2004 (1);
Statement of Additional Information of US
Systematic Mid
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<Table>
<Caption>
Cap Growth and US Systematic SMID Growth Funds
dated February____, 2004
Item 14. Financial Statements Annual Reports of US Systematic Mid Cap Growth
and US Systematic SMID Growth Funds, each a
series of the Registrant, dated March 31, 2004(2);
Semi-Annual Reports dated September 30, 2004; Pro Formas
PART C
Item 15. Indemnification
Item 16. Exhibits
Item 17. Undertakings
</Table>
- ----------
(1) Incorporated herein by reference to Post-Effective Amendment No. 22 to the
Registrant's Registration Statement on Form N-1A, filed July 30, 2004 (File
No. 33-71469).
(2) Incorporated herein by reference to the Annual Reports filed by
Nicholas-Applegate Institutional Funds, filed May 28, 2004 (File No.
811-07384).
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NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
NICHOLAS-APPLEGATE U.S. SYSTEMATIC MID CAP GROWTH FUND
January 21, 2005
Dear Shareholder:
The enclosed proxy materials describe a proposal that Nicholas-Applegate
U.S. Systematic Mid Cap Growth Fund (the "Target") reorganize and become part of
Nicholas-Applegate U.S. Systematic SMID Growth Fund ("SMID Growth Fund"). The
Target and SMID Growth Fund (each a "Fund") are each a series of
Nicholas-Applegate Institutional Funds, a Delaware statutory trust (the
"Trust"). If the proposal is approved and implemented in its entirety, each
shareholder of the Target will become a shareholder of SMID Growth Fund.
You are cordially invited to attend a special meeting of the Target's
shareholders ("Meeting") to be held on February 10, 2005, at 10 a.m., Pacific
Time, at the Trust's offices, 600 West Broadway, 30th Floor, San Diego,
California 92101. At the Meeting, the Target's shareholders will be asked to
approve the Plan of Reorganization and Termination (the "Reorganization Plan")
involving the Target and SMID Growth Fund.
THE TRUST'S BOARD OF TRUSTEES ("BOARD") BELIEVES THE PROPOSED
REORGANIZATION WILL BE IN THE BEST INTEREST OF SHAREHOLDERS OF THE TARGET.
ACCORDINGLY, THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE REORGANIZATION PLAN.
THE REORGANIZATION WILL BE EFFECTED ONLY IF APPROVED BY A MAJORITY OF THE
TARGET'S OUTSTANDING SHARES VOTED IN PERSON OR REPRESENTED BY PROXY. YOUR VOTE
IS EXTREMELY IMPORTANT. WE HOPE YOU WILL PARTICIPATE BY CASTING YOUR VOTE IN
PERSON OR BY PROXY IF YOU ARE UNABLE TO ATTEND THE MEETING.
We thank you for your attention to this matter. We look forward to
seeing you at the Meeting or receiving your proxy card(s) so that your shares
may be voted at the Meeting. If you have any questions on voting of proxies or
the proposal to be considered at the Meeting, please call us toll-free at
(800) 551-8043.
Very truly yours,
Horacio A. Valeiras, CFA
President
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TRANSFER OF THE ASSETS OF U.S. SYSTEMATIC MID CAP GROWTH FUND TO AND IN
EXCHANGE FOR CLASS IV SHARES OF U.S. SYSTEMATIC SMID GROWTH FUND
QUESTIONS AND ANSWERS
Nicholas-Applegate Capital Management LLC, the Funds' investment adviser
("Nicholas-Applegate"), and the Board encourage you to read the enclosed
Prospectus/Proxy Statement carefully. The following is designed to provide a
brief overview of the proposal and answer some questions you may have about
this shareholder vote.
WHAT IS THE PURPOSE OF THE SHAREHOLDER VOTE?
The vote is to determine whether the Target should be reorganized and
become part of another fund managed by Nicholas-Applegate, SMID Growth Fund. If
the Target's shareholders decide in favor of the proposal, you will become a
shareholder of SMID Growth Fund, and the Target will cease to exist.
WHAT IS THE RATIONALE FOR MERGING THE TARGET WITH SMID GROWTH FUND?
The Target has insufficient assets to remain a viable investment product,
and Nicholas-Applegate does not believe it will be able to attract further
investment in the Target. Although the Target has, in the past, had more assets,
the net assets of the Target as of September 30, 2004 were $11,250,920. As a
result, the Target no longer benefits from the operating efficiencies often
associated with larger mutual funds. Nicholas-Applegate has indicated that it
may not be able to continue to serve as the investment adviser to the Target
under these circumstances. By merging the Target into SMID Growth Fund, the
Target's shareholders would have the benefit of combining assets with a fund
having a similar investment objective and an investment strategy that, while
comparable, allows exposure to a broader range of the stock market. Furthermore,
the combined Fund would hopefully enjoy greater operating efficiencies because
it would carry more net assets than either predecessor Fund alone.
WHAT ARE THE ADVANTAGES OF MERGING THESE FUNDS?
There are three key potential advantages:
- Combining the Funds' assets allows the investment adviser to more
efficiently manage and diversify the single, larger fund than it can the
two smaller funds.
- A single, larger fund can attract assets from institutional investors that
typically avoid holding high percentages of any fund. If the single fund
grows larger, shareholders may enjoy lower expense ratios over time. Larger
funds tend to enjoy economies of scale that result in lower operating
expenses as the fixed costs of operating a fund are shared by more
investors and distributed across more assets. These benefits are not
available to funds with fewer assets under management.
- - There will be no change in the portfolio management team. Both Funds are
managed by Stacey Nutt, Ph.D. and Todd Wolter, CFA.
The potential benefits and possible disadvantages are explained in more
detail in the enclosed Prospectus/Proxy Statement.
HOW ARE THESE TWO FUNDS ALIKE?
Each Fund seeks long-term capital appreciation by investing in stocks from
a universe of U.S. companies that includes those with midsize market
capitalizations. Additionally, each Fund uses Nicholas-Applegate's Systematic
Investment Process to help identify the strongest investment opportunities
available in its respective universe. However, the Target and SMID Growth Fund
differ somewhat in regard to the size of companies in which they invest. The
Target invests primarily in U.S companies with midsize market capitalizations,
but may also invest in companies with small size market capitalizations, though
it has done so to only a very limited extent. Generally, midsize companies are
those with market capitalizations in the range covered by the Russell MidCap
Growth Index, which as of October 3, 2004 contained companies with
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market capitalization between $298 million and $13.19 billion. The SMID Growth
Fund invests primarily in U.S. companies with small to midsize market
capitalizations. Generally, small to midsize companies are those with market
capitalizations in the range corresponding to the middle 90% of the Russell 2500
Growth Index, which as of October 3, 2004 contained companies with market
capitalization between $68 million and $6.5 billion.
HOW IS SMID GROWTH FUND MANAGED?
Nicholas-Applegate emphasizes a team approach to portfolio management.
Nicholas-Applegate's Systematic Research and Investment Team, a group of
seasoned portfolio managers and analysts, who currently manage the Target and
SMID Growth Fund, will continue to manage SMID Growth Fund. Stacey Nutt, Ph.D.,
Lead Portfolio Manager for the Systematic Research and Investment Team, and Todd
Wolter, CFA will be primarily responsible for the day-to-day investment
management decisions. Stacey is also a member of Nicholas-Applegate's Executive
Committee. Prior to joining the firm in 1999, he was Research Director for
Decision Analytics at Vestek Systems, Inc. Previously, Stacey was a member of
the faculty of Virginia Tech for three years. He is published in academic and
professional finance journals including the JOURNAL OF FINANCE, AUDITING and
FINANCIAL MANAGEMENT. He received his Ph.D. and M.B.A. in Accounting with a
minor in Finance and Statistics from Georgia Institute of Technology School of
Management and earned his B.S. in business administration from Oral Roberts
University. He has twelve years of relevant experience.
Prior to joining the firm in 2000, Todd was a quantitative risk analyst
with Credit Suisse Asset Management, specializing in modeling and measuring
portfolio risk for bonds and equities. His previous experience includes a
research and teaching position with the University of California, Irvine, and
experience with Olde Financial Corporation and Prudential Securities. He earned
his M.B.A. in Finance from the University of California, Irvine and his B.A. in
Economics from the University of Southern California. Todd has nine years of
investment industry experience.
WHAT HAPPENS IF SHAREHOLDERS DECIDE IN FAVOR OF A REORGANIZATION?
Shareholders will receive full and fractional Class IV Shares of SMID
Growth Fund equal in value to the shares of the Target that they owned on the
effective date of the reorganization.
The net asset value per share of SMID Growth Fund will not be affected by
the transactions. That means the reorganization will not result in a dilution of
any shareholder's interest.
IF THE FUNDS MERGE, WILL THERE BE TAX CONSEQUENCES FOR YOU?
Unlike a transaction in which you direct Nicholas-Applegate to sell shares
of one fund to buy shares of another, an exchange of shares pursuant to the
proposed reorganization IS NOT CONSIDERED A TAXABLE EVENT. The Funds themselves
also will recognize no gains or losses as a result of the proposed
reorganization, except with respect to the Target's assets that are sold in
connection therewith. Accordingly, you will not have to report any capital gains
due to the reorganization, although the Target's shareholders may receive a
distribution of ordinary income and/or capital gains immediately before the
reorganization to the extent that the Target has any undistributed income and/or
gains.
You should consult your tax advisor regarding any possible effect the
proposed reorganization might have on your tax situation, given your personal
circumstances - particularly regarding state and local taxes.
WHO WILL PAY FOR THE REORGANIZATION?
The expenses of the reorganization, including legal expenses, printing,
packaging, and postage, plus the costs of any supplementary solicitation, will
be borne by Nicholas-Applegate.
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WHAT DOES THE BOARD RECOMMEND?
The Board believes you should vote in favor of the Reorganization Plan.
More importantly, however, the Board recommends that you study the issues
involved, call us with any questions, and vote promptly to ensure that a quorum
of the Target shareholder votes will be represented at the Meeting.
WHERE CAN I GET MORE INFORMATION ABOUT SMID GROWTH FUND?
We hope this Q&A has helped you better understand why we are making this
proposal. If you have any questions, we encourage you to call us at
(800) 551-8043.
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NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
NICHOLAS-APPLEGATE U.S. SYSTEMATIC MID CAP GROWTH FUND
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 10, 2005
To the Shareholders:
A special meeting of shareholders ("Meeting") of Nicholas-Applegate U.S.
Systematic Mid Cap Growth Fund (the "Fund"), a series of Nicholas-Applegate
Institutional Funds (the "Trust"), will be held on February 10, 2005, at 10:00
a.m., Pacific time, at the Trust's offices, 600 West Broadway, San Diego,
California 92101, for the following purposes:
(1) For the shareholders of the Fund to approve a Plan of Reorganization
and Termination under which Nicholas-Applegate U.S. Systematic SMID Growth Fund
("SMID Growth Fund"), another series of the Trust, would acquire all the assets
of the Fund in exchange solely for Class IV Shares of equal value of SMID Growth
Fund and SMID Growth Fund's assumption of the Fund's liabilities, followed by
the distribution of those shares to the Fund's shareholders.
(2) To transact other business that properly comes before the Meeting or
any adjournment thereof.
The reorganization proposal is described in the accompanying
Prospectus/Proxy Statement.
YOUR BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
PROPOSAL.
You are entitled to vote at the Meeting and any adjournment thereof if you
owned shares of a Fund at the close of business on January 14, 2005. EACH
SHAREHOLDER IS REQUESTED TO SIGN, DATE, AND RETURN THE ENCLOSED PROXY CARD(S)
WITHOUT DELAY, EVEN IF YOU PLAN TO ATTEND THE MEETING. A POSTAGE-PAID ENVELOPE
IS ENCLOSED FOR THIS PURPOSE. ANY SHAREHOLDER PRESENT AT THE MEETING MAY VOTE
PERSONALLY ON ALL MATTERS BROUGHT BEFORE IT.
By order of the Board of Trustees,
Charles H. Field, Jr., Secretary
January 21, 2005
San Diego, California
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TRANSFER OF ASSETS OF
NICHOLAS-APPLEGATE U.S. SYSTEMATIC MID CAP GROWTH FUND
(A SERIES OF NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS)
TO AND IN EXCHANGE FOR CLASS IV SHARES OF
U.S. SYSTEMATIC GROWTH FUND
(A SERIES OF NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS)
PROSPECTUS/PROXY STATEMENT
JANUARY 21, 2005
----------------
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON THURSDAY, FEBRUARY 10, 2005
This Prospectus/Proxy Statement is being furnished to shareholders of
Nicholas-Applegate U.S. Systematic Mid Cap Growth Fund (the "Target"), a series
of Nicholas-Applegate Institutional Funds (the "Trust"), in connection with the
solicitation of proxies by the Trust's Board of Trustees ("Board") for use at a
special meeting of the Target's shareholders to be held on February 10, 2005
("Meeting"), at 10:00 a.m. Pacific time, and at any adjournment of the Meeting.
As more fully described in this Prospectus/Proxy Statement, the purpose of
the Meeting is to vote on a proposed reorganization. In the reorganization,
Nicholas-Applegate U.S. Systematic SMID Growth Fund ("SMID Growth Fund"),
another series of the Trust, would acquire all the assets of the Target in
exchange solely for Class IV Shares of SMID Growth Fund and SMID Growth Fund's
assumption of all the Target's liabilities, followed by the distribution of
those shares to the Target's shareholders (all such transactions involving SMID
Growth Fund and the Target, sometimes referred to herein individually as a
"Fund" and collectively as "Funds," are referred to herein as the
"Reorganization"). As a result, each Target shareholder would receive a number
of full and fractional SMID Growth Fund Class IV Shares having an aggregate
value that on the effective date of the Reorganization is equal to the aggregate
value of the shareholder's Target shares. As soon as practicable following the
distribution of the Target's shares, the Target will be terminated.
This Prospectus/Proxy Statement sets forth concisely the information about
the Reorganization and the Funds that a shareholder should know before voting on
the Reorganization. Additional information is contained in the following:
- A Statement of Additional Information, dated January 19, 2005, relating to
the Reorganization and including historical financial statements ("SAI"),
has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated herein by this reference.
- The Trust's Prospectus and Statement of Additional Information, each dated
July 30, 2004 ("Pro/SAI"), its Annual Report to Shareholders for the fiscal
year ended March 31, 2004 ("Annual Report"), and its Semi-Annual Report to
Shareholders for the period ended September 30, 2004 ("Semi-Annual Report")
have been filed with the SEC and are incorporated herein by this reference
with respect to the Funds.
Copies of the documents listed above may be obtained without charge, and
further inquiries may be made, by writing to Nicholas-Applegate Institutional
Funds, Attn: Mutual Fund Operations, 600 West Broadway, Suite 3200, San Diego,
CA 92101, or by calling toll-free (800) 551-8043. In addition, the SEC maintains
a Website (http://www.sec.gov) that contains the Pro/SAI and other material
incorporated herein by reference, together with other information regarding the
Funds.
Investors are advised to read and retain this Prospectus/Proxy Statement
for future reference.
The Funds are each a separate series of the Trust, a Delaware statutory
trust registered as an open-end management investment company.
Nicholas-Applegate Capital Management LLC, a Delaware limited liability
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company ("Nicholas-Applegate"), serves as the investment adviser to each Fund.
Each Fund's investment objective is to seek maximum long-term capital
appreciation.
This Prospectus/Proxy Statement will first be mailed to shareholders on or
about January 21, 2005.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
3
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TABLE OF CONTENTS
<Table>
<Caption>
PAGE
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SYNOPSIS 1
The Proposed Reorganizations 1
Comparative Fee Table 1
Example of Effect on Fund Expenses 2
Comparison of Investment Objectives, Principal Investment Strategies, and Risks 3
Performance of the Funds 4
Form of Organization 6
Investment Adviser and Investment Advisory Fees 6
Expense Waivers 6
Operations of SMID Growth Fund Following the Reorganization 6
Dividends and other Distributions 7
Federal Income Tax Consequences of the Reorganization 7
Shares of Beneficial Interest and Voting Rights 8
PRINCIPAL RISK FACTORS 8
THE PROPOSED TRANSACTION 9
Reorganization Plan 9
Reasons for the Reorganization 10
Description of Securities to Be Issued 10
Federal Income Tax Considerations 11
Capitalization 11
VOTING INFORMATION 12
ADDITIONAL INFORMATION ABOUT THE FUNDS 13
INFORMATION CONCERNING ADVISER, DISTRIBUTOR, AND AFFILIATED COMPANIES 13
MISCELLANEOUS 14
OTHER BUSINESS 14
BOARD RECOMMENDATION 14
APPENDIX A - Form of Plan of Reorganization and Termination A-1
APPENDIX B - Additional Information Regarding SMID Growth Fund B-1
APPENDIX C - Management Discussion and Analysis of the Funds C-1
APPENDIX D - Principal Shareholders D-1
</Table>
i
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SYNOPSIS
The following is a summary of certain information contained elsewhere (1)
in this Prospectus/Proxy Statement, (2) in the SAI, the Pro/SAI with respect to
each Fund, and the Annual Report and Semi-Annual Report with respect to each
Fund (each of which is incorporated herein by reference and thus is legally part
of this Prospectus/Proxy Statement), and (3) in the Plan of Reorganization and
Termination (the form of which is attached as Appendix A to this
Prospectus/Proxy Statement) ("Reorganization Plan"). As discussed more fully
below, the Board believes that the Reorganization will benefit shareholders of
the Target. The Funds have the same investment objective and have similar
investment policies and strategies, although the Target invests in a portfolio
of stocks that, on balance, have higher market capitalizations than does SMID
Growth Fund.
THE PROPOSED REORGANIZATIONS
The Board considered and adopted the Reorganization Plan at a meeting held
on November 11, 2004. The Reorganization Plan provides for SMID Growth Fund's
acquisition of all the assets of the Target in exchange solely for Class IV
Shares of beneficial interest in SMID Growth Fund and SMID Growth Fund's
assumption of all the liabilities of the Target, all as of the close of business
on February 11, 2005, or a later date when the Reorganization Plan is approved
and all contingencies have been met ("Effective Time"). Under the terms of the
Reorganization Plan, the Target then would distribute those SMID Growth Fund
shares to its shareholders of record determined as of the Effective Time
("Shareholders"), so that each Shareholder would receive a number of full and
fractional SMID Growth Fund Class IV Shares that is equal in value to the
Shareholder's Target shares as of the Effective Time. The Target would be
terminated as soon as practicable thereafter.
For the reasons set forth below under "The Proposed Transaction -
Reasons for the Reorganization," the Board, including the trustees who are
not "interested persons" (as that term is defined in section 2(a)(19) of the
Investment Company Act of 1940, as amended ("1940 Act")) of the Trust
("Independent Trustees"), has determined that the Reorganization is in the
best interest of the Funds, that the terms of the Reorganization are fair and
reasonable, and that the interests of each Fund's shareholders will not be
diluted as a result of the Reorganization. Accordingly, the Board recommends
approval of the Reorganization Plan.
COMPARATIVE FEE TABLE
The fees and expenses set forth below are based on net assets and accruals
of the Target and SMID Growth Fund's Class IV shares as of September 30, 2004.
The "Pro Forma After Reorganization" operating expenses information is based on
the net assets and Fund accruals of the Target and SMID Growth Fund as of
September 30, 2004, as adjusted showing the effect of the Reorganization had it
occurred on such date. Annual fund operating expenses are paid out of fund
assets, so their effect is reflected in the share prices. Like all mutual funds,
the Funds incur certain expenses in their operations, and as a shareholder you
pay these expenses indirectly. The tables below compare annual operating
expenses for the Target's shares and SMID Growth Fund's Class IV Shares for the
fiscal year ended March 31, 2004, and PRO FORMA expenses, based on those annual
operating expenses for SMID Growth Fund's Class IV Shares assuming the
Reorganization Plan is approved and effected. (SMID Growth Fund also offers
other share classes, which are not involved in the proposed Reorganization.)
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets) (as
a percentage of average net assets)
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<Table>
<Caption>
PRO FORMA AFTER
REORGANIZATION
SMID GROWTH SMID GROWTH FUND
FUND (CLASS IV) TARGET (CLASS I) (CLASS IV)
--------------- ---------------- ----------------
Management Fees 0.70% 0.60% 0.70%
Distribution (12b-1) Fees None None None
Shareholder Service Fee None 0.08% None
</Table>
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<Table>
Other Expenses 0.97%(2)(3) 0.88%(2) 0.81%(2)
Total Annual Fund Operating Expenses 1.67% 1.56% 1.51%
Waiver of Fund Expenses (1) (0.54%) (0.33%) (0.38%)
Net expenses 1.13% 1.23% 1.13%
</Table>
(1) Nicholas-Applegate has agreed to waive its fees and absorb other
operating expenses of the Funds so that total operating expenses,
excluding taxes, interest, brokerage, and extraordinary expenses, do
not exceed the percentages set forth in "Expense Waivers" below for
the Target's shares and SMID Growth Fund's shares through March 31,
2005. The Funds reduce expenses by offsets to custodial and other fees
based upon the amount of securities lent to third parties and cash
maintained with its custodian. These offset arrangements will have no
effect on the amount of fees that the Investment Adviser must waive or
expenses that it must otherwise reimburse under the Expense Limitation
Agreement.
(2) Each of the Funds has arrangements with its brokers, custodians and
third party service providers whereby commissions paid by the Fund,
interest earned on cash maintained with its custodian and income from
securities lending arrangements are used to reduce Fund expenses and
offset fees. "Other Expenses" do not take into account these expected
expense reductions, and are therefore higher than the actual expenses
of each Fund. If these estimated expense reductions were taken into
account, the "Total Annual Fund Operating Expenses" for each Fund, and
the estimated "Total Annual Fund Operating Expenses" for the combined
Fund would be as follows:
<Table>
<Caption>
COMBINED FUND
SMID GROWTH (CLASS IV)
FUND (CLASS IV) TARGET (CLASS I) (PRO FORMA)
--------------- ---------------- --------------
Total Annual Operating Expenses 1.45% 1.28% 1.25%
Net Expenses 0.91% 0.95% .87%
</Table>
(3) SMID Growth Fund commenced its operations on February 27, 2004. Other
Expenses of the SMID Growth Fund are based on estimated amounts for
the current fiscal year.
EXAMPLE OF EFFECT ON FUND EXPENSES
The following Example is intended to help you compare the cost of investing
in the Target's shares with the cost of investing in SMID Growth Fund Class IV
Shares assuming the Reorganization Plan has been approved and effected.
The Example assumes that you invest $10,000 in shares of the specified Fund
(Class IV in the case of SMID Growth Fund) for the time periods indicated and
then redeem all those shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year, that all dividends and
other distributions are reinvested, and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
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<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
SMID Growth Fund (Class IV) $ 119 $ 496 $ 912 $ 2,149
Target (Class I) $ 129 $ 482 $ 870 $ 2,026
Combined Fund (Class IV) $ 119 $ 460 $ 836 $ 1,954
</Table>
* The effect on fund expenses of SMID Growth Fund is based on the estimated
expenses for SMID Growth Fund's first year of operations. SMID Growth Fund
commenced investment operations on March 27, 2004.
** Had the offset credits described above been applied to the above example,
your cost for the 1, 3, 5 and 10 year periods would be:
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
SMID GROWTH FUND (CLASS IV) $ 96 $ 423 $ 785 $ 1,858
TARGET (CLASS I) $ 100 $ 389 $ 708 $ 1,656
COMBINED FUND (CLASS IV) $ 91 $ 374 $ 685 $ 1,611
</Table>
COMPARISON OF INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RISKS
Each Fund's investment objective is long-term capital appreciation. SMID
Growth Fund invests primarily in stocks from a universe of U.S. companies with
small to midsize ("SMID") market capitalizations. The Target invests primarily
in stocks from a universe of U.S. companies with midsize market capitalizations,
but also may invest in companies with small size market capitalizations.
The Funds have similar investment strategies. Each Fund is managed by the
Nicholas-Applegate Systematic Research and Investment Team ("Systematic Team").
The Systematic Team focuses on identifying the strongest investment
opportunities in the U.S. small to mid cap equity universe by screening
investment possibilities with a quantitative model that assigns numeric scores
to various characteristics of those opportunities. After screening the universe
of investment opportunities, the Systematic Team then engages in a fundamental
analysis of promising investment candidates to verify that the advantageous
characteristics revealed by the model are indeed present in those candidates
and not statistical anomalies.
The process begins with the Systematic Team's quantitative research model,
which estimates a rate of return for each stock in the investment universe based
on an array of factors. The research model focuses on key characteristics of
change such as earning trends, the rate of earnings acceleration in reported and
expected earnings and positive earnings revisions. In the opinion of the
Systematic Team, companies with upward earnings revisions and those reporting
earnings above expectations will outperform the market.
When determining whether positive change is sustainable over the long term,
the Systematic Team analyzes fundamental quality by focusing on a number of
variables including earnings acceleration and valuation measures. Once the team
has assessed an investment opportunity for the presence of a positive catalyst
and sustainability, it seeks confirming signals that these changes are beginning
to be recognized by the market through rising stock prices. The Systematic Team
considers whether to sell a particular security when any of these factors
materially changes.
3
<Page>
Each Fund invests in U.S. securities of issuers that are expected to
provide the best opportunities to achieve the Fund's investment objective. The
Funds differ somewhat in regard to the size of the companies in which they
primarily invest. The Target invests primarily in U.S companies with midsize
market capitalizations. Generally, midsize companies are those with market
capitalizations in the range covered by the Russell MidCap Growth Index, which
typically contains companies with market capitalization between $298 million and
$13.19 billion. The SMID Growth Fund primarily invests in U.S. companies with
small to midsize market capitalizations. Generally, small to midsize companies
are those with market capitalizations in the range covered by the middle 90% of
the Russell 2500 Growth Index, which typically contains companies with market
capitalization between $68 million and $6.5 billion. Each Fund may lend
portfolio securities on a short-term or long-term basis, up to 30% of total
assets. Each Fund also expects a high portfolio turnover rate.
Each Fund is subject to the risks of stock market volatility, securities
lending, and active portfolio trading. Each fund also invests in smaller
issuers. Investments in small-capitalization companies entail greater risk
because these companies may have unproven track records, limited product of
service base, and limited access to capital and may be more likely to fail than
larger more established companies. Information regarding smaller companies may
be less available, incomplete or inaccurate, and their securities may trade less
frequently than those of larger companies. The universe of companies that the
SMID Growth Fund may invest in contains more small-capitalization companies than
the universe of companies that the Target may invest in.
In response to adverse market, economic, political, or other conditions,
each Fund may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and short-term, higher quality debt
securities. Each Fund may do this to minimize potential losses and maintain
liquidity to meet shareholder redemptions during adverse market conditions. Such
a defensive posture of a Fund may result in its failing to achieve its
investment objective.
PERFORMANCE OF THE FUNDS
The following tables show how each Fund has performed in the past. PAST
PERFORMANCE IS NOT AN INDICATION OF FUTURE RESULTS.
YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)
The table below shows the percentage gain or loss for the Target's shares
in each calendar year since its inception. The table provides some indication of
the risks of investing in the Target by showing how its return has varied from
year-to-year. The SMID Growth Fund commenced its operations on February 27,
2004, and has less than a year's performance. For the period from February 27,
2004 to December 31, 2004, the SMID Growth Fund returned a % gain compared
with a % loss in the Russell 2500 Growth Index. The information gives some
indication of the risk of an investment in a Fund compared to a respective
index.
<Table>
<Caption>
TARGET FUND
1994 -10.52
1995 38.57
1996 16.46
1997 16.66
1998 14.65
1999 99.11
2000 -13.76
</Table>
4
<Page>
<Table>
2001 -43.28
2002 -31.22
2003 25.75
2004 ---
Best Quarter Q4 '99
+63.45%
Worst Quarter Q3 '01
-34.65%
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/04 (%)
<Table>
<Caption>
SINCE INCEPTION
TARGET FUND 1 YEAR 5 YEAR 10 YEAR (9/30/85)*
Before Taxes
After Taxes on Distributions
After Taxes on Distributions
and Sale of Fund Shares
Russell MidCap Growth Index**
(reflects no deduction for
expenses or taxes)
</Table>
* Performance results reflect the total returns of a predecessor unregistered
account managed by Nicholas-Applegate prior to the effective date of the
Fund's registration date on 4/19/93. Returns are restated to reflect all fees
and expenses applicable to the Fund. If the predecessor unregistered account had
been registered as an investment company under federal securities laws, its
performance might have been adversely affected because of the additional
restrictions applicable to registered investment companies.
Performance is shown only for Class I Shares. The Fund's Class II-IV Shares have
less than a year's performance. After-tax returns are calculated using the
historical highest individual federal marginal income tax rates and do not
reflect the impact of state and local taxes. Actual after-tax returns depend on
an investor's tax situation and may differ from those shown. After-tax returns
shown are not relevant to investors who are tax exempt or who hold their fund
shares through tax-deferred arrangements, such as 401(k) plans or individual
retirement accounts. In some cases the return after taxes may exceed the return
before taxes due to an assumed tax benefit from any losses on a sale of Fund
shares at the end of the measurement period.
