UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07384
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
(Exact name of registrant as specified in charter)
600 WEST BROADWAY, 30TH FLOOR, SAN DIEGO, CA 92101
(Address of principal executive offices) (Zip Code)
Charles H. Field, Jr.
c/o Nicholas-Applegate Capital Management
600 West Broadway, 30th Floor
San Diego, CA 92101
(Name and address of agent for service)
Copy to:
Deborah A. Wussow
c/o Nicholas-Applegate Capital Management
600 West Broadway, 30th Floor
San Diego, CA 92101
Registrant's telephone number, including area code: (619) 687-2988
Date of fiscal year end: March 31
Date of reporting period: September 30, 2007
ITEM 1. REPORTS TO STOCKHOLDERS.
<Page>
NICHOLAS|APPLEGATE(R)
INSTITUTIONAL FUNDS
SEPTEMBER 30, 2007 SEMI-ANNUAL REPORT (UNAUDITED)
Class I, II, III & IV Shares
U.S. Micro Cap
U.S. Emerging Growth
U.S. Small Cap Value
U.S. Systematic Large Cap Growth
U.S. Small to Mid Cap Growth
U.S. Convertible
Global Select
International Growth
International Growth Opportunities
Emerging Markets
International Systematic
International All Cap Growth
U.S. High Yield Bond
[A COMPANY of Allianz LOGO]
Global Investors
<Page>
LETTER TO SHAREHOLDERS
Dear Fellow Shareholder,
The six months ended September 30, 2007 was an unusually volatile time in the
world's financial markets. Over the summer, deterioration in the value of
securities tied to U.S. residential mortgages sparked a global liquidity crisis
that caused investors to shun riskier assets. Monetary action taken by central
banks worldwide helped restore investor confidence, and major U.S. and non-U.S.
equity indexes finished the period with strong gains.
In this semi-annual report, we review the performance of the financial markets
and our mutual funds from April 1 through September 30. In addition, we share
our perspective on the dynamics shaping the investment landscape and our outlook
for the months ahead.
During the period, the broad U.S. equity market, as measured by the S&P 500
Index, gained 8.44%. The Index reached an all-time record on July 19, lifted by
healthy economic and earnings growth and buoyant merger activity. The rally
ended abruptly, however, when mounting losses on U.S. mortgage-backed securities
made investors reluctant to buy even high-quality corporate debt, causing
liquidity to dry up in the fixed-income markets. Financial institutions holding
mortgage-backed securities, including a few highly leveraged hedge funds, were
inundated with broker margin calls and redemption requests. To raise cash and
reduce leverage, they sold their most liquid assets, including stocks. By
mid-August, the S&P 500 Index had fallen nearly 10% from its July peak,
approaching the technical definition of a market correction. The Federal Reserve
intervened, and stock prices reversed course once again, climbing higher in
August and September.
International equities in both developed and emerging countries followed a
similar, volatile path. Gains throughout much of the period erased steep summer
losses that resulted from concerns about foreign ownership of U.S.
mortgage-backed securities, as well as tighter credit market conditions
globally. Central banks, including the European Central Bank and Bank of Japan,
helped calm investors' nerves by pumping extra liquidity into the financial
system.
For the full period, the MSCI EAFE Index, a barometer of developed non-U.S.
equities, gained 9.05%. The vast majority of the increase was due to currency
movements, as the euro, pound and yen rose 6.8%, 4.0% and 2.6%, respectively,
versus the U.S. dollar. Weakness in the dollar was caused by the problems in the
U.S. housing and mortgage markets and an interest rate cut from the Federal
Reserve in September. Amid rising oil prices, an economic upturn in the euro
region and six consecutive quarters of above-trend growth in the United Kingdom,
European policymakers were focused on controlling inflation. The European
Central Bank raised interest rates in June, and the Bank of England tightened
monetary policy in May and July. Japanese central bankers held rates steady at
0.50%, as economic growth showed signs of losing momentum.
Stock markets in emerging countries delivered the best performance, with the
MSCI Emerging Markets Index gaining 31.76% on positive country and company
fundamentals. Economic growth in developing nations remained robust, led by
China where GDP expanded at a 10.9% annual rate in the April-to-June quarter.
Corporate earnings for companies in the index were expected to grow more than
16% in 2007, and balance sheets were strong. In fact, emerging market businesses
are estimated to carry about half as much debt as their U.S. and European
counterparts.
In the volatile market conditions, Nicholas-Applegate Institutional Funds
delivered strong results. All nine of the funds using traditional investment
processes outpaced their benchmarks. Of the four funds using systematic
approaches, three outperformed or performed broadly in line with their
benchmarks and one trailed. The environment was challenging for systematic
strategies in general due to the inherent difficulty of modeling a rare event
such as the recent liquidity crisis, which was the worst of its kind in nearly a
decade. In addition, rapid deleveraging by some quantitative hedge funds in
early August caused short-term market dislocations which negatively affected
performance in Nicholas-Applegate's systematic strategies.
Looking ahead, we believe that the housing slowdown in the United States will
continue, but that the U.S. economy will still grow at a moderate pace.
Overseas, economic activity should remain at its higher-than-normal rate,
supported by growth in emerging countries and positive trends in Europe,
reflected in record-low unemployment in the euro zone. We expect growth in U.S.
corporate profits of around 5-7%, with higher growth of 10-12% internationally.
Against this backdrop, we anticipate more modest price appreciation for stocks
compared to the robust gains of the past six months.
In this environment, companies that can deliver strong earnings growth should
continue to capture investor attention. Growth stocks outperformed value stocks
in developed markets during the first nine months of 2007, suggesting that many
years of value leadership may be drawing to a close. We also think this kind of
environment is ideal for security selection, particularly for investing in
companies where positive change is leading to increased earnings estimates. As
we seek to deliver excess return to shareholders, we continue to search out
those companies for all of our funds.
On behalf of everyone at Nicholas-Applegate, thank you for your participation in
the Nicholas-Applegate Institutional Funds. We appreciate the trust you have
placed in us.
Best Regards,
/s/ Horacio A. Valeiras
- ----------------------------------------
Horacio A. Valeiras, CFA
President and Chief Investment Officer
September 30, 2007
<Page>
TABLE OF CONTENTS
THE FUNDS' REVIEW AND OUTLOOK, PERFORMANCE AND SCHEDULE OF INVESTMENTS
U.S. Micro Cap 1
U.S. Emerging Growth 6
U.S. Small Cap Value 10
U.S. Systematic Large Cap Growth 13
U.S. Small to Mid Cap Growth 17
U.S. Convertible 21
Global Select 26
International Growth 30
International Growth Opportunities 34
Emerging Markets 38
International Systematic 42
International All Cap Growth 46
U.S. High Yield Bond 49
THE FUNDS':
Financial Highlights 54
Statements of Assets and Liabilities 62
Statements of Operations 64
Statements of Changes in Net Assets 66
Notes to Financial Statements 70
Shareholder Expense Example 76
Supplementary Information 78
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION TO SHAREHOLDERS AND TO OTHERS ONLY
WHEN PRECEDED OR ACCOMPANIED BY A CURRENTLY EFFECTIVE PROSPECTUS FOR
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS CLASS I, II, III & IV SHARES.
DISTRIBUTOR: NICHOLAS-APPLEGATE SECURITIES.
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U.S. MICRO CAP FUND
MANAGEMENT TEAM: JOHN C. MCCRAW, Portfolio Manager; ROBERT S. MARREN, Portfolio
Manager; BLAKE H. BURDINE, Analyst; K. MATHEW AXLINE, CFA, Analyst; STEPHEN W.
LYFORD, Analyst
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The U.S. Micro Cap Fund seeks to maximize long-term capital appreciation
by investing primarily in U.S. companies with "micro" market capitalizations
that offer superior growth prospects.
MARKET OVERVIEW: Prices of U.S. micro-cap growth stocks advanced from April 1
through September 30, 2007 in what was a volatile environment for U.S. equities.
During the first half of the period, key market indexes rose to new highs,
lifted by better-than-expected corporate profit growth, signs the economy was
improving after a first quarter slowdown and a blistering pace of mergers and
acquisitions (M&A). Global M&A activity, as measured by total transaction
values, ran at a record annual level between January 1 and June 30.
Stocks tumbled in July, however, triggered by a steep increase in residential
mortgage defaults. The rise in defaults undermined the value of mortgage-backed
securities owned by financial institutions, including hedge funds. As the value
of their portfolios sank, fund managers were inundated with redemption requests
and broker margin calls. To raise cash and reduce leverage, they liquidated
stocks, and reports of massive, irregular share price movements rippled down
Wall Street.
Equities regained their footing in the last two months of the period, as easier
monetary policy from the Federal Reserve helped restore investor confidence..
The central bank lowered the discount rate charged on direct Fed loans to banks
by 0.50% in both August and September. Also in September, it cut the key target
fed funds rate, the rate charged on overnight loans between banks, by 0.50%.
PERFORMANCE: During the six months ended September 30, 2007, the Fund's Class I
shares gained 11.15% and outperformed the Russell Microcap Growth Index, which
rose 2.83%.
PORTFOLIO SPECIFICS: The Fund's outperformance was driven by stock selection,
consistent with our bottom-up investment approach. Stock selection was
particularly strong in the industrials, consumer discretionary and consumer
staples sectors, where Chart Industries, Shutterfly and Green Mountain Coffee
Roasters were top performers. Chart Industries, a manufacturer of equipment used
in the production and storage of industrial gases, was awarded a $100+ million
contract. Shutterfly, an online supplier of photo management services and
merchandise, saw order growth accelerate and announced a strategic partnership
with a bridal retailer. Green Mountain Coffee Roasters, a distributor of coffee
and coffee products, benefited from brisk sales of its Keurig single-cup brewing
machines.
Although stock selection was the primary source of relative strength, sector
weightings also added value. For example, an underweight in financials was a
plus, as financials was the worst-performing sector in the index amid turmoil in
the mortgage and credit markets. The Fund outperformed by a wide margin, but
there were pockets of relative weakness, including stock selection in the
telecommunication services sector.
MARKET OUTLOOK: Continued softness in the housing market and record-high
commodity prices may dampen investor sentiment over the coming months. However,
additional monetary easing from the Fed may drive further gains in micro-cap
growth stocks. History shows that the beginning of a monetary easing cycle, as
we saw in September, typically benefits equity investors.
Regardless of how big-picture developments unfold, we remain confident that our
research-intensive investment process will continue to identify micro-cap growth
companies for the Fund that are poised to exceed earnings expectations.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN U.S. MICRO CAP FUND
CLASS I AND II SHARES WITH THE RUSSELL 2000 GROWTH/RUSSELL MICROCAP GROWTH INDEX
AND RUSSELL 2000 GROWTH INDEX.
[CHART]
<Table>
<Caption>
RUSSELL 2000
U.S. MICRO CAP GROWTH/RUSSELL
FUND CLASS I MICROCAP RUSSELL 2000
SHARES GROWTH INDEX GROWTH INDEX
7/12/1995 $250,000 $250,000 $250,000
7/31/1995 $261,400 $258,350 $258,350
8/31/1995 $266,210 $261,538 $261,538
9/30/1995 $275,607 $266,923 $266,923
10/31/1995 $270,205 $253,793 $253,793
11/30/1995 $278,203 $264,996 $264,996
12/31/1995 $286,994 $270,868 $270,868
1/31/1996 $284,584 $268,625 $268,625
2/29/1996 $301,374 $280,874 $280,874
3/31/1996 $316,985 $286,427 $286,427
4/30/1996 $365,199 $308,416 $308,416
5/31/1996 $408,803 $324,232 $324,232
6/30/1996 $371,602 $303,163 $303,163
7/31/1996 $318,983 $266,153 $266,153
8/31/1996 $340,579 $285,856 $285,856
9/30/1996 $359,583 $300,578 $300,578
10/31/1996 $349,191 $287,611 $287,611
11/30/1996 $361,133 $295,610 $295,610
12/31/1996 $369,403 $301,374 $301,374
1/31/1997 $384,696 $308,902 $308,902
2/28/1997 $358,960 $290,248 $290,248
3/31/1997 $329,346 $269,765 $269,765
4/30/1997 $319,630 $266,644 $266,644
5/31/1997 $374,799 $306,720 $306,720
6/30/1997 $408,905 $317,121 $317,121
7/31/1997 $444,848 $333,370 $333,370
8/31/1997 $477,277 $343,375 $343,375
9/30/1997 $522,714 $370,776 $370,776
10/31/1997 $488,215 $348,507 $348,507
11/30/1997 $483,382 $340,199 $340,199
12/31/1997 $480,917 $340,390 $340,390
1/31/1998 $473,366 $335,849 $335,849
2/28/1998 $510,005 $365,501 $365,501
3/31/1998 $556,211 $380,834 $380,834
4/30/1998 $565,555 $383,168 $383,168
5/31/1998 $533,375 $355,331 $355,331
6/30/1998 $542,016 $358,962 $358,962
7/31/1998 $498,709 $328,989 $328,989
8/31/1998 $371,039 $253,045 $253,045
9/30/1998 $402,912 $278,701 $278,701
10/31/1998 $416,691 $293,239 $293,239
11/30/1998 $459,652 $315,985 $315,985
12/31/1998 $521,475 $344,579 $344,579
1/31/1999 $536,650 $360,078 $360,078
2/28/1999 $472,896 $327,138 $327,138
3/31/1999 $479,517 $338,790 $338,790
4/30/1999 $516,488 $368,709 $368,709
5/31/1999 $495,157 $369,292 $369,292
6/30/1999 $544,425 $388,746 $388,746
7/31/1999 $539,688 $376,726 $376,726
8/31/1999 $560,790 $362,636 $362,636
9/30/1999 $582,324 $369,632 $369,632
10/31/1999 $633,977 $379,098 $379,098
11/30/1999 $750,882 $419,184 $419,184
12/31/1999 $963,682 $493,065 $493,065
1/31/2000 $1,001,747 $488,474 $488,474
2/29/2000 $1,347,650 $602,123 $602,123
3/31/2000 $1,207,225 $538,828 $538,828
4/30/2000 $988,114 $484,422 $484,422
5/31/2000 $853,039 $442,006 $442,006
6/30/2000 $1,112,960 $499,104 $499,104
7/31/2000 $993,205 $456,331 $456,331
8/31/2000 $1,094,214 $504,333 $503,607
9/30/2000 $1,048,257 $479,277 $478,326
10/31/2000 $913,451 $440,374 $430,541
11/30/2000 $728,660 $360,416 $349,083
12/31/2000 $764,437 $382,470 $354,040
1/31/2001 $805,029 $413,427 $403,004
2/28/2001 $688,058 $356,754 $348,800
3/31/2001 $622,693 $324,318 $322,326
4/30/2001 $701,152 $364,024 $356,782
5/31/2001 $748,620 $372,455 $378,653
6/30/2001 $794,735 $382,612 $402,925
7/31/2001 $757,541 $349,971 $371,174
8/31/2001 $725,876 $328,098 $346,937
9/30/2001 $618,519 $275,143 $294,792
10/31/2001 $659,774 $301,612 $320,026
11/30/2001 $690,718 $326,796 $346,748
12/31/2001 $738,170 $347,156 $372,824
1/31/2002 $727,836 $334,797 $363,019
2/28/2002 $689,988 $313,136 $335,066
3/31/2002 $748,430 $340,347 $363,044
4/30/2002 $749,777 $332,996 $354,730
5/31/2002 $720,236 $313,515 $333,979
6/30/2002 $696,828 $286,929 $314,474
7/31/2002 $557,881 $242,828 $263,530
8/31/2002 $550,294 $242,707 $263,872
9/30/2002 $513,809 $225,183 $242,340
10/31/2002 $525,524 $236,578 $251,210
11/30/2002 $559,210 $260,023 $279,094
12/31/2002 $517,269 $242,081 $264,609
1/31/2003 $505,579 $235,496 $261,751
2/28/2003 $492,485 $229,209 $253,297
3/31/2003 $511,741 $232,670 $257,907
4/30/2003 $566,088 $254,680 $282,872
5/31/2003 $644,491 $283,383 $322,191
6/30/2003 $694,697 $288,852 $339,300
7/31/2003 $766,250 $310,689 $367,496
8/31/2003 $812,992 $327,373 $384,474
9/30/2003 $822,585 $319,091 $391,356
10/31/2003 $916,113 $346,660 $426,461
11/30/2003 $955,964 $357,961 $442,538
12/31/2003 $951,184 $359,572 $449,442
1/31/2004 $1,028,896 $378,450 $478,521
2/29/2004 $1,032,291 $377,882 $475,793
3/31/2004 $1,008,858 $379,658 $470,797
4/30/2004 $951,050 $360,599 $442,691
5/31/2004 $960,656 $367,775 $440,876
6/30/2004 $964,114 $379,985 $454,895
7/31/2004 $866,450 $345,901 $405,721
8/30/2004 $827,286 $338,464 $397,728
9/30/2004 $858,888 $357,181 $416,223
10/31/2004 $861,637 $365,860 $422,133
11/30/2004 $954,349 $396,775 $461,349
12/31/2004 $1,008,556 $411,020 $484,971
1/31/2005 $949,253 $392,483 $461,837
2/28/2005 $964,441 $397,860 $461,283
3/31/2005 $927,599 $382,940 $438,865
4/30/2005 $887,156 $358,585 $410,646
5/31/2005 $931,957 $383,865 $436,311
6/30/2005 $987,595 $396,264 $453,066
7/31/2005 $1,064,924 $423,963 $487,952
8/31/2005 $1,055,552 $417,985 $481,950
9/30/2005 $1,071,491 $421,287 $488,022
10/31/2005 $1,030,989 $405,699 $468,697
11/30/2005 $1,098,828 $428,662 $493,350
12/31/2005 $1,113,662 $428,019 $494,929
1/31/2006 $1,223,915 $469,323 $545,016
2/28/2006 $1,208,371 $466,836 $544,416
3/31/2006 $1,289,815 $489,524 $566,029
4/30/2006 $1,297,167 $488,104 $558,841
5/31/2006 $1,206,884 $453,742 $518,269
6/30/2006 $1,193,609 $454,014 $511,635
7/31/2006 $1,127,721 $430,450 $485,798
8/31/2006 $1,132,909 $443,063 $498,866
9/30/2006 $1,139,593 $446,076 $499,215
10/31/2006 $1,195,889 $475,026 $532,912
11/30/2006 $1,229,254 $486,379 $545,648
12/31/2006 $1,255,806 $485,212 $551,323
1/31/2007 $1,284,815 $494,237 $560,365
2/28/2007 $1,258,220 $492,655 $554,929
3/31/2007 $1,272,312 $497,187 $554,874
4/30/2007 $1,332,110 $510,214 $567,691
5/31/2007 $1,393,521 $533,479 $583,360
6/30/2007 $1,399,373 $530,385 $580,968
7/31/2007 $1,320,589 $502,858 $546,923
8/31/2007 $1,325,607 $515,480 $554,854
9/30/2007 $1,414,423 $530,481 $574,773
</Table>
Annualized Total Returns As of 9/30/07
<Table>
<Caption>
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Micro Cap Fund Class I 24.10% 22.44% 10.47%
- --------------------------------------------------------------------------------
Russell 2000 Growth/Russell
Microcap Growth Index 14.31% 18.67% 4.40%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index 18.94% 18.70% 3.65%
- --------------------------------------------------------------------------------
</Table>
1
<Page>
[CHART]
<Table>
<Caption>
Russell 2000
U.S. Micro Growth/Russell
Cap Fund Microcap Growth Russell 2000
Class II Index Growth Index
7/12/1995 $250,000 $250,000 $250,000
7/31/1995 $261,400 $258,350 $258,350
8/31/1995 $266,210 $261,538 $261,538
9/30/1995 $275,607 $266,923 $266,923
10/31/1995 $270,205 $253,793 $253,793
11/30/1995 $278,203 $264,996 $264,996
12/31/1995 $286,994 $270,868 $270,868
1/31/1996 $284,584 $268,625 $268,625
2/29/1996 $301,374 $280,874 $280,874
3/31/1996 $316,985 $286,427 $286,427
4/30/1996 $365,199 $308,416 $308,416
5/31/1996 $408,803 $324,232 $324,232
6/30/1996 $371,602 $303,163 $303,163
7/31/1996 $318,983 $266,153 $266,153
8/31/1996 $340,579 $285,856 $285,856
9/30/1996 $359,583 $300,578 $300,578
10/31/1996 $349,191 $287,611 $287,611
11/30/1996 $361,133 $295,610 $295,610
12/31/1996 $369,403 $301,374 $301,374
1/31/1997 $384,696 $308,902 $308,902
2/28/1997 $358,960 $290,248 $290,248
3/31/1997 $329,346 $269,765 $269,765
4/30/1997 $319,630 $266,644 $266,644
5/31/1997 $374,799 $306,720 $306,720
6/30/1997 $408,905 $317,121 $317,121
7/31/1997 $444,848 $333,370 $333,370
8/31/1997 $477,277 $343,375 $343,375
9/30/1997 $522,714 $370,776 $370,776
10/31/1997 $488,215 $348,507 $348,507
11/30/1997 $483,382 $340,199 $340,199
12/31/1997 $480,917 $340,390 $340,390
1/31/1998 $473,366 $335,849 $335,849
2/28/1998 $510,005 $365,501 $365,501
3/31/1998 $556,211 $380,834 $380,834
4/30/1998 $565,555 $383,168 $383,168
5/31/1998 $533,375 $355,331 $355,331
6/30/1998 $542,016 $358,962 $358,962
7/31/1998 $498,709 $328,989 $328,989
8/31/1998 $371,039 $253,045 $253,045
9/30/1998 $402,912 $278,701 $278,701
10/31/1998 $416,691 $293,239 $293,239
11/30/1998 $459,652 $315,985 $315,985
12/31/1998 $521,475 $344,579 $344,579
1/31/1999 $536,650 $360,078 $360,078
2/28/1999 $472,896 $327,138 $327,138
3/31/1999 $479,517 $338,790 $338,790
4/30/1999 $516,488 $368,709 $368,709
5/31/1999 $495,157 $369,292 $369,292
6/30/1999 $544,425 $388,746 $388,746
7/31/1999 $539,688 $376,726 $376,726
8/31/1999 $560,790 $362,636 $362,636
9/30/1999 $582,324 $369,632 $369,632
10/31/1999 $633,977 $379,098 $379,098
11/30/1999 $750,882 $419,184 $419,184
12/31/1999 $963,682 $493,065 $493,065
1/31/2000 $1,001,747 $488,474 $488,474
2/29/2000 $1,347,650 $602,123 $602,123
3/31/2000 $1,207,225 $538,828 $538,828
4/30/2000 $988,114 $484,422 $484,422
5/31/2000 $853,039 $442,006 $442,006
6/30/2000 $1,112,960 $499,104 $499,104
7/31/2000 $993,205 $456,331 $456,331
8/31/2000 $1,094,214 $504,333 $503,607
9/30/2000 $1,048,257 $479,277 $478,326
10/31/2000 $913,451 $440,374 $430,541
11/30/2000 $728,660 $360,416 $349,083
12/31/2000 $764,437 $382,470 $354,040
1/31/2001 $805,029 $413,427 $403,004
2/28/2001 $688,058 $356,754 $348,800
3/31/2001 $622,693 $324,318 $322,326
4/30/2001 $701,152 $364,024 $356,782
5/31/2001 $748,620 $372,455 $378,653
6/30/2001 $794,735 $382,612 $402,925
7/31/2001 $757,541 $349,971 $371,174
8/31/2001 $725,876 $328,098 $346,937
9/30/2001 $618,519 $275,143 $294,792
10/31/2001 $659,774 $301,612 $320,026
11/30/2001 $690,718 $326,796 $346,748
12/31/2001 $738,170 $347,156 $372,824
1/31/2002 $727,836 $334,797 $363,019
2/28/2002 $689,988 $313,136 $335,066
3/31/2002 $748,430 $340,347 $363,044
4/30/2002 $749,777 $332,996 $354,730
5/31/2002 $720,236 $313,515 $333,979
6/30/2002 $696,828 $286,929 $314,474
7/31/2002 $557,881 $242,828 $263,530
8/31/2002 $550,294 $242,707 $263,872
9/30/2002 $513,809 $225,183 $242,340
10/31/2002 $525,524 $236,578 $251,210
11/30/2002 $559,210 $260,023 $279,094
12/31/2002 $517,269 $242,081 $264,609
1/31/2003 $505,579 $235,496 $261,751
2/28/2003 $492,485 $229,209 $253,297
3/31/2003 $511,741 $232,670 $257,907
4/30/2003 $566,088 $254,680 $282,872
5/31/2003 $644,491 $283,383 $322,191
6/30/2003 $694,697 $288,852 $339,300
7/31/2003 $766,250 $310,689 $367,496
8/31/2003 $812,992 $327,373 $384,474
9/30/2003 $822,585 $319,091 $391,356
10/31/2003 $916,113 $346,660 $426,461
11/30/2003 $955,964 $357,961 $442,538
12/31/2003 $951,184 $359,572 $449,442
1/31/2004 $1,028,896 $378,450 $478,521
2/29/2004 $1,032,291 $377,882 $475,793
3/31/2004 $1,008,858 $379,658 $470,797
4/30/2004 $951,050 $360,599 $442,691
5/31/2004 $960,656 $367,775 $440,876
6/30/2004 $964,114 $379,985 $454,895
7/31/2004 $866,450 $345,901 $405,721
8/30/2004 $827,286 $338,464 $397,728
9/30/2004 $858,888 $357,181 $416,223
10/31/2004 $862,324 $365,860 $422,133
11/30/2004 $955,110 $396,775 $461,349
12/31/2004 $1,009,360 $411,020 $484,971
1/31/2005 $950,111 $392,483 $461,837
2/28/2005 $965,313 $397,860 $461,283
3/31/2005 $929,113 $382,940 $438,865
4/30/2005 $888,604 $358,585 $410,646
5/31/2005 $933,390 $383,865 $436,311
6/30/2005 $989,766 $396,264 $453,066
7/31/2005 $1,067,166 $423,963 $487,952
8/31/2005 $1,057,775 $417,985 $481,950
9/30/2005 $1,074,382 $421,287 $488,022
10/31/2005 $1,033,878 $405,699 $468,697
11/30/2005 $1,101,700 $428,662 $493,350
12/31/2005 $1,117,234 $428,019 $494,929
1/31/2006 $1,228,176 $469,323 $545,016
2/28/2006 $1,212,578 $466,836 $544,416
3/31/2006 $1,294,669 $489,524 $566,029
4/30/2006 $1,302,826 $488,104 $558,841
5/31/2006 $1,212,540 $453,742 $518,269
6/30/2006 $1,199,202 $454,014 $511,635
7/31/2006 $1,132,646 $430,450 $485,798
8/31/2006 $1,138,536 $443,063 $498,866
9/30/2006 $1,145,139 $446,076 $499,215
10/31/2006 $1,201,366 $475,026 $532,912
11/30/2006 $1,235,485 $486,379 $545,648
12/31/2006 $1,262,789 $485,212 $551,323
1/31/2007 $1,292,591 $494,237 $560,365
2/28/2007 $1,266,093 $492,655 $554,929
3/31/2007 $1,280,146 $497,187 $554,874
4/30/2007 $1,340,697 $510,214 $567,691
5/31/2007 $1,402,905 $533,479 $583,360
6/30/2007 $1,408,657 $530,385 $580,968
7/31/2007 $1,329,913 $502,858 $546,923
8/31/2007 $1,334,834 $515,480 $554,854
9/30/2007 $1,424,401 $530,481 $574,773
</Table>
Annualized Total Returns As of 9/30/07
<Table>
<Caption>
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Micro Cap Fund Class II 24.39% 22.62% 10.54%
- --------------------------------------------------------------------------------
Russell 2000 Growth/Russell
Microcap Growth Index 14.31% 18.67% 4.40%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index 18.94% 18.70% 3.65%
- --------------------------------------------------------------------------------
</Table>
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I AND II SHARES COMPARED WITH THE RUSSELL 2000 GROWTH INDEX AND A
BLENDED INDEX COMPRISED OF THE RUSSELL 2000 GROWTH INDEX/RUSSELL MICROCAP GROWTH
INDEX. THE FUND'S CLASS I AND II SHARES CALCULATE THEIR PERFORMANCE BASED UPON
THE HISTORICAL PERFORMANCE OF THEIR CORRESPONDING SERIES OF NICHOLAS-APPLEGATE
MUTUAL FUNDS (RENAMED ING MUTUAL FUNDS), ADJUSTED TO REFLECT ALL FEES AND
EXPENSES APPLICABLE TO CLASS I AND II SHARES. THE NICHOLAS-APPLEGATE
INSTITUTIONAL FUNDS' CLASS I SHARES WERE FIRST AVAILABLE ON MAY 7, 1999 AND
CLASS II SHARES ON SEPTEMBER 30, 2004. THE HISTORICAL PERFORMANCE OF CLASS II
SHARES INCLUDES THE PERFORMANCE OF CLASS I SHARES FOR PERIODS PRIOR TO THE
INCEPTION OF CLASS II SHARES. AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE
CHANGES IN PRINCIPAL VALUE, REINVESTMENT DIVIDENDS, AND CAPITAL GAIN
DISTRIBUTIONS. THE TOTAL RETURNS SHOWN ABOVE DO NOT SHOW THE EFFECTS OF INCOME
TAXES ON AN INDIVIDUAL'S INVESTMENT. IN MOST CASES, TAXES MAY REDUCE YOUR ACTUAL
INVESTMENT RETURNS ON INCOME OR GAINS PAID BY THE FUND OR ANY GAINS YOU MAY
REALIZE IF YOU SELL YOUR SHARES. PAST PERFORMANCE CANNOT GUARANTEE FUTURE
RESULTS.
THE RUSSELL 2000 GROWTH INDEX IS AN UNMANAGED INDEX COMPRISED OF THOSE RUSSELL
2000 COMPANIES WITH HIGHER PRICE-TO-BOOK RATIOS AND HIGHER FORECASTED GROWTH
VALUES. THE RUSSELL 2000 GROWTH INDEX IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE 2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX, WHICH
REPRESENTS APPROXIMATELY 10% OF THE TOTAL MARKET CAPITALIZATION OF THE RUSSELL
3000 INDEX.
THE RUSSELL MICROCAP INDEX ISOLATES THE SMALLEST 1,000 SECURITIES IN THE RUSSELL
2000 INDEX PLUS THE NEXT 1,000 SECURITIES. THE RUSSELL MICROCAP GROWTH INDEX
ISOLATES THE SECURITIES IN THE RUSSELL MICROCAP INDEX WITH PURELY GROWTH
CHARACTERISTICS. THE RUSSELL MICROCAP INDEX IS A NEW INDEX (AUGUST 2000) AND
THEREFORE HAS LESS PERFORMANCE HISTORY THAN THE FUND'S CLASS I SHARES (JULY
1995). THE BLENDED INDEX REPRESENTS THE RUSSELL 2000 GROWTH PERFORMANCE UP TO
THE INCEPTION OF THE RUSSELL MICROCAP GROWTH INDEX. INDEX PERFORMANCE THEREAFTER
IS THAT OF THE RUSSELL MICROCAP GROWTH INDEX.
THE INDEXES DIFFER FROM THE FUND IN COMPOSITION, DO NOT PAY MANAGEMENT FEES OR
EXPENSES AND INCLUDES REINVESTED DIVIDENDS. ONE CANNOT INVEST DIRECTLY IN AN
INDEX. SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE WITH MARKET CONDITIONS. YOU MAY HAVE A GAIN OR LOSS WHEN
YOU SELL YOUR SHARES.
2
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------
COMMON STOCK - 98.8%
AEROSPACE/DEFENSE-EQUIPMENT - 3.0%
Astronics Corp.* 17,650 $ 769,010
Ducommun, Inc.* 26,000 839,800
Kaman Corp. 26,800 926,208
-----------
2,535,018
-----------
ALTERNATIVE WASTE TECH - 1.9%
Calgon Carbon Corp.* 69,660 972,454
Darling International, Inc.* 63,980 632,762
-----------
1,605,216
-----------
APPLICATIONS SOFTWARE - 3.0%
Actuate Corp.* 98,690 636,550
Callidus Software, Inc.* 69,620 598,732
EPIQ Systems, Inc.* 39,970 752,235
Moldflow Corp.* 29,400 566,244
-----------
2,553,761
-----------
AUCTION HOUSE/ART DEALER - 0.8%
Premier Exhibitions, Inc.* 44,100 665,028
-----------
AUDIO/VIDEO PRODUCTS - 0.7%
Universal Electronics, Inc.* 19,320 627,900
-----------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL - 2.2%
Amerigon, Inc. Cl. A* 28,800 498,528
Spartan Motors, Inc. 42,099 708,526
Titan International, Inc. 20,034 639,485
-----------
1,846,539
-----------
AUTO/TRUCK PARTS & EQUIPMENT-REPLACEMENT - 0.9%
Aftermarket Technology Corp.* 23,900 758,586
-----------
BREWERY - 0.8%
Boston Beer Co., Inc. Cl. A* 14,000 681,240
-----------
BROADCAST SERVICES/PROGRAMMING - 1.1%
DG FastChannel, Inc.* 38,140 899,341
-----------
BUILDING PRODUCTS-AIR & HEATING - 0.8%
AAON, Inc. 33,350 657,996
-----------
BUILDING PRODUCTS-DOORS & WINDOWS - 0.9%
Apogee Enterprises, Inc. 30,800 798,952
-----------
CASINO HOTELS - 0.3%
MTR Gaming Group, Inc.* 22,770 216,998
-----------
CHEMICALS-PLASTICS - 1.6%
Landec Corp.* 46,720 722,291
Metabolix, Inc.* 25,800 625,908
-----------
1,348,199
-----------
CHEMICALS-SPECIALTY - 2.2%
ICO, Inc.* 76,100 1,071,488
KMG Chemicals, Inc. 31,376 821,424
-----------
1,892,912
-----------
COFFEE - 0.7%
Green Mountain Coffee Roasters, Inc.* 18,600 617,334
-----------
COMMERCIAL SERVICES - 1.5%
HMS Holdings Corp.* 23,261 572,453
Team, Inc.* 26,306 720,258
-----------
1,292,711
-----------
COMMERCIAL SERVICES-FINANCE - 0.6%
PRG-Schultz International, Inc.* 38,700 525,546
-----------
COMPUTER SERVICES - 0.9%
BluePhoenix Solutions, Ltd.* 41,000 754,810
-----------
COMPUTER SOFTWARE - 1.3%
Double-Take Software, Inc.* 30,600 584,766
Phoenix Technologies, Ltd.* 50,300 538,713
-----------
1,123,479
-----------
COMPUTERS-INTEGRATED SYSTEMS - 2.4%
3D Systems Corp.* 32,200 760,564
Netscout Systems, Inc.* 53,800 586,420
Stratasys, Inc.* 23,004 633,990
-----------
1,980,974
-----------
COMPUTERS-PERIPHERAL EQUIPMENT - 0.7%
Immersion Corp.* 35,900 588,042
-----------
DATA PROCESSING/MANAGEMENT - 1.7%
FalconStor Software, Inc.* 64,020 771,441
Pegasystems, Inc. 54,600 649,740
-----------
1,421,181
-----------
DIAGNOSTIC KITS - 0.9%
Quidel Corp.* 37,300 729,588
-----------
DISTRIBUTION/WHOLESALE - 0.8%
MWI Veterinary Supply, Inc.* 17,700 668,175
-----------
DIVERSIFIED MANUFACTURING OPERATIONS - 2.6%
AZZ, Inc.* 14,460 505,522
Koppers Holdings, Inc. 24,690 953,281
LSB Industries, Inc.* 32,700 773,355
-----------
2,232,158
-----------
E-COMMERCE/PRODUCTS - 1.3%
Shutterfly, Inc.* 34,988 1,116,467
-----------
ELECTRONIC COMPONENTS-MISCELLANEOUS - 0.9%
Methode Electronics, Inc. Cl. A 50,300 757,015
-----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 1.7%
Advanced Analogic Technologies, Inc.* 63,000 670,320
Monolithic Power Systems, Inc.* 30,300 769,620
-----------
1,439,940
-----------
ELECTRONIC DESIGN AUTOMATION - 0.7%
Magma Design Automation, Inc.* 40,340 567,584
ELECTRONIC MEASURE INSTRUMENTS - 2.5%
Axsys Technologies, Inc.* 24,458 757,220
FARO Technologies, Inc.* 20,030 884,325
Measurement Specialties, Inc.* 15,700 438,030
-----------
2,079,575
-----------
ENGINEERING/R & D SERVICES - 2.0%
Michael Baker Corp.* 20,256 992,747
Stanley, Inc.* 25,600 705,280
-----------
1,698,027
-----------
ENTERPRISE SOFTWARE/SERVICES - 2.5%
American Software, Inc. Cl. A 48,800 448,960
JDA Software Group, Inc.* 43,859 906,127
Taleo Corp. Cl. A* 31,248 794,012
-----------
2,149,099
-----------
FIREARMS & AMMUNITION - 0.7%
Sturm Ruger & Co., Inc.* 35,059 627,907
-----------
FOOD-WHOLESALE/DISTRIBUTION - 0.4%
Spartan Stores, Inc. 16,470 371,069
-----------
INSTRUMENTS-CONTROLS - 0.6%
Spectrum Control, Inc.* 33,900 491,211
-----------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------
INTERNET APPLICATIONS SOFTWARE - 1.8%
S1 Corp.* 88,670 $ 802,464
Vocus, Inc.* 24,660 721,058
-----------
1,523,522
-----------
INTERNET FINANCIAL SERVICES - 0.7%
Authorize.Net Holdings, Inc.* 35,600 627,628
-----------
INTERNET INFRASTRUCTURE SOFTWARE - 1.4%
Chordiant Software, Inc.* 54,916 761,136
TeleCommunication Systems, Inc. Cl. A* 113,500 452,865
-----------
1,214,001
-----------
INTERNET SECURITY - 0.8%
Vasco Data Security International* 17,800 628,518
-----------
MACHINERY TOOLS & RELATED PRODUCTS - 0.9%
Hardinge, Inc. 22,300 776,709
-----------
MACHINERY-FARM - 0.9%
Lindsay Corp. 17,519 766,982
-----------
MACHINERY-GENERAL INDUSTRY - 1.3%
Chart Industries, Inc.* 32,670 1,050,667
-----------
MARINE SERVICES - 0.6%
Great Lakes Dredge & Dock Corp.* 61,300 536,988
-----------
MEDICAL INFORMATION SYSTEMS - 0.9%
Phase Forward, Inc.* 38,200 764,382
-----------
MEDICAL LABS & TESTING SERVICES - 1.0%
Bio-Reference Labs, Inc.* 23,960 808,890
-----------
MEDICAL LASER SYSTEMS - 1.2%
Cynosure, Inc. Cl. A* 26,410 974,529
-----------
MEDICAL PRODUCTS - 2.3%
Osteotech, Inc.* 68,200 512,864
Synovis Life Technologies, Inc.* 38,260 825,268
Tutogen Medical, Inc.* 51,270 589,605
-----------
1,927,737
-----------
MEDICAL-BIOMEDICAL/GENETICS - 3.6%
AMAG Pharmaceuticals, Inc.* 8,200 469,040
CryoLife, Inc.* 61,420 580,419
Regeneration Technologies, Inc.* 64,400 690,368
Sangamo Biosciences, Inc.* 45,700 644,827
Seattle Genetics, Inc.* 61,800 694,632
-----------
3,079,286
-----------
MEDICAL-DRUGS - 1.3%
Akorn, Inc.* 86,400 647,136
Biodel, Inc.* 25,900 441,336
-----------
1,088,472
-----------
MEDICAL-GENERIC DRUGS - 0.4%
Javelin Pharmaceuticals, Inc.* 73,600 369,472
-----------
MEDICAL-NURSING HOMES - 0.5%
Sun Healthcare Group, Inc.* 26,200 437,802
-----------
METAL PROCESSORS & FABRICATION - 5.4%
Ampco-Pittsburgh Corp. 13,800 543,444
CIRCOR International, Inc. 17,740 805,573
Dynamic Materials Corp. 16,100 771,029
LB Foster Co. Cl. A* 24,520 1,065,639
RBC Bearings, Inc.* 15,100 579,085
Sun Hydraulics Corp. 26,192 832,906
-----------
4,597,676
-----------
MRI/MEDICAL DIAGNOSTIC IMAGING CENTERS - 0.7%
Alliance Imaging, Inc.* 65,400 592,524
-----------
OIL COMPANIES-EXPLORATION & PRODUCTION - 1.8%
Arena Resources, Inc.* 9,650 632,075
Gulfport Energy Corp.* 37,600 889,616
-----------
1,521,691
-----------
OIL FIELD MACHINERY & EQUIPMENT - 3.6%
Bolt Technology Corp.* 14,690 479,775
Flotek Industries, Inc.* 17,080 754,082
Mitcham Industries, Inc.* 33,000 636,240
T-3 Energy Services, Inc.* 27,000 1,151,280
-----------
3,021,377
-----------
OIL-FIELD SERVICES - 0.7%
Matrix Service Co.* 29,840 625,148
-----------
POLLUTION CONTROL - 0.4%
Fuel Tech, Inc.* 16,688 368,638
-----------
PRIVATE CORRECTIONS - 1.0%
Cornell Cos., Inc.* 34,800 819,540
-----------
RACETRACKS - 1.0%
Churchill Downs, Inc.* 16,600 829,336
-----------
RECYCLING - 0.7%
Metalico, Inc.* 68,810 626,859
-----------
RESEARCH & DEVELOPMENT - 1.6%
Exponent, Inc.* 30,800 772,772
Kendle International, Inc.* 14,700 610,491
-----------
1,383,263
-----------
RETAIL-AUTOMOBILE - 0.9%
Rush Enterprises, Inc. Cl. A* 29,200 740,220
-----------
SATELLITE TELECOMMUNICATIONS - 0.7%
GeoEye, Inc.* 22,900 589,675
-----------
SCHOOLS - 1.2%
Capella Education Co.* 17,800 995,198
-----------
SEISMIC DATA COLLECTION - 1.0%
Dawson Geophysical Co.* 10,940 847,959
-----------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS - 0.9%
O2Micro International, Ltd. - ADR* 46,970 726,626
-----------
SPECIFIED PURPOSE ACQUISITION - 1.6%
Endeavor Acquisition Corp.* 54,200 642,270
Star Maritime Acquisition Corp.* 53,200 745,332
-----------
1,387,602
-----------
TELECOMMUNICATIONS EQUIPMENT - 1.9%
Network Equipment Technologies, Inc.* 68,340 990,930
Preformed Line Products Co. 11,500 598,230
-----------
1,589,160
-----------
TELECOMMUNICATIONS SERVICES - 0.6%
Knology, Inc.* 28,400 475,132
-----------
THERAPEUTICS - 1.0%
Anika Therapeutics, Inc.* 38,372 798,521
-----------
TRANSPORT-SERVICES - 0.7%
Dynamex, Inc.* 22,700 581,574
-----------
VETERINARY PRODUCTS - 0.8%
PetMed Express, Inc.* 50,100 701,901
-----------
WATER - 0.7%
Pico Holdings, Inc.* 13,600 565,080
-----------
WATER TREATMENT SYSTEMS - 0.9%
Basin Water, Inc.* 66,200 783,146
-----------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------
WIRELESS EQUIPMENT - 1.1%
Globecomm Systems, Inc.* 42,050 $ 557,583
Novatel Wireless, Inc.* 16,281 368,765
-----------
926,348
-----------
WOUND, BURN & SKIN CARE - 0.7%
Obagi Medical Products, Inc.* 30,713 567,269
-----------
Total Common Stock (Cost: $68,691,605) 83,556,626
-----------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 2.1%
TIME DEPOSIT - 2.1%
Bank of America London
4.370%, 10/01/07 (Cost: $1,787,914) $1,787,914 1,787,914
- ------------------------------------------------------------------------------------
Total Investments - 100.9% (Cost: $70,479,519) 85,344,540
- ------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (0.9%) (808,800)
- ------------------------------------------------------------------------------------
Net Assets - 100.0% $84,535,740
- ------------------------------------------------------------------------------------
</Table>
* NON-INCOME PRODUCING SECURITIES.
ADR - AMERICAN DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- ------------------------------------------------------------------------------------
Industrial 28.3%
Consumer, Non-cyclical 22.9
Technology 16.3
Communications 11.4
Energy 7.1
Consumer, Cyclical 6.7
Basic Materials 3.8
Financial 1.6
Utilities 0.7
Short Term Investments 2.1
- ------------------------------------------------------------------------------------
Total Investments 100.9
Liabilities in excess of other assets (0.9)
- ------------------------------------------------------------------------------------
Net Assets 100.0%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
<Page>
U. S. EMERGING GROWTH FUND
MANAGEMENT TEAM: JOHN C. MCCRAW, Portfolio Manager; ROBERT S. MARREN, Portfolio
Manager; BLAKE H. BURDINE, Analyst; K. MATHEW AXLINE, CFA, Analyst; STEPHEN W.
LYFORD, Analyst
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The U.S. Emerging Growth Fund seeks to maximize long-term capital
appreciation through investments primarily in U.S. companies with market
capitalizations similar to the Russell 2000 Growth Index at time of purchase.
