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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 March 4, 2005
pursuant to Rule 461(a) under the Securities Act of 1933 as amended.
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
The Registration Statement consists of the following papers and documents:
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<Caption>
FORM N-14
ITEM NO. PROSPECTUS/PROXY STATEMENT CAPTION
- ----------- ---------------------------------------------------
PART A
Item 1. Beginning of Registration Cover Page
Statement and Outside Front
Cover Page of Prospectus
Item 2. Beginning and Outside Back Cover Cover Page
Page of Prospectus
Item 3. Synopsis Information and Risk Synopsis
Factors
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 Letter to Shareholders; Questions and Answers;
Acquired Synopsis; Reasons 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
</Table>
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<Table>
Item 8. Interest of Certain Persons and Not Applicable
Experts
Item 9. Additional Information Required Not Applicable
for Reoffering By Persons Deemed
to be Underwriters
PART B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. Additional Information About Statement of Additional Information of
Registrant Nicholas-Applegate Institutional Funds dated July
30, 2004 (1); Statement of Additional Information
of Emerging Countries and Emerging Markets
Opportunities Funds dated March 4, 2005
Item 13. Additional Information About the Statement of Additional Information of
Fund Being Acquired Nicholas-Applegate Institutional Funds dated July
30, 2004 (1); Statement of Additional Information
of Emerging Countries and Emerging Markets
Opportunities Funds dated March 4, 2005
Item 14. Financial Statements Semi-Annual Reports of Emerging Countries and
Emerging Markets Opportunities Funds, each a series
of the Registrant, dated September 30, 2004 (3);
Pro Formas
PART C
Item 15. Indemnification
Item 16. Exhibits
Item 17. Undertakings
</Table>
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(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. 333-71469).
(2) Incorporated herein by reference to the Semi-Annual Reports filed by the
Registrant, filed November 26, 2004 (File No. 811-07384).
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NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
NICHOLAS-APPLEGATE EMERGING COUNTRIES FUND
March 4, 2005
Dear Shareholder:
The enclosed proxy materials describe a proposal that Nicholas-Applegate
Emerging Countries Fund (the "Target") reorganize and become part of
Nicholas-Applegate Emerging Markets Opportunities Fund ("EMO Fund"). The Target
and EMO 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 EMO Fund.
You are cordially invited to attend a special meeting of the Target's
shareholders ("Meeting") to be held on March 24, 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 EMO 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 EMERGING COUNTRIES FUND TO AND IN
EXCHANGE FOR SHARES OF EMERGING MARKETS OPPORTUNITIES 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, EMO Fund. If the
Target's shareholders decide in favor of the proposal, you will become a
shareholder of EMO Fund, and the Target will cease to exist.
WHAT IS THE RATIONALE FOR MERGING THE TARGET WITH EMO FUND?
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 December 31, 2004 were $25,820,477.00.
Nicholas-Applegate has informed the Trust that if the Target continues to lose
assets to redemptions, it will no longer benefit 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 such circumstances. By merging the Target into EMO Fund, the Target's
shareholders would have the benefit of combining assets with a fund having
identical fee waiver agreements a similar investment objective and an investment
strategy that, while comparable, focuses its investments in emerging market
securities with smaller capitalizations. The strategy of EMO Fund focuses on
emerging markets securities, but it avoids extremely large, or "mega-cap,"
companies domiciled in emerging countries. Mega-cap companies are sensitive to
the global economy, whereas smaller companies in emerging countries are more
tied to the markets of, and the investment risks associated with, the
emerging country where they are located. Accordingly, EMO Fund provides
investors a more focused, diversified investment in emerging markets, and a
lower correlation with global markets than the Target.
WHAT ARE THE ADVANTAGES OF MERGING THESE FUNDS?
There are three key potential advantages:
- EMO Fund's strategy avoids the largest companies in emerging markets, so
EMO Fund will have higher correlation with local economies and lower
correlation with the global economy.
- Combining the Funds' assets allows Nicholas-Applegate to more efficiently
manage and diversify the single fund than it can manage and diversify the
two separate funds.
- There will be no change in the portfolio management team. Both Funds are
managed by Andrew Beal, Rebecca K. Hagstrom, CFA, Linda Ba and Jason
Campbell.
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 companies
located in developing countries around the world -- that is, countries with
securities markets that are, in the opinion of Nicholas-Applegate, less
sophisticated than more developed markets in terms of participation, analyst
coverage, liquidity and regulation. Additionally, each Fund is managed by the
same team from Nicholas-Applegate, composed of Andrew Beal, Rebecca K. Hagstrom,
CFA, Linda Ba and Jason Campbell. However, the Target and EMO Fund differ
somewhat in regard to the size of companies in which they invest. The Target
invests primarily in emerging market securities across the entire range of the
emerging markets universe, as defined by the MSCI Emerging Markets Index (the
"Index"). EMO Fund invests primarily in the securities of smaller capitalized
companies located in emerging markets and does not invest in the largest, most
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widely owned and best understood companies in the emerging markets universe, as
represented by the 50 largest companies in the Index. As of December 31, 2004,
the capitalization range of the Index was $6.5 million to $66.7 billion in
U.S.dollars.
HOW IS EMO FUND MANAGED?
Nicholas-Applegate emphasizes a team approach to portfolio management.
Nicholas-Applegate's Emerging Markets Investment Team, a group of seasoned
portfolio managers and analysts, who currently manage the Target and EMO Fund,
will continue to manage EMO Fund. Andrew Beal, Lead Portfolio Manager for
Emerging Markets, Rebecca K. Hagstrom, CFA, Linda Ba and Jason Campbell will be
primarily responsible for the day-to-day investment management decisions.
Prior to joining Nicholas-Applegate in 2001, Andrew specialized in Asian
investments for ten years with Schroder Investment Management Ltd. of London, UK
and Seoul, Korea. He was most recently head of Asian Institutional Investments,
Global Emerging Markets For Schroder. He Earned His B.S. in economics and
politics from the University of Bath, England. He has fourteen years of
investment industry experience.
Becky Hagstrom joined the firm in 2000 with responsiblities in portfolio
management and research on the International team, covering primarily the
Europe, Middle East, Africa (EMEA) region. Becky was previously an investment
analyst with Prudential Global Asset Management where she covered the same
region. She started her career with Prudential Realty Group and moved on to
Prudential Capital Group as an analyst. She earned her B.S. in international
affairs, graduating magna cum laude from Georgia Institute of Technology and
holds the CFA designation. She has ten years of investment industry experience.
Prior to joining Nicholas-Applegate in 2003, Linda was associate portfolio
manager for Artisan Partners' International Small Cap Fund and one of six
investment professionals responsible for managing the Artisan International
Fund, a five-star Morningstar Fund. Prior to joining Artisan, Linda was vice
president of the International Core Group for the Putnam Investments team
responsible for the top-ranked International Voyager Fund. Prior to joining
Putnam, Linda was an analyst structuring mergers and acquisitions for CS First
Boston's Hong Kong office and worked in corporate finance for BT Securities in
Hong Kong and New York City. She holds an M.B.A. from Stanford University, a
B.S. in economics from the Wharton School and a B.A. in history from the
University of Pennsylvania, where she graduated magna cum laude and Phi Beta
Kappa. She has thirteen years of investment industry experience.
Prior to joining Nicholas-Applegate in 1998, Jason was a teaching assistant
with San Diego State University's Economics Department. He Earned His M.A. and
B.A. from San Diego State University in Latin American studies and economics.
Jason attended Pontificia Universidade Catolica do Rio de Janeiro and speaks
fluent Portuguese and Spanish. He has lived in Brazil and traveled extensively
throughout Latin America. He has seven years of investment industry experience.
WHAT HAPPENS IF SHAREHOLDERS DECIDE IN FAVOR OF THE REORGANIZATION?
Shareholders will receive full and fractional shares of EMO Fund equal in
value and of identical class to the shares of the Target that they owned on the
effective date of the reorganization.
The net asset value per share of EMO 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
or incur any capital losses due to the reorganization, although the Target's
shareholders
2
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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.
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 EMO 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 EMERGING COUNTRIES FUND
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 24, 2005
To the Shareholders:
A special meeting of shareholders ("Meeting") of Nicholas-Applegate
Emerging Countries Fund (the "Fund"), a series of Nicholas-Applegate
Institutional Funds (the "Trust"), will be held on March 24, 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 Emerging Markets Opportunities
Fund ("EMO Fund"), another series of the Trust, would acquire all the assets of
the Fund in exchange solely for shares of identical class and equal value of EMO
Fund and EMO 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 February 25, 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
March 4, 2005
San Diego California
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TRANSFER OF ASSETS OF
NICHOLAS-APPLEGATE EMERGING COUNTRIES FUND
(A SERIES OF NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS)
TO AND IN EXCHANGE FOR SHARES OF IDENTICAL CLASS OF
NICHOLAS-APPLEGATE EMERGING MARKETS OPPORTUNITIES FUND
(A SERIES OF NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS)
PROSPECTUS/PROXY STATEMENT
MARCH 4, 2005
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON WEDNESDAY, MARCH 23, 2005
This Prospectus/Proxy Statement is being furnished to shareholders of
Nicholas-Applegate Emerging Countries 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 March 24, 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 Emerging Markets Opportunities Fund ("EMO Fund"), another
series of the Trust, would acquire all the assets of the Target in exchange
solely for shares of identical class of EMO Fund and EMO 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 EMO 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 shares of a
class of EMO Fund having an aggregate value that on the effective date of the
Reorganization is equal to the aggregate of (and is in the same class as) 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 Plan (as defined below). Additional information is contained
in the following:
- A Statement of Additional Information, dated March 4, 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 (together, the "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. A copy
of the Trust's prospectus, which includes the Target, accompanies this
Prospectus/Proxy Statement.
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.
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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 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 March 4, 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.
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TABLE OF CONTENTS
<Table>
TABLE OF CONTENTS 4
SYNOPSIS 5
The Proposed Reorganization 5
Comparative Fee Table 5
Example of Effect on Fund Expenses 7
Comparison of Investment Objectives, Principal Investment Strategies, and Risks 7
Performance of the Funds 8
Form of Organization 9
Investment Adviser and Investment Advisory Fees 9
Expense Waivers 10
Operations of Emerging Markets Opportunities Fund Following the Reorganization 10
Dividends and other Distributions 11
Federal Income Tax Consequences of the Reorganization 12
Shares of Beneficial Interest and Voting Rights 12
PRINCIPAL RISK FACTORS 12
THE PROPOSED TRANSACTION 13
Reorganization Plan 13
Reasons for the Reorganization 14
Description of Securities to be Issued 15
Federal Income Tax Considerations 15
Capitalization 16
VOTING INFORMATION 16
OUTSTANDING SHARES 17
ADDITIONAL INFORMATION ABOUT THE FUNDS 18
INFORMATION CONCERNING ADVISER, DISTRIBUTOR, AND AFFILIATED COMPANIES 18
MISCELLANEOUS 19
Legal Matters 19
Experts 19
OTHER BUSINESS 19
BOARD RECOMMENDATION 19
APPENDIX A -- Form of Plan of Reorganization and Termination A-1
</Table>
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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, by being incorporated herein by reference with respect to
the Funds, 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 EMO Fund.
THE PROPOSED REORGANIZATION
The Board considered and adopted the Reorganization Plan at a meeting held
on November 11, 2004. The Reorganization Plan provides for EMO Fund's
acquisition of all the assets of the Target in exchange solely for shares of
beneficial interest of identical classes in EMO Fund and EMO Fund's assumption
of all the liabilities of the Target, all as of the close of business on March
28, 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 EMO 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 EMO Fund
shares that is equal in value to, and in the same class as, 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 each 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 EMO Fund's shares as of September 30, 2004. The "Combined Fund
- -- Pro Forma" operating expenses information is based on the net assets and Fund
accruals of the Target and EMO 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 EMO Fund's shares for the fiscal year ended March 31, 2004, and Pro
Forma expenses, based on those annual operating expenses for EMO Fund's shares
assuming the Reorganization Plan is approved and effected. (EMO Fund also offers
other share classes, which are not involved in the proposed Reorganization.)
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This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets, as
a percentage of average net assets)
<Table>
<Caption>
EMO COMBINED FUND
(CLASS I
EMO FUND (CLASS I) TARGET (CLASS I) PRO FORMA)
------------------ ---------------- -----------------
Management Fees 0.90% 0.85% 0.90%
Distribution (12b-1) Fees None None None
Shareholder Service Fee 0.20% 0.20% 0.20%
Other Expenses 0.60%(2)(3) 0.84%(2) 0.83%(2)
Total Annual Fund Operating Expenses 1.70% 1.89% 1.93%
Waiver of Fund Expenses (1) -- (0.24%) (0.28%)
Net Expenses 1.70% 1.65% 1.65%
</Table>
<Table>
<Caption>
EMO COMBINED FUND
(CLASS II
EMO FUND (CLASS II) TARGET (CLASS II) PRO FORMA)
------------------ ---------------- -----------------
Management Fees 0.90% 0.85% 0.90%
Distribution (12b-1) Fees None None None
Shareholder Service Fee 0.13% 0.13% 0.13%
Other Expenses 0.52%(2)(3) 0.76%(2) 0.75%(2)
Total Annual Fund Operating Expenses 1.55% 1.74% 1.78%
Waiver of Fund Expenses (1) -- (0.24%) (0.28%)
Net Expenses 1.55% 1.50% 1.50%
</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 EMO Fund's shares through November 30, 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
Nicholas-Applegate 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>
EMO COMBINED FUND
(CLASS I
EMO FUND (CLASS I) TARGET (CLASS I) PRO FORMA)
------------------ ---------------- -----------------
Total Annual Operating Expenses 1.56% 1.77% 1.79%
Net Expenses 1.56% 1.53% 1.51%
</Table>
<Table>
<Caption>
EMO COMBINED FUND
(CLASS II
EMO FUND (CLASS II) TARGET (CLASS II) PRO FORMA)
------------------ ---------------- -----------------
Total Annual Operating Expenses 1.41% 1.63% 1.64%
Net Expenses 1.41% 1.38% 1.36%
</Table>
(3) EMO Fund commenced its operations on May 28, 2004. Other Expenses of the
EMO Fund are based on estimated amounts for the current fiscal year.
6
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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 EMO Fund shares assuming
the Reorganization Plan has been approved and effected.
The Example assumes that you invest $10,000 in shares of the specified
class of 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:
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
EMO Fund (Class I) $ 179 $ 563 $ -- $ --
Target (Class I) $ 173 $ 600 $ 1,071 $ 2,471
EMO Combined Fund (Class I) $ 173 $ 609 $ 1,090 $ 2,520
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
EMO Fund (Class II) $ 163 $ 513 $ -- $ --
Target (Class II) $ 158 $ 551 $ 984 $ 2,273
EMO Combined Fund (Class II) $ 158 $ 560 $ 1,003 $ 2,321
</Table>
The example above does not take into account any offset arrangements that
the Fund will enter into with its brokers, custodians and third party service
providers. If the offset credits described were applied to the above example,
your cost for the 1, 3, 5 and 10 year periods would be as follows:
<Table>
<Caption>
YEAR 1 YEAR 3 YEAR 5 YEAR 10
-------- -------- -------- --------
EMO Fund (Class I) $ 164 $ 516 $ -- $ --
Target (Class I) $ 161 $ 561 $ 1002 $ 2312
EMO Combined Fund (Class I) $ 159 $ 563 $ 1009 $ 2335
<Caption>
YEAR 3 YEAR 3 YEAR 5 YEAR 10
-------- -------- -------- --------
EMO Fund (Class II) $ 148 $ 467 $ -- $ --
Target (Class II) $ 145 $ 513 $ 919 $ 2126
EMO Combined Fund (Class II) $ 143 $ 513 $ 922 $ 2137
</Table>
COMPARISON OF INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RISKS
Each Fund's investment objective is to maximize long-term capital
appreciation.
The Funds differ in regard to the size of the companies in which they
primarily invest. The Target invests primarily in emerging market securities
across the entire range of the emerging markets universe, as defined by the MSCI
Emerging Markets Index (the "Index"). The EMO Fund invests primarily in emerging
market securities, but does not invest in the largest, most widely owned and
best understood companies in the emerging markets universe, as represented by
the 50 largest companies in the Index. As of December 31, 2004, the
capitalization range of the Index was $6.5 million to $66.7 billion in U.S.
dollars. The difference in these investment strategies is apparent in the market
capitalization of securities actually held by each of the Funds. As of December
31, 2004, the weighted average capitalization of an issuer the securities of
which were held by EMO Fund was $3.9 billion, whereas the weighted average
capitalization of an issuer the securities of which were held by the Target was
$11.7 billion.
The strategy of the EMO Fund focuses on emerging markets securities, but
unlike the Target, it avoids extremely large, or "mega-cap," companies domiciled
in emerging countries. Mega-cap companies are sensitive to the global economy,
whereas smaller companies in emerging countries are more tied to the markets of
the emerging country where they are located. The EMO Fund strategy results in a
lower correlation, and better diversification, to investments in securities of
companies located in the United States and other developed
7
<Page>
markets. Furthermore, due to the different investment strategies in EMO Fund and
the Target, the potential earnings growth of companies in the EMO Fund tends to
be higher.
EMO Fund typically diversifies across more securities than the Target: EMO
Fund typically holds about 130 securities, while the Target typically holds
about 80 securities.
Each Fund is managed by the same team from Nicholas-Applegate, composed of
Andrew Beal, Rebecca K. Hagstrom, CFA, Linda Ba and Jason Campbell (the
"Emerging Markets Team") The Emerging Markets Team researches countries with
securities markets that are, in the opinion of Nicholas-Applegate, less
sophisticated than more developed markets in terms of participation, analyst
coverage, liquidity, and regulation. These are markets that have yet to reach a
level of maturity associated with developed non-U.S. stock markets, especially
in terms of participation by investors.