** Index inception date: January 1, 1986.
5
<Page>
FORM OF ORGANIZATION
The Trust is an open-end management investment company currently offering
several separate series, including the Funds. It was organized in December 1992
as a statutory trust under the laws of Delaware. On July 24, 1998, the funds in
Nicholas-Applegate Mutual Funds, another Delaware statutory trust managed by
Nicholas-Applegate, changed from a "master-feeder" investment structure (under
which those funds invested all their assets in portfolios of the Trust, which
then were classified for federal tax purposes as partnerships) to a multi-class
structure, whereupon they withdrew their assets from those portfolios and the
Trust became inactive. In May 1999 the Trust was reactivated, with its
portfolios reorganized as regulated investment companies under Subchapter M of
the Code ("RICs"), and substantially all the institutional assets of the
Nicholas-Applegate Mutual Funds were transferred to those RICs in tax-free
exchanges for Class I Shares thereof, each of which is treated for accounting
purposes as a continuation of the Trust's former portfolios.
INVESTMENT ADVISER AND INVESTMENT ADVISORY FEES
Nicholas-Applegate is each Fund's investment adviser. In this capacity,
Nicholas-Applegate supervises all aspects of each Fund's operations and makes
and implements all investment decisions for the Funds.
Nicholas-Applegate is currently paid the following: (1) by SMID Growth
Fund, a monthly management fee computed at the annual rate of 0.70% of its
average daily net assets; and (2) by the Target, a monthly management fee
computed at the annual rate of .60% of its average daily net assets. The
moderately higher management fee for SMID Growth Fund is a result of the
difficulty inherent in selecting the securities of companies with small to mid
size market capitalizations, compared to companies with mid size market
capitalizations.
A discussion regarding the basis for the Board of Trustees approving the
investment advisory contract of each Fund will be available in the Fund's annual
report to shareholders for the fiscal year ended March 31, 2004.
EXPENSE WAIVERS
Nicholas-Applegate has agreed to waive its fees and absorb other operating
expenses of the Funds so that total operating expenses (excluding taxes,
interest, brokerage and extraordinary expenses) do not exceed the percentages,
as set forth below, for the Target's shares and SMID Growth Fund's Class IV
Shares through March 31, 2005.
<Table>
Target 1.23%
U.S. Systematic SMID Growth Class IV Shares 1.13%
</Table>
The Funds reduce expenses by offsets to custodial and other fees based
upon the amount of securities lent to third parties and cash maintained with
its custodian. These offset arrangements will have no effect on the amount of
fees that Nicholas-Applegate must waive or expenses that it must otherwise
reimburse under the Expense Limitation Agreement.
OPERATIONS OF SMID GROWTH FUND FOLLOWING THE REORGANIZATION
As indicated above, the Funds' investment objectives and policies are
similar, although they each concentrate in companies of different, but
overlapping capitalization ranges. Based on its review of each Fund's investment
portfolio, Nicholas-Applegate believes that most of the assets the Target holds
will be consistent with SMID Growth Fund's investment policies and thus can be
transferred to and held by SMID Growth Fund if the Reorganization Plan is
approved. If, however, the Target has any assets that SMID Growth Fund may not
hold, those assets will be sold prior to the Reorganization. The proceeds of
those sales will be held in temporary investments or reinvested in assets that
SMID Growth Fund may hold. The possible need for the Target to dispose of assets
prior to the Reorganization could result in its selling securities at a
disadvantageous time and could result in its realizing losses that would not
otherwise have been realized. Alternatively, these sales could result in the
Target realizing gains that would not otherwise have been realized.
PURCHASES. The minimum initial investment for opening an account with
Class IV Shares is $100,000,000, and the minimum subsequent investment is
$10,000. The minimum investment may be waived for purchases of shares made by
current or retired trustees, members, officers, and employees of the Trust,
the Distributor, Nicholas-Applegate and its affiliates, certain family
members of the above persons, and trusts or plans primarily for
6
<Page>
such persons or former employees employed by one of its affiliates, or at the
Distributor's discretion. Nicholas-Applegate may take into account the
aggregate assets that the shareholder has under management with
Nicholas-Applegate. SMID Growth Fund may only accept orders for shares in
states where it is legally able to offer shares. Effective January 14, 2005,
the Target ceased accepting investment subscriptions. SMID Growth Fund's
shares may be purchased by wire transfer, telephone exchange, or check by
mail. They are sold on a continuous basis at the net asset value ("NAV") per
share next calculated after receipt of a purchase order in good form. SMID
Growth Fund's NAV per share is computed separately and is determined once
each day that the New York Stock Exchange is open ("Business Day") as of the
close of regular trading on the Exchange but may also be computed at other
times. The Funds may also use fair value pricing as determined in good faith
by or under policies established by the Board. By approving the Pricing
Policy and Procedures, the Board has authorized Nicholas-Applegate to
implement its Pricing Policy and Procedures ("Procedures"), subject to the
Board's oversight. In fulfilling its duty to the Board, Nicholas-Applegate
relies on approved pricing vendors to furnish market quotations, and, in the
absence of readily available market quotations, it will fair value securities
in good faith based upon criteria set forth in the Procedures. Accordingly,
Nicholas-Applegate will not rely only on pricing vendors to compute value; it
will monitor for significant events the effect of which suggest that the
market quotation of a security does not represent an amount the Fund's would
reasonably expect to receive upon a current sale. If Nicholas-Applegate
identifies a significant event, its Pricing Committee will promptly convene
to determine whether the market quotation for a security or group of
securities as obtained from the regular approved pricing source is (are)
reliable (I.E., represents a price that the Funds might reasonably expect to
receive on a current sale) and, if the market quotation(s) is (are) not
deemed to be reliable, instead fair value such security (ies) in good faith.
For a more complete discussion of SMID Growth Fund's share purchase policies,
see "Purchases and Redemptions" in Appendix B.
REDEMPTIONS. Procedures to redeem shares in each Fund are identical. Each
Fund's shares may be redeemed by wire transfer, telephone exchange, or check by
mail. Redemptions are made at the NAV per share next determined after a request
in proper form is received at the Trust's office. If shares were purchased with
a check that has not yet cleared, payment will be delayed until after the check
has cleared, which can take up to 15 calendar days. The maximum amount that may
be redeemed by telephone, regardless of account size, is $50,000. Redemptions by
a corporation, trust, or fiduciary may have special requirements. Each Fund
reserves the right to make payment wholly or partly in shares of readily
marketable investment securities. For a more complete discussion of SMID Growth
Fund's share redemption policies, see "Purchases and Redemptions" in Appendix B.
Redemptions of the Target's shares may be effected through the Effective Time.
EXCHANGES. Each Fund's shares may be exchanged for shares of the same class
of another Nicholas-Applegate mutual fund on the basis of their respective NAVs
at the time of the exchange only if an investor is eligible to purchase shares
of such class. An exchange is the sale of shares from one fund immediately
followed by the purchase of shares in another fund. The Funds do not permit
market timing or other excessive trading practices that may disrupt portfolio
management strategies and increase expenses. For a more complete discussion of
SMID Growth Fund's exchange policies, see "Exchanges" in Appendix B.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund earns investment income in the form of dividends and interest on
investments. Dividends each Fund pays are based solely on its net investment
income. Each Fund's policy is to annually distribute most or all of its net
earnings in the form of dividends to its shareholders, at the discretion of the
Board. Dividends are automatically reinvested in additional shares of the
distributing Fund at the NAV per share on the payable date unless otherwise
requested.
Each Fund also realizes capital gains and losses when it sells securities
for more or less than it paid. If a Fund's total gains on these sales exceed
total losses thereon (including losses carried forward from previous years), the
Fund has net capital gains. Net realized capital gains, if any, are distributed
to each Fund's shareholders at least annually, usually in November or December.
Capital gain distributions are automatically reinvested in additional shares of
the distributing Fund on the payable date unless otherwise requested.
At or before the Effective Time, the Target will declare as a distribution
substantially all of its previously undistributed net investment income and net
realized capital gains, if any, and will distribute that amount to continue to
maintain its federal tax status as a regulated investment company.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
The Trust will receive an opinion of its counsel, Kirkpatrick & Lockhart
LLP, to the effect that the Reorganization will constitute a tax-free
"reorganization" as defined in section 368(a)(1)(D) of the Internal Revenue Code
of 1986, as amended ("Code"). Accordingly, neither of the Funds nor their
shareholders will recognize any gain or loss as a direct result of the
Reorganization. See "The Proposed Transaction - Federal Income Tax
Considerations," below. To the extent the Target sells securities prior to the
Effective Time, it may recognize net gains or losses. Any net gains recognized
on those sales would increase the amount of any distribution the Target must
make to its shareholders before the Effective Time.
7
<Page>
SHARES OF BENEFICIAL INTEREST AND VOTING RIGHTS
Target shareholders will have the same voting rights regarding matters that
involve the Trust after the Reorganization as they had prior to the
Reorganization.
On any matter submitted to a vote of shareholders of the Trust, all shares
then entitled to vote will be voted by the affected series unless otherwise
required by the Investment Company Act, in which case all shares of the Trust
will be voted in the aggregate. For example, a change in a Fund's fundamental
investment policies would be voted upon by shareholders of that Fund. However,
all shares of the Trust may vote together in the election or selection of
Trustees, principal underwriters and accountants for the Trust.
Rule 18f-2 under the Investment Company Act provides that any matter
required to be submitted to the holders of the outstanding voting securities of
any investment company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by a majority of the outstanding shares
of the series of the Trust affected by the matter. Under Rule 18f-2, a series is
presumed to be affected by a matter, unless the interests of each series in the
matter are identical or the matter does not affect any interest of such series.
Under Rule 18f-2 the approval of an investment advisory agreement or any change
in a fundamental investment policy would be effectively acted upon with respect
to a Fund only if approved by a majority of its outstanding shares. However, the
rule also provides that the ratification of independent public accountants, the
approval of principal underwriting contracts and the election of directors may
be effectively acted upon by the shareholders of the Trust voting without regard
to the Fund.
PRINCIPAL RISK FACTORS
Because the Funds have the same investment objective and substantially
similar investment policies, an investment in SMID Growth Fund is subject to
many of the same specific risks as an investment in the Target, as well as the
general risks arising from investing in any mutual fund. There is no guarantee
that a Fund will achieve its investment objective or that it will not lose
principal value.
The principal specific risks associated with investing in the Funds include
the following:
MARKET RISK. The prices of equity securities change in response to many
factors, including the historical and prospective earnings of the issuer, the
value of its assets, general economic conditions, interest rates, investor
perceptions, domestic and worldwide political events, and market liquidity.
Stock prices are unpredictable, may fall suddenly, and may continue to fall for
extended periods.
SECURITIES LENDING RISK. There is the risk that when lending portfolio
securities, the securities may not be available to a Fund on a timely basis, and
a Fund may, therefore lose the opportunity to sell the securities at a desirable
price.
ACTIVE PORTFOLIO TRADING. A high portfolio turnover rate has the potential
generate short term losses and short-term gains, which are taxed at a higher
rate than longer-term gains for shareholders whose performance is taxed as
ordinary income. Active portfolio trading may have an adverse effect on a Fund's
after tax performance.
SMALLER ISSUERS RISK. Investments in small-capitalization companies entail
greater risk because these companies may have unproven track records, limited
product or service base, and limited access to capital and may be more likely to
fail than larger, more established companies. Information regarding smaller
companies may be less available, incomplete or inaccurate, and their securities
may trade less frequently than those of larger companies.
LACK OF OPERATING HISTORY. Unlike the Target, SMID Growth Fund has less
than a 3 year operating history upon which prospective shareholders can evaluate
their likely performance.
8
<Page>
THE PROPOSED TRANSACTION
REORGANIZATION PLAN
The terms and conditions under which the proposed Reorganization will be
consummated are set forth in the Reorganization Plan. Significant provisions of
the Reorganization Plan are summarized below; however, this summary is qualified
in its entirety by reference to the Reorganization Plan, the form of which is
attached as Appendix A to this Prospectus/Proxy Statement.
The Reorganization Plan provides for (a) SMID Growth Fund's acquisition as
of the Effective Time of all the assets of the Target in exchange solely for
SMID Growth Fund Class IV Shares and SMID Growth Fund's assumption of all
liabilities of the Target and (b) the distribution of those shares to
Shareholders.
The Target's assets to be acquired by SMID Growth Fund include all cash,
cash equivalents, securities, receivables, claims and rights of action, rights
to register shares under applicable securities laws, books and records, deferred
and prepaid expenses shown as assets on the Target's books, and other property
the Target owns at the Effective Time. SMID Growth Fund will assume from the
Target all its liabilities, debts, obligations, and duties of whatever kind or
nature; provided, however, that the Target will use its best efforts to
discharge all its known liabilities before the Effective Time.
The value of the Target's assets to be acquired by SMID Growth Fund and the
NAV per share of SMID Growth Fund shares to be exchanged for those assets will
be determined as of the close of regular trading on the New York Stock Exchange
on the date of the Effective Time, using the valuation procedures described in
the Pro/SAI. The Target's net value will be the value of its assets to be
acquired by SMID Growth Fund, less the amount of its liabilities, as of that
close.
At, or as soon as practicable after, the Effective Time, the Target will
distribute the SMID Growth Fund shares it receives PRO RATA to the Shareholders,
so that each Shareholder will receive a number of full and fractional SMID
Growth Fund Class IV Shares equal in aggregate value to the Shareholder's Target
shares as of the Effective Time. The shares will be distributed by opening
accounts on SMID Growth Fund's books in the names of the Shareholders and by
transferring to those accounts the shares previously credited to the Target's
account on those books. Fractional SMID Growth Fund shares will be rounded to
the third decimal place. The Target will be terminated as soon as practicable
after the share distribution.
Because SMID Growth Fund shares will be issued at their NAV in exchange for
the net assets of the Target, the aggregate value of SMID Growth Fund shares
issued to Shareholders will equal the aggregate value of their Target shares.
The NAV per share of SMID Growth Fund will be unchanged by the transactions.
Thus, the Reorganizations will not result in a dilution of any shareholder's
interest.
Any transfer taxes payable on the issuance of SMID Growth Fund shares in a
name other than that of the registered Shareholder will be paid by the person to
whom those shares are to be issued as a condition of the transfer. Any reporting
responsibility of the Target to a public authority will continue to be its
responsibility until it is dissolved.
The entire cost of the Reorganization, including professional fees and the
cost of soliciting proxies for the Meeting, consisting principally of printing
and mailing expenses, together with the cost of any supplementary solicitation,
will be borne by Nicholas-Applegate. In approving the Reorganization, the Board
considered the fact that the Target may benefit from the operational
efficiencies often associated with larger mutual funds, the alternative to the
Reorganization (which is to liquidate the Target) and the consequences of such
liquidation to the Target's shareholders. After such consideration, the Board
found that the Reorganization is in the best interests of both Funds.
The consummation of the Reorganization is subject to a number of conditions
set forth in the Reorganization Plan, some of which may be waived by the Trust
on behalf of either Fund. In addition, the Trust may amend the
9
<Page>
Reorganization Plan in any manner, except that no amendment may be made
subsequent to the Meeting that has a material adverse effect on the interests of
the Shareholders.
REASONS FOR THE REORGANIZATION
The Board, including a majority of the Independent Trustees, has determined
that the Reorganization is in the best interests of both Funds that the terms of
the Reorganization are fair and reasonable, and that the interests of each
Fund's shareholders will not be diluted as a result of the Reorganizations. In
approving the Reorganization, the Board, including a majority of the Independent
Trustees, considered a number of factors, including the following:
(1) the compatibility of the Funds' investment objectives, policies, and
restrictions;
(2) each Fund's relative asset size;
(3) the investment experience and expertise of the Funds' portfolio
managers;
(4) the effect of the Reorganization on the Funds' expected investment
performance;
(5) the effect of the Reorganization on the Funds' ability to attract new
investment;
(6) the effect of the Reorganization on the Funds' expense ratios; the tax
consequences of the Reorganization;
(7) the tax consequences of the Reorganization;
(8) the effect of the Reorganization on each Fund's shareholders' rights;
(9) the potential benefits of the Reorganization to Nicholas-Applegate and
other persons; and
(10) the alternatives to the Reorganization.
Nicholas-Applegate recommended the Reorganization to the Board at meetings
thereof held on November 11, 2004. In recommending the Reorganization,
Nicholas-Applegate advised the Board that the investment advisory and
administration fee schedule applicable to Class IV Shares of SMID Growth Fund is
almost identical to that of the Target, and it is likely that Nicholas-Applegate
would not be able to raise meaningful assets necessary to make the Target a
viable long-term investment product. Further, Nicholas-Applegate advised the
Board that it is more efficient to manage a single, larger diversified fund than
two smaller funds; that a larger fund can attract assets from institutional
investors that avoid holding high percentages of any fund; and that larger funds
may experience lower expenses through economies of scale. The Board considered
that the Target has had and will most likely continue to have difficulty
maintaining sufficient assets to remain economically viable. The Board also
considered that there will be no change in portfolio management personnel and
that the Funds have an identical investment objective and similar investment
strategies. Nicholas-Applegate also advised the Board that it will not be able
to continue to serve as the Target's investment adviser given its current asset
size and that any reduction in the Funds' expense ratios as a result of the
Reorganization could benefit Nicholas-Applegate by reducing or eliminating any
reimbursements or waivers of expenses resulting from its obligation to limit
each Fund's expenses.
DESCRIPTION OF SECURITIES TO BE ISSUED
The Trust is registered with the SEC as an open-end management investment
company. Fund shares entitle their holders to one vote per full share and
fractional votes for fractional shares held. The Target currently has only Class
I Shares outstanding. SMID Growth Fund has outstanding Class I Shares, but newly
issued Class IV Shares are involved in the Reorganization. If the Reorganization
Plan is approved, each Shareholder will receive SMID Growth Fund Class IV
Shares.
The Funds do not hold annual meetings of shareholders. There normally will
be no meetings of shareholders for the purpose of electing trustees unless fewer
than a majority of the trustees holding office have been elected by
shareholders, at which time the trustees then in office will call a
shareholders' meeting for the election of
10
<Page>
trustees. The trustees will call annual or special meetings of shareholders for
action by shareholder vote as required by the 1940 Act or the Trust's
Declaration of Trust or at their discretion.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of the Target's assets for SMID Growth Fund Class IV Shares
and SMID Growth Fund's assumption of the Target's liabilities is intended to
qualify for federal income tax purposes as a tax-free reorganization under
section 368(a)(1)(D) of the Code. The Trust will receive an opinion of its
counsel, Kirkpatrick & Lockhart LLP, substantially to the effect that--
(1) SMID Growth Fund's acquisition of the Target's assets in exchange
solely for SMID Growth Fund shares and SMID Growth Fund's assumption of the
Target's liabilities, followed by the Target's distribution of those shares
PRO RATA to the Shareholders constructively, if not actually, in exchange
for their Target shares, will qualify as a "reorganization" as defined in
section 368(a)(1)(D) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
(2) The Target will recognize no gain or loss on the transfer of its
assets to SMID Growth Fund in exchange solely for SMID Growth Fund shares
and SMID Growth Fund's assumption of the Target's liabilities or on the
subsequent distribution of those shares to the Target's Shareholders in
exchange for their Target shares:
(3) SMID Growth Fund will recognize no gain or loss on its receipt of
the transferred assets in exchange solely for SMID Growth Fund shares and
its assumption of the Target's liabilities;
(4) SMID Growth Fund's basis in each transferred asset will be the
same as the Target's basis therein immediately before the Reorganization,
and SMID Growth Fund's holding period for each of those assets will include
the Target's holding period therefor;
(5) A Shareholder will recognize no gain or loss on the exchange of
all its Target shares solely for SMID Growth Fund shares pursuant to the
Reorganization; and
(6) A Shareholder's aggregate basis in the SMID Growth Fund shares it
receives in the Reorganization will be the same as the aggregate basis in
the Target shares it constructively, if not actually, surrenders in
exchange for those SMID Growth Fund shares, and its holding period for
those SMID Growth Fund shares will include, in each instance, its holding
period for those Target shares, provided the shareholder holds them as
capital assets at the Effective Time.
The tax opinion will state that no opinion is expressed as to the effect of
the Reorganization on the Funds, or any Shareholder with respect to any asset as
to which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.
Target shareholders should consult their tax advisers regarding the effect,
if any, of the Reorganization in light of their individual circumstances.
Because the foregoing discussion only relates to the federal income tax
consequences of the Reorganization, those shareholders also should consult their
tax advisers about state and local tax consequences, if any, of the
Reorganization.
CAPITALIZATION
The following table shows each Fund's capitalization as of September 30,
2004 (unaudited), and on a PRO FORMA combined basis (unaudited) as of September
30, 2004, giving effect to the Reorganizations:
11
<Page>
<Table>
<Caption>
SMID GROWTH SMID GROWTH
FUND TARGET FUND FUND (PRO FORMA)
---------------- ----------- ----------------
NET ASSETS $ 4,902,069 $ 11,250,920 $ 16,152,989
NET ASSET VALUE
PER SHARE $ 9.49 $ 10.09 $ 9.51
SHARES OUTSTANDING 516,595 1,114,726 1,701,799
</Table>
The foregoing table should not be relied on to reflect the number of shares
to be issued in the Reorganization; the actual number of shares to be issued
will depend upon the Funds' respective NAVs per share and number of shares
outstanding at the Effective Time.
VOTING INFORMATION
The Trust is furnishing this Prospectus/Proxy Statement in connection with
the solicitation of proxies for use at the Meeting. Shareholders of record at
the close of business on January 14, 2005 ("Record Date"), are entitled to vote
at the Meeting or any adjournment thereof. These proxy materials will first be
mailed to shareholders on or about January 21, 2005.
Each shareholder of the Target is entitled to one vote for each full share
and a fractional vote for each fractional share of the Target outstanding on the
Trust's books in the name of the shareholder or his or her nominee on the Record
Date. If a shareholder specifies how to vote on the proposal, it will be voted
accordingly. If a shareholder gives no such direction, the proxy will be voted
FOR the proposal described in this Prospectus/Proxy Statement. The proxy confers
discretionary authority on the persons designated therein to vote on other
business not currently contemplated that may properly come before the Meeting. A
shareholder may revoke a proxy at any time prior to use by revoking the proxy
with the Secretary of the Trust, by submitting a proxy bearing a later date, or
by attending and voting at the Meeting.
Approval of the Reorganization requires the vote of a "majority of the
outstanding shares" of the Target (as defined in the 1940 Act) entitled to vote
on the proposal. Under the 1940 Act, the favorable vote of a "majority of the
outstanding voting shares" of a Fund means: (a) the holders of 67% or more of
the outstanding voting securities present at the Meeting, if the holders of 50%
or more of the outstanding voting securities of the Fund are present or
represented by proxy; or (b) the vote of the holders of more than 50% of the
outstanding voting securities, whichever is less. If the Target shareholders do
not approve the Reorganization, the Board will determine what action, if any, is
in the best interest of the shareholders.
The presence in person or by proxy of more than one-third of the
outstanding shares of beneficial interest in the Target entitled to vote at the
Meeting will constitute a quorum for the Target. For purposes of determining the
presence of a quorum, shares represented by abstentions and "broker non-votes"
will be counted as present and have the effect of a "No" vote at the Meeting. If
a quorum is not present at the Meeting, sufficient votes in favor of the
proposal set forth in the Notice of Meeting are not received by the time
scheduled for the Meeting, or the holders of shares present in person or by
proxy determine to adjourn the Meeting for any reason, the shareholders present
in person or by proxy may adjourn the Meeting from time to time, without notice
other than announcement at the Meeting or any adjournment thereof. Any
adjournment will require the affirmative vote of shareholders holding a majority
of the shares present in person or by proxy at the Meeting. The persons named on
the proxy card will vote in favor of adjournment those favorable shares that
they represent if adjournment is necessary to obtain a quorum or to obtain a
favorable vote on the proposal or for any other reason they determine is
appropriate. Business may be conducted once a quorum is present and may continue
until adjournment of the Meeting, notwithstanding the withdrawal or temporary
absence of sufficient shares to reduce the number present to less than a quorum.
In addition to solicitations by mail, proxies may be solicited by officers and
employees of Nicholas-Applegate, by personal interview, by telephone, or by
facsimile. The Investment Adviser will bear the cost of solicitation of
12
<Page>
proxies, including the cost of printing, preparing, assembling, and mailing the
Notice of Meeting, this Prospectus/Proxy Statement, and the form of proxy.
OUTSTANDING SHARES
As of the Record Date, the Target had < > shares of beneficial interest
outstanding. On December 31, 2004, the following shareholders owned of record
more than 5% of the outstanding shares of the Target:
U.S. SYSTEMATIC MID CAP GROWTH FUND CLASS I SHARES
<Table>
<Caption>
SHAREHOLDER NAME SHARES OWNED PERCENTAGE OF FUND
---------------- ------------ ------------------
< Holder > < > < >%
< Address >
< Holder > < > < >%
< Address >
</Table>
Except as otherwise indicated, the Trust's officers and Trustees as a group
owned less than one percent of the outstanding shares of the Target on the
Record Date.
ADDITIONAL INFORMATION ABOUT THE FUNDS
Information about SMID Growth Fund is included in Appendices B and C, which
include management's discussion and analysis for the period ended September 30,
2004. Information about each Fund is contained in the Pro/SAI, the Annual
Report, and the Semi-Annual Report, which are incorporated by reference herein.
Copies of the Pro/SAI, the Annual Report and Semi-Annual Report, which have been
filed with the SEC, may be obtained upon request and without charge by
contacting the Distributor by calling toll-free (800) 551-8043 or by writing to
Nicholas-Applegate Institutional Funds, Attn: Mutual Fund Operations, 600 West
Broadway, Suite 3200, San Diego, CA 92101.
This Prospectus/Proxy Statement and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto that the Trust has filed with the
SEC under the Securities Act of 1933, as amended, and the 1940 Act, to which
reference is hereby made.
Each Fund is subject to the information requirements of the Securities
Exchange Act of 1934, as amended, and the 1940 Act and in accordance with those
requirements files reports, proxy material, and other information with the SEC.
These reports, proxy material, and other information can be inspected and copied
at the Public Reference Room maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, the SEC's Midwest Regional office, 175 W. Jackson
Boulevard, Suite 900, Chicago, Illinois 60604, and the SEC's Northeast Regional
Office, 233 Broadway, New York, New York 10279. Copies of such reports,
materials, and other information can also be obtained from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, Washington, D.C. 20459, at prescribed rates.
INFORMATION CONCERNING ADVISER, DISTRIBUTOR,
AND AFFILIATED COMPANIES
The Trust's investment adviser is Nicholas-Applegate, a limited liability
company organized under the laws of Delaware, with offices at 600 West Broadway,
30th Floor, San Diego, California 92101.
Nicholas-Applegate was organized in August 1984 to manage discretionary
accounts primarily in publicly traded equity securities and securities
convertible or exercisable for publicly traded equity securities, with the goal
of capital appreciation. On January 31, 2001, Nicholas-Applegate was acquired by
Allianz of America, Inc. ("AZOA"). Allianz AG, the parent of AZOA, is a publicly
traded German Aktiengesellschaft (a German publicly traded company), which,
together with its subsidiaries, comprise one of the world's largest insurance
groups
13
<Page>
("Allianz Group"). Allianz Group currently has assets under management of
approximately $1.3 trillion. Allianz AG's address is: Koeniginstrasses 28,
D-80802, Munich, Germany.
Nicholas-Applegate Securities LLC ("Distributor"), 600 West Broadway, 30th
Floor, San Diego, CA 92101, is the principal underwriter and distributor for the
Trust and, in such capacity, is responsible for distributing shares of the
Funds. The Distributor is a limited liability company organized under the laws
of Delaware to distribute shares of registered investment companies. Its
managing member is Nicholas-Applegate Holdings, LLC, the managing member of
Nicholas-Applegate.
MISCELLANEOUS
LEGAL MATTERS
Certain legal matters in connection with the issuance of SMID Growth Fund
shares as part of the Reorganization will be passed on by the Trust's counsel,
Kirkpatrick & Lockhart LLP, 4 Embarcadero Center, 10th Floor, San Francisco, CA
94111.
EXPERTS
Each Fund's audited financial statements, incorporated herein by this
reference, have been audited by PricewaterhouseCoopers LLP, the Funds'
independent accountants, whose report thereon is included in the Annual Report.
Those financial statements have been incorporated herein by reference in
reliance on PricewaterhouseCoopers LLP's report given on their authority as
experts in auditing and accounting matters.
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting. If,
however, any other matters properly come before the Meeting, it is the intention
that proxies that do not contain specific instructions to the contrary will be
voted on such matters in accordance with the judgment of the persons designated
in the proxies.
BOARD RECOMMENDATION
REQUIRED VOTE. Approval of the Reorganization Plan requires the affirmative
vote of a majority of the Target's outstanding voting securities.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
REORGANIZATION PLAN.