MARKET OVERVIEW: U.S. small-cap growth stocks delivered healthy increases during
the six months ended September 30, 2007. Solid gains throughout much of the
period eclipsed a summer decline caused by deterioration in the mortgage market
and the worst liquidity crunch in nearly ten years. Factors contributing to the
period's overall positive results included:
- - Improvement in the economy, with GDP growing at a 3.8% annual rate in the
second quarter compared to the meager 0.6% growth rate posted in the prior
quarter
- - Soaring merger and buyout activity, fueled by corporate cash surpluses and
robust inflows into private equity funds
- - Accommodative monetary policy from the Federal Reserve, including the first
cut in the target funds rate since June 2003
Small-cap growth stocks outperformed small-cap value stocks in every month of
the period -- their longest winning streak in more than seven years. Within the
small-cap growth market, financials was the only sector to decline amid problems
with subprime mortgages and tighter credit market conditions. The materials
sector turned in the highest return, boosted by double-digit gains in chemicals
and metals and mining stocks.
PERFORMANCE: The Fund's Class I shares rose 15.89% during the six months ended
September 30, 2007, outperforming the 6.70% gain in the Russell 2000 Growth
Index.
PORTFOLIO SPECIFICS: The Fund's outperformance was due to stock selection, which
was positive in most sectors and strongest in industrials. The Fund's
best-performing investments included DryShips and Excel Maritime Carriers, two
shipping companies that specialize in transporting dry bulk commodities, such as
coal and grain. Both benefited from better-than-expected demand for dry bulk
commodities that pushed up the daily charter rates on their vessels. JA Solar
Holdings, a manufacturer of solar cells, was another top performer in the
industrials sector. The company was recognized for its floating-price supply
contracts, which should provide a cost advantage relative to competitors that
have locked in what are expected to be high prices for the wafers used to create
the cells.
Stock selection was also especially strong in the information technology sector,
helped by a significant gain from Vasco Data Security International. The company
provides technologies that increase the security of web-based transactions, such
as online banking, and is experiencing brisk demand from financial institutions
in Asia. Areas of relative weakness in the Fund included stock selection in the
consumer discretionary sector, where several of our retail holdings
underperformed.
MARKET OUTLOOK: Continued softness in the housing market and record-high
commodity prices may dampen investor sentiment over the coming months. However,
additional monetary easing from the Fed may drive further gains in small-cap
growth stocks. History shows that the beginning of a monetary easing cycle, as
we saw in September, typically benefits equity investors.
In the changing market environment, we believe our focus on stocks exhibiting
positive and sustainable change will continue to lead us to exciting investment
opportunities for the Fund.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN U.S. EMERGING GROWTH
FUND CLASS I SHARES WITH THE RUSSELL 2000 GROWTH INDEX.
[CHART]
<Table>
<Caption>
U.S. EMERGING
GROWTH FUND RUSSELL 2000
CLASS I SHARES GROWTH INDEX
10/1/1993 $250,000 $250,000
10/31/1993 $250,400 $257,225
11/30/1993 $237,400 $246,820
12/31/1993 $249,920 $256,560
1/31/1994 $257,143 $263,389
2/28/1994 $255,286 $262,230
3/31/1994 $234,855 $246,122
4/30/1994 $235,474 $246,498
5/31/1994 $229,076 $240,974
6/30/1994 $217,519 $230,677
7/31/1994 $222,679 $233,965
8/31/1994 $237,744 $251,133
9/30/1994 $240,633 $252,185
10/31/1994 $243,935 $254,871
11/30/1994 $231,553 $244,559
12/31/1994 $241,147 $250,321
1/31/1995 $231,007 $245,222
2/28/1995 $243,351 $256,553
3/31/1995 $255,254 $264,047
4/30/1995 $259,442 $268,018
5/31/1995 $261,426 $271,529
6/30/1995 $284,571 $290,241
7/31/1995 $312,124 $312,862
8/31/1995 $313,006 $316,723
9/30/1995 $319,619 $323,244
10/31/1995 $307,055 $307,344
11/30/1995 $320,721 $320,910
12/31/1995 $327,708 $328,021
1/31/1996 $323,033 $325,305
2/29/1996 $342,668 $340,139
3/31/1996 $352,952 $346,864
4/30/1996 $389,650 $373,492
5/31/1996 $411,388 $392,645
6/30/1996 $386,378 $367,131
7/31/1996 $341,966 $322,312
8/31/1996 $372,353 $346,172
9/30/1996 $397,130 $364,000
10/31/1996 $379,833 $348,297
11/30/1996 $383,574 $357,983
12/31/1996 $389,595 $364,964
1/31/1997 $394,413 $374,081
2/28/1997 $351,961 $351,490
3/31/1997 $332,993 $326,685
4/30/1997 $327,874 $322,906
5/31/1997 $379,961 $371,438
6/30/1997 $407,660 $384,034
7/31/1997 $436,865 $403,712
8/31/1997 $445,295 $415,827
9/30/1997 $487,145 $449,010
10/31/1997 $452,521 $422,043
11/30/1997 $435,017 $411,981
12/31/1997 $436,748 $412,212
1/31/1998 $426,704 $406,713
2/28/1998 $464,803 $442,622
3/31/1998 $490,779 $461,190
4/30/1998 $490,779 $464,017
5/31/1998 $452,334 $430,306
6/30/1998 $468,959 $434,704
7/31/1998 $429,195 $398,406
8/31/1998 $325,073 $306,438
9/30/1998 $358,956 $337,508
10/31/1998 $363,545 $355,112
11/30/1998 $401,944 $382,658
12/31/1998 $455,854 $417,285
1/31/1999 $500,962 $436,054
2/28/1999 $447,786 $396,164
3/31/1999 $495,828 $410,275
4/30/1999 $525,167 $446,507
5/31/1999 $504,263 $447,212
6/30/1999 $566,975 $470,771
7/31/1999 $569,542 $456,215
8/31/1999 $564,775 $439,153
9/30/1999 $581,645 $447,624
10/31/1999 $637,022 $459,088
11/30/1999 $720,228 $507,631
12/31/1999 $882,812 $597,101
1/31/2000 $860,761 $591,542
2/29/2000 $1,159,018 $729,171
3/31/2000 $1,010,263 $652,520
4/30/2000 $867,488 $586,635
5/31/2000 $762,089 $535,270
6/30/2000 $918,319 $604,416
7/31/2000 $822,264 $552,617
8/31/2000 $942,613 $610,747
9/30/2000 $886,924 $580,405
10/31/2000 $793,111 $533,294
11/30/2000 $611,428 $436,464
12/31/2000 $665,221 $463,171
1/31/2001 $676,406 $500,660
2/28/2001 $563,494 $432,029
3/31/2001 $509,701 $392,749
4/30/2001 $570,951 $440,833
5/31/2001 $573,081 $451,043
6/30/2001 $583,733 $463,343
7/31/2001 $545,918 $423,815
8/31/2001 $509,701 $397,327
9/30/2001 $423,420 $333,198
10/31/2001 $459,104 $365,252
11/30/2001 $495,321 $395,751
12/31/2001 $518,223 $420,406
1/31/2002 $503,310 $405,439
2/28/2002 $471,886 $379,207
3/31/2002 $510,766 $412,161
4/30/2002 $502,777 $403,258
5/31/2002 $476,147 $379,667
6/30/2002 $442,593 $347,472
7/31/2002 $379,746 $294,065
8/31/2002 $378,681 $293,918
9/30/2002 $358,442 $272,697
10/31/2002 $364,833 $286,496
11/30/2002 $382,409 $314,887
12/31/2002 $356,844 $293,160
1/31/2003 $346,725 $285,186
2/28/2003 $336,072 $277,572
3/31/2003 $336,605 $281,763
4/30/2003 $368,029 $308,418
5/31/2003 $400,517 $343,177
6/30/2003 $410,637 $349,800
7/31/2003 $442,060 $376,245
8/31/2003 $469,223 $396,449
9/30/2003 $446,854 $386,419
10/31/2003 $488,397 $419,806
11/30/2003 $500,647 $433,491
12/31/2003 $491,593 $435,442
1/31/2004 $520,886 $458,303
2/29/2004 $511,831 $457,615
3/31/2004 $511,299 $459,766
4/30/2004 $480,408 $436,686
5/31/2004 $485,734 $445,376
6/30/2004 $507,038 $460,162
7/31/2004 $462,832 $418,886
8/30/2004 $444,191 $409,880
9/30/2004 $476,147 $432,546
10/31/2004 $488,908 $443,057
11/30/2004 $528,314 $480,495
12/31/2004 $546,435 $497,745
1/31/2005 $525,124 $475,297
2/28/2005 $538,462 $481,808
3/31/2005 $520,370 $463,740
4/30/2005 $487,327 $434,246
5/31/2005 $520,903 $464,861
6/30/2005 $544,344 $479,876
7/31/2005 $584,299 $513,419
8/31/2005 $588,564 $506,180
9/30/2005 $594,450 $510,179
10/31/2005 $578,994 $491,302
11/30/2005 $606,091 $519,110
12/31/2005 $618,334 $518,331
1/31/2006 $688,701 $568,350
2/28/2006 $698,274 $565,338
3/31/2006 $740,938 $592,813
4/30/2006 $749,459 $591,094
5/31/2006 $705,765 $549,481
6/30/2006 $701,531 $549,811
7/31/2006 $658,317 $521,276
8/31/2006 $665,229 $536,549
9/30/2006 $666,293 $540,198
10/31/2006 $699,341 $575,256
11/30/2006 $712,139 $589,005
12/31/2006 $719,047 $587,591
1/31/2007 $733,931 $598,521
2/28/2007 $740,243 $596,605
3/31/2007 $750,533 $602,094
4/30/2007 $788,960 $617,869
5/31/2007 $830,222 $646,044
6/30/2007 $849,733 $642,297
7/31/2007 $809,030 $608,962
8/31/2007 $828,528 $624,247
9/30/2007 $869,789 $642,412
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Emerging Growth Fund Class I 30.54% 19.39% 5..96%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index 18.94% 18.70% 3..65%
- --------------------------------------------------------------------------------
THE GRAPH ABOVE SHOWS THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I SHARES COMPARED WITH THE RUSSELL 2000 GROWTH INDEX FOR THE
PERIODS INDICATED. THE FUND CALCULATES PERFORMANCE BASED UPON THE HISTORICAL
PERFORMANCE OF A CORRESPONDING SERIES OF NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED ING MUTUAL FUNDS), ADJUSTED TO REFLECT ALL FEES AND EXPENSES APPLICABLE
TO CLASS I SHARES. THE NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS' CLASS I SHARES
WERE FIRST AVAILABLE ON MAY 7, 1999. AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE
CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN
DISTRIBUTIONS. THE TOTAL RETURNS SHOWN ABOVE DO NOT SHOW THE EFFECTS OF INCOME
TAXES ON AN INDIVIDUAL'S INVESTMENT. IN MOST CASES, TAXES MAY REDUCE YOUR ACTUAL
INVESTMENT RETURNS ON INCOME OR GAINS PAID BY THE FUND OR ANY GAINS YOU MAY
REALIZE IF YOU SELL YOUR SHARES. PAST PERFORMANCE CANNOT GUARANTEE FUTURE
RESULTS.
THE RUSSELL 2000 GROWTH INDEX IS AN UNMANAGED INDEX COMPRISED OF THOSE RUSSELL
2000 COMPANIES WITH HIGHER PRICE-TO-BOOK RATIOS AND HIGHER FORECASTED GROWTH
VALUES. THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX GENERALLY REPRESENTATIVE OF
THE 2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX, WHICH REPRESENTS
APPROXIMATELY 10% OF THE TOTAL MARKET CAPITALIZATION OF THE RUSSELL 3000 INDEX.
THE UNMANAGED INDEX DIFFERS FROM THE FUND IN COMPOSITION, DOES NOT PAY
MANAGEMENT FEES OR EXPENSES AND INCLUDES REINVESTED DIVIDENDS. ONE CANNOT INVEST
DIRECTLY IN AN INDEX.
SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE WITH MARKET CONDITIONS. YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
YOUR SHARES.
6
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
COMMON STOCK - 99.5%
ADVERTISING SERVICES - 0.6%
inVentiv Health, Inc.* 1,800 $ 78,876
-----------
AEROSPACE/DEFENSE-EQUIPMENT - 5.4%
AAR Corp.* 2,200 66,748
BE Aerospace, Inc.* 2,000 83,060
Ducommun, Inc.*,## 2,100 67,830
Kaman Corp. 2,300 79,488
Moog, Inc. Cl. A*,## 1,600 70,304
Orbital Sciences Corp.* 3,800 84,512
TransDigm Group, Inc.* 2,600 118,846
Triumph Group, Inc. 1,300 106,223
-----------
677,011
-----------
AGRICULTURAL CHEMICALS - 1.6%
CF Industries Holdings, Inc. 1,500 113,865
UAP Holding Corp. 2,600 81,536
-----------
195,401
-----------
AIRLINES - 0.4%
Republic Airways Holdings, Inc.* 2,400 50,808
-----------
ALTERNATIVE WASTE TECH - 0.6%
Darling International, Inc.* 7,400 73,186
-----------
APPAREL MANUFACTURERS - 1.3%
G-III Apparel Group, Ltd.*,## 3,300 64,977
Phillips-Van Heusen 800 41,984
Volcom, Inc.*,## 1,200 51,024
-----------
157,985
-----------
APPLICATIONS SOFTWARE - 0.5%
Actuate Corp.* 9,800 63,210
-----------
AUDIO/VIDEO PRODUCTS - 0.6%
Universal Electronics, Inc.*,## 2,300 74,750
-----------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL - 2.1%
ArvinMeritor, Inc. 3,600 60,552
Spartan Motors, Inc.## 4,700 79,101
Tenneco, Inc.*,## 1,800 55,818
Titan International, Inc.## 2,300 73,416
-----------
268,887
-----------
BROADCAST SERVICES/PROGRAMMING - 0.6%
DG FastChannel, Inc.*,## 3,400 80,172
-----------
BUILDING & CONSTRUCTION-MISCELLANEOUS - 0.7%
Layne Christensen Co.* 1,500 83,220
-----------
BUILDING PRODUCTS-DOORS & WINDOWS - 0.6%
Apogee Enterprises, Inc. 2,900 75,226
-----------
BUILDING PRODUCTS-LIGHT FIXTURES - 0.6%
LSI Industries, Inc. 3,600 73,872
-----------
BUILDING-HEAVY CONSTRUCTION - 0.8%
Perini Corp.* 1,700 95,081
-----------
BUILDING-MAINTENANCE & SERVICE - 0.5%
Healthcare Services Group## 3,300 66,891
-----------
CASINO HOTELS - 0.2%
MTR Gaming Group, Inc.*,## 2,400 22,872
-----------
CASINO SERVICES - 0.8%
Bally Technologies, Inc.* 2,800 99,204
-----------
CHEMICALS-PLASTICS - 1.1%
Metabolix, Inc.*,## 2,900 70,354
PolyOne Corp.* 9,400 70,218
-----------
140,572
-----------
CHEMICALS-SPECIALTY - 0.6%
Terra Industries, Inc.* 2,500 78,150
-----------
COMPUTER SERVICES - 0.8%
BluePhoenix Solutions, Ltd.* 5,400 99,414
-----------
COMPUTERS-INTEGRATED SYSTEMS - 0.5%
Radiant Systems, Inc.* 4,300 68,069
-----------
COMPUTERS-PERIPHERAL EQUIPMENT - 1.6%
Sigma Designs, Inc.*,## 1,700 82,008
Synaptics, Inc.*,## 2,500 119,400
-----------
201,408
-----------
CONSULTING SERVICES - 1.2%
FTI Consulting, Inc.* 1,800 90,558
Watson Wyatt Worldwide, Inc. Cl. A 1,300 58,422
-----------
148,980
-----------
CONSUMER PRODUCTS-MISCELLANEOUS - 1.1%
Fossil, Inc.* 1,700 63,512
Tupperware Brands Corp.## 2,200 69,278
-----------
132,790
-----------
COSMETICS & TOILETRIES - 0.7%
Elizabeth Arden, Inc.* 3,200 86,272
-----------
DATA PROCESSING/MANAGEMENT - 0.6%
FalconStor Software, Inc.*,## 6,000 72,300
-----------
DIAGNOSTIC KITS - 0.7%
Inverness Medical Innovations, Inc.* 1,600 88,512
-----------
DIVERSIFIED MANUFACTURING OPERATIONS - 2.9%
Ameron International Corp. 700 74,039
Barnes Group, Inc.## 2,800 89,376
Koppers Holdings, Inc.## 2,700 104,247
LSB Industries, Inc.*,## 3,800 89,870
-----------
357,532
-----------
E-COMMERCE/PRODUCTS - 0.9%
Shutterfly, Inc.*,## 3,700 118,067
-----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 3.8%
Advanced Analogic Technologies, Inc.* 6,100 64,904
Emcore Corp.*,## 10,600 101,760
Omnivision Technologies, Inc.*,## 3,400 77,282
Semtech Corp.* 4,000 81,920
SiRF Technology Holdings, Inc.*,## 3,500 74,725
Skyworks Solutions, Inc.* 8,800 79,552
-----------
480,143
-----------
ELECTRONIC DESIGN AUTOMATION - 0.7%
Magma Design Automation, Inc.*,## 5,800 81,606
-----------
ELECTRONIC MEASURE INSTRUMENTS - 1.2%
FARO Technologies, Inc.*,## 1,600 70,640
Itron, Inc.* 900 83,763
-----------
154,403
-----------
E-MARKETING/INFORMATION - 0.4%
Valueclick, Inc.* 2,300 51,658
-----------
ENERGY-ALTERNATE SOURCES - 0.8%
JA Solar Holdings Co., Ltd. - ADR*,## 2,100 94,395
-----------
ENGINEERING/R & D SERVICES - 2.7%
Aecom Technology Corp.*,## 2,400 83,832
EMCOR Group, Inc.* 2,000 62,720
Michael Baker Corp.*,## 2,100 102,921
URS Corp.* 1,500 84,675
-----------
334,148
-----------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES - 2.9%
American Software, Inc. Cl. A 6,900 $ 63,480
Concur Technologies, Inc.* 3,100 97,712
JDA Software Group, Inc.* 3,200 66,112
Lawson Software, Inc.*,## 7,100 71,071
Ultimate Software Group, Inc.*,## 1,700 59,330
-----------
357,705
-----------
ENTERTAINMENT SOFTWARE - 0.6%
Take-Two Interactive Software, Inc.*,## 4,400 75,152
-----------
FINANCE-OTHER SERVICES - 1.0%
FCStone Group, Inc.* 1,650 53,245
GFI Group, Inc.* 800 68,896
-----------
122,141
-----------
FIREARMS & AMMUNITION - 0.6%
Smith & Wesson Holding Corp.*,## 3,800 72,542
-----------
FOOD-MISCELLANEOUS/DIVERSIFIED - 0.3%
M&F Worldwide Corp.* 800 40,152
-----------
FOOD-WHOLESALE/DISTRIBUTION - 0.4%
Spartan Stores, Inc. 2,300 51,819
-----------
FOOTWEAR & RELATED APPAREL - 0.5%
Iconix Brand Group, Inc.*,## 2,600 61,854
-----------
HOME FURNISHINGS - 0.9%
Tempur-Pedic International, Inc.## 3,100 110,825
-----------
HOTELS & MOTELS - 0.6%
Morgans Hotel Group Co.* 3,200 69,600
-----------
HOUSEWARES - 0.6%
Libbey, Inc.## 4,200 73,584
-----------
INDUSTRIAL AUDIO & VIDEO PRODUCTS - 0.7%
China Security & Surveillance Technology, Inc.*,## 3,500 85,050
-----------
INDUSTRIAL AUTOMATION/ROBOTICS - 0.7%
Hurco Cos, Inc.*,## 1,600 86,496
-----------
INSTRUMENTS-SCIENTIFIC - 0.5%
FEI Co.*,## 2,000 62,860
-----------
INTERNET APPLICATIONS SOFTWARE - 1.1%
Cybersource Corp.*,## 5,200 60,788
DealerTrack Holdings, Inc.* 1,800 75,384
-----------
136,172
-----------
INTERNET INFRASTRUCTURE SOFTWARE - 0.6%
Chordiant Software, Inc.* 5,200 72,072
-----------
INTERNET SECURITY - 0.6%
Vasco Data Security International* 2,000 70,620
-----------
INVESTMENT COMPANIES - 0.3%
NexCen Brands, Inc.*,## 5,500 36,960
-----------
MACHINERY TOOLS & RELATED PRODUCTS - 0.8%
Hardinge, Inc. 2,800 97,524
-----------
MACHINERY-CONSTRUCTION & MINING - 0.6%
Bucyrus International, Inc. Cl. A 1,100 80,223
-----------
MACHINERY-GENERAL INDUSTRY - 3.7%
Altra Holdings, Inc.*,## 4,400 73,348
Chart Industries, Inc.* 4,400 141,504
DXP Enterprises, Inc.*,## 1,400 49,714
Kadant, Inc.*,## 2,400 67,200
Middleby Corp.* 800 51,632
Robbins & Myers, Inc. 1,300 74,477
-----------
457,875
-----------
MEDICAL IMAGING SYSTEMS - 0.6%
Given Imaging, Ltd.*,## 2,600 71,552
-----------
MEDICAL INFORMATION SYSTEMS - 0.8%
Phase Forward, Inc.* 5,200 104,052
-----------
MEDICAL INSTRUMENTS - 1.2%
Arthrocare Corp.* 1,300 72,657
NuVasive, Inc.* 2,300 82,639
-----------
155,296
-----------
MEDICAL LABS & TESTING SERVICES - 0.8%
Icon PLC - ADR*,## 2,000 102,060
-----------
MEDICAL LASER SYSTEMS - 0.9%
Cynosure, Inc. Cl. A* 2,900 107,010
-----------
MEDICAL-BIOMEDICAL/GENETICS - 1.4%
Alexion Pharmaceuticals, Inc.* 1,500 97,725
Regeneron Pharmaceuticals, Inc.* 4,100 72,980
-----------
170,705
-----------
MEDICAL-DRUGS - 0.4%
Indevus Pharmaceuticals, Inc.* 7,200 49,752
-----------
MEDICAL-OUTPATIENT/HOME MEDICAL CARE - 0.7%
Air Methods Corp.*,## 1,900 87,780
-----------
METAL PROCESSORS & FABRICATION - 2.7%
CIRCOR International, Inc. 2,000 90,820
Haynes International, Inc.* 900 76,833
LB Foster Co. Cl. A*,## 1,900 82,574
RBC Bearings, Inc.* 2,300 88,205
-----------
338,432
-----------
NETWORKING PRODUCTS - 0.4%
Switch & Data Facilities Co., Inc.*,## 3,100 50,499
-----------
NON-FERROUS METALS - 0.3%
USEC, Inc.*,## 3,200 32,800
-----------
OIL COMPANIES-EXPLORATION & PRODUCTION - 0.6%
Carrizo Oil & Gas, Inc.*,## 1,600 71,776
-----------
OIL FIELD MACHINERY & EQUIPMENT - 2.6%
Complete Production Services, Inc.* 3,100 63,488
Flotek Industries, Inc.*,## 2,300 101,545
NATCO Group, Inc.* 1,500 77,625
T-3 Energy Services, Inc.* 2,000 85,280
-----------
327,938
-----------
OIL-FIELD SERVICES - 0.9%
Cal Dive International, Inc.*,## 4,800 72,000
Oceaneering International, Inc.* 600 45,480
-----------
117,480
-----------
PAPER & RELATED PRODUCTS - 0.9%
Neenah Paper, Inc. 1,500 49,635
Rock-Tenn Co. Cl. A 2,400 69,360
-----------
118,995
-----------
PHYSICAL THERAPY/REHABILITATION CENTERS - 0.4%
Psychiatric Solutions, Inc.* 1,400 54,992
-----------
POLLUTION CONTROL - 0.3%
Fuel Tech, Inc.*,## 1,700 37,553
-----------
PRINTING-COMMERCIAL - 0.4%
Consolidated Graphics, Inc.* 900 56,511
-----------
PRIVATE CORRECTIONS - 1.6%
Cornell Cos., Inc.*,## 3,300 77,715
The Geo Group, Inc.* 4,000 118,440
-----------
196,155
-----------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
PROPERTY/CASUALTY INSURANCE - 1.6%
Amtrust Financial Services, Inc.## 5,500 $ 83,435
Navigators Group, Inc.* 1,300 70,525
Tower Group, Inc. 2,000 52,360
-----------
206,320
-----------
RESEARCH & DEVELOPMENT - 1.3%
Kendle International, Inc.*,## 1,900 78,907
Parexel International Corp.* 2,000 82,540
-----------
161,447
-----------
RESORTS/THEME PARKS - 0.6%
Vail Resorts, Inc.*,## 1,200 74,748
-----------
RETAIL-APPAREL/SHOE - 1.4%
Bebe Stores, Inc.## 4,000 58,520
Dress Barn, Inc.* 3,400 57,834
JOS A Bank Clothiers, Inc.*,## 1,700 56,814
-----------
173,168
-----------
RETAIL-AUTOMOBILE - 0.6%
Rush Enterprises, Inc. Cl. A* 3,200 81,120
-----------
RETAIL-JEWELRY - 0.7%
Movado Group, Inc. 2,700 86,184
-----------
RETAIL-MISCELLANEOUS/DIVERSIFIED - 0.7%
Pricesmart, Inc.## 3,700 87,320
-----------
RETAIL-SPORTING GOODS - 0.5%
Zumiez, Inc.*,## 1,300 57,681
-----------
RUBBER-TIRES - 0.6%
Cooper Tire & Rubber Co. 3,100 75,640
-----------
SATELLITE TELECOMMUNICATIONS - 0.6%
GeoEye, Inc.* 3,100 79,825
-----------
SCHOOLS - 1.3%
Capella Education Co.*,## 2,000 111,820
Corinthian Colleges, Inc.* 3,400 54,094
-----------
165,914
-----------
SEISMIC DATA COLLECTION - 0.5%
ION Geophysical Corp.*,## 4,400 60,852
-----------
SEMICONDUCTOR COMPONENTS- INTEGRATED CIRCUITS - 1.7%
Anadigics, Inc.*,## 5,600 101,248
O2Micro International, Ltd. - ADR* 5,200 80,444
Pericom Semiconductor Corp.* 3,200 37,504
-----------
219,196
-----------
STEEL PIPE &TUBE - 0.6%
Valmont Industries, Inc.## 900 76,365
-----------
TELECOMMUNICATIONS EQUIPMENT - 1.6%
Arris Group, Inc.* 3,600 44,460
CommScope, Inc.* 1,600 80,384
Plantronics, Inc. 2,800 79,940
-----------
204,784
-----------
TELECOMMUNICATIONS SERVICES - 1.4%
NTELOS Holdings Corp. 3,500 103,110
PAETEC Holding Corp.* 5,300 66,091
-----------
169,201
-----------
THERAPEUTICS - 2.9%
Alnylam Pharmaceuticals, Inc.*,## 2,000 65,540
Cypress Bioscience, Inc.* 5,000 68,450
Isis Pharmaceuticals, Inc.*,## 5,100 76,347
MGI Pharma, Inc.* 2,400 66,672
Onyx Pharmaceuticals, Inc.* 2,000 87,040
-----------
364,049
-----------
TRANSACTIONAL SOFTWARE - 1.1%
Synchronoss Technologies, Inc.*,## 2,000 84,120
VeriFone Holdings, Inc.*,## 1,200 53,196
-----------
137,316
-----------
TRANSPORT-AIR FREIGHT - 0.5%
Atlas Air Worldwide Holdings, Inc.* 1,100 56,793
-----------
TRANSPORT-MARINE - 1.5%
DryShips, Inc. 900 81,765
Excel Maritime Carriers, Ltd. 1,800 100,440
-----------
182,205
-----------
WEB PORTALS/ISP - 0.5%
Trizetto Group* 3,800 66,538
-----------
WIRE & CABLE PRODUCTS - 1.0%
Belden, Inc. 1,600 75,056
General Cable Corp.*,## 800 53,696
-----------
128,752
-----------
WIRELESS EQUIPMENT - 0.2%
Novatel Wireless, Inc.* 1,300 29,445
-----------
Total Common Stock (Cost: $9,919,474) 12,442,498
-----------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 36.7%
MONEY MARKET FUNDS - 35.4%
Boston Global Investment Trust - Enhanced Portfolio, 5.408%** $4,429,950 4,429,950
-----------
TIME DEPOSIT - 1.3%
Wells Fargo Bank 4.370%, 10/01/07 165,779 165,779
-----------
Total Short Term Investments (Cost: $4,595,729) 4,595,729
- -------------------------------------------------------------------------------------------
Total Investments - 136.2% (Cost: $14,515,203) 17,038,227
- -------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (36.2%) (4,526,946)
- -------------------------------------------------------------------------------------------
Net Assets - 100.0% $12,511,281
- -------------------------------------------------------------------------------------------
</Table>
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
9/30/07.
ADR - AMERICAN DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
<Table>
<Caption>
PERCENT OF
SECTOR NET ASSETS
- -------------------------------------------------------------------------------------------
Industrial 30.6%
Consumer, Non-cyclical 18.8
Technology 14.7
Consumer, Cyclical 13.0
Communications 9.6
Energy 5.4
Basic Materials 4.5
Financial 2.9
Short Term Investments 36.7
- -------------------------------------------------------------------------------------------
Total Investments 136.2
Liabilities in excess of other assets (36.2)
- -------------------------------------------------------------------------------------------
Net Assets 100.0%
- -------------------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<Page>
U.S. SMALL CAP VALUE FUND
MANAGEMENT TEAM: MARK P. ROEMER, Portfolio Manager; CARMA WALLACE, CFA, Analyst
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The U.S. Small Cap Value Fund seeks to maximize long-term capital
appreciation through investments primarily in smaller U.S. companies with market
capitalizations corresponding to the Russell 2000 Value Index that, in the
opinion of the Investment Adviser, are undervalued in the marketplace.
MARKET OVERVIEW: U.S. small-cap value stocks declined during the six months
ended September 30, 2007. Losses were concentrated in June and July and
precipitated by the following events:
- A sharp acceleration in residential mortgage defaults, which depressed
the value of mortgage-backed securities and prompted funds owning them
to sell stocks to raise cash and reduce the leverage in their
portfolios
- An ensuing increase in risk aversion that caused liquidity to dry up
for even creditworthy corporate borrowers
- An abrupt slowdown in the pace of mergers and private equity buyouts
in the wake of tighter conditions in the credit markets
Small-cap value stocks rallied later in the period in response to the Federal
Reserve's decision to lower the discount window rate in August and September and
the key fed funds rate in September. However, gains were unable to erase earlier
losses.
Within the small-cap value market, the consumer discretionary sector turned in
the weakest results, as falling consumer confidence and the ongoing housing
slump dampened the outlook for spending. The materials sector performed the
best, generating a strong gain amid robust global demand for steel, chemicals
and other commodities. Energy stocks also did well, buoyed by record-high oil
prices.
PERFORMANCE: From April 1 through September 30, 2007, the Fund's Class I shares
lost 4.46% and the Russell 2000 Value Index fell 4.10%.
PORTFOLIO SPECIFICS: The Fund performed broadly in line with the benchmark,
benefiting from stock selection in the consumer discretionary and information
technology sectors. One of the portfolio's best-performing holdings was
Aftermarket Technology, a provider of logistics services and remanufactured
transmissions used in auto repair. The company announced the renewal of a major
contract and reported better-than-expected earnings, driven by healthy sales
growth and margin expansion. Comtech Telecommunications, a provider of advanced
communications, was another top performer, supported by a record order backlog
in its mobile data segment. In addition, an underweight in consumer
discretionary companies had a positive impact on the portfolio.
Stock selection was weakest among financials, where holdings in a variety of
industries underperformed, including insurance, consumer finance and real estate
investment trusts (REITs). In addition, stock selection among energy and health
care companies detracted.
The Fund remained well diversified throughout the period, reflecting our
risk-controlled approach to portfolio construction. At September 30, the largest
overweight versus the index was in the information technology sector (+4.7%),
and the largest underweight was in consumer staples (-3.7%).
MARKET OUTLOOK: Our process evaluates investment opportunities on a relative
basis and is required to remain fully invested. As such, the process neither
utilizes nor results in a forecast or outlook on the overall market, but expects
to perform equally well versus the Russell 2000 Value Index in both up and down
markets.
By applying our disciplined, bottom-up process in all investment environments,
we believe the Fund will generate consistently strong, long-term returns.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN U.S. SMALL CAP VALUE
FUND CLASS I SHARES WITH THE RUSSELL 2000 VALUE INDEX.
[CHART]
<Table>
<Caption>
U.S. SMALL CAP
VALUE FUND RUSSELL 2000
CLASS I SHARES VALUE INDEX
12/30/1997 $250,000 $250,000
12/31/1997 $248,617 $250,504
1/31/1998 $246,355 $245,969
2/28/1998 $267,925 $260,851
3/31/1998 $280,698 $271,441
4/30/1998 $283,771 $272,771
5/31/1998 $274,008 $263,115
6/30/1998 $271,752 $261,642
7/31/1998 $252,912 $241,155
8/31/1998 $209,998 $203,390
9/30/1998 $219,489 $214,882
10/31/1998 $230,594 $221,264
11/30/1998 $242,745 $227,260
12/31/1998 $251,379 $234,396
1/31/1999 $239,838 $229,075
2/28/1999 $224,921 $213,429
3/31/1999 $216,720 $211,658
4/30/1999 $237,553 $230,982
5/31/1999 $247,108 $238,073
6/30/1999 $256,810 $246,692
7/31/1999 $255,260 $240,845
8/31/1999 $246,962 $232,030
9/30/1999 $239,174 $227,389
10/31/1999 $230,648 $222,842
11/30/1999 $236,639 $224,000
12/31/1999 $240,256 $230,877
1/31/2000 $233,732 $224,828
2/29/2000 $230,083 $238,565
3/31/2000 $248,579 $239,687
4/30/2000 $257,324 $241,101
5/31/2000 $255,258 $237,412
6/30/2000 $260,240 $244,344
7/31/2000 $260,563 $252,481
8/31/2000 $277,078 $263,767
9/30/2000 $281,274 $262,263
10/31/2000 $283,121 $261,319
11/30/2000 $275,691 $255,988
12/31/2000 $305,403 $283,507
1/31/2001 $318,153 $291,332
2/28/2001 $318,314 $290,924
3/31/2001 $313,098 $286,269
4/30/2001 $334,350 $299,523
5/31/2001 $354,411 $307,221
6/30/2001 $361,633 $319,572
7/31/2001 $365,110 $312,413
8/31/2001 $361,098 $311,320
9/30/2001 $324,453 $276,950
10/31/2001 $334,350 $284,178
11/30/2001 $351,469 $304,611
12/31/2001 $379,885 $323,253
1/31/2002 $383,641 $327,552
2/28/2002 $384,446 $329,550
3/31/2002 $419,054 $354,234
4/30/2002 $428,175 $366,703
5/31/2002 $415,298 $354,565
6/30/2002 $408,859 $346,729
7/31/2002 $350,106 $295,205
8/31/2002 $347,960 $293,906
9/30/2002 $324,619 $272,921
10/31/2002 $322,473 $277,015
11/30/2002 $348,387 $299,121
12/31/2002 $342,602 $286,348
1/31/2003 $332,317 $278,273
2/28/2003 $322,997 $268,923
3/31/2003 $328,782 $271,801
4/30/2003 $358,028 $297,622
5/31/2003 $399,809 $328,009
6/30/2003 $411,058 $333,552
7/31/2003 $439,340 $350,197
8/31/2003 $464,409 $363,504
9/30/2003 $454,115 $359,324
10/31/2003 $501,037 $388,609
11/30/2003 $524,123 $403,531
12/31/2003 $543,989 $418,139
1/31/2004 $566,835 $432,607
2/29/2004 $581,072 $440,999
3/31/2004 $584,052 $447,085
4/30/2004 $556,571 $423,971
5/31/2004 $568,490 $429,101
6/30/2004 $591,336 $450,899
7/31/2004 $564,848 $430,158
8/30/2004 $559,219 $434,373
9/30/2004 $592,660 $451,575
10/31/2004 $599,950 $458,574
11/30/2004 $650,586 $499,295
12/31/2004 $673,877 $511,179
1/31/2005 $654,334 $491,396
2/28/2005 $662,971 $501,126
3/31/2005 $653,557 $490,803
4/30/2005 $630,290 $465,477
5/31/2005 $659,977 $493,871
6/30/2005 $684,792 $515,700
7/31/2005 $726,496 $545,044
8/31/2005 $706,590 $532,508
9/30/2005 $703,976 $531,602
10/31/2005 $681,801 $518,259
11/30/2005 $721,686 $539,300
12/31/2005 $729,336 $535,148
1/31/2006 $770,324 $579,405
2/28/2006 $768,322 $579,347
3/31/2006 $797,210 $607,445
4/30/2006 $808,053 $609,085
5/31/2006 $786,397 $583,869
6/30/2006 $791,587 $591,051
7/31/2006 $756,678 $582,835
8/31/2006 $789,593 $600,262
9/30/2006 $798,832 $606,144
10/31/2006 $840,611 $636,997
11/30/2006 $858,600 $655,151
12/31/2006 $869,504 $660,851
1/31/2007 $876,373 $670,764
2/28/2007 $865,856 $662,514
3/31/2007 $879,104 $670,530
4/30/2007 $890,005 $677,504
5/31/2007 $928,275 $702,368
6/30/2007 $907,760 $686,003
7/31/2007 $828,513 $627,624
8/31/2007 $832,158 $640,176
9/30/2007 $839,481 $643,057
</Table>
Annualized Total Returns As of 9/30/07
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
U.S. Small Cap Value Fund Class I 5.09% 20.91% 13.22%
- --------------------------------------------------------------------------------
Russell 2000 Value Index 6.09% 18.70% 10.18%
- --------------------------------------------------------------------------------
THE GRAPH ABOVE SHOWS THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I SHARES COMPARED WITH THE RUSSELL 2000 VALUE INDEX FOR THE PERIODS
INDICATED. AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE CHANGES IN PRINCIPAL
VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN DISTRIBUTIONS. THE FUND'S
PERFORMANCE INCLUDES HISTORICAL PERFORMANCE OF COMPARABLE MANAGED INSTITUTIONAL
POOLED ACCOUNTS MANAGED BY THE INVESTMENT ADVISER PRIOR TO THE INCEPTION OF THE
FUND. THE TOTAL RETURNS SHOWN ABOVE DO NOT SHOW THE EFFECTS OF INCOME TAXES ON
AN INDIVIDUAL'S INVESTMENT. IN MOST CASES, TAXES MAY REDUCE YOUR ACTUAL
INVESTMENT RETURNS ON INCOME OR GAINS PAID BY THE FUND OR ANY GAINS YOU MAY
REALIZE IF YOU SELL YOUR SHARES. PAST PERFORMANCE CANNOT GUARANTEE FUTURE
RESULTS.
THE RUSSELL 2000 VALUE INDEX MEASURES THE PERFORMANCE OF THOSE RUSSELL 2000
COMPANIES WITH LOWER PRICE-TO-BOOK RATIOS AND LOWER FORECASTED GROWTH VALUES.
THE UNMANAGED INDEX DIFFERS FROM THE FUND IN COMPOSITION, DOES NOT PAY
MANAGEMENT FEES OR EXPENSES AND INCLUDES REINVESTED DIVIDENDS. ONE CANNOT INVEST
DIRECTLY IN AN INDEX.
SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE WITH MARKET CONDITIONS. YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
YOUR SHARES.
10
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 97.5%
AEROSPACE/DEFENSE - 0.7%
United Industrial Corp. 2,600 $ 195,676
-----------
AUTO/TRUCK PARTS & EQUIPMENT-REPLACEMENT - 1.8%
Aftermarket Technology Corp.* 16,000 507,840
-----------
CHEMICALS-DIVERSIFIED - 0.6%
Olin Corp. 8,000 179,040
-----------
CHEMICALS-SPECIALTY - 1.8%
Hercules, Inc. 24,200 508,684
-----------
COMMERCIAL BANKS-CENTRAL US - 7.0%
Amcore Financial, Inc. 19,900 495,908
Associated Banc-Corp. 17,200 509,636
Macatawa Bank Corp. 36,541 494,400
Mercantile Bank Corp. 20,693 444,072
-----------
1,944,016
-----------
COMMERCIAL BANKS-EASTERN US - 1.7%
Provident Bankshares Corp. 15,300 479,349
-----------
COMMERCIAL BANKS-SOUTHERN US - 4.8%
BancTrust Financial Group, Inc. 16,200 257,904
Bank of Granite Corp. 13,200 179,256
Community Trust Bancorp, Inc. 5,500 165,220
Intervest Bancshares Corp. 14,100 348,975
Simmons First National Corp. Cl. A 14,100 371,394
-----------
1,322,749
-----------
COMMERCIAL BANKS-WESTERN US - 1.3%
Community Bancorp* 14,000 351,960
-----------
COMMERCIAL SERVICES - 1.3%
Convergys Corp.* 20,600 357,616
-----------
COMMERCIAL SERVICES-FINANCE - 2.4%
Deluxe Corp. 12,600 464,184
TNS, Inc. 12,500 200,750
-----------
664,934
-----------
COMPUTERS-PERIPHERAL EQUIPMENT - 1.8%
Electronics for Imaging* 18,800 504,968
-----------
CONSULTING SERVICES - 0.6%
Watson Wyatt Worldwide, Inc. Cl. A 3,800 170,772
-----------
CONSUMER PRODUCTS-MISCELLANEOUS - 1.8%
American Greetings Corp. Cl. A 19,400 512,160
-----------
CONTAINERS-METAL/GLASS - 1.9%
Greif, Inc. Cl. A 8,700 527,916
-----------
CONTAINERS-PAPER/PLASTIC - 1.5%
Packaging Corp. of America 14,000 406,980
-----------
DIVERSIFIED OPERATIONS/COMMERCIAL SERVICES - 1.7%
Viad Corp. 13,100 471,600
-----------
ELECTRIC-INTEGRATED - 0.7%
El Paso Electric Co.* 8,800 203,544
-----------
ELECTRONIC COMPONENTS-MISCELLANEOUS - 1.7%
Methode Electronics, Inc. Cl. A 31,400 472,570
-----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 0.7%
Semtech Corp.* 10,000 204,800
-----------
ENERGY-ALTERNATE SOURCES - 1.8%
Covanta Holding Corp.* 20,900 512,259
-----------
ENGINEERING/R & D SERVICES - 1.5%
URS Corp.* 7,200 406,440
-----------
ENTERPRISE SOFTWARE/SERVICES - 0.7%
MicroStrategy, Inc. Cl. A* 2,600 206,284
-----------
FINANCE-AUTO LOANS - 1.4%
United PanAm Financial Corp.* 45,500 374,920
-----------
FINANCE-INVESTMENT BANKERS/BROKERS - 0.7%
Piper Jaffray Cos.* 3,500 187,600
-----------
GAS-DISTRIBUTION - 1.7%
Northwest Natural Gas Co. 10,600 484,420
-----------
HEALTH CARE COST CONTAINMENT - 1.9%
Healthspring, Inc.* 26,700 520,650
-----------
HUMAN RESOURCES - 1.4%
Korn/Ferry International* 23,200 383,032
-----------
INDUSTRIAL AUTOMATION/ROBOTICS - 0.7%
Cognex Corp. 11,100 197,136
-----------
INVESTMENT COMPANIES - 1.8%
Apollo Investment Corp. 23,400 486,720
-----------
LASERS-SYSTEMS/COMPONENTS - 3.3%
Cymer, Inc.* 11,100 426,129
Rofin-Sinar Technologies, Inc.* 6,900 484,449
-----------
910,578
-----------
LIFE/HEALTH INSURANCE - 1.0%
Scottish Re Group, Ltd.* 84,800 270,512
-----------
MACHINERY-GENERAL INDUSTRY - 1.9%
Gardner Denver, Inc.* 13,200 514,800
-----------
MEDICAL-DRUGS - 1.6%
Medicis Pharmaceutical Corp. Cl. A 14,800 451,548
-----------
MEDICAL-HMO - 2.0%
Centene Corp.* 25,700 552,807
-----------
MEDICAL-OUTPATIENT/HOME MEDICAL CARE - 2.6%
Apria Healthcare Group, Inc.* 11,700 304,317
VistaCare, Inc. Cl. A* 63,600 415,944
-----------
720,261
-----------
METAL PROCESSORS & FABRICATION - 1.8%
Quanex Corp. 10,350 486,243
-----------
MULTIMEDIA - 2.6%
Gemstar-TV Guide International, Inc.* 34,200 238,032
Meredith Corp. 8,200 469,860
-----------
707,892
-----------
NON-HAZARDOUS WASTE DISPOSAL - 1.4%
Waste Industries USA, Inc. 13,600 389,232
-----------
OIL-FIELD SERVICES - 2.5%
SEACOR Holdings, Inc.* 2,600 247,260
Trico Marine Services, Inc.* 15,400 458,920
706,180
PAPER & RELATED PRODUCTS - 0.7%
Potlatch Corp. 4,400 198,132
-----------
PROPERTY/CASUALTY INSURANCE - 3.5%
Amerisafe, Inc.* 28,800 476,352
RLI Corp. 3,100 175,832
Tower Group, Inc. 5,700 149,226
Zenith National Insurance Corp. 3,700 166,093
-----------
967,503
-----------
REITS-DIVERSIFIED - 2.4%
Cousins Properties, Inc. 17,700 519,672
Washington Real Estate Investment Trust 4,400 145,992
-----------
665,664
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
REITS-HOTELS - 1.3%
Ashford Hospitality Trust, Inc. 36,200 $ 363,810
-----------
REITS-MORTGAGE - 2.7%
Anthracite Capital, Inc. 18,700 170,170
Gramercy Capital Corp. 7,200 181,224
JER Investors Trust, Inc. 144A# 24,500 304,290
JER Investors Trust, Inc. 7,200 89,640
-----------
745,324
-----------
REITS-REGIONAL MALLS - 2.1%
CBL & Associates Properties, Inc. 5,700 199,785
Pennsylvania Real Estate Investment Trust 9,600 373,824
-----------
573,609
-----------
RETAIL-APPAREL/SHOE - 1.0%
Aeropostale, Inc.* 13,900 264,934
-----------
RETAIL-DISCOUNT - 1.8%
Big Lots, Inc.* 17,200 513,248
-----------
RETAIL-HAIR SALONS - 0.6%
Regis Corp. 5,200 165,932
-----------
RETAIL-RESTAURANTS - 0.8%
CBRL Group, Inc. 5,100 208,080
-----------
SAVINGS & LOANS/THRIFTS-EASTERN US - 0.5%
Brookline Bancorp, Inc. 12,528 145,199
-----------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS - 1.7%
ChipMOS TECHNOLOGIES Bermuda, Ltd.* 77,600 464,824
-----------
SEMICONDUCTOR EQUIPMENT - 1.8%
Amkor Technology, Inc.* 26,100 300,672
Credence Systems Corp.* 66,500 205,485
-----------
506,157
-----------
STEEL-PRODUCERS - 1.7%
Ryerson, Inc. 13,800 465,612
-----------
TELECOMMUNICATIONS EQUIPMENT - 1.9%
Comtech Telecommunications Corp.* 10,000 534,900
-----------
THERAPEUTICS - 0.7%
MGI Pharma, Inc.* 7,200 200,016
-----------
TRANSPORT-MARINE - 0.4%
Quintana Maritime, Ltd. 5,700 108,699
-----------
TRANSPORT-TRUCK - 0.5%
YRC Worldwide, Inc.* 5,200 142,064
-----------
WIRELESS EQUIPMENT - 1.3%
InterDigital, Inc.* 17,600 365,728
- --------------------------------------------------------------------------------
Total Common Stock (Cost: $25,838,453) 27,056,123
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 2.2%
TIME DEPOSIT - 2.2%
Citibank Nassau 4.370%, 10/01/07 (Cost: $610,500) $610,500 $ 610,500
- --------------------------------------------------------------------------------
Total Investments - 99.7% (Cost: $26,448,953) 27,666,623
- --------------------------------------------------------------------------------
Other Assets in Excess of Liabilities - 0.3% 92,293
- --------------------------------------------------------------------------------
Net Assets - 100.0% $27,758,916
- --------------------------------------------------------------------------------
</Table>
* NON-INCOME PRODUCING SECURITIES.