In analyzing specific companies for possible investment, the Emerging
Markets Team ordinarily looks for several of the following characteristics in
investment candidates for both Funds: above average per share earnings growth;
high return on invested capital; a healthy balance sheet; sound financial and
accounting policies and overall financial strength; strong competitive
advantages; effective research and product development and marketing;
development of new technologies; efficient service; pricing flexibility; strong
management; and general operating characteristics that will enable the companies
to compete successfully in their respective markets. The Emerging Markets Team
also considers whether to sell an investment in a Fund when any of those factors
materially changes.
Each Fund invests in emerging market securities of issuers that are
expected to provide the best opportunities to achieve the Fund's investment
objective. Each Fund may lend portfolio securities on a short-term or long-term
basis, up to 30% of total assets, and may invest up to 20% of its assets in
U.S.companies. 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 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. The universe of companies that
the EMO Fund may invest in contains a higher percentage of small-capitalization
companies than the universe of companies that the Target may invest in.
Each Fund is also subject to risks inherent in investing overseas. The
dollar value of the Fund's non-U.S. investments will be affected by changes in
exchange rates between the dollar and the currencies in which those investments
are traded. The value of the Fund's non-U.S. investments may be adversely
affected by political and social instability in their home countries and by
changes in economic or taxation policies in those countries. Non-U.S. companies
generally are subject to less stringent regulations, including financial and
accounting controls, than are U.S. companies. As a result, there generally is
less publicly available information about foreign companies than about U.S.
companies. The securities markets of other countries are smaller than U.S.
securities markets. As a result, many non-U.S. securities may be less liquid and
their prices may be more volatile than U.S. securities. These risks are
magnified in emerging markets.
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, both
before and after taxes. PAST PERFORMANCE BEFORE AND AFTER TAXES IS NOT AN
INDICATION OF FUTURE RESULTS.
8
<Page>
YEAR-BY-YEAR TOTAL RETURN OF EMERGING COUNTRIES FUND 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 EMO Fund commenced its operations on May 28, 2004, and has
less than a year's performance. For the period from May 28, 2004 to December 31,
2004, the EMO Fund returned a 49.06% gain compared with a 25.95% gain in the
MSCI Emerging Markets Index. The information gives some indication of the risk
of an investment in a Fund compared to a respective index.
YEAR-BY-YEAR TOTAL RETURN OF EMERGING COUNTRIES FUND AS OF 12/31 EACH YEAR (%)
<Table>
1995 6.96
1996 28.08
1997 10.12
1998 - 21.22
1999 78.96
2000 - 35.00
2001 - 14.87
2002 - 14.47
2003 56.38
2004 19.29
Best Quarter (Q4 '99)
+38.17%
Worst Quarter (Q3 '98)
- 25.93%
</Table>
AVERAGE ANNUAL TOTAL RETURN OF EMERGING COUNTRIES FUND BEFORE AND AFTER TAXES AS
OF 12/31/04 (%)
<Table>
<Caption>
SINCE INCEPTION
TARGET FUND 1 YEAR 5 YEAR 10 YEAR (12/28/94)
Before Taxes 19.29% - 2.46 6.50% 5.88%
After Taxes on Distributions 19.35% - 3.25 5.62% 5.01%
After Taxes on Distributions and Sale of Fund Shares 12.90% - 2.56 5.13% 4.58%
MSCI EM (reflects no deduction for expenses or taxes) 25.95% 4.59% 3.30% 2.61%
</Table>
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.
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.
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 EMO Fund, a
monthly management fee computed at the annual rate of 0.90% of its average daily
net assets; and (2) by the Target, a monthly management fee
9
<Page>
computed at the annual rate of .85% of its average daily net assets. The
moderately higher management fee for EMO Fund is a result of the difficulty
inherent in searching for opportunities in stocks outside the largest, most
widely owned and best understood companies in the emerging markets universe.
A discussion regarding the basis for the Board of Trustees approving the
investment advisory contract of each Fund is 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 and EMO Fund's shares of the indicated
class through November 30, 2005.
<Table>
<Caption>
CLASS I CLASS II
------- --------
Emerging Countries 1.65% 1.50%
Emerging Markets Opportunities 1.75% 1.60%
</Table>
To ensure that Shareholders of the Target do not incur additional expenses
as a result of the Reorganization, Nicholas-Applegate has agreed to lower the
percentages to 1.65% for EMO Fund's Class I shares and to 1.50% for EMO Fund's
Class II shares; at the Effective Time.
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 THE FUNDS FOLLOWING THE REORGANIZATION
As indicated above, the Funds' investment objectives and policies are
similar, although EMO Fund focuses on companies that are not among the largest,
most widely owned and best understood stocks in the emerging markets universe.
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 EMO
Fund's investment policies and thus can be transferred to and held by EMO Fund
if the Reorganization Plan is approved. Any Target assets that EMO Fund may not
hold will be sold after the Reorganization. The proceeds of those sales will be
held in temporary investments or reinvested in assets that EMO Fund may hold.
The possible need for EMO Fund to dispose of assets after 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 EMO Fund realizing gains that would
not otherwise have been realized.
PURCHASES. The minimum initial investment for opening an account with Class
I Shares is $250,000, and the minimum subsequent investment is $10,000; the
minimum initial investment for opening an account with Class II Shares is
$10,000,000, 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, Nicholas-Applegate
Securities LLC ("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 Nicholas-Applegate. EMO
Fund may only accept orders for shares in states where it is legally able to
offer shares. Effective February 25, 2005, the Target ceased accepting
investment subscriptions. EMO 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. EMO 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.
10
<Page>
FAIR VALUE PRICING. The Funds may also use fair value pricing as determined
in good faith by or under policies established by the Board. 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(s) 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, will instead fair value such security (ies) in good
faith. The use of fair value pricing according to the Procedures may cause the
net asset value of its shares to differ from the net asset value that would be
calculated using closing market prices. Additionally, international securities
markets may be open on days when the U.S. markets are closed, and accordingly
the value of international securities owned by the Fund could change on a day
you cannot buy or redeem shares of the Fund. For a more complete discussion of
EMO Fund's share purchase policies, see "Purchases and Redemptions" in Part 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 EMO Fund's
share redemption policies, see "Purchases and Redemptions" in Part B.
Redemptions of the Target's shares may be effected through the Effective Time.
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 Trust does not permit market timing or other excessive trading
practices which may disrupt portfolio management strategies and increase
expenses. The Fund has delegated responsibility for pricing securities and
reviewing trading practices to its CCO, and to Nicholas-Applegate. To protect
the interests of other shareholders in a Fund, Nicholas-Applegate monitors
trading activity, and the Trust may cancel the exchange privileges (or reject
any exchange or purchase orders) of any parties who, in the opinion of
Nicholas-Applegate, are engaging in market timing. For these purposes, the Trust
may consider a shareholder's trading history in the Funds. The Trust may change
or cancel its exchange policies at any time, upon 60 days' notice to its
shareholders.
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.
11
<Page>
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
Nicholson Graham 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.
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 similar investment
policies, an investment in EMO 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
12
<Page>
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, EMO Fund has less than a 3
year operating history upon which prospective shareholders can evaluate their
likely performance.
CURRENCY EXCHANGE RATES. The dollar value of a Fund's non-U.S.investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS. The value of a Fund's
non-U.S.investments may be adversely affected by political and social
instability in their home countries and by changes in economic or taxation
policies in those countries.
REGULATIONS. Non-U.S. companies generally are subject to less stringent
regulations, including financial and accounting controls, than are
U.S.companies. As a result, there generally is less publicly available
information about foreign companies than about U.S. companies.
MARKETS. The securities markets of other countries are smaller than
U.S.securities markets. As a result, many non-U.S. securities may be less liquid
and their prices may be more volatile than U.S. securities.
EMERGING SECURITIES MARKETS. Non-U.S. securities risks are magnified in
countries with emerging securities markets since these countries may have
unstable governments and less established markets. These markets tend to be less
liquid and more volatile, and offer less regulatory protection for investors.
The economies of emerging countries may be predominantly based on only a few
industries or dependent on revenue from particular commodities, international
aid or other assistance.
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) EMO Fund's acquisition as of the
Effective Time of all the assets of the Target in exchange solely for EMO Fund
shares and EMO Fund's assumption of all liabilities of the Target and (b) the
distribution of those shares to the Shareholders.
The Target's assets to be acquired by EMO 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. EMO 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 EMO Fund and the NAV per
share of each class of EMO 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 EMO Fund, less the amount of its liabilities, as of that close.
13
<Page>
At, or as soon as practicable after, the Effective Time, the Target will
distribute the EMO Fund shares it receives PRO RATA to the Shareholders, so that
each Shareholder will receive a number of full and fractional EMO Fund shares
equal in aggregate value to, and in the identical class as, the Shareholder's
Target shares as of the Effective Time. The shares will be distributed by
opening accounts on EMO 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 EMO Fund shares will be rounded to the third
decimal place. The Target will be terminated as soon as practicable after the
share distribution.
Because EMO Fund shares will be issued at their NAV in exchange for the net
assets of the Target, the aggregate value of EMO Fund shares issued to
Shareholders will equal the aggregate value of their Target shares. The NAV per
share of EMO 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 EMO 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 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) EMO Fund's lower correlation with securities of developed markets;
(3) each Fund's relative asset size;
(4) the investment experience and expertise of the Funds' portfolio
managers;
(5) the effect of the Reorganization on the Funds' expected investment
performance;
(6) the effect of the Reorganization on the Funds' ability to attract new
investment;
(7) the effect of the Reorganization on the Funds' expense ratios;
(8) the tax consequences of the Reorganization;
(9) the effect of the Reorganization on each Fund's shareholders' rights;
(10) the potential benefits of the Reorganization to Nicholas-Applegate and
other persons; and
(11) the alternatives to the Reorganization.
14
<Page>
Nicholas-Applegate recommended the Reorganization to the Board at a meeting
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 I and Class II Shares of EMO
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 inability to raise future assets; 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 Class I
and Class II Shares outstanding. EMO Fund has outstanding Class I Shares, but
newly issued Class II Shares are involved in the Reorganization. If the
Reorganization Plan is approved, each Shareholder of Class I Shares of the
Target will receive EMO Fund Class I Shares, and each Shareholder of Class II
Shares of the Target will receive EMO Fund Class II 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 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 EMO Fund shares and EMO 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
Nicholson Graham LLP, substantially to the effect that --
(1) EMO Fund's acquisition of the Target's assets in exchange
solely for EMO Fund shares and EMO Fund's assumption of the Target's
liabilities, followed by the 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;
(2) The Target will recognize no gain or loss on the transfer of
its assets to EMO Fund in exchange solely for EMO Fund shares and EMO
Fund's assumption of the Target's liabilities or on the subsequent
distribution of those shares to the Shareholders in exchange for their
Target shares:
(3) EMO Fund will recognize no gain or loss on its receipt of the
transferred assets in exchange solely for EMO Fund shares and its
assumption of the Target's liabilities;
(4) EMO Fund's basis in each transferred asset will be the same
as the Target's basis therein immediately before the Reorganization,
and EMO Fund's holding period for each of those assets will include
the Target's holding period therefor;
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<Page>
(5) A Shareholder will recognize no gain or loss on the exchange
of all its Target shares solely for EMO Fund shares pursuant to the
Reorganization; and
(6) A Shareholder's aggregate basis in the EMO Fund shares it
receives in the Reorganization will be the same as the aggregate basis
in the Target shares it actually or constructively surrenders in
exchange for those EMO Fund shares, and its holding period for those
EMO 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 Fund, 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 Reorganization:
<Table>
<Caption>
EMO FUND
EMO FUND TARGET (PRO FORMA)
NET ASSETS $ 8,841,926 $ 66,506,617 $ 75,351,170
NET ASSET VALUE PER SHARE (CLASS I) $ 10.70 $ 15.00 $ 10.70
NET ASSET VALUE PER SHARE (CLASS II) -- $ 15.01 $ 10.70
SHARES OUTSTANDING (CLASS I) 826,562 1,190,898 2,496,045
SHARES OUTSTANDING (CLASS II) -- 3,239,872 4,544,920
</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 February 25, 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 March 4, 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
16
<Page>
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. Nicholas-Applegate will bear the cost of solicitation of 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:
EMERGING COUNTRIES FUND CLASS I SHARES
<Table>
<Caption>
SHAREHOLDER NAME SHARES OWNED PERCENTAGE OF FUND
- ---------------- ------------ ------------------
LEUTHOLD CORE INVESTMENT FUND 142,985.69 14.31%
100 N SIXTH ST SUITE 412 A
MINNEAPOLIS MN 55403
NORTHERN TRUST CO CUST
HF INVESTMENT LTD PARTNERSHIP 184,974.315 18.51%
PO BOX 92956
CHICAGO IL 60675 2956
UNIVERSITY OF BRITISH COLUMBIA
STAFF PENSION PLAN 91,416.234 9.15%
2336 WEST MALL
VANCOUVER BC V6T 1Z4
CANADA 033
CHARLES SCHWAB & CO INC 98,458.758 9.85%
101 MONTGOMERY STREET
11TH FLOOR
SAN FRANCISCO CA 94104 4122
T ROWE PRICE TRUST COMPANY FBO
RETIREMENT PLAN CLIENTS 264,219.561 26.44%
PO BOX 17215
BALTIMORE MD 21297 1215
</Table>
17
<Page>
EMERGING COUNTRIES FUND CLASS II SHARES
<Table>
<Caption>
SHAREHOLDER NAME SHARES OWNED PERCENTAGE OF FUND
- ---------------- ------------ ------------------
NORTHERN TRUST COMPANY FBO
NATIONAL FUEL GAS CO RTMT TRUST 399,795.521 78.57%
PO BOX 92956
CHICAGO IL 60675
LAUER & CO
C/O THE GLENMEDE TRUST CO 80,147.282 15.75%
PO BOX 58997
PHILADELPHIA PA 19102 8997
</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 EMO Fund is included in the SAI, 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 ("Allianz Group"). Allianz Group currently has assets under management of
approximately US$1.3 trillion. Allianz AG's address is: Koeniginstrasses 28,
D-80802, Munich, Germany.
The Distributor, Nicholas-Applegate Securities LLC, 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
18
<Page>
distribute shares of registered investment companies. Its managing member is
Nicholas-Applegate Holdings, LLC, the managing member of Nicholas-Applegate.
MISCELLANEOUS
DISCLOSURE OF PORTFOLIO HOLDINGS
Information on the Fund's policy of disclosing portfolio holdings may be
found in the Statement of Additional Information.
LEGAL MATTERS
Certain legal matters in connection with the issuance of EMO Fund shares as
part of the Reorganization will be passed on by the Trust's counsel, Kirkpatrick
& Lockhart Nicholson Graham 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.
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<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 Emerging Countries Fund ("Target") and
Nicholas-Applegate Emerging Markets Opportunities 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 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
in exchange for those 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 two classes of outstanding shares, designated Class I and Class
II ("Class I Target Shares" and "Class II Target Shares", respectively, and
collectively "Target Shares"). Acquiring Fund's shares are divided into multiple
classes, including Class I and Class II Shares ("Class I Acquiring Fund Shares"
and "Class II Acquiring Fund Shares", respectively, and collectively, "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) (1) Class I Acquiring Fund Shares
determined by dividing the net value of Target (computed as set forth
in paragraph 2.1) ("Target Value") attributable to the Class I Target
Shares by the net asset value ("NAV") of a Class I Acquiring Fund
Share (computed as set forth in paragraph 2.2), and (2) Class II
Acquiring Fund Shares determined by dividing the Target Value
attributable to the Class II Target Shares by the NAV of a Class II
Acquiring Fund Share (as so computed), 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
A-1
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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).
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, by class (I.E, the account for
each Shareholder that holds Class I Target Shares shall be credited with
the respective PRO RATA number of full and fractional Class I Acquiring
Fund Shares due that Shareholder, and the account for each Shareholder that
holds Class II Target Shares shall be credited with the respective PRO RATA
number of full and fractional Class II 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 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 per share of such class
of Acquiring Fund Shares shall be computed as of the Valuation Time, using
the valuation procedures set forth in the P/SAI.
A-2
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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").
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 March 24, 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
A-3
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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 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, or other undertaking to which Trust, on
Acquiring Fund's behalf, is a party or by which it is bound or result
A-4
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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.
A-5
<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
acquisitions, redemptions, and distributions) of the proprietary
interest in Target at the Effective Time;
A-6
<Page>
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 Nicholson Graham 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 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
A-7
<Page>
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.
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.
A-8
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
NICHOLAS-APPLEGATE EMERGING COUNTRIES FUND
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
PROXY FOR THE MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 24, 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 March 24, 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_
<Page>
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 Emerging Markets Opportunities Fund ("EMO Fund"), a
series of the Trust, would acquire all of the assets and assume all of
the liabilities of Nicholas-Applegate Emerging Countries Fund (the
"Target"), another series of the Trust, in exchange solely for shares of
equal value of, and identical class as, EMO Fund.
_____FOR _____AGAINST _____ABSTAIN
<Page>
PART B
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
NICHOLAS-APPLEGATE EMERGING MARKETS OPPORTUNITIES FUND
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 18, 2005
This Statement of Additional Information ("SAI") relates specifically to
the proposed reorganization whereby Nicholas-Applegate Emerging Markets
Opportunities Fund ("EMO Fund") would acquire all the assets of
Nicholas-Applegate Emerging Countries Fund (the "Target") in exchange solely
for shares of identical class of EMO Fund, and the assumption by EMO Fund of
all the Target's liabilities, followed by the distribution of those shares to
the Target's shareholders (all such transactions involving EMO 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 EMO 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 EMO 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
March 4, 2005.
This SAI is not a prospectus and should be read only in conjunction with
the Prospectus/Proxy Statement dated February 18, 2005 relating to the
above-referenced matter. A copy of the Prospectus/Proxy Statement may be
obtained by calling toll-free (800) 551-8643.