14
<Page>
APPENDIX A
FORM OF PLAN OF REORGANIZATION AND TERMINATION
THIS PLAN OF REORGANIZATION AND TERMINATION ("PLAN") is adopted by
Nicholas-Applegate Institutional Funds, a Delaware statutory trust ("TRUST"), on
behalf of Nicholas-Applegate U.S. Systematic Mid Cap Growth Fund ("TARGET") and
Nicholas-Applegate U.S. Systematic SMID Growth Fund ("ACQUIRING FUND"), each a
segregated portfolio of assets ("series") thereof (each, a "FUND"). All
covenants and obligations of a Fund contained herein shall be deemed to be
covenants and obligations of Trust acting on its behalf, and all rights and
benefits created hereunder in favor of a Fund shall inure to, and shall be
enforceable by, Trust acting on its behalf.
Trust wishes to effect a reorganization described in section 368(a)(1)(D)
of the Internal Revenue Code of 1986, as amended ("CODE"), and intends this Plan
to be, and adopts it as, a "plan of reorganization" within the meaning of the
regulations under section 368(a) of the Code ("REGULATIONS"). The reorganization
will consist of (1) the transfer of Target's assets to Acquiring Fund in
exchange solely for voting shares of beneficial interest in Acquiring Fund
("ACQUIRING FUND SHARES") and Acquiring Fund's assumption of Target's
liabilities, (2) the distribution of those shares PRO RATA to the holders of
shares of beneficial interest in Target ("TARGET SHARES") in exchange for the
Target Shares and in complete liquidation of Target, and (3) Target's
termination, all on the terms and conditions set forth herein (such transactions
being referred to herein collectively as the "REORGANIZATION").
Trust is a statutory trust that is duly organized, validly existing, and in
good standing under the laws of the State of Delaware. Trust is duly registered
as an open-end management investment company under the Investment Company Act of
1940, as amended ("1940 ACT"). Before January 1, 1997, Trust "claimed"
classification for federal tax purposes as an association taxable as a
corporation, and it has never elected otherwise. Each Fund is a duly established
and designated series of Trust.
Trust's Amended and Restated Declaration of Trust dated February 19, 1999
("DECLARATION OF TRUST"), permits Trust to vary its shareholders' investment
therein. Trust does not have a fixed pool of assets -- each series thereof
(including each Fund) is a managed portfolio of securities, and
Nicholas-Applegate Capital Management LLC, the Funds' investment adviser
("ADVISER"), has the authority to buy and sell securities for it.
Trust's Board of Trustees ("BOARD") (1) has duly adopted and approved this
Plan and the transactions contemplated hereby and (2) has determined that
participation in the Reorganization is in the best interests of each Fund and
that the interests of the existing shareholders of each Fund will not be diluted
as a result of the Reorganization.
Target has a single class of outstanding shares, designated Class I (I.E.,
the Target Shares). Acquiring Fund's shares are divided into multiple classes,
including Class IV Shares. Only Acquiring Fund's Class IV Shares, which are
substantially similar to the Target Shares, are involved in the Reorganization
and included in the term "Acquiring Fund Shares."
1. PLAN OF REORGANIZATION AND TERMINATION
1.1. Subject to the requisite approval of Target's shareholders and the
terms and conditions set forth herein, Target shall assign, sell, convey,
transfer, and deliver all of its assets described in paragraph 1.2 ("ASSETS") to
Acquiring Fund. In exchange therefor, Acquiring Fund shall --
(a) issue and deliver to Target the number of full and fractional
(rounded to the third decimal place) Acquiring Fund Shares determined by
dividing the net value of Target (computed as set forth in paragraph 2.1)
by the net asset value ("NAV") of an Acquiring Fund Share (computed as set
forth in paragraph 2.2), and
(b) assume all of Target's liabilities described in paragraph 1.3
("LIABILITIES").
Such transactions shall take place at the Closing (as defined in paragraph
3.1).
1.2. The Assets shall consist of all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), claims and rights of
action, rights to register shares under applicable securities laws, books and
records, deferred and prepaid expenses shown as assets on Target's books, and
other property Target owns at the Valuation Time (as defined in paragraph 2.1).
<Page>
1.3. The Liabilities shall consist of all of Target's liabilities, debts,
obligations, and duties of whatever kind or nature, whether absolute, accrued,
contingent, or otherwise, whether or not arising in the ordinary course of
business, whether or not determinable at the Effective Time, and whether or not
specifically referred to in this Plan. Notwithstanding the foregoing, Target
agrees to use its best efforts to discharge all its known Liabilities before the
Effective Time (as defined in paragraph 3.1).
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders one or more dividends and/or other distributions in an
amount large enough so that it will have distributed substantially all (and in
any event not less than 98%) of its (a) "investment company taxable income"
(within the meaning of section 852(b)(2) of the Code), computed without regard
to any deduction for dividends paid, and (b) "net capital gain" (as defined in
section 1222(11) of the Code), after reduction by any capital loss carryforward,
for the current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute the Acquiring Fund Shares it receives
pursuant to paragraph 1.1 to its shareholders of record, determined as of the
Effective Time (each, a "SHAREHOLDER"), in exchange for their Target Shares.
That distribution shall be accomplished by Trust's transfer agent's opening
accounts on Acquiring Fund's share transfer books in the Shareholders' names and
transferring those Acquiring Fund Shares thereto. Each Shareholder's account
shall be credited with the respective PRO RATA number of full and fractional
(rounded to the third decimal place) Acquiring Fund Shares due that Shareholder.
All issued and outstanding Target Shares, including any represented by
certificates, shall simultaneously be canceled on Target's share transfer books.
Acquiring Fund shall not issue certificates representing the Acquiring Fund
Shares issued in connection with the Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, but in all events within six months after
the Effective Time, Target shall be terminated as a series of Trust and any
further actions shall be taken in connection therewith as required by applicable
law.
1.7. Any reporting responsibility of Target to a public authority,
including the responsibility for filing regulatory reports, tax returns, and
other documents with the Securities and Exchange Commission ("SEC"), any state
securities commission, any federal, state, and local tax authorities, and any
other relevant regulatory authority, is and shall remain its responsibility up
to and including the date on which it is terminated.
1.8. Any transfer taxes payable on issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's share transfer books
of the Target Shares actually or constructively exchanged therefor shall be paid
by the person to whom those Acquiring Fund Shares are to be issued, as a
condition of that transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange ("NYSE") on the date of the Closing ("VALUATION TIME"), using the
valuation procedures set forth in Trust's then-current prospectus regarding
Class I Shares and statement of additional information (collectively, "P/SAI"),
less (b) the amount of the Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of an Acquiring Fund Share
shall be computed as of the Valuation Time, using the valuation procedures set
forth in the P/SAI.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of Brown Brothers Harriman & Co., Private Bankers
("CUSTODIAN").
<Page>
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("CLOSING"), shall occur at Trust's principal office on or about
February 11, 2005, or at such other place and/or on such other date Trust
determines. All acts taking place at Closing shall be deemed to take place
simultaneously as of the close of business on the date thereof or at such other
time Trust determines ("EFFECTIVE TIME"). If, immediately before the Valuation
Time, (a) the NYSE is closed to trading or trading thereon is restricted or (b)
trading or the reporting of trading on the NYSE or elsewhere is disrupted, so
that accurate appraisal of Target's net value and/or the NAV of an Acquiring
Fund Share is impracticable, the Effective Time shall be postponed until the
first business day after the day when that trading has been fully resumed and
that reporting has been restored.
3.2. Trust's fund accounting and pricing agent shall deliver at the Closing
a certificate of an authorized officer verifying that the information (including
adjusted basis and holding period, by lot) concerning the Assets, including all
portfolio securities, transferred by Target to Acquiring Fund, as reflected on
Acquiring Fund's books immediately after the Closing, does or will conform to
that information on Target's books immediately before the Closing. Custodian
shall deliver at the Closing a certificate of an authorized officer stating that
(a) the Assets it holds will be transferred to Acquiring Fund at the Effective
Time and (b) all necessary taxes in conjunction with the delivery of the Assets,
including all applicable federal and state stock transfer stamps, if any, have
been paid or provision for payment has been made. Trust's transfer agent shall
deliver at the Closing a certificate as to the opening of accounts in the
Shareholders' names on Acquiring Fund's share transfer books and a confirmation,
or other evidence satisfactory to Trust, that the Acquiring Fund Shares to be
credited to Target at the Effective Time have been credited to Target's account
on Acquiring Fund's books.
4. CONDITIONS PRECEDENT
4.1. Trust's obligation to implement this Plan on Acquiring Fund's behalf
shall be subject to satisfaction of the following conditions at or before the
Effective Time:
4.1.1. At the Effective Time, Trust, on Target's behalf, will have
good and marketable title to the Assets and full right, power, and
authority to sell, assign, transfer, and deliver the Assets free of any
liens or other encumbrances (except securities that are subject to
"securities loans" as referred to in section 851(b)(2) of the Code); and on
delivery and payment for the Assets, Trust, on Acquiring Fund's behalf,
will acquire good and marketable title thereto, subject to no restrictions
on the full transfer thereof;
4.1.2. Target is not in material violation of, and the adoption of
this Plan and consummation of the transactions contemplated hereby will not
materially conflict with or violate, Delaware law or any provision of the
Declaration of Trust or Trust's By-Laws (collectively, "GOVERNING
DOCUMENTS") or of any agreement, instrument, lease, or other undertaking to
which Trust, on Target's behalf, is a party or by which it is bound or
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree to which Trust, on
Target's behalf, is a party or by which it is bound;
4.1.3. All material contracts and other commitments of or applicable
to Target (other than this Plan and investment contracts, including
options, futures, and forward contracts) will be terminated, or provision
for discharge of any liabilities of Target thereunder will be made, at or
prior to the Effective Time, without either Fund's incurring any liability
or penalty with respect thereto and without diminishing or releasing any
rights Trust, on Target's behalf, may have had with respect to actions
taken or omitted or to be taken by any other party thereto prior to the
Closing;
4.1.4. No litigation, administrative proceeding, or investigation of
or before any court or governmental body is presently pending or (to
Trust's knowledge) threatened against Trust with respect to Target or any
of its properties or assets that, if adversely determined, would materially
and adversely affect Target's financial condition or the conduct of its
business; and Trust knows of no
<Page>
facts that might form the basis for the institution of any such litigation,
proceeding, or investigation and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially or adversely affects its business or its ability to
consummate the transactions contemplated hereby;
4.1.5. Target incurred the Liabilities in the ordinary course of its
business;
4.1.6. Target is a "fund" as defined in section 851(g)(2) of the Code;
it qualified for treatment as a regulated investment company under
Subchapter M of the Code ("RIC") for each past taxable year since it
commenced operations and will continue to meet all the requirements for
that qualification for its current taxable year; from the time the Board
approved this Plan ("APPROVAL TIME") through the Effective Time, Target
will invest its assets in a manner that ensures its compliance with those
requirements; and Target has no earnings and profits accumulated in any
taxable year in which the provisions of Subchapter M did not apply to it;
4.1.7. Target is not under the jurisdiction of a court in a "title 11
or similar case" (as defined in section 368(a)(3)(A) of the Code);
4.1.8. During the five-year period ending at the Effective Time, (a)
neither Target nor any person "related" (within the meaning of section
1.368-1(e)(3) of the Regulations) to it will have acquired Target Shares,
either directly or through any transaction, agreement, or arrangement with
any other person, with consideration other than Acquiring Fund Shares or
Target Shares, except for shares redeemed in the ordinary course of
Target's business as a series of an open-end investment company as required
by section 22(e) of the 1940 Act, and (b) no distributions will have been
made with respect to Target Shares, other than normal, regular dividend
distributions made pursuant to Target's historic dividend-paying practice
and other distributions that qualify for the deduction for dividends paid
(within the meaning of section 561 of the Code) referred to in sections
852(a)(1) and 4982(c)(1)(A) of the Code;
4.1.9. From the date it commenced operations through the Effective
Time, Target has conducted and will conduct its "historic business" (within
the meaning of section 1.368-1(d)(2) of the Regulations) in a substantially
unchanged manner; and from the Approval Time through the Effective Time,
Target will not (a) dispose of and/or acquire any assets (i) for the
purpose of satisfying Acquiring Fund's investment objective or policies or
(ii) for any other reason except in the ordinary course of its business as
a RIC or (b) otherwise change its historic investment policies; and
4.1.10. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested in
the stock and securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock and securities of five or
fewer issuers.
4.2. Trust's obligation to implement this Plan on Target's behalf shall be
subject to satisfaction of the following conditions at or before the Effective
Time:
4.2.1. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in exchange
for the Assets in the Reorganization;
4.2.2. The Acquiring Fund Shares to be issued and delivered to Target
hereunder (a) at the Effective Time, will have been duly authorized and
duly registered under the federal securities laws (and appropriate notices
respecting them will have been duly filed under applicable state securities
laws) and (b) when issued and delivered as provided herein, will be duly
and validly issued and outstanding shares of Acquiring Fund, fully paid and
non-assessable by Trust;
4.2.3. Acquiring Fund is not in material violation of, and the
adoption of this Plan and consummation of the transactions contemplated
hereby will not materially conflict with or violate, Delaware law or any
provision of the Governing Documents or of any agreement, instrument,
lease,
<Page>
or other undertaking to which Trust, on Acquiring Fund's behalf, is a party
or by which it is bound or result in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, judgment, or decree to
which Trust, on Acquiring Fund's behalf, is a party or by which it is
bound;
4.2.4. No litigation, administrative proceeding, or investigation of
or before any court or governmental body is presently pending or (to
Trust's knowledge) threatened against Trust with respect to Acquiring Fund
or any of its properties or assets that, if adversely determined, would
materially and adversely affect Acquiring Fund's financial condition or the
conduct of its business; and Trust knows of no facts that might form the
basis for the institution of any such litigation, proceeding, or
investigation and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially or adversely affects its business or its ability to consummate
the transactions contemplated hereby;
4.2.5. Acquiring Fund is a "fund" as defined in section 851(g)(2) of
the Code; it qualified for treatment as a RIC for each past taxable year
since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; it
intends to continue to meet all such requirements for the next taxable
year; and it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it;
4.2.6. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiring Fund, or any person "related"
(within the meaning of section 1.368-1(e)(3) of the Regulations) to it,
have any plan or intention to acquire -- during the five-year period
beginning at the Effective Time, either directly or through any
transaction, agreement, or arrangement with any other person -- with
consideration other than Acquiring Fund Shares, any Acquiring Fund Shares
issued to the Shareholders pursuant to the Reorganization, except for
redemptions in the ordinary course of such business as required by section
22(e) of the 1940 Act;
4.2.7. Following the Reorganization, Acquiring Fund (a) will continue
Target's "historic business" (within the meaning of section 1.368-1(d)(2)
of the Regulations) and (b) will use a significant portion of Target's
"historic business assets" (within the meaning of section 1.368-1(d)(3) of
the Regulations) in a business; in addition, Acquiring Fund (c) has no plan
or intention to sell or otherwise dispose of any of the Assets, except for
dispositions made in the ordinary course of that business and dispositions
necessary to maintain its status as a RIC, and (d) expects to retain
substantially all the Assets in the same form as it receives them in the
Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
4.2.8. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another statutory or business trust or a
corporation or any "fund" thereof (as defined in section 851(g)(2) of the
Code) following the Reorganization;
4.2.9. Acquiring Fund does not directly or indirectly own, nor at the
Effective Time will it directly or indirectly own, nor has it directly or
indirectly owned at any time during the past five years, any shares of
Target;
4.2.10. During the five-year period ending at the Effective Time,
neither Acquiring Fund nor any person "related" (within the meaning of
section 1.368-1(e)(3) of the Regulations) to it will have acquired Target
Shares with consideration other than Acquiring Fund Shares; and
4.2.11. Immediately after the Reorganization, (a) not more than 25% of
the value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock and securities of
any one issuer and (b) not more than 50% of the value of such assets will
be invested in the stock and securities of five or fewer issuers.
<Page>
4.3. Trust's obligation to implement this Plan on each Fund's behalf shall
be subject to satisfaction of the following conditions at or before the
Effective Time:
4.3.1. The fair market value of the Acquiring Fund Shares each
Shareholder receives will be approximately equal to the fair market value
of the Target Shares it actually or constructively surrenders in exchange
therefor;
4.3.2. Trust's management (a) is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (i) any portion of
their Target Shares before the Reorganization to any person "related"
(within the meaning of section 1.368-1(e)(3) of the Regulations) to either
Fund or (ii) any portion of the Acquiring Fund Shares they receive in the
Reorganization to any person "related" (within such meaning) to Acquiring
Fund, (b) does not anticipate dispositions of those Acquiring Fund Shares
at the time of or soon after the Reorganization to exceed the usual rate
and frequency of dispositions of shares of Target as a series of an
open-end investment company, (c) expects that the percentage of Shareholder
interests, if any, that will be disposed of as a result of or at the time
of the Reorganization will be DE MINIMIS, and (d) does not anticipate that
there will be extraordinary redemptions of Acquiring Fund Shares
immediately following the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any, incurred
in connection with the Reorganization;
4.3.4. The fair market value of the Assets on a going concern basis
will equal or exceed the Liabilities to be assumed by Acquiring Fund and
those to which the Assets are subject;
4.3.5. There is no intercompany indebtedness between the Funds that
was issued or acquired, or will be settled, at a discount;
4.3.6. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair
market value of the net assets, and at least 70% of the fair market value
of the gross assets, Target held immediately before the Reorganization. For
the purposes of the foregoing, any amounts Target uses to pay its
Reorganization expenses and to make redemptions and distributions
immediately before the Reorganization (except (a) redemptions in the
ordinary course of its business required by section 22(e) of the 1940 Act
and (b) regular, normal dividend distributions made to conform to its
policy of distributing all or substantially all of its income and gains to
avoid the obligation to pay federal income tax and/or the excise tax under
section 4982 of the Code) will be included as assets held thereby
immediately before the Reorganization;
4.3.7. None of the compensation received by any Shareholder who is an
employee of or service provider to Target will be separate consideration
for, or allocable to, any of the Target Shares that Shareholder held; none
of the Acquiring Fund Shares any such Shareholder receives will be separate
consideration for, or allocable to, any employment agreement, investment
advisory agreement, or other service agreement; and the compensation paid
to any such Shareholder will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's-length
for similar services;
4.3.8. Immediately after the Reorganization, the Shareholders will own
shares constituting "control" (as defined in section 304(c) of the Code) of
Acquiring Fund;
4.3.9. Neither Fund will be reimbursed for any expenses incurred by it
or on its behalf in connection with the Reorganization unless those
expenses are solely and directly related to the Reorganization (determined
in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B.
187) ("REORGANIZATION EXPENSES");
4.3.10. The aggregate value of the acquisitions, redemptions, and
distributions limited by paragraphs 4.1.8, 4.2.6, and 4.2.10 will not
exceed 50% of the value (without giving effect to such
<Page>
acquisitions, redemptions, and distributions) of the proprietary interest
in Target at the Effective Time;
4.3.11. Trust has called a special meeting of Target's shareholders
("MEETING") to consider and act on this Plan and to take all other action
necessary to obtain their approval, to the extent same is required, of the
transactions contemplated herein; and such approval has been obtained;
4.3.12. This Plan has been duly authorized by all necessary action on
the part of the Board, which has made the determinations required by Rule
17a-8(a) under the 1940 Act; and, subject to Target's shareholders'
approval in accordance with the Governing Documents and applicable law,
this Plan constitutes a valid and legally binding obligation of each Fund,
enforceable in accordance with its terms, except as the same may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium,
and similar laws relating to or affecting creditors' rights generally and
by general principles of equity (whether applied by a court of law or
equity);
4.3.13. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the Securities Exchange Act of
1934, as amended ("1934 ACT"), the 1940 Act, or state securities laws for
Trust's adoption and performance of this Plan, except for (a) Trust's
filing with the SEC of a registration statement on Form N-14 relating to
the Acquiring Fund Shares issuable hereunder, and any supplement or
amendment thereto ("REGISTRATION STATEMENT"), including therein a
prospectus/proxy statement ("PROSPECTUS/PROXY STATEMENT"), and (b) such
consents, approvals, authorizations, and filings as have been made or
received or as may be required subsequent to the Effective Time;
4.3.14. On the effective date of the Registration Statement, at the
time of the Meeting, and at the Effective Time, the Prospectus/Proxy
Statement will (a) comply in all material respects with the applicable
provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the rules
and regulations thereunder and (b) not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
4.3.15. All necessary filings will have been made with the SEC and
state securities authorities, and no order or directive will have been
received that any other or further action is required to permit the parties
to carry out the transactions contemplated hereby; the Registration
Statement will have become effective under the 1933 Act, no stop orders
suspending the effectiveness thereof will have been issued, and the SEC
will not have issued an unfavorable report with respect to the
Reorganization under section 25(b) of the 1940 Act nor instituted any
proceedings seeking to enjoin consummation of the transactions contemplated
hereby under section 25(c) of the 1940 Act; and all consents, orders, and
permits of federal, state, and local regulatory authorities (including the
SEC and state securities authorities) Trust deems necessary to permit
consummation, in all material respects, of the transactions contemplated
hereby will have been obtained, except where failure to obtain same would
not involve a risk of a material adverse effect on the assets or properties
of either Fund;
4.3.16. At the Effective Time, no action, suit, or other proceeding
will be pending before any court or governmental agency in which it is
sought to restrain or prohibit, or to obtain damages or other relief in
connection with, the transactions contemplated hereby; and
4.3.17. Trust will have received an opinion of Kirkpatrick & Lockhart
LLP ("COUNSEL"), addressed to and in form and substance reasonably
satisfactory to it, as to the federal income tax consequences mentioned
below ("TAX OPINION"). In rendering the Tax Opinion, Counsel may assume
satisfaction of all the conditions set forth in this paragraph 4, may treat
them as representations and warranties Trust made to Counsel, and may rely
as to factual matters, exclusively and without independent verification, on
such representations and warranties and on additional representations and
warranties in separate letters, if any, addressed to Counsel. The Tax
Opinion shall be substantially to
<Page>
the effect that, based on the facts and assumptions stated therein and
conditioned on consummation of the Reorganization in accordance with this
Plan, for federal income tax purposes:
(a) Acquiring Fund's acquisition of the Assets in exchange solely
for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares PRO
RATA to the Shareholders actually or constructively in exchange for
their Target Shares, will qualify as a "reorganization" as defined in
section 368(a)(1)(D) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
(b) Target will recognize no gain or loss on the transfer of the
Assets to Acquiring Fund in exchange solely for Acquiring Fund Shares
and Acquiring Fund's assumption of the Liabilities or on the
subsequent distribution of those shares to the Shareholders in
exchange for their Target Shares;
(c) Acquiring Fund will recognize no gain or loss on its receipt
of the Assets in exchange solely for Acquiring Fund Shares and its
assumption of the Liabilities;
(d) Acquiring Fund's basis in each Asset will be the same as
Target's basis therein immediately before the Reorganization, and
Acquiring Fund's holding period for each Asset will include Target's
holding period therefor;
(e) A Shareholder will recognize no gain or loss on the exchange
of all its Target Shares solely for Acquiring Fund Shares pursuant to
the Reorganization; and
(f) A Shareholder's aggregate basis in the Acquiring Fund Shares
it receives in the Reorganization will be the same as the aggregate
basis in its Target Shares it actually or constructively surrenders in
exchange for those Acquiring Fund Shares, and its holding period for
those Acquiring Fund Shares will include, in each instance, its
holding period for those Target Shares, provided the Shareholder holds
them as capital assets at the Effective Time.
Notwithstanding subparagraphs (b) and (d), the Tax Opinion may state
that no opinion is expressed as to the effect of the Reorganization on the
Funds or any Shareholder with respect to any Asset as to which any
unrealized gain or loss is required to be recognized for federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a mark-to-market system of accounting.
4.4. At any time before the Effective Time, Trust may waive any of the
conditions set forth in this paragraph 4 (other than those set forth in
paragraphs 4.3.11, 4.3.15, and 4.3.17) if, in the Board's judgment, such a
waiver will not have a material adverse effect on either Fund's shareholders'
interests.
5. TERMINATION AND AMENDMENT OF PLAN
5.1. The Board may terminate this Plan and abandon the Reorganization at
any time before the Effective Time if circumstances develop that, in its
judgment, make proceeding with the Reorganization inadvisable for either Fund.
5.2. The Board may amend, modify, or supplement this Plan at any time in
any manner, notwithstanding Target's shareholders' approval thereof; provided
that, following such approval no such amendment, modification, or supplement
shall have a material adverse effect on the Shareholders' interests.
<Page>
6. MISCELLANEOUS
6.1. This Plan shall be construed and interpreted in accordance with the
internal laws of the State of Delaware, provided that, in the case of any
conflict between those laws and the federal securities laws, the latter shall
govern.
6.2. Adviser has agreed to, and shall, bear all the Reorganization
Expenses.
6.3. Nothing expressed or implied herein is intended or shall be construed
to confer on or give any person, firm, trust, or corporation other than Trust
(on the Funds' behalf) and their respective successors and assigns any rights or
remedies under or by reason of this Plan.
6.4. Notice is hereby given that this instrument is adopted on behalf of
Trust's trustees solely in their capacities as trustees, and not individually,
and that Trust's obligations under this instrument are not binding on or
enforceable against any of its trustees, officers, or shareholders or any series
of Trust other than the Funds but are only binding on and enforceable against
the respective Funds' property. Each Fund, in asserting any rights or claims
under this Plan, shall look only to the other Fund's property in settlement of
such rights or claims and not to such trustees, officers, or shareholders.
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
NICHOLAS-APPLEGATE U.S. SYSTEMATIC MID CAP GROWTH FUND
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
PROXY FOR THE MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 10, 2005
I (we), having received notice of the meeting and the Prospectus/Proxy
Statement, appoint Horacio A. Valeiras, Charles H. Field, Jr. and Deborah A.
Wussow, and each of them, my (our) attorneys with full power of substitution in
them and each of them and in my (our) name(s) to attend the Meeting of
Shareholders to be held on February 10, 2005, at 10:00 a.m., Pacific time, at
the offices of Nicholas-Applegate Institutional Funds (the "Trust"), 600 West
Broadway, San Diego, California 92101, and any adjourned session or sessions
thereof, and there to vote and act upon the following matter as more fully
described in the accompanying Proxy Statement in respect of all shares of the
Fund which I (we) will be entitled to vote or act upon, with all the powers I
(we) would possess if personally present.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
PROPOSAL.
NOTE: In signing, please write name(s) exactly as appearing hereon. When
signing as attorney, executor, administrator or other fiduciary, please give
your full title as such. Joint owners should each sign personally.
- ---------------------
Signature
- ---------------------
Signature
___________________________, 200_
Date
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND SHOULD BE
RETURNED AS SOON AS POSSIBLE IN THE ENVELOPE PROVIDED. THE BOARD RECOMMENDS THAT
YOU VOTE IN FAVOR OF THE FOLLOWING PROPOSAL:
1. To approve a Plan of Reorganization and Termination under which
Nicholas-Applegate U.S. Systematic SMID Growth Fund ("SMID Growth Fund"), a
series of the Trust, would acquire all of the assets of Nicholas-Applegate U.S.
Systematic Mid Cap Growth Fund (the "Target"), another series of the Trust, in
exchange solely for Class IV Shares of equal value of SMID Growth Fund and SMID
Growth
<Page>
PART B
NICHOLAS-APPLEGATE INSITUTIONAL FUNDS
NICHOLAS-APPLEGATE U.S. SYSTEMATIC SMID GROWTH FUND
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 19, 2005
This Statement of Additional Information ("SAI") relates specifically to
the proposed reorganization whereby Nicholas-Applegate U.S. Systematic SMID
Growth Fund ("SMID Growth Fund") would acquire all the assets of
Nicholas-Applegate U.S. Systematic Mid Cap Growth Fund (the "Target") in
exchange solely for Class IV Shares of SMID Growth Fund and the assumption by
SMID Growth Fund of all the Target's liabilities, followed by the distribution
of those shares to the Target's shareholders (all such transactions involving
SMID Growth Fund and the Target being referred to herein as a "Reorganization").
This SAI consists of the information set forth herein and the
following described documents, each of which is incorporated by reference herein
(legally forms a part of the SAI):
(1) The audited financial statements of SMID Growth Fund and the Target
(each, a series of Nicholas-Applegate Institutional Funds) included in the
Annual Report to Shareholders of Nicholas-Applegate Institutional Funds (the
"Trust") for the fiscal year ended March 31, 2004, previously filed on EDGAR,
Accession Number 0001003715-04-000202.
(2) The unaudited financial statements of SMID Growth Fund and the Target
included in the Semi-Annual Report to the Shareholders of the Trust for the
period ended September 30, 2004, previously filed on EDGAR, Accession Number
0001047469-04-036187.
(3) The Statement of Additional Information of the Trust, dated July 30,
2004, previously filed on EDGAR, Accession Number 0001047469-04-024872, except
for the information contained herein, which has been updated as of January 19,
2005.