# 144A SECURITY. CERTAIN CONDITION FOR PUBLIC SALE MAY EXIST. THE TOTAL
MARKET VALUE OF 144A SECURITIES OWNED AT SEPTEMBER 30, 2007 WAS $304,290 OR
1.1% OF NET ASSETS.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Financial 32..0%
Consumer, Non-cyclical 18..0
Industrial 17..1
Technology 6..8
Consumer, Cyclical 6..0
Communications 5..8
Basic Materials 4..9
Energy 4..4
Utilities 2..5
Short Term Investments 2..2
- --------------------------------------------------------------------------------
Total Investments 99..7
Other assets in excess of liabilities 0..3
- --------------------------------------------------------------------------------
Net Assets 100..0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
12
<Page>
U.S. SYSTEMATIC LARGE CAP GROWTH FUND
MANAGEMENT TEAM: JAMES LI, PH.D., CFA, Portfolio Manager; JANE EDMONDSON,
Portfolio Manager; LU YU, CFA, CIPM, Analyst
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The U.S. Systematic Large Cap Growth Fund seeks to maximize long-term
capital appreciation by investing primarily in stocks from a universe of large
U.S. companies with market capitalizations similar to the upper 90% of the
Russell 1000 Growth Index at time of purchase.
MARKET OVERVIEW: U.S. large-cap growth stocks generated strong increases between
April 1 and September 30 in a volatile market environment. Healthy gains at the
beginning and end of the period overshadowed sharp losses during the summer.
In April and May, investors bid share prices up on robust merger and acquisition
activity, better-than-expected corporate earnings growth and signs the economy
was improving after having slowed to a near standstill during the first quarter
of the year. Gains in the core consumer price index, which excludes food and
energy prices, slipped to a twelve-month low, and the Federal Reserve held
interest rates steady as it had since June 2006.
Equities subsequently reversed course, as a rise in residential mortgage
defaults undermined the value of mortgage-backed securities. The drop in value
caused financial institutions holding the bonds to sell stocks to meet cash
needs and reduce leverage to dampen potential losses. Risk aversion skyrocketed,
prompting a liquidity crunch throughout the financial markets. The Federal
Reserve intervened, lowering both the discount rate and the key federal funds
rate. Stocks rallied in response to the central bank's actions, delivering gains
in both August and September.
Among major Russell indexes, large-cap growth stocks posted the best returns
during the period and outpaced large-cap value stocks by more than 6%.
PERFORMANCE: During the six months ended September 30, 2007, the Fund's Class I
shares gained 14.47%, outperforming the Russell 1000 Growth Index, which
advanced 11.36%.
PORTFOLIO SPECIFICS: Outperformance over the index was driven by stock
selection, which was especially strong in the industrials, energy and materials
sectors. Top-performing holdings included Precision Castparts, a manufacturer of
metal components that experienced robust demand across all of its business
segments; National Oilwell Varco, an oilfield equipment company which reported a
jump in new orders; and Freeport-McMoRan Copper & Gold, a mining company that
announced it was selling a non-core business and would use the proceeds to repay
debt. PC and multimedia device maker Apple was another standout performer. The
company launched its highly anticipated iPhone in June and sold its one
millionth unit seventy-four days later. On the negative side, an overweight in
consumer discretionary stocks hurt relative performance amid concerns about the
outlook for consumer spending.
As of September 30, holdings remained broadly diversified across sectors and
industries. The Fund was overweight consumer discretionary, information
technology, and health care, where our model has identified a number of
attractively valued stocks with strong earnings growth and cash flow. The Fund
was underweight financials due to deteriorating fundamentals in the mortgage and
credit markets.
MARKET OUTLOOK: Our process evaluates investment opportunities on a relative
basis and is required to remain fully invested. As such, the process neither
utilizes nor results in a forecast or outlook on the overall market, but expects
to perform equally well versus the Russell 1000 Growth Index in both up and down
markets.
We are confident that the Fund's proprietary stock-selection model, in
conjunction with its risk-controlled approach to portfolio construction, will
continue to add value above the index over time.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN U.S. SYSTEMATIC LARGE
CAP GROWTH FUND CLASS I AND II SHARES WITH THE RUSSELL 1000 GROWTH INDEX.
[CHART]
<Table>
<Caption>
U.S. SYSTEMATIC
LARGE CAP
GROWTH FUND RUSSELL 1000
CLASS I SHARES GROWTH INDEX
12/27/1996 $250,000 $250,000
12/31/1996 $247,200 $246,185
1/31/1997 $272,400 $263,452
2/28/1997 $267,800 $261,669
3/31/1997 $260,000 $247,507
4/30/1997 $270,000 $263,941
5/31/1997 $300,200 $282,990
6/30/1997 $311,400 $294,315
7/31/1997 $350,200 $320,345
8/31/1997 $342,200 $301,595
9/30/1997 $359,600 $316,436
10/31/1997 $359,200 $304,741
11/30/1997 $354,897 $317,683
12/31/1997 $361,073 $321,241
1/31/1998 $366,478 $330,846
2/28/1998 $400,192 $355,733
3/31/1998 $424,641 $369,912
4/30/1998 $438,281 $375,032
5/31/1998 $427,214 $364,388
6/30/1998 $458,097 $386,707
7/31/1998 $448,284 $384,147
8/31/1998 $373,570 $326,494
9/30/1998 $420,007 $351,576
10/31/1998 $451,657 $379,832
11/30/1998 $494,721 $408,726
12/31/1998 $580,590 $445,580
1/31/1999 $645,965 $471,745
2/28/1999 $632,475 $450,195
3/31/1999 $697,590 $473,907
4/30/1999 $730,134 $474,514
5/31/1999 $735,294 $459,932
6/30/1999 $770,229 $492,146
7/31/1999 $760,111 $476,505
8/31/1999 $755,701 $484,291
9/30/1999 $769,969 $474,116
10/31/1999 $825,745 $509,922
11/30/1999 $920,954 $537,432
12/31/1999 $1,138,610 $593,330
1/31/2000 $1,089,839 $565,509
2/29/2000 $1,248,865 $593,157
3/31/2000 $1,292,448 $635,615
4/30/2000 $1,193,089 $605,372
5/31/2000 $1,117,078 $574,886
6/30/2000 $1,235,116 $618,456
7/31/2000 $1,180,637 $592,673
8/31/2000 $1,334,734 $646,334
9/30/2000 $1,219,032 $585,197
10/31/2000 $1,094,249 $557,505
11/30/2000 $883,799 $475,324
12/31/2000 $865,615 $460,284
1/31/2001 $843,954 $492,085
2/28/2001 $698,749 $408,544
3/31/2001 $604,620 $364,086
4/30/2001 $683,507 $410,132
5/31/2001 $652,754 $404,095
6/30/2001 $620,130 $394,736
7/31/2001 $584,564 $384,872
8/31/2001 $518,513 $353,389
9/30/2001 $434,278 $318,121
10/31/2001 $455,938 $334,822
11/30/2001 $511,560 $366,999
12/31/2001 $508,886 $366,302
1/31/2002 $489,365 $359,818
2/28/2002 $457,810 $344,886
3/31/2002 $483,482 $356,819
4/30/2002 $455,404 $327,702
5/31/2002 $442,033 $319,772
6/30/2002 $393,631 $290,193
7/31/2002 $362,611 $274,232
8/31/2002 $364,483 $275,055
9/30/2002 $340,951 $246,532
10/31/2002 $359,403 $269,139
11/30/2002 $373,041 $283,753
12/31/2002 $336,940 $264,146
1/31/2003 $329,987 $257,727
2/28/2003 $329,185 $256,541
3/31/2003 $340,416 $261,313
4/30/2003 $361,809 $280,650
5/31/2003 $372,506 $294,655
6/30/2003 $376,517 $298,721
7/31/2003 $387,213 $306,159
8/31/2003 $396,573 $313,782
9/30/2003 $385,876 $310,425
10/31/2003 $404,060 $327,871
11/30/2003 $408,606 $331,281
12/31/2003 $408,072 $342,743
1/31/2004 $418,768 $349,735
2/29/2004 $415,827 $351,973
3/31/2004 $402,991 $345,427
4/30/2004 $393,631 $341,420
5/31/2004 $403,793 $347,770
6/30/2004 $412,618 $352,152
7/31/2004 $390,957 $332,255
8/30/2004 $385,609 $330,627
9/30/2004 $390,688 $333,768
10/31/2004 $403,229 $338,975
11/30/2004 $427,221 $350,636
12/31/2004 $438,371 $364,381
1/31/2005 $423,379 $352,247
2/28/2005 $432,101 $355,981
3/31/2005 $426,916 $349,502
4/30/2005 $408,644 $342,861
5/31/2005 $429,607 $359,421
6/30/2005 $429,865 $358,092
7/31/2005 $448,392 $375,602
8/31/2005 $440,500 $370,757
9/30/2005 $445,390 $372,462
10/31/2005 $434,210 $368,850
11/30/2005 $454,662 $384,747
12/31/2005 $454,389 $383,554
1/31/2006 $471,838 $390,305
2/28/2006 $473,489 $389,680
3/31/2006 $486,557 $395,448
4/30/2006 $486,849 $394,894
5/31/2006 $470,783 $381,507
6/30/2006 $469,135 $380,019
7/31/2006 $472,138 $372,799
8/31/2006 $487,860 $384,430
9/30/2006 $502,496 $395,002
10/31/2006 $521,792 $408,867
11/30/2006 $525,914 $416,962
12/31/2006 $529,490 $418,380
1/31/2007 $547,969 $429,132
2/28/2007 $537,229 $421,064
3/31/2007 $545,502 $423,338
4/30/2007 $565,359 $443,277
5/31/2007 $586,334 $459,235
6/30/2007 $577,480 $452,393
7/31/2007 $571,705 $445,381
8/31/2007 $589,657 $452,462
9/30/2007 $624,446 $471,420
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Systematic Large Cap Growth
Fund Class I 24.27% 12.15% 5.34%
- --------------------------------------------------------------------------------
Russell 1000 Growth Index 19.35% 13.84% 4.06%
- --------------------------------------------------------------------------------
13
<Page>
[CHART]
<Table>
<Caption>
U.S. SYSTEMATIC
LARGE CAP
GROWTH FUND RUSSELL 1000
CLASS II SHARES GROWTH INDEX
12/27/1996 $250,000 $250,000
12/31/1996 $247,200 $246,185
1/31/1997 $272,400 $263,452
2/28/1997 $267,800 $261,669
3/31/1997 $260,000 $247,507
4/30/1997 $270,000 $263,941
5/31/1997 $300,200 $282,990
6/30/1997 $311,400 $294,315
7/31/1997 $350,200 $320,345
8/31/1997 $342,200 $301,595
9/30/1997 $359,600 $316,436
10/31/1997 $359,200 $304,741
11/30/1997 $354,897 $317,683
12/31/1997 $361,073 $321,241
1/31/1998 $366,478 $330,846
2/28/1998 $400,192 $355,733
3/31/1998 $424,641 $369,912
4/30/1998 $438,281 $375,032
5/31/1998 $427,214 $364,388
6/30/1998 $458,097 $386,707
7/31/1998 $448,284 $384,147
8/31/1998 $373,570 $326,494
9/30/1998 $420,007 $351,576
10/31/1998 $451,657 $379,832
11/30/1998 $494,721 $408,726
12/31/1998 $580,590 $445,580
1/31/1999 $645,965 $471,745
2/28/1999 $632,475 $450,195
3/31/1999 $697,590 $473,907
4/30/1999 $730,134 $474,514
5/31/1999 $735,294 $459,932
6/30/1999 $770,229 $492,146
7/31/1999 $760,111 $476,505
8/31/1999 $755,701 $484,291
9/30/1999 $769,969 $474,116
10/31/1999 $825,745 $509,922
11/30/1999 $920,954 $537,432
12/31/1999 1,138,610 $593,330
1/31/2000 1,089,839 $565,509
2/29/2000 1,248,865 $593,157
3/31/2000 1,292,448 $635,615
4/30/2000 1,193,089 $605,372
5/31/2000 1,117,078 $574,886
6/30/2000 1,235,116 $618,456
7/31/2000 1,180,637 $592,673
8/31/2000 1,334,734 $646,334
9/30/2000 1,219,032 $585,197
10/31/2000 1,094,249 $557,505
11/30/2000 $883,799 $475,324
12/31/2000 $865,615 $460,284
1/31/2001 $843,954 $492,085
2/28/2001 $698,749 $408,544
3/31/2001 $604,620 $364,086
4/30/2001 $683,507 $410,132
5/31/2001 $652,754 $404,095
6/30/2001 $620,130 $394,736
7/31/2001 $584,564 $384,872
8/31/2001 $518,513 $353,389
9/30/2001 $434,278 $318,121
10/31/2001 $455,938 $334,822
11/30/2001 $511,560 $366,999
12/31/2001 $508,886 $366,302
1/31/2002 $489,365 $359,818
2/28/2002 $457,810 $344,886
3/31/2002 $483,482 $356,819
4/30/2002 $455,404 $327,702
5/31/2002 $442,033 $319,772
6/30/2002 $393,631 $290,193
7/31/2002 $362,611 $274,232
8/31/2002 $364,483 $275,055
9/30/2002 $340,951 $246,532
10/31/2002 $359,403 $269,139
11/30/2002 $373,041 $283,753
12/31/2002 $336,940 $264,146
1/31/2003 $329,987 $257,727
2/28/2003 $329,185 $256,541
3/31/2003 $340,416 $261,313
4/30/2003 $361,809 $280,650
5/31/2003 $372,506 $294,655
6/30/2003 $376,517 $298,721
7/31/2003 $387,213 $306,159
8/31/2003 $396,573 $313,782
9/30/2003 $385,876 $310,425
10/31/2003 $404,060 $327,871
11/30/2003 $408,606 $331,281
12/31/2003 $408,072 $342,743
1/31/2004 $418,768 $349,735
2/29/2004 $415,827 $351,973
3/31/2004 $402,991 $345,427
4/30/2004 $393,631 $341,420
5/31/2004 $403,793 $347,770
6/30/2004 $412,618 $352,152
7/31/2004 $390,957 $332,255
8/30/2004 $385,609 $330,627
9/30/2004 $390,688 $333,768
10/31/2004 $395,767 $338,975
11/30/2004 $419,315 $350,636
12/31/2004 $430,259 $364,381
1/31/2005 $415,544 $352,247
2/28/2005 $424,104 $355,981
3/31/2005 $419,015 $349,502
4/30/2005 $401,081 $342,861
5/31/2005 $421,657 $359,421
6/30/2005 $421,910 $358,092
7/31/2005 $440,094 $375,602
8/31/2005 $432,348 $370,757
9/30/2005 $437,147 $372,462
10/31/2005 $426,175 $368,850
11/30/2005 $446,290 $384,747
12/31/2005 $446,290 $383,554
1/31/2006 $463,830 $390,305
2/28/2006 $465,731 $389,680
3/31/2006 $478,399 $395,448
4/30/2006 $478,686 $394,894
5/31/2006 $463,033 $381,507
6/30/2006 $461,413 $380,019
7/31/2006 $458,460 $372,799
8/31/2006 $473,818 $384,430
9/30/2006 $488,080 $395,002
10/31/2006 $506,969 $408,867
11/30/2006 $511,075 $416,962
12/31/2006 $514,601 $418,380
1/31/2007 $532,407 $429,132
2/28/2007 $522,184 $421,064
3/31/2007 $530,278 $423,338
4/30/2007 $549,421 $443,277
5/31/2007 $570,190 $459,235
6/30/2007 $561,580 $452,393
7/31/2007 $555,908 $445,381
8/31/2007 $573,419 $452,462
9/30/2007 $607,365 $471,420
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Systematic Large Cap Growth
Fund Class II 24.44% 12.24% 5.38%
- --------------------------------------------------------------------------------
Russell 1000 Growth Index 19.35% 13.84% 4.06%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I AND II SHARES COMPARED WITH THE RUSSELL 1000 GROWTH INDEX FOR THE
PERIODS INDICATED. THE FUND'S CLASS I AND II SHARES CALCULATE THEIR PERFORMANCE
BASED UPON THE HISTORICAL PERFORMANCE OF A CORRESPONDING SERIES OF
NICHOLAS-APPLEGATE MUTUAL FUNDS (RENAMED ING MUTUAL FUNDS), ADJUSTED TO REFLECT
ALL FEES AND EXPENSES APPLICABLE TO THE FUND'S CLASS I AND II SHARES. THE
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS' CLASS I SHARES WERE FIRST AVAILABLE ON
MAY 7, 1999 AND CLASS II SHARES ON SEPTEMBER 30, 2005. THE HISTORICAL
PERFORMANCE OF CLASS II SHARES INCLUDES THE PERFORMANCE OF CLASS I SHARES FOR
PERIODS PRIOR TO THE INCEPTION OF CLASS II. AVERAGE ANNUAL TOTAL RETURN FIGURES
INCLUDE CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN
DISTRIBUTIONS. THE TOTAL RETURNS SHOWN ABOVE DO NOT SHOW THE EFFECTS OF INCOME
TAXES ON AN INDIVIDUAL'S INVESTMENT. IN MOST CASES, TAXES MAY REDUCE YOUR ACTUAL
INVESTMENT RETURNS ON INCOME OR GAINS PAID BY THE FUND OR ANY GAINS YOU MAY
REALIZE IF YOU SELL YOUR SHARES. PAST PERFORMANCE CANNOT GUARANTEE FUTURE
RESULTS.
RUSSELL 1000 GROWTH INDEX MEASURES THE PERFORMANCE OF THOSE RUSSELL 1000
COMPANIES WITH HIGHER PRICE-TO-BOOK RATIOS AND HIGHER FORECASTED GROWTH VALUES.
THE RUSSELL 1000 INDEX CONSISTS OF THE 1,000 LARGEST SECURITIES IN THE RUSSELL
3000 INDEX, WHICH REPRESENTS APPROXIMATELY 90% OF THE TOTAL MARKET
CAPITALIZATION OF THE RUSSELL 3000 INDEX. IT IS A LARGE-CAP, MARKET-ORIENTED
INDEX AND IS HIGHLY CORRELATED WITH THE S&P 500 INDEX. THE UNMANAGED INDEX
DIFFERS FROM THE FUND IN COMPOSITION, DOES NOT PAY MANAGEMENT FEES OR EXPENSES
AND INCLUDES REINVESTED DIVIDENDS. ONE CANNOT INVEST DIRECTLY IN AN INDEX.
SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE WITH MARKET CONDITIONS. YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
YOUR SHARES.
14
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------
COMMON STOCK - 99.7%
AEROSPACE/DEFENSE - 3.8%
Lockheed Martin Corp. 5,000 $ 542,450
Raytheon Co. 4,700 299,954
-----------
842,404
-----------
AGRICULTURAL CHEMICALS - 1.2%
Monsanto Co. 3,100 265,794
-----------
APPLIANCES - 0.7%
Whirlpool Corp. 1,800 160,380
-----------
APPLICATIONS SOFTWARE - 4.3%
Microsoft Corp. 32,100 945,666
-----------
ATHLETIC FOOTWEAR - 1.3%
Nike, Inc. Cl. B 4,800 281,568
-----------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL - 1.0%
Johnson Controls, Inc. 1,900 224,409
-----------
BROADCAST SERVICES/PROGRAMMING - 2.0%
Liberty Media Corp. - Capital* 3,500 436,905
-----------
CABLE TV - 1.3%
EchoStar Communications Corp.* 5,900 276,179
-----------
CHEMICALS-DIVERSIFIED - 1.1%
Celanese Corp. Cl. A 6,000 233,880
-----------
COMPUTERS - 6.8%
Apple, Inc.* 2,300 353,142
Hewlett-Packard Co. 11,300 562,627
International Business Machines Corp. 4,800 565,440
-----------
1,481,209
-----------
COMPUTERS-MEMORY DEVICES - 2.8%
EMC Corp.* 11,600 241,280
Network Appliance, Inc.* 14,200 382,122
-----------
623,402
-----------
COSMETICS & TOILETRIES - 1.0%
Procter & Gamble Co. 3,275 230,363
-----------
DATA PROCESSING/MANAGEMENT - 1.5%
NAVTEQ Corp.* 4,200 327,474
-----------
E-COMMERCE/PRODUCTS - 1.4%
Amazon.Com, Inc.* 3,400 316,710
-----------
ELECTRIC-GENERATION - 1.5%
The AES Corp.* 16,100 322,644
-----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 6.9%
Broadcom Corp. Cl. A* 6,300 229,572
Intel Corp. 28,500 737,010
MEMC Electronic Materials, Inc.* 4,500 264,870
Nvidia Corp.* 7,650 277,236
-----------
1,508,688
-----------
ELECTRONIC MEASURE INSTRUMENTS - 0.5%
Garmin, Ltd. 1,000 119,400
-----------
ENGINEERING/R & D SERVICES - 1.7%
Fluor Corp. 2,600 374,348
-----------
ENGINES-INTERNAL COMBUST - 2.3%
Cummins, Inc. 3,900 498,771
-----------
ENTERPRISE SOFTWARE/SERVICES - 2.6%
BMC Software, Inc.* 7,300 227,979
Oracle Corp.* 15,600 337,740
-----------
565,719
-----------
FINANCE-INVESTMENT BANKERS/BROKERS - 0.6%
The Goldman Sachs Group, Inc. 600 130,044
-----------
FOOTWEAR & RELATED APPAREL - 1.3%
CROCS, Inc.* 4,300 289,175
-----------
HEALTH CARE COST CONTAINMENT - 0.7%
McKesson Corp. 2,600 152,854
-----------
INTERNET SECURITY - 0.9%
Symantec Corp.* 10,400 201,552
-----------
MACHINERY-FARM - 1.5%
AGCO Corp.* 6,600 335,082
-----------
MEDICAL INSTRUMENTS - 1.7%
Intuitive Surgical, Inc.* 1,600 368,000
-----------
MEDICAL PRODUCTS - 3.3%
Johnson & Johnson 11,100 729,270
-----------
MEDICAL-DRUGS - 6.8%
Abbott Laboratories 12,100 648,802
Forest Laboratories, Inc.* 10,000 372,900
Merck & Co., Inc. 4,900 253,281
Schering-Plough Corp. 6,800 215,084
-----------
1,490,067
-----------
MEDICAL-HMO - 5.2%
Aetna, Inc. 9,100 493,857
UnitedHealth Group, Inc.* 8,400 406,812
WellCare Health Plans, Inc.* 2,200 231,946
-----------
1,132,615
-----------
METAL PROCESSORS & FABRICATION - 2.6%
Precision Castparts Corp. 3,800 562,324
-----------
METAL-DIVERSIFIED - 2.5%
Freeport-McMoRan Copper & Gold, Inc. 5,300 555,917
-----------
MULTIMEDIA - 1.5%
The Walt Disney Co.* 9,400 323,266
-----------
NETWORKING PRODUCTS - 5.7%
Cisco Systems, Inc.* 31,900 1,056,209
Juniper Networks, Inc.* 5,100 186,711
-----------
1,242,920
-----------
OIL FIELD MACHINERY & EQUIPMENT - 3.9%
Cameron International Corp.* 2,600 239,954
National Oilwell Varco, Inc.* 4,200 606,900
-----------
846,854
-----------
OIL REFINING & MARKETING - 2.2%
Frontier Oil Corp. 5,700 237,348
Valero Energy Corp. 3,800 255,284
-----------
492,632
-----------
OIL-FIELD SERVICES - 1.6%
Schlumberger, Ltd. 3,400 357,000
-----------
PHARMACY SERVICES - 1.8%
Medco Health Solutions, Inc.* 4,400 397,716
-----------
PUBLISHING-NEWSPAPERS - 1.4%
Gannett Co., Inc. 6,800 297,160
-----------
RETAIL-COMPUTER EQUIPMENT - 1.3%
GameStop Corp. Cl. A* 5,100 287,385
-----------
RETAIL-DISCOUNT - 2.0%
Dollar Tree Stores, Inc.* 6,300 255,402
Wal-Mart Stores, Inc. 4,200 183,330
-----------
438,732
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
<Page>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------
RETAIL-RESTAURANTS - 2.3%
Darden Restaurants, Inc. 5,900 $ 246,974
McDonald's Corp. 4,800 261,456
-----------
508,430
-----------
SUPER-REGIONAL BANKS-US - 1.0%
Fifth Third Bancorp 6,300 213,444
-----------
TELEPHONE-INTEGRATED - 2.2%
Verizon Communications, Inc. 10,700 473,796
- ----------------------------------------------------------------------------
Total Common Stock (Cost: $18,204,869) 21,862,148
- ----------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- ----------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 1.3%
TIME DEPOSIT - 1.3%
Wells Fargo Bank 4.370%, 10/01/07
(Cost: $293,667) $293,667 293,667
- ----------------------------------------------------------------------------
Total Investments - 101.0% (Cost: $18,498,536) 22,155,815
- ----------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (1.0%) (215,435)
- ----------------------------------------------------------------------------
Net Assets - 100.0% $21,940,380
- ----------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- ----------------------------------------------------------------------------
Technology 23.7%
Consumer, Non-cyclical 20.5
Communications 16.2
Industrial 13.7
Consumer, Cyclical 10.0
Energy 7.7
Basic Materials 4.8
Financial 1.6
Utilities 1.5
Short Term Investments 1.3
- ----------------------------------------------------------------------------
Total Investments 101.0
Liabilities in excess of other assets (1.0)
- ----------------------------------------------------------------------------
Net Assets 100.0%
- ----------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
<Page>
U.S. SMALL TO MID CAP GROWTH FUND
MANAGEMENT TEAM: JOHN C. MCCRAW, Portfolio Manager; ROBERT S. MARREN, Portfolio
Manager; BLAKE H. BURDINE, Analyst; K. MATHEW AXLINE, CFA, Analyst; STEPHEN W.
LYFORD, Analyst
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The U.S. Small to Mid Cap Growth Fund seeks to maximize long-term capital
appreciation by investing primarily in stocks from a universe of U.S. companies
with small to mid (SMID) market capitalizations similar to the middle 90% of the
Russell 2500 Growth Index at time of purchase.
MARKET OVERVIEW: The small- to mid-cap growth segment of the U.S. equity market,
as measured by the Russell 2500 Growth Index, delivered a strong gain from July
31 (the inception date of the Fund) through September 30, 2007.
The period got off to a rocky start, as stock prices plummeted during the first
two weeks of August. The sell-off was precipitated by losses in mortgage-backed
securities and culminated in the worst liquidity crunch in nearly a decade.
Hedge funds and other financial institutions with mortgage-backed exposure saw
the value of their portfolios decline. To raise cash and scale back leverage to
stem potential losses, they sold their more liquid assets, namely U.S. stocks.
As investors reassessed their tolerance for risk, liquidity in the bond market
dried up. Even healthy businesses were unable to access short-term capital.
Equities then staged an impressive comeback, buoyed by easier monetary policy.
The Federal Reserve lowered the discount rate from 6.25% to 5.75% at an
unscheduled meeting on August 17. At its regular meeting in September, the
central bank cut the key fed funds rate from 5.25% to 4.75% and the discount
rate another 0.50%. The Dow Jones Industrial Average finished September near a
record high, leaving Wall Street with its best month since the latter half of
the Clinton administration.
PERFORMANCE: The Fund's Class I shares gained 7.50% from its July 31, 2007
inception through September 30, 2007. This compared favorably to the 5.06%
increase in the Russell 2500 Growth Index.
PORTFOLIO SPECIFICS: Stock selection drove the Fund's strong performance versus
the benchmark and added the most value in the information technology,
industrials and materials sectors. One of the portfolio's best-performing
investments was BluePhoenix Solutions, a provider of tools and services that
help organizations modernize legacy database systems and software applications.
The company's positive operating metrics, including a steady increase in order
backlog, prompted upward revisions to earnings estimates. Other notable
performers included L.B. Foster, a manufacturer and distributor of products used
in infrastructure industries such as rail and construction, and Flotek
Industries, a specialty chemical company. L.B. Foster benefited from generally
strong trends in its business and news that the company had sold its stake in a
privately held regional railroad for a substantial gain. Flotek announced that
it had acquired a company that would expand its product lines and geographic
footprint.
Areas of relative weakness in the portfolio included an underweight in health
care, the best-performing sector in the index. Investors sought refuge in the
perceived stability of health care stocks in the volatile market environment.
MARKET OUTLOOK: Continued softness in the housing market and record-high
commodity prices may dampen investor sentiment over the coming months. However,
additional monetary easing from the Fed may drive further gains in small- to
mid-cap growth stocks. History shows that the beginning of a monetary easing
cycle, as we saw in September, typically benefits equity investors.
Whatever direction the market takes, we are confident that our bottom-up
investment approach will uncover companies with exceptional growth prospects for
the Fund.
17
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCK - 98.8%
AEROSPACE/DEFENSE-EQUIPMENT - 3.5%
BE Aerospace, Inc.* 1,400 $ 58,142
Orbital Sciences Corp.* 1,800 40,032
TransDigm Group, Inc.* 1,200 54,852
Triumph Group, Inc. 600 49,026
----------
202,052
----------
AGRICULTURAL CHEMICALS - 1.2%
CF Industries Holdings, Inc. 900 68,319
----------
ALTERNATIVE WASTE TECH - 0.8%
Darling International, Inc.* 4,900 48,461
----------
APPAREL MANUFACTURERS - 2.1%
Guess ?, Inc. 1,000 49,030
Hanesbrands, Inc.* 1,200 33,672
Phillips-Van Heusen 700 36,736
----------
119,438
----------
APPLICATIONS SOFTWARE - 0.7%
Salesforce.com, Inc.* 800 41,056
----------
AUCTION HOUSE/ART DEALER - 0.8%
Sotheby's Holdings Cl. A 1,000 47,790
----------
AUDIO/VIDEO PRODUCTS - 0.6%
Universal Electronics, Inc.* 1,100 35,750
----------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL - 0.7%
Tenneco, Inc.* 1,300 40,313
----------
BUILDING PRODUCTS-LIGHT FIXTURES - 0.7%
LSI Industries, Inc. 2,000 41,040
----------
BUILDING-HEAVY CONSTRUCTION - 0.7%
Perini Corp.* 700 39,151
----------
CELLULAR TELECOMMUNICATIONS - 1.1%
NII Holdings, Inc.* 800 65,720
----------
CHEMICALS-DIVERSIFIED - 1.5%
Celanese Corp. Cl. A 800 31,184
FMC Corp. 1,000 52,020
----------
83,204
----------
CHEMICALS-PLASTICS - 0.6%
Metabolix, Inc.* 1,300 31,538
----------
CHEMICALS-SPECIALTY - 2.4%
Cytec Industries, Inc. 600 41,034
ICO, Inc.* 3,200 45,056
Terra Industries, Inc.* 1,600 50,016
----------
136,106
----------
COFFEE - 0.8%
Green Mountain Coffee Roasters, Inc.* 1,300 43,147
----------
COMMERCIAL SERVICES - 0.7%
Quanta Services, Inc.* 1,600 42,320
----------
COMPUTER SERVICES - 1.0%
BluePhoenix Solutions, Ltd.* 3,100 57,071
----------
COMPUTER SOFTWARE - 1.0%
Omniture, Inc.* 1,800 54,576
----------
COMPUTERS-INTEGRATED SYSTEMS - 0.6%
Riverbed Technology, Inc.* 800 32,312
----------
COMPUTERS-PERIPHERAL EQUIPMENT - 1.6%
Sigma Designs, Inc.* 900 43,416
Synaptics, Inc.* 1,000 47,760
----------
91,176
----------
CONSULTING SERVICES - 1.4%
FTI Consulting, Inc.* 900 45,279
Watson Wyatt Worldwide, Inc. Cl. A 800 35,952
----------
81,231
----------
CONTAINERS-METAL/GLASS - 0.9%
Owens-Illinois, Inc.* 1,200 49,740
----------
DIAGNOSTIC KITS - 1.1%
Inverness Medical Innovations, Inc.* 1,100 60,852
----------
DIVERSIFIED MANUFACTURING OPERATIONS - 5.3%
Ameron International Corp. 500 52,885
Barnes Group, Inc. 1,500 47,880
Harsco Corp. 800 47,416
Koppers Holdings, Inc. 1,100 42,471
Roper Industries, Inc. 500 32,750
SPX Corp. 500 46,280
Trinity Industries, Inc. 900 33,786
----------
303,468
----------
E-COMMERCE/PRODUCTS - 0.9%
Shutterfly, Inc.* 1,600 51,056
----------
E-COMMERCE/SERVICES - 0.8%
priceline.com, Inc.* 500 44,375
----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 4.0%
Emcore Corp.* 4,400 42,240
Intersil Corp. Cl. A 1,400 46,802
MEMC Electronic Materials, Inc.* 800 47,088
ON Semiconductor Corp.* 3,400 42,704
Skyworks Solutions, Inc.* 5,300 47,912
----------
226,746
----------
ELECTRONIC MEASURE INSTRUMENTS - 1.8%
Itron, Inc.* 600 55,842
Trimble Navigation, Ltd.* 1,200 47,052
----------
102,894
----------
E-MARKETING/INFORMATION - 0.4%
Valueclick, Inc.* 1,100 24,706
----------
ENERGY-ALTERNATE SOURCES - 0.7%
Sunpower Corp. Cl. A* 500 41,410
----------
ENGINEERING/R & D SERVICES - 3.2%
Foster Wheeler, Ltd.* 400 52,512
EMCOR Group, Inc.* 1,200 37,632
McDermott International, Inc.* 1,000 54,080
Stanley, Inc.* 1,400 38,570
----------
182,794
----------
ENTERPRISE SOFTWARE/SERVICES - 2.7%
BMC Software, Inc.* 1,100 34,353
Concur Technologies, Inc.* 1,400 44,128
JDA Software Group, Inc.* 1,900 39,254
Ultimate Software Group, Inc.* 1,000 34,900
----------
152,635
----------
E-SERVICES/CONSULTING - 0.7%
Perficient, Inc.* 1,900 41,553
----------
FINANCE-OTHER SERVICES - 2.1%
FCStone Group, Inc.* 750 24,202
GFI Group, Inc.* 600 51,672
IntercontinentalExchange, Inc.* 300 45,570
----------
121,444
----------
FIREARMS & AMMUNITION - 0.8%
Smith & Wesson Holding Corp.* 2,400 45,816
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
<Page>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------
FOOTWEAR & RELATED APPAREL - 0.9%
CROCS, Inc.* 800 $ 53,800
----------
HOME FURNISHINGS - 0.7%
Tempur-Pedic International, Inc. 1,200 42,900
----------
INDUSTRIAL GASES - 0.8%
Airgas, Inc. 900 46,467
----------
INSTRUMENTS-CONTROLS - 0.7%
Mettler Toledo International, Inc.* 400 40,800
----------
INTERNET APPLICATIONS SOFTWARE - 1.3%
DealerTrack Holdings, Inc.* 1,000 41,880
Vocus, Inc.* 1,200 35,088
----------
76,968
----------
INTERNET SECURITY - 0.6%
Vasco Data Security International, Inc.* 900 31,779
----------
LEISURE & RECREATIONAL PRODUCTS - 0.8%
WMS Industries, Inc.* 1,350 44,685
----------
MACHINERY-CONSTRUCTION & MINING - 1.5%
Bucyrus International, Inc. Cl. A 600 43,758
Terex Corp.* 500 44,510
----------
88,268
----------
MACHINERY-ELECTRICAL - 0.5%
Baldor Electric Co. 700 27,965
----------
MACHINERY-FARM - 1.1%
AGCO Corp.* 1,200 60,924
----------
MACHINERY-GENERAL INDUSTRY - 2.4%
Chart Industries, Inc.* 1,500 48,240
Robbins & Myers, Inc. 800 45,832
The Manitowoc Co., Inc. 1,000 44,280
----------
138,352
----------
MACHINERY-PUMPS - 0.8%
Flowserve Corp. 600 45,708
----------
MEDICAL IMAGING SYSTEMS - 0.5%
Given Imaging, Ltd.* 1,100 30,272
----------
MEDICAL INFORMATION SYSTEMS - 1.3%
Allscripts Healthcare Solutions, Inc.* 1,400 37,842
Phase Forward, Inc.* 1,900 38,019
----------
75,861
----------
MEDICAL INSTRUMENTS - 2.9%
Arthrocare Corp.* 600 33,534
Cepheid, Inc.* 2,200 50,160
Intuitive Surgical, Inc.* 200 46,000
NuVasive, Inc.* 1,000 35,930
----------
165,624
----------
MEDICAL LABS & TESTING SERVICES - 0.8%
Icon PLC - ADR* 900 45,927
----------
MEDICAL LASER SYSTEMS - 1.0%
Cynosure, Inc. Cl. A* 1,500 55,350
----------
MEDICAL-BIOMEDICAL/GENETICS - 1.3%
Alexion Pharmaceuticals, Inc.* 600 39,090
Halozyme Therapeutics, Inc.* 4,000 34,760
----------
73,850
----------
MEDICAL-OUTPATIENT/HOME MEDICAL CARE - 0.6%
Air Methods Corp.* 800 36,960
----------
METAL PROCESSORS & FABRICATION - 1.8%
LB Foster Co. Cl. A* 1,400 60,844
RBC Bearings, Inc.* 1,100 42,185
----------
103,029
----------
NETWORKING PRODUCTS - 0.7%
Atheros Communications, Inc.* 1,300 38,961
----------
NON-FERROUS METALS - 0.3%
USEC, Inc.* 1,600 16,400
----------
OIL COMPANIES-EXPLORATION & PRODUCTION - 0.7%
Gulfport Energy Corp.* 1,700 40,222
----------
OIL FIELD MACHINERY & EQUIPMENT - 2.8%
Dresser-Rand Group, Inc.* 1,200 51,252
Flotek Industries, Inc.* 1,100 48,565
T-3 Energy Services, Inc.* 1,400 59,696
----------
159,513
----------
PATIENT MONITORING EQUIPMENT - 0.8%
Insulet Corp.* 2,200 47,850
----------
PHYSICAL THERAPY/REHABILITATION CENTERS - 0.6%
Psychiatric Solutions, Inc.* 900 35,352
----------
PRIVATE CORRECTIONS - 0.6%
Corrections Corp. of America* 1,400 36,638
----------
PROPERTY/CASUALTY INSURANCE - 0.6%
Amtrust Financial Services, Inc. 2,100 31,857
----------
RESEARCH & DEVELOPMENT - 0.6%
Parexel International Corp.* 800 33,016
----------
RETAIL-APPAREL/SHOE - 2.1%
Men's Wearhouse, Inc. 800 40,416
The Buckle, Inc. 1,000 37,940
Under Armour, Inc. Cl. A* 700 41,874
----------
120,230
----------
RETAIL-COMPUTER EQUIPMENT - 1.1%
GameStop Corp. Cl. A* 1,100 61,985
----------
RETAIL-DISCOUNT - 0.7%
Dollar Tree Stores, Inc.* 1,000 40,540
----------
RETAIL-JEWELRY - 0.6%
Movado Group, Inc. 1,100 35,112
----------
RUBBER-TIRES - 0.5%
The Goodyear Tire & Rubber Co.* 1,000 30,410
----------
SEISMIC DATA COLLECTION - 0.5%
ION Geophysical Corp.* 2,200 30,426
----------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS - 0.8%
Anadigics, Inc.* 2,400 43,392
----------
SEMICONDUCTOR EQUIPMENT - 0.8%
Varian Semiconductor Equipment Associates, Inc.* 900 48,168
----------
STEEL-PRODUCERS - 0.6%
Reliance Steel & Aluminum Co. 600 33,924
----------
TELECOMMUNICATIONS EQUIPMENT - 2.3%
CommScope, Inc.* 800 40,192
Harris Corp. 800 46,232
Plantronics, Inc. 1,500 42,825
----------
129,249
----------
TELECOMMUNICATIONS SERVICES - 0.8%
NTELOS Holdings Corp. 1,500 44,190
----------
THERAPEUTICS - 1.3%
Cypress Bioscience, Inc.* 2,800 38,332
MGI Pharma, Inc.* 1,300 36,114
----------
74,446
----------
TOOLS-HAND HELD - 0.4%
Snap-On, Inc. 500 24,770
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<Page>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------
TRANSACTIONAL SOFTWARE - 1.7%
Synchronoss Technologies, Inc.* 800 $ 33,648
VeriFone Holdings, Inc.* 1,400 62,062
----------
95,710
----------
TRANSPORT-EQUIPMENT & LEASING - 0.6%
Aircastle, Ltd. 1,100 36,762
----------
TRANSPORT-MARINE - 1.9%
Eagle Bulk Shipping, Inc. 1,600 41,184
Genco Shipping & Trading, Ltd. 1,000 65,530
----------
106,714
----------
WEB PORTALS/ISP - 0.6%
Trizetto Group* 2,000 35,020
----------
WIRE & CABLE PRODUCTS - 1.6%
Belden, Inc. 800 37,528
General Cable Corp.* 800 53,696
----------
91,224
- ------------------------------------------------------------------------------
Total Common Stock (Cost: $5,171,991) 5,658,830
- ------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 2.0%
TIME DEPOSIT - 2.0%
Wells Fargo Bank 4.370%, 10/01/07 (Cost: $112,373) $112,373 112,373
- ------------------------------------------------------------------------------
Total Investments - 100.8% (Cost: $5,284,364) 5,771,203
- ------------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (0.8%) (43,732)
- ------------------------------------------------------------------------------
Net Assets - 100.0% $5,727,471
- ------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
ADR - AMERICAN DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- ------------------------------------------------------------------------------
Industrial 31.8%
Consumer, Non-cyclical 15.9
Technology 15.3
Consumer, Cyclical 10.9
Communications 10.2
Basic Materials 7.3
Energy 4.7
Financial 2.7
Short Term Investments 2.0
- ------------------------------------------------------------------------------
Total Investments 100.8
Liabilities in excess of other assets (0.8)
- ------------------------------------------------------------------------------
Net Assets 100.0%
- ------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
<Page>
U.S. CONVERTIBLE FUND
MANAGEMENT TEAM: DOUGLAS G. FORSYTH, CFA, Portfolio Manager; WILLIAM L.
STICKNEY, Portfolio Manager; JUSTIN KASS, CFA, Portfolio Manager; MICHAEL E.