<Page>
TABLE OF CONTENTS
<Table>
<Caption>
TABLE OF CONTENTS 1
ADDITIONAL INFORMATION REGARDING EMERGING MARKETS
OPPORTUNITIES FUND 2
FINANCIAL HIGHLIGHTS 4
MANAGEMENT DISCUSSION AND ANALYSIS OF THE FUNDS 8
EMERGING MARKETS OPPORTUNITIES FUND INSTITUTIONAL SHARES 9
EMERGING COUNTRIES FUND INSTITUTIONAL SHARES 8
FINANCIAL STATEMENTS 11
PRO FORMA FINANCIAL STATEMENTS 11
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS STATEMENTS OF ASSETS
AND LIABILITIES SEPTEMBER 30, 2004 (UNAUDITED) 11
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS STATEMENTS OF
OPERATIONS PERIOD ENDED SEPTEMBER 30, 2004 (UNAUDITED) 12
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS STATEMENTS OF CHANGES IN
NET ASSETS PERIODS ENDED SEPTEMBER 30, 2004 AND MARCH 31, 2004 13
</Table>
1
<Page>
ADDITIONAL INFORMATION REGARDING EMERGING MARKETS
OPPORTUNITIES FUND
FUND HOLDINGS INFORMATION
Generally, the Fund views holdings information as sensitive and limits the
dissemination of material non-public holdings information to circumstances in
accordance with Board of Trustees-approved guidelines, as outlined below.
Persons who may gain access to the portfolio holdings information fall into
one of four categories: the public, service providers, rating organizations,
and the Federal Government. The Board has made a determination that
transparency and uniformity in portfolio disclosures to the public are in the
best interest of shareholders, in that it allows shareholders and their
advisers to learn what securities they indirectly own, and allows prospective
shareholders and their advisers to better evaluate an investment in the Fund.
The Board has made a determination that it is in the Fund's best interest to
disclose portfolio holdings to service providers such as custodians, proxy
voting services and portfolio analysis services; pursuant to confidentiality
agreements, so that the Fund can carry out its normal operations. The Board
has also determined that portfolio disclosure to rating organizations is in
the best interest of the Fund's shareholders, in that ratings and publicity
from these organizations improve the Fund's ability to attract more assets
and retain existing assets.
The Fund will provide a full list of its holdings as of the end of the
previous month to any person who makes a request on or after the 5th business
day of the month and will furnish portfolio holdings as of the end of the
month prior to the previous month to any person who submits a request prior
to the 5th business day of the month. The Fund will provide its top ten
holdings as of the end of the calendar quarter on the Investment Advisers web
site 15 days or more after the calendar quarter-end.
Disclosure is also made to service providers in real time, on a monthly
basis. Such service providers include the Fund's custodian, Brown Brothers
Harriman ("BBH"), portfolio analysis providers such as Vestek and Factset,
and proxy voting services. Disclosure is made under contracts that include
confidentiality provisions.
Disclosure is also made to rating organizations such as Lipper, Morningstar
and S&P on a weekly and monthly basis, under contracts that include
confidentiality provisions.
The Fund also provides a complete list of its holdings to the Federal
Government 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.
2
<Page>
Nicholas-Applegate may not enter into any arrangements with third parties
from which it would derive any monetary benefit for the disclosure of
material non-public holdings information. If, in the future, the Investment
Adviser desired to make such an arrangement, it would seek prior Board
approval and any such arrangements would be disclosed in the Fund's SAI.
There is no assurance that the Fund's policies on holdings information will
protect the Fund from the potential misuse of holdings by individuals or
firms in possession of that information.
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.
3
<Page>
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).
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.
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS
For a share outstanding during the period indicated
<Table>
<Caption>
NET ASSET NET NET REALIZED TOTAL FROM
VALUE, INVESTMENT AND UNREALIZED INVESTMENT
BEGINNING INCOME (LOSS) (2) GAINS (LOSS) OPERATIONS
- -------------------------------------------------------------------------------------------------------
GLOBAL EQUITY FUNDS -- CONTINUED
EMERGING COUNTRIES
For the period ended 09/30/04 (1) $ 16.20 $ 0.11 $ (1.31) $ (1.20)
For the year ended 03/31/04 8.70 0.20 7.30 7.50
For the year ended 03/31/03 12.13 0.02 (3.45) (3.43)
For the year ended 03/31/02 11.20 0.04 0.89 0.93
For the year ended 03/31/01 23.69 (0.02) (10.84) (10.86)
For the period 5/7/99 through 3/31/00 15.88 (0.10) 7.91 7.81
For the period 4/1/99 through 5/7/99 (1) 13.44 (0.02) 2.46 2.44
EMERGING MARKETS
OPPORTUNITIES FUND
5/28/04 (commenced) to 03/31/04 $ 10.00 $ 0.03 $ 0.67 $ 0.70
<Caption>
DISTRIBUTIONS FROM:
--------------------------
NET NET
INVESTMENT REALIZED TOTAL
INCOME CAPITAL GAINS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------
GLOBAL EQUITY FUNDS -- CONTINUED
EMERGING COUNTRIES
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 -- (1.63) (1.63)
For the period 5/7/99 through 3/31/00 -- -- --
For the period 4/1/99 through 5/7/99 (1) -- -- --
EMERGING MARKETS
OPPORTUNITIES FUND
5/28/04 (commenced) to 03/31/04 $ -- $ -- $ --
</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 and expenses incurred from the creation
and operation of the Mauritius entity), of the Emerging Countries Fund
does not exceed 1.65% for the period 04/01/02 to 06/30/02, 1.50% for the
period 07/01/02 to 01/21/03, 1.65% for the period 01/22/03 to 03/31/03,
respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
<Page>
<Table>
<Caption>
NET ASSET
VALUE, TOTAL
ENDING RETURN (3)
- ------------------------------------------------------------------
GLOBAL EQUITY FUNDS -- CONTINUED
EMERGING COUNTRIES
For the period ended 09/30/04 (1) $ 15.00 (7.41%)
For the year ended 03/31/04 16.20 86.21%
For the year ended 03/31/03 8.70 (28.28%)
For the year ended 03/31/02 12.13 8.30%
For the year ended 03/31/01 11.20 (46.75%)
For the period 5/7/99 through 3/31/00 23.69 49.18%
For the period 4/1/99 through 5/7/99 (1) 15.88 18.07%
EMERGING MARKETS
OPPORTUNITIES FUND
5/28/04 (commenced) to 03/31/04 $ 10.70 7.00%
<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)
- ------------------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY FUNDS -- CONTINUED
EMERGING COUNTRIES
For the period ended 09/30/04 (1) 1.52% 1.80% (0.09%) 1.71% 1.46%
For the year ended 03/31/04 1.67% 1.89% (0.07%) 1.82% 1.70%(7)
For the year ended 03/31/03 0.19% 2.25% (0.42%) 1.83% 1.80%(6)
For the year ended 03/31/02 0.35% 1.89% (0.20%) 1.69% 1.69%
For the year ended 03/31/01 (0.11%) 1.72% (0.04%) 1.68% 1.68%
For the period 5/7/99 through 3/31/00 (0.62%) 1.77% (0.10%) 1.67% 1.67%
For the period 4/1/99 through 5/7/99 (1) (1.22%) 1.64% -- 1.64% 1.64%
EMERGING MARKETS
OPPORTUNITIES FUND
5/28/04 (commenced) to 03/31/04 0.79% 3.26% (1.51%) 1.75% 1.70%
<Caption>
FUND'S
PORTFOLIO NET ASSETS,
TURNOVER ENDING
RATE (IN 000'S)
- --------------------------------------------------------------------
GLOBAL EQUITY FUNDS -- CONTINUED
EMERGING COUNTRIES
For the period ended 09/30/04 (1) 29% $ 17,869
For the year ended 03/31/04 100% 19,966
For the year ended 03/31/03 222% 49,526
For the year ended 03/31/02 260% 117,070
For the year ended 03/31/01 244% 140,538
For the period 5/7/99 through 3/31/00 180% 300,085
For the period 4/1/99 through 5/7/99 (1) 34% 178,902
EMERGING MARKETS
OPPORTUNITIES FUND
5/28/04 (commenced) to 03/31/04 26% $ 8,842
</Table>
(7) The Board of Trustees approved the amendments to the Expenses Limitation
Agreement where by overall operating expenses (excluding taxes, interest,
brokerage, extraordinary expenses and expenses incurred from the creation
and operation of the Mauritius entity) of the Emerging Countries Fund does
not exceed 1.65% for the period 04/01/03 to 07/28/03, 1.73% for the period
07/29/03 to 02/23/04, 1.65% for the period 02/24/04 to 03/31/04,
respectively.
5
<Page>
For a class II share outstanding during the period indicated
<Table>
<Caption>
NET ASSET NET NET REALIZED TOTAL FROM
VALUE, INVESTMENT AND UNREALIZED INVESTMENT
BEGINNING INCOME (LOSS) (2) GAINS (LOSS) OPERATIONS
- -------------------------------------------------------------------------------------------------------
GLOBAL FUNDS
EMERGING COUNTRIES
For the period ended 09/30/04 (1) $ 16.19 $ 0.12 $ (1.30) $ (1.18)
9/08/03 (commenced) to 03/31/04 12.90 0.06 3.23 3.29
<Caption>
DISTRIBUTIONS FROM:
--------------------------
NET NET
INVESTMENT REALIZED TOTAL
INCOME CAPITAL GAINS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------
GLOBAL FUNDS
EMERGING COUNTRIES
For the period ended 09/30/04 (1) $ -- $ -- $ --
9/08/03 (commenced) to 03/31/04 -- -- --
</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.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
<Page>
<Table>
<Caption>
NET ASSET
VALUE, TOTAL
ENDING RETURN (3)
- ------------------------------------------------------------------
GLOBAL FUNDS
EMERGING COUNTRIES
For the period ended 09/30/04 (1) $ 15.01 (7.29%)
9/08/03 (commenced) to 03/31/04 16.19 25.50%
<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)
- ------------------------------------------------------------------------------------------------------------------------------
GLOBAL FUNDS
EMERGING COUNTRIES
For the period ended 09/30/04 (1) 1.67% 1.65% (0.09%) 1.56% 1.30%
9/08/03 (commenced) to 03/31/04 0.77% 1.56% 0.07% 1.63% 1.52%
<Caption>
FUND'S
PORTFOLIO NET ASSETS,
TURNOVER ENDING
RATE (IN 000'S)
- --------------------------------------------------------------------
GLOBAL FUNDS
EMERGING COUNTRIES
For the period ended 09/30/04 (1) 29% $ 48,638
9/08/03 (commenced) to 03/31/04 123% 52,500
</Table>
(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.
7
<Page>
MANAGEMENT DISCUSSION AND ANALYSIS OF THE FUNDS
EMERGING COUNTRIES FUND
MANAGEMENT TEAM: ANDREW BEAL, Lead Portfolio Manager; LINDA BA, Portfolio
Manager; JASON CAMPBELL, Portfolio Manager; REBECCA K. HAGSTROM, CFA, Investment
Analyst; FLORA KIM, Investment Analyst; ERIC SAGMEISTER, Investment Analyst;
SCOTT R. WILLIAMS, Investment Analyst; MICHAEL J. FREDERICKS, Portfolio
Specialist
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The Emerging Countries Fund seeks to maximize long-term capital
appreciation through investments in companies located in developing countries
around the world.
MARKET OVERVIEW: From April 1, 2004 through September 30, 2004, stocks in
developing countries posted modest declines. Losses were concentrated in the
first four months of the period and were largely due to concerns about:
- Higher interest rates in the United States, as emerging market equities
have historically been very sensitive to rising rates in developed markets
- Chinese officials' efforts to curb the country's booming growth and its
impact on commodity-oriented companies in developing nations
Later in the period, emerging market equities reversed course, posting strong
gains in August and September. Investors appeared to have become more
comfortable with the outlook for emerging markets, as well as China's ability to
engineer a "soft landing" for its economy.
PERFORMANCE: The Fund's Class I Shares were down 7.41% during the six months
ended September 30, 2004. The MSCI Emerging Markets Index lost 2.10%.
PORTFOLIO SPECIFICS: Emerging market growth stocks underperformed their value
counterparts this period, which hurt performance versus the benchmark.
Consistent with our investment philosophy, the Fund's holdings are concentrated
in growth stocks. In contrast, the style-neutral MSCI Emerging Markets Index
includes a mix of growth and value names. Stock selection in Russia, Taiwan and
the energy sector also negatively impacted the Fund's relative return.
On a positive note, issue selection in South Korea and the consumer
discretionary sector helped performance versus the index. For example, Edgars
Consolidated, a South African department store chain, was one of the Fund's
best-performing holdings. Edgars benefited from several positive influences,
including market share gains and the continued strength of the South African
consumer.
MARKET OUTLOOK: Despite near-term losses, our longer-term outlook for
emerging market equities is positive given:
- Inflation in many emerging markets has been relatively subdued
- Economic growth in developing countries has been generally resilient, and
expectations have not weakened significantly
- Countries and companies have taken advantage of the low interest rates of
the past few years to strengthen their balance sheets, leaving them less
vulnerable to rising U.S. rates
As always, we remain committed to our investment philosophy centered on
positive, sustainable change. We are confident our approach will benefit the
Fund over the long term.
8
<Page>
EMERGING MARKETS OPPORTUNITIES FUND INSTITUTIONAL SHARE
MANAGEMENT TEAM: ANDREW BEAL, Lead Portfolio Manager; LINDA BA, Portfolio
Manager; JASON CAMPBELL, Portfolio Manager; REBECCA K. HAGSTROM, CFA, Investment
Analyst; FLORA KIM, Investment Analyst; ERIC SAGMEISTER, Investment Analyst;
SCOTT R. WILLIAMS, Investment Analyst; MICHAEL J. FREDERICKS, Portfolio
Specialist
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The Emerging Markets Opportunities Fund seeks to maximize long-term
capital appreciation through investments in companies located in developing
countries around the world, emphasizing companies with market capitalizations
that are generally less than that of the top 50 securities in the MSCI Emerging
Markets Index.
MARKET OVERVIEW: During the six months ended September 30, 2004, investors
sent equity prices in emerging countries lower. A robust rally in August and
September, when the MSCI Emerging Markets Index rose 10.21%, was unable to erase
prior months' losses.
This period's decline was largely driven by worries of higher U.S. interest
rates, as emerging market equities have historically been sensitive to rising
rates in developed markets. Adding to selling pressure were fears the Chinese
government's efforts to slow its country's growth would hurt demand for exports
from other developing countries. Markets in emerging Asia were especially weak
on this concern.
While stock prices in developing markets were down overall, Latin American
equities posted solid gains. Rising crude prices lent support to markets in
oil-producing countries, such as Mexico and Venezuela. Economic indicators
showed improvement in Brazil, which reported its strongest consecutive monthly
increase in industrial output since 1995.
PERFORMANCE: From its May 28, 2004 inception through September 30, 2004, the
Fund gained 7.00% and the MSCI Emerging Markets Index rose 8.30%.
PORTFOLIO SPECIFICS: The Fund's gain was broad based, with holdings in the
majority of countries and sectors registering increases. Compared to the index,
the Fund modestly lagged. Stock selection in Taiwan, Malaysia and the
industrials sector drove underperformance, as did an underweight and issue
selection among energy companies.
Another area that hurt relative performance was the Fund's
higher-than-benchmark exposure to growth stocks, since growth trailed value in
emerging countries. Because our investment philosophy emphasizes companies with
growth characteristics, the Fund's holdings are concentrated in growth stocks.
However, the MSCI Emerging Markets Index is style neutral, consisting of both
growth and value names.
On the positive side, stock selection in Mexico, Brazil and among materials
companies boosted relative results. An overweight in Brazil, where stocks prices
rose sharply, was another plus. Brazil-based Braskem, a chemical firm, and
Mexico-based Grupo Mexico, a mining company, were among the best-performing
holdings this period.
MARKET OUTLOOK: The outlook for emerging market equities remains solid.
Inflation in many developing countries has been relatively subdued. Slow, but
steady, economic growth throughout much of the world is creating demand for the
export goods and services produced in many emerging nations. Low global interest
rates help to stimulate corporate investment, which, in turn, stimulates demand
for raw materials exported by developing countries.
Looking forward, Nicholas-Applegate remains confident in our ability to
invest in companies for the Fund that are leveraged to the current economic
environment.
9
<Page>
[CHART]
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN EMERGING COUNTRIES
FUND CLASS I AND II SHARES WITH THE MSCI EMERGING MARKETS INDEX.