This SAI is not a prospectus and should be read only in conjunction with
the Prospectus/Proxy Statement dated January 14, 2005 relating to the
above-referenced matter. A copy of the Prospectus/Proxy Statement may be
obtained by calling toll-free (800) 551-8643.
TABLE OF CONTENTS
<Table>
Additional Information about the U.S. Systematic SMID Growth Fund B-2
Financial Statements B-5
Pro Forma Financial Statements B-10
</Table>
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<Page>
APPENDIX B
ADDITIONAL INFORMATION REGARDING U.S. SYSTEMATIC SMID GROWTH FUND
INVESTMENT ADVISER
Investment decisions for U.S. Systematic SMID Growth Fund ("SMID Growth
Fund" or the "Fund") are made by its investment adviser, Nicholas-Applegate,
subject to direction by the Board. Nicholas-Applegate continually conducts
investment research and supervision for the fund and is responsible for the
purchase or sale of portfolio instruments, for which it receives an annual fee
from SMID Growth Fund.
Founded in 1984, Nicholas-Applegate currently manages approximately $15
billion in discretionary assets for numerous clients, including employee benefit
plans, corporations, public retirement systems and unions, university
endowments, foundations, and other institutional investors and individuals.
Nicholas-Applegate's address is 600 West Broadway, Suite 2900, San Diego,
California 92101.
SHARE PRICE
The NAV per SMID Growth Fund Class IV Share is determined each business day
at the close of regular trading on the New York Sock Exchange (usually 4 p.m.
Eastern time) by dividing the value of the net assets (I.E., the value of the
securities it holds, plus any cash or other assets, minus its liabilities,
including accrued estimated expenses) attributable to that class by the number
of its shares outstanding.
PURCHASES AND REDEMPTIONS
Shares are offered at net asset value without a sales charge. Your
financial institution may charge you a fee to execute orders on your behalf. Buy
and sell requests are executed at the NAV per share next calculated after your
request is received in good order by the transfer agent or another agent
designated by the Trust. SMID Growth Fund reserves the right to refuse any
purchase order.
The minimum initial investment for opening an account with Class IV Shares
is $100,000,000, and the minimum subsequent investment is $10,000. The minimum
investment may be waived for purchases of shares made by current or retired
trustees, members, officers, and employees of the Trust, the Distributor,
Nicholas-Applegate and its affiliates, certain family members of the above
persons, and trusts or plans primarily for such persons or former employees
employed by one of its affiliates, or at the Distributor's discretion.
Nicholas-Applegate may take into account the aggregate assets that the
shareholder has under management with the Investment Adviser. SMID Growth Fund
may only accept orders for shares in states where it is legally able to offer
shares. SMID Growth Fund provides for telephone, mail, or wire redemption of
shares. It reserves the right to redeem in-kind, under certain circumstances, by
paying the proceeds of a redemption in securities rather than in cash.
Additional information concerning purchases and redemption of shares, including
how SMID Growth Fund's NAV per share is calculated, is contained in the Pro/SAI.
DIVIDENDS AND OTHER DISTRIBUTIONS
SMID Growth Fund generally distributes most or all of its net earnings in
the form of dividends and distributes any net capital gains annually to
shareholders of record on the distribution record date. Annual dividends and net
capital gains are normally distributed in the last calendar quarter. Dividends
and other distributions are reinvested in additional shares of the same class of
SMID Growth Fund, or paid in cash, as a shareholder has elected. See the Pro/SAI
for further information concerning dividends and other distributions.
After the Reorganization, shareholders of the Target who have elected to
reinvest their dividends and/or other distributions therefrom will have
dividends and/or other distributions they receive from SMID Growth Fund
reinvested in that Fund's shares. Shareholders of a Target who have elected to
have their dividends and/or other distributions therefrom in cash will receive
dividends and/or other distributions from SMID Growth Fund in cash after the
Reorganization, although they may thereafter elect to have those dividends
and/or other distributions reinvested in additional SMID Growth Fund shares.
B-2
<Page>
SMID Growth Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code, which requires, among
other things, that it distribute at least 90% of its taxable income. So long as
it does so, it will not be required to pay any federal income tax on the amounts
it distributes to its shareholders. A 4% nondeductible federal excise tax will
be imposed on undistributed amounts if SMID Growth Fund does not meet certain
other distribution requirements by the end of each calendar year. SMID Growth
Fund anticipates meeting such distribution requirements.
YOUR ACCOUNT
TRANSACTION POLICIES
PURCHASE OF SHARES. Shares are offered at net asset value without a sales
charge. The minimum initial investment for opening an individual account in the
Fund with Class IV Shares is $100,000,000. Certain omnibus accounts may not
combine the assets of the underlying investor in order to satisfy the investment
minimums. In addition, the Investment Adviser may take into account the
aggregate assets that the shareholder has under management with the Investment
Adviser. The minimum investment may be waived for purchases of shares made by
current or retired directors, trustees, partners, officers and employees of the
Trust, the Distributor, the Investment Adviser and its affiliates, certain
family members of the above persons, and trusts or plans primarily for such
persons or former employees employed by one of its affiliates, or, at the
discretion of the Distributor.
ANTI-MONEY LAUNDERING PROGRAM. The Fund is required to comply with various
federal anti-money laundering laws and regulations. Consequently, the Fund may
be required to "freeze" the account of a shareholder if the shareholder appears
to be involved in suspicious activity or if certain account information matches
information on government lists of known terrorists or other suspicious persons,
or the Fund may be required to transfer the account or proceeds of the account
to a government agency. The Fund may also be required to reject a purchase
payment, block a shareholder's account and consequently refuse to implement
requests for transfers and withdrawals. Federal law requires the Fund to obtain,
verify and record identifying information, which may include the name, street
address, taxpayer identification number or other identifying information from
shareholders who open an account with the Fund. The Fund may also ask to see a
shareholder's driver's license or other identifying documents. Applications
without this information may be rejected and orders may not be processed. The
Fund reserves the right to place limits on transactions in any account until the
identity of the shareholder is verified; to refuse an investment in the Fund or
involuntarily redeem a shareholder's shares and close an account in the event
that a shareholder's identity is not verified within 5 days of the purchase; or
suspend the payment of withdrawal proceeds if it is deemed necessary to comply
with anti-money laundering regulations. An involuntary redemption may result in
an unfavorable tax consequence or loss of principal. The Fund and its agents
will not be responsible for any loss resulting from the shareholder's delay in
providing all required identifying information or from closing an account and
redeeming a shareholders share when a shareholder's identity cannot be verified.
PRICING OF SHARES. The net asset value per share ("NAV") of the Fund is
determined each business day at the close of regular trading on the New York
Stock Exchange (usually 4 p.m. Eastern time) by dividing the value of the Fund's
net assets by the number of its shares outstanding.
Securities traded in non-U.S. countries may not take place on all business days
of the New York Stock Exchange, and may occur in various non-U.S. markets on
days which are not business days of the New York Stock Exchange. Accordingly,
the Fund's NAV may change on days when the U.S. markets are closed whereby a
shareholder of the Fund will not be able to sell their shares.
NAV is based on the market value of the securities in a Fund's portfolio. If
the methods utilized by Nicholas-Applegate to value the Fund's portfolio
securities do not accurately reflect current market value, portfolio
securities are valued at fair value as determined in good faith by or under
policies established by the Trust's Board of Trustees.
BUY AND SELL PRICES. When you buy shares, you pay the NAV, as described earlier.
When you sell shares, you receive the NAV. Your financial institution may charge
you a fee to execute orders on your behalf.
EXECUTION OF REQUESTS. The Fund is open on the days the New York Stock Exchange
is open, usually Monday-Friday. Buy and sell requests are executed at the NAV
next calculated after your request is received in
B-3
<Page>
good order by the transfer agent or another agent designated by the Trust. The
Fund reserves the right to refuse any purchase order.
The Fund reserves the right to reject any purchase or to suspend or modify the
continuous offering of its shares. Your financial representative is responsible
for forwarding payment promptly to the transfer agent. The Fund reserves the
right to cancel any buy request if payment is not received within three days.
In unusual circumstances, the Fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to seven business days
or longer, as allowed by federal securities laws.
PURCHASE OF SHARES JUST BEFORE RECORD DATE. If you buy shares of the Fund just
before the record date for a distribution (the date that determines who receives
the distribution), the Fund will pay that distribution to you. When a
distribution is paid, the value of each share of the Fund decreases by the
amount of the distribution to reflect the payout. The distribution you receive
makes up the decrease in share value. As explained under the Taxability of
Dividends section, the distribution may be subject to income or capital gains
taxes. The timing of your purchase means that part of your investment came back
to you as taxable income.
EXCHANGES. On any business day you may exchange all or a portion of your shares
for shares of any other available Nicholas-Applegate Institutional Fund of the
same share class only if you are eligible to purchase shares of such class.
The Fund does not permit market timing or other excessive trading practices
which may disrupt portfolio management strategies and increase expenses. To
protect the interests of other shareholders in the Fund, the Investment Adviser
monitors trading activity and the Fund may cancel the exchange privileges (or
reject any exchange or purchase orders) of any parties who, in the opinion of
the Investment Adviser, are engaging in market timing. For these purposes, the
Fund may consider a shareholder's trading history in the Fund. The Trust may
change or cancel its exchange policies at any time, upon 60 days' notice to its
shareholders.
REDEMPTIONS IN KIND. When the Fund elects to satisfy a redemption request with
securities, the shareholder assumes the responsibility of selling the securities
as well as a market risk of an unfavorable market movement during the time
required to convert the securities to cash.
TELEPHONE TRANSACTIONS. For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition the Fund will take measures to
verify the identity of the caller, such as asking for name, account number,
Social Security or taxpayer ID number and other relevant information. If these
measures are not taken, the Fund may be responsible for any losses that may
occur in your account due to an unauthorized telephone call.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider sending your request in writing.
CERTIFICATED SHARES. Shares of the Fund are electronically recorded. The Fund
does not normally issue certificated shares.
SALES IN ADVANCE OF PURCHASE PAYMENTS. When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the Fund will not release the proceeds to you
until your purchase payment clears. This may take up to fifteen calendar days
after the purchase.
FEATURES AND ACCOUNT POLICIES
The services referred to in this section may be terminated or modified at any
time upon 60 days' written notice to shareholders. Shareholders seeking to add
to, change or cancel their selection of available services should contact the
transfer agent.
RETIREMENT PLANS. You may invest in the Fund through various retirement plans,
including IRAs, Roth IRAs, Simplified Employee Plan (SEP) IRAs, 403(b) plans,
457 plans, and all qualified retirement plans. For further
B-4
<Page>
information about any of the plans, agreements, applications and annual fees,
contact the Distributor, your financial representative or plan sponsor. To
determine which retirement plan is appropriate for you, consult your tax
adviser.
ACCOUNT STATEMENTS. Shareholders will receive periodic statements reporting all
account activity, including systematic transactions, dividends and capital gains
paid.
SEMI-ANNUAL REPORTS AND PROSPECTUSES. The Fund produces financial reports every
six months and updates its prospectus annually. To avoid sending duplicate
copies of materials to households, only one copy of the Fund's annual and
semi-annual report and prospectus will be mailed to shareholders having the same
residential address on the Trust's records. However, any shareholder may contact
the distributor, Nicholas-Applegate Securities, to request that copies of these
reports and prospectuses be sent personally to that shareholder.
FINANCIAL STATEMENTS AND EXPERTS
The audited financial statements of the Target and the SMID Growth Fund for the
fiscal year ended March 31, 2004 have been incorporated herein by reference in
reliance upon the reports of PricewaterhouseCoopers LLP, the Target's and SMID
Growth Fund' s independent registered public accounting firm, given on their
authority as experts in accounting and auditing.
NOTICE TO BANKS, BROKER/DEALERS AND VOTING TRUSTEES
AND THEIR NOMINEES
Please advise the Target, in care of UMB, 803 West Michigan Street, Suite A,
Milwaukee, WI 53233-201, whether other persons are the beneficial owners of
Target shares for which proxies are being solicited from you, and, if so, the
number of copies of the Prospectus/Proxy Statement and other soliciting material
you wish to receive in order to supply copies to the beneficial owners of Target
shares.
PORTFOLIO HOLDINGS. The Fund provides a complete list of its holdings four
times in each fiscal year, at each quarter-end. For the second and fourth
quarters, the lists appear in the Fund's semiannual and annual reports to
shareholders. For the first and third quarters, the Fund files the list with
the Securities and Exchange Commission ("SEC") on Form N-Q. Shareholders can
look up the Fund's Form N-Q on the SEC's website at www.sec.gov. Form N-Q may
also be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. To find out more about this public service, call the SEC at
1-202-942-8090.
DIVIDENDS. The Fund generally distributes most or all of their net earnings in
the form of dividends.
DIVIDEND REINVESTMENTS. If you choose this option, or if you do not indicate any
choice, your dividends will be reinvested on the ex-dividend date.
Alternatively, you can choose to have a check for your dividends mailed to you.
Interest will not accrue or be paid on uncashed dividend checks.
TAXABILITY OF DIVIDENDS. Dividends you receive from the Fund, whether reinvested
or taken as cash, are generally taxable. Dividends from the Fund's net capital
gain (I.E., the excess of net long-term capital gain over net short-term capital
loss) are taxable as long-term capital gains; dividends from other sources are
generally taxable as ordinary income, except that the Fund's dividends
attributable to its "qualified dividend income" (I.E., dividends received on
stock of most domestic and certain foreign corporations with respect to which
the Fund satisfies certain holding period, debt-financing, and other
restrictions) generally will be subject to federal income tax for individual
shareholders who satisfy those restrictions with respect to their Fund shares at
the rate for net capital gain -- a % maximum of 15%. A portion of the Fund's
dividends -- not exceeding the aggregate dividends it receives from domestic
corporations only -- also may be eligible for the dividends-received deduction
allowed to corporations, subject to similar holding period, debt-financing, and
other restrictions. However, dividends a corporate shareholder deducts pursuant
to the dividends-received deduction are subject indirectly to the federal
alternative minimum tax.
Some dividends paid in January may be taxable as if they had been paid the
previous December.
The tax information statement that is mailed to you annually details your
dividends and their federal tax category, although you should verify your tax
liability with your tax professional.
TAXABILITY OF TRANSACTIONS. Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
Federal tax law requires you to provide the Fund with your taxpayer
identification number and certifications as to your tax status. If you fail to
do this, or if you are otherwise subject to backup withholding, the Fund will,
as required, withhold and pay to the U.S. Treasury 28% of your distributions
and, in the latter case, redemption proceeds (regardless of the extent to which
gain or loss may be realized). Dividends of net investment income and net
short-term capital gains paid to a nonresident non-U.S. shareholder generally
will be subject to a U.S. withholding tax of up to 30%. This rate may be lower,
depending on any tax treaty the U.S. may have with the shareholder's country.
However, withholding tax does not apply to the Fund's distributions of amounts
it properly designates as "interest-related dividends" and "short-term capital
gain dividends" with respect to a taxable year beginning after December 31,
2004, and before January 1, 2008, paid to a shareholder who files a statement
(generally, Form W-8BEN) that the beneficial owner of the Fund's shares is a
non-U.S. person, with certain exceptions.
SMALL ACCOUNTS. If you draw down a non-retirement account so that its total
value is less than the minimum investment, you may be asked to purchase more
shares within 60 days. If you do not take action, the Fund may close out your
account and mail you the proceeds. Your account will not be closed if its drop
in value is due to Fund performance. See "Automatic Share Conversion" below.
AUTOMATIC INVESTMENT PLAN. You may make regular monthly or quarterly investments
in the Fund through automatic withdrawals of specified amounts from your bank
account once an automatic investment plan is established.
FINANCIAL HIGHLIGHTS
The following financial highlights tables are intended to help you understand
the Funds' financial performance for the period since commencement of
operations. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions).
B-5
<Page>
Except as otherwise noted, the Financial Highlights have been audited by
PricewaterhouseCoopers, LLP with respect to the fiscal year ended March 31,
2004. Please read in conjunction with the Trust's 2004 Annual Report, which is
available upon request.
<Table>
<Caption>
NET ASSET NET NET REALIZED TOTAL FROM
VALUE, INVESTMENT AND UNREALIZED INVESTMENT
BEGINNING INCOME (LOSS) (2) GAINS (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------
U.S. SYSTEMATIC MID CAP GROWTH
For the period ended 09/30/04 (1) $ 10.39 $ 0.10(8) $ (0.40) $ (0.30)
For the year ended 03/31/04 7.94 (0.03) 2.48 2.45
For the year ended 03/31/03 11.40 (0.06) (3.40) (3.46)
For the year ended 03/31/02 13.60 (0.09) (2.11) (2.20)
For the year ended 03/31/01 41.51 (0.20) (19.98) (20.18)
For the period 5/7/99 through 3/31/00 19.44 (0.15) 22.22 22.07
For the period 4/1/99 through 5/7/99 (1) 19.17 (0.01) 0.28 0.27
U.S. SYSTEMATIC SMID GROWTH
For the period ended 09/30/04 (1) $ 9.89 $ (0.01) $ (0.39) $ (0.40)
2/27/04 (commenced) to 03/31/04 10.00 -- (0.11) (0.11)
<Caption>
DISTRIBUTIONS FROM:
--------------------------
NET NET
INVESTMENT REALIZED TOTAL
INCOME CAPITAL GAINS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------
U.S. SYSTEMATIC MID CAP GROWTH
For the period ended 09/30/04 (1) $ -- $ -- $ --
For the year ended 03/31/04 -- -- --
For the year ended 03/31/03 -- -- --
For the year ended 03/31/02 -- -- --
For the year ended 03/31/01 -- (7.73) (7.73)
For the period 5/7/99 through 3/31/00 -- -- --
For the period 4/1/99 through 5/7/99 (1) -- -- --
U.S. SYSTEMATIC SMID GROWTH
For the period ended 09/30/04 (1) $ -- $ -- $ --
2/27/04 (commenced) to 03/31/04 -- -- --
</Table>
<Table>
<Caption>
NET ASSET
VALUE, TOTAL
ENDING RETURN (3)
- ------------------------------------------------------------------
U.S. SYSTEMATIC MID CAP GROWTH
For the period ended 09/30/04 (1) $ 10.09 (2.89%)
For the year ended 03/31/04 10.39 30.86%
For the year ended 03/31/03 7.94 (30.35%)
For the year ended 03/31/02 11.40 (16.18%)
For the year ended 03/31/01 13.60 (53.95%)
For the period 5/7/99 through 3/31/00 41.51 113.48%
For the period 4/1/99 through 5/7/99 (1) 19.44 1.41%
U.S. SYSTEMATIC SMID GROWTH
For the period ended 09/30/04 (1) $ 9.49 (4.04%)
2/27/04 (commenced) to 03/31/04 9.89 (1.10%)
</Table>
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS (4)
----------------------------------------------------------------------------------
EXPENSES EXPENSES NET OF
NET EXPENSES NET OF REIMBURSEMENT/
INVESTMENT TOTAL (REIMBURSEMENTS)/ REIMBURSEMENT/ RECOUPMENT
INCOME (LOSS) EXPENSES RECOUPMENT RECOUPMENT OFFSET (5)
- -------------------------------------------------------------------------------------------------------------------------------
U.S. SYSTEMATIC MID CAP GROWTH
For the period ended 09/30/04 (1) 1.89%(10) 1.56% (0.31%) 1.25% 0.97%
For the year ended 03/31/04 (0.28%) 1.12% -- 1.12% 0.73%
For the year ended 03/31/03 (0.72%) 1.22% (0.20%) 1.02% 1.00%(6)
For the year ended 03/31/02 (0.70%) 1.08% (0.07%) 1.01% 1.01%
For the year ended 03/31/01 (0.68%) 1.03% (0.03%) 1.00% 1.00%
For the period 5/7/99 through 3/31/00 (0.60%) 1.09% (0.08%) 1.01% 1.01%
For the period 4/1/99 through 5/7/99 (1) (0.70%) 0.99% -- 0.99% 0.99%
U.S. SYSTEMATIC SMID GROWTH
For the period ended 09/30/04 (1) (0.23%) 1.87% (0.50%) 1.37% 1.15%
2/27/04 (commenced) to 03/31/04 (0.43%) 4.39% (3.04%) 1.35% 1.35%(7)
</Table>
<Table>
<Caption>
FUND'S
PORTFOLIO NET ASSETS,
TURNOVER ENDING
RATE (IN 000'S)
- -----------------------------------------------------------------------
U.S. SYSTEMATIC MID CAP GROWTH
For the period ended 09/30/04 (1) 165% $ 11,251
For the year ended 03/31/04 245% 29,747
For the year ended 03/31/03 206% 42,084
For the year ended 03/31/02 154% 110,347
For the year ended 03/31/01 186% 113,952
For the period 5/7/99 through 3/31/00 110% 252,377
For the period 4/1/99 through 5/7/99 (1) 25% 128,710
U.S. SYSTEMATIC SMID GROWTH
For the period ended 09/30/04 (1) 61% $ 4,902
2/27/04 (commenced) to 03/31/04 14% 5,347
</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. Systematic Mid Cap
Growth Fund did not exceed 1.00% throughout the year.
(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) of the U.S. Systematic SMID Growth
Fund did not exceed 1.33%, for the period 02/24/04 to 03/31/04.
(10) Net Investment Income ratio includes the proceeds of the class action suit
for the amount of $90,091.54 representing a three cent per share impact to
the fund.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-6
<Page>
APPENDIX C
MANAGEMENT DISCUSSION AND ANALYSIS OF THE FUNDS
U.S. SYSTEMATIC SMID GROWTH FUND INSTITUTIONAL SHARES
U.S. SYSTEMATIC SMID GROWTH FUND
MANAGEMENT TEAM: STACEY R. NUTT, PH.D., Lead Portfolio Manager; TODD N.
WOLTER, CFA, Portfolio Manager; CARMA WALLACE, CFA, Investment Analyst; AERUS
TRAN, Investment Analyst; MARK P. ROEMER, Portfolio Specialist.
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The U.S. Systematic SMID Growth Fund seeks to maximize long-term
capital appreciation through investments primarily in stocks of U.S. companies
with small-mid (SMID) market capitalizations. Generally, small to mid companies
are those within the capitalization range of the Russell 2500 Growth Index, as
measured at time of purchase.
MARKET OVERVIEW: U.S. stock markets were choppy during the six months ended
September 30, 2004, with major equity indices finishing the period flat to down.
In April, stocks traded lower as investors anticipated that the surging U.S.
economy would prompt the Federal Reserve to begin the process of normalizing
monetary policy. In May and June, strong economic reports offset concerns about
higher rates, sparking a rally that left stocks in positive territory for the
second quarter. Equities succumbed to selling pressure in July, amid reports of
falling retail sales, declining factory orders and lower-than-expected growth in
non-farm payrolls. As the summer progressed, equities reversed course once
again. Investors sent most market indices higher in September, despite oil
prices touching $50 a barrel.
While the Fed increased the target funds rate to 1.75% in three separate
policy actions, rates remained near 40-year lows. In addition, companies
reported strong second-quarter operating results, and the outlook for third- and
fourth-quarter profits was generally favorable.
PERFORMANCE: The Fund lost 4.04% during the six months ended September 30,
2004. This compared favorably to the Russell 2500 Growth Index, which declined
5.48%. The Fund has less than a year's performance.
PORTFOLIO SPECIFICS: While posting a loss this period, the Fund outperformed
its benchmark. Sources of relative strength included holdings in the
industrials, energy and materials sectors. In these groups, the Fund benefited
from a combination of positive stock selection and above-index exposure. Stock
selection in the consumer discretionary sector was also beneficial. On the
negative side, technology was the worst-performing sector on a relative basis
due to unfavorable issue selection.
At the individual company level, notably strong performers included Tesoro
Petroleum, an oil refiner; Coldwater Creek, a retailer of women's apparel; and
Century Aluminum, an aluminum producer. Coventry Health Care, a managed health
care provider, also performed exceptionally well. The company reported
higher-than-expected second-quarter earnings as revenues surged nearly 20%
compared to the second quarter of 2003.
The Fund was broadly diversified at September 30, 2004. With the exception of
an overweight in energy and an underweight in technology, all sector weights
were within 5% of the index weights.
MARKET OUTLOOK: Our process evaluates investment opportunities on a relative
basis and is required to remain fully invested. As such, the process neither
utilizes nor results in a forecast or outlook on the overall market, but expects
to perform equally well versus the Russell 2500 Growth Index in both up and down
markets.
Nicholas-Applegate is confident that consistent application of this approach
will lead us to companies with strong growth prospects for the Fund.
B-7
<Page>
U.S. SYSTEMATIC MID CAP GROWTH FUND INSTITUTIONAL SHARES
U.S. SYSTEMATIC MID CAP GROWTH FUND
MANAGEMENT TEAM: TODD N. WOLTER, CFA, Portfolio Manager; STACEY R. NUTT,
PH.D., Lead Portfolio Manager; CARMA WALLACE, CFA, Investment Analyst; MARK P.
ROEMER, Portfolio Specialist
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 in U.S. securities with market
capitalizations similar to the Russell Midcap Growth Index at time of purchase.
MARKET OVERVIEW: From April 1, 2004 through September 30, 2004, major U.S.
stock market indices posted lackluster performance. During the period, the S&P
500 Index dipped 0.18%, the Dow Jones Industrial Average lost 1.71% and the
tech-heavy NASDAQ Composite fell 4.87%. A number of headwinds that had been in
place most of the year kept buyers on the sidelines, including:
- Ongoing geopolitical concerns and conflict in Iraq
- Higher interest rates, as the Federal Reserve raised the funds target rate
by 75 basis points during the period to 1.75%.
- Price of crude oil touching $50 a barrel
In addition, there were signs that economic growth might be moderating. Gains
in employment continued but not at the pace seen earlier in the year. The
manufacturing sector expanded at a solid clip, but growth showed evidence of
peaking.
All of these influences tended to obscure favorable corporate fundamentals.
Second quarter 2004 earnings for companies in the S&P 500 Index grew by 25% year
over year, and expectations were for healthy growth in the third and fourth
quarters.
PERFORMANCE: During the six-month period ended September 30, 2004, the Fund
posted a 2.89% loss, outperforming the Russell Midcap Growth Index, which fell
3.32%.
PORTFOLIO SPECIFICS: A number of sectors both helped and hurt performance
versus the index. On the negative side, stock selection in the technology sector
was the primary detractor, with positions in the semiconductor and electronic
equipment industries posting sharp declines. Issue selection among financials
and health care companies also hurt relative results.
On a positive note, holdings among industrial companies benefited relative
performance due to an overweight in the sector and strong stock selection.
Top-performing names included Terex, a manufacturer of heavy equipment, and
Masco, a maker of building and home improvement products. Shares of Terex rose
sharply on a strengthening outlook for mining equipment. Masco exceeded
second-quarter expectations and raised earnings guidance for the year. Other
sources of relative strength were issue selection in the consumer discretionary
sector and an overweight in materials, a group that led the broad mid-cap growth
market.
As of September 30, 2004, the Fund remained well diversified across sectors
and industries. The largest overweight was in materials, and the largest
underweight was in consumer discretionary names.
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. We are confident that our proprietary stock-selection model, in
conjunction with our risk-controlled approach to portfolio construction, will
produce strong results for shareholders over the long term.
B-8
<Page>
[CHART]
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN U.S. SYSTEMATIC MID
CAP GROWTH FUND CLASS I SHARES WITH THE RUSSELL MID CAP GROWTH INDEX.