YEE, Portfolio Manager; ELIZABETH LEMESEVSKI, Analyst; DAVID A. FOSTER, CPA,
CFA, Analyst; JOANNA H. WILLARS, Analyst; NICOLE D. LARRABEE, Fixed Income
Trading Assistant
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The U.S. Convertible Fund seeks to maximize total return consisting of
capital appreciation and current income by investing primarily in convertible
securities of U.S. companies across all market capitalizations.
MARKET OVERVIEW: From April 1 to September 30, 2007, the Merrill Lynch All
Convertibles All Qualities Index gained 5.40%. Convertible securities
participated in the U.S. equity advance, which saw the S&P 500 Index climb 8.44%
and the NASDAQ Composite Index rise 11.30%.
Like U.S. stocks, the convertible market started the period on a strong note,
moving higher on a surge of merger and acquisition activity and
better-than-expected corporate earnings growth. Then a number of events
converged to create a significant sell-off in the markets over the summer.
Rising delinquencies on mortgages led to rapid quality and price declines in
collateralized mortgage obligations (CMOs). Price declines in the CMO market
fueled price declines in all collateralized debt obligations (CDOs) which, in
turn, cut off demand for loans. The lack of demand for loans ultimately put
pressure on all bond and stock prices. However, by September, the markets
rallied, as the financial crisis appeared contained, the Federal Reserve cut the
fed funds rate and corporate profits for most industries continued to exceed
expectations.
Consistent with volatile conditions, larger-cap, investment-grade convertibles
outperformed. Most industries posted gains, led by materials. Among the few
decliners, transportation was the weakest group.
PERFORMANCE: The Fund's Class I shares gained 10.53% during the six months ended
September 30, 2007, outperforming the Merrill Lynch All Convertibles All
Qualities Index, which rose 5.40%.
PORTFOLIO SPECIFICS: The key driver of the Fund's absolute and relative
performance was security selection, and the top performers were those companies
that improved their operating statistics and exceeded profit expectations.
Issuers from diverse industries contributed to the Fund's positive return,
including several energy companies that advanced on solid corporate profits,
attractive valuations and higher energy prices. A number of our industrial and
defense names benefited from robust earnings and impressive operating
improvements. Lastly, three of our portfolio companies were acquired at large
premiums.
Although not material, select issuers negatively impacted portfolio performance.
For example, a financial advisory firm was weak on concerns that tighter lending
standards would cause a slowdown in its mergers and acquisitions business.
At September 30, the Fund's conversion premium was 17%, compared to the market's
premium of 32%. The Fund continues to be well positioned to participate in the
upside of an improving economic environment, while not sacrificing downside
protection.
MARKET OUTLOOK: Our outlook for the convertible market remains positive, despite
recent volatility. While there are challenges facing U.S. equities, including
concerns about rising commodity prices and inflation, corporate balance sheets
are generally healthy. In addition, default rates remain low and are not
expected to change in the near future, and the Fed may cut interest rates
further.
We continue to build the Fund one security at a time by finding companies that
are opportunistically capitalizing on change. We are also maintaining our
discipline of identifying the best convertibles with the optimal risk/reward
profile: 70-80% of the upside and 40-50% of the downside.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN U.S. CONVERTIBLE FUND
CLASS I, II AND IV SHARES WITH THE MERRILL LYNCH ALL CONVERTIBLES, ALL QUALITIES
INDEX.
[CHART]
<Table>
<Caption>
U.S. CONVERTIBLE FUND MERRILL LYNCH ALL CONVERTIBLES
CLASS I SHARES ALL QUALITIES INDEX
4/19/1993 $250,000 $250,000
4/30/1993 $255,000 $248,560
5/31/1993 $265,200 $254,242
6/30/1993 $273,686 $255,910
7/31/1993 $276,286 $256,862
8/31/1993 $292,366 $264,098
9/30/1993 $297,658 $266,712
10/31/1993 $305,367 $273,263
11/30/1993 $298,466 $269,481
12/31/1993 $307,599 $273,588
1/31/1994 $318,058 $280,728
2/28/1994 $314,495 $277,174
3/31/1994 $300,437 $265,724
4/30/1994 $297,974 $260,511
5/31/1994 $295,054 $260,430
6/30/1994 $286,733 $257,487
7/31/1994 $290,575 $262,057
8/31/1994 $296,242 $268,834
9/30/1994 $292,805 $265,401
10/31/1994 $292,337 $266,335
11/30/1994 $283,625 $258,202
12/31/1994 $284,249 $257,169
1/31/1995 $282,288 $259,015
2/28/1995 $285,986 $267,112
3/31/1995 $294,394 $274,364
4/30/1995 $297,868 $280,087
5/31/1995 $303,587 $287,821
6/30/1995 $315,214 $297,644
7/31/1995 $330,029 $307,710
8/31/1995 $335,309 $312,218
9/30/1995 $343,089 $316,280
10/31/1995 $337,496 $307,681
11/30/1995 $344,584 $319,483
12/31/1995 $347,547 $320,665
1/31/1996 $357,278 $330,551
2/29/1996 $367,247 $338,015
3/31/1996 $372,976 $341,544
4/30/1996 $383,046 $347,893
5/31/1996 $394,920 $355,582
6/30/1996 $386,153 $350,316
7/31/1996 $365,339 $335,392
8/31/1996 $387,735 $348,328
9/30/1996 $406,075 $357,918
10/31/1996 $406,603 $362,234
11/30/1996 $417,256 $374,474
12/31/1996 $420,594 $371,722
1/31/1997 $436,702 $382,554
2/28/1997 $430,763 $381,127
3/31/1997 $426,585 $372,948
4/30/1997 $431,448 $376,338
5/31/1997 $453,667 $395,430
6/30/1997 $471,723 $407,834
7/31/1997 $500,687 $431,117
8/31/1997 $494,378 $428,781
9/30/1997 $518,554 $448,603
10/31/1997 $508,183 $439,963
11/30/1997 $509,656 $440,148
12/31/1997 $518,626 $444,453
1/31/1998 $513,544 $445,822
2/28/1998 $537,783 $465,562
3/31/1998 $562,198 $482,677
4/30/1998 $568,832 $485,708
5/31/1998 $555,863 $474,978
6/30/1998 $577,597 $478,987
7/31/1998 $581,756 $471,381
8/31/1998 $497,692 $417,219
9/30/1998 $525,712 $425,547
10/31/1998 $537,173 $436,539
11/30/1998 $571,176 $457,392
12/31/1998 $630,407 $484,154
1/31/1999 $667,790 $508,038
2/28/1999 $634,801 $490,287
3/31/1999 $674,349 $510,575
4/30/1999 $695,658 $531,299
5/31/1999 $684,389 $528,616
6/30/1999 $717,103 $548,101
7/31/1999 $695,733 $544,599
8/31/1999 $701,090 $537,737
9/30/1999 $704,245 $541,275
10/31/1999 $749,105 $562,493
11/30/1999 $817,049 $595,072
12/31/1999 $955,212 $675,681
1/31/2000 $960,657 $675,519
2/29/2000 $1,122,047 $732,350
3/31/2000 $1,073,463 $731,310
4/30/2000 $1,003,043 $680,879
5/31/2000 $938,949 $651,390
6/30/2000 $1,009,558 $684,924
7/31/2000 $970,185 $664,602
8/31/2000 $1,070,502 $715,650
9/30/2000 $1,069,753 $692,299
10/31/2000 $1,014,019 $665,216
11/30/2000 $865,972 $585,703
12/31/2000 $920,269 $608,123
1/31/2001 $950,269 $645,949
2/28/2001 $856,763 $597,438
3/31/2001 $803,986 $571,575
4/30/2001 $849,492 $609,933
5/31/2001 $834,881 $606,127
6/30/2001 $815,344 $596,562
7/31/2001 $785,910 $587,978
8/31/2001 $763,433 $577,600
9/30/2001 $716,253 $543,135
10/31/2001 $732,870 $554,302
11/30/2001 $757,641 $569,135
12/31/2001 $766,051 $581,087
1/31/2002 $754,254 $571,906
2/28/2002 $742,488 $555,689
3/31/2002 $767,658 $575,639
4/30/2002 $759,060 $567,230
5/31/2002 $750,103 $562,278
6/30/2002 $707,422 $531,803
7/31/2002 $652,668 $499,948
8/31/2002 $661,022 $506,157
9/30/2002 $644,100 $488,315
10/31/2002 $655,500 $499,205
11/30/2002 $676,083 $535,197
12/31/2002 $663,373 $531,183
1/31/2003 $662,245 $539,735
2/28/2003 $655,556 $538,440
3/31/2003 $662,636 $547,540
4/30/2003 $696,298 $575,161
5/31/2003 $733,690 $601,917
6/30/2003 $738,972 $605,746
7/31/2003 $752,200 $607,469
8/31/2003 $765,815 $615,009
9/30/2003 $768,112 $622,600
10/31/2003 $817,194 $644,944
11/30/2003 $835,091 $655,459
12/31/2003 $850,707 $675,411
1/31/2004 $883,629 $695,901
2/29/2004 $884,778 $701,407
3/31/2004 $889,025 $704,027
4/30/2004 $870,533 $687,053
5/31/2004 $875,495 $688,814
6/30/2004 $893,093 $700,003
7/31/2004 $860,674 $681,136
8/30/2004 $849,055 $682,504
9/30/2004 $879,111 $694,209
10/31/2004 $872,518 $697,293
11/30/2004 $922,949 $722,648
12/31/2004 $953,037 $740,330
1/31/2005 $941,124 $724,129
2/28/2005 $953,453 $722,424
3/31/2005 $929,998 $705,743
4/30/2005 $902,656 $682,453
5/31/2005 $928,743 $699,992
6/30/2005 $958,184 $714,762
7/31/2005 $993,158 $737,563
8/31/2005 $992,363 $737,047
9/30/2005 $1,005,264 $744,343
10/31/2005 $986,365 $728,563
11/30/2005 $1,013,096 $741,823
12/31/2005 $1,021,403 $747,758
1/31/2006 $1,065,528 $778,565
2/28/2006 $1,066,806 $776,775
3/31/2006 $1,089,316 $787,572
4/30/2006 $1,107,943 $794,266
5/31/2006 $1,076,034 $781,876
6/30/2006 $1,072,053 $781,719
7/31/2006 $1,069,373 $783,517
8/31/2006 $1,082,740 $794,095
9/30/2006 $1,099,631 $803,544
10/31/2006 $1,123,823 $824,276
11/30/2006 $1,140,118 $840,514
12/31/2006 $1,153,344 $843,708
1/31/2007 $1,181,024 $861,932
2/28/2007 $1,187,874 $862,191
3/31/2007 $1,206,880 $864,777
4/30/2007 $1,244,534 $885,100
5/31/2007 $1,287,097 $905,103
6/30/2007 $1,284,652 $902,297
7/31/2007 $1,265,768 $880,642
8/31/2007 $1,278,172 $879,585
9/30/2007 $1,333,773 $911,338
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Convertible Fund Class I 21.30% 15.67% 9..90%
- --------------------------------------------------------------------------------
Merrill Lynch All Convertibles
All Qualities Index 13.45% 13.30% 7..35%
- --------------------------------------------------------------------------------
21
<Page>
[CHART]
<Table>
<Caption>
MERRILL LYNCH
U.S. CONVERTIBLE FUND ALL CONVERTIBLES
CLASS II SHARES ALL QUALITIES INDEX
4/19/1993 $250,000 $250,000
4/30/1993 $255,000 $248,560
5/31/1993 $265,200 $254,242
6/30/1993 $273,686 $255,910
7/31/1993 $276,286 $256,862
8/31/1993 $292,366 $264,098
9/30/1993 $297,658 $266,712
10/31/1993 $305,367 $273,263
11/30/1993 $298,466 $269,481
12/31/1993 $307,599 $273,588
1/31/1994 $318,058 $280,728
2/28/1994 $314,495 $277,174
3/31/1994 $300,437 $265,724
4/30/1994 $297,974 $260,511
5/31/1994 $295,054 $260,430
6/30/1994 $286,733 $257,487
7/31/1994 $290,575 $262,057
8/31/1994 $296,242 $268,834
9/30/1994 $292,805 $265,401
10/31/1994 $292,337 $266,335
11/30/1994 $283,625 $258,202
12/31/1994 $284,249 $257,169
1/31/1995 $282,288 $259,015
2/28/1995 $285,986 $267,112
3/31/1995 $294,394 $274,364
4/30/1995 $297,868 $280,087
5/31/1995 $303,587 $287,821
6/30/1995 $315,214 $297,644
7/31/1995 $330,029 $307,710
8/31/1995 $335,309 $312,218
9/30/1995 $343,089 $316,280
10/31/1995 $337,496 $307,681
11/30/1995 $344,584 $319,483
12/31/1995 $347,547 $320,665
1/31/1996 $357,278 $330,551
2/29/1996 $367,247 $338,015
3/31/1996 $372,976 $341,544
4/30/1996 $383,046 $347,893
5/31/1996 $394,920 $355,582
6/30/1996 $386,153 $350,316
7/31/1996 $365,339 $335,392
8/31/1996 $387,735 $348,328
9/30/1996 $406,075 $357,918
10/31/1996 $406,603 $362,234
11/30/1996 $417,256 $374,474
12/31/1996 $420,594 $371,722
1/31/1997 $436,702 $382,554
2/28/1997 $430,763 $381,127
3/31/1997 $426,585 $372,948
4/30/1997 $431,448 $376,338
5/31/1997 $453,667 $395,430
6/30/1997 $471,723 $407,834
7/31/1997 $500,687 $431,117
8/31/1997 $494,378 $428,781
9/30/1997 $518,554 $448,603
10/31/1997 $508,183 $439,963
11/30/1997 $509,656 $440,148
12/31/1997 $518,626 $444,453
1/31/1998 $513,544 $445,822
2/28/1998 $537,783 $465,562
3/31/1998 $562,198 $482,677
4/30/1998 $568,832 $485,708
5/31/1998 $555,863 $474,978
6/30/1998 $577,597 $478,987
7/31/1998 $581,756 $471,381
8/31/1998 $497,692 $417,219
9/30/1998 $525,712 $425,547
10/31/1998 $537,173 $436,539
11/30/1998 $571,176 $457,392
12/31/1998 $630,407 $484,154
1/31/1999 $667,790 $508,038
2/28/1999 $634,801 $490,287
3/31/1999 $674,349 $510,575
4/30/1999 $695,658 $531,299
5/31/1999 $684,389 $528,616
6/30/1999 $717,103 $548,101
7/31/1999 $695,733 $544,599
8/31/1999 $701,090 $537,737
9/30/1999 $704,245 $541,275
10/31/1999 $749,105 $562,493
11/30/1999 $817,049 $595,072
12/31/1999 $955,212 $675,681
1/31/2000 $960,657 $675,519
2/29/2000 $1,122,047 $732,350
3/31/2000 $1,073,463 $731,310
4/30/2000 $1,003,043 $680,879
5/31/2000 $938,949 $651,390
6/30/2000 $1,009,558 $684,924
7/31/2000 $970,185 $664,602
8/31/2000 $1,070,502 $715,650
9/30/2000 $1,069,753 $692,299
10/31/2000 $1,014,019 $665,216
11/30/2000 $865,972 $585,703
12/31/2000 $920,269 $608,123
1/31/2001 $950,269 $645,949
2/28/2001 $856,763 $597,438
3/31/2001 $803,986 $571,575
4/30/2001 $849,492 $609,933
5/31/2001 $834,881 $606,127
6/30/2001 $815,344 $596,562
7/31/2001 $785,910 $587,978
8/31/2001 $763,433 $577,600
9/30/2001 $716,253 $543,135
10/31/2001 $732,870 $554,302
11/30/2001 $757,641 $569,135
12/31/2001 $766,051 $581,087
1/31/2002 $754,254 $571,906
2/28/2002 $742,488 $555,689
3/31/2002 $767,658 $575,639
4/30/2002 $759,060 $567,230
5/31/2002 $750,103 $562,278
6/30/2002 $707,422 $531,803
7/31/2002 $652,668 $499,948
8/31/2002 $661,022 $506,157
9/30/2002 $644,100 $488,315
10/31/2002 $655,500 $499,205
11/30/2002 $676,083 $535,197
12/31/2002 $663,373 $531,183
1/31/2003 $662,245 $539,735
2/28/2003 $655,556 $538,440
3/31/2003 $662,636 $547,540
4/30/2003 $696,298 $575,161
5/31/2003 $733,690 $601,917
6/30/2003 $738,972 $605,746
7/31/2003 $752,200 $607,469
8/31/2003 $765,815 $615,009
9/30/2003 $768,112 $622,600
10/31/2003 $817,194 $644,944
11/30/2003 $835,091 $655,459
12/31/2003 $850,707 $675,411
1/31/2004 $883,629 $695,901
2/29/2004 $884,778 $701,407
3/31/2004 $889,025 $704,027
4/30/2004 $870,533 $687,053
5/31/2004 $875,495 $688,814
6/30/2004 $893,093 $700,003
7/31/2004 $860,674 $681,136
8/30/2004 $849,055 $682,504
9/30/2004 $879,111 $694,209
10/31/2004 $872,518 $697,293
11/30/2004 $922,949 $722,648
12/31/2004 $953,037 $740,330
1/31/2005 $941,124 $724,129
2/28/2005 $953,453 $722,424
3/31/2005 $929,998 $705,743
4/30/2005 $902,656 $682,453
5/31/2005 $928,743 $699,992
6/30/2005 $958,184 $714,762
7/31/2005 $993,158 $737,563
8/31/2005 $992,363 $737,047
9/30/2005 $1,005,264 $744,343
10/31/2005 $986,365 $728,563
11/30/2005 $1,013,589 $741,823
12/31/2005 $1,022,204 $747,758
1/31/2006 $1,066,364 $778,565
2/28/2006 $1,067,643 $776,775
3/31/2006 $1,090,384 $787,572
4/30/2006 $1,109,030 $794,266
5/31/2006 $1,077,089 $781,876
6/30/2006 $1,073,427 $781,719
7/31/2006 $1,070,744 $783,517
8/31/2006 $1,084,128 $794,095
9/30/2006 $1,101,366 $803,544
10/31/2006 $1,125,596 $824,276
11/30/2006 $1,141,917 $840,514
12/31/2006 $1,155,848 $843,708
1/31/2007 $1,183,011 $861,932
2/28/2007 $1,189,872 $862,191
3/31/2007 $1,209,505 $864,777
4/30/2007 $1,246,758 $885,100
5/31/2007 $1,289,896 $905,103
6/30/2007 $1,287,316 $902,297
7/31/2007 $1,268,907 $880,642
8/31/2007 $1,281,343 $879,585
9/30/2007 $1,337,465 $911,338
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Convertible Fund Class II 21.44% 15.74% 9..94%
- --------------------------------------------------------------------------------
Merrill Lynch All Convertibles
All Qualities Index 13.45% 13.30% 7..35%
- --------------------------------------------------------------------------------
[CHART]
<Table>
<Caption>
MERRILL LYNCH
U.S. CONVERTIBLE FUND ALL CONVERTIBLES
CLASS IV SHARES ALL QUALITIES INDEX
4/19/1993 $250,000 $250,000
4/30/1993 $255,000 $248,560
5/31/1993 $265,200 $254,242
6/30/1993 $273,686 $255,910
7/31/1993 $276,286 $256,862
8/31/1993 $292,366 $264,098
9/30/1993 $297,658 $266,712
10/31/1993 $305,367 $273,263
11/30/1993 $298,466 $269,481
12/31/1993 $307,599 $273,588
1/31/1994 $318,058 $280,728
2/28/1994 $314,495 $277,174
3/31/1994 $300,437 $265,724
4/30/1994 $297,974 $260,511
5/31/1994 $295,054 $260,430
6/30/1994 $286,733 $257,487
7/31/1994 $290,575 $262,057
8/31/1994 $296,242 $268,834
9/30/1994 $292,805 $265,401
10/31/1994 $292,337 $266,335
11/30/1994 $283,625 $258,202
12/31/1994 $284,249 $257,169
1/31/1995 $282,288 $259,015
2/28/1995 $285,986 $267,112
3/31/1995 $294,394 $274,364
4/30/1995 $297,868 $280,087
5/31/1995 $303,587 $287,821
6/30/1995 $315,214 $297,644
7/31/1995 $330,029 $307,710
8/31/1995 $335,309 $312,218
9/30/1995 $343,089 $316,280
10/31/1995 $337,496 $307,681
11/30/1995 $344,584 $319,483
12/31/1995 $347,547 $320,665
1/31/1996 $357,278 $330,551
2/29/1996 $367,247 $338,015
3/31/1996 $372,976 $341,544
4/30/1996 $383,046 $347,893
5/31/1996 $394,920 $355,582
6/30/1996 $386,153 $350,316
7/31/1996 $365,339 $335,392
8/31/1996 $387,735 $348,328
9/30/1996 $406,075 $357,918
10/31/1996 $406,603 $362,234
11/30/1996 $417,256 $374,474
12/31/1996 $420,594 $371,722
1/31/1997 $436,702 $382,554
2/28/1997 $430,763 $381,127
3/31/1997 $426,585 $372,948
4/30/1997 $431,448 $376,338
5/31/1997 $453,667 $395,430
6/30/1997 $471,723 $407,834
7/31/1997 $500,687 $431,117
8/31/1997 $494,378 $428,781
9/30/1997 $518,554 $448,603
10/31/1997 $508,183 $439,963
11/30/1997 $509,656 $440,148
12/31/1997 $518,626 $444,453
1/31/1998 $513,544 $445,822
2/28/1998 $537,783 $465,562
3/31/1998 $562,198 $482,677
4/30/1998 $568,832 $485,708
5/31/1998 $555,863 $474,978
6/30/1998 $577,597 $478,987
7/31/1998 $581,756 $471,381
8/31/1998 $497,692 $417,219
9/30/1998 $525,712 $425,547
10/31/1998 $537,173 $436,539
11/30/1998 $571,176 $457,392
12/31/1998 $630,407 $484,154
1/31/1999 $667,790 $508,038
2/28/1999 $634,801 $490,287
3/31/1999 $674,349 $510,575
4/30/1999 $695,658 $531,299
5/31/1999 $684,389 $528,616
6/30/1999 $717,103 $548,101
7/31/1999 $695,733 $544,599
8/31/1999 $701,090 $537,737
9/30/1999 $704,245 $541,275
10/31/1999 $749,105 $562,493
11/30/1999 $817,049 $595,072
12/31/1999 $955,212 $675,681
1/31/2000 $960,657 $675,519
2/29/2000 $1,122,047 $732,350
3/31/2000 $1,073,463 $731,310
4/30/2000 $1,003,043 $680,879
5/31/2000 $938,949 $651,390
6/30/2000 $1,009,558 $684,924
7/31/2000 $970,185 $664,602
8/31/2000 $1,070,502 $715,650
9/30/2000 $1,069,753 $692,299
10/31/2000 $1,014,019 $665,216
11/30/2000 $865,972 $585,703
12/31/2000 $920,269 $608,123
1/31/2001 $950,269 $645,949
2/28/2001 $856,763 $597,438
3/31/2001 $803,986 $571,575
4/30/2001 $849,492 $609,933
5/31/2001 $834,881 $606,127
6/30/2001 $815,344 $596,562
7/31/2001 $785,910 $587,978
8/31/2001 $763,433 $577,600
9/30/2001 $716,253 $543,135
10/31/2001 $732,870 $554,302
11/30/2001 $757,641 $569,135
12/31/2001 $766,051 $581,087
1/31/2002 $754,254 $571,906
2/28/2002 $742,488 $555,689
3/31/2002 $767,658 $575,639
4/30/2002 $759,060 $567,230
5/31/2002 $750,103 $562,278
6/30/2002 $707,422 $531,803
7/31/2002 $652,668 $499,948
8/31/2002 $661,022 $506,157
9/30/2002 $644,100 $488,315
10/31/2002 $655,500 $499,205
11/30/2002 $676,083 $535,197
12/31/2002 $663,373 $531,183
1/31/2003 $662,245 $539,735
2/28/2003 $655,556 $538,440
3/31/2003 $662,636 $547,540
4/30/2003 $696,298 $575,161
5/31/2003 $733,690 $601,917
6/30/2003 $738,972 $605,746
7/31/2003 $752,200 $607,469
8/31/2003 $765,815 $615,009
9/30/2003 $768,112 $622,600
10/31/2003 $817,194 $644,944
11/30/2003 $835,091 $655,459
12/31/2003 $850,707 $675,411
1/31/2004 $883,629 $695,901
2/29/2004 $884,778 $701,407
3/31/2004 $889,025 $704,027
4/30/2004 $870,533 $687,053
5/31/2004 $875,495 $688,814
6/30/2004 $893,093 $700,003
7/31/2004 $860,674 $681,136
8/30/2004 $849,055 $682,504
9/30/2004 $879,111 $694,209
10/31/2004 $872,518 $697,293
11/30/2004 $922,949 $722,648
12/31/2004 $953,037 $740,330
1/31/2005 $941,124 $724,129
2/28/2005 $953,453 $722,424
3/31/2005 $929,998 $705,743
4/30/2005 $902,656 $682,453
5/31/2005 $928,743 $699,992
6/30/2005 $958,184 $714,762
7/31/2005 $993,158 $737,563
8/31/2005 $992,363 $737,047
9/30/2005 $1,005,264 $744,343
10/31/2005 $986,365 $728,563
11/30/2005 $1,013,096 $741,823
12/31/2005 $1,021,403 $747,758
1/31/2006 $1,065,528 $778,565
2/28/2006 $1,066,806 $776,775
3/31/2006 $1,089,316 $787,572
4/30/2006 $1,107,943 $794,266
5/31/2006 $1,076,034 $781,876
6/30/2006 $1,072,053 $781,719
7/31/2006 $1,069,373 $783,517
8/31/2006 $1,082,740 $794,095
9/30/2006 $1,099,631 $803,544
10/31/2006 $1,123,823 $824,276
11/30/2006 $1,140,118 $840,514
12/31/2006 $1,153,344 $843,708
1/31/2007 $1,180,447 $861,932
2/28/2007 $1,187,884 $862,191
3/31/2007 $1,207,603 $864,777
4/30/2007 $1,245,280 $885,100
5/31/2007 $1,288,367 $905,103
6/30/2007 $1,286,305 $902,297
7/31/2007 $1,267,911 $880,642
8/31/2007 $1,280,337 $879,585
9/30/2007 $1,336,287 $911,338
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. Convertible Fund Class IV 21.52% 15.71% 9..93%
- --------------------------------------------------------------------------------
Merrill Lynch All Convertibles
All Qualities Index 13.45% 13.30% 7..35%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I, II AND IV SHARES COMPARED WITH THE MERRILL LYNCH ALL
CONVERTIBLES, ALL QUALITIES INDEX FOR THE PERIODS INDICATED. THE FUND'S CLASS I,
II AND IV SHARES CALCULATE THEIR PERFORMANCE BASED UPON THE HISTORICAL
PERFORMANCE OF THEIR CORRESPONDING SERIES OF NICHOLAS-APPLEGATE MUTUAL FUNDS
(RENAMED ING MUTUAL FUNDS), ADJUSTED TO REFLECT ALL FEES AND EXPENSES APPLICABLE
TO THE FUND'S CLASS I, II AND IV SHARES. THE NICHOLAS-APPLEGATE INSTITUTIONAL
FUNDS' CLASS I SHARES WERE FIRST AVAILABLE ON MAY 7, 1999, CLASS II SHARES ON
SEPTEMBER 30, 2005 AND CLASS IV SHARES ON DECEMBER 30, 2006. THE HISTORICAL
PERFORMANCE OF CLASS I, II AND IV SHARES INCLUDES THE PERFORMANCE OF CLASS I
SHARES FOR PERIODS PRIOR TO THE INCEPTION OF CLASS II. AVERAGE ANNUAL TOTAL
RETURN FIGURES INCLUDE CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS, AND
CAPITAL GAIN DISTRIBUTIONS. THE TOTAL RETURNS SHOWN ABOVE DO NOT SHOW THE
EFFECTS OF INCOME TAXES ON AN INDIVIDUAL'S INVESTMENT. IN MOST CASES, TAXES MAY
REDUCE YOUR ACTUAL INVESTMENT RETURNS ON INCOME OR GAINS PAID BY THE FUND OR ANY
GAINS YOU MAY REALIZE IF YOU SELL YOUR SHARES. PAST PERFORMANCE CANNOT GUARANTEE
FUTURE RESULTS.
FOR THE PERIOD FROM THE FUND'S INCEPTION TO DECEMBER 31, 2004, PERFORMANCE IS
COMPARED TO THE CREDIT SUISSE FIRST BOSTON CONVERTIBLE INDEX. FOR THE PERIOD
FROM JANUARY 1, 2005 TO PRESENT, PERFORMANCE IS COMPARED TO THE MERRILL LYNCH
ALL CONVERTIBLES, ALL QUALITIES INDEX. THE CHANGE IN BENCHMARKS WAS PROMPTED BY
THE RETIREMENT OF THE CREDIT SUISSE FIRST BOSTON CONVERTIBLE INDEX IN DECEMBER
2004.
THE UNMANAGED INDEXES DIFFER FROM THE FUND IN COMPOSITION, DO NOT PAY MANAGEMENT
FEES OR EXPENSES AND INCLUDE REINVESTED DIVIDENDS. ONE CANNOT INVEST DIRECTLY IN
AN INDEX.
SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE WITH MARKET CONDITIONS. YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
YOUR SHARES.
22
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BOND - 83.7%
AEROSPACE/DEFENSE - 2.7%
Lockheed Martin Corp.++ 5.110%, 08/15/33 $1,585,000 $ 2,418,076
United Industrial Corp. 3.750%, 09/15/24 935,000 1,844,288
------------
4,262,364
------------
AEROSPACE/DEFENSE-EQUIPMENT - 3.2%
Orbital Sciences Corp. 2.438%, 01/15/27 2,035,000 2,302,094
Triumph Group, Inc. 2.625%, 10/01/26 1,720,000 2,747,700
------------
5,049,794
------------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL - 1.3%
ArvinMeritor, Inc. 144A# 4.000%, 02/15/27 1,560,000 1,400,100
ArvinMeritor, Inc. 4.000%, 02/15/27 675,000 605,812
------------
2,005,912
------------
AUTO-CARS/LIGHT TRUCKS - 1.7%
Ford Motor Co. 4.250%, 12/15/36 2,305,000 2,705,494
------------
BREWERY - 1.7%
Molson Coors Brewing Co. 2.500%, 07/30/13 2,405,000 2,687,587
------------
BROADCAST SERVICES/PROGRAMMING - 1.2%
Liberty Media LLC 0.750%, 03/30/23 1,740,000 1,929,225
------------
CELLULAR TELECOMMUNICATIONS - 3.0%
Nextel Communications, Inc. 5.250%, 01/15/10 2,280,000 2,285,700
NII Holdings, Inc. 144A# 3.125%, 06/15/12 1,140,000 1,154,250
NII Holdings, Inc. 144A# 2.750%, 08/15/25 730,000 1,274,762
NII Holdings, Inc. 2.750%, 08/15/25 20,000 34,925
------------
4,749,637
------------
COMMERCIAL SERVICES - 1.3%
Quanta Services, Inc. 144A# 3.750%, 04/30/26 870,000 1,152,750
Quanta Services, Inc. 3.750%, 04/30/26 670,000 887,750
------------
2,040,500
------------
COMPUTER SERVICES - 3.3%
DST Systems, Inc. 4.125%, 08/15/23 1,395,000 2,540,644
Electronic Data Systems Corp. 3.875%, 07/15/23 2,530,000 2,548,975
------------
5,089,619
------------
COMPUTERS - 1.7%
Hewlett-Packard Co.+ 0.000%, 10/14/17 3,220,000 2,640,400
------------
COMPUTERS-MEMORY DEVICES - 1.7%
EMC Corp. 144A# 1.750%, 12/01/11 1,885,000 2,681,412
------------
CONSULTING SERVICES - 0.7%
FTI Consulting, Inc. 3.750%, 07/15/12 650,000 1,148,063
------------
DIAGNOSTIC KITS - 1.6%
Inverness Medical Innovations, Inc. 144A# 3.000%, 05/15/16 1,290,000 1,677,000
Inverness Medical Innovations, Inc. 3.000%, 05/15/16 640,000 832,000
------------
2,509,000
------------
DIVERSIFIED MANUFACTURING OPERATIONS - 1.6%
Roper Industries, Inc. 1.481%, 01/15/34 3,025,000 2,503,188
------------
E-COMMERCE/SERVICES - 1.5%
priceline.com, Inc. 144A# 0.750%, 09/30/13 630,000 1,399,388
priceline.com, Inc. 2.250%, 01/15/25 425,000 993,438
------------
2,392,826
------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 2.8%
Intel Corp. 2.950%, 12/15/35 2,130,000 2,215,200
Micron Technology, Inc. 1.875%, 06/01/14 1,470,000 1,438,762
Skyworks Solutions, Inc. 1.250%, 03/01/10 560,000 637,700
------------
4,291,662
------------
ELECTRONIC DESIGN AUTOMATION - 1.4%
Cadence Design Systems, Inc. 144A# 1.500%, 12/15/13 1,805,000 2,134,412
------------
ELECTRONIC MEASURE INSTRUMENTS - 1.7%
Itron, Inc. 2.500%, 08/01/26 1,695,000 2,635,725
------------
ELECTRONICS-MILITARY - 1.6%
L-3 Communications Corp. 144A# 3.000%, 08/01/35 1,065,000 1,238,062
L-3 Communications Corp. 3.000%, 08/01/35 1,110,000 1,290,375
------------
2,528,437
------------
ENERGY-ALTERNATE SOURCES - 1.5%
Covanta Holding Corp. 1.000%, 02/01/27 2,260,000 2,310,850
------------
ENTERPRISE SOFTWARE/SERVICES - 0.8%
Lawson Software, Inc. 144A# 2.500%, 04/15/12 1,145,000 1,225,150
------------
FINANCE-INVESTMENT BANKERS/BROKERS - 0.8%
Merrill Lynch & Co., Inc.+ 0.000%, 03/13/32 1,050,000 1,178,520
------------
FOOTWEAR & RELATED APPAREL - 1.5%
Iconix Brand Group, Inc. 144A# 1.875%, 06/30/12 2,125,000 2,297,656
------------
INSTRUMENTS-SCIENTIFIC - 1.7%
Fisher Scientific International, Inc. 3.250%, 03/01/24 1,730,000 2,709,612
------------
LIFE/HEALTH INSURANCE - 1.5%
Prudential Financial, Inc.++ 2.960%, 12/12/36 2,295,000 2,361,165
------------
MACHINERY-FARM - 1.7%
AGCO Corp. 1.250%, 12/15/36 1,920,000 2,649,600
------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS - 2.7%
Kyphon, Inc. 144A# 1.250%, 02/01/14 $1,460,000 $ 1,912,600
St Jude Medical, Inc. 144A# 1.220%, 12/15/08 2,290,000 2,338,663
------------
4,251,263
------------
MEDICAL-BIOMEDICAL/GENETICS - 4.2%
Celgene Corp. 1.750%, 06/01/08 325,000 1,915,062
Genzyme Corp. 1.250%, 12/01/23 2,190,000 2,326,875
Invitrogen Corp. 2.000%, 08/01/23 1,820,000 2,345,525
------------
6,587,462
------------
MEDICAL-DRUGS - 5.7%
Allergan, Inc. 144A# 1.500%, 04/01/26 1,800,000 2,090,250
Allergan, Inc. 1.500%, 04/01/26 30,000 34,838
Schering-Plough Corp. 6.000%, 08/13/10 8,000 2,218,000
Teva Pharmaceutical Finance LLC 0.500%, 02/01/24 1,995,000 2,421,431
Wyeth++ 4.877%, 01/15/24 2,055,000 2,175,772
------------
8,940,291
------------
MULTIMEDIA - 1.4%
The Walt Disney Co. 2.125%, 04/15/23 1,710,000 2,092,612
------------
NETWORKING PRODUCTS - 1.4%
Juniper Networks, Inc.+ 0.000%, 06/15/08 1,205,000 2,202,138
------------
OIL & GAS DRILLING - 1.6%
Transocean, Inc. 1.500%, 05/15/21 1,555,000 2,453,013
------------
OIL COMPANIES-EXPLORATION & PRODUCTION - 1.5%
Devon Energy Corp. 4.950%, 08/15/08 1,350,000 2,364,187
------------
OIL FIELD MACHINERY & EQUIPMENT - 1.7%
Cameron International Corp. 2.500%, 06/15/26 1,760,000 2,611,400
------------
OIL-FIELD SERVICES - 1.6%
Schlumberger, Ltd. 1.500%, 06/01/23 860,000 2,497,225
------------
PRINTING-COMMERCIAL - 1.4%
Bowne & Co., Inc. 5.000%, 10/01/33 2,020,000 2,141,200
------------
REITS-DIVERSIFIED - 1.3%
Digital Realty Trust LP 144A# 4.125%, 08/15/26 1,630,000 2,079,554
------------
RETAIL-DISCOUNT - 1.4%
TJX Cos., Inc.+ 0.000%, 02/13/21 2,255,000 2,212,719
------------
RETAIL-SPORTING GOODS - 1.2%
Dick's Sporting Goods, Inc. 1.606%, 02/18/24 1,570,000 1,860,450
------------
RUBBER-TIRES - 1.3%
The Goodyear Tire & Rubber Co. 4.000%, 06/15/34 805,000 2,058,787
------------
TELECOMMUNICATIONS EQUIPMENT - 1.2%
CommScope, Inc. 1.000%, 03/15/24 800,000 1,863,000
------------
THERAPEUTICS - 1.5%
Gilead Sciences, Inc. 144A# 0.625%, 05/01/13 1,905,000 2,290,762
------------
TOYS - 1.3%
Hasbro, Inc. 2.750%, 12/01/21 1,534,000 2,034,467
------------
TRANSACTIONAL SOFTWARE - 1.1%
VeriFone Holdings, Inc. 144A# 1.375%, 06/15/12 1,450,000 1,687,438
------------
WEB HOSTING/DESIGN - 1.5%
Equinix, Inc. 2.500%, 04/15/12 2,245,000 2,295,512
------------
WEB PORTALS/ISP - 0.8%
Trizetto Group 2.750%, 10/01/25 1,150,000 1,279,375
------------
WIRE & CABLE PRODUCTS - 1.3%
General Cable Corp. 0.875%, 11/15/13 1,415,000 2,067,669
------------
WIRELESS EQUIPMENT - 1.4%
American Tower Corp. 3.000%, 08/15/12 1,020,000 2,213,400
- -----------------------------------------------------------------------------------------
Total Convertible Corporate Bond (Cost: $114,771,349) 130,801,734
- -----------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK - 11.3%
AGRICULTURAL OPERATIONS - 1.7%
Bunge, Ltd. 4.875%, 12/31/49 19,340 2,593,978
------------
AUTO-CARS/LIGHT TRUCKS - 0.9%
General Motors Corp. 6.250%, 07/15/33 58,065 1,422,012
------------
ELECTRIC-GENERATION - 1.2%
AES Trust III 6.750%, 10/15/29 37,993 1,851,779
------------
ELECTRIC-INTEGRATED - 1.6%
Entergy Corp. 7.625%, 02/17/09 37,755 2,523,922
------------
INDEPENDENT POWER PRODUCER - 1.4%
NRG Energy, Inc. 5.750%, 03/16/09 6,070 2,245,141
------------
METAL-DIVERSIFIED - 1.9%
Freeport-McMoRan Copper & Gold, Inc. 6.750%, 05/01/10 18,815 2,918,207
------------
MULTI-LINE INSURANCE - 1.5%
MetLife, Inc. 6.375%, 08/15/08 70,000 2,401,000
------------
NON-HAZARDOUS WASTE DISPOSAL - 1.1%
Allied Waste Industries, Inc. 6.250%, 03/01/08 5,300 1,758,938
- -----------------------------------------------------------------------------------------
Total Convertible Preferred Stock (Cost: $14,349,904) 17,714,977
- -----------------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
COMMON STOCK - 2.5%
TELECOMMUNICATIONS EQUIPMENT - 1.0%
Harris Corp 28,092 $ 1,623,437
TELEPHONE-INTEGRATED - 1.5%
CenturyTel, Inc 49,066 2,267,830
- -----------------------------------------------------------------------------------------
Total Common Stock (Cost: $3,335,382) 3,891,267
- -----------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 2.5%
TIME DEPOSIT - 2.5%
Bank of America London 4.370%, 10/01/07 (Cost: $3,856,125) $3,856,125 3,856,125
- -----------------------------------------------------------------------------------------
Total Investments - 100.0% (Cost: $136,312,760) 156,264,103
- -----------------------------------------------------------------------------------------
Other Assets in Excess of Liabilities - 0.0% 58,819
- -----------------------------------------------------------------------------------------
Net Assets - 100.0% $156,322,922
- -----------------------------------------------------------------------------------------
</Table>
# 144A SECURITY CERTAIN CONDITION FOR PUBLIC SALE MAY EXIST. THE TOTAL
MARKET VALUE OF 144A SECURITIES OWNED AT SEPTEMBER 30, 2007 WAS $30,034,209
OR 19.2% OF NET ASSETS.
+ ZERO COUPON BOND.
++ THE COUPON RATE SHOWN ON FLOATING RATE SECURITIES REPRESENTS THE RATE AT
SEPTEMBER 30, 2007.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
<Table>
<Caption>
PERCENT OF
SECTOR NET ASSETS
- -----------------------------------------------------------------------------------------
Consumer, Non-cyclical 22.5%
Industrial 16.8
Communications 15.9
Technology 12.6
Consumer, Cyclical 10.6
Energy 7.8
Financial 5.1
Utilities 4.3
Basic Materials 1.9
Short Term Investments 2.5
- -----------------------------------------------------------------------------------------
Total Investments 100.0
Other assets in excess of liabilities 0.0
- -----------------------------------------------------------------------------------------
NET ASSETS 100.0%
- -----------------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
<Page>
GLOBAL SELECT FUND
MANAGEMENT TEAM: CHRISTOPHER A. HERRERA, Portfolio Manager; PEDRO V. MARCAL,
Portfolio Manager; NELSON W. SHING, Portfolio Manager; TODD R. BUECHS, Analyst;
GREGORY ISE, Analyst; ALAN TRICE, Analyst
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The Global Select Fund seeks to maximize long-term capital appreciation by
investing in companies that, in the opinion of the Investment Adviser, represent
the "best of the best" globally.
MARKET OVERVIEW: The global equity market was volatile but delivered impressive
gains during the six months ended September 30, 2007. Over the summer, sharp
acceleration in residential mortgage defaults in the United States set off a
chain of events that resulted in a global liquidity crunch and downward pressure
on stock prices worldwide. Despite the sell-off, several factors contributed to
the period's overall positive returns, such as:
- Significant merger and buyout activity during the second quarter of
2007
- Buoyant growth in many economies, especially those in developing
countries
- The Federal Reserve's decision to lower the key federal funds rate
0.50% in September, the first such rate cut since June 2003
Within the global equity market, stocks in developing countries were the clear
winners. The MSCI Emerging Markets Index advanced 31.76%, driven by strength in
the BRIC nations of Brazil, Russia, India and China. Gains in developed
countries were more subdued but still robust, with the S&P 500 Index rising
8.44% and the MSCI EAFE Index climbing 9.05%. Most of the increase in the MSCI
EAFE Index was due to appreciation in non-U.S. currencies relative to the U..S.
dollar, particularly the euro. Globally, growth stocks outperformed value stocks
by more than 4%.
PERFORMANCE: Between April 1 and September 30, 2007, the Fund's Class I shares
advanced 14.89%, outperforming the MSCI All Country World Index, up 11.25%.
PORTFOLIO SPECIFICS: The Fund's outperformance versus the index was driven by
positive stock selection at both the country and sector level. The strongest
stock selection came from the United States, the United Kingdom and the
financials and telecommunication services sectors. Top-performing holdings
included U.S.-based Apple, a manufacturer of personal electronic devices;
U.K.-based Wellstream, an energy pipeline producer; and China Mobile, a provider
of wireless communications services. Apple continued to leverage its product
development pipeline, with strong expected sales for new iPods and Macs over the
coming quarters. Wellstream benefited from the smooth start-up of a new
production facility in Brazil and record-high oil prices. China Mobile reported
impressive subscription growth that brought its total wireless subscriber base
to nearly 350 million. Areas of relative weakness included stock selection in
South Korea and an underweight in materials, which was the best-performing
sector in the index.
MARKET OUTLOOK: We are positive in our outlook for global equities. There are
challenges facing the markets, such as record-high commodity prices and the
ongoing U.S. housing slump. That said, a number of factors make us optimistic
about future performance, including:
- Rebound in equities and stabilization in the credit markets toward the
end of the period
- Expectations for healthy corporate profits across countries and
sectors, with the exception of financials
- Robust pace of global economic activity
As always, we continue to seek out the "best of the best" globally for the Fund,
regardless of country, sector or capitalization range.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN GLOBAL SELECT FUND
CLASS I AND II SHARES WITH THE MSCI ALL COUNTRY WORLD INDEX.