ANNUALIZED TOTAL RETURNS
As of 9/30/04
<Table>
<Caption>
SINCE
1 YEAR 5 YEARS INCEPTION
19.52% 0.85% 4.36%
</Table>
<Table>
<Caption>
EMERGING COUNTRIES FUND
CLASS I SHARES MSCI EM INDEX
11/28/1994 $ 250,000 $ 250,000
11/30/1994 $ 251,800 $ 254,738
12/31/1994 $ 237,014 $ 234,279
1/31/1995 $ 217,797 $ 209,353
2/28/1995 $ 215,595 $ 203,984
3/31/1995 $ 218,398 $ 205,280
4/30/1995 $ 231,009 $ 214,489
5/31/1995 $ 248,825 $ 225,900
6/30/1995 $ 251,427 $ 226,568
7/31/1995 $ 268,243 $ 231,654
8/31/1995 $ 266,841 $ 226,197
9/30/1995 $ 267,042 $ 225,124
10/31/1995 $ 254,230 $ 216,506
11/30/1995 $ 248,625 $ 212,645
12/31/1995 $ 253,511 $ 222,076
1/31/1996 $ 276,630 $ 237,862
2/29/1996 $ 280,651 $ 234,080
3/31/1996 $ 281,857 $ 235,903
4/30/1996 $ 299,951 $ 245,335
5/31/1996 $ 310,204 $ 244,239
6/30/1996 $ 310,807 $ 245,764
7/31/1996 $ 298,946 $ 228,968
8/31/1996 $ 311,812 $ 234,829
9/30/1996 $ 317,441 $ 236,863
10/31/1996 $ 309,199 $ 230,546
11/30/1996 $ 321,453 $ 234,409
12/31/1996 $ 324,696 $ 235,469
1/31/1997 $ 348,815 $ 251,531
2/28/1997 $ 359,557 $ 262,302
3/31/1997 $ 353,679 $ 255,412
4/30/1997 $ 356,720 $ 255,864
5/31/1997 $ 378,001 $ 263,186
6/30/1997 $ 406,782 $ 277,271
7/31/1997 $ 426,442 $ 281,410
8/31/1997 $ 393,810 $ 245,601
9/30/1997 $ 421,983 $ 252,406
10/31/1997 $ 354,693 $ 210,990
11/30/1997 $ 344,552 $ 203,291
12/31/1997 $ 357,563 $ 208,190
1/31/1998 $ 336,925 $ 191,862
2/28/1998 $ 363,844 $ 211,887
3/31/1998 $ 384,705 $ 221,082
4/30/1998 $ 397,043 $ 218,674
5/31/1998 $ 355,768 $ 188,707
6/30/1998 $ 331,318 $ 168,912
7/31/1998 $ 346,571 $ 174,268
8/31/1998 $ 245,169 $ 123,880
9/30/1998 $ 245,394 $ 131,738
10/31/1998 $ 265,900 $ 145,611
11/30/1998 $ 279,646 $ 157,721
12/31/1998 $ 281,674 $ 155,435
1/31/1999 $ 290,237 $ 152,927
2/28/1999 $ 284,378 $ 154,415
3/31/1999 $ 303,081 $ 174,765
4/30/1999 $ 337,558 $ 196,387
5/31/1999 $ 335,755 $ 195,245
6/30/1999 $ 378,795 $ 217,403
7/31/1999 $ 370,457 $ 211,498
8/31/1999 $ 370,232 $ 213,422
9/30/1999 $ 364,824 $ 206,199
10/31/1999 $ 371,133 $ 210,590
11/30/1999 $ 412,596 $ 229,472
12/31/1999 $ 504,083 $ 258,656
1/31/2000 $ 496,647 $ 260,198
2/29/2000 $ 547,574 $ 263,634
3/31/2000 $ 533,828 $ 264,921
4/30/2000 $ 459,241 $ 239,808
5/31/2000 $ 435,130 $ 229,894
6/30/2000 $ 460,367 $ 237,992
7/31/2000 $ 430,623 $ 225,753
8/31/2000 $ 443,016 $ 226,862
9/30/2000 $ 400,878 $ 207,054
10/31/2000 $ 367,302 $ 192,042
11/30/2000 $ 318,515 $ 175,251
12/31/2000 $ 327,651 $ 179,482
1/31/2001 $ 349,224 $ 204,197
2/28/2001 $ 315,469 $ 188,208
3/31/2001 $ 284,252 $ 169,722
4/30/2001 $ 295,927 $ 178,108
5/31/2001 $ 298,211 $ 180,234
6/30/2001 $ 290,597 $ 176,535
7/31/2001 $ 272,070 $ 165,379
8/31/2001 $ 262,426 $ 163,742
9/30/2001 $ 219,534 $ 138,395
10/31/2001 $ 228,163 $ 146,989
11/30/2001 $ 255,827 $ 162,335
12/31/2001 $ 278,922 $ 175,224
1/31/2002 $ 286,282 $ 181,164
2/28/2002 $ 291,866 $ 184,135
3/31/2002 $ 307,855 $ 195,220
4/30/2002 $ 308,870 $ 196,489
5/31/2002 $ 302,779 $ 193,365
6/30/2002 $ 277,146 $ 178,863
7/31/2002 $ 252,274 $ 165,198
8/31/2002 $ 253,797 $ 167,742
9/30/2002 $ 219,280 $ 149,642
10/31/2002 $ 232,478 $ 159,354
11/30/2002 $ 254,558 $ 170,318
12/31/2002 $ 238,569 $ 164,663
1/31/2003 $ 238,061 $ 163,939
2/28/2003 $ 232,985 $ 159,512
3/31/2003 $ 220,803 $ 154,998
4/30/2003 $ 243,645 $ 168,808
5/31/2003 $ 262,172 $ 180,929
6/30/2003 $ 276,131 $ 191,242
7/31/2003 $ 292,374 $ 203,214
8/31/2003 $ 317,246 $ 216,849
9/30/2003 $ 318,515 $ 218,432
10/31/2003 $ 345,925 $ 237,021
11/30/2003 $ 344,909 $ 239,936
12/31/2003 $ 373,081 $ 257,331
1/31/2004 $ 387,801 $ 266,467
2/29/2004 $ 407,090 $ 278,751
3/31/2004 $ 414,704 $ 282,347
4/30/2004 $ 374,604 $ 259,251
5/31/2004 $ 363,437 $ 254,143
6/30/2004 $ 360,137 $ 255,313
7/31/2004 $ 347,701 $ 250,794
8/30/2004 $ 363,944 $ 261,302
9/30/2004 $ 380,695 $ 276,405
</Table>
<Table>
<Caption>
SINCE
1 YEAR INCEPTION
19.70% 4.37%
</Table>
[CHART]
<Table>
<Caption>
EMERGING COUNTRIES FUND
CLASS II SHARES MSCI EM INDEX
6/30/2003 $ 250,000 $ 250,000
7/31/2003 $ 264,706 $ 265,650
8/31/2003 $ 287,224 $ 283,475
9/30/2003 $ 288,143 $ 285,544
10/31/2003 $ 312,960 $ 309,844
11/30/2003 $ 312,270 $ 313,655
12/31/2003 $ 337,546 $ 336,395
1/31/2004 $ 351,103 $ 348,337
2/29/2004 $ 368,336 $ 364,396
3/31/2004 $ 372,013 $ 369,097
4/30/2004 $ 339,154 $ 338,904
5/31/2004 $ 329,044 $ 332,228
6/30/2004 $ 326,057 $ 333,756
7/31/2004 $ 314,798 $ 327,849
8/30/2004 $ 330,193 $ 341,586
9/30/2004 $ 344,899 $ 361,329
</Table>
The graph above shows the value of a hypothetical $250,000 investment in the
Fund's Class I and II shares compared with the Morgan Stanley Capital
International Emerging Markets Index ("MSCI EM") for the periods indicated.
Class I and II shares have a shareholder services fee of up to .25% of their
average daily net assets. Performance is shown for Class I and II shares. The
Fund's Class I shares calculate their performance based upon the historical
performance of their corresponding series of Nicholas-Applegate Mutual Funds
(renamed Pilgrim Mutual Funds), adjusted to reflect all fees and expenses
applicable to the Fund's Class I shares. The Nicholas-Applegate Institutional
Funds' Class I shares were first available on May 7, 1999. Average annual total
return figures include changes in principal value, reinvested dividends, and
capital gain distributions. Absent expense limitations, total returns would have
been slightly lower. The total returns shown above do not show the effects of
income taxes on an individual's investment. In most cases, taxes may reduce your
actual investment returns on income or gains paid by the Fund or any gains you
may realize if you sell your shares. Past performance cannot guarantee future
results.
The MSCI EM Index is a market capitalization weighted index composed of over 800
companies representative of the market structure of emerging countries in
Europe, Latin America, Africa, Middle East and Asia. The MSCI EM Index excludes
closed markets and those shares in otherwise free markets that are not
purchasable by foreigners. The unmanaged Index differs from the Fund in
composition, does not pay management fees or expenses and includes reinvested
dividends. One cannot invest directly in an index.
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility and the social,
economic and political climates of countries where the Fund invests. Emerging
markets involve heightened risks related to the same factors, in addition to
those associated with their relatively small size and lesser liquidity. You may
have a gain or loss when you sell your shares.
10
<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>
EMERGING EMERGING
MARKET OPPORTUNITIES COUNTRIES PRO-FORMA
PERIOD ENDED PERIOD ENDED COMBINED STATEMENT
SEPTEMBER 30, 2004 SEPTEMBER 30, 2004 ADJUSTMENTS OF ASSETS & LIABILITIES
-------------------- ------------------ ----------- -----------------------
ASSETS
Investments, at value* $ 8,831,617 $ 65,952,735 $ 74,784,352
Foreign currencies, at value** 30,545 503,133 533,678
Cash 9,925 25,458 35,383
Receivables:
Investment securities sold -- -- --
Capital shares sold -- 4,630 4,630
Dividends 14,524 187,798 202,322
Foreign taxes receivable -- 599 599
Interest -- -- --
Other recivables 2,581 52,445 55,026
Other assets 10,019 4,354 14,373
-------------------- ------------------ ----------- -----------------------
Total assets 8,899,211 66,731,152 75,630,363
-------------------- ------------------ ----------- -----------------------
LIABILITIES
Payables:
Bank overdraft $ -- -- --
Investments purchased 12,856 -- 12,856
Capital shares redeemed -- 30,087 - 30,087
Collateral on securities loaned -- -- --
Distributions fee -- -- --
Management Fees -- 51,865 5,492a 57,357
Other Liabilites 44,429 142,583 (8,119)b 178,893
-------------------- ------------------ ----------- -----------------------
Total Liabilities 57,285 224,535 279,193
-------------------- ------------------ ----------- -----------------------
NET ASSETS 8,841,926 66,506,617 2,627 75,351,170
-------------------- ------------------ ----------- -----------------------
* Investments, at cost 8,290,715 54,296,713 62,587,430
-------------------- ------------------ ----------- -----------------------
** Foreign currencies, at cost 29,983 499,822 529,805
-------------------- ------------------ ----------- -----------------------
NET ASSETS CONSIST OF:
Paid-in capital $ 8,301,330 $ 75,738,577 84,039,907
Undistributed net investment income (loss) 20,831 1,151,074 2,627 1,174,532
Accumulated net realized gain (loss) on
investments and foreign currencies (21,756) (22,042,953) (22,064,709)
Net unrealized appreciation (depreciation ) of
investments and of other assets and liabilities --
denominated in foreign currencies 541,521 11,659,919 12,201,440
-------------------- ------------------ ----------- -----------------------
Net Assets applicable to all shares outstanding $ 8,841,926 $ 66,506,617 2,627 75,351,170
-------------------- ------------------ ----------- -----------------------
Class I Shares outstanding 826,562 1,190,898 478,585c 2,496,045
Class II Shares outstanding - 3,239,872 1,305,033c 4,544,920
-------------------- ------------------ ----------- -----------------------
Net Asset Value - Class I Share $ 10.70 $ 15.00 .00d 10.70
Net Asset Value - Class II Share $ -- $ 15.01 .00d 10.70
-------------------- ------------------ ----------- -----------------------
</Table>
a - Sum of management fees and expenses reimbursed from 9/30/04 SOP
b - Sum of all other adjustments from 9/30/04 SOP
c - Shares adjustment at conversion ratio using 9/30/04 NAVS
d - NAV impact of adjustments
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<Page>
PRO-FORMA COMBINING THE STATEMENT OF OPERATIONS
September 30, 2004 (UNAUDITED)
<Table>
<Caption>
EMERGING EMERGING
MARKET OPPORTUNITIES COUNTRIES PRO-FORMA
PERIOD ENDED PERIOD ENDED COMBINED STATEMENT
SEPTEMBER 30, 2004 SEPTEMBER 30, 2004 ADJUSTMENTS OF OPERATIONS
-------------------- ------------------ ----------- ------------------
INVESTMENT INCOME
Dividends, net of foreign taxes* $ 65,137 $ 967,938 -- 1,033,075
Interest 542 60 -- 602
-------------------- ------------------ ----------- ------------------
Total Income 65,679 967,998 -- 1,033,677
-------------------- ------------------ ----------- ------------------
EXPENSES
Advisory fee 23,645 276,898 16,288(a) 316,831
Accounting and administration fees 1,904 33,580 3,008(b) 38,492
Custodian fees 33,694 76,066 (300)(c) 109,460
Transfer agent fees and expenses 7,235 14,494 (10,027)(d) 11,702
Shareholder servicing fees 5,254 48,710 -- 53,964
Administrative services 5,254 46,361 -- 51,615
Professional fees 1,626 22,674 -- 24,300
Shareholder reporting 1,253 13,951 -- 15,204
Registration fees 4,956 4,906 -- 9,862
Trustees' fees and expenses 459 3,801 -- 4,260
Interest and credit facility fee 136 644 -- 780
Insurance -- 3,884 -- 3,884
Miscellaneous 386 4,480 (800)(e) 4,066
-------------------- ------------------ ----------- ------------------
Total Expenses 85,802 550,449 8,169 644,420
Expenses offset (1,264) (83,445) (84,709)
Expenses reimbursed (39,690) (28,732) (10,796)(f) (79,218)
-------------------- ------------------ ----------- ------------------
Net Expenses 44,848 438,272 (2,627) 480,493
-------------------- ------------------ ----------- ------------------
NET INVESTMENT INCOME (LOSS) 20,831 529,726 2,627 553,184
-------------------- ------------------ ----------- ------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Realized gain/ (loss) from:
Securities (6,021) 4,066,037 -- 4,060,016
Foreign currency transactions (15,735) (23,784) (39,519)
-------------------- ------------------ ----------- ------------------
Net realized gain (loss) (21,756) 4,042,253 -- 4,020,497
-------------------- ------------------ ----------- ------------------
Change in unrealized appreciation
(depreciation) of:
Investments 540,902 (10,116,334) -- (9,575,432)
Other assets and liabilities denominated in
foreign currencies 619 (16,495) -- (15,876)
-------------------- ------------------ ----------- ------------------
Net unrealized appreciation (depreciation) 541,521 (10,132,829) -- (9,591,308)
-------------------- ------------------ ----------- ------------------
NET GAIN (LOSS) ON INVESTMENTS 519,765 (6,090,576) -- (5,570,811)
-------------------- ------------------ ----------- ------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 540,596 $ (5,560,850) 2,627 (5,017,627)
-------------------- ------------------ ----------- ------------------
* Foreign taxes withheld $ -- -- --
- ----------------------------------------------- -------------------- ------------------ ----------- ------------------
-- --
Average net assets 5,240,088 64,974,458 70,214,546
</Table>
a - Emerging Market Opportunities Fund (EMO) will be the survivor w/ current
management fee of 90 bp vs 85 in Emerging Countries
b - Fee would increase by account charge for additional class
c - Eliminate duplicate BIDS Worldview fee
d - Eliminate duplicate account minimums
e - Eliminate duplicate CA franchise tax payment
f - EMO caps are reduced 10 bps form current prospectus for all classes
12
<Page>
PRO-FORMA COMBINING THE STATEMENT OF OPERATIONS
MARCH 31, 2004
<Table>
<Caption>
EMERGING EMERGING PRO-FORMA
MARKET OPPORTUNITIES COUNTRIES COMBINED STATEMENT
PERIOD ENDED PERIOD ENDED OF OPERATIONS
MARCH 31, 2004 MARCH 31, 2004 ADJUSTMENTS (UNAUDITED)(a)
-------------------- -------------- ----------- ------------------
INVESTMENT INCOME
Dividends, net of foreign taxes* $ $ 1,629,869 0 1,629,869
Interest -- 0 --
Securities Lending 387 0 387
-------------------- -------------- ----------- ------------------
Total Income -- 1,630,256 0 1,630,256
-------------------- -------------- ----------- ------------------
EXPENSES
Advisory fee 476,282 476,282
Accounting and administration fees 58,166 58,166
Custodian fees 113,938 113,938
Transfer agent fees and expenses 33,538 33,538
Shareholder servicing fees 95,368 95,368
Administrative services 92,982 92,982
Professional fees 46,095 46,095
Shareholder reporting 27,798 27,798
Registration fees 10,209 10,209
Trustees' fees and expenses 7,985 7,985
Interest and credit facility fee 3,380 3,380
Insurance 3,685 3,685
Miscellaneous 8,684 8,684
-------------------- -------------- ----------- ------------------
Total Expenses -- 978,110 -- 978,110
Expenses offset (5,748) -- (5,748)
Expenses (reimbursed)/recouped -- (63,282) --
-------------------- -------------- ----------- ------------------
Net Expenses -- 909,080 -- 972,362
-------------------- -------------- ----------- ------------------
NET INVESTMENT INCOME (LOSS) -- 721,176 -- 721,176
-------------------- -------------- ----------- ------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Realized gain (loss) from:
Securities 9,812,536 0 9,812,536
Foreign currency transactions -- (56,936) 0 (56,936)
-------------------- -------------- ----------- ------------------
Net realized gain (loss) -- 9,755,600 0 9,755,600
-------------------- -------------- ----------- ------------------
Change in unrealized appreciation
(depreciation) of:
Investments 22,282,199 0 22,282,199
Other assets and liabilities denominated
in foreign currencies -- 39,039 0 39,039
-------------------- -------------- ----------- ------------------
Net unrealized appreciation (depreciation) -- 22,321,238 0 22,321,238
-------------------- -------------- ----------- ------------------
NET GAIN (LOSS) ON INVESTMENTS -- 32,076,838 0 32,076,838
-------------------- -------------- ----------- ------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ -- $ 32,798,014 - 32,798,014
-------------------- -------------- ----------- ------------------
*Foreign taxes withheld $ -- $ 186,489 186,489
-------------------- -------------- ----------- ------------------
Average net assets 619,760,891 619,760,891
</Table>
FOOT NOTES
a - Emerging Market Opportunities Fund did not commence operations until
after 3/31/2004, so combined pro formas reflect only the operations of
Emerging Countries Fund.