ANNUALIZED TOTAL RETURNS
As of 9/30/04
<Table>
<Caption>
1 YEAR 5 YEARS 10 YEARS
10.03% - 7.14% 5.85%
</Table>
<Table>
<Caption>
U.S. SYSTEMATIC MID CAP GROWTH RUSSELL MID CAP
FUND CLASS I SHARES GROWTH INDEX
9/30/1985 $ 250,000.00 $ 250,000.00
10/31/1985 $ 263,066.67 n/a
11/30/1985 $ 289,075.19 n/a
12/31/1985 $ 311,844.68 n/a
1/31/1986 $ 325,056.50 $ 254,807.50
2/28/1986 $ 353,130.55 $ 277,271.33
3/31/1986 $ 388,396.52 $ 293,918.70
4/30/1986 $ 386,014.35 $ 297,128.29
5/31/1986 $ 420,047.95 $ 315,779.03
6/30/1986 $ 437,507.94 $ 320,667.29
7/31/1986 $ 413,911.68 $ 295,148.59
8/31/1986 $ 435,669.64 $ 308,539.48
9/30/1986 $ 388,689.93 $ 282,970.82
10/31/1986 $ 426,535.37 $ 300,053.76
11/30/1986 $ 426,862.38 $ 302,871.27
12/31/1986 $ 414,298.40 $ 293,875.99
1/31/1987 $ 479,743.74 $ 334,696.54
2/28/1987 $ 504,626.45 $ 359,632.44
3/31/1987 $ 508,798.02 $ 364,488.56
4/30/1987 $ 503,489.57 $ 355,010.40
5/31/1987 $ 505,637.79 $ 357,300.92
6/30/1987 $ 523,217.13 $ 371,925.25
7/31/1987 $ 560,975.96 $ 388,852.31
8/31/1987 $ 578,628.01 $ 404,896.75
9/30/1987 $ 570,276.48 $ 395,952.58
10/31/1987 $ 410,751.14 $ 287,175.69
11/30/1987 $ 376,686.18 $ 267,199.18
12/31/1987 $ 429,183.67 $ 301,986.91
1/31/1988 $ 414,233.77 $ 305,044.83
2/29/1988 $ 445,494.62 $ 330,063.69
3/31/1988 $ 439,955.63 $ 331,553.93
4/30/1988 $ 443,944.56 $ 333,426.87
5/31/1988 $ 447,747.69 $ 327,524.55
6/30/1988 $ 488,925.55 $ 352,276.89
7/31/1988 $ 470,867.90 $ 338,944.62
8/31/1988 $ 452,959.23 $ 326,033.20
9/30/1988 $ 478,445.73 $ 338,929.77
10/31/1988 $ 482,735.80 $ 336,882.64
11/30/1988 $ 467,079.06 $ 328,772.86
12/31/1988 $ 483,551.39 $ 341,011.10
1/31/1989 $ 513,031.90 $ 361,108.59
2/28/1989 $ 500,496.82 $ 358,145.70
3/31/1989 $ 509,489.08 $ 362,534.41
4/30/1989 $ 536,525.97 $ 383,183.29
5/31/1989 $ 569,665.39 $ 403,541.81
6/30/1989 $ 542,074.60 $ 398,132.34
7/31/1989 $ 603,744.62 $ 429,326.00
8/31/1989 $ 625,700.80 $ 445,943.93
9/30/1989 $ 637,943.67 $ 445,786.51
10/31/1989 $ 619,358.25 $ 427,200.33
11/30/1989 $ 641,324.82 $ 437,312.16
12/31/1989 $ 647,588.43 $ 448,368.29
1/31/1990 $ 609,035.33 $ 406,819.34
2/28/1990 $ 635,690.78 $ 415,182.74
3/31/1990 $ 655,820.98 $ 432,584.71
4/30/1990 $ 640,452.91 $ 420,620.71
5/31/1990 $ 744,313.03 $ 463,876.50
6/30/1990 $ 753,889.85 $ 469,603.06
7/31/1990 $ 728,383.25 $ 454,630.70
8/31/1990 $ 669,141.41 $ 401,762.61
9/30/1990 $ 618,532.01 $ 374,546.41
10/31/1990 $ 604,532.57 $ 367,544.64
11/30/1990 $ 644,411.57 $ 406,884.41
12/31/1990 $ 652,316.35 $ 425,351.67
1/31/1991 $ 716,025.92 $ 457,257.30
2/28/1991 $ 782,807.27 $ 497,512.86
3/31/1991 $ 822,078.10 $ 523,510.89
4/30/1991 $ 801,991.99 $ 518,850.60
5/31/1991 $ 839,658.88 $ 545,081.09
6/30/1991 $ 785,304.96 $ 515,371.45
7/31/1991 $ 844,961.96 $ 541,370.39
8/31/1991 $ 884,985.00 $ 558,290.38
9/30/1991 $ 886,371.47 $ 557,646.67
10/31/1991 $ 913,819.44 $ 570,159.15
11/30/1991 $ 873,763.69 $ 551,355.30
12/31/1991 $ 1,014,497.89 $ 625,385.77
1/31/1992 $ 1,022,275.71 $ 630,952.96
2/29/1992 $ 1,039,006.96 $ 632,314.55
3/31/1992 $ 987,749.28 $ 606,340.34
4/30/1992 $ 959,664.28 $ 594,734.98
5/31/1992 $ 949,651.78 $ 595,894.12
6/30/1992 $ 919,326.23 $ 578,165.08
7/31/1992 $ 953,770.32 $ 603,939.10
8/31/1992 $ 929,226.63 $ 596,031.73
9/30/1992 $ 964,692.12 $ 609,088.40
10/31/1992 $ 1,019,936.82 $ 627,436.58
11/30/1992 $ 1,099,151.91 $ 667,083.04
12/31/1992 $ 1,151,984.48 $ 679,861.01
1/31/1993 $ 1,184,316.84 $ 687,876.58
2/28/1993 $ 1,169,591.84 $ 666,697.54
3/31/1993 $ 1,226,044.14 $ 686,001.77
4/30/1993 $ 1,194,788.41 $ 657,826.99
5/31/1993 $ 1,273,544.56 $ 688,869.85
6/30/1993 $ 1,305,239.10 $ 686,038.59
7/31/1993 $ 1,319,645.72 $ 683,876.20
8/31/1993 $ 1,391,678.78 $ 723,633.34
9/30/1993 $ 1,408,006.28 $ 732,292.34
10/31/1993 $ 1,405,124.95 $ 744,089.57
11/30/1993 $ 1,349,419.38 $ 726,779.81
12/31/1993 $ 1,379,769.31 $ 755,946.21
1/31/1994 $ 1,402,023.66 $ 775,396.71
2/28/1994 $ 1,374,711.51 $ 768,729.85
3/31/1994 $ 1,282,659.45 $ 732,495.77
4/30/1994 $ 1,292,775.06 $ 730,705.55
5/31/1994 $ 1,271,532.28 $ 731,775.30
6/30/1994 $ 1,208,815.49 $ 700,290.67
7/31/1994 $ 1,230,058.27 $ 719,688.72
8/31/1994 $ 1,290,751.94 $ 762,617.43
9/30/1994 $ 1,268,497.60 $ 750,039.58
10/31/1994 $ 1,284,682.57 $ 763,001.02
11/30/1994 $ 1,205,780.81 $ 729,350.38
12/31/1994 $ 1,234,649.94 $ 739,572.96
1/31/1995 $ 1,211,552.75 $ 748,464.10
2/28/1995 $ 1,280,844.33 $ 788,290.63
3/31/1995 $ 1,324,938.97 $ 819,555.02
4/30/1995 $ 1,350,135.91 $ 826,431.09
5/31/1995 $ 1,371,133.36 $ 846,805.92
6/30/1995 $ 1,472,970.98 $ 885,344.06
7/31/1995 $ 1,591,606.56 $ 941,058.76
8/31/1995 $ 1,626,252.35 $ 951,363.35
9/30/1995 $ 1,659,848.27 $ 972,540.70
10/31/1995 $ 1,642,000.44 $ 947,964.60
11/30/1995 $ 1,673,496.61 $ 990,329.14
12/31/1995 $ 1,710,915.34 $ 990,863.91
1/31/1996 $ 1,729,728.77 $ 1,008,362.57
2/29/1996 $ 1,799,449.12 $ 1,046,508.93
3/31/1996 $ 1,799,449.12 $ 1,054,755.42
4/30/1996 $ 1,916,756.38 $ 1,105,710.65
5/31/1996 $ 1,994,223.44 $ 1,128,289.26
6/30/1996 $ 1,945,529.86 $ 1,094,192.36
7/31/1996 $ 1,798,342.45 $ 1,009,250.21
8/31/1996 $ 1,882,449.54 $ 1,063,810.27
9/30/1996 $ 2,000,863.48 $ 1,131,383.50
10/31/1996 $ 1,974,303.34 $ 1,118,112.37
11/30/1996 $ 2,041,311.77 $ 1,183,980.37
12/31/1996 $ 1,992,539.17 $ 1,164,042.14
1/31/1997 $ 2,075,809.46 $ 1,215,551.01
2/28/1997 $ 1,941,387.42 $ 1,188,784.58
3/31/1997 $ 1,830,756.88 $ 1,121,606.36
4/30/1997 $ 1,833,136.03 $ 1,149,074.50
5/31/1997 $ 1,990,160.02 $ 1,252,043.07
6/30/1997 $ 2,065,103.28 $ 1,286,687.10
7/31/1997 $ 2,275,658.16 $ 1,409,848.79
8/31/1997 $ 2,242,350.05 $ 1,396,088.66
9/30/1997 $ 2,389,857.42 $ 1,466,744.71
10/31/1997 $ 2,249,487.50 $ 1,393,304.80
11/30/1997 $ 2,249,940.26 $ 1,407,948.44
12/31/1997 $ 2,324,431.52 $ 1,426,434.80
1/31/1998 $ 2,266,662.78 $ 1,400,744.71
2/28/1998 $ 2,484,055.66 $ 1,532,442.72
3/31/1998 $ 2,608,714.51 $ 1,596,682.72
4/30/1998 $ 2,578,309.91 $ 1,618,365.68
5/31/1998 $ 2,427,807.15 $ 1,551,802.29
6/30/1998 $ 2,579,830.14 $ 1,595,702.78
7/31/1998 $ 2,467,593.58 $ 1,527,342.87
8/31/1998 $ 1,935,212.64 $ 1,235,834.21
9/30/1998 $ 2,126,364.25 $ 1,329,312.71
10/31/1998 $ 2,180,076.28 $ 1,427,190.01
11/30/1998 $ 2,326,994.46 $ 1,523,453.97
12/31/1998 $ 2,665,064.26 $ 1,681,222.87
1/31/1999 $ 2,938,363.68 $ 1,731,625.93
2/28/1999 $ 2,695,079.80 $ 1,646,949.42
3/31/1999 $ 3,028,410.30 $ 1,738,668.04
4/30/1999 $ 3,148,472.48 $ 1,817,899.14
5/31/1999 $ 3,003,134.06 $ 1,794,520.95
6/30/1999 $ 3,243,258.40 $ 1,919,796.46
7/31/1999 $ 3,194,285.67 $ 1,858,670.14
8/31/1999 $ 3,249,577.46 $ 1,839,358.56
9/30/1999 $ 3,246,417.93 $ 1,823,705.62
10/31/1999 $ 3,630,300.93 $ 1,964,714.54
11/30/1999 $ 4,093,172.20 $ 2,168,180.38
12/31/1999 $ 5,306,432.04 $ 2,543,600.81
1/31/2000 $ 5,336,447.58 $ 2,543,092.09
2/29/2000 $ 7,345,909.19 $ 3,077,726.34
3/31/2000 $ 6,556,026.48 $ 3,080,896.39
4/30/2000 $ 5,608,167.23 $ 2,781,833.78
5/31/2000 $ 5,011,015.90 $ 2,579,065.92
6/30/2000 $ 5,897,264.30 $ 2,852,730.60
7/31/2000 $ 5,573,412.39 $ 2,672,095.70
8/31/2000 $ 6,521,271.64 $ 3,075,074.45
9/30/2000 $ 6,434,384.54 $ 2,924,734.06
10/31/2000 $ 5,537,077.79 $ 2,724,565.26
11/30/2000 $ 4,125,683.52 $ 2,132,489.99
12/31/2000 $ 4,576,444.42 $ 2,244,786.91
1/31/2001 $ 4,498,727.02 $ 2,373,009.14
2/28/2001 $ 3,568,338.76 $ 1,962,549.75
3/31/2001 $ 3,019,875.99 $ 1,681,669.63
4/30/2001 $ 3,483,959.87 $ 1,961,987.14
5/31/2001 $ 3,339,627.56 $ 1,952,765.80
6/30/2001 $ 3,248,587.18 $ 1,953,800.76
7/31/2001 $ 2,884,425.67 $ 1,822,036.44
8/31/2001 $ 2,582,438.07 $ 1,689,938.80
9/30/2001 $ 2,122,795.18 $ 1,410,591.91
10/31/2001 $ 2,342,811.84 $ 1,558,845.12
11/30/2001 $ 2,518,245.14 $ 1,726,732.74
12/31/2001 $ 2,595,968.75 $ 1,792,348.59
1/31/2002 $ 2,504,921.09 $ 1,734,097.26
2/28/2002 $ 2,322,825.76 $ 1,635,773.95
3/31/2002 $ 2,531,569.19 $ 1,760,583.50
4/30/2002 $ 2,418,314.78 $ 1,667,448.63
5/31/2002 $ 2,298,398.34 $ 1,617,758.66
6/30/2002 $ 2,085,213.57 $ 1,439,158.10
7/31/2002 $ 1,869,808.12 $ 1,299,271.94
8/31/2002 $ 1,872,028.79 $ 1,294,724.49
9/30/2002 $ 1,805,408.55 $ 1,191,793.89
10/31/2002 $ 1,860,925.42 $ 1,284,157.91
11/30/2002 $ 1,918,662.96 $ 1,384,707.48
12/31/2002 $ 1,785,422.48 $ 1,301,071.15
1/31/2003 $ 1,763,215.73 $ 1,288,320.65
2/28/2003 $ 1,734,346.96 $ 1,277,112.26
3/31/2003 $ 1,763,215.73 $ 1,300,866.55
4/30/2003 $ 1,834,277.32 $ 1,389,455.56
5/31/2003 $ 1,945,311.06 $ 1,523,121.19
6/30/2003 $ 1,943,090.38 $ 1,544,901.82
7/31/2003 $ 2,003,048.60 $ 1,600,054.81
8/31/2003 $ 2,122,965.04 $ 1,688,217.83
9/30/2003 $ 2,036,195.79 $ 1,655,466.41
10/31/2003 $ 2,224,938.04 $ 1,788,897.00
11/30/2003 $ 2,280,450.47 $ 1,836,839.44
12/31/2003 $ 2,244,922.52 $ 1,856,860.99
1/31/2004 $ 2,295,993.95 $ 1,918,137.40
2/29/2004 $ 2,327,080.91 $ 1,950,362.11
3/31/2004 $ 2,307,096.43 $ 1,946,656.42
4/30/2004 $ 2,198,292.08 $ 1,891,760.71
5/31/2004 $ 2,264,906.99 $ 1,936,406.26
6/30/2004 $ 2,322,639.91 $ 1,967,195.12
7/31/2004 $ 2,198,292.08 $ 1,836,770.09
8/30/2004 $ 2,140,559.16 $ 1,814,177.82
9/30/2004 $ 2,240,481.52 $ 1,882,028.07
</Table>
The graph above shows the value of a hypothetical $250,000 investment in the
Fund's Class I shares compared with the Russell Mid Cap Growth Index for the
periods indicated. Class I shares have a shareholder services fee of up to .25%
of their average daily net assets. Performance is shown for Class I shares only.
Class II-IV shares are new and have no prior performance. The Fund's Class I
shares calculate their performance based upon the historical performance of
their corresponding series of Nicholas-Applegate Mutual Funds (renamed ING
Mutual Funds), adjusted to reflect all fees and expenses applicable to the
Fund's Class I shares. The Fund's performance includes historical performance of
comparable managed institutional separate accounts managed by the Investment
Adviser prior to the Nicholas-Applegate Mutual Fund's inception. The
Nicholas-Applegate Institutional Funds' Class I shares were first available on
May 7, 1999. Average annual total return figures include changes in principal
value, reinvested dividends, and capital gain distributions. Absent expense
limitations, total returns would have been slightly lower. The total returns
shown above do not show the effects of income taxes on an individual's
investment. In most cases, taxes may reduce your actual investment returns on
income or gains paid by the Fund or any gains you may realize if you sell your
shares. Past performance cannot guarantee future results.
Russell Mid Cap Growth Index measures the performance of those Russell Mid cap
companies with higher price-to-book ratios and higher forecasted growth values.
The stocks are also members of the Russell 1000 Growth index. The Russell Mid
Cap Index is an unmanaged index generally representative of the smallest 800
stocks in the Russell 1000 Index as ranked by total market capitalization. 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.
B-9
<Page>
PRO FORMA FINANCIAL STATEMENTS
Shown below are financial statements for each Fund and pro forma financial
statements for the combined Fund, assuming the Reorganization is consummated, as
of September 30, 2004. The first table presents Statements of Assets and
Liabilities (unaudited) for each Fund and estimated pro forma figures for the
combined Fund. The second table presents Statements of Operations (unaudited)
for each Fund and estimated pro forma figures for the combined Fund. The third
table presents the Statement of Changes in Net Assets (unaudited) for each Fund
and estimated pro forma figures for the combined Fund. The forth table presents
the Portfolio of Investments (unaudited) for each fund and estimated pro forma
figures for the combined Fund. The tables are followed by the Notes to the Pro
Forma Financial Statements (unaudited).
PRO-FORMA COMBINING THE STATEMENT OF ASSETS & LIABILITIES
(UNAUDITED)
<Table>
<Caption>
U.S. SYSTEMATIC U.S. SYSTEMATIC
SMID GROWTH FUND MID CAP GROWTH PRO-FORMA
PERIOD ENDED PERIOD ENDED COMBINED STATEMENT
SEPTEMBER 30, 2004 SEPTEMBER 30, 2004 ADJUSTMENTS OF ASSETS & LIABILITIES
------------------ ------------------ ----------- -----------------------
ASSETS
Investments, at value* $ 4,899,144 11,956,137 $ 16,855,281
Cash 23,258 -- 23,258
Receivables:
Investment securities sold 131,075 242,494 373,569
Capital shares sold 4,817 4,817
Dividends 3,519 5,375 8,894
Other recivables 4,690 98,869 103,559
Other assets 1,847 7,906 9,753
------------------ ------------------ ----------- ---------------
Total assets 5,063,533 12,315,598 17,379,131
------------------ ------------------ ----------- ---------------
LIABILITIES
Payables:
Bank overdraft $ -- 68,751 68,751
Investments purchased 147,372 185,614 332,986
Collateral on securities loaned -- 753,475 753,475
To investment advisor 803 3,277 6,900 10,980
Other Liabilites 13,289 53,561 (46,315) 20,535
------------------ ------------------ ----------- ---------------
Total Liabilities 161,464 1,064,678 1,186,727
------------------ ------------------ ----------- ---------------
NET ASSETS 4,902,069 11,250,920 39,415 16,192,404
------------------ ------------------ ----------- ---------------
* Investments, at cost 4,817,579 11,636,002 16,453,583
------------------ ------------------ ----------- ---------------
** Foreign currencies, at cost -- -- --
------------------ ------------------ ----------- ---------------
NET ASSETS CONSIST OF:
Paid-in capital $ 5,125,120 $ 24,938,045 30,063,165
Undistributed net investment income (loss) (5,691) 84,055 39,415 #REF!
Accumulated net realized gain (loss)
on investments and foreign currencies (298,925) (14,091,313) (14,390,238)
Net unrealized appreciation (depreciation)
of investments and of other assets and --
liabilities denominated in foreign currencies 81,565 320,133 401,698
------------------ ------------------ ----------- ---------------
Net Assets applicable to all shares outstanding $ 4,902,069 $ 11,250,920 39,415 16,192,404
------------------ ------------------ ----------- ---------------
Institutional Shares outstanding 516,595 1,114,726 70,478 1,701,799
Net Asset Value - Institutional Share $ 9.49 10.09 .02 9.51
</Table>
B-10
<Page>
PRO-FORMA COMBINING THE STATEMENT OF OPERATIONS
SEPTEMBER 30, 2004 (UNAUDITED)
<Table>
<Caption>
U.S. SYSTEMATIC U.S. SYSTEMATIC
SMID GROWTH FUND MID CAP GROWTH PRO-FORMA
PERIOD ENDED PERIOD ENDED COMBINED STATEMENT
SEPTEMBER 30, 2004 SEPTEMBER 30, 2004 ADJUSTMENTS OF OPERATIONS
------------------ ------------------ ----------- ----------------------
INVESTMENT INCOME
Dividends, net of foreign taxes* $ 23,032 $ 80,518 -- 103,550
Interest 179 92,607 -- 92,786
------------------ ------------------ ----------- ----------------------
Total Income 23,211 173,125 -- 196,336
------------------ ------------------ ----------- ----------------------
EXPENSES
Advisory fee 17,581 55,257 9210 82,048 a
Accounting and administration fees 2,124 15,731 3,008 20,863 b
Custodian fees 6,819 16,049 (300) 22,568 c
Transfer agent fees and expenses 10,185 12,372 (10,027) 12,530 d
Shareholder servicing fees 2,512 7,368 (7,368) 2,512 e
Administrative services 2,512 6,447 (6,447) 2,512 f
Professional fees 973 7,929 -- 8,902
Shareholder reporting 600 5,953 -- 6,553
Registration fees 1,961 8,648 -- 10,609
Trustees' fees and expenses 168 1,717 -- 1,885
Interest and credit facility fee 26 397 -- 423
Insurance 478 3,241 -- 3,719
Miscellaneous 940 2,229 (800) 2,369 g
------------------ ------------------ ----------- ----------------------
Total Expenses 46,879 143,338 (12,724) 177,493
Expenses offset (5,328) (25,405) (30,733)
Expenses reimbursed (12,649) (28,863) (2,310) (43,822)
------------------ ------------------ ----------- ----------------------
Net Expenses 28,902 89,070 (15,034) 102,938 h
------------------ ------------------ ----------- ----------------------
NET INVESTMENT INCOME (LOSS) (5,691) 84,055 15,034 93,398
------------------ ------------------ ----------- ----------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Realized gain/ (loss) from:
Securities (294,700) 4,229,610 -- 3,934,910
------------------ ------------------ ----------- ----------------------
Net realized gain (loss) (294,700) 4,229,610 -- 3,934,910
------------------ ------------------ ----------- ----------------------
Change in unrealized appreciation (depreciation) of:
Investments 62,202 (4,936,803) -- (4,874,601)
------------------ ------------------ ----------- ----------------------
Net unrealized appreciation (depreciation) 62,202 (4,936,803) -- (4,874,601)
------------------ ------------------ ----------- ----------------------
NET GAIN (LOSS) ON INVESTMENTS (232,498) (707,193) -- (939,691)
------------------ ------------------ ----------- ----------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ (238,189) $ (623,138) 15,034 (846,293)
================== ================== =========== ======================
*Foreign taxes withheld $ -- -- --
------------------ ------------------ ----------- ----------------------
-- --
Average net assets 5,009,418 18,368,675 23,378,093
</Table>
a - Systematic SMID Growth will be the survivor w/ current management fee of
70 bp vs 60 in Systematic Mid Cap Growth
b - Fee would increase by account charge for additional class
c - Eliminate duplicate BIDS Worldview fee
d - Eliminate duplicate account minimums
e - Mid Cap assets into SMID Class IV with 0 shareholder servicing fee
f - Mid Cap assets into SMID Class IV with 0 co-administration fee
g - Eliminate duplicate CA franchise tax payment
h - SMID Class I fee cap is 133 bp; SMID Class IV fee cap is 113 bp
B-11
<Page>
COMBINED STATEMENTS OF CHANGES IN NET ASSETS
PERIODS ENDED SEPTEMBER 30, 2004 MARCH 31, 2004
<Table>
<Caption>
U.S. SYSTEMATIC SMID GROWTH FUND+ U.S. SYSTEMATIC MID CAP GROWTH FUND
--------------------------------- -----------------------------------
SEPTEMBER 30, SEPTEMBER 30,
2004 MARCH 31, 2004 MARCH 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
-------------- -------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income (loss) $ (5,691) $ (1,283) $ 84,055 $ (125,284)
Net realized gain (loss) (294,700) (4,225) 4,229,610 10,589,305
Net unrealized appreciation (depreciation) 62,202 19,363 (4,936,803) 1,670,436
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets from
investment operations (238,189) 13,855 (623,138) 12,134,457
-------------- -------------- -------------- --------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
Institutional Class 11,076 5,333,451 577,011 3,124,845
Retirement Class -- -- -- 41
Cost of shares redeemed
Institutional Class (218,124) -- (18,449,524) (27,596,227)
Retirement Class -- -- -- (4,185)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets from
share transactions # (207,048) 5,333,451 (17,872,513) (24,475,526)
-------------- -------------- -------------- --------------
Net Increase (Decrease) in Net Assets (445,237) 5,347,306 (18,495,651) 12,341,069
NET ASSETS
Beginning 5,347,306 -- 29,746,571 42,087,640
-------------- -------------- -------------- --------------
Ending $ 4,902,069 $ 5,347,306 $ 11,250,920 $ 29,746,571
============== ============== ============== ==============
Undistributed net investment income (loss), ending $ (5,691) $ -- $ 84,055 $ --
============== ============== ============== ==============
INSTITUTIONAL CLASS - CAPITAL SHARE ACTIVITY
Shares sold 1,194 540,645 58,659 340,353
Shares redeemed (24,050) -- (1,806,842) (2,777,862)
-------------- -------------- -------------- --------------
Net Institutional Share Activity (22,856) 540,645 (1,748,183) (2,437,509)
============== ============== ============== ==============
RETIREMENT CLASS - CAPITAL SHARE ACTIVITY
Shares sold -- -- -- 4
Shares redeemed -- -- -- (467)
-------------- -------------- -------------- --------------
Net Retirement Share Activity -- -- -- (463)
============== ============== ============== ==============
Average NAV per Share based on capstock transactions
(unaudited) 9.06 9.86 10.22 10.04
<Caption>
COMBINED STATEMENTS OF
CHANGES IN NET ASSETS
ADJUSTMENT ADJUSTMENT ---------------------------------
SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31,
2004 2004 2004 2004
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
-------------- -------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income (loss) 15,034 24,381 93,398 (102,186)
Net realized gain (loss) 3,934,910 10,585,080
Net unrealized appreciation (depreciation) (4,874,601) 1,689,799
-------------- --------------
Net increase (decrease) in net assets from
investment operations (846,293) 12,172,693
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
Institutional Class 588,087 8,458,296
Retirement Class -- 41
Cost of shares redeemed
Institutional Class (18,667,648) (27,596,227)
Retirement Class -- (4,185)
-------------- --------------
Net increase (decrease) in net assets from
share transactions (18,079,561) (19,142,075)
-------------- --------------
Net Increase (Decrease) in Net Assets (18,925,854) (6,369,382)
NET ASSETS
Beginning 35,118,258 42,087,640
-------------- --------------
Ending 16,192,404 35,118,258
============== ==============
Undistributed net investment income (loss), ending 117,779 --
============== ==============
INSTITUTIONAL CLASS - CAPITAL SHARE ACTIVITY
Shares sold 59,853 880,998
Shares redeemed (1,830,892) (2,777,862)
-------------- --------------
Net Institutional Share Activity (224,761) (43,543) (1,995,800) (1,940,407)
============== ==============
RETIREMENT CLASS - CAPITAL SHARE ACTIVITY
Shares sold -- 4
Shares redeemed -- (467)
-------------- --------------
Net Retirement Share Activity -- (463)
============== ==============
Average NAV per Share based on capstock transactions 9.06 9.86
</Table>
# Conversion ratio is based on the average price of the Systematic SMID
Growth Fund net change in capital share transactions.
+ Commenced operations on 2/27/2004.
B-12
<Page>
PRO FORMA SCHEDULE OF INVESTMENTS OF COMBINED FUND
SEPTEMBER 30, 2004 (UNAUDITED)
<Table>
<Caption>
U.S. SYSTEMATIC MID CAP
GROWTH FUND
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
COMMON STOCK - 96.0%
ADVERTISING SERVICES - 0.3%
Getty Images, Inc. *
AEROSPACE/DEFENSE-EQUIPMENT - 1.2%
Goodrich Corp. 4,500 $ 141,120
----------------
APPAREL MANUFACTURERS - 0.7%
Coach, Inc. * 2,800 118,776
----------------
APPLICATIONS SOFTWARE - 0.4%
Progress Software Corp. *
SS&C Technologies, Inc.
AUDIO/VIDEO PRODUCTS - 1.3%
Harman International Industries, Inc. 1,500 161,625
----------------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL - 1.8%
Advanced Auto Parts, Inc. * 1,600 55,040
BorgWarner, Inc. # 1,800 77,922
Autoliv, Inc.
Dana Corp.
Tenneco Automotive, Inc. *
----------------
132,962
----------------
BROADCAST SERVICES/PROGRAMMING - 0.2%
World Wrestling Entertainment, Inc.
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS - 1.0%
Masco Corp. 3,100 107,043
Vulcan Materials Co. # 1,200 61,140
----------------
168,183
----------------
BUILDING PRODUCTS-CEMENT/AGGREGATE - 0.6%
Martin Marietta Materials, Inc. 1,900 86,013
----------------
BUILDING-MAINTENANCE & SERVICE - 0.2%
ABM Industries, Inc.
BUILDING-RESIDENTIAL/COMMERCIAL - 0.7%
Lennar Corp.-Cl. A 2,400 114,240
----------------
CELLULAR TELECOMMUNICATIONS - 1.4%
</Table>
B-13
<Page>
<Table>
Nextel Partners, Inc. Cl. A *
Western Wireless Corp. Cl. A * 4,900 125,979
----------------
125,979
----------------
CHEMICALS-SPECIALTY - 0.7%
Ashland, Inc. 2,000 112,160
----------------
CIRCUIT BOARDS - 0.2%
Park Electrochemical Corp.
COMMERCIAL BANKS-CENTRAL US - 0.9%
Associated Banc Corp. 2,950 94,606
Corus Bankshares, Inc.