[CHART]
<Table>
<Caption>
GLOBAL SELECT FUND MSCI ALL COUNTRY
CLASS I SHARES WORLD INDEX
9/30/1997 $250,000 $250,000
10/31/1997 $235,000 $235,125
11/30/1997 $236,200 $238,722
12/31/1997 $247,000 $241,850
1/31/1998 $255,800 $247,170
2/28/1998 $275,000 $264,077
3/31/1998 $296,200 $275,353
4/30/1998 $310,400 $277,941
5/31/1998 $311,200 $272,660
6/30/1998 $325,800 $277,568
7/31/1998 $334,000 $277,651
8/31/1998 $277,000 $238,753
9/30/1998 $286,800 $243,504
10/31/1998 $298,200 $265,736
11/30/1998 $319,687 $281,866
12/31/1998 $361,061 $294,944
1/31/1999 $397,187 $300,961
2/28/1999 $377,610 $293,407
3/31/1999 $413,333 $306,610
4/30/1999 $428,469 $319,856
5/31/1999 $414,745 $308,565
6/30/1999 $463,385 $323,932
7/31/1999 $473,678 $322,603
8/31/1999 $491,842 $322,216
9/30/1999 $507,786 $318,736
10/31/1999 $557,636 $334,864
11/30/1999 $652,092 $345,279
12/31/1999 $828,075 $374,040
1/31/2000 $772,143 $353,880
2/29/2000 $903,653 $355,083
3/31/2000 $870,639 $378,412
4/30/2000 $805,975 $361,421
5/31/2000 $766,140 $352,024
6/30/2000 $816,070 $363,958
7/31/2000 $792,060 $353,257
8/31/2000 $854,814 $364,244
9/30/2000 $789,332 $344,247
10/31/2000 $724,941 $337,499
11/30/2000 $659,497 $316,575
12/31/2000 $702,601 $321,861
1/31/2001 $693,118 $330,004
2/28/2001 $596,133 $302,251
3/31/2001 $554,322 $281,910
4/30/2001 $615,099 $302,433
5/31/2001 $601,737 $299,076
6/30/2001 $594,840 $289,924
7/31/2001 $578,030 $285,343
8/31/2001 $533,201 $272,217
9/30/2001 $472,855 $247,364
10/31/2001 $489,235 $252,608
11/30/2001 $536,218 $268,143
12/31/2001 $559,495 $270,664
1/31/2002 $553,891 $263,248
2/28/2002 $552,598 $261,326
3/31/2002 $589,237 $273,138
4/30/2002 $573,288 $264,479
5/31/2002 $562,081 $264,850
6/30/2002 $515,097 $248,694
7/31/2002 $465,958 $227,828
8/31/2002 $470,269 $228,421
9/30/2002 $437,078 $203,363
10/31/2002 $467,682 $218,331
11/30/2002 $495,269 $230,273
12/31/2002 $454,320 $219,289
1/31/2003 $448,285 $212,886
2/28/2003 $440,096 $209,160
3/31/2003 $442,251 $208,366
4/30/2003 $475,872 $226,973
5/31/2003 $510,787 $240,183
6/30/2003 $522,425 $244,794
7/31/2003 $538,805 $250,228
8/31/2003 $571,564 $256,159
9/30/2003 $561,650 $257,798
10/31/2003 $599,151 $273,447
11/30/2003 $603,461 $277,630
12/31/2003 $632,341 $295,232
1/31/2004 $653,031 $300,281
2/29/2004 $663,807 $305,836
3/31/2004 $671,566 $304,215
4/30/2004 $644,841 $297,218
5/31/2004 $646,134 $299,715
6/30/2004 $659,928 $305,769
7/31/2004 $629,324 $296,076
8/30/2004 $626,738 $298,000
9/30/2004 $650,876 $304,288
10/31/2004 $666,367 $311,804
11/30/2004 $720,542 $328,922
12/31/2004 $737,403 $341,750
1/31/2005 $721,918 $334,573
2/28/2005 $752,455 $346,317
3/31/2005 $733,794 $338,837
4/30/2005 $710,973 $331,552
5/31/2005 $737,848 $337,984
6/30/2005 $752,014 $341,566
7/31/2005 $788,938 $354,273
8/31/2005 $788,938 $357,142
9/30/2005 $815,841 $367,999
10/31/2005 $783,044 $358,174
11/30/2005 $815,227 $371,390
12/31/2005 $847,836 $380,601
1/31/2006 $898,961 $399,402
2/28/2006 $890,691 $398,963
3/31/2006 $923,290 $407,541
4/30/2006 $949,604 $421,316
5/31/2006 $896,046 $405,053
6/30/2006 $888,250 $405,053
7/31/2006 $894,113 $407,929
8/31/2006 $915,035 $418,698
9/30/2006 $927,205 $423,681
10/31/2006 $950,107 $439,653
11/30/2006 $983,171 $452,315
12/31/2006 $997,427 $462,538
1/31/2007 $1,001,317 $467,256
2/28/2007 $995,809 $464,966
3/31/2007 $1,020,505 $474,498
4/30/2007 $1,077,552 $495,755
5/31/2007 $1,111,602 $511,025
6/30/2007 $1,112,158 $509,696
7/31/2007 $1,100,592 $502,050
8/31/2007 $1,097,840 $500,896
9/30/2007 $1,173,042 $527,944
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Global Select Fund Class I 26.52% 21.82% 16..71%
- --------------------------------------------------------------------------------
MSCI All Country World Index 24.59% 21.02% 7..76%
- --------------------------------------------------------------------------------
26
<Page>
[CHART]
<Table>
<Caption>
GLOBAL SELECT FUND MSCI ALL COUNTRY
CLASS II SHARES WORLD INDEX
9/30/1997 $250,000 $250,000
10/31/1997 $235,000 $235,125
11/30/1997 $236,200 $238,722
12/31/1997 $247,000 $241,850
1/31/1998 $255,800 $247,170
2/28/1998 $275,000 $264,077
3/31/1998 $296,200 $275,353
4/30/1998 $310,400 $277,941
5/31/1998 $311,200 $272,660
6/30/1998 $325,800 $277,568
7/31/1998 $334,000 $277,651
8/31/1998 $277,000 $238,753
9/30/1998 $286,800 $243,504
10/31/1998 $298,200 $265,736
11/30/1998 $319,687 $281,866
12/31/1998 $361,061 $294,944
1/31/1999 $397,187 $300,961
2/28/1999 $377,610 $293,407
3/31/1999 $413,333 $306,610
4/30/1999 $428,469 $319,856
5/31/1999 $414,745 $308,565
6/30/1999 $463,385 $323,932
7/31/1999 $473,678 $322,603
8/31/1999 $491,842 $322,216
9/30/1999 $507,786 $318,736
10/31/1999 $557,636 $334,864
11/30/1999 $652,092 $345,279
12/31/1999 $828,075 $374,040
1/31/2000 $772,143 $353,880
2/29/2000 $903,653 $355,083
3/31/2000 $870,639 $378,412
4/30/2000 $805,975 $361,421
5/31/2000 $766,140 $352,024
6/30/2000 $816,070 $363,958
7/31/2000 $792,060 $353,257
8/31/2000 $854,814 $364,244
9/30/2000 $789,332 $344,247
10/31/2000 $724,941 $337,499
11/30/2000 $659,497 $316,575
12/31/2000 $702,601 $321,861
1/31/2001 $693,118 $330,004
2/28/2001 $596,133 $302,251
3/31/2001 $554,322 $281,910
4/30/2001 $615,099 $302,433
5/31/2001 $601,737 $299,076
6/30/2001 $594,840 $289,924
7/31/2001 $578,030 $285,343
8/31/2001 $533,201 $272,217
9/30/2001 $472,855 $247,364
10/31/2001 $489,235 $252,608
11/30/2001 $536,218 $268,143
12/31/2001 $559,495 $270,664
1/31/2002 $553,891 $263,248
2/28/2002 $552,598 $261,326
3/31/2002 $589,237 $273,138
4/30/2002 $573,288 $264,479
5/31/2002 $562,081 $264,850
6/30/2002 $515,097 $248,694
7/31/2002 $465,958 $227,828
8/31/2002 $470,269 $228,421
9/30/2002 $437,078 $203,363
10/31/2002 $467,682 $218,331
11/30/2002 $495,269 $230,273
12/31/2002 $454,320 $219,289
1/31/2003 $448,285 $212,886
2/28/2003 $440,096 $209,160
3/31/2003 $442,251 $208,366
4/30/2003 $475,872 $226,973
5/31/2003 $510,787 $240,183
6/30/2003 $522,425 $244,794
7/31/2003 $538,829 $250,228
8/31/2003 $571,159 $256,159
9/30/2003 $561,678 $257,798
10/31/2003 $599,198 $273,447
11/30/2003 $603,092 $277,630
12/31/2003 $632,403 $295,232
1/31/2004 $652,640 $300,281
2/29/2004 $663,408 $305,836
3/31/2004 $671,170 $304,215
4/30/2004 $644,457 $297,218
5/31/2004 $646,198 $299,715
6/30/2004 $659,962 $305,769
7/31/2004 $629,339 $296,076
8/30/2004 $628,458 $298,000
9/30/2004 $651,334 $304,288
10/31/2004 $666,445 $311,804
11/30/2004 $720,627 $328,922
12/31/2004 $737,490 $341,750
1/31/2005 $722,002 $334,573
2/28/2005 $752,543 $346,317
3/31/2005 $733,880 $338,837
4/30/2005 $711,497 $331,552
5/31/2005 $738,391 $337,984
6/30/2005 $752,495 $341,566
7/31/2005 $789,442 $354,273
8/31/2005 $789,442 $357,142
9/30/2005 $816,362 $367,999
10/31/2005 $783,952 $358,174
11/30/2005 $816,173 $371,390
12/31/2005 $848,330 $380,601
1/31/2006 $899,484 $399,402
2/28/2006 $891,209 $398,963
3/31/2006 $923,827 $407,541
4/30/2006 $950,618 $421,316
5/31/2006 $897,004 $405,053
6/30/2006 $889,200 $405,053
7/31/2006 $895,068 $407,929
8/31/2006 $916,013 $418,698
9/30/2006 $928,196 $423,681
10/31/2006 $951,122 $439,653
11/30/2006 $984,507 $452,315
12/31/2006 $998,782 $462,538
1/31/2007 $1,002,677 $467,256
2/28/2007 $997,163 $464,966
3/31/2007 $1,021,892 $474,498
4/30/2007 $1,079,016 $495,755
5/31/2007 $1,113,652 $511,025
6/30/2007 $1,113,652 $509,696
7/31/2007 $1,102,070 $502,050
8/31/2007 $1,099,315 $500,896
9/30/2007 $1,174,618 $527,944
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Global Select Fund Class II 26.55% 21.86% 16..73%
- --------------------------------------------------------------------------------
MSCI All Country World Index 24.59% 21.02% 7..76%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I AND II SHARES COMPARED WITH THE MORGAN STANLEY CAPITAL
INTERNATIONAL ALL COUNTRY WORLD INDEX ("MSCI ACWI") OVER THE PERIODS INDICATED.
THE FUND'S CLASS I AND II SHARES CALCULATE THEIR PERFORMANCE BASED UPON THE
HISTORICAL PERFORMANCE OF THEIR CORRESPONDING SERIES OF NICHOLAS-APPLEGATE
MUTUAL FUNDS (RENAMED ING MUTUAL FUNDS), ADJUSTED TO REFLECT ALL FEES AND
EXPENSES APPLICABLE TO THE FUND'S CLASS I AND II SHARES. THE NICHOLAS-APPLEGATE
INSTITUTIONAL FUNDS' CLASS I SHARES WERE FIRST AVAILABLE ON MAY 7, 1999 AND
CLASS II SHARES ON JUNE 30, 2003. THE HISTORICAL PERFORMANCE OF CLASS II SHARES
INCLUDES THE PERFORMANCE OF CLASS I SHARES FOR PERIODS PRIOR TO THE INCEPTION OF
CLASS II. AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE CHANGES IN PRINCIPAL
VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN DISTRIBUTIONS. THE TOTAL RETURNS
SHOWN ABOVE DO NOT SHOW THE EFFECTS OF INCOME TAXES ON AN INDIVIDUAL'S
INVESTMENT. IN MOST CASES, TAXES MAY REDUCE YOUR ACTUAL INVESTMENT RETURNS ON
INCOME OR GAINS PAID BY THE FUND OR ANY GAINS YOU MAY REALIZE IF YOU SELL YOUR
SHARES. PAST PERFORMANCE CANNOT GUARANTEE FUTURE RESULTS.
THE MSCI ACWI IS A MARKET CAPITALIZATION WEIGHTED INDEX COMPOSED OF OVER 2000
COMPANIES. THE MSCI ACWI IS REPRESENTATIVE OF THE MARKET STRUCTURE OF 21
COUNTRIES IN NORTH AMERICA, EUROPE, AND THE PACIFIC RIM, EXCLUDING CLOSED
MARKETS AND THOSE SHARES IN OTHERWISE FREE MARKETS THAT ARE NOT PURCHASABLE BY
FOREIGNERS.
THE UNMANAGED INDEX DIFFERS FROM THE FUND IN COMPOSITION, DOES NOT PAY
MANAGEMENT FEES OR EXPENSES AND INCLUDES REINVESTED DIVIDENDS. ONE CANNOT INVEST
DIRECTLY IN AN INDEX.
SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE WITH MARKET CONDITIONS, CURRENCY VOLATILITY AND THE SOCIAL,
ECONOMIC AND POLITICAL CLIMATES OF COUNTRIES WHERE THE FUND INVESTS. YOU MAY
HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
27
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------
COMMON STOCK - 96.5%
BRAZIL - 1.0%
Unibanco - Uniao de Bancos Brasileiros SA - GDR## 12,800 $ 1,683,840
------------
FINLAND - 1.6%
Outotec OYJ 37,580 2,645,498
------------
FRANCE - 5.1%
AXA SA 59,031 2,634,380
Total SA 33,097 2,683,869
Veolia Environnement 35,156 3,019,325
------------
8,337,574
------------
GERMANY - 5.3%
Commerzbank AG 32,436 1,309,598
Continental AG 19,018 2,622,965
Henkel KGaA 53,543 2,528,814
Siemens AG* 16,133 2,212,217
------------
8,673,594
------------
GREECE - 0.9%
OPAP SA 37,890 1,465,679
------------
HONG KONG - 5.6%
Hang Lung Properties, Ltd. 349,000 1,563,360
Hutchison Whampoa, Ltd. 132,000 1,414,531
Jardine Matheson Holdings, Ltd. 95,200 2,722,720
Kowloon Development Co., Ltd. 583,000 1,488,897
Melco International Development 1,036,000 1,944,338
------------
9,133,846
------------
INDONESIA - 1.1%
Indosat Tbk PT 2,041,000 1,718,502
------------
IRELAND - 1.2%
Icon PLC - ADR* 37,300 1,903,419
------------
ITALY - 2.6%
Geox SpA 64,660 1,385,780
UniCredito Italiano SpA 333,195 2,843,120
------------
4,228,900
------------
JAPAN - 8.0%
Aichi Corp. 98,400 1,198,612
Asics Corp. 114,000 1,762,309
Chugai Pharmaceutical Co., Ltd.## 132,900 2,191,986
Joint Corp. 52,600 1,404,008
Mitsubishi UFJ Financial Group, Inc. 165 1,491,979
Nitori Co., Ltd. 27,750 1,310,112
Sony Corp. - ADR 43,300 2,080,998
Sumco Corp. 38,200 1,554,371
------------
12,994,375
------------
NETHERLANDS - 3.9%
Koninklijke Ahold NV* 122,734 1,850,189
Koninklijke Philips Electronics NV* 42,643 1,919,406
Royal Numico NV 32,972 2,550,877
------------
6,320,472
------------
REPUBLIC OF CHINA - 2.5%
AAC Acoustic Technologies Holdings, Inc.* 1,070,000 1,320,860
China Mobile, Ltd. 171,000 2,799,869
------------
4,120,729
------------
SOUTH KOREA - 0.7%
Osstem Implant Co., Ltd.* 25,537 1,061,774
------------
SPAIN - 3.1%
Tecnicas Reunidas SA## 27,194 2,001,377
Telefonica SA 106,966 2,986,149
------------
4,987,526
------------
SWEDEN - 1.6%
Telefonaktiebolaget LM Ericsson Cl. B 631,000 2,516,567
------------
SWITZERLAND - 4.7%
Adecco SA 17,197 1,013,537
Nestle SA 6,898 3,088,216
Roche Holding AG* 10,397 1,878,794
Sika AG 845 1,640,524
------------
7,621,071
------------
TAIWAN - 0.9%
United Microelectronics Corp. - ADR## 403,100 1,447,129
------------
UNITED KINGDOM - 8.4%
ARM Holdings PLC 507,775 1,593,154
IG Group Holdings PLC 325,610 2,512,558
International Power PLC 306,419 2,817,076
Reed Elsevier PLC 137,292 1,728,619
Standard Chartered PLC 75,560 2,463,075
Wellstream Holdings PLC* 157,435 2,615,718
------------
13,730,200
------------
UNITED STATES - 38.3%
3M Co. 28,700 2,685,746
Affiliated Managers Group, Inc.*,## 13,800 1,759,638
Aflac, Inc. 38,800 2,213,152
Ansys, Inc.* 54,300 1,855,431
Apollo Investment Corp.## 92,500 1,924,000
Apple, Inc.* 17,400 2,671,596
Boeing Co. 28,000 2,939,720
Bristol-Myers Squibb Co. 52,200 1,504,404
Corning, Inc. 104,800 2,583,320
DaVita, Inc.* 19,400 1,225,692
Devon Energy Corp. 19,700 1,639,040
Genzyme Corp.* 30,100 1,864,996
Helmerich & Payne, Inc. 82,900 2,721,607
Hess Corp. 42,400 2,820,872
ITT Corp. 34,000 2,309,620
Limited Brands, Inc. 67,300 1,540,497
Merck & Co., Inc. 32,400 1,674,756
Morgan Stanley 17,700 1,115,100
Motorola, Inc. 156,500 2,899,945
Oracle Corp.* 111,900 2,422,635
Praxair, Inc. 23,800 1,993,488
Procter & Gamble Co. 42,300 2,975,382
Psychiatric Solutions, Inc.*,## 62,600 2,458,928
Spansion, Inc. Cl. A* 118,600 1,002,170
The Coca-Cola Co. 40,800 2,344,776
Thermo Fisher Scientific, Inc.* 44,700 2,580,084
Volcom, Inc.*,## 35,600 1,513,712
Waters Corp.* 31,500 2,107,980
XTO Energy, Inc. 48,000 2,968,320
------------
62,316,607
- -----------------------------------------------------------------------------------
Total Common Stock (Cost: $124,967,401) 156,907,302
- -----------------------------------------------------------------------------------
EQUITY-LINKED SECURITIES - 1.4%
TAIWAN - 1.4%
Credit Suisse FB Hon Hai Precision
Industry Co., Ltd. - 11/05/07 (Cost: $1,536,925) 252,304 2,282,241
- -----------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 9.0%
MONEY MARKET FUNDS - 7.8%
Boston Global Investment Trust -
Enhanced Portfolio, 5.408%** $12,611,900 $ 12,611,900
------------
TIME DEPOSITS - 1.2%
Citibank Nassau 4.370%, 10/01/07 1,999,457 1,999,457
- -----------------------------------------------------------------------------------
Total Short Term Investments (Cost: $14,611,357) 14,611,357
- -----------------------------------------------------------------------------------
Total Investments - 106.9% (Cost: $141,115,683) 173,800,900
- -----------------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (6.9%) (11,174,932)
- -----------------------------------------------------------------------------------
Net Assets - 100.0% $162,625,968
- -----------------------------------------------------------------------------------
</Table>
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/07.
ADR - AMERICAN DEPOSITORY RECEIPT
GDR - GLOBAL DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
<Table>
<Caption>
PERCENT OF
SECTOR NET ASSETS
- -----------------------------------------------------------------------------------
Consumer, Non-cyclical 19.8%
Industrial 15.7
Financial 14.7
Communications 10.6
Consumer, Cyclical 10.0
Energy 9.5
Technology 9.1
Diversified 3.7
Utilities 3.6
Basic Materials 1.2
Short Term Investments 9.0
- -----------------------------------------------------------------------------------
Total Investments 106.9
Liabilities in excess of other assets (6.9)
- -----------------------------------------------------------------------------------
Net Assets 100.0%
- -----------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
<Page>
INTERNATIONAL GROWTH FUND
MANAGEMENT TEAM: HORACIO A. VALEIRAS, CFA, Portfolio Manager and Chief
Investment Officer; PEDRO V. MARCAL, Portfolio Manager
GOAL: The International Growth Fund seeks to maximize long-term capital
appreciation through investments primarily in companies located outside the
United States with market capitalizations predominantly in the top 75% of
publicly traded companies as measured by stock market capitalizations within
each country.
MARKET OVERVIEW: Equity markets in developed countries outside the United States
registered healthy gains from April 1 through September 30, 2007. The U.S.
dollar weakened against a basket of currencies, more than doubling returns for
U.S.-based investors. Broadly speaking, growth stocks outperformed value stocks
by approximately 5%.
From a regional perspective, European equities outpaced Pacific Rim shares due
to weakness in Japan. Japanese stocks were hard hit by the U.S. mortgage and
credit problems, as well as signs the economy was slowing, including the first
drop in capital spending in four years. However, outside of Japan, Pacific Rim
markets posted strong increases. Australia was a standout performer, as this
top-five global producer of coal, nickel and other materials benefited from
robust demand for commodities.
European markets were led by substantial gains in Germany, the region's largest
economy and the world's largest exporting country. After nearly a decade of
being a drag on euro zone growth, Germany has experienced an economic
reawakening, as rising exports have fueled business spending and hiring.
Strength in the German economy helped drive the euro to a record high versus the
U.S. dollar, as did the Federal Reserve's decision to cut the fed funds rate in
September. Monetary easing in the United States raised hopes that the European
Central Bank might follow suit, despite having raised its key interest rate in
June to keep inflationary pressures at bay.
PERFORMANCE: The Fund's Class I shares gained 21.83% during the six months ended
September 30, 2007, outperforming the 9.05% increase in the MSCI EAFE Index.
PORTFOLIO SPECIFICS: The Fund's outperformance of the index was largely due to
stock selection, which was positive in most countries and nearly every sector of
investment. Stock selection was especially strong in France, Japan, Canada and
the industrials sector. Overall, the portfolio's sector and currency exposures,
which are a byproduct of our bottom-up investment decisions, were also a source
of value added. For example, an underweight in financials was a plus, since
financials was the market's worst-performing sector amid the U.S.-induced global
liquidity crunch. Pockets of relative weakness in the Fund included stock
selection in Germany and an underweight in the energy sector.
At the individual stock level, some of our best-performing holdings were
France-based Alstom, a transport and energy infrastructure firm; Japan Steel
Works, a manufacturer of industrial machinery; and Canada-based Aur Resources, a
mining company.
MARKET OUTLOOK: International stocks are facing several challenges, including
global liquidity issues, record-high oil prices and large currency swings. That
said, a number of positive factors may pave the way for additional price gains,
including:
- Expectations for healthy corporate profit growth throughout developed
non-U.S. countries
- Pro-growth developments in Europe, such as the election of French
President Nicolas Sarkozy who campaigned on economic reforms
- Attractive valuations in Europe relative to history and relative to
the U.S. and emerging markets
In the shifting market terrain, we remain focused on identifying fundamentally
strong companies with exceptional growth prospects for the Fund.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN INTERNATIONAL GROWTH
FUND CLASS I AND II SHARES WITH THE MSCI EAFE INDEX.
[CHART]
<Table>
<Caption>
INTERNATIONAL GROWTH FUND
CLASS I SHARES MSCI EAFE INDEX
12/27/1996 $250,000 $250,000
12/31/1996 $252,475 $252,250
1/31/1997 $274,682 $243,422
2/28/1997 $277,282 $247,403
3/31/1997 $282,684 $248,299
4/30/1997 $286,685 $249,617
5/31/1997 $313,293 $265,860
6/30/1997 $331,298 $280,522
7/31/1997 $352,505 $285,060
8/31/1997 $334,099 $263,770
9/30/1997 $358,707 $278,546
10/31/1997 $328,898 $257,136
11/30/1997 $325,228 $254,515
12/31/1997 $329,820 $256,735
1/31/1998 $341,928 $268,476
2/28/1998 $365,307 $285,703
3/31/1998 $387,017 $294,500
4/30/1998 $398,289 $296,831
5/31/1998 $408,101 $295,391
6/30/1998 $412,902 $297,627
7/31/1998 $431,271 $300,644
8/31/1998 $369,482 $263,398
9/30/1998 $351,948 $255,322
10/31/1998 $358,419 $281,937
11/30/1998 $379,975 $296,381
12/31/1998 $400,853 $308,074
1/31/1999 $416,302 $307,164
2/28/1999 $399,183 $299,843
3/31/1999 $411,918 $312,359
4/30/1999 $426,950 $325,016
5/31/1999 $410,457 $308,278
6/30/1999 $442,817 $320,297
7/31/1999 $457,431 $329,817
8/31/1999 $464,530 $331,022
9/30/1999 $471,628 $334,354
10/31/1999 $502,527 $346,877
11/30/1999 $567,666 $358,929
12/31/1999 $677,711 $391,144
1/31/2000 $629,452 $366,291
2/29/2000 $705,914 $376,151
3/31/2000 $666,012 $390,732
4/30/2000 $611,068 $370,171
5/31/2000 $578,686 $361,130
6/30/2000 $609,814 $375,253
7/31/2000 $582,865 $359,521
8/31/2000 $606,263 $362,641
9/30/2000 $566,987 $344,984
10/31/2000 $531,055 $336,835
11/30/2000 $505,070 $324,203
12/31/2000 $521,270 $335,726
1/31/2001 $505,514 $335,553
2/28/2001 $463,129 $310,398
3/31/2001 $426,292 $289,706
4/30/2001 $455,806 $309,838
5/31/2001 $441,160 $298,903
6/30/2001 $423,407 $286,679
7/31/2001 $413,199 $281,463
8/31/2001 $396,112 $274,342
9/30/2001 $364,378 $246,551
10/31/2001 $363,935 $252,863
11/30/2001 $371,258 $262,194
12/31/2001 $375,474 $263,741
1/31/2002 $358,831 $249,736
2/28/2002 $361,272 $251,484
3/31/2002 $381,022 $265,089
4/30/2002 $379,246 $266,839
5/31/2002 $378,803 $270,228
6/30/2002 $365,932 $259,473
7/31/2002 $331,314 $233,863
8/31/2002 $328,207 $233,325
9/30/2002 $296,474 $208,266
10/31/2002 $306,903 $219,450
11/30/2002 $315,336 $229,413
12/31/2002 $303,353 $221,705
1/31/2003 $292,701 $212,459
2/28/2003 $288,485 $207,594
3/31/2003 $284,712 $203,671
4/30/2003 $309,788 $223,875
5/31/2003 $329,316 $237,643
6/30/2003 $335,086 $243,513
7/31/2003 $339,302 $249,455
8/31/2003 $352,839 $255,516
9/30/2003 $352,617 $263,437
10/31/2003 $377,915 $279,876
11/30/2003 $380,884 $286,145
12/31/2003 $405,580 $308,522
1/31/2004 $415,146 $312,903
2/29/2004 $420,263 $320,193
3/31/2004 $424,268 $322,114
4/30/2004 $408,694 $315,092
5/31/2004 $408,472 $316,447
6/30/2004 $414,034 $323,504
7/31/2004 $392,231 $313,055
8/30/2004 $393,343 $314,495
9/30/2004 $404,467 $322,766
10/31/2004 $418,947 $333,805
11/30/2004 $449,153 $356,704
12/31/2004 $466,401 $372,363
1/31/2005 $462,763 $365,549
2/28/2005 $485,716 $381,413
3/31/2005 $465,024 $371,992
4/30/2005 $454,561 $363,660
5/31/2005 $460,243 $364,205
6/30/2005 $468,666 $369,195
7/31/2005 $489,568 $380,529
8/31/2005 $494,121 $390,271
9/30/2005 $526,832 $407,716
10/31/2005 $507,286 $395,851
11/30/2005 $531,332 $405,629
12/31/2005 $575,432 $424,531
1/31/2006 $619,511 $450,640
2/28/2006 $600,615 $449,739
3/31/2006 $621,697 $464,760
4/30/2006 $647,746 $487,301
5/31/2006 $613,221 $468,978
6/30/2006 $606,905 $469,166
7/31/2006 $606,602 $473,857
8/31/2006 $624,375 $487,031
9/30/2006 $624,125 $487,859
10/31/2006 $645,470 $506,885
11/30/2006 $668,836 $522,193
12/31/2006 $696,393 $538,642
1/31/2007 $686,922 $542,305
2/28/2007 $687,540 $546,752
3/31/2007 $707,135 $560,967
4/30/2007 $745,108 $586,379
5/31/2007 $777,073 $597,462
6/30/2007 $793,547 $597,760
7/31/2007 $815,687 $589,033
8/31/2007 $797,334 $579,962
9/30/2007 $861,918 $611,106
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
International Growth Fund Class I 38.04% 23.77% 9..15%
- --------------------------------------------------------------------------------
MSCI EAFE Index 25.38% 24.05% 8..35%
- --------------------------------------------------------------------------------
30
<Page>
[CHART]
<Table>
<Caption>
INTERNATIONAL GROWTH FUND
CLASS II SHARES MSCI EAFE INDEX
12/27/1996 $250,000 $250,000
12/31/1996 $252,475 $252,250
1/31/1997 $274,682 $243,422
2/28/1997 $277,282 $247,403
3/31/1997 $282,684 $248,299
4/30/1997 $286,685 $249,617
5/31/1997 $313,293 $265,860
6/30/1997 $331,298 $280,522
7/31/1997 $352,505 $285,060
8/31/1997 $334,099 $263,770
9/30/1997 $358,707 $278,546
10/31/1997 $328,898 $257,136
11/30/1997 $325,228 $254,515
12/31/1997 $329,820 $256,735
1/31/1998 $341,928 $268,476
2/28/1998 $365,307 $285,703
3/31/1998 $387,017 $294,500
4/30/1998 $398,289 $296,831
5/31/1998 $408,101 $295,391
6/30/1998 $412,902 $297,627
7/31/1998 $431,271 $300,644
8/31/1998 $369,482 $263,398
9/30/1998 $351,948 $255,322
10/31/1998 $358,419 $281,937
11/30/1998 $379,975 $296,381
12/31/1998 $400,853 $308,074
1/31/1999 $416,302 $307,164
2/28/1999 $399,183 $299,843
3/31/1999 $411,918 $312,359
4/30/1999 $426,950 $325,016
5/31/1999 $410,457 $308,278
6/30/1999 $442,817 $320,297
7/31/1999 $457,431 $329,817
8/31/1999 $464,530 $331,022
9/30/1999 $471,628 $334,354
10/31/1999 $502,527 $346,877
11/30/1999 $567,666 $358,929
12/31/1999 $677,711 $391,144
1/31/2000 $629,452 $366,291
2/29/2000 $705,914 $376,151
3/31/2000 $666,012 $390,732
4/30/2000 $611,068 $370,171
5/31/2000 $578,686 $361,130
6/30/2000 $609,814 $375,253
7/31/2000 $582,865 $359,521
8/31/2000 $606,263 $362,641
9/30/2000 $566,987 $344,984
10/31/2000 $531,055 $336,835
11/30/2000 $505,070 $324,203
12/31/2000 $521,270 $335,726
1/31/2001 $505,514 $335,553
2/28/2001 $463,129 $310,398
3/31/2001 $426,292 $289,706
4/30/2001 $455,806 $309,838
5/31/2001 $441,160 $298,903
6/30/2001 $423,407 $286,679
7/31/2001 $413,199 $281,463
8/31/2001 $396,112 $274,342
9/30/2001 $364,378 $246,551
10/31/2001 $363,935 $252,863
11/30/2001 $371,258 $262,194
12/31/2001 $375,474 $263,741
1/31/2002 $358,831 $249,736
2/28/2002 $361,272 $251,484
3/31/2002 $381,022 $265,089
4/30/2002 $379,246 $266,839
5/31/2002 $378,803 $270,228
6/30/2002 $365,932 $259,473
7/31/2002 $331,314 $233,863
8/31/2002 $328,207 $233,325
9/30/2002 $296,474 $208,266
10/31/2002 $306,903 $219,450
11/30/2002 $315,336 $229,413
12/31/2002 $303,353 $221,705
1/31/2003 $292,701 $212,459
2/28/2003 $288,485 $207,594
3/31/2003 $284,712 $203,671
4/30/2003 $309,788 $223,875
5/31/2003 $329,316 $237,643
6/30/2003 $335,086 $243,513
7/31/2003 $339,302 $249,455
8/31/2003 $352,839 $255,516
9/30/2003 $352,617 $263,437
10/31/2003 $377,915 $279,876
11/30/2003 $380,884 $286,145
12/31/2003 $405,580 $308,522
1/31/2004 $415,146 $312,903
2/29/2004 $420,263 $320,193
3/31/2004 $424,268 $322,114
4/30/2004 $408,694 $315,092
5/31/2004 $408,472 $316,447
6/30/2004 $414,034 $323,504
7/31/2004 $392,231 $313,055
8/30/2004 $393,343 $314,495
9/30/2004 $404,467 $322,766
10/31/2004 $418,947 $333,805
11/30/2004 $449,153 $356,704
12/31/2004 $466,401 $372,363
1/31/2005 $462,763 $365,549
2/28/2005 $485,716 $381,413
3/31/2005 $465,024 $371,992
4/30/2005 $454,561 $363,660
5/31/2005 $460,243 $364,205
6/30/2005 $468,666 $369,195
7/31/2005 $489,568 $380,529
8/31/2005 $494,121 $390,271
9/30/2005 $526,832 $407,716
10/31/2005 $507,286 $395,851
11/30/2005 $531,332 $405,629
12/31/2005 $575,432 $424,531
1/31/2006 $619,511 $450,640
2/28/2006 $600,863 $449,739
3/31/2006 $621,954 $464,760
4/30/2006 $648,262 $487,301
5/31/2006 $614,034 $468,978
6/30/2006 $608,016 $469,166
7/31/2006 $608,016 $473,857
8/31/2006 $625,831 $487,031
9/30/2006 $625,831 $487,859
10/31/2006 $647,485 $506,885
11/30/2006 $671,442 $522,193
12/31/2006 $698,770 $538,642
1/31/2007 $689,546 $542,305
2/28/2007 $689,891 $546,752
3/31/2007 $710,242 $560,967
4/30/2007 $748,667 $586,379
5/31/2007 $781,084 $597,462
6/30/2007 $797,565 $597,760
7/31/2007 $820,056 $589,033
8/31/2007 $801,933 $579,962
9/30/2007 $866,809 $611,106
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
International Growth Fund Class II 38.51% 23.93% 9.22%
- --------------------------------------------------------------------------------
MSCI EAFE Index 25.38% 24.05% 8.35%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I AND II SHARES COMPARED WITH THE MORGAN STANLEY CAPITAL
INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST INDEX ("MSCI EAFE") OVER THE PERIODS
INDICATED. THE FUND'S CLASS I AND II SHARES CALCULATE THEIR PERFORMANCE BASED
UPON THE HISTORICAL PERFORMANCE OF THEIR CORRESPONDING SERIES OF
NICHOLAS-APPLEGATE MUTUAL FUNDS (RENAMED ING MUTUAL FUNDS), ADJUSTED TO REFLECT
ALL FEES AND EXPENSES APPLICABLE TO THE FUND'S CLASS I AND II SHARES. THE
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS' CLASS I SHARES WERE FIRST AVAILABLE ON
MAY 7, 1999 AND CLASS II SHARES ON JANUARY 23, 2006. THE HISTORICAL PERFORMANCE
OF CLASS II SHARES INCLUDES THE PERFORMANCE OF CLASS I SHARES FOR PERIODS PRIOR
TO THE INCEPTION OF CLASS II SHARES. AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE
CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN
DISTRIBUTIONS. THE TOTAL RETURNS SHOWN ABOVE DO NOT SHOW THE EFFECTS OF INCOME
TAXES ON AN INDIVIDUAL'S INVESTMENT. IN MOST CASES, TAXES MAY REDUCE YOUR ACTUAL
INVESTMENT RETURNS ON INCOME OR GAINS PAID BY THE FUND OR ANY GAINS YOU MAY
REALIZE IF YOU SELL YOUR SHARES. PAST PERFORMANCE CANNOT GUARANTEE FUTURE
RESULTS.
THE MSCI EAFE INDEX IS AN UNMANAGED INDEX OF OVER 900 COMPANIES, AND IS A
GENERALLY ACCEPTED BENCHMARK FOR MAJOR OVERSEAS MARKETS. INDEX WEIGHTINGS
REPRESENT THE RELATIVE CAPITALIZATIONS OF THE MAJOR OVERSEAS MARKETS INCLUDED IN
THE INDEX ON A U.S. DOLLAR ADJUSTED BASIS. THE UNMANAGED INDEX DIFFERS FROM THE
FUND IN COMPOSITION, DOES NOT PAY MANAGEMENT FEES OR EXPENSES AND INCLUDES
REINVESTED DIVIDENDS. ONE CANNOT INVEST DIRECTLY IN AN INDEX.
SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE WITH MARKET CONDITIONS, CURRENCY VOLATILITY AND THE SOCIAL,
ECONOMIC AND POLITICAL CLIMATES OF COUNTRIES WHERE THE FUND INVESTS. YOU MAY
HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
31
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 89.0%
AUSTRALIA - 6.1%
AMP, Ltd. 20,175 $ 188,180
CSL, Ltd. 4,845 460,058
Incitec Pivot, Ltd. 5,513 417,326
Rio Tinto, Ltd. 2,619 250,820
-----------
1,316,384
-----------
BELGIUM - 1.1%
InBev NV 2,667 241,075
-----------
BRAZIL - 1.4%
Cia Vale do Rio Doce - ADR 6,800 230,724
Unibanco - Uniao de Bancos Brasileiros SA - GDR 500 65,775
-----------
296,499
-----------
CANADA - 3.9%
Inmet Mining Corp. 1,800 180,688
Rogers Communications, Inc. Cl. B 9,800 446,557
Teck Cominco, Ltd. Cl. B 4,600 218,589
-----------
845,834
-----------
DENMARK - 2.2%
FLSmidth & Co. AS Cl. B 3,400 360,670
Novo Nordisk AS Cl. B* 900 108,350
-----------
469,020
-----------
EGYPT - 0.5%
Orascom Construction Industries - GDR 698 118,137
-----------
FINLAND - 3.3%
Nokia OYJ 5,812 220,359
Outotec OYJ 4,280 301,297
Wartsila OYJ Cl. B* 2,692 183,956
-----------
705,612
-----------
FRANCE - 7.6%
Alstom 2,665 540,345
Cie Generale de Geophysique-Veritas* 819 266,900
Neopost SA 1,235 173,739
Total SA 2,280 184,887
Veolia Environnement 5,636 484,040
-----------
1,649,911
-----------
GERMANY - 9.1%
E.ON AG 1,259 232,155
IVG Immobilien AG 3,712 137,994
Rhoen Klinikum AG 3,543 113,118
RWE AG 1,817 227,913
SAP AG 3,820 223,009
Siemens AG* 2,336 320,321
Solarworld AG 4,233 243,026
Stada Arzneimittel AG 3,602 234,256
United Internet AG 10,500 235,785
-----------
1,967,577
-----------
GREECE - 1.9%
National Bank of Greece SA 3,214 204,314
Piraeus Bank SA 5,800 206,707
-----------
411,021
-----------
HONG KONG - 2.2%
Kerry Properties, Ltd. 20,000 154,210
Pacific Basin Shipping, Ltd. 94,200 195,708
Sun Hung Kai Properties, Ltd. 7,000 118,039
-----------
467,957
-----------
ITALY - 2.4%
Saipem SpA 4,874 207,392
UniCredito Italiano SpA 35,527 303,148
-----------
510,540
-----------
JAPAN - 17.6%
Chugai Pharmaceutical Co., Ltd. 14,900 245,753
East Japan Railway Co. 33 259,949
Fanuc, Ltd.* 1,000 101,813
Honda Motor Co., Ltd. 4,300 144,312
Japan Tobacco, Inc. 63 345,633
KDDI Corp. 33 244,455
Komatsu, Ltd. 5,600 187,941
Mitsubishi Corp. 7,900 250,020
Mitsubishi Electric Corp. 13,300 166,517
Mitsubishi Estate Co., Ltd. 3,300 94,396
Mitsui Engineering & Shipbuilding Co., Ltd. 19,000 107,542
Nintendo Co., Ltd. 100 51,993
Nitori Co., Ltd. 1,550 73,177
Nomura Holdings, Inc. 8,800 147,362
Secom Co., Ltd. 2,000 96,161
Sumitomo Heavy Industries, Ltd. 12,000 154,310
The Japan Steel Works, Ltd. 23,000 381,350
Tokuyama Corp. 8,000 121,236
Tokyu Land Corp. 11,000 110,273
Toyo Tanso Co., Ltd. 3,600 362,770
Toyota Motor Corp.* 2,700 159,162
-----------
3,806,125
-----------
MEXICO - 0.3%
America Movil SAB de CV - ADR 1,200 76,800
-----------
NETHERLANDS - 3.5%
Koninklijke BAM Groep NV 7,208 191,589
Koninklijke Philips Electronics NV* 4,500 202,230
Royal KPN NV 9,062 156,841
SBM Offshore NV 5,028 197,141
-----------
747,801
-----------
NORWAY - 1.1%
Renewable Energy Corp. AS* 5,400 247,480
-----------
PERU - 0.2%
Credicorp, Ltd. 800 54,160
-----------
REPUBLIC OF CHINA - 1.2%
China Coal Energy Co. 52,400 155,811
China Communications Construction Co., Ltd. 43,000 102,288
-----------
258,099
-----------
SINGAPORE - 2.4%
City Developments, Ltd. 21,600 235,724
DBS Group Holdings, Ltd. 19,100 277,921
-----------
513,645
-----------
SOUTH KOREA - 0.5%
Samsung Heavy Industries Co., Ltd.* 1,980 105,258
-----------
SPAIN - 1.2%
Iberdrola SA* 1,715 100,486
Telefonica SA 6,009 167,752
-----------
268,238
-----------
SWEDEN - 0.9%
Assa Abloy AB Cl. B 4,600 95,107
Telefonaktiebolaget LM Ericsson - ADR 2,300 91,540
-----------
186,647
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
SWITZERLAND - 6.0%
ABB, Ltd. 12,607 $ 330,877
Julius Baer Holding AG 2,475 184,428
Nestle SA 506 226,535
Roche Holding AG* 1,396 252,265
Swatch Group AG 3,314 211,487
Syngenta AG* 480 103,133
-----------
1,308,725
-----------
UNITED KINGDOM - 12.4%
BP PLC 17,509 202,439
British American Tobacco PLC 7,107 253,680
BT Group PLC 32,183 201,294
Burberry Group PLC 13,528 181,078
Imperial Tobacco Group PLC 3,932 179,523
International Power PLC 44,027 404,764
Reckitt Benckiser PLC 3,566 208,656
Royal Dutch Shell PLC Cl. A 5,003 205,590
Southern Cross Healthcare, Ltd. 12,097 125,694
Standard Chartered PLC 6,448 210,189
Unilever PLC 7,395 232,773
Vodafone Group PLC 75,012 269,737
-----------
2,675,417
- --------------------------------------------------------------------------------
Total Common Stock (Cost: $14,849,694) 19,247,962
- --------------------------------------------------------------------------------
PREFERRED STOCK - 3.2%
BRAZIL - 0.8%
Usinas Siderurgicas de Minas Gerais SA 2,500 173,913
- --------------------------------------------------------------------------------
GERMANY - 2.4%
Fresenius SE 3,715 288,309
Henkel KGaA 4,611 236,661
-----------
524,970
- --------------------------------------------------------------------------------
Total Preferred Stock (Cost: $671,832) 698,883
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 5.4%
TIME DEPOSITS - 5.4%
Citibank Nassau 4.370%, 10/01/07 (Cost: $1,155,952) $1,155,952 1,155,952
- --------------------------------------------------------------------------------
Total Investments - 97.6% (Cost: $16,677,478) 21,102,797
- --------------------------------------------------------------------------------
Other Assets in Excess of Liabilities - 2.4% 521,570
- --------------------------------------------------------------------------------
Net Assets - 100.0% $21,624,367
- --------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
ADR - AMERICAN DEPOSITORY RECEIPT
GDR - GLOBAL DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------
Industrial 22.1%
Consumer, Non-cyclical 17.8
Financial 12.4
Communications 9.8
Energy 8.8
Basic Materials 7.8
Utilities 6.7
Consumer, Cyclical 5.0
Technology 1.8
Short Term Investments 5.4
- --------------------------------------------------
Total Investments 97.6
Other assets in excess of liabilities 2.4
- --------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
<Page>
INTERNATIONAL GROWTH OPPORTUNITIES FUND
MANAGEMENT TEAM: CHRISTOPHER A. HERRERA, Portfolio Manager; NELSON W. SHING,
Portfolio Manager; TODD R. BUECHS, Analyst; GREGORY ISE, Analyst; ALAN Trice,
Analyst
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The International Growth Opportunities Fund seeks to maximize long-term
capital appreciation through investments primarily in companies located outside
the United States with market capitalizations predominantly in the bottom 20% of
publicly traded companies as measured by the market capitalization in the
Citigroup World BMI xUS.