13
<Page>
COMBINED STATEMENTS OF CHANGES IN NET ASSETS
PERIODS ENDED SEPTEMBER 30, 2004 MARCH 31, 2004
<Table>
<Caption>
EMERGING COUNTRIES FUND EMERGING MARKETS OPPORTUNITIES 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) $ 20,831 $ -- $ 529,726 $ 721,176
Net realized gain (loss) (21,756) -- 4,042,253 9,755,600
Net unrealized appreciation (depreciation) 541,521 -- (10,132,829) 22,321,238
---------- ----------- ------------ -----------
Net increase (decrease) in net assets from
investment operations 540,596 -- (5,560,850) 32,798,014
---------- ----------- ------------ -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
Class I 8,301,390 4,262,756 18,773,501
Class II -- 67,003 43,525,917
Cost of shares redeemed
Class I (60) (4,629,377) (71,487,521)
Class II -- (99,287) (669,828)
---------- ----------- ------------ -----------
Net increase (decrease) in net assets from
share transactions# 8,301,330 -- (398,905) (9,857,931)
---------- ----------- ------------ -----------
Net Increase (Decrease) in Net Assets 8,841,926 (5,959,755) 22,940,083
NET ASSETS
Beginning -- 72,466,372 49,526,289
---------- ----------- ------------ -----------
Ending $8,841,926 $ $ 66,506,617 $72,466,372
---------- ----------- ------------ -----------
Undistributed net investment income (loss), ending $ 20,831 $ -- $ 1,151,074 $ 621,348
---------- ----------- ------------ -----------
CLASS I - CAPITAL SHARE ACTIVITY
Shares sold 826,567 284,625 1,452,218
Shares redeemed (5) (326,486) (5,914,453)
---------- ----------- ------------ -----------
Net Institutional Share Activity 826,562 -- (41,861) (4,462,235)
---------- ----------- ------------ -----------
CLASS II - CAPITAL SHARE ACTIVITY
Shares sold -- 4,528 3,287,650
Shares redeemed -- (6,957) (45,349)
---------- ----------- ------------ -----------
Net Retirement Share Activity -- -- (2,429) 3,242,301
---------- ----------- ------------ -----------
Average NAV per Share based on capstock transactions 10.04 8.76 11.81
13.29 13.22
<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) 2,627 --(a) 553,184 721,176
Net realized gain (loss) 4,020,497 9,755,600
Net unrealized appreciation (depreciation) (9,591,308) 22,321,238
---------- ----------
Net increase (decrease) in net assets from
investment operations (5,017,627) 32,798,014
---------- ----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
Class I 12,564,146 18,773,501
Class II 67,003 43,525,917
Cost of shares redeemed
Class I (4,629,437) (71,487,521)
Class II (99,287) (669,828)
---------- ----------
Net increase (decrease) in net assets from
share transactions 7,902,425 (9,857,931)
---------- ----------
Net Increase (Decrease) in Net Assets 2,884,798 22,940,083
NET ASSETS
Beginning 72,466,372 49,526,289
---------- ----------
Ending 75,351,170 72,466,372
---------- ----------
Undistributed net investment income (loss), ending 1,174,532 621,348
---------- ----------
CLASS I - CAPITAL SHARE ACTIVITY
Shares sold 1,111,192 1,452,218
Shares redeemed (326,491) (5,914,453)
---------- ----------
Net Institutional Share Activity 4,571 --(b) 789,272 (4,462,235)
---------- ----------
CLASS II - CAPITAL SHARE ACTIVITY
Shares sold 4,528 3,287,650
Shares redeemed (6,957) (45,349)
---------- ----------
Net Retirement Share Activity (2,429) 3,242,301
---------- ----------
Average NAV per Share based on capstock transactions 10.01 2.21
</Table>
a. Expense adjustments carried from SOP
b. Converting share activity in EC (Target) to EMO equivalent board on
average year.
# Conversion ratio is based on the average price of the Emerging Countries
Fund net change in capital share transactions.
+ Commenced operations on 5/28/2004.
14
<Page>
PRO FORMA SCHEDULE OF INVESTMENTS OF COMBINED FUND
SEPTEMBER 30, 2004 (UNAUDITED)
<Table>
<Caption>
EMERGING MARKETS OPPORTUNITIES FUND
-----------------------------------------------
NUMBER
OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCK - 89.5%
- -----------------------------------------------------------------------------------------------------------------------------
BRAZIL - 8.1%
All America Latina Logistica * 2,700 $ 56,097
Banco Bradesco S.A. ADR 1,800 94,860
Banco Itau S.A. ADR 400 22,200
Companhia Brasileira de Distribuicao Grupo Pao de Acucar ADR 3,200 63,968
Companhia de Bebidas das Americas ADR 3,100 69,440
Companhia de Saneamento Basico do Estado de Sal Paulo 530,000 24,845
Companhia Vale Do Rio Doce ADR
Empresa Brasiliera de Aeronautica S.A. ADR
Natura Cosmeticos S.A. 4,200 84,911
Petroleo Brasileiro S.A. ADR 1,500 52,875
Tele Norte Leste Participacoes S.A. ADR 2,900 38,367
Telecelular Sul Participacoes S.A. ADR 1,574 22,461
Telesp Celular Participacoes S.A ADR * 7,600 46,968
Uniao de Bancos Brasileiros S.A. ADR
Votorantim Celulose e Papel S.A. ADR 1,400 48,370
------------------- ---------------------------
625,362
------------------- ---------------------------
CHILE - 0.5%
Antofagasta PLC 1,881 38,497
------------------- ---------------------------
CZECH REPUBLIC - 0.5%
Komercni Banka A.S.
INDIA - 1.2%
India Tabacco, Ltd. GDR, 144A 3,900 96,474
Satyam Computer Services, Ltd. ADR 5,200 120,224
------------------- ---------------------------
216,698
------------------- ---------------------------
INDONESIA - 3.1%
Bank Central Asia PT 526,500 114,956
Bank Mandiri 506,000 80,098
Telekomunikasi TBK PT 226,000 102,391
------------------- ---------------------------
297,445
------------------- ---------------------------
ISREAL- 0.8%
Agis Industries (1983), Ltd. 2,573 64,095
Bank Hapoalim, Ltd 15,045 41,609
Teva Pharmaceutical Industrial, Ltd. + ADR
------------------- ---------------------------
105,704
------------------- ---------------------------
MALAYSIA - 3.9%
AMMB Holdings Berhad * 87,500 75,987
Commerce Asset-- Holding Berhad 72,900 86,329
Glomac Berhad 49,300 22,963
IOI Corp. Berhad 28,000 68,895
MK Land Holdings Berhad 120,900 63,313
Tenaga Nasional Berhad
------------------- ---------------------------
317,487
------------------- ---------------------------
MEXICO - 6.9%
Cemex S.A. de CV + ADR
Consorcio ARA S.A. de C.V. * 31,200 88,928
Corporacion Geo S.A.-- Ser. B *
Grupo Elektra S.A. 25,700 172,423
Grupo Financiero Banorte S.A de C.V. 16,600 78,105
Grupo Financiero Inbursa S.A de C.V. 31,676 54,032
Grupo Mexico S.A.-- Ser. B * 27,571 111,203
Grupo Telavisa S.A. ADR 1,900 100,187
Industrias Penoles S.A. de C.V. 15,400 71,581
Telefonos de Mexico S.A. de CV (Telmex) + ADR
------------------- ---------------------------
676,459
------------------- ---------------------------
PANAMA - 0.9%
Banco Latinoamericano de Exportaciones S.A. 5,200 79,820
------------------- ---------------------------
PHILIPPINES - 1.0%
Philippine Long Distance Telephone Co. * 3,500 86,746
------------------- ---------------------------
POLAND - 1.1%
Bank Zachodni Wbk S.A. 897 21,106
BRE Bank S.A. * 678 20,641
Orbis S.A. 3,105 20,496
Softbank S.A. GDR * 4,621 33,133
Telekomunikacja Polska S.A.
------------------- ---------------------------
95,376
------------------- ---------------------------
REBUBLIC OF CHINA - 7.1%
Aluminum Corp. of China, Ltd. 264,000 170,966
China Mobile Hong Kong, Ltd. +
China Mobile Hong Kong, Ltd. + ADR
China Petroleum & Chemical Corp. 226,000 92,017
Cosco Pacific Ltd. 58,000 96,691
Denway Motors, Ltd. 232,000 77,353
Huaneng Power International, Inc.-- Ser. H
Lee & Man Paper Manufacturing, Ltd. 84,000 63,554
Sinopec Shanghai Petrochem Cl. H 268,000 102,243
------------------- ---------------------------
602,824
------------------- ---------------------------
RUSSIAN FEDERATION - 3.2%
Irkutskenergo
LUKOIL Oil Co. ADR 800 99,200
North-West Telecom
RAO Unified Energy System--Reg GDR 1,481 43,023
Red October
Sibirtelecom
Slavneft-Megionneftgas *
Uralelektromed *
YUKOS Corp. + ADR 2,400 38,640
------------------- ---------------------------
180,863
------------------- ---------------------------
SINGAPORE - 0.2%
Hi-P International, Ltd. 148,000 150,321
------------------- ---------------------------
SOUTH AFRICA - 12.9%
African Bank Investment, Ltd. 57,399 115,153
Anglo American PLC +
Edgar Consolidated Stores, Ltd. 3,496 102,051
Ellerine Holdings, Ltd. 9,961 61,858
FirstRand 34,569 64,707
Foshini, Ltd. 8,640 38,096
Gold Fields, Ltd. 1,217 16,446
Harmony Gold Mining Co., Ltd. 1,770 24,083
Harmony Gold Mining Co., Ltd. ADR 6,100 83,082
Impala Platinum Holdings, Ltd. 1,155 92,578
Kumba Resources, Ltd. 27,103 164,292
Metropolitan Holdings, Ltd. 42,258 57,432
Mvelephanda Resources, Ltd. * 22,445 65,168
Old Mutual PLC
Pretoria Portland Cement Co., Ltd. 3,717 103,904
Reunert, Ltd. 14,450 62,263
Sanlam, Ltd. 21,461 36,326
Sasol, Ltd. 8,186 152,342
------------------- ---------------------------
1,239,781
------------------- ---------------------------
<Caption>
EMERGING COUNTRIES FUND
-----------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK - 89.5%
- ----------------------------------------------------------------------------------------------------------------------------------
BRAZIL - 8.1%
All America Latina Logistica * $
Banco Bradesco S.A. ADR 8,500 447,950
Banco Itau S.A. ADR 6,000 333,000
Companhia Brasileira de Distribuicao Grupo Pao de Acucar ADR 14,800 295,852
Companhia de Bebidas das Americas ADR 22,400 501,760
Companhia de Saneamento Basico do Estado de Sal Paulo 3,990,000 187,037
Companhia Vale Do Rio Doce ADR 11,400 219,450
Empresa Brasiliera de Aeronautica S.A. ADR 7,100 187,440
Natura Cosmeticos S.A.
Petroleo Brasileiro S.A. ADR 48,000 1,647,045
Tele Norte Leste Participacoes S.A. ADR 30,100 398,223
Telecelular Sul Participacoes S.A. ADR 11,722 167,273
Telesp Celular Participacoes S.A ADR * 57,000 352,260
Uniao de Bancos Brasileiros S.A. ADR 13,900 336,797
Votorantim Celulose e Papel S.A. ADR 10,500 362,775
--------------------------- ------------------------
5,436,862
--------------------------- ------------------------
CHILE - 0.5%
Antofagasta PLC 14,800 302,897
--------------------------- ------------------------
CZECH REPUBLIC - 0.5%
Komercni Banka A.S. 3,288 367,149
--------------------------- ------------------------
--------------------------- ------------------------
INDIA - 1.2%
India Tabacco, Ltd. GDR, 144A 28,800 712,426
Satyam Computer Services, Ltd. ADR
--------------------------- ------------------------
712,426
--------------------------- ------------------------
INDONESIA - 3.1%
Bank Central Asia PT 3,394,200 741,092
Bank Mandiri 3,273,100 518,122
Telekomunikasi TBK PT 1,795,400 813,418
--------------------------- ------------------------
2,072,632
--------------------------- ------------------------
ISREAL- 0.8%
Agis Industries (1983), Ltd.
Bank Hapoalim, Ltd
Teva Pharmaceutical Industrial, Ltd. + ADR 19,200 498,240
--------------------------- ------------------------
498,240
--------------------------- ------------------------
MALAYSIA - 3.9%
AMMB Holdings Berhad * 687,120 596,710
Commerce Asset-- Holding Berhad 532,300 630,355
Glomac Berhad
IOI Corp. Berhad 257,000 632,355
MK Land Holdings Berhad
Tenaga Nasional Berhad 266,100 770,289
--------------------------- ------------------------
2,629,709
--------------------------- ------------------------
MEXICO - 6.9%
Cemex S.A. de CV + ADR 13,400 377,076
Consorcio ARA S.A. de C.V. *
Corporacion Geo S.A.-- Ser. B * 233,000 336,141
Grupo Elektra S.A. 221,000 1,482,701
Grupo Financiero Banorte S.A de C.V.
Grupo Financiero Inbursa S.A de C.V.
Grupo Mexico S.A.-- Ser. B *
Grupo Telavisa S.A. ADR 10,500 553,665
Industrias Penoles S.A. de C.V.
Telefonos de Mexico S.A. de CV (Telmex) ADR 54,600 1,761,942
--------------------------- ------------------------
4,511,525
--------------------------- ------------------------
PANAMA - 0.9%
Banco Latinoamericano de Exportaciones S.A. 38,900 597,115
--------------------------- ------------------------
PHILIPPINES - 1.0%
Philippine Long Distance Telephone Co. * 27,400 679,097
--------------------------- ------------------------
POLAND - 1.1%
Bank Zachodni Wbk S.A. 6,687 157,346
BRE Bank S.A. * 5,788 176,210
Orbis S.A. 23,977 158,271
Softbank S.A. GDR * 15,297 109,680
Telekomunikacja Polska S.A. 27,300 118,066
--------------------------- ------------------------
719,573
--------------------------- ------------------------
REBUBLIC OF CHINA - 7.1%
Aluminum Corp. of China, Ltd. 1,988,000 1,287,424
China Mobile Hong Kong, Ltd. + 290,300 880,425
China Mobile Hong Kong, Ltd. + ADR 22,400 342,720
China Petroleum & Chemical Corp. 2,651,600 1,079,607
Cosco Pacific Ltd.
Denway Motors, Ltd. 1,716,000 572,143
Huaneng Power International, Inc.-- Ser. H 714,400 577,160
Lee & Man Paper Manufacturing, Ltd.
Sinopec Shanghai Petrochem Cl. H
--------------------------- ------------------------
4,739,479
--------------------------- ------------------------
RUSSIAN FEDERATION - 3.2%
Irkutskenergo 948,876 184,794
LUKOIL Oil Co. ADR 5,500 682,000
North-West Telecom 221,404 112,473
RAO Unified Energy System--Reg GDR 7,264 211,019
Red October 1,582 9,848
Sibirtelecom 2,609,410 129,688
Slavneft-Megionneftgas * 9,100 184,275
Uralelektromed * 1,582 91,756
YUKOS Corp. + ADR 38,114 613,635
--------------------------- ------------------------
2,219,488
--------------------------- ------------------------
SINGAPORE - 0.2%
Hi-P International, Ltd.
--------------------------- ------------------------
SOUTH AFRICA - 12.9%
African Bank Investment, Ltd. 425,565 853,759
Anglo American PLC + 91,427 2,174,480
Edgar Consolidated Stores, Ltd. 26,584 776,006
Ellerine Holdings, Ltd.
FirstRand 244,567 457,784
Foshini, Ltd. 38,173 168,315
Gold Fields, Ltd. 28,000 378,378
Harmony Gold Mining Co., Ltd.
Harmony Gold Mining Co., Ltd. ADR 60,226 820,278
Impala Platinum Holdings, Ltd.
Kumba Resources, Ltd. 162,500 985,039
Metropolitan Holdings, Ltd. 149,498 203,179
Mvelephanda Resources, Ltd. *
Old Mutual PLC 101,582 208,341
Pretoria Portland Cement Co., Ltd.
Reunert, Ltd. 40,769 175,669
Sanlam, Ltd.