----------------
94,606
----------------
COMMERCIAL BANKS-EASTERN US - 0.8%
Commerce Bancorp, Inc. # 2,200 121,440
----------------
COMMERCIAL BANKS-WESTERN US - 0.2%
Nara Bancorp, Inc.
COMMERCIAL SERVICES-FINANCE - 1.3%
ACE Cash Express, Inc. *
H&R Block, Inc. 2,300 113,666
Moody's Corp. 1,100 80,575
----------------
194,241
----------------
COMPUTER AIDED DESIGN - 0.2%
Autodesk, Inc.
COMPUTERS-PERIPHERAL EQUIPMENT - 0.7%
Lexmark Internaitonal, Inc. * 1,400 117,614
----------------
CONSULTING SERVICES - 0.1%
Clark, Inc.
DATA PROCESSING/MANAGEMENT - 1.9%
Fiserv, Inc. * 2,200 76,692
The Dun & Bradstreet Corp. * 2,500 146,750
----------------
223,442
----------------
DIAGNOSTIC EQUIPMENT - 0.2%
Gen-Probe, Inc. *
DIALYSIS CENTERS - 1.0%
Davita, Inc. * 3,650 113,698
----------------
DISPOSABLE MEDICAL PRODUCTS - 1.0%
C. R. Bard, Inc. 2,800 158,564
----------------
DISTRIBUTION/WHOLESALE - 0.6%
Aviall Inc. *
WW Grainger, Inc. 1,600 92,240
----------------
92,240
----------------
DIVERSIFIED FINANCIAL SERVICES - 0.9%
CIT Group, Inc. 3,800 142,082
</Table>
B-14
<Page>
<Table>
DIVERSIFIED MANUFACTURING OPERATIONS - 2.7%
ITT Industries, Inc. 1,700 135,983
Textron, Inc. 2,700 173,529
The Brink's Co. 3,400 102,578
----------------
412,090
----------------
DIVERSIFIED OPERATIONS/COMMERCIAL SERVICES - 0.6%
Aramark Corp. Cl. B 4,300 103,802
----------------
ELECTRIC PRODUCTS-MISCELLANEOUS - 0.1%
Littlefuse, Inc.
ELECTRONIC COMPONENTS-MISCELLANEOUS - 1.3%
Sanmina Corp. * 14,400 101,520
Solectron Corp. 12,900 63,855
----------------
165,375
----------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 3.1%
Altera Corp. * 3,900 76,323
Fairchild Semiconductor International, Inc. Cl. A *
International Rectifier Corp. * 3,500 120,050
LSI Logic Corp. *
Microchip Technology, Inc. * 4,100 110,044
PMC - Sierra, Inc. * # 7,300 64,313
----------------
370,730
----------------
ELECTRONIC CONNECTORS - 0.8%
Amphenol Corp. Cl. A * 2,300 78,798
Thomas & Betts Corp.
----------------
78,798
----------------
ELECTRONIC FORMS - 0.6%
Adobe Systems, Inc. 2,000 98,940
----------------
ELECTRONIC MEASURE INSTRUMENTS - 0.6%
Agilent Technologies, Inc. * 4,700 101,379
----------------
ELECTRONIC PARTS DISTRIBUTION - 0.8%
Avnet, Inc. * 5,400 92,448
----------------
ENTERPRISE SOFTWARE/SERVICES - 0.5%
BMC Software, Inc. * 4,800 75,888
----------------
ENTERTAINMENT SOFTWARE - 1.0%
Activision, Inc. * 8,100 112,347
----------------
ENVIRON MONITORING&DET - 0.3%
Mine Safety Appliances Co.
FIDUCIARY BANKS - 1.2%
Investors Financial Services Corp. 2,900 130,877
----------------
FILTRATION/SEPARATE PRODUCTS - 0.2%
Clarcor, Inc.
</Table>
B-15
<Page>
<Table>
FINANCE-AUTO LOANS - 0.3%
AmeriCredit Corp. *
FINANCE-INVESTMENT BANKERS/BROKERS - 1.1%
E*Trade Financial Corp. * 7,300 83,366
Friedman, Billings, Ramsey Group
Jefferies Group, Inc.
----------------
83,366
----------------
FINANCE-MORTGAGE LOAN/BANKER - 0.3%
CharterMac
FINANCE-OTHER SERVICES - 0.8%
Chicago Mercantile Exchange # 650 104,845
----------------
FINANCIAL GUARANTEE INSURANCE - 0.6%
Ambac Financial Group, Inc. 1,200 95,940
----------------
FOOD-BAKING - 0.2%
Flowers Foods, Inc.
FOOD-MISCELLANEOUS/DIVERSIFIED - 0.2%
Corn Products International, Inc.
FOOD-WHOLESALE/DISTRIBUTION - 0.8%
Supervalu, Inc. 3,400 93,670
----------------
FORESTRY - 1.0%
Weyerhaeuser Co. 2,400 159,552
----------------
FUNERAL SERVICES & RELATED ITEMS - 1.3%
Service Corp. International * # 19,900 123,579
Stewart Enterprises, Inc. Cl. A *
----------------
123,579
----------------
GAS-DISTRIBUTION - 0.2%
UGI Corp.
HOSPITAL BEDS/EQUIPMENT - 0.2%
Kinetic Concepts, Inc. *
HOTELS&MOTELS - 0.3%
Choice Hotels International, Inc. Inc.
HUMAN RESOURCES - 1.7%
Resources Connection, Inc. *
Heidrick & Struggles Intl *
Hewitt Associates, Inc. *
Korn/Ferry International * 6,400 116,672
----------------
116,672
----------------
IDENTIFICATION SYSTEMS/DEVICES - 0.2%
Checkpoint Systems, Inc. *
INDUSTRIAL AUTOMATION/ROBOTICS - 0.2%
</Table>
B-16
<Page>
<Table>
Nordson Corp.
INSTRUMENTS-CONTROLS - 0.9%
Parker-Hannifin Corp. # 2,100 123,606
Woodward Governor Co.
----------------
123,606
----------------
INSTRUMENTS-SCIENTIFIC - 1.4%
PerkinElmer, Inc. 9,000 154,980
----------------
INTERNET SECURITY - 2.0%
VeriSign, Inc. * 3,900 77,532
CheckFree Corp. 4,800 132,816
McAfee, Inc.
----------------
210,348
----------------
INTIMATE APPAREL - 0.3%
Warnaco Group, Inc.
LEISURE&RECREATIONAL PRODUCTS - 0.3%
Brunswick Corp.
LIFE/HEALTH INSURANCE - 0.6%
Lincoln National Corp. 1,900 89,300
----------------
MACHINERY-CONSTRUCTION&MINING - 1.2%
Joy Global, Inc.
Terex Corp. * 2,900 125,860
----------------
125,860
----------------
MACHINERY-ELECTRICAL - 0.3%
Regal-Beloit Corp.
MACHINERY-GENERAL INDUSTRY - 0.5%
Gardner Denver, Inc. *
Middleby Corp.
MEDICAL INFORMATION SYSTEMS - 0.8%
IMS Health, Inc. 5,400 129,168
----------------
MEDICAL INSTRUMENTS - 0.7%
Abaxis, Inc. *
Biomet, Inc. 1,800 84,384
----------------
84,384
----------------
MEDICAL LABS&TESTING SERVICES - 1.1%
Covance, Inc. * # 3,000 119,910
----------------
MEDICAL LASER SYSTEMS - 0.2%
Lca-Vision, Inc. *
MEDICAL PRODUCTS - 1.1%
Varian Medical Systems, Inc. * 5,000 172,850
----------------
MEDICAL-BIOMEDICAL/GENETICS - 0.8%
</Table>
B-17
<Page>
<Table>
Invitrogen Corp. * 1,700 93,483
----------------
MEDICAL-DRUGS - 1.2%
First Horizon Pharmaceutical Corp. *
Celgene Corp. * 1,400 81,522
Cephalon, Inc. *
Sepracor, Inc. *
----------------
81,522
----------------
MEDICAL-HMO - 2.5%
Coventry Health Care, Inc. * 1,850 98,735
Humana, Inc. * 4,700 93,906
WellChoice, Inc. * 2,800 104,524
----------------
297,165
----------------
MEDICAL-NURSING HOMES - 0.7%
Manor Care, Inc. * 3,600 107,856
----------------
MEDICAL-HOSPITALS - 0.2%
Vca Antech, Inc. *
MEDICAL-OUTPATIENT/HOME MEDICAL CARE - 0.2%
Amedisys, Inc. *
MEDICAL-WHOLESALE DRUG DISTRIBUTORS - 0.4%
AmeriSource Bergen Corp. 1,300 69,823
----------------
METAL-ALUMINUM - 0.3%
Century Aluminum Co.
METAL-COPPER - 0.8%
Phelps Dodge Corp. 900 82,827
Southern Peru Copper Corp.
----------------
82,827
----------------
METAL-DIVERSIFIED - 0.6%
Freeport-McMoran Copper & Gold, Inc. Cl. B 2,300 93,150
----------------
MISCELLANEOUS MANUFACTURING - 0.4%
Armor Holdings, Inc. *
MULTI-LINE INSURANCE - 0.6%
CNA Financial Corp. 4,100 98,441
----------------
MULTIMEDIA - 0.6%
Gemstar - TV Guide International, Inc. *
Meredith Corp. 1,400 71,932
----------------
71,932
----------------
NETWORKING PRODUCTS - 0.6%
Juniper Networks, Inc. * 4,200 99,120
----------------
OFFICE FURNISHINGS-ORIGINAL - 1.0%
HNI Corp. 2,900 114,782
----------------
OIL COMPANIES-EXPLORATION & PRODUCTION - 2.5%
</Table>
B-18
<Page>
<Table>
Clayton Williams Energy, Inc. *
Houston Exploration Co.
Kerr-McGee Corp. 2,100 120,225
Meridian Resource Corp.
Plains Exploration & Product Company *
Pogo Producing Co. 2,000 94,900
----------------
215,125
----------------
OIL FIELD MACHINERY & EQUIPMENT - 1.6%
Universal Compression Holdings, Inc. *
Carbo Ceramics, Inc.
Grant Prideco, Inc. * 6,100 124,989
----------------
124,989
----------------
OIL-FIELD SERVICES - 0.9%
Baker Hughes, Inc. 3,300 144,276
----------------
OIL REFINING & MARKETING - 0.6%
Tesoro Petroleum Corp. *
Giant Industries, Inc.
OPTICAL SUPPLIES - 1.7%
Ocular Sciences, Inc. *
Advanced Medical Optics, Inc. *
Bausch & Lomb, Inc. 2,200 146,190
----------------
146,190
----------------
PAPER & RELATED PRODUCTS - 1.7%
Georgia-Pacific Corp. 3,800 136,610
Potlatch Corp.
Temple-Inland, Inc. 1,300 87,295
----------------
223,905
----------------
PROPERTY/CASUALTY INSURANCE - 1.4%
Berkley Corp. 3,000 126,480
Landamerica Financial Group, Inc.
----------------
126,480
----------------
RETAIL-APPAREL/SHOE - 1.1%
Claires Stores, Inc. 3,000 75,120
Nordstrom, Inc. 2,100 80,304
Stein Mart, Inc.
----------------
155,424
----------------
RETAIL-AUTO PARTS - 0.5%
Pep Boys 4,400 61,600
----------------
RETAIL-COMPUTER EQUIPMENT - 0.7%
CDW Computer Centers, Inc. 1,900 110,257
----------------
RETAIL-CATALOG SHOPPING - 0.4%
Coldwater Creek, Inc. *
RETAIL-CONVENIENCE STORE - 0.9%
Seven-Eleven, Inc. * 3,800 75,924
The Pantry, Inc. *
----------------
75,924
----------------
</Table>
B-19
<Page>
<Table>
RETAIL-DISCOUNT - 0.7%
Dollar General Corp. 5,700 114,855
----------------
RETAIL-MAJOR DEPARTMENT STORES - 0.8%
May Deptartment Stores Co. 5,000 128,150
----------------
RETAIL-REGIONAL DEPARTMENT STORES - 0.6%
Federated Department Stores, Inc. * 2,300 104,489
----------------
RETAIL-RESTAURANTS - 1.8%
Brinker International, Inc. 2,900 90,335
CKE Restaurants, Inc. *
Yum! Brands, Inc. * 3,400 138,244
----------------
228,579
----------------
RUBBER-TIRES - 0.2%
Goodyear Tire & Rubber Co.
SAVINGS & LOANS/THRIFTS-EASTERN US - 1.3%
BankAtlantic Bancorp, Inc. Cl. A
Harbor Florida Bancshares, Inc.
Hudson City Bancorp, Inc. # 2,600 92,924
New York Community Bancorp, Inc. 3,100 63,674
----------------
156,598
----------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS - 1.5%
Atmel Corp. * # 29,300 106,066
Cypress Semiconductor Corp. * 7,500 66,300
----------------
172,366
----------------
SEMICONDUCTOR EQUIPMENT - 0.5%
KLA -Tencor Corp. * 2,000 82,960
----------------
STEEL PIPE & TUBE - 0.2%
Maverick Tube Corp.
STEEL-PRODUCERS - 1.3%
Reliance Steel & Aluminum Co.
United States Steel Corp. 4,400 165,528
----------------
165,528
----------------
TELECOMMUNICATIONS EQUIPMENT - 2.6%
Harris Corp. 2,800 153,832
Avaya, Inc. * 8,700 121,278
Tellabs, Inc. * 7,900 72,601
----------------
347,711
----------------
TELECOMMUNICATIONS EQUIPMENT FIBER OPTICS - 0.4%
Corning, Inc. * 5,600 62,048
----------------
THERAPEUTICS - 1.1%
Imclone Systems, Inc. * 1,500 79,275
MGI Pharma, Inc. * 2,100 56,049
----------------
135,324
----------------
TOOLS-HAND HELD - 0.7%
The Black & Decker Corp. 1,400 108,416
----------------
</Table>
B-20
<Page>
<Table>
TOYS - 0.7%
Hasbro, Inc. 4,500 84,600
----------------
TRANSPORT-AIR FREIGHT - 0.8%
CNF, Inc. 2,200 90,178
----------------
TRANSPORT-MARINE - 0.2%
Omi Corp.
TRANSPORT-SERVICES - 0.5%
Hub Group, Inc. Cl. A *
Pacer International, Inc. *
WIRE & CABLE PRODUCTS - 0.1%
Encore Wire Corp. *
TOTAL COMMON STOCK ----------------
(COST U.S. SYSTEMATIC MID CAP GROWTH FUND : $10,405,627) 10,725,762
(COST U.S..SYSTEMATIC SMID GROWTH FUND : $4,716,336)
<Caption>
PRICIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENT - 8.2%
MONEY MARKET FUND - 4.6%
Federated Prime Obligated Fund ** $ 753,475 $ 753,475
(COST U.S. SYSTEMATIC MID CAP GROWTH FUND : $753,475) ----------------
TIME DEPOSITS - 3.6%
Brown Brothers Harriman & Co.
1.30%, 10/01/04
(COST U.S. SYSTEMATIC MID CAP GROWTH FUND : $476,900) $ 476,900 $ 476,900
(COST U.S..SYSTEMATIC SMID GROWTH FUND : $101,243) ----------------
TOTAL INVESTMENTS - 104.3%
(COST U.S. SYSTEMATIC MID CAP GROWTH FUND : $11,636,002) 11,956,137
(COST U.S..SYSTEMATIC SMID GROWTH FUND : $4,817,579)
LIABILITIES IN EXCESS OF OTHER ASSETS - (4.3%) (705,217)
----------------
NET ASSETS - 100.0% $ 11,250,920
================
</Table>
* Non-income producing securities.
** All of the security was purchased with cash collateral process from
security loans.
# Part of all of this security is out for loan.
See Accompanying Notes to Financial Statements.
B-21
<Page>
<Table>
<Caption>
U.S. SYSTEMATIC SMID GROWTH
FUND ADJUSTMENTS COMBINED FUNDS PROFORMA
NUMBER NUMBER
OF SHARES VALUE OF SHARES VALUE
------------------------------ -----------------------
COMMON STOCK - 96.0%
ADVERTISING SERVICES - 0.3%
Getty Images, Inc. * 900 $ 49,770 900 49,770
AEROSPACE/DEFENSE-EQUIPMENT - 1.2%
Goodrich Corp. 1,800 56,448 6,300 197,568
------------- -----------
APPAREL MANUFACTURERS - 0.7%
Coach, Inc. * 2,800 118,776
------------- -----------
APPLICATIONS SOFTWARE - 0.4%
Progress Software Corp. * 1,100 21,890 1,100 21,890
SS&C Technologies, Inc. 2,200 42,966 2,200 42,966
------------- -----------
64,856 64,856
------------- -----------
AUDIO/VIDEO PRODUCTS - 1.3%
Harman International Industries, Inc. 400 43,100 1,900 204,725
------------- -----------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL - 1.8%
Advanced Auto Parts, Inc. * 1,000 34,400 2,600 89,440
BorgWarner, Inc. # 1,800 77,922
Autoliv, Inc. 1,400 56,560 1,400 56,560
Dana Corp. 2,900 51,301 2,900 51,301
Tenneco Automotive, Inc. * 1,700 22,270 1,700 22,270
------------- -----------
164,531 297,493
------------- -----------
BROADCAST SERVICES/PROGRAMMING - 0.2%
World Wrestling Entertainment, Inc. 2,000 24,440 2,000 24,440
------------- -----------
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS - 1.0%
Masco Corp. 3,100 107,043
Vulcan Materials Co. # 1,200 61,140
------------- -----------
168,183
------------- -----------
BUILDING PRODUCTS-CEMENT/AGGREGATE - 0.6%
Martin Marietta Materials, Inc. 400 18,108 2,300 104,121
------------- -----------
BUILDING-MAINTENANCE & SERVICE - 0.2%
ABM Industries, Inc. 2,000 40,300 2,000 40,300
------------- -----------
BUILDING-RESIDENTIAL/COMMERCIAL - 0.7%
Lennar Corp.-Cl. A 2,400 114,240
------------- -----------
</Table>
B-22
<Page>
<Table>
CELLULAR TELECOMMUNICATIONS - 1.4%
Nextel Partners, Inc. Cl. A * 2,400 39,792 2,400 39,792
Western Wireless Corp. Cl. A * 2,100 53,991 7,000 179,970
------------- -----------
93,783 219,762
------------- -----------
CHEMICALS-SPECIALTY - 0.7%
Ashland, Inc. 2,000 112,160
------------- -----------
CIRCUIT BOARDS - 0.2%
Park Electrochemical Corp. 1,300 27,560 1,300 27,560
------------- -----------
COMMERCIAL BANKS-CENTRAL US - 0.9%
Associated Banc Corp. 2,950 94,606
Corus Bankshares, Inc. 1,100 47,443 1,100 47,443
------------- -----------
47,443 142,049
------------- -----------
COMMERCIAL BANKS-EASTERN US - 0.8%
Commerce Bancorp, Inc. # 2,200 121,440
------------- -----------
COMMERCIAL BANKS-WESTERN US - 0.2%
Nara Bancorp, Inc. 2,000 40,300 2,000 40,300
------------- -----------
COMMERCIAL SERVICES-FINANCE - 1.3%
ACE Cash Express, Inc. * 900 23,436 900 23,436
H&R Block, Inc. 2,300 113,666
Moody's Corp. 1,100 80,575
------------- -----------
23,436 217,677
------------- -----------
COMPUTER AIDED DESIGN - 0.2%
Autodesk, Inc. 700 34,041 700 34,041
------------- -----------
COMPUTERS-PERIPHERAL EQUIPMENT - 0.7%
Lexmark Internaitonal, Inc. * 1,400 117,614
------------- -----------
CONSULTING SERVICES - 0.1%
Clark, Inc. 1,100 14,894 1,100 14,894
------------- -----------
DATA PROCESSING/MANAGEMENT - 1.9%
Fiserv, Inc. * 2,200 76,692
The Dun & Bradstreet Corp. * 1,500 88,050 4,000 234,800
------------- -----------
88,050 311,492
------------- -----------
DIAGNOSTIC EQUIPMENT - 0.2%
Gen-Probe, Inc. * 600 23,922 600 23,922
------------- -----------
DIALYSIS CENTERS - 1.0%
Davita, Inc. * 1,850 57,627 5,500 171,325
------------- -----------
DISPOSABLE MEDICAL PRODUCTS - 1.0%
C. R. Bard, Inc. 2,800 158,564
------------- -----------
DISTRIBUTION/WHOLESALE - 0.6%
Aviall Inc. * 500 10,200 500 10,200
WW Grainger, Inc. 1,600 92,240
------------- -----------
10,200 102,440
------------- -----------
DIVERSIFIED FINANCIAL SERVICES - 0.9%
CIT Group, Inc. 3,800 142,082
------------- -----------
</Table>
B-23
<Page>
<Table>
DIVERSIFIED MANUFACTURING OPERATIONS - 2.7%
ITT Industries, Inc. 1,700 135,983
Textron, Inc. 2,700 173,529
The Brink's Co. 1,400 42,238 4,800 144,816
------------- -----------
42,238 454,328
------------- -----------
DIVERSIFIED OPERATIONS/COMMERCIAL SERVICES - 0.6%
Aramark Corp. Cl. B 4,300 103,802
------------- -----------
ELECTRIC PRODUCTS-MISCELLANEOUS - 0.1%
Littlefuse, Inc. 600 20,718 600 20,718
------------- -----------
ELECTRONIC COMPONENTS-MISCELLANEOUS - 1.3%
Sanmina Corp. * 5,500 38,775 19,900 140,295
Solectron Corp. 12,900 63,855
------------- -----------
38,775 204,150
------------- -----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 3.1%
Altera Corp. * 3,900 76,323
Fairchild Semiconductor International, Inc. Cl. A * 2,800 39,676 2,800 39,676
International Rectifier Corp. * 1,300 44,590 4,800 164,640
LSI Logic Corp. * 6,900 29,739 6,900 29,739
Microchip Technology, Inc. * 4,100 110,044
PMC - Sierra, Inc. *# 2,900 25,549 10,200 89,862
------------- -----------
139,554 510,284
------------- -----------
ELECTRONIC CONNECTORS - 0.8%
Amphenol Corp. Cl. A * 2,300 78,798
Thomas & Betts Corp. 1,800 48,276 1,800 48,276
------------- -----------
48,276 127,074
------------- -----------
ELECTRONIC FORMS - 0.6%
Adobe Systems, Inc. 2,000 98,940
------------- -----------
ELECTRONIC MEASURE INSTRUMENTS - 0.6%
Agilent Technologies, Inc. * 4,700 101,379
------------- -----------
ELECTRONIC PARTS DISTRIBUTION - 0.8%
Avnet, Inc. * 2,200 37,664 7,600 130,112
------------- -----------
ENTERPRISE SOFTWARE/SERVICES - 0.5%
BMC Software, Inc. * 4,800 75,888
------------- -----------
ENTERTAINMENT SOFTWARE - 1.0%
Activision, Inc. * 3,300 45,771 11,400 158,118
------------- -----------
ENVIRON MONITORING&DET - 0.3%
Mine Safety Appliances Co. 1,300 52,936 1,300 52,936
------------- -----------
FIDUCIARY BANKS - 1.2%
Investors Financial Services Corp. 1,400 63,182 4,300 194,059
------------- -----------
FILTRATION/SEPARATE PRODUCTS - 0.2%
Clarcor, Inc. 500 23,835 500 23,835
------------- -----------
</Table>
B-24
<Page>
<Table>
FINANCE-AUTO LOANS - 0.3%
AmeriCredit Corp. * 2,100 43,848 2,100 43,848
------------- -----------
FINANCE-INVESTMENT BANKERS/BROKERS - 1.1%
E*Trade Financial Corp. * 2,300 26,266 9,600 109,632
Friedman, Billings, Ramsey Group 2,200 42,020 2,200 42,020
Jefferies Group, Inc. 600 20,682 600 20,682
------------- -----------
88,968 172,334
------------- -----------
FINANCE-MORTGAGE LOAN/BANKER - 0.3%
CharterMac 2,100 46,179 2,100 46,179
------------- -----------
FINANCE-OTHER SERVICES - 0.8%
Chicago Mercantile Exchange # 200 32,260 850 137,105
------------- -----------
FINANCIAL GUARANTEE INSURANCE - 0.6%
Ambac Financial Group, Inc. 1,200 95,940
------------- -----------
FOOD-BAKING - 0.2%
Flowers Foods, Inc. 1,100 28,435 1,100 28,435
------------- -----------
FOOD-MISCELLANEOUS/DIVERSIFIED - 0.2%
Corn Products International, Inc. 800 36,880 800 36,880
------------- -----------
FOOD-WHOLESALE/DISTRIBUTION - 0.8%
Supervalu, Inc. 1,300 35,815 4,700 129,485
------------- -----------
FORESTRY - 1.0%
Weyerhaeuser Co. 2,400 159,552
------------- -----------
FUNERAL SERVICES & RELATED ITEMS - 1.3%
Service Corp. International *# 8,800 54,648 28,700 178,227
Stewart Enterprises, Inc. Cl. A * 4,800 33,360 4,800 33,360
------------- -----------
88,008 211,587
------------- -----------
GAS-DISTRIBUTION - 0.2%
UGI Corp. 900 33,534 900 33,534
------------- -----------
HOSPITAL BEDS/EQUIPMENT - 0.2%
Kinetic Concepts, Inc. * 700 36,785 700 36,785
------------- -----------
HOTELS&MOTELS - 0.3%
Choice Hotels International, Inc. Inc. 800 46,072 800 46,072
------------- -----------
HUMAN RESOURCES - 1.7%
Resources Connection, Inc. * 900 34,002 900 34,002
Heidrick & Struggles Intl * 900 25,938 900 25,938
Hewitt Associates, Inc. * 1,200 31,752 1,200 31,752
Korn/Ferry International * 3,400 61,982 9,800 178,654
------------- -----------
153,674 270,346
------------- -----------
IDENTIFICATION SYSTEMS/DEVICES - 0.2%
Checkpoint Systems, Inc. * 1,800 28,026 1,800 28,026
------------- -----------
</Table>
B-25
<Page>
<Table>
INDUSTRIAL AUTOMATION/ROBOTICS - 0.2%
Nordson Corp. 1,100 37,763 1,100 37,763
------------- -----------
INSTRUMENTS-CONTROLS - 0.9%
Parker-Hannifin Corp. # 2,100 123,606
Woodward Governor Co. 400 26,996 400 26,996
------------- -----------
26,996 150,602
------------- -----------
INSTRUMENTS-SCIENTIFIC - 1.4%
PerkinElmer, Inc. 4,100 70,602 13,100 225,582
------------- -----------
INTERNET SECURITY - 2.0%
VeriSign, Inc. * 900 17,892 4,800 95,424
CheckFree Corp. 2,000 55,340 6,800 188,156
McAfee, Inc. 1,700 34,170 1,700 34,170
------------- -----------
107,402 317,750
------------- -----------
INTIMATE APPAREL - 0.3%
Warnaco Group, Inc. 2,100 46,683 2,100 46,683
------------- -----------
LEISURE&RECREATIONAL PRODUCTS - 0.3%
Brunswick Corp. 1,200 54,912 1,200 54,912
------------- -----------
LIFE/HEALTH INSURANCE - 0.6%
Lincoln National Corp. 1,900 89,300
------------- -----------
MACHINERY-CONSTRUCTION&MINING - 1.2%
Joy Global, Inc. 1,000 34,380 1,000 34,380
Terex Corp. * 600 26,040 3,500 151,900
------------- -----------
60,420 186,280
------------- -----------
MACHINERY-ELECTRICAL - 0.3%
Regal-Beloit Corp. 1,700 41,123 1,700 41,123
------------- -----------
MACHINERY-GENERAL INDUSTRY - 0.5%
Gardner Denver, Inc. * 1,300 35,841 1,300 35,841
Middleby Corp. 800 42,120 800 42,120
------------- -----------
77,961 77,961
------------- -----------
MEDICAL INFORMATION SYSTEMS - 0.8%
IMS Health, Inc. 5,400 129,168
------------- -----------
MEDICAL INSTRUMENTS - 0.7%
Abaxis, Inc. * 1,700 22,117 1,700 22,117
Biomet, Inc. 1,800 84,384
------------- -----------
22,117 106,501
------------- -----------
MEDICAL LABS&TESTING SERVICES - 1.1%
Covance, Inc. *# 1,300 51,961 4,300 171,871
------------- -----------
MEDICAL LASER SYSTEMS - 0.2%
Lca-Vision, Inc. * 1,500 38,685 1,500 38,685
------------- -----------
MEDICAL PRODUCTS - 1.1%
Varian Medical Systems, Inc. * 5,000 172,850
------------- -----------
</Table>
B-26
<Page>
<Table>
MEDICAL-BIOMEDICAL/GENETICS - 0.8%
Invitrogen Corp. * 600 32,994 2,300 126,477
------------- -----------
MEDICAL-DRUGS - 1.2%
First Horizon Pharmaceutical Corp. * 2,100 42,021 2,100 42,021
Celgene Corp. * 1,400 81,522
Cephalon, Inc. * 800 38,320 800 38,320
Sepracor, Inc. * 700 34,146 700 34,146
------------- -----------
114,487 196,009
------------- -----------
MEDICAL-HMO - 2.5%
Coventry Health Care, Inc. *# 600 32,022 2,450 130,757
Humana, Inc. * 1,900 37,962 6,600 131,868
WellChoice, Inc. * 900 33,597 3,700 138,121
------------- -----------
103,581 400,746
------------- -----------
MEDICAL-NURSING HOMES - 0.7%
Manor Care, Inc. * 3,600 107,856
------------- -----------
MEDICAL-HOSPITALS - 0.2%
Vca Antech, Inc. * 1,200 24,756 1,200 24,756
MEDICAL-OUTPATIENT/HOME MEDICAL CARE - 0.2%
Amedisys, Inc. * 1,300 38,935 1,300 38,935
MEDICAL-WHOLESALE DRUG DISTRIBUTORS - 0.4%
AmeriSource Bergen Corp. 1,300 69,823
------------- -----------
METAL-ALUMINUM - 0.3%
Century Aluminum Co. 1,600 44,368 1,600 44,368
METAL-COPPER - 0.8%
Phelps Dodge Corp. 900 82,827
Southern Peru Copper Corp. 700 36,162 700 36,162
------------- -----------
36,162 118,989
------------- -----------
METAL-DIVERSIFIED - 0.6%
Freeport-McMoran Copper & Gold, Inc. Cl. B 2,300 93,150
------------- -----------
MISCELLANEOUS MANUFACTURING - 0.4%
Armor Holdings, Inc. * 1,400 58,254 1,400 58,254
MULTI-LINE INSURANCE - 0.6%
CNA Financial Corp. 4,100 98,441
------------- -----------
MULTIMEDIA - 0.6%
Gemstar - TV Guide International, Inc. * 5,200 29,380 5,200 29,380
Meredith Corp. 1,400 71,932
------------- -----------
29,380 101,312
------------- -----------
NETWORKING PRODUCTS - 0.6%
Juniper Networks, Inc. * 4,200 99,120
------------- -----------
OFFICE FURNISHINGS-ORIGINAL - 1.0%
HNI Corp. 1,300 51,454 4,200 166,236
------------- -----------
</Table>
B-27
<Page>
<Table>
OIL COMPANIES-EXPLORATION & PRODUCTION - 2.5%
Clayton Williams Energy, Inc. * 1,300 27,859 1,300 27,859
Houston Exploration Co. 1,000 59,350 1,000 59,350
Kerr-McGee Corp. 2,100 120,225
Meridian Resource Corp. 4,300 37,969 4,300 37,969
Plains Exploration & Product Company * 1,800 42,948 1,800 42,948
Pogo Producing Co. 500 23,725 2,500 118,625
------------- -----------
191,851 406,976
------------- -----------
OIL FIELD MACHINERY & EQUIPMENT - 1.6%
Universal Compression Holdings, Inc. * 1,200 40,884 1,200 40,884
Carbo Ceramics, Inc. 500 36,070 500 36,070
Grant Prideco, Inc. * 2,800 57,372 8,900 182,361
------------- -----------
134,326 259,315
------------- -----------
OIL-FIELD SERVICES - 0.9%
Baker Hughes, Inc. 3,300 144,276
------------- -----------
OIL REFINING & MARKETING - 0.6%
Tesoro Petroleum Corp. * 2,300 67,919 2,300 67,919
Giant Industries, Inc. 1,200 29,160 1,200 29,160
------------- -----------
97,079 97,079
------------- -----------
OPTICAL SUPPLIES - 1.7%
Ocular Sciences, Inc. * 1,100 52,767 1,100 52,767
Advanced Medical Optics, Inc. * 1,000 39,570 1,000 39,570
Bausch & Lomb, Inc. 600 39,870 2,800 186,060
------------- -----------
132,207 278,397
------------- -----------
PAPER & RELATED PRODUCTS - 1.7%
Georgia-Pacific Corp. 3,800 136,610
Potlatch Corp. 1,100 51,491 1,100 51,491
Temple-Inland, Inc. 1,300 87,295
------------- -----------
51,491 275,396
------------- -----------
PROPERTY/CASUALTY INSURANCE - 1.4%
Berkley Corp. 1,700 71,672 4,700 198,152
Landamerica Financial Group, Inc. 600 27,300 600 27,300
------------- -----------
98,972 225,452
------------- -----------
RETAIL-APPAREL/SHOE - 1.1%
Claires Stores, Inc. 3,000 75,120
Nordstrom, Inc. 2,100 80,304
Stein Mart, Inc. 2,000 30,440 2,000 30,440
------------- -----------
30,440 185,864
------------- -----------
RETAIL-AUTO PARTS - 0.5%
Pep Boys 1,400 19,600 5,800 81,200
------------- -----------
RETAIL-COMPUTER EQUIPMENT - 0.7%
CDW Computer Centers, Inc. 1,900 110,257
------------- -----------
RETAIL-CATALOG SHOPPING - 0.4%
Coldwater Creek, Inc. * 2,750 57,393 2,750 57,393
------------- -----------
RETAIL-CONVENIENCE STORE - 0.9%
Seven-Eleven, Inc. * 1,600 31,968 5,400 107,892
The Pantry, Inc. * 1,600 40,272 1,600 40,272
------------- -----------
72,240 148,164
------------- -----------
</Table>
B-28
<Page>
<Table>
RETAIL-DISCOUNT - 0.7%
Dollar General Corp. 5,700 114,855
------------- -----------
RETAIL-MAJOR DEPARTMENT STORES - 0.8%
May Deptartment Stores Co. 5,000 128,150
------------- -----------
RETAIL-REGIONAL DEPARTMENT STORES - 0.6%