MARKET OVERVIEW: International small-cap stocks, as measured by the Citigroup
World EMI xUS, generated positive returns during the six months ended September
30, 2007. Performance was flat in local currencies; however, a decline in the
U.S. dollar relative to a broad basket of currencies enhanced returns for
U.S.-based investors. The environment was volatile and characterized by:
- Healthy gains in the index in April and May, fueled by a robust pace
of mergers and acquisitions and strong macroeconomic data out of
Europe
- Falling stock prices over the summer, as the prolonged U.S. housing
downturn, tighter credit market conditions and high commodity prices
threatened global growth
- Rebound in September in response to the Federal Reserve's decision to
cut the fed funds target rate by 0.50%.
Within the Citigroup World EMI xUS, returns in U.S. dollar terms were positive
in the majority of countries. Australia, a leading global commodity producer,
turned in some of the best results. Japanese stocks declined, as the economy
continued to suffer from weak consumer and capital spending.
PERFORMANCE: The Fund's Class I shares gained 19.39% from April 1 through
September 30, 2007. This compared favorably to the 5.89% advance in the
Citigroup World EMI xUS Growth, the Fund's primary benchmark, and the 5.49%
increase in the Citigroup World EMI xUS.
PORTFOLIO SPECIFICS: Consistent with our bottom-up investment approach, the
Fund's strong performance versus the indexes was driven by stock selection. From
a country perspective, stock selection was strongest in China, Japan and Norway.
In terms of sectors, stock selection added the most value among industrials,
materials and consumer discretionary companies. Two of the portfolio's
best-performing holdings were Norway-based Golden Ocean Group, a commodities
shipper, and China Hongxing Sports, a manufacturer of athletic shoes and
accessories. Golden Ocean Group advanced on favorable industry conditions caused
by high global demand for raw materials and a low supply of ships. China
Hongxing Sports benefited from rising disposable incomes and a growing interest
in sports in China.
While the Fund outperformed the indexes by a wide margin, there were pockets of
relative weakness. For example, stock selection in Germany and the
telecommunication services sector detracted.
MARKET OUTLOOK: Our outlook for international small-cap stocks is positive.
Demand for equities quickened in September, as intervention by the Federal
Reserve provided investors with enough comfort to bid stock prices higher.
Issues in the credit markets still remain but have receded, and the outlook for
corporate earnings continues to be strong, with the exception of financials.
Economic activity outside the United States is robust, particularly in
developing markets, and early signs point to a U.S. slowdown rather than a
recession.
Against this backdrop, we are confident that our research-intensive investment
process will continue to uncover stocks for the Fund that are poised to exceed
earnings expectations.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN INTERNATIONAL GROWTH
OPPORTUNITIES FUND CLASS I, II, AND III SHARES WITH THE CITIGROUP WORLD EMI XUS
GROWTH INDEX AND THE CITIGROUP WORLD EMI XUS INDEX.
[CHART]
<Table>
<Caption>
INTERNATIONAL GROWTH CITIGROUP WORLD CITIGROUP WORLD
OPPORTUNITIES FUND EMI XUS EMI XUS
CLASS I SHARES GROWTH INDEX INDEX
12/31/1997 $250,000 $250,000 $250,000
1/31/1998 $255,925 $260,950 $260,425
2/28/1998 $282,388 $279,295 $279,853
3/31/1998 $312,914 $292,170 $293,006
4/30/1998 $329,717 $294,595 $295,233
5/31/1998 $337,861 $300,752 $300,724
6/30/1998 $338,706 $293,414 $291,943
7/31/1998 $345,785 $292,622 $289,928
8/31/1998 $291,151 $255,547 $254,354
9/30/1998 $287,162 $247,982 $247,716
10/31/1998 $298,562 $264,572 $265,229
11/30/1998 $319,342 $274,626 $273,743
12/31/1998 $340,834 $282,892 $280,367
1/31/1999 $367,760 $284,844 $279,498
2/28/1999 $360,773 $279,034 $274,076
3/31/1999 $369,179 $289,274 $284,381
4/30/1999 $391,219 $303,015 $299,795
5/31/1999 $376,000 $295,136 $291,940
6/30/1999 $417,586 $306,174 $301,895
7/31/1999 $453,582 $318,023 $313,186
8/31/1999 $483,110 $324,829 $318,041
9/30/1999 $497,458 $325,771 $317,277
10/31/1999 $531,385 $325,966 $314,105
11/30/1999 $653,072 $350,121 $324,815
12/31/1999 $777,547 $383,347 $346,253
1/31/2000 $801,962 $376,485 $337,701
2/29/2000 $1,013,680 $408,712 $351,851
3/31/2000 $900,047 $400,293 $353,293
4/30/2000 $807,882 $371,992 $331,707
5/31/2000 $756,016 $357,782 $325,968
6/30/2000 $815,288 $378,891 $347,091
7/31/2000 $792,215 $365,630 $335,186
8/31/2000 $830,717 $380,986 $345,510
9/30/2000 $779,046 $357,784 $328,822
10/31/2000 $718,904 $328,983 $310,671
11/30/2000 $649,601 $300,394 $297,902
12/31/2000 $683,121 $310,427 $310,533
1/31/2001 $669,322 $314,090 $313,576
2/28/2001 $626,820 $290,533 $301,253
3/31/2001 $559,750 $262,933 $277,424
4/30/2001 $593,727 $283,100 $297,232
5/31/2001 $589,571 $280,297 $296,518
6/30/2001 $560,210 $264,460 $285,873
7/31/2001 $546,205 $254,860 $278,383
8/31/2001 $525,067 $249,891 $277,465
9/30/2001 $471,090 $217,255 $241,838
10/31/2001 $488,520 $230,029 $251,802
11/30/2001 $497,949 $239,599 $261,371
12/31/2001 $504,820 $239,934 $261,789
1/31/2002 $491,291 $232,160 $255,820
2/28/2002 $494,976 $233,275 $260,604
3/31/2002 $521,606 $249,441 $277,543
4/30/2002 $524,109 $250,937 $283,149
5/31/2002 $534,434 $257,788 $293,711
6/30/2002 $509,423 $245,414 $283,108
7/31/2002 $466,478 $222,762 $258,364
8/31/2002 $461,441 $220,713 $256,582
9/30/2002 $418,988 $200,209 $233,233
10/31/2002 $420,371 $205,194 $237,571
11/30/2002 $432,772 $213,340 $246,171
12/31/2002 $427,016 $208,561 $242,724
1/31/2003 $411,643 $202,576 $237,239
2/28/2003 $404,975 $198,747 $233,396
3/31/2003 $399,224 $197,177 $231,552
4/30/2003 $432,280 $216,382 $254,244
5/31/2003 $470,147 $235,250 $275,880
6/30/2003 $479,785 $242,120 $285,260
7/31/2003 $495,618 $248,754 $294,788
8/31/2003 $523,868 $258,903 $308,495
9/30/2003 $533,036 $272,107 $322,840
10/31/2003 $590,178 $291,835 $346,085
11/30/2003 $598,204 $296,037 $351,830
12/31/2003 $633,079 $313,177 $373,115
1/31/2004 $655,111 $323,387 $386,025
2/29/2004 $669,130 $333,962 $398,224
3/31/2004 $675,554 $342,378 $408,259
4/30/2004 $656,706 $332,175 $396,501
5/31/2004 $655,130 $334,666 $397,889
6/30/2004 $680,811 $344,070 $411,815
7/31/2004 $648,676 $328,828 $395,754
8/30/2004 $648,936 $330,834 $398,603
9/30/2004 $673,271 $342,214 $412,116
10/31/2004 $689,362 $352,686 $425,098
11/30/2004 $746,234 $377,797 $458,383
12/31/2004 $778,024 $395,252 $480,340
1/31/2005 $780,592 $398,690 $486,152
2/28/2005 $825,007 $416,273 $509,049
3/31/2005 $805,867 $406,990 $498,359
4/30/2005 $778,951 $394,861 $482,511
5/31/2005 $787,675 $396,836 $485,503
6/30/2005 $805,162 $405,765 $495,456
7/31/2005 $830,685 $420,818 $513,986
8/31/2005 $848,877 $434,032 $529,406
9/30/2005 $902,781 $449,180 $550,052
10/31/2005 $861,524 $432,695 $531,681
11/30/2005 $912,095 $450,435 $551,991
12/31/2005 $997,376 $479,984 $586,545
1/31/2006 $1,071,082 $516,703 $630,712
2/28/2006 $1,082,007 $512,879 $630,271
3/31/2006 $1,155,476 $535,959 $657,625
4/30/2006 $1,235,666 $564,633 $691,689
5/31/2006 $1,162,885 $538,547 $660,909
6/30/2006 $1,116,835 $530,522 $651,194
7/31/2006 $1,100,864 $524,793 $646,701
8/31/2006 $1,122,441 $541,848 $668,171
9/30/2006 $1,126,370 $545,262 $673,650
10/31/2006 $1,165,567 $567,727 $702,011
11/30/2006 $1,222,097 $592,593 $733,461
12/31/2006 $1,289,313 $613,275 $759,132
1/31/2007 $1,292,407 $618,426 $767,786
2/28/2007 $1,314,378 $627,455 $779,533
3/31/2007 $1,371,816 $651,926 $809,779
4/30/2007 $1,452,205 $680,872 $847,515
5/31/2007 $1,548,631 $697,144 $865,652
6/30/2007 $1,594,780 $690,243 $857,515
7/31/2007 $1,620,775 $689,138 $857,086
8/31/2007 $1,528,229 $662,813 $825,288
9/30/2007 $1,637,803 $690,254 $854,338
</Table>
Annualized Total Returns As of 9/30/07
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
International Growth Opportunities
Fund Class I 45.40% 31.31% 21.25%
- --------------------------------------------------------------------------------
Citigroup World EMI xUS Growth Index 26.60% 28.08% 10.98%
- --------------------------------------------------------------------------------
Citigroup World EMI xUS Index 26.82% 29.65% 13.43%
- --------------------------------------------------------------------------------
34
<Page>
[CHART]
<Table>
<Caption>
INTERNATIONAL GROWTH CITIGROUP WORLD
OPPORTUNITIES FUND EMI XUS CITIGROUP WORLD
CLASS II SHARES GROWTH INDEX EMI XUS
12/31/1997 $250,000 $250,000 $250,000
1/31/1998 $255,925 $260,950 $260,425
2/28/1998 $282,388 $279,295 $279,853
3/31/1998 $312,914 $292,170 $293,006
4/30/1998 $329,717 $294,595 $295,233
5/31/1998 $337,861 $300,752 $300,724
6/30/1998 $338,706 $293,414 $291,943
7/31/1998 $345,785 $292,622 $289,928
8/31/1998 $291,151 $255,547 $254,354
9/30/1998 $287,162 $247,982 $247,716
10/31/1998 $298,562 $264,572 $265,229
11/30/1998 $319,342 $274,626 $273,743
12/31/1998 $340,834 $282,892 $280,367
1/31/1999 $367,760 $284,844 $279,498
2/28/1999 $360,773 $279,034 $274,076
3/31/1999 $369,179 $289,274 $284,381
4/30/1999 $391,219 $303,015 $299,795
5/31/1999 $376,000 $295,136 $291,940
6/30/1999 $417,586 $306,174 $301,895
7/31/1999 $453,582 $318,023 $313,186
8/31/1999 $483,110 $324,829 $318,041
9/30/1999 $497,458 $325,771 $317,277
10/31/1999 $531,385 $325,966 $314,105
11/30/1999 $653,072 $350,121 $324,815
12/31/1999 $777,547 $383,347 $346,253
1/31/2000 $801,962 $376,485 $337,701
2/29/2000 $1,013,680 $408,712 $351,851
3/31/2000 $900,047 $400,293 $353,293
4/30/2000 $807,882 $371,992 $331,707
5/31/2000 $756,016 $357,782 $325,968
6/30/2000 $815,288 $378,891 $347,091
7/31/2000 $792,215 $365,630 $335,186
8/31/2000 $830,717 $380,986 $345,510
9/30/2000 $779,046 $357,784 $328,822
10/31/2000 $718,904 $328,983 $310,671
11/30/2000 $649,601 $300,394 $297,902
12/31/2000 $683,121 $310,427 $310,533
1/31/2001 $669,322 $314,090 $313,576
2/28/2001 $626,820 $290,533 $301,253
3/31/2001 $559,750 $262,933 $277,424
4/30/2001 $593,727 $283,100 $297,232
5/31/2001 $589,571 $280,297 $296,518
6/30/2001 $560,210 $264,460 $285,873
7/31/2001 $546,205 $254,860 $278,383
8/31/2001 $525,067 $249,891 $277,465
9/30/2001 $471,090 $217,255 $241,838
10/31/2001 $488,520 $230,029 $251,802
11/30/2001 $497,949 $239,599 $261,371
12/31/2001 $504,820 $239,934 $261,789
1/31/2002 $491,291 $232,160 $255,820
2/28/2002 $494,976 $233,275 $260,604
3/31/2002 $521,606 $249,441 $277,543
4/30/2002 $524,109 $250,937 $283,149
5/31/2002 $534,434 $257,788 $293,711
6/30/2002 $509,423 $245,414 $283,108
7/31/2002 $466,478 $222,762 $258,364
8/31/2002 $461,441 $220,713 $256,582
9/30/2002 $418,988 $200,209 $233,233
10/31/2002 $420,371 $205,194 $237,571
11/30/2002 $432,772 $213,340 $246,171
12/31/2002 $427,016 $208,561 $242,724
1/31/2003 $411,643 $202,576 $237,239
2/28/2003 $404,975 $198,747 $233,396
3/31/2003 $399,224 $197,177 $231,552
4/30/2003 $432,280 $216,382 $254,244
5/31/2003 $470,147 $235,250 $275,880
6/30/2003 $479,785 $242,120 $285,260
7/31/2003 $495,618 $248,754 $294,788
8/31/2003 $524,067 $258,903 $308,495
9/30/2003 $533,238 $272,107 $322,840
10/31/2003 $590,614 $291,835 $346,085
11/30/2003 $598,647 $296,037 $351,830
12/31/2003 $633,787 $313,177 $373,115
1/31/2004 $655,843 $323,387 $386,025
2/29/2004 $670,075 $333,962 $398,224
3/31/2004 $676,508 $342,378 $408,259
4/30/2004 $657,430 $332,175 $396,501
5/31/2004 $656,049 $334,666 $397,889
6/30/2004 $681,963 $344,070 $411,815
7/31/2004 $649,843 $328,828 $395,754
8/30/2004 $650,103 $330,834 $398,603
9/30/2004 $674,417 $342,214 $412,116
10/31/2004 $690,940 $352,686 $425,098
11/30/2004 $747,942 $377,797 $458,383
12/31/2004 $779,805 $395,252 $480,340
1/31/2005 $782,378 $398,690 $486,152
2/28/2005 $827,130 $416,273 $509,049
3/31/2005 $808,023 $406,990 $498,359
4/30/2005 $780,793 $394,861 $482,511
5/31/2005 $789,772 $396,836 $485,503
6/30/2005 $807,305 $405,765 $495,456
7/31/2005 $832,897 $420,818 $513,986
8/31/2005 $851,387 $434,032 $529,406
9/30/2005 $905,620 $449,180 $550,052
10/31/2005 $864,324 $432,695 $531,681
11/30/2005 $915,060 $450,435 $551,991
12/31/2005 $1,000,801 $479,984 $586,545
1/31/2006 $1,074,760 $516,703 $630,712
2/28/2006 $1,085,615 $512,879 $630,271
3/31/2006 $1,159,546 $535,959 $657,625
4/30/2006 $1,240,250 $564,633 $691,689
5/31/2006 $1,167,447 $538,547 $660,909
6/30/2006 $1,121,333 $530,522 $651,194
7/31/2006 $1,105,298 $524,793 $646,701
8/31/2006 $1,126,851 $541,848 $668,171
9/30/2006 $1,131,021 $545,262 $673,650
10/31/2006 $1,170,607 $567,727 $702,011
11/30/2006 $1,227,381 $592,593 $733,461
12/31/2006 $1,295,132 $613,275 $759,132
1/31/2007 $1,298,241 $618,426 $767,786
2/28/2007 $1,320,441 $627,455 $779,533
3/31/2007 $1,378,540 $651,926 $809,779
4/30/2007 $1,459,460 $680,872 $847,515
5/31/2007 $1,556,806 $697,144 $865,652
6/30/2007 $1,603,199 $690,243 $857,515
7/31/2007 $1,629,812 $689,138 $857,086
8/31/2007 $1,537,076 $662,813 $825,288
9/30/2007 $1,647,131 $690,254 $854,338
</Table>
Annualized Total Returns As of 9/30/07
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
International Growth Opportunities
Fund Class II 45.63% 31.49% 21.33%
- --------------------------------------------------------------------------------
Citigroup World EMI xUS Growth Index 26.60% 28.08% 10.98%
- --------------------------------------------------------------------------------
Citigroup World EMI xUS Index 26.82% 29.65% 13.43%
- --------------------------------------------------------------------------------
[CHART]
<Table>
<Caption>
INTERNATIONAL GROWTH CITIGROUP WORLD
OPPORTUNITIES FUND EMI XUS CITIGROUP WORLD
CLASS III SHARES GROWTH INDEX EMI XUS
12/31/1997 $250,000 $250,000 $250,000
1/31/1998 $255,925 $260,950 $260,425
2/28/1998 $282,388 $279,295 $279,853
3/31/1998 $312,914 $292,170 $293,006
4/30/1998 $329,717 $294,595 $295,233
5/31/1998 $337,861 $300,752 $300,724
6/30/1998 $338,706 $293,414 $291,943
7/31/1998 $345,785 $292,622 $289,928
8/31/1998 $291,151 $255,547 $254,354
9/30/1998 $287,162 $247,982 $247,716
10/31/1998 $298,562 $264,572 $265,229
11/30/1998 $319,342 $274,626 $273,743
12/31/1998 $340,834 $282,892 $280,367
1/31/1999 $367,760 $284,844 $279,498
2/28/1999 $360,773 $279,034 $274,076
3/31/1999 $369,179 $289,274 $284,381
4/30/1999 $391,219 $303,015 $299,795
5/31/1999 $376,000 $295,136 $291,940
6/30/1999 $417,586 $306,174 $301,895
7/31/1999 $453,582 $318,023 $313,186
8/31/1999 $483,110 $324,829 $318,041
9/30/1999 $497,458 $325,771 $317,277
10/31/1999 $531,385 $325,966 $314,105
11/30/1999 $653,072 $350,121 $324,815
12/31/1999 $777,547 $383,347 $346,253
1/31/2000 $801,962 $376,485 $337,701
2/29/2000 $1,013,680 $408,712 $351,851
3/31/2000 $900,047 $400,293 $353,293
4/30/2000 $807,882 $371,992 $331,707
5/31/2000 $756,016 $357,782 $325,968
6/30/2000 $815,288 $378,891 $347,091
7/31/2000 $792,215 $365,630 $335,186
8/31/2000 $830,717 $380,986 $345,510
9/30/2000 $779,046 $357,784 $328,822
10/31/2000 $718,904 $328,983 $310,671
11/30/2000 $649,601 $300,394 $297,902
12/31/2000 $683,121 $310,427 $310,533
1/31/2001 $669,322 $314,090 $313,576
2/28/2001 $626,820 $290,533 $301,253
3/31/2001 $559,750 $262,933 $277,424
4/30/2001 $593,727 $283,100 $297,232
5/31/2001 $589,571 $280,297 $296,518
6/30/2001 $560,210 $264,460 $285,873
7/31/2001 $546,205 $254,860 $278,383
8/31/2001 $525,067 $249,891 $277,465
9/30/2001 $471,090 $217,255 $241,838
10/31/2001 $488,520 $230,029 $251,802
11/30/2001 $497,949 $239,599 $261,371
12/31/2001 $504,820 $239,934 $261,789
1/31/2002 $491,291 $232,160 $255,820
2/28/2002 $494,976 $233,275 $260,604
3/31/2002 $521,606 $249,441 $277,543
4/30/2002 $524,109 $250,937 $283,149
5/31/2002 $534,434 $257,788 $293,711
6/30/2002 $509,423 $245,414 $283,108
7/31/2002 $466,478 $222,762 $258,364
8/31/2002 $461,441 $220,713 $256,582
9/30/2002 $418,988 $200,209 $233,233
10/31/2002 $420,371 $205,194 $237,571
11/30/2002 $432,772 $213,340 $246,171
12/31/2002 $427,016 $208,561 $242,724
1/31/2003 $411,643 $202,576 $237,239
2/28/2003 $404,975 $198,747 $233,396
3/31/2003 $399,224 $197,177 $231,552
4/30/2003 $432,280 $216,382 $254,244
5/31/2003 $470,147 $235,250 $275,880
6/30/2003 $479,785 $242,120 $285,260
7/31/2003 $495,618 $248,754 $294,788
8/31/2003 $523,868 $258,903 $308,495
9/30/2003 $533,036 $272,107 $322,840
10/31/2003 $590,178 $291,835 $346,085
11/30/2003 $598,204 $296,037 $351,830
12/31/2003 $633,079 $313,177 $373,115
1/31/2004 $655,111 $323,387 $386,025
2/29/2004 $669,130 $333,962 $398,224
3/31/2004 $675,554 $342,378 $408,259
4/30/2004 $656,706 $332,175 $396,501
5/31/2004 $655,130 $334,666 $397,889
6/30/2004 $680,811 $344,070 $411,815
7/31/2004 $648,676 $328,828 $395,754
8/30/2004 $648,936 $330,834 $398,603
9/30/2004 $673,271 $342,214 $412,116
10/31/2004 $689,362 $352,686 $425,098
11/30/2004 $746,234 $377,797 $458,383
12/31/2004 $778,024 $395,252 $480,340
1/31/2005 $780,592 $398,690 $486,152
2/28/2005 $825,007 $416,273 $509,049
3/31/2005 $805,867 $406,990 $498,359
4/30/2005 $778,951 $394,861 $482,511
5/31/2005 $787,675 $396,836 $485,503
6/30/2005 $805,162 $405,765 $495,456
7/31/2005 $830,685 $420,818 $513,986
8/31/2005 $848,877 $434,032 $529,406
9/30/2005 $902,781 $449,180 $550,052
10/31/2005 $861,614 $432,695 $531,681
11/30/2005 $912,191 $450,435 $551,991
12/31/2005 $997,754 $479,984 $586,545
1/31/2006 $1,071,688 $516,703 $630,712
2/28/2006 $1,082,619 $512,879 $630,271
3/31/2006 $1,156,129 $535,959 $657,625
4/30/2006 $1,236,827 $564,633 $691,689
5/31/2006 $1,164,225 $538,547 $660,909
6/30/2006 $1,118,355 $530,522 $651,194
7/31/2006 $1,102,362 $524,793 $646,701
8/31/2006 $1,124,189 $541,848 $668,171
9/30/2006 $1,128,349 $545,262 $673,650
10/31/2006 $1,167,954 $567,727 $702,011
11/30/2006 $1,224,599 $592,593 $733,461
12/31/2006 $1,292,320 $613,275 $759,132
1/31/2007 $1,295,680 $618,426 $767,786
2/28/2007 $1,317,965 $627,455 $779,533
3/31/2007 $1,375,824 $651,926 $809,779
4/30/2007 $1,456,723 $680,872 $847,515
5/31/2007 $1,553,595 $697,144 $865,652
6/30/2007 $1,600,047 $690,243 $857,515
7/31/2007 $1,626,608 $689,138 $857,086
8/31/2007 $1,534,054 $662,813 $825,288
9/30/2007 $1,644,199 $690,254 $854,338
</Table>
Annualized Total Returns As of 9/30/07
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
International Growth Opportunities
Fund Class III 45.72% 31.45% 21.31%
- --------------------------------------------------------------------------------
Citigroup World EMI xUS Growth Index 26.60% 28.08% 10.98%
- --------------------------------------------------------------------------------
Citigroup World EMI xUS Index 26.82% 29.65% 13.43%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I THROUGH III SHARES COMPARED WITH THE CITIGROUP WORLD EMI XUS
GROWTH INDEX AND CITIGROUP WORLD EMI XUS INDEX FOR THE PERIODS INDICATED. THE
FUND'S CLASS I THROUGH III SHARES CALCULATE THEIR PERFORMANCE BASED UPON THE
HISTORICAL PERFORMANCE OF THEIR CORRESPONDING SERIES OF NICHOLAS-APPLEGATE
MUTUAL FUNDS (RENAMED ING MUTUAL FUNDS), ADJUSTED TO REFLECT ALL FEES AND
EXPENSES APPLICABLE TO THE FUND'S CLASS I THROUGH III SHARES. THE
NICHOLAS-APPLEGATE INSTITUTIONAL FUND'S CLASS I SHARES WERE FIRST AVAILABLE ON
MAY 7, 1999, CLASS II SHARES COMMENCED OPERATIONS ON JUNE 5, 2003 AND CLASS III
SHARES ON SEPTEMBER 30, 2005. THE HISTORICAL PERFORMANCE OF CLASS II AND III
SHARES INCLUDES THE PERFORMANCE OF CLASS I SHARES FOR PERIODS PRIOR TO THE
INCEPTION OF THE RELEVANT CLASS. AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE
CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN
DISTRIBUTIONS. THE TOTAL RETURNS SHOWN ABOVE DO NOT SHOW THE EFFECTS OF INCOME
TAXES ON AN INDIVIDUAL'S INVESTMENT. IN MOST CASES, TAXES MAY REDUCE YOUR ACTUAL
INVESTMENT RETURNS ON INCOME OR GAINS PAID BY THE FUND OR ANY GAINS YOU MAY
REALIZE IF YOU SELL YOUR SHARES. PAST PERFORMANCE CANNOT GUARANTEE FUTURE
RESULTS.
THE CITIGROUP WORLD EMI XUS INDEX ("EMI") IS A WORLD MARKET CAPITALIZATION
WEIGHTED INDEX MEASURING CAPITAL APPRECIATION EXCLUDING THE U.S. THE EMI INDEX
IS COMPRISED OF COMPANIES IN THE BOTTOM 20% OF ANY GIVEN COUNTRY'S AVAILABLE
MARKET CAPITALIZATION. MAJOR CORPORATE EVENTS SUCH AS EXTRAORDINARY DIVIDENDS,
SPIN-OFFS, SCRIP ISSUES IN OTHER SECURITIES, AND SHARES REPURCHASED VIA TENDER
OFFERS ARE ACCOUNTED FOR IN THE CALCULATION. THE CITIGROUP WORLD EMI XUS GROWTH
INDEX COVERS ONLY THOSE COMPANIES IN EACH COUNTRY THAT EXHIBIT GROWTH
CHARACTERISTICS RELATIVE TO OTHER COMPANIES IN THE SAME COUNTRY ACCORDING TO A
MULTIVARIABLE FORMULA. THE INDEXES ARE UNMANAGED AND DO NOT INCLUDE
NON-EXTRAORDINARY DIVIDENDS. THE UNMANAGED INDEXES DIFFER FROM THE FUND IN
COMPOSITION, DO NOT PAY MANAGEMENT FEES OR EXPENSES, AND INCLUDE REINVESTED
DIVIDENDS. ONE CAN NOT INVEST DIRECTLY IN AN INDEX.
SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE WITH MARKET CONDITIONS, CURRENCY VOLATILITY AND THE SOCIAL,
ECONOMIC AND POLITICAL CLIMATES OF COUNTRIES WHERE THE FUND INVESTS. YOU MAY
HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
35
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 97.0%
AUSTRALIA - 3.3%
Incitec Pivot, Ltd.## 49,883 $ 3,776,074
Murchison Metals, Ltd.*,## 360,130 1,612,607
Western Areas NL* 179,421 806,595
------------
6,195,276
------------
BELGIUM - 3.2%
EVS Broadcast Equipment SA 29,953 2,986,096
Umicore## 12,934 3,082,849
------------
6,068,945
------------
CANADA - 3.2%
Gildan Activewear, Inc. Cl. A* 87,900 3,484,332
HudBay Minerals, Inc.* 41,000 1,062,443
Inmet Mining Corp. 14,100 1,415,392
------------
5,962,167
------------
DENMARK - 1.1%
Carlsberg AS Cl. B* 15,550 2,118,290
------------
FINLAND - 3.6%
Outotec OYJ 95,567 6,727,575
------------
FRANCE - 6.7%
Cie Generale de Geophysique-Veritas* 10,117 3,296,985
Neopost SA 25,468 3,582,815
Nexans SA 30,587 5,017,644
Teleperformance 17,993 699,340
------------
12,596,784
------------
GERMANY - 10.5%
Aareal Bank AG 36,998 1,815,276
Balda AG*,## 146,625 1,407,529
Bauer AG## 41,335 2,698,212
Comdirect Bank AG 223,371 2,776,410
IVG Immobilien AG 62,936 2,339,646
Morphosys AG*,## 20,332 1,254,050
SGL Carbon AG* 63,621 3,637,240
Stada Arzneimittel AG## 57,170 3,718,046
------------
19,646,409
------------
GREECE - 2.3%
Greek Postal Savings Bank 117,996 2,584,243
Jumbo SA 52,953 1,805,864
------------
4,390,107
------------
HONG KONG - 3.0%
Kowloon Development Co., Ltd. 742,900 1,897,258
Melco International Development 1,242,200 2,331,329
Tian An China Investment 1,063,200 1,300,149
------------
5,528,736
------------
INDONESIA - 1.6%
Bakrie and Brothers Tbk PT* 53,260,500 1,747,201
Bakrie Sumatera Plantations Tbk PT 7,464,700 1,257,041
------------
3,004,242
------------
IRELAND - 3.2%
Kingspan Group PLC 144,029 3,142,105
Paddy Power PLC 78,130 2,753,370
------------
5,895,475
------------
ITALY - 3.7%
Azimut Holding SpA 156,181 2,398,818
Digital Multimedia Technologies SpA*,## 35,545 2,315,710
Mariella Burani SpA 69,997 2,292,550
------------
7,007,078
------------
JAPAN - 10.9%
Asics Corp. 151,400 2,340,470
Haseko Corp.* 350,600 838,282
Inui Steamship Co., Ltd. 86,000 1,790,810
KK DaVinci Advisors* 1,428 1,071,481
Nitori Co., Ltd. 32,900 1,553,250
Parco Co., Ltd. 102,800 1,370,190
Sumco Techxiv Corp. 47,400 2,691,145
The Japan Steel Works, Ltd. 211,300 3,503,448
Tokuyama Corp.## 80,800 1,224,487
Tokyu Land Corp. 190,400 1,908,718
Towa Pharmaceutical Co., Ltd. 47,200 2,043,699
------------
20,335,980
------------
MEXICO - 1.7%
Banco Compartamos SA de CV* 347,100 1,885,542
Grupo Famsa SA*,## 337,100 1,378,039
------------
3,263,581
------------
NETHERLANDS - 3.5%
Koninklijke BAM Groep NV## 69,551 1,848,664
SBM Offshore NV## 72,838 2,855,881
Unit 4 Agresso NV 62,986 1,849,735
------------
6,554,280
------------
NORWAY - 3.1%
Fred Olsen Energy ASA 46,440 2,436,660
Golden Ocean Group, Ltd.## 493,000 3,286,818
------------
5,723,478
------------
REPUBLIC OF CHINA - 6.7%
AAC Acoustic Technologies Holdings, Inc.* 1,564,000 1,930,678
China Hongxing Sports, Ltd.## 6,014,700 4,578,538
Harbin Power Equipment 1,542,000 3,862,617
Parkson Retail Group, Ltd.## 251,000 2,264,885
------------
12,636,718
------------
SINGAPORE - 3.6%
Jiutian Chemical Group, Ltd.## 5,378,300 2,355,010
StarHub, Ltd. 1,214,300 2,535,842
UOL Group, Ltd. 513,900 1,800,182
------------
6,691,034
------------
SOUTH AFRICA - 0.9%
Aquarius Platinum, Ltd. 47,444 1,662,553
------------
SOUTH KOREA - 3.3%
Hyunjin Materials Co., Ltd.* 43,175 2,141,884
Osstem Implant Co., Ltd.* 35,442 1,473,603
STX Engine Co., Ltd.* 34,670 2,614,031
------------
6,229,518
------------
SPAIN - 2.4%
Grifols SA 198,689 4,549,305
------------
SWEDEN - 3.3%
Lindab International AB 131,500 3,577,651
Meda AB Cl. A## 80,400 1,292,555
Rezidor Hotel Group AB## 176,000 1,273,263
------------
6,143,469
------------
SWITZERLAND - 0.6%
Forbo Holding AG* 2,028 1,197,843
------------
UNITED ARAB EMIRATES - 1.7%
Lamprell PLC 375,903 3,216,553
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
36
<Page>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
UNITED KINGDOM - 9.9%
Aberdeen Asset Management PLC 756,917 $ 2,822,052
ARM Holdings PLC 301,767 946,800
Babcock International Group 284,710 2,958,275
Charter PLC* 109,601 2,641,587
Henderson Group PLC 577,681 2,009,622
IG Group Holdings PLC 373,040 2,878,549
RPS Group PLC 358,543 2,474,493
Southern Cross Healthcare, Ltd. 177,356 1,842,815
------------
18,574,193
- --------------------------------------------------------------------------------
Total Common Stock (Cost: $123,687,082) 181,919,589
- --------------------------------------------------------------------------------
PREFERRED STOCK - 2.0%
BRAZIL - 2.0%
Banco do Estado do
Rio Grande do Sul Cl. B* 253,800 1,682,804
Duratex SA 71,500 2,125,571
------------
3,808,375
- --------------------------------------------------------------------------------
Total Preferred Stock (Cost: $3,420,233) 3,808,375
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 20.3%
MONEY MARKET FUNDS - 19.0%
Boston Global Investment Trust -
Enhanced Portfolio, 5.408%** $35,653,305 35,653,305
------------
TIME DEPOSITS - 1.3%
Wells Fargo Bank
4.370%, 10/01/07 2,298,804 2,298,804
- -------------------------------------------------------------------------------
Total Short Term Investments (Cost: $37,952,109) 37,952,109
- -------------------------------------------------------------------------------
Total Investments - 119.3% (Cost: $165,059,424) 223,680,073
- -------------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (19.3%) (36,118,754)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $187,561,319
- -------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/07.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Industrial 28.9%
Consumer, Cyclical 15.4
Consumer, Non-cyclical 13.9
Financial 13.0
Basic Materials 11.0
Energy 6.3
Technology 4.8
Communications 4.4
Diversified 1.3
Short Term Investments 20.3
- --------------------------------------------------------------------------------
Total Investments 119.3
Liabilities in excess of other assets (19.3)
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37
<Page>
EMERGING MARKETS FUND
MANAGEMENT TEAM: KUNAL GHOSH, Portfolio Manager; STEVEN TAEL, PH.D., CFA,
Portfolio Manager; SHERRY ZHANG, Analyst
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The Emerging Markets Fund seeks to maximize long-term capital appreciation
primarily through investments in countries with emerging securities markets.
These markets have yet to reach a level of maturity associated with the
developed foreign stock markets and are, in the opinion of the Investment
Adviser, less sophisticated than more developed markets in terms of
participation, analyst coverage, liquidity and regulation.
MARKET OVERVIEW: Prices of emerging market equities soared between April 1 and
September 30, 2007, driven by generally robust country and company fundamentals
and a favorable global economic backdrop. Stocks in most markets posted
impressive gains in local currency terms, and overall performance was even
better in U.S. dollars due to a decline in the value of the dollar. Some of the
best-performing countries were:
- China, where the economy grew at its fastest pace in twelve years,
despite government efforts to curb growth
- Brazil, which benefited from rising domestic consumption, monetary
easing and high prices for its mineral and agricultural exports
- South Korea, where explosive growth in China has positively impacted
South Korea's shipbuilding and construction industries
While the MSCI Emerging Markets Index fell sharply over the summer amid the U.S.
mortgage-induced liquidity crunch, it rallied to an all-time high in late
September. The quick rebound underscored the financial stability of many of
these countries and their reduced dependence on external sources of capital.
PERFORMANCE: The Fund's Class I shares rose 31.98% during the six months ended
September 30, 2007, and the MSCI Emerging Markets Index gained 31.76%.
PORTFOLIO SPECIFICS: The Fund kept pace in the rapidly rising market, performing
in line with the benchmark. Major areas of relative strength included stock
selection in South Korea and the information technology and energy sectors.
Three of the best-performing holdings were South Korea-based STX Pan Ocean, a
global shipping company that benefited from a strong freight environment;
Tencent Holdings, a provider of instant messaging services in China that
reported robust growth, and Petroleo Brasileiro, Brazil's national oil company
that announced promising results from exploration tests done at one of its
fields. An overweight in industrials was also a plus, as industrials was the
best-performing sector in the benchmark amid a positive outlook for
infrastructure spending globally.
Key areas of relative weakness included stock selection in China and the
financials sector. For example, below-index exposure to two Chinese insurance
companies that registered significant gains was unfavorable.
Holdings were broadly diversified at September 30, consistent with our
risk-controlled approach to portfolio construction. The Fund's largest
overweights versus the index were in South Korea (+4.8%) and the materials
sector (+6.1%). The largest underweights were in China (-4.9%) and
telecommunication services (-4.7%).
MARKET OUTLOOK: Our process evaluates investment opportunities on a relative
basis and is required to remain fully invested. As such, the process neither
utilizes nor results in a forecast or outlook on the overall market, but expects
to perform equally well versus the MSCI Emerging Markets Index in both up and
down markets.
Through consistent application of our systematic, model-driven process, we
believe that the Fund will add value above the benchmark over time.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN EMERGING MARKETS FUND
CLASS I AND II SHARES WITH THE MSCI EM INDEX.
[CHART]
<Table>
<Caption>
EMERGING MARKETS FUND
CLASS I SHARES MSCI EM INDEX
8/18/2006 $250,000 $250,000
8/31/2006 $252,250 $248,850
9/30/2006 $250,989 $250,940
10/31/2006 $266,249 $262,860
11/30/2006 $283,236 $282,443
12/31/2006 $298,219 $295,181
1/31/2007 $301,738 $292,111
2/28/2007 $304,755 $290,417
3/31/2007 $321,608 $302,092
4/30/2007 $341,226 $316,109
5/31/2007 $367,637 $331,851
6/30/2007 $383,225 $347,548
7/31/2007 $399,818 $366,072
8/31/2007 $378,948 $358,421
9/30/2007 $424,460 $398,027
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Emerging Markets Fund Class I 69.12% 60.58%
- --------------------------------------------------------------------------------
MSCI EM Index 58.63% 51.60%
- --------------------------------------------------------------------------------
38
<Page>
[CHART]
<Table>
<Caption>
Emerging Markets
Fund Class II shares MSCI EM Index
8/18/2006 $250,000 $250,000
8/31/2006 $252,250 $248,850
9/30/2006 $250,989 $250,940
10/31/2006 $266,249 $262,860
11/30/2006 $283,236 $282,443
12/31/2006 $298,219 $295,181
1/31/2007 $301,738 $292,111
2/28/2007 $304,755 $290,417
3/31/2007 $321,608 $302,092
4/30/2007 $340,969 $316,109
5/31/2007 $367,633 $331,851
6/30/2007 $382,963 $347,548
7/31/2007 $399,545 $366,072
8/31/2007 $378,689 $358,421
9/30/2007 $424,435 $398,027
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Emerging Markets Fund Class II 69.10% 60.57%
- --------------------------------------------------------------------------------
MSCI EM Index 58.63% 51.60%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I AND II SHARES COMPARED WITH THE MORGAN STANLEY CAPITAL
INTERNATIONAL EMERGING MARKETS INDEX ("MSCI EM") OVER THE PERIODS INDICATED.
AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE CHANGES IN PRINCIPAL VALUE,
REINVESTED DIVIDENDS, AND CAPITAL GAIN DISTRIBUTIONS. THE TOTAL RETURNS SHOWN
ABOVE DO NOT SHOW THE EFFECTS OF INCOME TAXES ON AN INDIVIDUAL'S INVESTMENT.. IN
MOST CASES, TAXES MAY REDUCE YOUR ACTUAL INVESTMENT RETURNS ON INCOME OR GAINS
PAID BY THE FUND OR ANY GAINS YOU MAY REALIZE IF YOU SELL YOUR SHARES. PAST
PERFORMANCE CANNOT GUARANTEE FUTURE RESULTS.
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 MSCI EM INDEX IS AN UNMANAGED INDEX CONSISTING OF
THAT 50% OF THE MSCI EM WITH THE HIGHEST PRICE/BOOK VALUE (P/BV) RATIO. INDEX
WEIGHTINGS REPRESENT THE RELATIVE CAPITALIZATIONS OF THE MAJOR OVERSEAS MARKETS
INCLUDED IN THE INDEX ON A U.S. DOLLAR ADJUSTED BASIS.
THE UNMANAGED INDEX DIFFERS FROM THE FUND IN COMPOSITION, DOES NOT PAY
MANAGEMENT FEES OR EXPENSES AND INCLUDES REINVESTED DIVIDENDS. ONE CANNOT INVEST
DIRECTLY IN AN INDEX. SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS, CURRENCY VOLATILITY
AND THE SOCIAL, ECONOMIC AND POLITICAL CLIMATES OF COUNTRIES WHERE THE FUND
INVESTS.YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
39
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 91.5%
BRAZIL - 9.7%
All America Latina Logistica SA 27,800 $ 394,337
Banco Itau Holding Financeira SA - ADR 900 45,558
Braskem SA* 3,700 34,728
Cia de Saneamento Basico do Estado de Sao
Paulo - ADR* 2,400 118,560
Cia Vale do Rio Doce - ADR 13,700 464,841
Cyrela Commercial Properties SA Empreendimentos
e Participacoes* 11,400 14,436
Eletropaulo Metropolitana Eletricidade de Sao
Paulo SA 1,370,000 90,837
Gerdau SA - ADR 12,520 328,274
Localiza Rent A CAR 17,000 172,772
Petroleo Brasileiro SA - ADR 10,100 762,550
Tele Norte Leste Participacoes SA - ADR 4,500 101,070
Telemig Celular Participacoes SA - ADR 1,000 58,600
Unibanco - Uniao de Bancos Brasileiros SA 56,900 751,142
-----------
3,337,705
-----------
CZECH REPUBLIC - 0.8%
Unipetrol - GDR* 17,100 270,911
-----------
EGYPT - 0.3%
Orascom Construction Industries 1,071 89,807
-----------
HONG KONG - 0.7%
Tencent Holdings, Ltd. 35,800 231,335
-----------
INDIA - 2.5%
Reliance Industries, Ltd. - GDR 144A#,* 5,273 603,758
Satyam Computer Services, Ltd. - ADR 9,900 256,311
-----------
860,069
-----------
INDONESIA - 0.3%
Bakrie and Brothers Tbk PT* 3,694,000 121,181
-----------
MALAYSIA - 2.8%
Bumiputra-Commerce Holdings Berhad 149,600 469,764
IOI Corp. Berhad* 170,805 303,263
Malayan Banking Berhad 20,600 66,500
UEM World Berhad 105,300 126,082
-----------
965,609
-----------
MEXICO - 3.9%
America Movil SA de CV - ADR 9,000 576,000
Cemex SAB de CV - ADR* 3,322 99,394
Grupo Mexico SAB de CV Cl. B 91,300 655,444
-----------
1,330,838
-----------
PHILIPPINES - 1.7%
Bank of the Philippine Islands 161,300 238,101
Filinvest Land, Inc.* 3,990,600 154,132
Megaworld Corp. 2,344,800 179,568
-----------
571,801
-----------
POLAND - 3.1%
Getin Holding SA* 15,527 78,210
Globe Trade Centre SA* 14,356 257,074
KGHM Polska Miedz SA 11,481 534,987
Polski Koncern Naftowy Orlen 9,768 204,548
-----------
1,074,819
-----------
REPUBLIC OF CHINA - 11.4%
China Communications Construction Co., Ltd. 168,900 401,778
China Construction Bank Corp. 243,000 222,398
China Everbright, Ltd.* 156,000 556,236
China Life Insurance Co., Ltd. 31,000 177,972
China Petroleum & Chemical Corp. 522,000 649,758
China Shenhua Energy Co., Ltd. 105,500 635,554
China Telecom Corp., Ltd. 484,000 365,088
FibreChem Technologies, Ltd. 82,100 86,831
Guangzhou R&F Properties Co., Ltd. 37,200 175,737
Industrial & Commercial Bank of China 294,300 205,705
Tianjin Development Holdings 269,400 384,924
Weiqiao Textile Co. 34,000 63,898
-----------
3,925,879
-----------
RUSSIAN FEDERATION - 7.4%
Evraz Group SA - GDR 14,987 948,677
Gazprom OAO - ADR 15,122 666,880
Mechel - ADR 2,800 142,800
MMC Norilsk Nickel - ADR 668 181,028
Sberbank 39,995 166,779
Unified Energy System - GDR* 3,767 455,807
-----------
2,561,971
-----------
SINGAPORE - 1.7%
Jiutian Chemical Group, Ltd. 197,000 86,261
Straits Asia Resources, Ltd.## 270,100 282,027
Yanlord Land Group, Ltd.## 94,800 236,289
-----------
604,577
-----------
SOUTH AFRICA - 8.0%
Grindrod, Ltd. 85,719
320,417
Impala Platinum Holdings, Ltd. 11,523 400,989
Naspers, Ltd. Cl. N 7,612 210,830
Nedbank Group, Ltd. 3,564 64,601
Remgro, Ltd. 19,985 507,105
RMB Holdings, Ltd. 32,168 155,645
Sanlam, Ltd. 78,813 254,492
Sasol, Ltd. 3,537 151,804
Standard Bank Group, Ltd. 29,559 426,279
Telkom SA, Ltd. 10,118 254,536
-----------
2,746,698
-----------
SOUTH KOREA - 20.3%
Daelim Industrial Co.* 1,534 284,121
GS Holdings Corp.* 1,080 61,485
Honam Petrochemical Corp.* 699 115,335
Hyundai Motor Co.* 3,723 300,639
Industrial Bank Of Korea* 17,380 375,081
KIWOOM Securities Co, Ltd.* 255 19,059
Korea Investment Holdings Co., Ltd.* 6,300 414,424
Korea Zinc Co., Ltd.* 1,396 263,900
LG Chem, Ltd.* 10,150 1,064,743
LG Corp.* 8,590 591,346
LG Electronics, Inc.* 13,400 1,251,926
Samsung Electronics Co., Ltd. 700 439,819
Samsung Heavy Industries Co., Ltd.* 7,000 372,125
Shinhan Financial Group Co., Ltd.* 4,732 309,210
STX Pan Ocean Co., Ltd.*,## 511,800 1,151,546
-----------
7,014,759
-----------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
TAIWAN - 11.8%
Advanced Semiconductor Engineering, Inc 178,002 195,265
Advanced Semiconductor Engineering, Inc. - ADR 6,950 37,669
Asustek Computer, Inc. 82,834 252,043
Asustek Computer, Inc. - GDR 4,695 14,085
AU Optronics Corp. 585,000 1,009,208
Catcher Technology Co., Ltd. 4,730 34,422
Cathay Financial Holding Co., Ltd. 78,400 185,460
Chi Mei Optoelectronics Corp. 460,000 534,212
China Steel Corp. 413,000 602,384
Chunghwa Picture Tubes, Ltd.* 227,000 64,688
Chunghwa Telecom Co., Ltd. - ADR 10,100 186,648
Coretronic Corp. 63,000 96,908
Far Eastern Department Stores Co., Ltd. 41,000 46,735
Far Eastern Textile Co., Ltd. 159,785 214,695
HannStar Display Corp.* 399,000 114,926
Siliconware Precision Industries Co. 161,279 363,230
Siliconware Precision Industries Co. - ADR 1 10
U-Ming Marine Transport Corp. 21,000 68,852
Walsin Lihwa Corp. 115,000 57,086
-----------
4,078,526
-----------
THAILAND - 4.4%
PTT PCL - NVDR 110,300 1,081,278
Rayong Refinery PCL* 609,700 453,606
-----------
1,534,884
-----------
UNITED STATES - 0.7%
NII Holdings, Inc.* 3,050 250,557
- --------------------------------------------------------------------------------
Total Common Stock (Cost: $25,341,324) 31,571,926
- --------------------------------------------------------------------------------
EQUITY-LINKED SECURITIES - 3.0%
INDIA - 3.0%
Merrill Lynch India Bulls Financial - 9/24/09 10,913 163,531
Merrill Lynch Tata Steel, Ltd. - 10/18/11 15,146 323,216
Merrill Lynch JSW Steel, Ltd. - 6/21/12 3,435 73,365
Merrill Lynch Oil & Natural Gas Corp., Ltd.