Sasol, Ltd. 68,100 1,267,344
--------------------------- ------------------------
8,468,572
--------------------------- ------------------------
<Caption>
ADJUSTMENTS COMBINED FUNDS PROFORMA
--------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------- --------------------------------------------
COMMON STOCK - 89.5%
- ---------------------------------------------------------------------- --------------------------------------------
BRAZIL - 8.1%
All America Latina Logistica * 2,700 56,097
Banco Bradesco S.A. ADR 10,300 542,810
Banco Itau S.A. ADR 6,400 355,200
Companhia Brasileira de Distribuicao Grupo Pao de Acucar ADR 18,000 359,820
Companhia de Bebidas das Americas ADR 25,500 571,200
Companhia de Saneamento Basico do Estado de Sal Paulo 4,520,000 211,882
Companhia Vale Do Rio Doce ADR 11,400 219,450
Empresa Brasiliera de Aeronautica S.A. ADR 7,100 187,440
Natura Cosmeticos S.A. 4,200 84,911
Petroleo Brasileiro S.A. ADR 49,500 1,699,920
Tele Norte Leste Participacoes S.A. ADR 33,000 436,590
Telecelular Sul Participacoes S.A. ADR 13,296 189,734
Telesp Celular Participacoes S.A ADR * 64,600 399,228
Uniao de Bancos Brasileiros S.A. ADR 13,900 336,797
Votorantim Celulose e Papel S.A. ADR 11,900 411,145
--------------------- ---------------------
6,062,224
--------------------- ---------------------
CHILE - 0.5%
Antofagasta PLC 16,681 341,394
--------------------- ---------------------
CZECH REPUBLIC - 0.5%
Komercni Banka A.S. 3,288 367,149
--------------------- ---------------------
--------------------- ---------------------
INDIA - 1.2%
India Tabacco, Ltd. GDR, 144A 32,700 808,900
Satyam Computer Services, Ltd. ADR 5,200 120,224
--------------------- ---------------------
929,124
--------------------- ---------------------
INDONESIA - 3.1%
Bank Central Asia PT 3,920,700 856,048
Bank Mandiri 3,779,100 598,220
Telekomunikasi TBK PT 2,021,400 915,809
--------------------- ---------------------
2,370,077
--------------------- ---------------------
ISREAL- 0.8%
Agis Industries (1983), Ltd. 2,573 64,095
Bank Hapoalim, Ltd 15,045 41,609
Teva Pharmaceutical Industrial, Ltd. + ADR 19,200 498,240
--------------------- ---------------------
603,944
--------------------- ---------------------
MALAYSIA - 3.9%
AMMB Holdings Berhad * 774,620 672,697
Commerce Asset-- Holding Berhad 605,200 716,684
Glomac Berhad 49,300 22,963
IOI Corp. Berhad 285,000 701,250
MK Land Holdings Berhad 120,900 63,313
Tenaga Nasional Berhad 266,100 770,289
--------------------- ---------------------
2,947,196
--------------------- ---------------------
MEXICO - 6.9%
Cemex S.A. de CV + ADR 13,400 377,076
Consorcio ARA S.A. de C.V. * 31,200 88,928
Corporacion Geo S.A.-- Ser. B * 233,000 336,141
Grupo Elektra S.A. 246,700 1,655,124
Grupo Financiero Banorte S.A de C.V. 16,600 78,105
Grupo Financiero Inbursa S.A de C.V. 31,676 54,032
Grupo Mexico S.A.-- Ser. B * 27,571 111,203
Grupo Telavisa S.A. ADR 12,400 653,852
Industrias Penoles S.A. de C.V. 15,400 71,581
Telefonos de Mexico S.A. de CV (Telmex) ADR 54,600 1,761,942
--------------------- ---------------------
5,187,984
--------------------- ---------------------
0 0
PANAMA - 0.9% 0 0
Banco Latinoamericano de Exportaciones S.A. 44,100 676,935
--------------------- ---------------------
PHILIPPINES - 1.0%
Philippine Long Distance Telephone Co. * 30,900 765,843
--------------------- ---------------------
POLAND - 1.1%
Bank Zachodni Wbk S.A. 7,584 178,452
BRE Bank S.A. * 6,466 196,851
Orbis S.A. 27,082 178,767
Softbank S.A. GDR * 19,918 142,813
Telekomunikacja Polska S.A. 27,300 118,066
--------------------- ---------------------
814,949
--------------------- ---------------------
REBUBLIC OF CHINA - 7.1%
Aluminum Corp. of China, Ltd. 2,252,000 1,458,390
China Mobile Hong Kong, Ltd. + 290,300 880,425
China Mobile Hong Kong, Ltd. + ADR 22,400 342,720
China Petroleum & Chemical Corp. 2,877,600 1,171,624
Cosco Pacific Ltd. 58,000 96,691
Denway Motors, Ltd. 1,948,000 649,496
Huaneng Power International, Inc.-- Ser. H 714,400 577,160
Lee & Man Paper Manufacturing, Ltd. 84,000 63,554
Sinopec Shanghai Petrochem Cl. H 268,000 102,243
--------------------- ---------------------
5,342,303
--------------------- ---------------------
RUSSIAN FEDERATION - 3.2% 0 0
Irkutskenergo 948,876 184,794
LUKOIL Oil Co. ADR 6,300 781,200
North-West Telecom 221,404 112,473
RAO Unified Energy System--Reg GDR 8,745 254,042
Red October 1,582 9,848
Sibirtelecom 2,609,410 129,688
Slavneft-Megionneftgas * 9,100 184,275
Uralelektromed * 1,582 91,756
YUKOS Corp. + ADR 40,514 652,275
--------------------- ---------------------
2,400,351
--------------------- ---------------------
SINGAPORE - 0.2%
Hi-P International, Ltd. 148,000 150,321
--------------------- ---------------------
SOUTH AFRICA - 12.9%
African Bank Investment, Ltd. 482,964 968,912
Anglo American PLC + 91,427 2,174,480
Edgar Consolidated Stores, Ltd. 30,080 878,057
Ellerine Holdings, Ltd. 9,961 61,858
FirstRand 279,136 522,491
Foshini, Ltd. 46,813 206,411
Gold Fields, Ltd. 29,217 394,824
Harmony Gold Mining Co., Ltd. 1,770 24,083
Harmony Gold Mining Co., Ltd. ADR 66,326 903,360
Impala Platinum Holdings, Ltd. 1,155 92,578
Kumba Resources, Ltd. 189,603 1,149,331
Metropolitan Holdings, Ltd. 191,756 260,611
Mvelephanda Resources, Ltd. * 22,445 65,168
Old Mutual PLC 101,582 208,341
Pretoria Portland Cement Co., Ltd. 3,717 103,904
Reunert, Ltd. 55,219 237,932
Sanlam, Ltd. 21,461 36,326
Sasol, Ltd. 76,286 1,419,686
--------------------- ---------------------
9,708,353
--------------------- ---------------------
<Page>
<Caption>
EMERGING MARKETS OPPORTUNITIES FUND
-----------------------------------------------
NUMBER
OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
SOUTH KOREA - 18.0%
Hynix Semiconductor Inc. *
Hyundai Motor Co. GDR, 144A 6,300 144,396
Hyundai Motor Co., Ltd.
Kookmin Bank *
Kookmin Bank-- Spon. ADR *
LG Electronics, Inc.
LG Home Shopping, Inc. 2,340 90,328
Ncsoft Corp. *
NHN Corp.
Pohang Iron & Steel Co., Ltd.
POSCO ADR 2,700 102,195
* Samsung Electronics Co., Ltd. +
* Samsung Electronics Co., Ltd. + GDR, 144A
Shinhan Financial Group Co. ADR * 3,400 117,640
Shinhan Financial Group Co., Ltd.
Shinsegae Co., Ltd.
SK Telecom Co., Ltd
SK Telecom Co., Ltd ADR 4,000 77,800
------------------- ---------------------------
532,359
------------------- ---------------------------
TAIWAN - 13.4%
Acer, Inc. 62,000 83,956
Asustek Computer, Inc. GDR, 144A 66,164 142,914
Benq Corp.
Cathay Financial Holding Co., Ltd. 55,000 103,621
Chinatrust Financial Holding
Compeq Manufacturing Co., Ltd. * 301,000 98,354
Eva Airways Corp. 316,723 123,072
Formosa Plastic Corp.
Fubon Financial Holding Corp. 84,000 77,150
Largan Precision Co., Ltd. 8,700 61,210
Nanya Technology Corp. * 5,000 4,136
Optimax Technology Corp. 40,431 91,050
Phoenix Precision Tech Corp. 199,989 91,841
Powerchip Semiconductor Corp. GDR, 144A * 11,600 84,680
* Siliconware Precision Industries Co. + 190,700 130,801
Taiwan Semiconductor Manufacturing Co., Ltd
Taiwan Styrene Monomer Corp. 87,000 63,771
* United Microelectronics Corp. + *
Yuanta Core Pacific Securities Co., Ltd. * 173,000 122,225
------------------- ---------------------------
1,278,781
------------------- ---------------------------
THAILAND - 2.6%
Advanced Info Services PCL 43,500 105,009
Krung Thai Bank, Ltd. 461,700 90,278
Quality Houses Public Co., Ltd.
------------------- ---------------------------
195,287
------------------- ---------------------------
TURKEY - 2.9%
Aksigorta A.S. 10,144,000 32,342
Arcelik A.S. *
Haci Omer Sabanci Holding 7,358,000 26,392
Hurriyet Gazetecilik ve Matbaacilik A.S. 27,353,500 49,511
Turk Otomobil Fabrikasi A.S. *
Turkiye Garanti Bankasi A.S. * 21,367,000 71,673
Yapi ve Kredi Bankasi A.S. *
------------------- ---------------------------
179,918
------------------- ---------------------------
UNITED KINGDOM - 1.1%
* BHP Billiton, Ltd. +
------------------- ---------------------------
UNITED STATES - 0.1%
NII Holdings, Inc. Cl. B * 1,900 78,299
------------------- ---------------------------
TOTAL COMMON STOCK 6,978,027
=================== ===========================
(COST EMERGING COUNTRIES : $50,672,782)
(COST EMERGING MARKETS OPPORTUNTIES : $6,513,926)
<Caption>
PRICIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
Preferred Stock - 4.5%
- -----------------------------------------------------------------------------------------------------------------------------
BRAZIL - 3.7%
All America Latina Logistica
Banco Bradesco S.A
Braskem S.A. Cl. A * 2,180,000 72,590
Caemi Mineracao E Metal * 210,000 132,214
Companhia Energetica de Minas Gerais 900,000 18,951
Suzano Bahia Sul Papel e Celulose S.A. 11,201 46,426
Tele Sudeste Celular Participacoes S.A. 9,600,000 24,277
Telemar Norte Leste S.A. 1,700 30,028
Ultrapar Participacoes S.A. 1,500,000 24,129
Usinas Siderurgicas de Minas Gerais-- Ser A 4,400 68,178
------------------- ---------------------------
416,793
------------------- ---------------------------
RUSSIAN FEDERATION - 0.4%
Transneft
------------------- ---------------------------
SOUTH KOREA - 0.4%
Hyundai Motor Co., Ltd
------------------- ---------------------------
TOTAL PREFERRED STOCK 0 416,793
=================== ===========================
(COST EMERGING COUNTRIES : $1,413,279)
(COST EMERGING MARKETS OPPORTUNTIES : $275,659)
<Caption>
PRICIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
EQUITY-LINKED SECURITIES - 4.3%
- -----------------------------------------------------------------------------------------------------------------------------
INDIA - 1.9%
UBS AG Bharat Petroleum Corp. 8,408 64,708
UBS AG London Bharat Petroleum Corp.
UBS AG Satyam Computers Services, Ltd.-- 01/10/05
------------------- ---------------------------
64,708
------------------- ---------------------------
SOUTH KOREA - 1.7%
Credit Suisse FB Hyundai Department Store Co., Ltd.-- 01/17/05 3,010 84,954
Credit Suisse FB Kangwon Land, Inc.-- 09/22/06 * 7,840 84,429
Credit Suisse FB Kia Motors Corp.-- 09/02/05 * 10,420 95,916
Credit Suisse FB LG Electronics, Inc.-- 05/06/05 1,870 107,506
Credit Suisse FB NHN Corp.-- 03/26/07 * 910 76,103
Credit Suisse FB Shinsegae Co.-- 07/05/05 * 330 87,838
UBS AG-- Top Engineering Co., Ltd. 7,225 55,531
UBS AG Daegu Bank 15,640 89,101
UBS AG Halla Climate Control Corp. 11,530 104,139
UBS AG Hynix Semiconductor, Inc. 11,830 107,878
UBS AG Interflex Co., Ltd.-- 05/27/05 3,661 76,621
UBS AG KH Vatec Co., Ltd. 1,897 44,728
UBS AG Ncsoft Corp.-- 05/27/05 1,020 83,886
UBS Samsung Electro-Mechanics Co., Ltd. 6,640 170,110
------------------- ---------------------------
1,268,740
------------------- ---------------------------
TAIWAN - 0.7%
Credit Suisse FB United Microelectronics Corp.-- 01/26/07
------------------- ---------------------------
TOTAL EQUITY-LINKED SECURITIES 1,333,448
=================== ===========================
(COST EMERGING COUNTRIES : $1,574,222)
(COST EMERGING MARKETS OPPORTUNTIES : $1,397,781)
<Caption>
EMERGING COUNTRIES FUND
------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
SOUTH KOREA - 18.0%
Hynix Semiconductor Inc. * 73,450 669,757
Hyundai Motor Co. GDR, 144A
Hyundai Motor Co., Ltd. 22,760 1,049,549
Kookmin Bank * 15,848 501,658
Kookmin Bank-- Spon. ADR * 10,600 337,504
LG Electronics, Inc. 14,220 817,511
LG Home Shopping, Inc. 18,179 701,743
Ncsoft Corp. * 8,958 736,711
NHN Corp. 7,289 609,579
Pohang Iron & Steel Co., Ltd. 5,140 765,532
POSCO ADR
Samsung Electronics Co., Ltd. 9,217 3,665,989
Samsung Electronics Co., Ltd. + GDR, 144A 2,000 396,000
Shinhan Financial Group Co. + ADR *
Shinhan Financial Group Co., Ltd. 60,120 1,038,982
Shinsegae Co., Ltd. 3,440 915,640
SK Telecom Co., Ltd 1,830 278,910
SK Telecom Co., Ltd ADR 29,500 573,775
--------------------------- ------------------------
13,058,840
--------------------------- ------------------------
TAIWAN - 13.4%
Acer, Inc.
Asustek Computer, Inc. GDR, 144A 502,137 1,084,616
Benq Corp. 251,900 261,021
Cathay Financial Holding Co., Ltd. 545,000 1,026,788
Chinatrust Financial Holding 621,986 670,141
Compeq Manufacturing Co., Ltd. * 1,815,000 593,067
Eva Airways Corp.
Formosa Plastic Corp. 417,534 651,437
Fubon Financial Holding Corp. 610,000 560,259
Largan Precision Co., Ltd. 33,220 233,723
Nanya Technology Corp. * 19,690 16,288
Optimax Technology Corp. 255,396 575,149
Phoenix Precision Tech Corp. 907,104 416,568
Powerchip Semiconductor Corp. GDR, 144A *
Siliconware Precision Industries Co. 1,093,400 749,962
Taiwan Semiconductor Manufacturing Co., Ltd + 754,888 962,221
Taiwan Styrene Monomer Corp. + 567,400 415,904
United Microelectronics Corp. * 1,031,342 622,388
Yuanta Core Pacific Securities Co., Ltd. *
--------------------------- ------------------------
8,839,532
--------------------------- ------------------------
THAILAND - 2.6%
Advanced Info Services PCL 412,800 996,500
Krung Thai Bank, Ltd. 3,655,900 714,853
Quality Houses Public Co., Ltd. 1,261,830 36,248
--------------------------- ------------------------
1,747,601
--------------------------- ------------------------
TURKEY - 2.9%
Aksigorta A.S. 74,091,500 236,227
Arcelik A.S. * 31,008,000 181,249
Haci Omer Sabanci Holding 57,477,800 206,164
Hurriyet Gazetecilik ve Matbaacilik A.S. 213,665,010 386,740
Turk Otomobil Fabrikasi A.S. * 131,445,907 314,318
Turkiye Garanti Bankasi A.S. * 158,977,000 533,267
Yapi ve Kredi Bankasi A.S. * 63,682,800 167,085
--------------------------- ------------------------
2,025,050
--------------------------- ------------------------
UNITED KINGDOM - 1.1%
BHP Billiton, Ltd. 77,800 817,050
--------------------------- ------------------------
UNITED STATES - 0.1%
NII Holdings, Inc. Cl. B *
--------------------------- ------------------------
TOTAL COMMON STOCK 60,442,837
=========================== ========================
(COST EMERGING COUNTRIES : $50,672,782)
(COST EMERGING MARKETS OPPORTUNTIES : $6,513,926)
<Caption>
PRICIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
Preferred Stock - 4.5%
- ----------------------------------------------------------------------------------------------------------------------------------
BRAZIL - 3.7%
All America Latina Logistica 21,100 438,384
Banco Bradesco S.A 6,263 330,127
Braskem S.A. Cl. A * 14,570,000 485,157
Caemi Mineracao E Metal * 338,000 212,802
Companhia Energetica de Minas Gerais 8,400,000 176,873
Suzano Bahia Sul Papel e Celulose S.A.
Tele Sudeste Celular Participacoes S.A. 63,800,000 161,341
Telemar Norte Leste S.A.
Ultrapar Participacoes S.A.
Usinas Siderurgicas de Minas Gerais-- Ser A 33,700 522,179
--------------------------- ------------------------
2,326,863
--------------------------- ------------------------
RUSSIAN FEDERATION - 0.4%
Transneft 360 321,480
--------------------------- ------------------------
SOUTH KOREA - 0.4%
Hyundai Motor Co., Ltd 12,230 316,504
--------------------------- ------------------------
TOTAL PREFERRED STOCK 12,590 2,964,847
=========================== ========================
(COST EMERGING COUNTRIES : $1,413,279)
(COST EMERGING MARKETS OPPORTUNTIES : $275,659)
PRICIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY-LINKED SECURITIES - 4.3%
- ----------------------------------------------------------------------------------------------------------------------------------
INDIA - 1.9%
UBS AG Bharat Petroleum Corp.
UBS AG London Bharat Petroleum Corp. 63,934 492,036
UBS AG Satyam Computers Services, Ltd.-- 01/10/05 108,543 890,487
--------------------------- ------------------------
1,382,523
--------------------------- ------------------------
SOUTH KOREA - 1.7%
Credit Suisse FB Hyundai Department Store Co., Ltd.-- 01/17/05
Credit Suisse FB Kangwon Land, Inc.-- 09/22/06 *
Credit Suisse FB Kia Motors Corp.-- 09/02/05 *
Credit Suisse FB LG Electronics, Inc.-- 05/06/05
Credit Suisse FB NHN Corp.-- 03/26/07 *
Credit Suisse FB Shinsegae Co.-- 07/05/05 *
UBS AG-- Top Engineering Co., Ltd.
UBS AG Daegu Bank
UBS AG Halla Climate Control Corp.
UBS AG Hynix Semiconductor, Inc.
UBS AG Interflex Co., Ltd.-- 05/27/05
UBS AG KH Vatec Co., Ltd.
UBS AG Ncsoft Corp.-- 05/27/05
UBS Samsung Electro-Mechanics Co., Ltd.