Federated Department Stores, Inc. * 2,300 104,489
------------- -----------
RETAIL-RESTAURANTS - 1.8%
Brinker International, Inc. 900 28,035 3,800 118,370
CKE Restaurants, Inc. * 2,400 26,520 2,400 26,520
Yum! Brands, Inc. * 3,400 138,244
------------- -----------
54,555 283,134
------------- -----------
RUBBER-TIRES - 0.2%
Goodyear Tire & Rubber Co. 3,000 32,220 3,000 32,220
------------- -----------
SAVINGS & LOANS/THRIFTS-EASTERN US - 1.3%
BankAtlantic Bancorp, Inc. Cl. A 1,300 23,816 1,300 23,816
Harbor Florida Bancshares, Inc. 1,000 31,100 1,000 31,100
Hudson City Bancorp, Inc. # 2,600 92,924
New York Community Bancorp, Inc. 3,100 63,674
------------- -----------
54,916 211,514
------------- -----------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS - 1.5%
Atmel Corp. *# 11,900 43,078 41,200 149,144
Cypress Semiconductor Corp. * 2,800 24,752 10,300 91,052
------------- -----------
67,830 240,196
------------- -----------
SEMICONDUCTOR EQUIPMENT - 0.5%
KLA-Tencor Corp. * 2,000 82,960
------------- -----------
STEEL PIPE & TUBE - 0.2%
Maverick Tube Corp. 1,100 33,891 1,100 33,891
------------- -----------
STEEL-PRODUCERS - 1.3%
Reliance Steel & Aluminum Co. 1,200 47,640 1,200 47,640
United States Steel Corp. 4,400 165,528
------------- -----------
47,640 213,168
------------- -----------
TELECOMMUNICATIONS EQUIPMENT - 2.6%
Harris Corp. 500 27,470 3,300 181,302
Avaya, Inc. * 8,700 121,278
Tellabs, Inc. * 4,400 40,436 12,300 113,037
------------- -----------
67,906 415,617
------------- -----------
TELECOMMUNICATIONS EQUIPMENT FIBER OPTICS - 0.4%
Corning, Inc. * 5,600 62,048
------------- -----------
THERAPEUTICS - 1.1%
Imclone Systems, Inc. * 400 21,140 1,900 100,415
MGI Pharma, Inc. * 1,100 29,359 3,200 85,408
------------- -----------
50,499 185,823
------------- -----------
TOOLS-HAND HELD - 0.7%
The Black & Decker Corp. 1,400 108,416
------------- -----------
</Table>
B-29
<Page>
<Table>
TOYS - 0.7%
Hasbro, Inc. 1,700 31,960 6,200 116,560
------------- -----------
TRANSPORT-AIR FREIGHT - 0.8%
CNF, Inc. 800 32,792 3,000 122,970
------------- -----------
TRANSPORT-MARINE - 0.2%
Omi Corp. 2,400 38,448 2,400 38,448
------------- -----------
TRANSPORT-SERVICES - 0.5%
Hub Group, Inc. Cl. A * 1,500 55,875 1,500 55,875
Pacer International, Inc. * 1,300 21,320 1,300 21,320
------------- -----------
77,195 77,195
------------- -----------
WIRE & CABLE PRODUCTS - 0.1%
Encore Wire Corp. * 1,300 17,212 1,300 17,212
------------- -----------
TOTAL COMMON STOCK
(COST U.S. SYSTEMATIC MID CAP GROWTH FUND :
$10,405,627)
------------- -----------
(COST U.S..SYSTEMATIC SMID GROWTH FUND :
$4,716,336) 4,797,901 15,523,663
<Caption>
PRICIPAL PRICIPAL
AMOUNT VALUE AMOUNT VALUE
------------------------------ -----------------------
SHORT TERM INVESTMENT - 8.2%
MONEY MARKET FUND - 4.6%
Federated Prime Obligated Fund ** 753,475 753,475
(COST U.S. SYSTEMATIC MID CAP GROWTH FUND : ------------- -----------
$753,475)
TIME DEPOSITS - 3.6%
Brown Brothers Harriman & Co.
1.30%, 10/01/04
(COST U.S. SYSTEMATIC MID CAP GROWTH FUND :
$476,900)
(COST U.S..SYSTEMATIC SMID GROWTH FUND :
$101,243) 101,243 $ 101,243
-------------
578,143 $ 578,143
-----------
TOTAL INVESTMENTS - 104.3%
(COST U.S. SYSTEMATIC MID CAP GROWTH FUND :
$11,636,002)
(COST U.S..SYSTEMATIC SMID GROWTH FUND :
$4,817,579) 4,899,144 16,855,281
LIABILITIES IN EXCESS OF OTHER ASSETS - (4.3%) 2,925 #REF! (662,877)
------------- -----------
NET ASSETS - 100.0% $ 4,902,069 #REF! $16,192,404
============= ===========
</Table>
B-30
<Page>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
On November 11, 2004, the Board of Trustees approved the Plan of
Reorganization (the "Plan") of the U.S Systematic Mid Cap Growth Fund (the
"Fund") and U.S. Systematic SMID Growth Fund, whereby, subject to approval by
the shareholders of the Fund, the U.S. Systematic SMID Growth Fund will acquire
all of the assets of the Fund subject to the liabilities of such Fund, in
exchange for a number of shares of U.S. Systematic SMID Growth Fund Class IV
shares equal in value to the net assets of the Fund (the "Merger").
The Merger will be accounted for as a tax-free merger of investment
companies. The unaudited pro forma combined financial statements are presented
for the information of the reader and may not necessarily be
representative of what the actual combined financial statements would have been
had the reorganization occurred at September 30, 2004. The unaudited pro forma
portfolio of investments and statement of assets and liabilities reflect the
financial position of the Funds at September 30, 2004. These statements have
been derived from the Funds' respective books and records utilized in
calculating daily net assets value at the date indicated above for each Fund
under generally accepted accounting principles. The historical cost of
investment securities will be carried forward to the surviving entity and the
results of operations of U.S. Systematic SMID Growth Fund for pre-combination
periods will not be restated.
The unaudited pro forma portfolio of investments, and unaudited statement
of assets and liabilities and statement of operations should be read in
conjunction with the historical financial statements of each Fund which are
incorporated by reference in the Statement of Additional Information.
B-31
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2004 (UNAUDITED)
<Table>
<Caption>
U.S. SYSTEMATIC
MID CAP
GROWTH
ASSETS
Investments, at value* $ 11,956,136
Foreign currencies, at value** --
Cash --
Receivables:
Investment securities sold 242,494
Capital shares sold 4,817
Dividends 5,375
Foreign taxes receivable --
Interest --
Expense offset and other 98,870
Other assets 7,905
---------------
Total assets 12,315,597
---------------
LIABILITIES
Payables:
Bank overdraft $ 68,751
Investments purchased 185,614
Capital shares redeemed --
Collateral on securities loaned 753,475
Distributions fee --
To investment advisor 3,277
Other Liabilities 53,560
---------------
Total Liabilities 1,064,677
---------------
NET ASSETS 11,250,920
===============
* Investments, at cost 11,636,003
===============
** Foreign currencies, at cost --
===============
NET ASSETS CONSIST OF:
Paid-in capital $ 24,938,045
Undistributed net investment income (loss) 84,055
Accumulated net realized gain (loss) on
investments and foreign currencies (14,091,313)
Net unrealized appreciation (depreciation) of
investments and of other assets and
liabilities denominated in foreign currencies 320,133
---------------
Net Assets applicable to all shares outstanding $ 11,250,920
===============
Net Assets of Class I shares $ 11,250,920
Net Assets of Class II shares --
Net Assets of Class III shares --
Net Assets of Class IV shares --
Net Assets of Class R shares --
===============
Class I Shares outstanding 1,114,726
Class II Shares outstanding --
Class III Shares outstanding --
Class IV Shares outstanding --
Class R Shares outstanding --
===============
Net Asset Value -- Class I Share $ 10.09
Net Asset Value -- Class II Share $ --
Net Asset Value -- Class III Share $ --
Net Asset Value -- Class IV Share $ --
Net Asset Value -- Class R Share $ --
===============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-32
<Page>
<Table>
<Caption>
U.S. SYSTEMATIC
SMID GROWTH
ASSETS
Investments, at value* $ 4,899,144
Foreign currencies, at value** --
Cash 23,258
Receivables:
Investment securities sold 131,075
Capital shares sold --
Dividends 3,519
Foreign taxes receivable --
Interest --
Expense offset and other 4,690
Other assets 1,846
---------------
Total assets 5,063,532
---------------
LIABILITIES
Payables:
Bank overdraft $ --
Investments purchased 147,372
Capital shares redeemed --
Collateral on securities loaned --
Distributions fee --
To investment advisor 803
Other Liabilities 13,288
---------------
Total Liabilities 161,463
---------------
NET ASSETS 4,902,069
===============
* Investments, at cost 4,817,579
===============
** Foreign currencies, at cost --
===============
NET ASSETS CONSIST OF:
Paid-in capital $ 5,125,120
Undistributed net investment income (loss) (5,691)
Accumulated net realized gain (loss) on
investments and foreign currencies (298,925)
Net unrealized appreciation (depreciation) of
investments and of other assets and
liabilities denominated in foreign currencies 81,565
---------------
Net Assets applicable to all shares outstanding $ 4,902,069
===============
Net Assets of Class I shares $ 4,902,069
===============
Class I Shares outstanding 516,595
===============
Net Asset Value -- Class I Share $ 9.49
===============
</Table>
B-33
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
STATEMENTS OF OPERATIONS
PERIOD ENDED SEPTEMBER 30, 2004 (UNAUDITED)
<Table>
<Caption>
U.S. SYSTEMATIC
MID CAP
GROWTH
INVESTMENT INCOME
Dividends, net of foreign taxes* $ 80,518
Interest 92,607
---------------
Total Income 173,125
---------------
EXPENSES
Advisory fees 55,257
Accounting and administration fees 15,731
Custodian fees 16,049
Transfer agent fees and expenses 12,372
Shareholder servicing fees 7,368
Administrative services fees 6,447
Professional fees 7,929
Shareholder reporting 5,953
Registration fees 8,648
Trustees' fees and expenses 1,717
Interest and credit facility fee 397
Insurance 3,241
Miscellaneous 2,229
---------------
Total Expenses 143,338
Expense offset (25,405)
Expenses (reimbursed)/recouped (28,863)
---------------
Net Expenses 89,070
---------------
NET INVESTMENT INCOME (LOSS) 84,055
---------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Realized gain from:
Securities 4,229,610
Foreign currency transactions --
---------------
Net realized gain (loss) 4,229,610
---------------
Change in unrealized appreciation
(depreciation) of:
Investments (4,936,803)
Other assets and liabilities denominated
in foreign currencies --
---------------
Net unrealized appreciation (depreciation) (4,936,803)
---------------
NET GAIN (LOSS) ON INVESTMENTS (707,193)
---------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS $ (623,138)
===============
* Foreign taxes withheld $ --
---------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-34
<Page>
<Table>
<Caption>
U.S. SYSTEMATIC
SMID GROWTH
INVESTMENT INCOME
Dividends, net of foreign taxes* $ 23,032
Interest 179
---------------
Total Income 23,211
---------------
EXPENSES
Advisory fees 17,581
Accounting and administration fees 2,124
Custodian fees 6,818
Transfer agent fees and expenses 10,185
Shareholder servicing fees 2,512
Administrative services fees 2,512
Professional fees 973
Shareholder reporting 600
Registration fees 1,962
Trustees' fees and expenses 168
Interest and credit facility fee 26
Insurance 477
Miscellaneous 941
---------------
Total Expenses 46,879
Expense offset (5,328)
Expenses (reimbursed)/recouped (12,649)
---------------
Net Expenses 28,902
---------------
NET INVESTMENT INCOME (LOSS) (5,691)
---------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Realized gain from:
Securities (294,700)
Foreign currency transactions --
---------------
Net realized gain (loss) (294,700)
---------------
Change in unrealized appreciation
(depreciation) of:
Investments 62,202
Other assets and liabilities denominated
in foreign currencies --
---------------
Net unrealized appreciation (depreciation) 62,202
---------------
NET GAIN (LOSS) ON INVESTMENTS (232,498)
---------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS $ (238,189)
===============
* Foreign taxes withheld $ --
---------------
</Table>
B-35
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
PERIODS ENDED SEPTEMBER 30, 2004 AND MARCH 31, 2004
<Table>
<Caption>
U.S. SYSTEMATIC MID CAP GROWTH U.S. SYSTEMATIC SMID GROWTH (1)
----------------------------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
2004 MARCH 31, 2004 MARCH 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
---------------- ---------------- ---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income (loss) $ 84,055 $ (125,284) $ (5,691) $ (1,283)
Net realized gain (loss) 4,229,610 10,589,305 (294,700) (4,225)
Net unrealized appreciation (depreciation) (4,936,803) 1,670,436 62,202 19,363
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets
from investment operations (623,138) 12,134,457 (238,189) 13,855
---------------- ---------------- ---------------- ----------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
Class I 577,011 3,124,845 11,076 5,333,451
Class R -- 41 -- --
Distributions reinvested
Class I -- -- -- --
Class R -- -- -- --
Cost of shares redeemed
Class I (18,449,524) (27,596,227) (218,124) --
Class R -- (4,185) -- --
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets
from share transactions (17,872,513) (24,475,526) (207,048) 5,333,451
---------------- ---------------- ---------------- ----------------
Net Increase (Decrease) in Net Assets (18,495,651) (12,341,069) (445,237) 5,347,306
NET ASSETS
Beginning 29,746,571 42,087,640 5,347,306 --
---------------- ---------------- ---------------- ----------------
Ending $ 11,250,920 $ 29,746,571 $ 4,902,069 $ 5,347,306
================ ================ ================ ================
Undistributed net investment income
(loss), ending $ 84,055 $ -- $ (5,691) $ --
================ ================ ================ ================
CLASS I -- CAPITAL SHARE ACTIVITY
Shares sold 58,659 340,353 1,194 540,645
Distributions reinvested -- -- -- --
Shares redeemed (1,806,842) (2,777,862) (25,244) --
---------------- ---------------- ---------------- ----------------
Net Class I Share Activity (1,748,183) (2,437,509) (24,050) 540,645
================ ================ ================ ================
CLASS R -- CAPITAL SHARE ACTIVITY
Shares sold -- 4 -- --
Distributions reinvested -- -- -- --
Shares redeemed -- (467) -- --
================ ================ ================ ================
Net Class R Share Activity -- (463) -- --
================ ================ ================ ================
</Table>
B-36
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
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"), five 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 four Funds have issued Retirement shares
("Class R"). No shares have a sales charge. Class R shares have a
distribution fee. All Funds have a shareholder services fee. The U.S.
Systematic Mid Cap Growth Fund and U.S. Systematic SMID Growth Funds are
covered in this report.
On April 19, 2004 the names of the U.S. Equity Growth Fund was changed to
U.S. Systematic Mid Cap Growth Fund to more changed accurately reflect its
investment policies.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies consistently followed by the Funds in
preparing these financial statements are described below. The policies conform
with accounting principles generally accepted in the United States.
SECURITY VALUATIONS
Equity securities, including ADRs and GDRs, that are traded on a stock
exchange or on the NASDAQ National Market System are valued at the last sale
price as of the close of business on the New York Stock Exchange (normally 4:00
p.m. New York time) on the day the securities are being valued, or lacking any
sales, at the mean between the closing bid and asked prices. Securities listed
or traded on certain non-U.S. exchanges whose operations are similar to the
United States over-the-counter market are valued at the price within the limits
of the latest available current bid and asked prices deemed by the Investment
Adviser best to reflect fair value. A security that is listed or traded on more
than one exchange is valued at the quotation on the exchange determined to be
the primary market for such security by the Investment Adviser. The Investment
Adviser has determined the Xetra is the primary market in Germany.
The Funds value long-term debt obligations, including high quality and high
yield corporate securities, municipal securities, asset-backed securities,
collateralized mortgage obligations and US Government and Agency issues, at the
quoted bid price provided by an approved bond pricing service. Convertible
securities are normally priced at the mean between the bid and ask prices.
Short-term debt instruments, (e.g., commercial paper, bankers acceptances, U.S.
Treasury Bills, etc.) having a maturity of less than 60 days will be valued at
amortized cost. If a fixed income security has a maturity of greater than 60
days, it will be valued at market price.
Securities or other assets for which reliable market quotations are not
readily available or for which the pricing agent or principal market maker does
not provide a valuation or methodology or provides a valuation or methodology
that, in the judgment of the Investment Adviser does not represent fair value
(Fair Value Securities), are valued by the Pricing Committee overseen by the
Board of Trustees in consultation as applicable, with the Investment Adviser's
portfolio managers, traders, and research and credit analysts and legal and
compliance personnel. Fair Value Securities may include, but are not limited to,
the following: certain private placements and restricted securities that do not
have an active trading market; securities whose trading has been suspended or
for which there is no current market; securities whose prices are stale;
securities denominated in currencies that are restricted, untraded, or for which
exchange rates are disrupted; securities affected by significant events; and
securities that the Investment Adviser or Pricing Committee believe were priced
incorrectly. A "significant event" (which includes, but is not limited to, an
extraordinarily political or market event) is an event that the Investment
Adviser or Pricing Committee believes with a reasonably high degree of certainty
has caused the closing market prices of a Fund's portfolio securities to no
longer reflect their value at the time of the Fund's NAV calculation.
B-37
<Page>
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.
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, 2004.
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
The Funds may purchase equity-linked securities, also known as
participation notes, equity swaps, and zero strike calls and warrants.
Equity-linked securities are primarily used by a Fund as an alternative means
to more efficiently and effectively access the securities market of what is
generally an emerging country. The Fund deposits an amount of cash with its
custodian (or broker, if legally permitted) in an amount near or equal to the
selling price of the underlying security in exchange for an equity linked
security. Upon sale, the Fund receives cash from the broker or custodian
equal to the value of the underlying security. Aside from market risk of the
underlying securities, there is a risk of default by the other party to the
transaction. In the event of insolvency of the other party, the Fund might be
unable to obtain its expected benefit. In addition, while a Fund will seek to
enter into such transactions only with parties
B-38
<Page>
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 by U.S.
Systematic Mid Cap Growth Fund at the period ended September 30, 2004 were
$728,562 and $735,475, respectively
CREDIT FACILITY
The Trust has a $15 million credit facility available to fund temporary or
emergency borrowing expiring in January 2005. Each Fund pays its pro-rata share
of an annual commitment fee plus interest on its specific borrowings. For the
period ended September 30, 2004, 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 Fund provided services to the Fund in addition to trade execution. These
services included payments of certain expenses on behalf of the Fund. In
addition, through arrangements with the Funds custodian, credits realized as a
result of uninvested cash balances were used to reduce the Funds expenses.
During the period, the credits used to reduce the Funds expenses were:
<Table>
<Caption>
CREDIT DIRECT SECURITY
INTEREST BROKERAGE LENDING
FUND OFFSET OFFSET OFFSET
---- -------- --------- --------
U.S. Systematic Mid Cap
Growth 1,709 16,170 7,526
U.S. Systematic SMID
Growth 388 4,940 --
</Table>
B-39
<Page>
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 -- TRANSACTIONS WITH AFFILIATES
The Investment Adviser receives the following annual fees payable monthly
based on the average daily net assets of each Fund.
<Table>
<Caption>
FUND ADVISORY FEE
---- ------------
U.S. Systematic Mid Cap Growth 0.60%
U.S. Systematic SMID Growth 0.70%
</Table>
Pursuant to the Administrative Services agreement the Investment Adviser
provides operational support services to the Funds and receives the following
annual fees payable monthly based on average daily net assets of each Fund.
<Table>
<Caption>
ADMINISTRATIVE SERVICES FEE
---------------------------
FUND CLASS I
---- -------
U.S. Systematic Mid Cap Growth 0.07%
U.S. Systematic SMID Growth 0.10%
</Table>
B-40
<Page>
Pursuant to the Shareholder Services agreement the Investment Adviser
provides account servicing to the Funds and receives the following annual fees
payable monthly based on the average daily net assets of each Fund.
<Table>
<Caption>
SHAREHOLDER SERVICES FEE
------------------------
FUND CLASS I
---- -------
U.S. Systematic Mid Cap Growth 0.08%
U.S. Systematic SMID Growth 0.10%
</Table>
The Investment Adviser has agreed to waive its fees and absorb other
operating expenses of the Funds so that total operating expenses are limited
to certain levels through March 31, 2005. The Investment Adviser will recover
expense reimbursements paid to the Funds to the extent of the difference
between the Funds' actual expenses (exclusive of taxes, interest, and
brokerage ) when they fall below the limit in the year such reimbursement is
paid.
The Funds reduce expenses by offsets to custodial and other fees based upon
the amount of securities lent to third parties and cash maintained with its
custodian. These offset arrangements will have no effect on the amount of fees
that the Investment Adviser must waive or expenses that it must otherwise
reimburse under the Expense Limitation Agreement.
<Table>
<Caption>
CLASS I
-------
4/1/04
TO
FUND 9/30/04
---- -------
U.S. Systematic Mid Cap Growth 1.23%
U.S. Systematic SMID Growth 1.33%
</Table>
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.
NOTE E -- INVESTMENT TRANSACTIONS
The following table presents purchases and sales of securities, excluding
short-term investments, during the period ended September 30, 2004 to indicate
the volume of transactions in each Fund. The tax cost of securities held at
September 30, 2004, 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.
B-41
<Page>
<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. Systematic Mid Cap Growth 29,976 48,214 11,636 914 (594) 320
U.S. Systematic SMID Growth 3,002 3,277 4,818 454 (372) 82
</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
During the period, the Funds have been party to financial instruments with
off-balance sheet risks, including forward non-U.S. currency contracts,
primarily in an attempt to minimize the risk to the Fund, in respect of its
portfolio transactions. These instruments involve market and/or credit risk in
excess of the amount recognized in the Statement of Assets and Liabilities.
Risks arise from the possible inability of counterparties to meet the terms of
their contracts and from unexpected movement in currencies, securities values
and interest rates. The contract amounts indicate the extent of the Funds'
involvement in such contracts.
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. You may also view how the Fund's securities were voted by
visiting the Securities & Exchange Commission's website at www.sec.gov.
NOTE H -- PORTFOLIO HOLDINGS
The Funds provide a complete list of their holdings four times in each fiscal
year, at each quarter-end. For the second and fourth quarters, the lists appear
in the Funds' semiannual and annual reports to shareholders. For the first and
third quarters, the Funds' file the lists with the Securities and Exchange
Commission on Form N-Q. Shareholders can look up the Funds' Form N-Q on the
SEC's website at www.sec.gov. Form 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.
B-42
<Page>
NOTE I -- CORPORATE GOVERNANCE (UNAUDITED)
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS IN
POSITION(S) OFFICE AND FUND COMPLEX
NAME, ADDRESS (1) HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS
AND AGE FUND SERVED (2) DURING PAST 5 YEARS TRUSTEE HELD BY TRUSTEE
- ------------------------ ----------- -------------- -------------------------------- ------------- ----------------------------
DISINTERESTED TRUSTEES:
GEORGE F. KEANE (75) Chairman & Since August Investment Consultant and 14 Director, Bramwell Funds
Trustee 2004 Director, (since 1994); (since 1994); Director,
President Emeritus and founding Longview Oil & Gas (since
Chief Executive Officer, The 2000); Director, Security
Common Fund (1971-1993); and Capital U.S. Real Estate
Endowment Advisors (1987-1999) (since 1997); Director, The
(organizations that provide Universal Bond Fund (since
investment management programs 1997); Director, Universal
for colleges and universities) ; Stainless & Alloy Products
Member, Investment Advisory Inc. (since 1994); Director,
Committee, New York State Common United Water Services and
Retirement Fund (since 1985). affiliated companies
(1996-2000); Director, and
former Chairman of the
Board, Trigen Energy
Corporation (1994-2000);
Trustee, Nicholas-Applegate
Mutual Funds (1994-1999).