- 3/09/09 3,766 90,531
Merrill Lynch Reliance Communications, Ltd.
- 1/25/11* 26,333 387,016
-----------
1,037,659
- --------------------------------------------------------------------------------
Total Equity-Linked Securities (Cost: $788,366) 1,037,659
- --------------------------------------------------------------------------------
PREFERRED STOCK - 2.7%
BRAZIL - 2.7%
Metalurgica Gerdau SA 10,100 340,326
Usinas Siderurgicas de Minas Gerais SA 8,600 598,261
-----------
938,587
- --------------------------------------------------------------------------------
Total Preferred Stock (Cost: $775,332) 938,587
- --------------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 6.7%
MONEY MARKET FUNDS - 4.5%
Boston Global Investment Trust - Enhanced
Portfolio, 5.408%** $1,567,650 $ 1,567,650
-----------
TIME DEPOSITS - 2.2%
Bank of America London 4.370%, 10/01/07 764,769 764,769
- -------------------------------------------------------------------------------
Total Short Term Investments (Cost: $2,332,419) 2,332,419
- -------------------------------------------------------------------------------
Total Investments - 103.9% (Cost: $29,237,441) 35,880,591
- -------------------------------------------------------------------------------
Liabilities In Excess Of Other Assets - (3.9%) (1,359,872)
- -------------------------------------------------------------------------------
Net Assets - 100.0% $34,520,719
- -------------------------------------------------------------------------------
</Table>
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
# - 144A SECURITY. CERTAIN CONDITIONS FOR PUBLIC SALE MAY EXSIST. THE TOTAL
MARKET VALUE OF 144A SECURITIES OWNED AT SEPTEMBER 30, 2007 WAS $603,758 OR
1.75% OF NET ASSETS
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/07.
ADR - AMERICAN DEPOSITORY RECEIPT
GDR - GLOBAL DEPOSITORY RECEIPT
NVDR - NON VOTING DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
AS OF SEPTEMBER 30, 2007 (Unaudited)
<Table>
<Caption>
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Industrial 20.5%
Basic Materials 20.1
Financial 18.4
Energy 17.0
Communications 7.6
Diversified 4.8
Technology 3.7
Utilities 1.9
Consumer, Cyclical 1.8
Consumer, Non-cyclical 1.4
Short Term Investments 6.7
- --------------------------------------------------------------------------------
Total Investments 103.9
Liabilities in excess of other assets (3.9)
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
41
<Page>
INTERNATIONAL SYSTEMATIC FUND
MANAGEMENT TEAM: HORACIO A. VALEIRAS, CFA, Portfolio Manager and Chief
Investment Officer; KUNAL GHOSH, Portfolio Manager; STEVEN TAEL, PH.D., CFA,
Portfolio Manager; SHERRY ZHANG, Analyst
GOAL: The International Systematic Fund seeks to maximize long-term capital
appreciation through investments primarily in companies located in the developed
countries represented in the MSCI EAFE Index. The Investment Adviser identifies
investment opportunities using a quantitative model that integrates stock,
sector, country and currency selection decisions.
MARKET OVERVIEW: Equities in developed non-U.S. countries climbed higher during
the six months ended September 30, 2007. A decline in the U.S. dollar versus a
basket of currencies substantially boosted returns for U.S.-based investors.
The market was volatile, with gains at the beginning and end of the period
offsetting losses accrued over the summer. The MSCI EAFE Index posted solid
increases in April and May, lifted by robust merger activity and favorable
economic trends in Europe, including rising business and consumer confidence in
Germany. However, stock prices subsequently retreated on a number of concerns,
most notably signs that losses in the U.S. mortgage market were affecting hedge
funds and banks worldwide. Amid uncertainty about the extent and magnitude of
the losses, global liquidity dried up. U.S., European, Australian and Japanese
central banks pumped an unusually large amount of funds into the banking system
to address the liquidity shortage. The Federal Reserve went a step further in
September by lowering the key fed funds rate, which prompted a global stock
market rally. The MSCI EAFE Index finished the period with its biggest monthly
gain in twenty months.
Stocks in nearly every country within the Index advanced, with Australia and
Germany producing some of the highest returns. Japan was one of the weakest
markets, as economic indicators suggested that the five-year-old recovery had
stalled.
PERFORMANCE: The Fund's Class I shares advanced 6.93% between April 1 and
September 30, 2007, and the MSCI EAFE Index rose 9.05%.
PORTFOLIO SPECIFICS: The Fund delivered a strong increase during the six-month
period, with stocks in most countries and sectors posting gains. On a relative
basis, stock selection in the United Kingdom and the financials sector had the
largest negative impact on performance versus the index. The portfolio's
worst-performing holdings included several U.K. banks whose shares fell sharply
in response to the global liquidity crunch. Unlike other major central banks,
the Bank of England did not take emergency steps in August to provide extra
liquidity. By the end of the period; however, the U.K. credit markets had
improved.
On the plus side, stock selection in Japan, France and the industrials sector
had a material positive effect on relative results. Top-performing holdings
included Marubeni, a Japanese trading company that had strong earnings growth in
its metals and energy segments, and French auto maker Renault, which saw a
pickup in sales, especially outside of Europe.
The Fund remained well diversified across countries and sectors throughout the
period. Based on our model's bottom-up stock selection recommendations, at
September 30, the Fund's largest overweights versus the MSCI EAFE Index were in
Sweden (+5.4%) and the consumer discretionary sector (+7.1%). The largest
underweights were in the United Kingdom (-5.0%) and financials (-8.0%).
MARKET OUTLOOK: The Fund's investment process evaluates opportunities on a
relative basis and is required to remain fully invested. The Fund's investment
process neither utilizes, nor results in, a forecast or outlook on the overall
market. Rather, the Fund expects to outperform the MSCI EAFE Index in both up
and down markets.
By applying our disciplined, bottom-up approach in all investment environments,
we believe the Fund will generate consistently strong returns over time.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN INTERNATIONAL
SYSTEMATIC FUND CLASS I, II AND III SHARES WITH THE MSCI EAFE INDEX.
[CHART]
<Table>
<Caption>
INTERNATIONAL SYSTEMATIC
FUND CLASS I SHARES MSCI EAFE INDEX
7/6/2005 $250,000 $250,000
7/31/2005 $262,750 $258,350
8/31/2005 $272,498 $264,964
9/30/2005 $290,755 $276,808
10/31/2005 $280,492 $268,753
11/30/2005 $289,748 $275,391
12/31/2005 $305,713 $288,224
1/31/2006 $332,341 $305,950
2/28/2006 $333,371 $305,338
3/31/2006 $347,306 $315,536
4/30/2006 $369,360 $330,840
5/31/2006 $355,176 $318,400
6/30/2006 $351,873 $318,527
7/31/2006 $355,181 $321,713
8/31/2006 $363,812 $330,656
9/30/2006 $362,538 $331,218
10/31/2006 $378,780 $344,136
11/30/2006 $387,416 $354,529
12/31/2006 $401,596 $365,696
1/31/2007 $403,403 $368,183
2/28/2007 $404,936 $371,202
3/31/2007 $413,197 $380,854
4/30/2007 $433,071 $398,106
5/31/2007 $441,083 $405,630
6/30/2007 $440,069 $406,239
7/31/2007 $442,401 $400,308
8/31/2007 $423,555 $394,143
9/30/2007 $442,149 $415,309
</Table>
Annualized Total Returns As of 9/30/07
<Table>
<Caption>
SINCE
1 YEAR INCEPTION
- --------------------------------------------------------------------------------
International Systematic Fund
Class I 21.95% 29..04%
- --------------------------------------------------------------------------------
MSCI EAFE Index 25.38% 25..48%
- --------------------------------------------------------------------------------
</Table>
42
<Page>
[CHART]
<Table>
<Caption>
INTERNATIONAL SYSTEMATIC
FUND CLASS II SHARES MSCI EAFE INDEX
7/6/2005 $250,000 $250,000
7/31/2005 $262,750 $258,350
8/31/2005 $272,498 $264,964
9/30/2005 $290,755 $276,808
10/31/2005 $280,492 $268,753
11/30/2005 $289,748 $275,391
12/31/2005 $305,713 $288,224
1/31/2006 $332,341 $305,950
2/28/2006 $333,371 $305,338
3/31/2006 $347,306 $315,536
4/30/2006 $369,360 $330,840
5/31/2006 $355,176 $318,400
6/30/2006 $351,873 $318,527
7/31/2006 $355,181 $321,713
8/31/2006 $363,812 $330,656
9/30/2006 $362,538 $331,218
10/31/2006 $378,780 $344,136
11/30/2006 $387,416 $354,529
12/31/2006 $401,596 $365,696
1/31/2007 $403,644 $368,183
2/28/2007 $404,936 $371,202
3/31/2007 $412,953 $380,854
4/30/2007 $432,816 $398,106
5/31/2007 $440,823 $405,630
6/30/2007 $440,030 $406,239
7/31/2007 $442,362 $400,308
8/31/2007 $423,517 $394,143
9/30/2007 $442,110 $415,309
</Table>
Annualized Total Returns As of 9/30/07
<Table>
<Caption>
SINCE
1 YEAR INCEPTION
- --------------------------------------------------------------------------------
International Systematic Fund
Class II 21.95% 29..07%
- --------------------------------------------------------------------------------
MSCI EAFE Index 25.38% 25..48%
- --------------------------------------------------------------------------------
</Table>
[CHART]
<Table>
<Caption>
International
Systematic Fund MSCI EAFE
Class III Shares Index
7/6/2005 $250,000 $250,000
7/31/2005 $262,750 $258,350
8/31/2005 $272,498 $264,964
9/30/2005 $290,755 $276,808
10/31/2005 $280,492 $268,753
11/30/2005 $289,748 $275,391
12/31/2005 $305,713 $288,224
1/31/2006 $332,341 $305,950
2/28/2006 $333,371 $305,338
3/31/2006 $347,306 $315,536
4/30/2006 $369,360 $330,840
5/31/2006 $355,176 $318,400
6/30/2006 $351,873 $318,527
7/31/2006 $355,181 $321,713
8/31/2006 $363,812 $330,656
9/30/2006 $362,538 $331,218
10/31/2006 $378,780 $344,136
11/30/2006 $387,416 $354,529
12/31/2006 $401,596 $365,696
1/31/2007 $403,644 $368,183
2/28/2007 $405,178 $371,202
3/31/2007 $413,160 $380,854
4/30/2007 $433,033 $398,106
5/31/2007 $441,304 $405,630
6/30/2007 $440,289 $406,239
7/31/2007 $442,622 $400,308
8/31/2007 $424,032 $394,143
9/30/2007 $442,605 $415,309
</Table>
Annualized Total Returns As of 9/30/07
SINCE
1 YEAR INCEPTION
- --------------------------------------------------------------------------------
International Systematic Fund
Class III 22.08% 29..14%
- --------------------------------------------------------------------------------
MSCI EAFE Index 25.38% 25..48%
- --------------------------------------------------------------------------------
THE GRAPHS ABOVE SHOW THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I , II AND III SHARES WITH THE MSCI EAFE INDEX FOR THE PERIODS
INDICATED. AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE CHANGES IN PRINCIPAL
VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN DISTRIBUTIONS. THE CLASS I SHARES
COMMENCED OPERATIONS ON JULY 6, 2005 AND CLASS II AND II SHARES ON DECEMBER 22,
2006. THE HISTORICAL PERFORMANCE OF CLASS II AND III SHARES INCLUDES THE
PERFORMANCE OF CLASS I SHARES FOR THE PERIODS PRIOR TO THE INCEPTION OF CLASS II
AND III SHARES. THE TOTAL RETURNS SHOWN ABOVE DO NOT SHOW THE EFFECTS OF INCOME
TAXES ON AN INDIVIDUALS' INVESTMENT. IN MOST CASES, TAXES MAY REDUCE YOUR ACTUAL
INVESTMENT RETURNS ON INCOME OR GAINS PAID BY THE FUND OR ANY GAINS YOU MAY
REALIZE IF YOU SELL YOUR SHARES. PAST PERFORMANCE CANNOT GUARANTEE FUTURE
RESULTS.
THE MSCI EAFE INDEX IS AN UNMANAGED INDEX COMPRISED OF OVER 900 COMPANIES AND IS
A GENERALLY ACCEPTED BENCHMARK FOR MAJOR OVERSEAS MARKETS. INDEX WEIGHTINGS
REPRESENT THE RELATIVE CAPITALIZATIONS OF THE MAJOR OVERSEAS MARKETS INCLUDED IN
THE INDEX ON A U.S. DOLLAR ADJUSTED BASIS. THE UNMANAGED INDEX DIFFERS FROM THE
FUND IN COMPOSITION, DOES NOT PAY MANAGEMENT FEES OR EXPENSES AND INCLUDES
REINVESTMENT DIVIDENDS. ONE CANNOT INVEST DIRECTLY IN AN INDEX.
SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE WITH MARKET CONDITIONS, CURRENCY VOLATILITY AND THE SOCIAL,
ECONOMIC AND POLITICAL CLIMATES OF COUNTRIES WHERE THE FUND INVESTS. YOU MAY
HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
43
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 84.4%
AUSTRALIA - 4.3%
Australia & New Zealand Banking Group, Ltd. 13,952 $ 366,701
BHP Billiton, Ltd. 15,092 594,995
Challenger Financial Services Group, Ltd. 57,374 314,793
Commonwealth Bank of Australia 34,815 1,737,350
David Jones, Ltd.## 69,634 314,275
OneSteel, Ltd. 104,202 636,274
Qantas Airways, Ltd. 271,237 1,339,374
------------
5,303,762
------------
AUSTRIA - 1.2%
RHI AG* 17,344 796,211
Voestalpine AG 4,118 354,899
Wienerberger AG 5,382 335,705
Wienerberger AG Rights 4,612 7
------------
1,486,822
------------
BELGIUM - 0.4%
Tessenderlo Chemie NV 9,555 552,242
------------
DENMARK - 0.3%
FLSmidth & Co. AS Cl. B 3,550 376,582
------------
FINLAND - 0.9%
Kesko OYJ Cl. B* 8,861 587,112
Nokia OYJ 13,074 495,694
------------
1,082,806
------------
FRANCE - 8.5%
Air France-KLM## 7,743 283,772
ArcelorMittal 5,490 432,151
BNP Paribas 6,139 669,985
Business Objects SA* 8,707 387,577
Credit Agricole SA 22,399 861,671
France Telecom SA 83,979 2,805,428
Peugeot SA 17,555 1,445,023
Renault SA 12,344 1,783,941
SEB SA 1,211 224,750
Total SA 19,061 1,545,675
------------
10,439,973
------------
GERMANY - 10.9%
Adidas AG 11,767 769,784
BASF AG 13,711 1,891,413
DaimlerChrysler AG 30,602 3,074,298
Deutsche Lufthansa AG 42,077 1,206,969
E.ON AG 16,074 2,963,981
RWE AG 1,024 128,444
Salzgitter AG 2,753 539,277
ThyssenKrupp AG* 25,463 1,617,237
Volkswagen AG 5,413 1,220,149
------------
13,411,552
------------
GREECE - 0.4%
National Bank of Greece SA 6,904 438,888
------------
HONG KONG - 2.4%
Cathay Pacific Airways, Ltd. 351,000 960,109
Hang Lung Group, Ltd. 73,000 417,685
Hong Kong Exchanges and Clearing, Ltd. 14,500 444,221
Kingboard Chemical Holdings, Ltd. 55,000 349,739
New World Development, Ltd. 210,000 583,885
Orient Overseas International, Ltd. 19,000 180,984
------------
2,936,623
------------
IRELAND - 0.9%
Anglo Irish Bank Corp. PLC 37,640 695,886
Irish Life & Permanent PLC 17,673 391,582
------------
1,087,468
------------
ITALY - 2.0%
Enel SpA 96,647 1,091,325
ENI SpA 23,799 879,651
Indesit Co. SpA 26,198 450,443
------------
2,421,419
------------
JAPAN - 17.7%
Aoyama Trading Co., Ltd. 5,400 137,095
Canon, Inc. 5,600 305,282
Chugai Pharmaceutical Co., Ltd. 10,700 176,480
Daiichi Sankyo Co., Ltd. 5,900 176,977
Daito Trust Construction Co., Ltd. 3,600 173,403
East Japan Railway Co. 31 244,194
Fast Retailing Co., Ltd. 3,200 184,463
FUJIFILM Holdings Corp. 6,200 286,241
Honda Motor Co., Ltd. 13,400 449,715
Itochu Corp. 96,700 1,172,860
Japan Tobacco, Inc. 29 159,101
JFE Holdings, Inc. 7,800 552,032
KDDI Corp. 90 666,696
Kyowa Hakko Kogyo Co., Ltd. 23,000 236,569
Marubeni Corp. 123,600 1,132,673
Mitsubishi Estate Co., Ltd. 12,000 343,260
Mitsui & Co., Ltd. 47,400 1,149,815
Mitsui OSK Lines, Ltd. 15,000 242,707
Mitsumi Electric Co., Ltd. 9,800 399,617
Mizuho Financial Group, Inc. 69 392,949
Nikon Corp. 9,000 309,090
Nintendo Co., Ltd. 2,300 1,195,844
Nippon Chemi-Con Corp. 41,300 365,547
Nippon Steel Corp. 77,000 553,658
Nippon Telegraph & Telephone Corp. 38 177,420
Nippon Yusen KK 161,800 1,578,399
Olympus Corp. 12,000 492,458
ORIX Corp.* 880 200,461
Shima Seiki Manufacturing, Ltd. 8,300 445,977
Sony Corp.* 23,700 1,147,755
Star Micronics Co., Ltd. 24,900 770,717
Sumitomo Corp. 65,500 1,264,270
Sumitomo Metal Industries, Ltd. 179,400 1,045,064
Sumitomo Mitsui Financial Group, Inc. 53 412,424
Taiyo Yuden Co., Ltd. 22,800 450,985
Takeda Pharmaceutical Co., Ltd. 6,700 470,686
Tokai Rika Co., Ltd. 10,400 289,354
Toshiba Corp. 23,000 214,572
Toyota Motor Corp.* 29,300 1,727,201
------------
21,694,011
------------
NETHERLANDS - 1.5%
ABN AMRO Holding NV 2,637 138,570
ING Groep NV 25,854 1,144,596
Royal KPN NV 34,588 598,634
------------
1,881,800
------------
NEW ZEALAND - 0.4%
Fletcher Building, Ltd. 48,471 464,767
------------
NORWAY - 0.1%
TGS Nopec Geophysical Co. ASA* 5,950 121,255
------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
REPUBLIC OF CHINA - 0.3%
China Resources Power Holdings Co. 68,000 $ 210,513
Lee & Man Paper Manufacturing, Ltd. 48,200 208,469
------------
418,982
------------
SINGAPORE - 1.7%
Jardine Cycle & Carriage, Ltd. 30,000 373,876
Singapore Airlines, Ltd.* 71,600 916,434
Venture Corp., Ltd. 47,000 522,416
Wing Tai Holdings, Ltd.* 125,000 325,036
------------
2,137,762
------------
SPAIN - 1.9%
ACS Actividades de Construccion y Servicios SA 16,395 902,335
Mapfre SA 198,459 894,696
Sacyr Vallehermoso SA## 5,017 175,091
Telefonica SA 15,018 419,255
------------
2,391,377
------------
SWEDEN - 6.8%
Alfa Laval AB 22,200 1,422,450
Electrolux AB Cl. B 9,600 202,565
Hennes & Mauritz AB Cl. B 35,500 2,241,712
Nordea Bank AB 33,900 588,490
Sandvik AB 35,800 765,081
SAS AB* 19,100 341,016
Skandinaviska Enskilda Banken AB* 46,500 1,505,901
Swedbank AB 7,500 249,844
Trelleborg AB Cl. B## 28,400 667,300
Volvo AB Cl. B 25,200 437,267
------------
8,421,626
------------
SWITZERLAND - 6.8%
Actelion, Ltd.* 10,451 577,033
Credit Suisse Group* 4,932 326,351
Nestle SA 7,457 3,338,479
Swatch Group AG Cl. B 1,166 381,281
Swiss Reinsurance 11,370 1,009,304
Temenos Group AG* 19,470 453,333
Zurich Financial Services AG 7,406 2,214,129
------------
8,299,910
------------
UNITED KINGDOM - 15.0%
3i Group PLC* 31,747 644,858
Aggreko PLC 24,142 284,293
Anglo American PLC 11,409 764,499
Barclays PLC 35,689 432,994
BHP Billiton PLC 22,371 797,607
BT Group PLC 358,126 2,239,958
De La Rue PLC 1 8
Galiform PLC* 128,594 288,190
Game Group PLC 29,553 115,603
Lloyds TSB Group PLC 32,480 358,989
Marks & Spencer Group PLC 47,753 598,817
Michael Page International PLC 25,084 210,808
Next PLC 38,987 1,560,008
Old Mutual PLC 450,689 1,471,893
Rio Tinto PLC 1,747 150,485
Royal Bank of Scotland Group PLC 91,963 983,644
Royal Dutch Shell PLC Cl. A 28,806 1,183,735
Royal Dutch Shell PLC Cl. B 80,720 3,308,832
Standard Life PLC 80,781 474,811
Vodafone Group PLC 293,488 1,055,360
WM Morrison Supermarkets PLC 164,389 945,306
Xstrata PLC 8,049 531,972
------------
18,402,670
- --------------------------------------------------------------------------------
Total Common Stock (Cost: $97,314,212) 103,772,297
- --------------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 2.7%
MONEY MARKET FUNDS - 1.0%
Boston Global Investment Trust - Enhanced
Portfolio, 5.408%** $1,177,005 $ 1,177,005
------------
TIME DEPOSITS - 1.7%
Citibank Nassau
4.370%, 10/01/07 2,126,527 2,126,527
- --------------------------------------------------------------------------------
Total Short Term Investments (Cost: $3,303,532) 3,303,532
- --------------------------------------------------------------------------------
Total Investments - 87.1% (Cost: $100,617,744) 107,075,829
- --------------------------------------------------------------------------------
Other Assets in Excess of Liabilities - 12.9% 15,812,543
- --------------------------------------------------------------------------------
Net Assets - 100.0% $122,888,372
- --------------------------------------------------------------------------------
</Table>
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/07.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
<Table>
<Caption>
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Consumer, Cyclical 24.4%
Financial 17.5
Industrial 10.4
Basic Materials 9.4
Communications 6.9
Energy 5.7
Consumer, Non-cyclical 5.6
Utilities 3.6
Technology 0.9
Short Term Investments 2.7
- --------------------------------------------------------------------------------
Total Investments 87.1
Other assets in excess of liabilities 12.9
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45
<Page>
INTERNATIONAL ALL CAP GROWTH FUND
MANAGEMENT TEAM: HORACIO A. VALEIRAS, CFA, Portfolio Manager and Chief
Investment Officer; PEDRO V. MARCAL, Portfolio Manager
GOAL: The International All Cap Growth Fund seeks to maximize long-term capital
appreciation. In pursuing this goal, the Fund invests in a diversified portfolio
of equity securities of companies primarily located in developed non-U.S.
markets.
MARKET OVERVIEW: As measured by the MSCI EAFE Index, equities in developed
non-U.S. markets delivered impressive gains from April 1 through September 30,
2007. The U.S. dollar weakened against a broad basket of currencies, resulting
in a significant performance enhancement for U.S.-based investors. Key factors
influencing stock prices included:
- Healthy corporate profit growth, economic improvement in the euro zone
and a brisk pace of mergers and buyouts during the first half of the
period
- Losses on securities backed by U.S mortgages, which sparked a global
liquidity crisis and broad sell-off in the world's equity markets
- Rising commodity prices, with the price of oil touching a record
$83.90 a barrel and gold hitting $744.80 an ounce, its highest level
in twenty-seven years
Concerns about inflation prompted the European Central Bank to raise interest
rates 0.25% in June and the Bank of England to raise rates on two separate
occasions for a total of 0.50%. Amid signs of deflation, the Bank of Japan held
steady.
As measured by various MSCI indexes, international growth stocks outpaced their
value counterpart by approximately 5%, and large caps bested small caps by more
than 9%.
PERFORMANCE: During the six months ended September 30, 2007, the Fund's Class I
shares gained 22.83%. This compared favorably to the 11.54% increase in the MSCI
EAFE Growth Index, the Fund's primary benchmark, and the 9.05% advance in the
MSCI EAFE Index.
PORTFOLIO SPECIFICS: The Fund's outperformance was driven by stock selection,
which was positive in most countries and particularly strong in France and
Norway. Top-performing holdings included France-based Alstom, a transport and
energy infrastructure firm that benefited from robust demand from Europe and
emerging markets, and Norway-based Renewable Energy, a solar company that
announced plans for a significant expansion in its production capabilities. On
the negative side, stock selection in Germany subtracted a modest amount from
relative performance, as did an underweight in the country. Germany was one of
the best-performing markets, supported by positive macroeconomic trends,
including the lowest unemployment rate in more than a decade.
MARKET OUTLOOK: International stocks are facing several challenges, including
global liquidity issues, record-high oil prices and large currency swings. That
said, a number of positive factors may pave the way for additional price gains,
including:
- Expectations for healthy corporate profit growth throughout developed
non-U.S. countries
- Pro-growth developments in Europe, such as the election of French
President Nicolas Sarkozy who campaigned on economic reforms
- Attractive valuations in Europe relative to history and relative to
the U.S. and emerging markets
In the changing environment, we are confident that our bottom-up investment
process will continue to lead us to companies with outstanding growth potential
for the Fund.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN INTERNATIONAL ALL CAP
GROWTH FUND CLASS I SHARES WITH THE MSCI EAFE GROWTH INDEX AND MSCI EAFE INDEX.
[CHART]
<Table>
<Caption>
INTERNATIONAL ALL CAP GROWTH
FUND CLASS I SHARES MSCI EAFE GROWTH INDEX MSCI EAFE INDEX
6/30/1999 $250,000 $250,000 $250,000
7/31/1999 $258,000 $254,800 $257,350
8/31/1999 $263,753 $256,354 $258,431
9/30/1999 $269,002 $260,456 $261,067
10/31/1999 $292,997 $274,286 $270,648
11/30/1999 $382,244 $294,282 $279,958
12/31/1999 $469,510 $326,976 $304,931
1/31/2000 $484,769 $308,437 $285,354
2/29/2000 $630,006 $325,555 $292,973
3/31/2000 $535,253 $332,001 $304,721
4/30/2000 $451,486 $310,222 $288,906
5/31/2000 $419,250 $291,329 $282,348
6/30/2000 $446,753 $301,730 $293,585
7/31/2000 $427,274 $282,811 $281,196
8/31/2000 $445,006 $285,922 $283,755
9/30/2000 $420,264 $267,051 $269,965
10/31/2000 $385,004 $254,607 $263,431
11/30/2000 $343,500 $242,793 $253,447
12/31/2000 $349,855 $247,260 $262,343
1/31/2001 $336,841 $246,568 $262,212
2/28/2001 $307,098 $221,566 $242,573
3/31/2001 $275,129 $206,344 $226,514
4/30/2001 $286,657 $220,603 $242,393
5/31/2001 $282,930 $211,801 $234,030
6/30/2001 $271,783 $201,550 $224,552
7/31/2001 $256,155 $196,672 $220,488
8/31/2001 $247,241 $187,724 $214,953
9/30/2001 $215,644 $170,002 $193,222
10/31/2001 $225,304 $176,769 $198,168
11/30/2001 $242,788 $185,854 $205,481
12/31/2001 $245,022 $186,932 $206,713
1/31/2002 $239,827 $176,857 $195,737
2/28/2002 $236,110 $179,244 $197,127
3/31/2002 $250,985 $186,145 $207,890
4/30/2002 $246,517 $187,225 $209,387
5/31/2002 $249,500 $187,768 $212,234
6/30/2002 $242,439 $182,961 $203,872
7/31/2002 $213,444 $163,457 $183,770
8/31/2002 $208,620 $162,231 $183,403
9/30/2002 $190,407 $148,150 $163,760
10/31/2002 $191,892 $156,535 $172,571
11/30/2002 $198,206 $161,153 $180,423
12/31/2002 $187,423 $157,446 $174,360
1/31/2003 $184,068 $149,668 $167,090
2/28/2003 $181,086 $146,451 $163,263
3/31/2003 $179,964 $145,015 $160,178
4/30/2003 $200,408 $157,733 $176,067
5/31/2003 $215,659 $166,030 $186,895
6/30/2003 $219,756 $168,969 $191,512
7/31/2003 $230,920 $171,216 $196,185
8/31/2003 $244,683 $174,349 $200,952
9/30/2003 $250,628 $180,277 $207,181
10/31/2003 $271,456 $190,661 $220,110
11/30/2003 $268,470 $195,142 $225,040
12/31/2003 $285,947 $208,567 $242,638
1/31/2004 $295,984 $212,655 $246,084
2/29/2004 $298,588 $216,717 $251,817
3/31/2004 $304,530 $216,955 $253,328
4/30/2004 $294,481 $211,727 $247,806
5/31/2004 $289,651 $211,473 $248,871
6/30/2004 $293,735 $214,222 $254,421
7/31/2004 $281,105 $205,546 $246,203
8/30/2004 $281,105 $205,792 $247,336
9/30/2004 $291,899 $210,896 $253,841
10/31/2004 $298,584 $217,961 $262,522
11/30/2004 $324,978 $233,044 $280,531
12/31/2004 $336,450 $242,925 $292,846
1/31/2005 $331,975 $237,338 $287,487
2/28/2005 $352,126 $246,902 $299,964
3/31/2005 $339,062 $240,952 $292,555
4/30/2005 $326,381 $236,495 $286,002
5/31/2005 $330,494 $237,370 $286,431
6/30/2005 $338,327 $239,340 $290,355
7/31/2005 $353,281 $246,640 $299,269
8/31/2005 $368,966 $253,743 $306,930
9/30/2005 $389,887 $264,476 $320,650
10/31/2005 $373,083 $257,256 $311,319
11/30/2005 $393,154 $262,144 $319,009
12/31/2005 $428,656 $276,037 $333,874
1/31/2006 $462,649 $293,069 $354,408
2/28/2006 $460,428 $289,787 $353,699
3/31/2006 $485,844 $301,146 $365,512
4/30/2006 $511,642 $314,969 $383,240
5/31/2006 $482,478 $301,929 $368,830
6/30/2006 $474,614 $302,382 $368,977
7/31/2006 $470,864 $303,803 $372,667
8/31/2006 $485,461 $311,155 $383,027
9/30/2006 $482,451 $309,475 $383,679
10/31/2006 $501,122 $320,028 $398,642
11/30/2006 $526,830 $329,405 $410,681
12/31/2006 $555,700 $338,661 $423,617
1/31/2007 $549,087 $341,404 $426,498
2/28/2007 $547,110 $344,067 $429,995
3/31/2007 $562,320 $355,662 $441,175
4/30/2007 $591,954 $371,134 $461,160
5/31/2007 $619,658 $379,039 $469,876
6/30/2007 $635,645 $380,100 $470,581
7/31/2007 $653,189 $377,059 $463,711
8/31/2007 $637,970 $373,402 $456,570
9/30/2007 $691,049 $396,739 $481,087
</Table>
Annualized Total Returns As of 9/30/07
<Table>
<Caption>
SINCE
1 YEAR 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
International All Cap Growth Fund Class I 43.17% 29.38% 13..10%
- --------------------------------------------------------------------------------
MSCI EAFE Growth Index 28.19% 21.78% 5..76%
- --------------------------------------------------------------------------------
MSCI EAFE Index 25.38% 24.05% 8..26%
- --------------------------------------------------------------------------------
</Table>
THE GRAPH ABOVE SHOWS THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I SHARES COMPARED WITH THE MSCI EAFE GROWTH INDEX AND MSCI EAFE
INDEX FOR THE PERIODS INDICATED. AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE
CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN
DISTRIBUTIONS. THE TOTAL RETURNS SHOWN ABOVE DO NOT SHOW THE EFFECTS OF INCOME
TAXES ON AN INDIVIDUAL'S INVESTMENT. IN MOST CASES, TAXES MAY REDUCE YOUR ACTUAL
INVESTMENT RETURNS ON INCOME OR GAINS PAID BY THE FUND OR ANY GAINS YOU MAY
REALIZE IF YOU SELL YOUR SHARES. PAST PERFORMANCE CANNOT GUARANTEE FUTURE
RESULTS.
ON NOVEMBER 18, 2005, THE FUND BECAME THE SUCCESSOR ENTITY TO THE
NICHOLAS-APPLEGATE INTERNATIONAL ALL CAP GROWTH FUND, A SERIES OF THE
PROFESSIONALLY MANAGED PORTFOLIOS ("ACQUIRED FUND"). THE ACQUIRED FUND
TRANSFERRED ALL OF ITS ASSETS AND LIABILITIES IN EXCHANGE FOR SHARES OF THE
FUND, AND THE INVESTMENT OBJECTIVES, POLICIES AND LIMITATIONS OF THE FUND ARE
SUBSTANTIALLY SIMILAR TO THOSE OF THE ACQUIRED FUND. THE PERFORMANCE SHOWN ABOVE
INCLUDES THE HISTORICAL PERFORMANCE OF THE ACQUIRED FUND FROM JUNE 30, 1999 TO
NOVEMBER 18, 2005.
THE MSCI EAFE GROWTH INDEX IS AN UNMANAGED INDEX THAT IS A GENERALLY ACCEPTED
BENCHMARK FOR MAJOR OVERSEAS MARKETS. IT CONSISTS OF THE TOP 50% OF THE MSCI
EAFE, THOSE COMPANIES WITH THE HIGHEST PRICE/BOOK VALUE RATIO. THE MSCI EAFE
INDEX CONSISTS OF APPROXIMATELY 900 COMPANIES WITH AVERAGE MARKET CAPITALIZATION
OF U.S. $8.7 BILLION. ITS WEIGHTINGS REPRESENT THE RELATIVE CAPITALIZATION OF
THE MAJOR OVERSEAS MARKETS INCLUDED IN THE INDEX ON A U.S. DOLLAR ADJUSTED
BASIS. THE MSCI EAFE IS A GENERALLY ACCEPTED BENCHMARK FOR MAJOR OVERSEAS
MARKETS. IT CONSISTS OF THE TOP 50% OF THE MSCI EAFE, THOSE COMPANIES WITH THE
HIGHEST PRICE/BOOK VALUE (P/BV) RATIO. THE MSCI EAFE INDEX CONSISTS OF
APPROXIMATELY 900 COMPANIES WITH AVERAGE MARKET CAPITALIZATION OF U.S. $8.7
BILLION. ITS WEIGHTINGS REPRESENT THE RELATIVE CAPITALIZATION OF THE MAJOR
OVERSEAS MARKETS INCLUDED IN THE INDEX ON A U.S. DOLLAR ADJUSTED BASIS. THE
UNMANAGED INDEXES DIFFER FROM THE FUND IN COMPOSITION, DO NOT PAY MANAGEMENT
FEES OR EXPENSES AND INCLUDE REINVESTED DIVIDENDS. ONE CANNOT INVEST DIRECTLY
INTO AN INDEX.
SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE WITH MARKET CONDITIONS, CURRENCY VOLATILITY AND THE SOCIAL,
ECONOMIC AND POLITICAL CLIMATES OF COUNTRIES WHERE THE FUND INVESTS. YOU MAY
HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
46
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------
COMMON STOCK - 90.8%
AUSTRALIA - 5.7%
AMP, Ltd. 5,042 $ 47,029
CSL, Ltd. 1,078 102,362
Incitec Pivot, Ltd.## 1,362 103,101
Rio Tinto, Ltd. 653 62,537
-----------
315,029
-----------
BELGIUM - 1.1%
InBev NV 663 59,930
-----------
BRAZIL - 1.5%
Cia Vale do Rio Doce - ADR 1,700 57,681
Unibanco - Uniao de Bancos Brasileiros SA - GDR 200 26,310
-----------
83,991
-----------
CANADA - 3.7%
Inmet Mining Corp. 400 40,153
Rogers Communications, Inc. Cl. B 2,400 109,361
Teck Cominco, Ltd. Cl. B 1,100 52,271
-----------
201,785
-----------
DENMARK - 2.2%
FLSmidth & Co. AS Cl. B 900 95,472
Novo Nordisk AS Cl. B* 200 24,078
-----------
119,550
-----------
EGYPT - 0.5%
Orascom Construction Industries - GDR 172 29,111
-----------
FINLAND - 3.1%
Nokia OYJ 1,458 55,279
Outotec OYJ 1,068 75,183
Wartsila OYJ Cl. B* 600 41,001
-----------
171,463
-----------
FRANCE - 7.5%
Alstom 657 133,211
Cie Generale de Geophysique-Veritas* 202 65,829
Neopost SA 309 43,470
Total SA - ADR 560 45,377
Veolia Environnement 1,406 120,752
-----------
408,639
-----------
GERMANY - 8.0%
E.ON AG 243 44,808
IVG Immobilien AG 926 34,424
Rhoen Klinikum AG 876 27,968
RWE AG 414 51,929
SAP AG 897 52,366
Siemens AG* 377 51,696
Solarworld AG 1,062 60,972
Stada Arzneimittel AG 812 52,808
United Internet AG 2,642 59,328
-----------
436,299
-----------
GREECE - 1.9%
National Bank of Greece SA 805 51,174
Piraeus Bank SA 1,487 52,995
-----------
104,169
-----------
HONG KONG - 4.5%
Kerry Properties, Ltd. 3,500 26,987
Pacific Basin Shipping, Ltd. 23,300 48,408
Sun Hung Kai Properties, Ltd. 10,000 168,626
-----------
244,021
-----------
ITALY - 2.1%
Saipem SpA 977 41,572
UniCredito Italiano SpA 8,908 76,011
-----------
117,583
-----------
JAPAN - 19.7%
Chugai Pharmaceutical Co., Ltd.## 3,700 61,026
East Japan Railway Co. 8 63,018
Fanuc, Ltd.* 200 20,363
Honda Motor Co., Ltd. 1,100 36,917
Japan Tobacco, Inc. 15 82,294
KDDI Corp. 8 59,262
Komatsu, Ltd. 7,700 258,418
Mitsubishi Corp. 2,000 63,296
Mitsubishi Electric Corp. 3,200 40,064
Mitsui Engineering & Shipbuilding Co., Ltd. 7,000 39,621
Nitori Co., Ltd.## 450 21,245
Nomura Holdings, Inc. 2,200 36,840
Secom Co., Ltd. 500 24,040
Sumitomo Heavy Industries, Ltd. 3,000 38,578
The Japan Steel Works, Ltd.## 5,700 94,509
Tokuyama Corp.## 2,100 31,825
Tokyu Land Corp. 2,000 20,050
Toyo Tanso Co., Ltd. 500 50,385
Toyota Motor Corp.* 600 35,369
-----------
1,077,120
-----------
MEXICO - 0.3%
America Movil SAB de CV - ADR 300 19,200
-----------
NETHERLANDS - 2.7%
Koninklijke BAM Groep NV 1,838 48,854
Koninklijke Philips Electronics NV* 1,050 47,187
SBM Offshore NV 1,262 49,481
-----------
145,522
-----------
NORWAY - 1.2%
Renewable Energy Corp. AS* 1,400 64,162
-----------
PERU - 0.2%
Credicorp, Ltd. 200 13,540
-----------
REPUBLIC OF CHINA - 1.2%
China Coal Energy Co. 13,000 38,655
China Communications Construction Co., Ltd. 11,000 26,167
-----------
64,822
-----------
RUSSIAN FEDERATION - 0.9%
Evraz Group SA - GDR 763 48,298
-----------
SINGAPORE - 1.1%
City Developments, Ltd. 5,300 57,840
-----------
SOUTH AFRICA - 0.9%
Aquarius Platinum, Ltd. 1,336 46,817
-----------
SOUTH KOREA - 0.4%
Samsung Heavy Industries Co., Ltd.* 450 23,922
-----------
SPAIN - 1.2%
Iberdrola SA* 422 24,726
Telefonica SA 1,480 41,317
-----------
66,043
-----------
SWEDEN - 0.9%
Assa Abloy AB Cl. B 1,400 28,945
Telefonaktiebolaget LM Ericsson - ADR 580 23,084
-----------
52,029
-----------
SWITZERLAND - 5.8%
ABB, Ltd. 2,810 73,750
Julius Baer Holding AG 618 46,051
Nestle SA 125 55,962
Roche Holding AG* 350 63,247
Swatch Group AG 831 53,031
Syngenta AG* 119 25,568
-----------
317,609
-----------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------
UNITED KINGDOM - 12.5%
BP PLC 4,313 $ 49,867
British American Tobacco PLC 1,757 62,715
BT Group PLC 15,594 97,535
Burberry Group PLC 3,396 45,457
Imperial Tobacco Group PLC 972 44,379
International Power PLC 10,837 99,630
Reckitt Benckiser PLC 881 51,550
Royal Dutch Shell PLC Cl. A 1,230 50,545
Southern Cross Healthcare, Ltd. 2,982 30,984
Standard Chartered PLC 1,587 51,732
Unilever PLC 1,828 57,540
Vodafone Group PLC 11,446 41,159
-----------
683,093
- -----------------------------------------------------------------------------
Total Common Stock (Cost: $3,457,417) 4,971,587
- -----------------------------------------------------------------------------
PREFERRED STOCK - 3.1%
BRAZIL - 0.8%
Usinas Siderurgicas de Minas Gerais SA 600 41,739
-----------
GERMANY - 2.3%
Fresenius SE 860 66,742
Henkel KGaA 1,137 58,357
-----------
125,099
- -----------------------------------------------------------------------------
Total Preferred Stock (Cost: $155,214) 166,838
- -----------------------------------------------------------------------------
EQUITY-LINKED SECURITIES - 1.0%
INDIA - 1.0%
Merrill Lynch Reliance Communications,
Ltd.* - 01/25/11 (Cost: $30,768) 3,889 57,156
- -----------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 58.6%
MONEY MARKET FUNDS - 30.2%
Boston Global Investment Trust -
Enhanced Portfolio, 5.408%** $1,653,600 1,653,600
-----------
TIME DEPOSITS - 28.4%
Wells Fargo Bank 4.370%, 10/01/07 1,556,837 1,556,837
- -----------------------------------------------------------------------------
Total Short Term Investments (Cost: $3,210,437) 3,210,437
- -----------------------------------------------------------------------------
Total Investments - 153.5% (Cost: $6,853,836) 8,406,018
- -----------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (53.5%) (2,930,198)
- -----------------------------------------------------------------------------
Net Assets - 100.0% $ 5,475,820
- -----------------------------------------------------------------------------
</Table>
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
09/30/07.