--------------------------- ------------------------
-
--------------------------- ------------------------
TAIWAN - 0.7%
Credit Suisse FB United Microelectronics Corp.-- 01/26/07 872,467 526,097
--------------------------- ------------------------
TOTAL EQUITY-LINKED SECURITIES 1,908,620
=========================== ========================
(COST EMERGING COUNTRIES : $1,574,222)
(COST EMERGING MARKETS OPPORTUNTIES : $1,397,781)
<Caption>
ADJUSTMENTS COMBINED FUNDS PROFORMA
--------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------- --------------------------------------------
SOUTH KOREA - 18.0%
Hynix Semiconductor Inc. * 73,450 669,757
Hyundai Motor Co. GDR, 144A 6,300 144,396
Hyundai Motor Co., Ltd. 22,760 1,049,549
Kookmin Bank * 15,848 501,658
Kookmin Bank-- Spon. ADR * 10,600 337,504
LG Electronics, Inc. 14,220 817,511
LG Home Shopping, Inc. 20,519 792,071
Ncsoft Corp. * 8,958 736,711
NHN Corp. 7,289 609,579
Pohang Iron & Steel Co., Ltd. 5,140 765,532
POSCO ADR 2,700 102,195
Samsung Electronics Co., Ltd. 9,217 3,665,989
Samsung Electronics Co., Ltd. + GDR, 144A 2,000 396,000
Shinhan Financial Group Co. + ADR * 3,400 117,640
Shinhan Financial Group Co., Ltd. 60,120 1,038,982
Shinsegae Co., Ltd. 3,440 915,640
SK Telecom Co., Ltd 1,830 278,910
SK Telecom Co., Ltd ADR 33,500 651,575
--------------------- ---------------------
13,591,199
--------------------- ---------------------
TAIWAN - 13.4%
Acer, Inc. 62,000 83,956
Asustek Computer, Inc. GDR, 144A 568,301 1,227,530
Benq Corp. 251,900 261,021
Cathay Financial Holding Co., Ltd. 600,000 1,130,409
Chinatrust Financial Holding 621,986 670,141
Compeq Manufacturing Co., Ltd. * 2,116,000 691,421
Eva Airways Corp. 316,723 123,072
Formosa Plastic Corp. 417,534 651,437
Fubon Financial Holding Corp. 694,000 637,409
Largan Precision Co., Ltd. 41,920 294,933
Nanya Technology Corp. * 24,690 20,424
Optimax Technology Corp. 295,827 666,199
Phoenix Precision Tech Corp. 1,107,093 508,409
Powerchip Semiconductor Corp. GDR, 144A * 11,600 84,680
Siliconware Precision Industries Co. 1,284,100 880,763
Taiwan Semiconductor Manufacturing Co., Ltd + 754,888 962,221
Taiwan Styrene Monomer Corp. 654,400 479,675
United Microelectronics Corp. + * 1,031,342 622,388
Yuanta Core Pacific Securities Co., Ltd. * 173,000 122,225
--------------------- ---------------------
10,118,313
--------------------- ---------------------
THAILAND - 2.6%
Advanced Info Services PCL 456,300 1,101,509
Krung Thai Bank, Ltd. 4,117,600 805,131
Quality Houses Public Co., Ltd. 1,261,830 36,248
--------------------- ---------------------
1,942,888
--------------------- ---------------------
TURKEY - 2.9%
Aksigorta A.S. 84,235,500 268,569
Arcelik A.S. * 31,008,000 181,249
Haci Omer Sabanci Holding 64,835,800 232,556
Hurriyet Gazetecilik ve Matbaacilik A.S. 241,018,510 436,251
Turk Otomobil Fabrikasi A.S. * 131,445,907 314,318
Turkiye Garanti Bankasi A.S. * 180,344,000 604,940
Yapi ve Kredi Bankasi A.S. * 63,682,800 167,085
--------------------- ---------------------
2,204,968
--------------------- ---------------------
UNITED KINGDOM - 1.1%
BHP Billiton, Ltd. + 77,800 817,050
--------------------- ---------------------
UNITED STATES - 0.1%
NII Holdings, Inc. Cl. B * 1,900 78,299
--------------------- ---------------------
TOTAL COMMON STOCK 67,420,864
===================== =====================
(COST EMERGING COUNTRIES : $50,672,782)
(COST EMERGING MARKETS OPPORTUNTIES : $6,513,926)
<Caption>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------- --------------------------------------------
Preferred Stock - 4.5%
- ----------------------------------------------------------------------------- --------------------------------------------
BRAZIL - 3.7%
All America Latina Logistica 21,100 438,384
Banco Bradesco S.A 6,263 330,127
Braskem S.A. Cl. A * 16,750,000 557,747
Caemi Mineracao E Metal * 548,000 345,016
Companhia Energetica de Minas Gerais 9,300,000 195,824
Suzano Bahia Sul Papel e Celulose S.A. 11,201 46,426
Tele Sudeste Celular Participacoes S.A. 73,400,000 185,618
Telemar Norte Leste S.A. 1,700 30,028
Ultrapar Participacoes S.A. 1,500,000 24,129
Usinas Siderurgicas de Minas Gerais-- Ser A 38,100 590,357
--------------------- ---------------------
2,743,656
--------------------- ---------------------
RUSSIAN FEDERATION - 0.4%
Transneft 360 321,480
--------------------- ---------------------
SOUTH KOREA - 0.4%
Hyundai Motor Co., Ltd 12,230 316,504
--------------------- ---------------------
TOTAL PREFERRED STOCK 12,590 3,381,640
===================== =====================
(COST EMERGING COUNTRIES : $1,413,279)
(COST EMERGING MARKETS OPPORTUNTIES : $275,659)
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------- --------------------------------------------
EQUITY-LINKED SECURITIES - 4.3%
- ----------------------------------------------------------------------------- --------------------------------------------
INDIA - 1.9%
UBS AG Bharat Petroleum Corp. 8,408 64,708
UBS AG London Bharat Petroleum Corp. 63,934 492,036
UBS AG Satyam Computers Services, Ltd.-- 01/10/05 108,543 890,487
--------------------- ---------------------
1,447,231
--------------------- ---------------------
SOUTH KOREA - 1.7%
Credit Suisse FB Hyundai Department Store Co., Ltd.-- 01/17/05 3,010 84,954
Credit Suisse FB Kangwon Land, Inc.-- 09/22/06 * 7,840 84,429
Credit Suisse FB Kia Motors Corp.-- 09/02/05 * 10,420 95,916
Credit Suisse FB LG Electronics, Inc.-- 05/06/05 1,870 107,506
Credit Suisse FB NHN Corp.-- 03/26/07 * 910 76,103
Credit Suisse FB Shinsegae Co.-- 07/05/05 * 330 87,838
UBS AG-- Top Engineering Co., Ltd. 7,225 55,531
UBS AG Daegu Bank 15,640 89,101
UBS AG Halla Climate Control Corp. 11,530 104,139
UBS AG Hynix Semiconductor, Inc. 11,830 107,878
UBS AG Interflex Co., Ltd.-- 05/27/05 3,661 76,621
UBS AG KH Vatec Co., Ltd. 1,897 44,728
UBS AG Ncsoft Corp.-- 05/27/05 1,020 83,886
UBS Samsung Electro-Mechanics Co., Ltd. 6,640 170,110
--------------------- ---------------------
1,268,740
--------------------- ---------------------
TAIWAN - 0.7%
Credit Suisse FB United Microelectronics Corp.-- 01/26/07 872,467 526,097
--------------------- ---------------------
TOTAL EQUITY-LINKED SECURITIES 3,242,068
===================== =====================
(COST EMERGING COUNTRIES : $1,574,222)
(COST EMERGING MARKETS OPPORTUNTIES : $1,397,781)
<Page>
<Caption>
EMERGING MARKETS OPPORTUNITIES FUND
-----------------------------------------------
PRICIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENT - 1.0%
- -----------------------------------------------------------------------------------------------------------------------------
TIME DEPOSITS - 0.9%
Brown Brothers Harriman & Co.
1.300%, 10/01/04
(Cost: $636,430)
------------------- ---------------------------
UNITED STATES - 0.1%
HSBC Bank USA
1.300%, 10/01/04
(Cost: $103,349) 103,349 103,349
------------------- ---------------------------
TOTAL SHORT TERM INVESTMENTS 103,349
=================== ===========================
(COST EMERGING COUNTRIES : $636,431)
(COST EMERGING MARKETS OPPORTUNTIES : $103,349)
---------------------------
TOTAL INVESTMENTS - 99.3% 8,831,617
===========================
(COST EMERGING COUNTRIES : $54,296,713)
(COST EMERGING MARKETS OPPORTUNTIES : $8,290,715)
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.7% 10,309
---------------------------
NET ASSETS - 100.0% $ 8,841,926
===========================
<Caption>
EMERGING COUNTRIES FUND
-----------------------------------------------------
PRICIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENT - 1.0%
- ----------------------------------------------------------------------------------------------------------------------------------
TIME DEPOSITS - 0.9%
Brown Brothers Harriman & Co.
1.300%, 10/01/04
(Cost: $636,430) 636,431 636,431
--------------------------- ------------------------
UNITED STATES - 0.1%
HSBC Bank USA
1.300%, 10/01/04
(Cost: $103,349)
--------------------------- ------------------------
TOTAL SHORT TERM INVESTMENTS 636,431
=========================== ========================
(COST EMERGING COUNTRIES : $636,431)
(COST EMERGING MARKETS OPPORTUNTIES : $103,349)
------------------------
TOTAL INVESTMENTS - 99.3% 65,952,735
========================
(COST EMERGING COUNTRIES : $54,296,713)
(COST EMERGING MARKETS OPPORTUNTIES : $8,290,715)
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.7% 553,882
------------------------
NET ASSETS - 100.0% $ 66,506,617
========================
<Caption>
ADJUSTMENTS COMBINED FUNDS PROFORMA
--------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------- --------------------------------------------
SHORT TERM INVESTMENT - 1.0%
- ---------------------------------------------------------------------- --------------------------------------------
TIME DEPOSITS - 0.9%
Brown Brothers Harriman & Co.
1.300%, 10/01/04
(Cost: $636,430) 636,431 636,431
--------------------- ---------------------
UNITED STATES - 0.1%
HSBC Bank USA
1.300%, 10/01/04
(Cost: $103,349) 103,349 103,349
--------------------- ---------------------
TOTAL SHORT TERM INVESTMENTS 739,780
===================== =====================
(COST EMERGING COUNTRIES : $636,431)
(COST EMERGING MARKETS OPPORTUNTIES : $103,349)
---------------------
TOTAL INVESTMENTS - 99.3% 74,784,352
=====================
(COST EMERGING COUNTRIES : $54,296,713)
(COST EMERGING MARKETS OPPORTUNTIES : $8,290,715)
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.7% 2,627 566,818
---------------------
NET ASSETS - 100.0% 2,627 $ 75,351,170
=====================
</Table>
+ Security may be sold or trimmed to align Target and EMO portfolios assuming
closing on September 30, 2004.
* Non-income producing securities.
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
<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 Emerging Countries Fund (the "Fund") and
Emerging Markets Opportunities Fund, whereby, subject to approval by the
shareholders of the Fund, the Emerging Markets Opportunities Fund will
acquire all of the assets of the Emerging Countries Fund subject to the
liabilities of such Fund, in exchange for Class I and Class II 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 Emerging Markets Opportunities 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.
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2004 (UNAUDITED)
<Table>
<Caption>
EMERGING EMERGING MARKETS
COUNTRIES OPPORTUNITIES
--------------- ----------------
ASSETS
Investments, at value* $ 65,952,735 $ 8,831,617
Foreign currencies, at value** 503,133 30,545
Cash 25,458 9,925
Receivables:
Investment securities sold -- --
Capital shares sold 4,630 --
Dividends 187,798 14,524
Foreign taxes receivable 599 --
Interest -- --
Expense offset and other 52,445 2,581
Other assets 4,354 10,019
------------- ----------------
Total assets 66,731,152 8,899,211
------------- ----------------
LIABILITIES
Payables:
Bank overdraft $ -- $ --
Investments purchased -- 12,856
Capital shares redeemed 30,087 --
Collateral on securities loaned -- --
Distributions fee -- --
To investment advisor 51,865 --
Other Liabilities 142,583 44,429
------------- ----------------
Total Liabilities 224,535 57,285
------------- ----------------
NET ASSETS 66,506,617 8,841,926
============= ================
* Investments, at cost 54,296,713 8,290,715
============= ================
** Foreign currencies, at cost 499,822 29,983
============= ================
NET ASSETS CONSIST OF:
Paid-in capital $ 75,738,577 $ 8,301,330
Undistributed net investment income (loss) 1,151,074 20,831
Accumulated net realized gain (loss) on
investments and foreign currencies (22,042,953) (21,756)
Net unrealized appreciation (depreciation) of
investments and of other assets and
liabilities denominated in foreign currencies 11,659,919 541,521
------------- ----------------
Net Assets applicable to all shares outstanding $ 66,506,617 $ 8,841,926
============= ================
Net Assets of Class I shares $ 17,869,030 $ 8,841,926
Net Assets of Class II shares 48,637,587 --
Net Assets of Class III shares -- --
Net Assets of Class IV shares -- --
Net Assets of Class R shares -- --
============= ================
Class I Shares outstanding 1,190,898 826,562
Class II Shares outstanding 3,239,872 --
Class III Shares outstanding -- --
Class IV Shares outstanding -- --
Class R Shares outstanding -- --
============= ================
Net Asset Value -- Class I Share $ 15.00 $ 10.70
Net Asset Value -- Class II Share $ 15.01 $ --
Net Asset Value -- Class III Share $ -- $ --
Net Asset Value -- Class IV Share $ -- $ --
Net Asset Value -- Class R Share $ -- $ --
============= ================
</Table>
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
STATEMENTS OF OPERATIONS
PERIOD ENDED SEPTEMBER 30, 2004 (UNAUDITED)
<Table>
<Caption>
EMERGING
EMERGING MARKETS
COUNTRIES OPPORTUNITIES
-------------- ----------------
INVESTMENT INCOME
Dividends, net of foreign taxes* $ 967,938 $ 65,137
Interest 60 542
------------- ----------------
Total Income 967,998 65,679
------------- ----------------
EXPENSES
Advisory fees 276,898 23,645
Accounting and administration fees 33,580 1,904
Custodian fees 76,066 33,694
Transfer agent fees and expenses 14,494 7,235
Shareholder servicing fees 48,710 5,254
Administrative services fees 46,361 5,254
Professional fees 22,674 1,626
Shareholder reporting 13,951 1,253
Registration fees 4,906 4,956
Trustees' fees and expenses 3,801 459
Interest and credit facility fee 644 136
Insurance 3,884 --
Miscellaneous 4,480 386
------------- ----------------
Total Expenses 550,449 85,802
Expense offset (83,445) (1,264)
Expenses (reimbursed)/recouped (28,732) (39,690)
------------- ----------------
Net Expenses 438,272 44,848
------------- ----------------
NET INVESTMENT INCOME (LOSS) 529,726 20,831
------------- ----------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Realized gain from:
Securities 4,066,037 (6,021)
Foreign currency transactions (23,784) (15,735)
------------- ----------------
Net realized gain (loss) 4,042,253 (21,756)
------------- ----------------
Change in unrealized appreciation
(depreciation) of:
Investments (10,116,334) 540,902
Other assets and liabilities denominated
in foreign currencies (16,495) 619
------------- ----------------
Net unrealized appreciation (depreciation) (10,132,829) 541,521
------------- ----------------
NET GAIN (LOSS) ON INVESTMENTS (6,090,576) 519,765
------------- ----------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS $ (5,560,850) $ 540,596
============= ================
* Foreign taxes withheld $ 116,500 $ 8,701
------------- ----------------
</Table>
<Page>
<Table>
<Caption>
EMERGING COUNTRIES
-----------------------------
SEPTEMBER 30,
2004 MARCH 31,
(UNAUDITED) 2004
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income (loss) $ 529,726 $ 721,176
Net realized gain (loss) 4,042,253 9,755,600
Net unrealized appreciation (depreciation) (10,132,829) 22,321,238
------------- -------------
Net increase (decrease) in net assets
from investment operations (5,560,850) 32,798,014
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- --
From net realized gains -- --
------------- -------------
Total distributions -- --
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
Class I 4,262,756 18,773,501
Class II 67,003 43,525,917
Class III -- --
Class IV -- --
Class R -- --
Distributions reinvested
Class I -- --
Class II -- --
Class III -- --
Class IV -- --
Class R -- --
Cost of shares redeemed
Class I (4,629,377) (71,487,521)
Class II (99,287) (669,828)
Class III -- --
Class IV -- --
Class R -- --
------------- -------------
Net increase (decrease) in net assets
from share transactions (398,905) (9,857,931)
------------- -------------
Net Increase (Decrease) in Net Assets (5,959,755) 22,940,083
NET ASSETS
Beginning 72,466,372 49,526,289
------------- -------------
Ending $ 66,506,617 $ 72,466,372
============= =============
Undistributed net investment income
(loss), ending $ 1,151,074 $ 621,348
============= =============
<Caption>
EMERGING MARKETS OPPORTUNITIES (1)
-------------------------------------
SEPTEMBER 30,
2004 MARCH 31,
(UNAUDITED) 2004
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income (loss) $ 20,831 $ --
Net realized gain (loss) (21,756) --
Net unrealized appreciation (depreciation) 541,521 --
----------------- -----------------
Net increase (decrease) in net assets
from investment operations 540,596 --
----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- --
From net realized gains -- --
----------------- -----------------
Total distributions -- --
----------------- -----------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold
Class I 8,301,390 --
Class II -- --
Class III -- --
Class IV -- --
Class R -- --
Distributions reinvested
Class I -- --
Class II -- --
Class III -- --
Class IV -- --
Class R -- --
Cost of shares redeemed
Class I (60) --
Class II -- --
Class III -- --
Class IV -- --
Class R -- --
----------------- -----------------
Net increase (decrease) in net assets
from share transactions 8,301,330 --
----------------- -----------------
Net Increase (Decrease) in Net Assets 8,841,926 --
NET ASSETS
Beginning -- --
----------------- -----------------
Ending $ 8,841,926 $ --
================= =================
Undistributed net investment income
(loss), ending $ 20,831 $ --
================= =================
</Table>
- ----------
(1) Fund commenced operations on 5/28/04.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
<Table>
<Caption>
EMERGING COUNTRIES EMERGING MARKETS OPPORTUNITIES
----------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
2004 MARCH 31, 2004 MARCH 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
------------- ---------- ------------- ----------
CLASS I -- CAPITAL SHARE ACTIVITY
Shares sold 284,625 1,452,218 826,567 --
Distributions reinvested -- -- -- --
Shares redeemed (326,486) (5,914,453) (5) --
------------- ---------- ------------- ----------
Net Class I Share Activity (41,861) (4,462,235) 826,562 --
============= ========== ============= ==========
CLASS II -- CAPITAL SHARE ACTIVITY
Shares sold 4,528 3,287,650 -- --
Distributions reinvested -- -- -- --
Shares redeemed (6,957) (45,349) -- --
============= ========== ============= ==========
Net Class II Share Activity (2,429) 3,242,301 -- --
============= ========== ============= ==========
CLASS III -- CAPITAL SHARE ACTIVITY
Shares sold -- -- -- --
Distributions reinvested -- -- -- --
Shares redeemed -- -- -- --
============= ========== ============= ==========
Net Class III Share Activity -- -- -- --
============= ========== ============= ==========
CLASS IV -- CAPITAL SHARE ACTIVITY
Shares sold -- -- -- --
Distributions reinvested -- -- -- --
Shares redeemed -- -- -- --
============= ========== ============= ==========
Net Class IV Share Activity -- -- -- --
============= ========== ============= ==========
CLASS R -- CAPITAL SHARE ACTIVITY
Shares sold -- -- -- --
Distributions reinvested -- -- -- --
Shares redeemed -- -- -- --
============= ========== ============= ==========
Net Class R Share Activity -- -- -- --
============= ========== ============= ==========
</Table>
<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")
and five Funds have issued Class II shares ("Class II") and one Fund has issued
Class III shares ("Class III") and one Fund has issued Class IV shares ("Class
IV") and five Funds have issued Retirement shares ("Class R"). No shares have a
sales charge. Class R has a distribution fee. All Funds have a shareholder
services fee. The Emerging Countries Fund and the Emerging Markets Opportunities
Fund are covered in this report.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies consistently followed by the Funds in preparing
these financial statements are described below. The policies conform with
accounting principles generally accepted in the United States.