WALTER E. AUCH (83) Trustee Since May 1999 Retired; prior thereto, Chairman 14 Trustee, LLBS Funds (since
and CEO of Chicago Board of 1994 and Brinson
Options Exchange (1979-1986); Supplementary Trust (since
Senior Executive Vice President 1997); Director, Thompson
PaineWebber, Inc. 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).
</Table>
B-43
<Page>
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS IN
POSITION(S) OFFICE AND FUND COMPLEX
NAME, ADDRESS (1) HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS
AND AGE FUND SERVED (2) DURING PAST 5 YEARS TRUSTEE HELD BY TRUSTEE
- ------------------------ ----------- -------------- -------------------------------- ------------- ----------------------------
DARLENE DEREMER (48) Trustee Since May 1999 Managing Director, Putnam Lovell 14 Founding Member and
NBF Private Equity (Since 2004); Director, National Defined
Managing Director, NewRiver Contribution Council (since
E-Business Advisory Services 1997); Trustee, Boston
Division (2000-2003); Prior to, Alzheimer's Association
President and Founder, DeRemer (since 1998); Director,
Associates, a strategic and King's Wood Montessori
marketing consulting firm for School (since 1995);
the financial services industry Editorial Board, National
(1987-2003); Vice President and Association of Variable
Director, Asset Management Annuities (since 1997);
Division, State Street Bank and Director, Nicholas-Applegate
Trust Company, now referred to Strategic Opportunities,
as State Street Global Advisers, Ltd. (1994-1997); Trustee,
(1982-1987); Vice President, T. Nicholas-Applegate Mutual
Rowe Price & Associates Funds (1994-1999); Director,
(1979-1982); Member, Boston Club Jurika & Voyles Fund Group
(since 1998); Member, Financial (since 1994-2000); Director,
Women's Association Advisory Nicholas-Applegate Southeast
Board (since 1995); Founder, Asia Fund, Ltd. (since
Mutual Fund Cafe Website. 2004).
INTERESTED TRUSTEES:
HORACIO A. VALEIRAS (45) President & Since August Managing Director (Since 2004) 14 Trustee, The Bishops School
Trustee 2004 and Chief Investment Officer. (Since 2002); Trustee, San
Nicholas-Applegate Capital Diego Rowing Club (Since
Management, Nicholas-Applegate 2002).
Securities (since 2002);
Managing Director of Morgan
Stanley Investment Management,
London (1997-2002); Head of
International Equity and Asset
Allocation, Miller Anderson &
Sherred; Director and Chief of
International Strategies, Credit
Suisse First Boston.
OFFICERS:
CHARLES H. FIELD, JR. Secretary Since May 2002 General Counsel, 14 NA
(49) Nicholas-Applegate Capital
Management, LLC (since 2004);
Deputy General Counsel
(1996-2004).
</Table>
B-44
<Page>
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS IN
POSITION(S) OFFICE AND FUND COMPLEX
NAME, ADDRESS (1) HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER DIRECTORSHIPS
AND AGE FUND SERVED (2) DURING PAST 5 YEARS TRUSTEE HELD BY TRUSTEE
- ------------------------ ----------- -------------- -------------------------------- ------------- ----------------------------
C. WILLIAM MAHER (43) Treasurer Since May 1999 Managing Director (since 2004) 14 NA
and Chief Financial Officer,
Nicholas-Applegate Capital
Management, Nicholas-Applegate
Securities, (Since 1998);
Co-Managing Chief Financial
Officer Nicholas-Applegate
Holdings LLC (Since 2001).
Formerly Chief Financial
Officer, Mitchell Hutchins Asset
Management, Inc. (1990-1998).
</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.
B-45
<Page>
APPENDIX D
PRINCIPAL SHAREHOLDERS
As of December 31, 2004, the following shareholders owned of record or
beneficially 5% or more of U.S. Systematic SMID Growth Fund.
Class I Shares
<Table>
<Caption>
NUMBER OF PERCENTAGE OF THE
NAME & ADDRESS SHARES FUND
-----------------------------------------------------------------------------------------------------
< Shareholder > < > < >%
< Shareholder > < > < >%
< Shareholder > < > < >%
</Table>
Class R Shares
<Table>
<Caption>
NUMBER OF PERCENTAGE OF THE
NAME & ADDRESS SHARES FUND
-----------------------------------------------------------------------------------------------------
< Shareholder > < > < >%
< Shareholder > < > < >%
< Shareholder > < > < >%
</Table>
D-1
<Page>
NICHOLAS-APPLEGATE INSITUTIONAL FUNDS
PART C
OTHER INFORMATION
Item 15. INDEMNIFICATION
Indemnification provisions for officers and trustees of Registrant are set
forth in Article V, Section 2 of the Amended and Restated Declaration of Trust,
and are hereby incorporated by reference. See Item 16(1) below. Under this
Article, officers and trustees will be indemnified to the fullest extent
permitted to trustees by laws applicable to a Delaware business trust, subject
only to such limitations as may be required by the Investment Management Company
Act of 1940, as amended ("1940 Act"), and the rules thereunder. Under the 1940
Act, trustees and officers of Registrant cannot be protected against liability
to Registrant or its shareholders to which they would be subject because of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties of their office. Registrant also maintains liability insurance policies
covering its trustees and officers.
ITEM 16. EXHIBITS.
(1)(a) Certificate of Trust of Registrant--filed as Exhibit
1.1 to Amendment No. 1 to the Registrant's Form N-1A
Registration Statement ("Amendment No. 1") on March
17, 1993 and incorporated herein by reference.
(b) Certificate of Amendment of Certificate of Trust of
Registrant--filed as Exhibit 1.2 to Amendment No. 1
to the Registrant's Form N-1A Registration Statement
on March 17, 1993 and incorporated herein by
reference.
(c) Declaration of Trust of Registrant--filed as Exhibit
1 to Registrant's Form N1-A Registration Statement on
December 31, 1992 and incorporated herein by
reference.
(d) Amended and Restated Declaration of Trust of
Registrant--filed as Exhibit 1.4 to Amendment No. 1
to the Registrant's Form N-1A Registration Statement
on March 17, 1993 and incorporated herein by
reference.
(e) Amended and Restated Declaration of Trust dated
February 19, 1999--filed as Exhibit (a)5 to the
Registrant's Form N-1A Registration Statement on May
6, 1999 and incorporated herein by reference.
(f) Amendment No. 1 to the Amended and Restated
Declaration of Trust dated February 19,1999--
filed as Exhibit (a)(6) to the Registrant's Form
N-1A Registration Statement on June 18, 1999 and
incorporated herein by reference.
(2)(a) Amended Bylaws of Registrant--filed as Exhibit 2 to
Amendment No. 2 to the Registrant's Form N-1A
Registration Statement on April 6, 1993 and
incorporated herein by reference.
(b) Amended Bylaws of Registrant dated February 19,
1999--filed as Exhibit 2(b) to the Registrant's Form
N-1A Registration Statement on May 6, 1999 and
incorporated herein by reference.
(3) Not applicable.
(4) Plan of Reorganization and Termination by
Registrant on behalf of U.S. Systematic Mid Cap
Growth Fund and U.S. Systematic SMID Growth Fund -
filed herewith.
(5) Provisions of instruments defining the rights of
holders of securities are continued in Articles VI
and VII of Registrants Amended and Restated
Declaration of Trust - filed as Exhibit 5 to the
Registrant's Form N-1A Registration Statement on
June 18, 1999 and incorporated herein by reference.
(6)(a) Investment Advisory Agreement between Registrant and
Nicholas-Applegate Capital Management--filed as
Exhibit (d) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.
(b) Form of letter agreement dated August 31, 1999
between Registrant and Nicholas-Applegate Capital
Management adding the Global Health Care Fund to the
Investment Advisory Agreement--filed as Exhibit
(d)(2) to the Registrant's Form N-1A Registration
Statement on June 18, 1999 and incorporated herein
by reference.
(c) Form of Sub Investment Advisory Agreement between
Registrant and Criterion Investment Management
LLC--filed as Exhibit (d)(3) to Post-Effective
Amendment No. 4 on May 25, 2000 and incorporated
herein by reference.
(d) Proposed Investment Advisory Agreement between
Registrant and Nicholas-Applegate Capital
Management--filed as Exhibit (d)(4) to
Post-Effective Amendment No. 5 on November 30, 2000
and incorporated herein by reference.
(e) Proposed Sub Investment Advisory Agreement between
Registrant and Criterion Investment Management
LLC--filed as Exhibit (d)(5) to Post-Effective
Amendment No. 5 on November 30, 2000 and incorporated
herein by reference.
(f) Form of letter agreement dated February 9, 2001
between Registrant and Nicholas-Applegate Capital
Management adding the International Structured and
Small Cap Value Funds to the Investment Advisory
Agreement--filed as Exhibit (d)(6) to
Post-Effective Amendment No. 6 on February 14, 2001
and incorporated herein by reference.
(g) Form of Letter agreement dated May 8, 2001 between
Registrant and Nicholas-Applegate Capital
Management amending Schedule A to the Investment
Advisory Agreement dated January 31, 2001 filed as
Exhibit (d)(7) to Post Effective Amendment No. 9 on
October 1, 2001 and incorporated herein by
reference.
(h) Form of letter agreement dated November 8, 2002
between Registrant and Nicholas-Applegate Capital
Management amending Schedule A to the Investment
Management Agreement--filed as Exhibit (d)(8) to
Post Effective Amendment No. 13 on December 6,
2002 and incorporated herein by reference.
(i) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management amending
Schedule A to the Investment Management Agreement--
filed as Exhibit (d)(9) to Post-Effective Amendment
No. 17 on October 17, 2003 and incorporated herein
by reference.
(j) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management amending
Schedule A to the Investment Advisory Agreement--
filed as Exhibit (d)(10) to Post Effective
Amendment No. 37 on March 17, 2004 and incorporated
herein by reference.
(7)(a) Distribution Agreement between Registrant and
Nicholas-Applegate Securities dated May 10,
1999--filed as Exhibit (e) to the Registrant's Form
N-1A Registration Statement on May 6, 1999 and
incorporated herein by reference.
(b) Distribution Agreement between Registrant and
Nicholas-Applegate Securities--filed as
Exhibit (e)(2) to Post-Effective Amendment No. 5 on
November 30, 2000 and incorporated herein by
reference.
(c) Form of Agency Trading Agreement--filed as
Exhibit (e)(4) to Post-Effective Amendment No. 8
on April 10, 2001 and incorporated herein by
reference.
(8) Benefit Plan for trustees or officers of
Registrant in their capacity as such - none
(9)(a) Custodian Services Agreement between Registrant and
Brown Brothers Harriman & Co.--filed as Exhibit 1(g)
to the Registrant's Form N-1A Registration Statement
on May 6, 1999 and incorporated herein by reference.
(b) Foreign Custody Agreement between Registrant and
Brown Brothers Harriman & Co.--filed as Exhibit
(2)(g) to the Registrant's Form N-1A Registration
Statement on May 6, 1999 and incorporated herein by
reference.
(c) Amendment to Custodian Services Agreement between
Registrant and Brown Brothers Harriman & Co.--filed
as Exhibit (3)(g) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.
(d) Cash Management Authorization Services Agreement
between Registrant and Brown Brothers Harriman &
Co.--filed as Exhibit (4)(g) to the Registrant's Form
N-1A Registration Statement on May 6, 1999 and
incorporated herein by reference.
(e) Form of letter agreement between Registrant and Brown
Brothers Harriman & Co. adding the Global Health Care
Fund to the Foreign Custody Agreement dated May 1,
1999--filed as Exhibit (g)(5) to Post-Effective
Amendment #4 on May 25, 2000 and incorporated
herein by reference.
(f) Form of letter agreement between Registrant and Brown
Brothers Harriman & Co. adding the Global Health Care
Fund to Custodian Services Agreement dated May 1,
1999--filed as Exhibit (g)(6) to Post-Effective
Amendment #4 on May 25, 2000 and incorporated
herein by reference.
(g) Form of letter agreement between Registrant and Brown
Brothers Harriman & Co. adding the Global Health Care
Fund to the Cash Management Authorization Services
Agreement dated May 1, 1999--filed as Exhibit (g)(7)
to Post-Effective Amendment #4 on May 25, 2000 and
incorporated herein by reference.
(h) Amendment to Appendix C to Custodian Services
Agreement between Registrant and Brown Brothers
Harriman & Co.--filed as Exhibit (g)(8) to
Post-Effective Amendment No. 17 on October 17,
2003 and incorporated herein by reference.
(i) Form of letter agreement between Registrant and
Brown Brothers Harriman & Co. adding International
Structured and Small Cap Value Funds to the Cash
Management Authorization Services Agreement dated
May 1, 1999--filed as Exhibit (g)(9) to
Post-Effective Amendment #6 on February 14, 2001
and superseded by Exhibit (g)(10)--filed on
February 14, 2001 and incorporated herein by
reference.
(j) 17f-5 Delegation Schedule between Registrant and
Brown Brothers Harriman & Co. dated February 14,
2001--filed as Exhibit (g)(10) to Post-Effective
Amendment No. 6 on February 14, 2001 and
incorporated herein by reference.
(k) Amendment to Custodian Services Agreement between
Registrant and Brown Brothers Harriman & Co. dated
February 14, 2001--filed as Exhibit (g)(11) to
Post-Effective Amendment No. 7 on April 10, 2001 --
filed as Exhibit (g)(11) to Post-Effective Amendment
No. 8 on May 30, 2001 and incorporated herein by
reference.
(l) Amendment to Appendix C to the Foreign Custody
Manager Delegation Agreement between Registrant
and Brown Brothers Harriman & Co.--filed as
Exhibit (g)(12) to Post-Effective Amendment
No. 17 on October 17, 2003 and incorporated herein
by reference.
(m) Amendment to the Cash Management Services
Agreement between Registrant and Brown
Brothers Harriman & Co.--filed as Exhibit (g)(13) to
Post-Effective Amendment No. 17 on October 17, 2003
and incorporated herein by reference.
(n) Amendment to Appendix C to Custodian Services
Agreement between Brown Brothers Harriman & Co.
adding Emerging Markets Opportunities Fund--filed
as Exhibit (g)(14) to Post-Effective Amendment
No. 37 on March 17, 2004 and incorporated herein by
reference.
(o) Amendment to Appendix C to the Foreign Custody
Manager Delegation Agreement between
Registrant and Brown Brothers Harriman & Co.
adding Emerging Markets Opportunities Fund--filed
as Exhibit (g)(15) to Post-Effective Amendment
No. 17 on October 17, 2003 and incorporated by
reference herein.
(p) Amendment to Cash Management Services
Agreement between Registrant and Brown
Brothers Harriman & Co. adding Emerging Markets
Opportunities Fund--filed as Exhibit (g)(16) to
Post-Effective Amendment No. 37 on March 17, 2004 and
incorporated herein by reference.
(10)(a) Form of Shareholder Servicing Agreement--filed
as Exhibit (e)(3) to Post-Effective Amendment
No. 8 on April 10, 2001 and incorporated herein by
reference.
(b) Shareholder Service Plan between Registrant and
Nicholas-Applegate Securities for Class R
Shares--filed as Exhibit No. (6)(h) to the
Registrant's Form N-1A Registration Statement on May
6, 1999 and incorporated herein by reference.
(c) Form of Rule 12b-1 Plan for Class R Shares--filed as
Exhibit (m) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.
(d) Shareholder Service Plan between Registrant and
Nicholas-Applegate Securities for Class I, Class II
Class III, Class IV, Class V and Class R shares dated
February 7, 2003--filed as Exhibit (m)(1) to Post
Effective Amendment #13 on December 6, 2002 and
incorporated herein by reference.
(e) Rule 18f-3 Plan between Registrant and
Nicholas-Applegate Capital Management--filed as
Exhibit (n) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.
(f) Amended to Rule 18f-3 Plan between Registrant and
Nicholas-Applegate Capital Management dated November
8, 2002--filed as Exhibit (n)(1) to Post
Effective Amendment #13 on December 6, 2002 and
incorporated herein by reference.
(11) Opinion and consent of counsel as to the legality
of the securities being registered, indicating
whether they will, when sold, be legally issued,
fully paid, and non-assessable--filed herewith.
(12) Opinion and consent as to the tax matters and
consequences to shareholders discussed in the
Prospectus/Proxy Statement -- to be filed by
Amendment within a reasonable time after closing.
(13)(a) Administration and Fund Accounting Agency Agreement
between Registrant and Brown Brothers Harriman & Co.
--filed as Exhibit (1)(h) to the Registrant's Form
N-1A Registration Statement on May 6, 1999 and
incorporated herein by reference.
(b) Administration Services Agreement between Registrant
and Nicholas-Applegate Capital Management--filed as
Exhibit (2)(h) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.
(c) License Agreement between Registrant and
Nicholas-Applegate Capital Management--filed as
Exhibit (3)(h) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.
(d) Expense Limitation Agreement between Registrant
and Nicholas-Applegate Capital Management--filed as
Exhibit No. (4)(h) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.
(e) Transfer Agency and Service Agreement between
Registrant and State Street Bank and Trust
Company--filed as Exhibit No. (5)(h) to the
Registrant's Form N-1A Registration Statement on May
27, 1999 and incorporated herein by reference.
(f) Form of letter agreement between Registrant and Brown
Brothers Harriman & Co. adding Global Health Care
Fund to the Administration and Fund Accounting Agency
Agreement dated May 1, 1999--filed as Exhibit (h)(7)
to Post-Effective Amendment #4 on May 27, 2000 and
incorporated herein by reference.
(g) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management adding Global
Health Care Fund to the Expense Limitation
Agreement--filed as Exhibit (h)(8) to the
Registrant's Form N-1A Registration Statement on
June 18, 1999 and incorporated herein by reference.
(h) Form of letter agreement between Registrant and State
Street Bank and Trust Company adding Global Health
Care Fund to the Transfer Agency and Service
Agreement--filed as Exhibit (h)(9) to the
Registrant's Form N-1A Registration Statement on
June 18, 1999 and incorporated herein by reference.
(i) Credit Agreement between Registrant and
BankBoston, N.A. dated December 21, 1999--filed as
Exhibit (h)(10) to Post-Effective Amendment #4 on
May 25, 2000 and incorporated herein by reference.
(j) Master Securities Lending Agreement between
Registrant and Goldman, Sachs & Co. dated July 22,
1999--filed as Exhibit (h)(11) to Post-Effective
Amendment #4 on May 25, 2000 and incorporated
herein by reference.
(k) Administrative Services Agreement between Registrant
and Nicholas-Applegate Capital Management--filed
as Exhibit (h)(12) to Post-Effective Amendment No. 5
on November 30, 2000 and incorporated herein by
reference.
(l) Form of letter agreement between Registrant and
Brown Brothers Harriman & Co. adding International
Structured and Small Cap Value Funds to the
Administration and Fund Accounting Agency Agreement
dated May 1, 1999--filed as Exhibit (h)(13) to
Post-Effective Amendment No. 6 on February 14, 2001
and superseded by Exhibit (h)(17)--filed as Exhibit
(h)(17) to Post-Effective Amendment No. 7 filed on
April 10, 2001 and incorporated herein by
reference.
(m) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management adding
International Structured and Small Cap Value Funds
to the Expense Limitation Agreement--filed as
Exhibit (h)(14) to Post-Effective Amendment No. 6
on February 14, 2001 and incorporated herein by
reference.
(n) Form of letter agreement between Registrant and
State Street Bank and Trust Company adding
International Structured and Small Cap Value Funds
to the Transfer Agency and Service Agreement--filed
as Exhibit (h)(16) to Post-Effective Amendment
No. 6 filed on February 14, 2001 and incorporated
herein by reference.
(o) Form of letter agreement between Registrant and
Fleet Bank (formerly BankBoston, N.A.) adding
International Structured and Small Cap Value Funds
to the Credit Agreement dated December 21,
1999--filed as Exhibit (h)(15) to Post-Effective
Amendment No. 6 on February 14, 2001 and
incorporated herein by reference.
(p) Amended Appendix C to the Administration and Fund
Accounting Agreement between Registrant and Brown
Brothers Harriman & Company dated February 14, 2001
-- filed as Exhibit (h)(17) to Post-Effective
Amendment No. 7 filed on April 10, 2001 and
incorporated herein by reference.
(q) Letter Agreement dated May 18, 2001 between
Registrant and Nicholas-Applegate Capital
Management amending the Expense Limitation
Agreement -- filed as Exhibit (h)(18) to
Post-Effective Amendment No. 8 filed on May 30, 2001
and incorporated herein by reference.
(r) Letter Agreement dated September 27, 2001 between
Registrant and Nicholas-Applegate Capital Management
amending The Expense Limitation Agreement Filed as
Exhibit (h)(19) to Post-Effective Amendment No. 9 on
October 1, 2001 and incorporated herein by reference.
(s) Letter Agreement dated May 17, 2002 between
Registrant and Nicholas-Applegate Capital Management
amending The Expense Limitation Agreement -- filed
as Exhibit (h)(20) to Post-Effective Amendment #10
on May 20, 2002 and incorporated herein by
reference.
(t) Amendment to the Administration Services agreement
between Registrant and Nicholas-Applegate Capital
Management dated November 8, 2002--filed as
Exhibit (h)(21) to Post Effective Amendment #13 on
December 6, 2002 and incorporated herein by
reference.
(u) Amendment to the Expense Limitation Agreement
between Registrant and Nicholas-Applegate Capital
Management dated November 8, 2002--filed as
Exhibit (h)(22) to Post Effective Amendment #13 on
December 6, 2002 and incorporated herein by
reference.
(v) Transfer Agency Agreement dated March 14, 2003
between Registrant and UMB Fund Services, INC.
filed as Exhibit (h)(23) to Post Effective Amendment
#15 on May 29, 2003 and incorporated herein by
reference.
(w) Letter Agreement dated April 1, 2003 between
Registrant and Nicholas-Applegate Capital Management
amending the Expense Limitation Agreement filed as
Exhibit (h)(24) to Post Effective Amendment #15 on
May 29, 2003 and incorporated herein by reference.
(x) Amendment to Credit Agreement dated February 28,
2003 between Registrant and Fleet National Bank
filed as Exhibit (h)(25) to Post Effective Amendment
#15 on May 29, 2003 and incorporated herein by
reference.
(y) Securities Lending and Agency Agreement--filed as
Exhibit (h)(26) to Post-Effective Amendment #15 on
May 29, 2003 and incorporated herein by reference.
(z) Amendment to the Expense Limitation Agreement between
Registrant and Nicholas-Applegate Capital Management
dated July 29, 2003 filed as Exhibit (h)(27) to
Post-Effective Amendment #16 on July 29, 2003 and
incorporated herein by reference.
(za) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management amending the
Expense Limitation Agreement--filed as Exhibit
(h)(28) to Post-Effective Amendment No. 17 on
October 17, 2003 and incorporated herein by
reference.
(zb) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management amending the
Administrative Services Agreement--filed as Exhibit
(h)(28) to Post-Effective Amendment No. 17 on
October 17, 2003 and incorporated herein by
reference.
(zc) Amendment to Appendix C to the Administration and
Accounting Agreement between Registrant and Brown
Brothers Harriman & Co.--filed as Exhibit (h)(30)
to Post-Effective Amendment No. 17 on October 17,
2003 and incorporated herein by reference.
(zd) Fourth Amendment to Securities Lending Agency
Agreement between Registrant and Brown Brothers
Harriman & Co.--filed as Exhibit (h)(31) to
Post-Effective Amendment No. 17 on October 17,
2003 and incorporated herein by reference.
(ze) Customer Identification Program Addendum to
Transfer Agency Agreement--filed as Exhibit
(h)(32) to Post-Effective Amendment No. 17 on
October 17, 2003 and incorporated herein by
reference.
(zf) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management amending
the Expense Limitation Agreement--filed as Exhibit
(h)(33) to Post-Effective Amendment No. 37 on
March 17, 2004 and incorporated herein by reference.
(zg) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management amending
the Administrative Services Agreement--filed as
Exhibit (h)(34) to Post-Effective Amendment No. 37 on
March 17, 2004 and incorporated herein by reference.
(zh) Amendment to Appendix C to the Administration
Agreement between Registrant and Brown Brothers
Harriman & Co.--filed as Exhibit (h)(35) to
Post-Effective Amendment No. 22 of July 30, 2004
and incorporated herein by reference.
(zi) Fifth Amendment to Securities Lending Agency
Agreement between Registrant and Brown Brothers
Harriman & Co.--filed as Exhibit (h)(36) to
Post-Effective Amendment No. 37 on March 17, 2004
and incorporated herein by reference.
(14) Consent of Independent Auditors
(k) Not Applicable
(15) Financial statements omitted from Part B -- None.
(16)(a) Limited Power of Attorney of Trustees--Filed as an
Exhibit to Amendment No. 12 to Registrant's Form N-1A
Registration Statement on August 1, 1994 and
incorporated herein by reference.
(b) Limited Power of Attorney of Walter E. Auch--Filed as
an Exhibit to Amendment No. 14 to Registrant's Form
N-1A Registration Statement on September 26, 1994 and
incorporated herein by reference.
(c) Limited Power of Attorney of John J.P. McDonnell--
filed as Exhibit (p)(2) to the Registrant's Form
N-1A Registration Statement on June 18, 1999 and
incorporated herein by reference.
(d) Certified Resolution of Board of Trustees of
Registrant regarding Limited Power of Attorney of
John J.P. McDonnell--filed as Exhibit (p)(3) to the
Registrant's Form N-1A Registration Statement on
June 18, 1999 and incorporated herein by reference.
(e) Limited Power of Attorney of Trustees--filed as
Exhibit (p)(4) to Post Effective Amendment #13 on
December 6, 2002 and incorporated herein by
reference.
(f) Limited Power of Attorney of Trustees dated
December 22, 2004 filed herewith.
C-1
<Page>
(17) Additional Exhibits
(a) Amended Code of Ethics dated April 2002 -- filed
as Exhibit (p)(1) to Post-Effective Amendment #10
on May 20, 2002 and incorporated herein by
reference.
(b) Amended Code of Ethics dated March 2003 filed as
Exhibit (o)(1) to Post Effective Amendment #15 on
May 29, 2003 and incorporated herein by reference.
(c) Amended Code of Ethics dated January 31, 2004 filed
as Exhibit (o)(2) to Post-Effective Amendment No. 37
on March 17, 2004 and incorporated herein by
reference.
(d) Form of Proxy Card -- filed herewith.
Item 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public re-offering of
the securities registered through the use of the prospectus which is a part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the
re-offering prospectus will contain the information called for by the applicable
registration form for re-offering by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file an amendment to the
Registration Statement, pursuant to Rule 485(b) of Regulation C of the 1933 Act,
for the purpose of including Exhibit 12, Opinion of Counsel Supporting Tax
Matters with a reasonable time after closing.
C-2
<Page>
Exhibit Index
(4) Form of Plan of Reorganization and Termination
(11) Opinion of Counsel
(14) Consent of Independent Auditors
(16) Limited Power of Attorney of Trustees dated December 22, 2004.
(17) Form of Proxy card
<Page>
NOTICE
A copy of the Declaration of Trust of Nicholas-Applegate Institutional
Funds (the "Trust"), together with all amendments thereto, is on file with the
Secretary of State of Delaware and notice is hereby given that this instrument
is executed on behalf of the Trust by an officer of the Trust as an officer and
not individually and that the obligations of or arising out of this instrument
are not binding upon any of the Trustees of the Trust or shareholders of any
series of the Trust individually but are binding only upon the assets and
property of the Trust or the respective series.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "1933 Act"), the Registrant has duly caused this Registration Statement
on Form N-14 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of San Diego and the State of California on this 22nd
day of December, 2004.
Nicholas-Applegate Institutional Funds
By: /s/
-----------------------------------------
Horacio A. Valeiras, President
Pursuant to the requirements of the 1933 Act, this Registration
Statement has been signed below by the following persons in their capacities
and on December 22, 2004.
George F. Keane*
Trustee and Chairman of the Board
/s/ Horacio A. Valeiras
- -----------------------------------------
Horacio A. Valeiras
Trustee and President
/s/ C. William Maher
- -----------------------------------------
C. William Maher
Principal Financial and Accounting Officer
/s/ Charles H. Field, Jr.
- -----------------------------------------
Charles H. Field, Jr.
Secretary
- -----------------------------------------
Walter E. Auch*
Trustee
- -----------------------------------------
Darlene DeRemer*
Trustee
/s/ Charles H. Field, Jr.
- -----------------------------------------
By Charles H. Field, Jr.
*Attorney In Fact