SECURITY VALUATIONS
Equity securities, including ADRs and GDRs, that are traded on a stock exchange
or on the NASDAQ National Market System are valued at the last sale price as of
the close of business on the New York Stock Exchange (normally 4:00 P.M. New
York time) on the day the securities are being valued, or lacking any sales, at
the mean between the closing bid and asked prices. Securities listed or traded
on certain non-U.S. exchanges whose operations are similar to the United States
over-the-counter market are valued at the price within the limits of the latest
available current bid and asked prices deemed by the Investment Adviser best to
reflect fair value. A security that is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the primary
market for such security by the Investment Adviser. The Investment Adviser has
determined the Xetra is the primary market in Germany.
The Funds value long-term debt obligations, including high quality and high
yield corporate securities, municipal securities, asset-backed securities,
collateralized mortgage obligations and US Government and Agency issues, at the
quoted bid price provided by an approved bond pricing service. Convertible
securities are normally priced at the mean between the bids and ask prices.
Short-term debt instruments, (e.g., commercial paper, bankers acceptances, U.S.
Treasury Bills, etc.) having a maturity of less than 60 days will be valued at
amortized cost. If a fixed income security has a maturity of greater than 60
days, it will be valued at market price.
Securities or other assets for which reliable market quotations are not readily
available or for which the pricing agent or principal market maker does not
provide a valuation or methodology or provides a valuation or methodology that,
in the judgment of the Investment Adviser does not represent fair value (Fair
Value Securities), are valued by the Pricing Committee overseen by the Board of
Trustees in consultation as applicable, with the Investment Adviser's portfolio
managers, traders, and research and credit analysts and legal and compliance
personnel. Fair Value Securities may include, but are not limited to, the
following: certain private placements and restricted securities that do not have
an active trading market; securities whose trading has been suspended or for
which there is no current market; securities whose prices are stale; securities
denominated in currencies that are restricted, untraded, or for which exchange
rates are disrupted; securities affected by significant events; and securities
that the Investment Adviser or Pricing Committee believe were priced
incorrectly. A "significant event" (which includes, but is not limited to, an
extraordinarily political or market event) is an event that the Investment
Adviser or Pricing Committee believes with a reasonably high degree of certainty
has caused the closing market prices of a Fund's portfolio securities to no
longer reflect their value at the time of the Fund's NAV calculation.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for as of trade date. Realized gains and
losses from security transactions are determined on an identified-cost basis.
Dividend income is recorded on the ex-dividend date or, for certain non-U.S.
securities, when the information becomes available to the Funds. Interest income
is recorded on an accrual basis. Discounts and premiums on debt securities are
accreted and amortized on the yield to maturity basis.
NON-U.S. CURRENCY TRANSACTIONS
At each net asset valuation date, the value of assets and liabilities
denominated in non-U.S. currencies are translated into U.S. dollars using the
current exchange rate at the spot rate at 11:00 a.m. Eastern Time against the
U.S. dollar, as provided by an approved pricing service. Security transactions,
income and expenses are converted at the prevailing exchange rate on the day of
the event. The effect of
<Page>
changes in exchange rates on securities denominated in a non-U.S. currency is
included with the net realized and unrealized gain or loss of the associated
security. Other Non-U.S. currency gains or losses are reported separately.
Certain Funds may use forward non-U.S. currency contracts to reduce their
exposure to currency fluctuations of their non-U.S. securities. These contracts
are commitments to purchase or sell a non-U.S. currency at a specified rate on a
future date. When the contract is fulfilled or closed, gains or losses are
realized. Until then, the gain or loss is included in unrealized appreciation or
depreciation of investments. The contract commitment is fully collateralized by
cash or securities of the Fund. Non-U.S. denominated assets and forward currency
contracts may involve more risks than U.S. transactions, including currency
risk, political and economic risk, regulatory and market risk. Evaluating and
monitoring such risk exposure is a part of the Funds' management strategy. There
were no such forward non-U.S. currency contracts at September 30, 2004.
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
Certain Funds may purchase equity-linked securities, also known as participation
notes, equity swaps, and zero strike calls and warrants. Equity-linked
securities are primarily used by a Fund as an alternative means to more
efficiently and effectively access the securities market of what is generally an
emerging country. The Fund deposits an amount of cash with its custodian (or
broker, if legally permitted) in an amount near or equal to the selling price of
the underlying security in exchange for an equity linked security. Upon sale,
the Fund receives cash from the broker or custodian equal to the value of the
underlying security. Aside from market risk of the underlying securities, there
is a risk of default by the other party to the transaction. In the event of
insolvency of the other party, the Fund might be unable to obtain its expected
benefit. In addition, while a Fund will seek to enter into such transactions
only with parties which are capable of entering into closing transactions with
the Fund, there can be no assurance that the Fund will be able to close out such
a transaction with the other party or obtain an offsetting position with any
other party, at any time prior to the end of the term of the underlying
agreement. This may impair the Fund's ability to enter into other transactions
at a time when doing so might be advantageous.
SECURITIES LENDING
In order to generate expense offset credits, each of the Funds may lend
portfolio securities, on a short-term or a long-term basis, up to 30% of a
Fund's total assets to broker/dealers, banks, or other institutional borrowers
of securities. A Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the Investment Adviser has
determined are creditworthy and under the guidelines established by the Board of
Trustees and will receive collateral in the form of cash or U.S. government
securities equal to at least 102% of the value of the securities loaned on U.S.
securities and 105% on non-U.S. securities.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, loose
the opportunity to sell securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
There was no such security lending activity at September 30, 2004.
<Page>
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 INTEREST DIRECT BROKERAGE SECURITY LENDING
FUND OFFSET OFFSET OFFSET
- ---- ------ ------ ------
Emerging Countries 3,344 45,740 34,361
Emerging Markets Opportunities 1,264 - -
</Table>
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.
NICHOLAS-APPLEGATE SOUTHEAST ASIA FUND, LTD.
The Emerging Countries Fund may, when appropriate, invest in the Indian stock
market through Nicholas-Applegate Southeast Asia Fund Ltd., a company organized
under the laws of Mauritius (the "Mauritius Company"). The Investment Adviser
has been advised by counsel that the Mauritius Company is entitled to Indian tax
benefits afforded by a double taxation treaty between India and Mauritius, and
believes the Mauritius Company is the most efficient means to invest in India.
Each Fund holds a 100% interest in a separate class of securities issued by the
Mauritius Company, represented by a separate, underlying portfolio of
securities. The accounts of the Mauritius Company are reflected in the Fund
using consolidation accounting principles.
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.
<Page>
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>
ADVISORY FEE
FUND
- ----
Emerging Countries 0.85%
Emerging Markets Opportunities 0.90%
</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 CLASS II
- ---- ------- --------
Emerging Countries 0.20% 0.12%
Emerging Markets Opportunities 0.20% 0.12%
</Table>
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 CLASS II
- ---- ------- --------
Emerging Countries 0.20% 0.13%
Emerging Markets Opportunities 0.20% 0.13%
</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 September 30, 2004. The Investment Adviser will recover expense
reimbursements paid to the Funds to the extent of the difference between the
Funds' actual expenses (exclusive of taxes, interest, brokerage and the expenses
incurred from the operation of the Mauritius Company ) when they fall below the
limit in the year such reimbursement is paid.
The Funds reduce expenses by offsets to custodial and other fees based upon the
amount of securities lent to third parties 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 CLASS II
4/1/04 TO 4/1/03 TO
FUND 9/30/04 9/30/04
- ---- ------- -------
Emerging Countries 1.65% 1.50%
Emerging Market Opportunities 1.75% 1.60%
</Table>
Emerging Markets Opportunities intends to lower its fee caps to 1.65% and 1.50%
for Classes I and II, respectively, at the date of the proposed merger with
Emerging Countries.
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.
<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)
- ---- ---------- ---------- ---------- ---------- ---------- ----------
Emerging Countries 20,446 18,544 54,297 14,283 (2,623) 11,660
Emerging Markets Opportunities 10,248 1,896 8,291 930 (388) 542
</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, several of the Funds have been party to financial instruments
with off-balance sheet risks, including forward non-U.S. currency contracts,
primarily in an attempt to minimize the risk to the Fund, in respect of its
portfolio transactions. These instruments involve market and/or credit risk in
excess of the amount recognized in the Statement of Assets and Liabilities.
Risks arise from the possible inability of counterparties to meet the terms of
their contracts and from unexpected movement in currencies, securities values
and interest rates. The contract amounts indicate the extent of the Funds'
involvement in such contracts.
NOTE G -- PROXY VOTING
The Investment Adviser votes proxies on behalf of the Funds pursuant to written
policies and procedures adopted by the Funds. To obtain free information on how
your Funds' securities were voted, please call the Funds at 1-800-551-8043 or
visit the Funds' website at WWW.NACM.COM. You may also view how the Fund's
securities were voted by visiting the Securities & Exchange Commission's website
at www.sec.gov.
NOTE H -- PORTFOLIO HOLDINGS
The Funds provide a complete list of their holdings four times in each fiscal
year, at the quarter-ends. For the second and fourth quarters, the lists appear
in the Funds' semiannual and annual reports to shareholders. For the first and
third quarters, the Funds file the lists with the Securities and Exchange
Commission on Form N-Q. Shareholders can look up the Funds' Form N-Q on the
SEC's website at WWW.SEC.GOV. Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. To find out more about this
public service, call the SEC at 1-202-942-8090.
NOTE I -- CORPORATE GOVERNANCE (UNAUDITED)
<Table>
<Caption>
TERM OF
POSITION(S) OFFICE AND
NAME, ADDRESS (1) HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION(S)
AND AGE FUND SERVED (2) DURING PAST 5 YEARS
- ------------------------ ------------- --------------- --------------------------------------------------------------
DISINTERESTED TRUSTEES:
George F. Chairman & Since Investment Consultant and Director, (since 1994); President
Keane (75) Trustee May 2004 Emeritus and founding Chief Executive Officer, The Common Fund
(1971-1993); and Endowment Advisors (1987-1999) (organizations
that provide investment management programs for colleges and
universities) ; Member, Investment Advisory Committee, New
York State Common Retirement Fund (since 1985).
Walter E. Trustee Since Retired; prior thereto, Chairman and CEO of Chicago Board of
Auch (83) May 1999 Options Exchange (1979-1986); Senior Executive Vice President
PaineWebber, Inc.
Darlene DeRemer (48) Trustee Since Managing Director, Putnam Lovell NBF Private Equity (Since
May 1999 2004); Managing Director, NewRiver E-Business Advisory
Services Division (2000-2003); Prior to, President and
Founder, DeRemer Associates, a strategic and marketing
consulting firm for the financial services industry
(1987-2003); Vice President and Director, Asset Management
Division, State Street Bank and Trust Company, now referred to
as State Street Global Advisers, (1982-1987); Vice President,
T. Rowe Price & Associates (1979-1982); Member, Boston Club
(since 1998); Member, Financial Women's Association Advisory
Board (since 1995); Founder, Mutual Fund Cafe Website.
</Table>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
NAME, ADDRESS (1) FUND COMPLEX OTHER DIRECTORSHIPS
AND AGE OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- ------------------ -------------------- -----------------------------------------------------------------------------------
George F. 14 Director, Bramwell Funds (since 1994); Director, Longview Oil & Gas (since 2000);
Keane (75) Director, Security Capital U.S. Real Estate (since 1997); Director, The Universal
Bond Fund (since 1997); Director, Universal Stainless & Alloy Products Inc. (since
1994); Director, United Water Services and affiliated companies (1996-2000);
Director, and former Chairman of the Board, Trigen Energy Corporation (1994-2000);
Trustee, Nicholas-Applegate Mutual Funds (1994-1999).
Walter E. 14 Trustee, LLBS Funds (since 1994 and Brinson Supplementary Trust (since 1997);
Auch (83) Director, Thompson Asset Management Corp (1987-1999); Director, Smith Barney Trak
Fund (since 1992) and Smith Barney Advisors (since 1992); Director, PIMCO Advisors
L.P (since 1994); Director, Banyon Realty Trust ( 1988-2002), Banyon Mortgage
Investment Fund ( 1989-2002) and Banyon Land Fund II (since 1988); Director, Express
America Holdings Corp ( 1992-1999); Director, Legend Properties, Inc. (1987-1999);
Director, Senele Group (since 1988); Director, Fort Dearborn Income Securities, Inc.
(1987-1995); Trustee, Nicholas-Applegate Mutual Funds (1994-1999); Director, Geotek
Industries, Inc. (1987-1998).
Darlene DeRemer (48) 14 Founding Member and Director, National Defined Contribution Council (since 1997);
Trustee, Boston Alzheimer's Association (since 1998); Director, King's Wood
Montessori School (since 1995); Editorial Board, National Association of Variable
Annuities (since 1997); Director, Nicholas-Applegate Strategic Opportunities, Ltd.
(1994-1997); Trustee, Nicholas-Applegate Mutual Funds (1994-1999); Director,
Jurika & Voyles Fund Group (since 1994-2000); Director, Nicholas-Applegate Southeast
Asia Fund, Ltd. (since 2004).
</Table>
<Page>
<Table>
<Caption>
TERM OF
POSITION(S) OFFICE AND
NAME, ADDRESS (1) HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION(S)
AND AGE FUND SERVED (2) DURING PAST 5 YEARS
- ------------------------ ------------- --------------- -------------------------------------------
INTERESTED TRUSTEES:
HORACIO A. VALEIRAS () President & Since Managing Director (Since 2004) and Chief
Trustee August 2004 Investment Officer. Nicholas-Applegate
Capital Management, Nicholas-Applegate
Securities (Since 2002); Managing
Director of Morgan Stanley Investment
Management, London (1997-2002); Head of
International Equity and Asset
Allocation, Miller Anderson & Sherred;
Director and Chief of International
Strategies, Credit Suisse First Boston.
OFFICERS:
CHARLES H. Secretary Since May 2002 General Counsel, Nicholas-Applegate
FIELD, JR. (49) Capital Management, LLC (since 2004);
Deputy General Counsel (1996-2004).
C. WILLIAM MAHER (43) Treasurer Since May 1999 Managing Director (since 2004) 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>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
NAME, ADDRESS (1) FUND COMPLEX OTHER DIRECTORSHIPS
AND AGE OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- ------------------ -------------------- --------------------------------------------
INTERESTED TRUSTEES:
HORACIO A. 14 Trustee, The Bishops School (Since 2002);
VALEIRAS () Trustee, San Diego Rowing Club (Since
2002).
OFFICERS:
CHARLES H. 14 NA
FIELD, JR. (49)
C. WILLIAM 14 NA
MAHER (43)
</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.
<Page>
PRINCIPAL SHAREHOLDERS
As of January 31, 2005, the following shareholders owned of record or
beneficially 5% or more of Emerging Markets Opportunities Fund.
Class I Shares
<Table>
<Caption>
NUMBER OF PERCENTAGE OF THE
NAME & ADDRESS SHARES FUND
-----------------------------------------------------------------------------------------------------
John H. Grimm 74,454.117 8.91%
713 Lodi St. 4
Syracuse, NY 13203-2265
Allianz Global Investors 600,578.13 71.85%
888 San Clemente Dr. Ste. 100
Newport Beach, CA 92660
</Table>
<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 Emerging Countries
Fund and Emerging Markets Opportunities 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>
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
24th day of February, 2005.
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 February 24, 2005.
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
<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