ADR - AMERICAN DEPOSITORY RECEIPT
GDR - GLOBAL DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
<Table>
<Caption>
PERCENT OF
SECTOR NET ASSETS
- -----------------------------------------------------------------------------
Industrial 24.2%
Consumer, Non-cyclical 16.9
Financial 13.0
Communications 10.3
Basic Materials 9.3
Energy 8.5
Utilities 6.2
Consumer, Cyclical 4.7
Technology 1.8
Short Term Investments 58.6
- -----------------------------------------------------------------------------
Total Investments 153.5
Liabilities in excess of other assets (53.5)
- -----------------------------------------------------------------------------
Net Assets 100.0%
- -----------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48
<Page>
U.S. HIGH YIELD BOND FUND
MANAGEMENT TEAM: DOUGLAS G. FORSYTH, CFA, Portfolio Manager; WILLIAM L.
STICKNEY, Portfolio Manager; JUSTIN KASS, CFA, Portfolio Manager; MICHAEL E.
YEE, Portfolio Manager; ELIZABETH LEMESEVSKI, Analyst; DAVID A. FOSTER, CPA,
CFA, Analyst; JOANNA H. WILLARS, Analyst; NICOLE D. LARRABEE, Fixed Income
Trading Assistant
CHIEF INVESTMENT OFFICER: HORACIO A. VALEIRAS, CFA
GOAL: The U.S. High Yield Bond Fund seeks to deliver total return via high
current income and capital growth from a diversified portfolio consisting
primarily of lower-rated U.S. corporate fixed-income securities.
MARKET OVERVIEW: The high-yield market, as measured by the Merrill Lynch High
Yield Master II Index, gained 0.63% from April 1 through September 30, 2007.. By
way of comparison, results trailed the S&P 500 Index, which rose 8.44%, and the
ten-year Treasury, which advanced 2.76%.
The flat return of the high-yield market masked the volatility that occurred
within the period. Following positive returns in the spring, the convergence of
several events created a significant sell-off in the market over the summer.
Mortgage delinquencies led to rapid quality and price declines in collateralized
mortgage obligations (CMOs). Price declines in the CMO market led to price
declines in all collateralized debt obligations (CDOs). This, in turn, cut off
demand for loans, and the lack of demand for loans ultimately put pressure on
all bond prices. The high-yield market subsequently rebounded to post gains in
both August and September, helped by the Federal Reserve's decision to ease the
fed funds rate 0.50%.
Against this backdrop, most industries within the Merrill Lynch High Yield
Master II Index generated positive returns. The best-performing industries were
hotels, environmental and aerospace, while real estate, banks and building
materials lagged. Across the market, credit upgrades slightly exceeded credit
downgrades by the rating agencies.
PERFORMANCE: The Fund's Class I shares gained 1.12% during the six months ended
September 30, 2007, outperforming the Merrill Lynch High Yield Master II Index,
which rose 0.63%.
PORTFOLIO SPECIFICS: The Fund performed well versus the index in the volatile
environment, and avoiding the weaker credits was certainly a plus. However, much
of the outperformance was due to purchases and trades that we made during the
sharpest downticks in the market, as well as the rebound of good credit. After
trailing in the first half of the period, higher-quality high-yield bonds --
which the Fund emphasizes -- rallied to outperform lower-quality bonds for the
full six months.
The majority of companies held in the portfolio met or exceeded expectations
during the first and second quarter earnings seasons. Positive performers
included a media company that reported better-than-expected operating margins
and a supplier of mobile office units that announced it had agreed to be
acquired at a large premium. Negative performers included a retailer that
experienced fundamental weakness and was sold from the portfolio. The Fund
continued to be rewarded for our credit research, as there were twenty-two
positive rating actions during the period and only four downgrades.
MARKET OUTLOOK: The outlook for high-yield securities is positive. In addition
to the attractiveness of the asset class versus other fixed-income options,
high-yield bonds now offer a compelling total return, as spreads versus
Treasuries have widened and prices have been cut. Furthermore, the default rate
continues to be low, the majority of issuers remain fundamentally sound, and the
Fed may continue to ease monetary policy.
Nicholas-Applegate recognizes that the long-term driver of total return in a
high-yield portfolio is company fundamentals. As such, we continue to build the
Fund one security at a time, performing rigorous credit analysis to identify
companies that are opportunistically capitalizing on change.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN U.S. HIGH YIELD BOND
FUND CLASS I SHARES WITH THE MERRILL LYNCH HIGH YIELD MASTER II INDEX.
[CHART]
<Table>
<Caption>
U.S. HIGH YIELD BOND FUND MERRILL LYNCH HIGH YIELD
CLASS I SHARES MASTER II INDEX
7/31/1996 $250,000 $250,000
8/31/1996 $256,780 $253,100
9/30/1996 $265,702 $258,997
10/31/1996 $268,927 $261,251
11/30/1996 $273,926 $266,502
12/31/1996 $278,314 $268,714
1/31/1997 $283,685 $270,729
2/28/1997 $289,776 $274,898
3/31/1997 $284,740 $271,132
4/30/1997 $285,969 $274,603
5/31/1997 $298,355 $280,397
6/30/1997 $305,705 $284,743
7/31/1997 $315,198 $292,289
8/31/1997 $318,279 $291,938
9/30/1997 $331,438 $297,193
10/31/1997 $332,537 $298,708
11/30/1997 $336,209 $301,516
12/31/1997 $337,882 $304,411
1/31/1998 $349,162 $309,251
2/28/1998 $353,474 $310,519
3/31/1998 $357,326 $313,469
4/30/1998 $360,503 $314,817
5/31/1998 $361,564 $316,706
6/30/1998 $363,444 $318,352
7/31/1998 $366,798 $320,390
8/31/1998 $346,504 $304,210
9/30/1998 $338,199 $305,001
10/31/1998 $329,809 $298,474
11/30/1998 $349,778 $313,965
12/31/1998 $353,159 $313,400
1/31/1999 $361,234 $317,631
2/28/1999 $360,705 $315,471
3/31/1999 $363,377 $319,130
4/30/1999 $374,002 $324,970
5/31/1999 $369,987 $321,981
6/30/1999 $372,230 $321,176
7/31/1999 $374,483 $321,593
8/31/1999 $371,599 $318,184
9/30/1999 $371,449 $316,912
10/31/1999 $372,224 $315,200
11/30/1999 $380,164 $319,298
12/31/1999 $386,897 $321,214
1/31/2000 $387,057 $319,993
2/29/2000 $390,727 $320,665
3/31/2000 $386,070 $315,951
4/30/2000 $389,146 $315,951
5/31/2000 $385,409 $311,970
6/30/2000 $395,091 $317,991
7/31/2000 $397,567 $319,708
8/31/2000 $397,746 $322,842
9/30/2000 $391,185 $320,065
10/31/2000 $380,829 $309,887
11/30/2000 $363,795 $297,987
12/31/2000 $373,720 $304,782
1/31/2001 $395,712 $324,074
2/28/2001 $400,493 $329,000
3/31/2001 $389,078 $322,420
4/30/2001 $385,667 $318,035
5/31/2001 $388,021 $323,633
6/30/2001 $378,357 $315,121
7/31/2001 $383,154 $320,226
8/31/2001 $385,571 $322,756
9/30/2001 $362,546 $300,453
10/31/2001 $375,106 $310,068
11/30/2001 $387,099 $320,982
12/31/2001 $384,991 $318,447
1/31/2002 $385,179 $320,198
2/28/2002 $383,435 $315,971
3/31/2002 $390,696 $323,934
4/30/2002 $395,842 $329,117
5/31/2002 $395,842 $326,583
6/30/2002 $384,206 $301,305
7/31/2002 $380,163 $289,614
8/31/2002 $385,460 $296,855
9/30/2002 $380,946 $292,224
10/31/2002 $381,201 $289,769
11/30/2002 $400,056 $307,880
12/31/2002 $400,266 $312,375
1/31/2003 $402,378 $321,746
2/28/2003 $405,796 $326,090
3/31/2003 $416,531 $334,698
4/30/2003 $435,321 $354,144
5/31/2003 $435,110 $358,217
6/30/2003 $448,232 $368,247
7/31/2003 $446,464 $363,239
8/31/2003 $450,461 $367,888
9/30/2003 $460,276 $377,858
10/31/2003 $468,138 $385,680
11/30/2003 $471,537 $391,002
12/31/2003 $482,499 $400,269
1/31/2004 $487,775 $406,753
2/29/2004 $484,768 $406,306
3/31/2004 $485,937 $409,028
4/30/2004 $485,699 $406,329
5/31/2004 $478,128 $399,949
6/30/2004 $483,852 $405,748
7/31/2004 $488,168 $411,226
8/30/2004 $495,902 $418,710
9/30/2004 $502,722 $424,530
10/31/2004 $511,067 $432,724
11/30/2004 $515,206 $437,224
12/31/2004 $521,647 $443,826
1/31/2005 $521,542 $443,383
2/28/2005 $526,445 $449,723
3/31/2005 $512,125 $437,445
4/30/2005 $507,926 $432,765
5/31/2005 $516,916 $440,511
6/30/2005 $524,825 $448,881
7/31/2005 $532,750 $455,928
8/31/2005 $533,922 $457,570
9/30/2005 $531,946 $452,994
10/31/2005 $529,446 $449,687
11/30/2005 $533,841 $451,846
12/31/2005 $539,339 $455,957
1/31/2006 $544,355 $463,162
2/28/2006 $548,819 $466,080
3/31/2006 $550,026 $469,016
4/30/2006 $553,491 $471,830
5/31/2006 $551,388 $471,736
6/30/2006 $550,451 $469,943
7/31/2006 $555,075 $474,971
8/31/2006 $561,402 $482,666
9/30/2006 $568,925 $488,892
10/31/2006 $577,061 $496,128
11/30/2006 $584,967 $504,066
12/31/2006 $592,337 $509,611
1/31/2007 $596,543 $515,064
2/28/2007 $605,491 $522,223
3/31/2007 $608,579 $523,320
4/30/2007 $617,647 $530,332
5/31/2007 $620,797 $534,097
6/30/2007 $608,940 $524,964
7/31/2007 $590,367 $508,585
8/31/2007 $601,938 $514,231
9/30/2007 $616,023 $526,572
</Table>
Annualized Total Returns As of 9/30/07
<Table>
<Caption>
1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
U.S. High Yield Bond Fund Class I 8.28% 10.09% 6..39%
- --------------------------------------------------------------------------------
Merrill Lynch High Yield
Master II Index 7.73% 12.50% 5..84%
- --------------------------------------------------------------------------------
</Table>
THE GRAPH ABOVE SHOWS THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS I SHARES COMPARED WITH THE MERRILL LYNCH HIGH YIELD MASTER II INDEX
FOR THE PERIODS INDICATED. THE FUND'S CLASS I SHARES CALCULATE THEIR PERFORMANCE
BASED UPON THE HISTORICAL PERFORMANCE OF THEIR CORRESPONDING SERIES OF
NICHOLAS-APPLEGATE MUTUAL FUNDS (RENAMED ING MUTUAL FUNDS), 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. THE TOTAL RETURNS
SHOWN ABOVE DO NOT SHOW THE EFFECTS OF INCOME TAXES ON AN INDIVIDUAL'S
INVESTMENT. IN MOST CASES, TAXES MAY REDUCE YOUR ACTUAL INVESTMENT RETURNS ON
INCOME OR GAINS PAID BY THE FUND OR ANY GAINS YOU MAY REALIZE IF YOU SELL YOUR
SHARES. PAST PERFORMANCE CANNOT GUARANTEE FUTURE RESULTS.
THE MERRILL LYNCH HIGH YIELD MASTER II INDEX IS AN UNMANAGED INDEX CONSISTING OF
U.S. DOLLAR DENOMINATED BONDS THAT ARE ISSUED IN COUNTRIES HAVING A BBB3 OR
HIGHER DEBT RATING WITH AT LEAST ONE YEAR REMAINING UNTIL MATURITY. ALL BONDS
MUST HAVE A CREDIT RATING BELOW INVESTMENT GRADE BUT NOT IN DEFAULT.
THE UNMANAGED INDEX DIFFERS FROM THE FUND IN COMPOSITION, DOES NOT PAY
MANAGEMENT FEES OR EXPENSES AND INCLUDES REINVESTED INCOME AND DIVIDENDS. ONE
CANNOT INVEST DIRECTLY IN AN INDEX.
BOND PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE
DIRECTION FROM INTEREST RATES. SINCE MARKETS CAN GO DOWN AS WELL AS UP,
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS. YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
49
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------
Corporate Bonds - 89.3%
ADVERTISING SALES - 1.5%
Lamar Media Corp. 6.625%, 08/15/15 $ 855,000 $ 829,350
-----------
ADVERTISING SERVICES - 1.5%
RH Donnelley Corp. 8.875%, 01/15/16 800,000 819,000
-----------
AEROSPACE/DEFENSE-EQUIPMENT - 1.0%
TransDigm, Inc. 7.750%, 07/15/14 535,000 543,025
-----------
AGRICULTURAL CHEMICALS - 1.3%
The Mosaic Co. 144A# 7.625%, 12/01/16 675,000 723,094
-----------
APPAREL MANUFACTURERS - 4.1%
Levi Strauss & Co. 9.750%, 01/15/15 810,000 854,550
Oxford Industries, Inc. 8.875%, 06/01/11 560,000 568,400
Phillips-Van Heusen 8.125%, 05/01/13 830,000 856,975
-----------
2,279,925
-----------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL - 4.6%
Accuride Corp. 8.500%, 02/01/15 910,000 878,150
American Axle & Manufacturing, Inc. 7.875%, 03/01/17 870,000 843,900
Tenneco, Inc. 8.625%, 11/15/14 820,000 830,250
-----------
2,552,300
-----------
CABLE TV - 3.6%
CCH I Holdings LLC/CCH I Holdings Capital Corp. 11.000%, 10/01/15 430,000 437,525
Echostar DBS Corp. 7.125%, 02/01/16 850,000 877,625
Mediacom Broadband LLC 8.500%, 10/15/15 300,000 302,250
Mediacom LLC/Mediacom Capital Corp. 9.500%, 01/15/13 375,000 381,562
-----------
1,998,962
-----------
CASINO HOTELS - 1.4%
Wynn Las Vegas Capital Corp. 6.625%, 12/01/14 785,000 773,225
-----------
CELLULAR TELECOMMUNICATIONS - 2.6%
Centennial Communications Corp. 10.000%, 01/01/13 260,000 276,250
Cricket Communications, Inc. 9.375%, 11/01/14 560,000 571,200
MetroPCS Wireless, Inc. 144A# 9.250%, 11/01/14 600,000 615,000
-----------
1,462,450
-----------
CHEMICALS-DIVERSIFIED - 0.7%
Lyondell Chemical Co. 8.250%, 09/15/16 330,000 373,725
-----------
COMMERCIAL SERVICES - 1.2%
ARAMARK Corp. 8.500%, 02/01/15 635,000 650,875
-----------
COMMERCIAL SERVICES-FINANCE - 1.4%
Deluxe Corp. 7.375%, 06/01/15 770,000 764,225
-----------
COMPUTER SERVICES - 1.2%
Unisys Corp. 8.000%, 10/15/12 715,000 681,038
-----------
CONSUMER PRODUCTS-MISCELLANEOUS - 1.9%
Central Garden and Pet Co. 9.125%, 02/01/13 380,000 358,150
Jarden Corp. 7.500%, 05/01/17 710,000 690,475
-----------
1,048,625
-----------
CONTAINERS-METAL/GLASS - 1.7%
Crown Americas LLC/Crown Americas Capital Corp. 7.750%, 11/15/15 905,000 938,937
-----------
DIVERSIFIED MANUFACTURING OPERATIONS - 2.0%
Harland Clarke Holdings Corp. 9.500%, 05/15/15 880,000 789,800
Park-Ohio Industries, Inc. 8.375%, 11/15/14 330,000 320,100
-----------
1,109,900
-----------
ELECTRIC-GENERATION - 1.2%
Edison Mission Energy 144A# 7.000%, 05/15/17 690,000 683,100
-----------
ELECTRONIC MEASURE INSTRUMENTS - 1.3%
Itron, Inc. 7.750%, 05/15/12 735,000 723,975
-----------
FINANCE-AUTO LOANS - 3.4%
Ford Motor Credit Co. LLC 9.875%, 08/10/11 670,000 679,158
Ford Motor Credit Co. LLC 7.000%, 10/01/13 375,000 339,288
GMAC LLC 6.750%, 12/01/14 965,000 887,800
-----------
1,906,246
-----------
FINANCE-INVESTMENT BANKERS/BROKERS - 1.1%
E*Trade Financial Corp. 8.000%, 06/15/11 620,000 620,000
-----------
INDEPENDENT POWER PRODUCER - 1.3%
NRG Energy, Inc. 7.375%, 01/15/17 735,000 736,838
-----------
MACHINERY-CONSTRUCTION & MINING - 1.1%
Terex Corp. 7.375%, 01/15/14 620,000 632,400
-----------
MEDICAL-HMO - 1.2%
Health Net, Inc. 6.375%, 06/01/17 715,000 690,927
-----------
MEDICAL-HOSPITALS - 2.7%
Community Health Systems, Inc. 144A# 8.875%, 07/15/15 740,000 764,050
HCA, Inc. 144A# 9.250%, 11/15/16 705,000 750,825
-----------
1,514,875
-----------
MEDICAL-NURSING HOMES - 1.3%
Sun Healthcare Group, Inc. 144A# 9.125%, 04/15/15 710,000 727,750
-----------
MEDICAL-OUTPATIENT/HOME MEDICAL CARE - 1.4%
Res-Care, Inc. 7.750%, 10/15/13 770,000 766,150
-----------
METAL-DIVERSIFIED - 1.2%
Freeport-McMoRan Copper & Gold, Inc. 8.375%, 04/01/17 600,000 657,000
-----------
NETWORKING PRODUCTS - 1.2%
Anixter International, Inc. 5.950%, 03/01/15 750,000 690,000
-----------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------
NON-FERROUS METALS - 0.8%
PNA Group, Inc. 10.750%, 09/01/16 $ 410,000 $ 420,250
-----------
OIL COMPANIES-EXPLORATION & PRODUCTION - 1.5%
Forest Oil Corp. 144A# 7.250%, 06/15/19 585,000 587,925
Mariner Energy, Inc. 8.000%, 05/15/17 230,000 225,975
-----------
813,900
-----------
OIL FIELD MACHINERY & EQUIPMENT - 1.3%
Complete Production Services, Inc. 8.000%, 12/15/16 750,000 745,312
-----------
PAPER & RELATED PRODUCTS - 1.4%
Neenah Paper, Inc. 7.375%, 11/15/14 790,000 766,300
-----------
PHYSICAL THERAPY/REHABILITATION CENTERS - 1.6%
Psychiatric Solutions, Inc. 7.750%, 07/15/15 865,000 880,138
-----------
PIPELINES - 2.4%
Copano Energy LLC 8.125%, 03/01/16 495,000 506,137
Dynegy Holdings, Inc. 144A# 7.750%, 06/01/19 835,000 802,644
-----------
1,308,781
-----------
PRINTING-COMMERCIAL - 1.1%
Cenveo Corp. 7.875%, 12/01/13 670,000 613,050
-----------
PUBLISHING-PERIODICALS - 1.5%
Idearc, Inc. 8.000%, 11/15/16 835,000 837,087
-----------
RENTAL AUTO/EQUIPMENT - 2.6%
Hertz Corp. 10.500%, 01/01/16 535,000 580,475
Williams Scotsman, Inc. 8.500%, 10/01/15 775,000 856,375
-----------
1,436,850
-----------
RETAIL-APPAREL/SHOE - 0.8%
Brown Shoe Co., Inc. 8.750%, 05/01/12 400,000 414,000
-----------
RETAIL-COMPUTER EQUIPMENT - 1.3%
GSC Holdings Corp. 8.000%, 10/01/12 670,000 700,150
-----------
RETAIL-DRUG STORE - 1.1%
Rite Aid Corp.. 8.625%, 03/01/15 285,000 259,350
Rite Aid Corp. 7.500%, 03/01/17 355,000 335,919
-----------
595,269
-----------
RETAIL-PROPANE DISTRIBUTION - 2.6%
Inergy LP/Inergy Finance Corp. 8.250%, 03/01/16 845,000 876,687
Star Gas Partners LP/Star Gas Finance Co. 10.250%, 02/15/13 525,000 549,938
-----------
1,426,625
-----------
RETAIL-REGIONAL DEPARTMENT STORES - 1.4%
Neiman-Marcus Group, Inc. 10.375%, 10/15/15 705,000 771,975
-----------
SEISMIC DATA COLLECTION - 0.6%
Seitel, Inc. 9.750%, 02/15/14 360,000 342,000
-----------
SPECIAL PURPOSE ENTITY - 4.2%
AMR HoldCo, Inc. EmCare HoldCo, Inc. 10.000%, 02/15/15 810,000 862,650
Hughes Network Systems LLC/HNS Finance Corp. 9.500%, 04/15/14 295,000 298,687
KAR Holdings, Inc. 144A# 8.750%, 05/01/14 845,000 813,312
MedCath Holdings Corp. 9.875%, 07/15/12 338,000 359,970
-----------
2,334,619
-----------
STEEL-PRODUCERS - 1.4%
Steel Dynamics, Inc. 144A# 6.750%, 04/01/15 805,000 780,850
-----------
TELECOMMUNICATIONS SERVICES - 4.8%
MasTec, Inc. 7.625%, 02/01/17 1,155,000 1,129,012
Time Warner Telecom Holdings, Inc. 9.250%, 02/15/14 625,000 651,563
West Corp. 9.500%, 10/15/14 410,000 425,375
West Corp. 11.000%, 10/15/16 445,000 469,475
-----------
2,675,425
-----------
TELEPHONE-INTEGRATED - 4.9%
Cincinnati Bell, Inc. 8.375%, 01/15/14 755,000 756,887
Level 3 Financing, Inc. 9.250%, 11/01/14 235,000 232,650
Qwest Capital Funding, Inc. 7.250%, 02/15/11 815,000 823,150
Windstream Corp. 8.625%, 08/01/16 820,000 878,425
-----------
2,691,112
-----------
WIRE & CABLE PRODUCTS - 0.5%
General Cable Corp. 7.125%, 04/01/17 290,000 285,650
-----------
WIRELESS EQUIPMENT - 1.4%
American Tower Corp. 144A# 7.000%, 10/15/17 750,000 758,437
- -----------------------------------------------------------------------------------------------
Total Corporate Bonds (Cost: $48,804,227) 49,495,697
- -----------------------------------------------------------------------------------------------
FOREIGN CORPORATE BONDS - 5.4%
CELLULAR TELECOMMUNICATIONS - 2.3%
Millicom International Cellular SA 10.000%, 12/01/13 485,000 517,737
Rogers Wireless, Inc. 8.000%, 12/15/12 735,000 769,971
-----------
1,287,708
-----------
OIL COMPANIES-EXPLORATION & PRODUCTION - 0.6%
OPTI Canada, Inc. 144A# 8.250%, 12/15/14 355,000 359,438
-----------
PAPER & RELATED PRODUCTS - 1.0%
Domtar, Inc. 7.125%, 08/15/15 560,000 548,800
-----------
SATELLITE TELECOMMUNICATIONS - 1.5%
Intelsat Subsidiary Holding Co., Ltd. 8.250%, 01/15/13 810,000 826,200
- -----------------------------------------------------------------------------------------------
Total Foreign Corporate Bonds (Cost: $2,885,650) 3,022,146
- -----------------------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
51
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 4.3%
TIME DEPOSIT - 4.3%
Wells Fargo Bank 4.370%, 10/01/07 (Cost: $2,395,154) $2,395,154 $ 2,395,154
- -----------------------------------------------------------------------------------------------
Total Investments - 99.0% (Cost: $54,085,031) 54,912,997
- -----------------------------------------------------------------------------------------------
Other Assets in Excess of Liabilities - 1.0% 542,545
- -----------------------------------------------------------------------------------------------
Net Assets - 100.0% $55,455,542
- -----------------------------------------------------------------------------------------------
</Table>
# 144A SECURITY. CERTAIN CONDITION FOR PUBLIC SALE MAY EXIST. THE TOTAL
MARKET VALUE OF 144A SECURITIES OWNED AT SEPTEMBER 30, 2007 WAS $8,366,425
OR 15.1% OF NET ASSETS.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
<Table>
<Caption>
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Communications 26..8%
Consumer, Cyclical 17..2
Consumer, Non-cyclical 16..4
Financial 8..8
Basic Materials 7..7
Industrial 7..6
Energy 6..4
Utilities 2..6
Technology 1..2
Short Term Investments 4..3
- --------------------------------------------------------------------------------
Total Investments 99..0
Other assets in excess of liabilities 1..0
- --------------------------------------------------------------------------------
Net Assets 100..0%
- --------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
52
<Page>
(This page intentionally left blank)
53
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS
For a Class I share outstanding during the period indicated
<Table>
<Caption>
DISTRIBUTIONS FROM:
-------------------------
NET ASSET NET NET REALIZED TOTAL FROM NET NET REALIZED
VALUE, INVESTMENT AND UNREALIZED INVESTMENT INVESTMENT CAPITAL
BEGINNING INCOME (LOSS) (2) GAINS (LOSS) OPERATIONS INCOME GAINS
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. MICRO CAP
For the period ended 09/30/07 (1) $15.33 $(0.09) $ 1.80 $ 1.71 $ -- $ --
For the year ended 03/31/07 17.43 (0.12) (0.19) (0.31) -- (1.79)
For the year ended 03/31/06 12.83 (0.11) 5.06 4.95 -- (0.35)
For the year ended 03/31/05 14.69 (0.09) (1.09) (1.18) -- (0.68)
For the year ended 03/31/04 7.44 (0.13) 7.38 7.25 -- --
For the year ended 03/31/03 10.88 (0.12) (3.32) (3.44) -- --
U.S. EMERGING GROWTH
For the period ended 09/30/07 (1) $13.09 $(0.03) $ 2.11 $ 2.08 $ -- $ --
For the year ended 03/31/07 13.90 (0.07) 0.19(11) 0.12 -- (0.93)
For the year ended 03/31/06 9.77 (0.11) 4.25 4.14 -- (0.01)
For the year ended 03/31/05 9.61 (0.07) 0.23 0.16 -- --
For the year ended 03/31/04 6.32 (0.09) 3.38 3.29 -- --
For the year ended 03/31/03 9.59 (0.07) (3.20) (3.27) -- --
U.S. SMALL CAP VALUE
For the period ended 09/30/07 (1) $19.29 $0.17 $(1.03) $(0.86) $ -- $ --
For the year ended 03/31/07 19.85 0.06 1.90 1.96 (0.08) (2.44)
For the year ended 03/31/06 17.40 0.11 3.58 3.69 (0.06) (1.18)
For the year ended 03/31/05 17.64 0.02 2.06 2.08 (0.01) (2.31)
For the year ended 03/31/04 10.23 0.03 7.86 7.89 (0.02) (0.46)
For the year ended 03/31/03 15.62 0.07 (3.29) (3.22) (0.12) (2.05)
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/07 (1) $19.77 $(0.02) $ 2.88 $ 2.86 $ -- $ --
For the year ended 03/31/07 17.86 0.02 1.89 1.91 -- --
For the year ended 03/31/06 15.67 0.03 2.16 2.19 -- --
For the year ended 03/31/05 15.06 0.07 0.54 0.61 -- --
For the year ended 03/31/04 12.73 (0.02) 2.35 2.33 -- --
For the year ended 03/31/03 18.08 (0.05) (5.30) (5.35) -- --
U.S. SMALL TO MID CAP GROWTH
7/31/07 (Commenced) to 09/30/07 (1) $10.00 $(0.01) $ 0.76 $ 0.75 $ -- $ --
U.S. CONVERTIBLE
For the period ended 09/30/07 (1) $24.35 $0.19 $ 2.37 $ 2.56 $(0.18) $ --
For the year ended 03/31/07 24.57 0.45 2.03 2.48 (0.47) (2.23)
For the year ended 03/31/06 22.44 0.27 3.45 3.72 (0.55) (1.04)
For the year ended 03/31/05 23.11 0.39 0.66 1.05 (0.45) (1.27)
For the year ended 03/31/04 17.72 0.55 5.43 5.98 (0.59) --
For the year ended 03/31/03 21.35 0.63 (3.55) (2.92) (0.71) --
</Table>
54
<Page>
<Table>
<Caption>
NET ASSET NET ASSETS,
TOTAL VALUE, TOTAL ENDING
DISTRIBUTIONS ENDING RETURN (3) (IN 000'S)
- ------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. MICRO CAP
For the period ended 09/30/07 (1) $ -- $17.04 11.15% $ 81,596
For the year ended 03/31/07 (1.79) 15.33 (1.35%) 84,405
For the year ended 03/31/06 (0.35) 17.43 39.04% 78,058
For the year ended 03/31/05 (0.68) 12.83 (8.17%) 69,246
For the year ended 03/31/04 -- 14.69 97.45% 68,876
For the year ended 03/31/03 -- 7.44 (31.62%) 35,625
U.S. EMERGING GROWTH
For the period ended 09/30/07 (1) $ -- $15.17 15.89% $ 8,622
For the year ended 03/31/07 (0.93) 13.09 1.30% 7,409
For the year ended 03/31/06 (0.01) 13.90 42.38% 6,721
For the year ended 03/31/05 -- 9.77 1.66% 12,043
For the year ended 03/31/04 -- 9.61 52.06% 32,095
For the year ended 03/31/03 -- 6.32 (34.10%) 36,756
U.S. SMALL CAP VALUE
For the period ended 09/30/07 (1) $ -- $18.43 (4.46%) $ 27,759
For the year ended 03/31/07 (2.52) 19.29 10.21% 67,326
For the year ended 03/31/06 (1.24) 19.85 21.97% 120,104
For the year ended 03/31/05 (2.32) 17.40 11.91% 86,017
For the year ended 03/31/04 (0.48) 17.64 77.64% 65,791
For the year ended 03/31/03 (2.17) 10.23 (21.54%) 10,980
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/07 (1) $ -- $22.63 14.47% $ 994
For the year ended 03/31/07 -- 19.77 10.69% 945
For the year ended 03/31/06 -- 17.86 13.98% 667
For the year ended 03/31/05 -- 15.67 4.05% 780
For the year ended 03/31/04 -- 15.06 18.30% 3,518
For the year ended 03/31/03 -- 12.73 (29.59%) 18,328
U.S. SMALL TO MID CAP GROWTH
7/31/07 (Commenced) to 09/30/07 (1) $ -- $10.75 7.50%(9) $ 5,727
U.S. CONVERTIBLE
For the period ended 09/30/07 (1) $(0.18) $26.73 10.53% $ 40,239
For the year ended 03/31/07 (2.70) 24.35 10.79% 39,022
For the year ended 03/31/06 (1.59) 24.57 17.15% 31,627
For the year ended 03/31/05 (1.72) 22.44 4.62% 35,397
For the year ended 03/31/04 (0.59) 23.11 34.15% 50,103
For the year ended 03/31/03 (0.71) 17.72 (13.69%) 44,901
<Caption>
RATIOS TO AVERAGE NET ASSETS (4)
---------------------------------------------------------------------------------
EXPENSES NET OF FUND'S
NET EXPENSE EXPENSES NET OF REIMBURSEMENT/ PORTFOLIO
INVESTMENT TOTAL (REIMBURSEMENTS)/ REIMBURSEMENT/ RECOUPMENT TURNOVER
INCOME (LOSS) EXPENSES RECOUPMENT (5) RECOUPMENT OFFSET (6) RATE
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. MICRO CAP
For the period ended 09/30/07 (1) (1.08%) 1.55% -- 1.55% 1.30% 87%
For the year ended 03/31/07 (0.75%) 1.58% -- 1.58% 1.19% 165%
For the year ended 03/31/06 (0.78%) 1.64% (0.07%) 1.57% 1.10%(10) 180%
For the year ended 03/31/05 (0.72%) 1.63% (0.07%) 1.56% 1.12% 266%
For the year ended 03/31/04 (1.08%) 1.64% (0.07%) 1.57% 1.19%(8) 298%
For the year ended 03/31/03 (1.36%) 1.75% (0.16%) 1.59% 1.55%(7) 164%
U.S. EMERGING GROWTH
For the period ended 09/30/07 (1) (0.37%) 1.19% -- 1.19% 0.64% 63%
For the year ended 03/31/07 (0.54%) 1.21% -- 1.21% 0.72% 148%
For the year ended 03/31/06 (1.04%) 1.89% (0.39%) 1.50% 1.17%(10) 128%
For the year ended 03/31/05 (0.75%) 1.63% (0.17%) 1.46% 1.06% 142%
For the year ended 03/31/04 (1.04%) 1.48% (0.00%) 1.48% 1.26%(8) 166%
For the year ended 03/31/03 (0.96%) 1.45% (0.17%) 1.28% 1.26%(7) 118%
U.S. SMALL CAP VALUE
For the period ended 09/30/07 (1) 1.66% 1.39% -- 1.39% 1.26% 17%
For the year ended 03/31/07 0.33% 1.31% -- 1.31% 1.01% 55%
For the year ended 03/31/06 0.60% 1.31% (0.01%) 1.30% 0.98%(10) 53%
For the year ended 03/31/05 0.11% 1.33% (0.03%) 1.30% 1.13% 73%
For the year ended 03/31/04 0.18% 1.35% (0.01%) 1.34% 1.19%(8) 101%
For the year ended 03/31/03 0.47% 1.54% (0.26%) 1.28% 1.25%(7) 109%
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/07 (1) (0.15%) 1.12% -- 1.12% 1.05% 55%
For the year ended 03/31/07 0.09% 1.13% -- 1.13% 1.05% 100%
For the year ended 03/31/06 0.19% 1.67% (0.53%) 1.14% 1.04%(10) 147%
For the year ended 03/31/05 0.45% 1.66% (0.54%) 1.12% 1.00% 197%
For the year ended 03/31/04 (0.16%) 1.33% (0.20%) 1.13% 0.93%(8) 172%
For the year ended 03/31/03 (0.34%) 1.27% (0.30%) 0.97% 0.95%(7) 193%
U.S. SMALL TO MID CAP GROWTH
7/31/07 (Commenced) to 09/30/07 (1) (0.45%) 0.88% -- 0.88% 0.83% 20%
U.S. CONVERTIBLE
For the period ended 09/30/07 (1) 1.47% 1.01% -- 1.01% 0.86% 54%
For the year ended 03/31/07 1.89% 1.02% -- 1.02% 0.85% 92%
For the year ended 03/31/06 1.02% 1.14% (0.11%) 1.03% 0.87%(10) 92%
For the year ended 03/31/05 1.68% 1.10% (0.08%) 1.02% 0.85% 102%
For the year ended 03/31/04 2.57% 1.10% (0.06%) 1.04% 1.00%(8) 103%
For the year ended 03/31/03 3.17% 1.16% (0.15%) 1.01% 1.00%(7) 114%
</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) THE EXPENSE REIMBURSEMENT AGREEMENT WAS TERMINATED ON JANUARY 23, 2006.
(6) NET EXPENSES INCLUDE CERTAIN ITEMS NOT SUBJECT TO EXPENSE REIMBURSEMENT.
(7) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSE LIMITATION
AGREEMENT WHEREBY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES), OF THE U.S. MICRO CAP, U.S.
SYSTEMATIC LARGE CAP GROWTH, GLOBAL SELECT, INTERNATIONAL GROWTH, AND U.S.
HIGH YIELD BOND DO NOT EXCEED 1.56%, 1.00%, 1.20%, 1.40%, AND 0.75% FOR THE
PERIOD 04/01/02 TO 06/30/02, 1.56%, 0.90%, 1.05%, 1.15%, AND 0.75% PERIOD
07/01/02 TO 01/21/03, 1.40%, 1.00%, 1.10%, 1.15%, AND 0.80% FOR THE PERIOD
01/22/03 TO 03/31/03, RESPECTIVELY. U.S. EMERGING GROWTH, U.S. SMALL CAP
VALUE, U.S. EQUITY GROWTH, CONVERTIBLE AND INTERNATIONAL GROWTH
OPPORTUNITIES HAD RATES THROUGHOUT THE YEAR OF 1.25%, 1.30%, 1.00%, 1.00%
AND 1.40% RESPECTIVELY.
(8) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSES LIMITATION
AGREEMENT WHERE BY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES), OF THE U.S. MICRO CAP, U.S. EMERGING
GROWTH, U.S. SYSTEMATIC LARGE CAP GROWTH, U.S. EQUITY GROWTH, U.S.
CONVERTIBLE, GLOBAL SELECT, INTERNATIONAL GROWTH, INTERNATIONAL GROWTH
OPPORTUNITIES, AND U.S. HIGH YIELD BOND DO NOT EXCEED 1.40%, 1.25%, 1.00%,
1.00%, 1.00%, 1.10%, 1.15%, AND 0.60% FOR THE PERIOD 04/01/03 TO 07/28/03,
1.56%, 1.48%, 1.12%, 1.23%, 1.02%, 1.16%, 1.41%, 1.56%, AND 0.63% FOR THE
PERIOD 07/29/03 TO 03/31/04, RESPECTIVELY. U.S. SMALL CAP VALUE DOES NOT
EXCEED 1.30% FOR THE PERIOD 04/01/03 TO 07/28/03, 1.45% FOR THE PERIOD
07/29/03 TO 02/23/04, 1.30% AND 1.65% FOR THE PERIOD 02/24/04 TO 03/31/04.
(9) INCEPTION TO DATE RETURN.
(10) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSE LIMITATION
AGREEMENT WHEREBY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES), OF THE U.S. EMERGING GROWTH, GLOBAL
SELECT, INTERNATIONAL GROWTH, INTERNATIONAL GROWTH OPPORTUNITIES, AND
INTERNATIONAL ALL CAP GROWTH DO NOT EXCEED 1.20%, 1.15%, 1.39%, 1.42%, AND
1.15% FOR THE PERIOD 01/24/06 TO 03/31/06 RESPECTIVELY. U.S. MICRO CAP,
U.S. SMALL CAP VALUE, U.S. SYSTEMATIC LARGE CAP GROWTH, U.S. CONVERTIBLE
AND U.S. HIGH YIELD BOND HAD RATES THROUGHOUT THE YEAR OF 1.56%, 1.30%,
1.12%, 1.02% AND 0.63% RESPECTIVELY.
(11) THE U.S. EMERGING GROWTH FUND RECEIVED $28,454 FROM A SECURITY LITIGATION
SETTLEMENT DURING THE YEAR WHICH IS REFLECTED IN REALIZED GAINS. THIS EVENT
HAD A $0.05 PER SHARE IMPACT TO THE FUND.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
DISTRIBUTIONS FROM:
-------------------------
NET ASSET NET NET REALIZED TOTAL FROM NET NET
VALUE, INVESTMENT AND UNREALIZED INVESTMENT INVESTMENT REALIZED
BEGINNING INCOME (LOSS) (2) GAINS (LOSS) OPERATIONS INCOME CAPITAL GAINS
- -------------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY FUNDS
GLOBAL SELECT
For the period ended 09/30/07 (1) $18.60 $ 0.10 $ 2.67 $ 2.77 $ -- $ --
For the year ended 03/31/07 18.96 0.06 1.85 1.91 -- (2.27)
For the year ended 03/31/06 16.09 0.03 3.97 4.00 (0.03) (1.10)
For the year ended 03/31/05 15.58 0.06 1.37 1.43 -- (0.92)
For the year ended 03/31/04 10.26 (0.01) 5.33 5.32 -- --
For the year ended 03/31/03 13.67 (0.02) (3.39) (3.41) -- --
INTERNATIONAL GROWTH
For the period ended 09/30/07 (1) $22.35 $ 0.14 $ 4.74 $ 4.88 $ -- $ --
For the year ended 03/31/07 22.69 0.07 2.86 2.93 (0.07) (3.20)
For the year ended 03/31/06 20.47 0.16 6.05 6.21 -- (3.99)
For the year ended 03/31/05 19.09 0.08 1.72 1.80 -- (0.42)
For the year ended 03/31/04 12.83 0.30 6.00 6.30 (0.04) --
For the year ended 03/31/03 17.17 0.12 (4.46) (4.34) -- --
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/07 (1) $57.36 $ 0.11 $11.01 $11.12 $ -- $ --
For the year ended 03/31/07 49.86 0.05 9.07 9.12 -- (1.62)
For the year ended 03/31/06 35.01 (0.01) 15.10 15.09 (0.24) --
For the year ended 03/31/05 29.43 0.32 5.35 5.67 (0.09) --
For the year ended 03/31/04 17.39 0.18 11.86 12.04 -- --
For the year ended 03/31/03 22.72 0.07 (5.40) (5.33) -- --
EMERGING MARKETS
For the period ended 09/30/07 (1) $12.79 $ 0.05 $ 4.04 $ 4.09 $ -- $ --
8/21/06 (Commenced) to 03/31/07 10.00 0.02 2.84 2.86 (0.07) --
INTERNATIONAL SYSTEMATIC
For the period ended 09/30/07 (1) $16.02 $ 0.11 $ 1.00 $ 1.11 $ -- $ --
For the year ended 03/31/07 13.70 0.09 2.50 2.59 (0.02) (0.25)
7/06/05 (Commenced) to 03/31/06 10.00 0.06 3.81 3.87 (0.01) (0.16)
INTERNATIONAL ALL CAP GROWTH
For the period ended 09/30/07 (1) $14.41 $ 0.09 $3.20 $ 3.29 $ -- $ --
For the year ended 03/31/07 13.00 0.07 1.93 2.00 (0.08) (0.51)
For the year ended 03/31/06 9.08 0.01 3.92 3.93 (0.01) --
For the year ended 03/31/05 8.19 0.01 0.92 0.93 -- (0.04)
For the year ended 03/31/04 4.84 (0.01) 3.36 3.35 -- --
For the year ended 03/31/03 6.74 (0.03) (1.87) (1.90) -- --
FIXED INCOME FUND
U.S. HIGH YIELD BOND
For the period ended 09/30/07 (1) $10.27 $ 0.35 $(0.24) $ 0.11 $(0.39) $ --
For the year ended 03/31/07 10.00 0.73 0.30 1.03 (0.76) --
For the year ended 03/31/06 10.04 0.70 0.02 0.72 (0.76) --
For the year ended 03/31/05 10.34 0.85 (0.31) 0.54 (0.84) (0.00)(13)
For the year ended 03/31/04 9.65 0.86 0.63 1.49 (0.80) --
For the year ended 03/31/03 9.88 0.83 (0.23) 0.60 (0.83) --
</Table>
56
<Page>
<Table>
<Caption>
NET ASSET NET ASSETS,
TOTAL VALUE, TOTAL ENDING
DISTRIBUTIONS ENDING RETURN (3) (IN 000'S)
- ---------------------------------------------------------------------------------------
GLOBAL EQUITY FUNDS
GLOBAL SELECT
For the period ended 09/30/07 (1) $ -- $21.37 14.89% $ 62,189
For the year ended 03/31/07 (2.27) 18.60 10.64% 78,550
For the year ended 03/31/06 (1.13) 18.96 25.76% 77,225
For the year ended 03/31/05 (0.92) 16.09 9.27% 66,115
For the year ended 03/31/04 -- 15.58 51.85% 78,327
For the year ended 03/31/03 -- 10.26 (24.95%) 69,776
INTERNATIONAL GROWTH
For the period ended
09/30/07 (1) $ -- $27.23 21.83% $ 8,348
For the year ended 03/31/07 (3.27) 22.35 13.80% 15,000
For the year ended 03/31/06 (3.99) 22.69 33.63% 45,889
For the year ended 03/31/05 (0.42) 20.47 9.49% 41,394
For the year ended 03/31/04 (0.04) 19.09 49.17% 51,450
For the year ended 03/31/03 -- 12.83 (25.28%) 88,029
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/07 (1) $ -- $68.48 19.39% $133,179
For the year ended 03/31/07 (1.62) 57.36 18.71% 104,003
For the year ended 03/31/06 (0.24) 49.86 43.34% 107,749
For the year ended 03/31/05 (0.09) 35.01 19.28% 55,462
For the year ended 03/31/04 -- 29.43 69.24% 54,015
For the year ended 03/31/03 -- 17.39 (23.46%) 65,351
EMERGING MARKETS
For the period ended 09/30/07 (1) $ -- $16.88 31.98% $ 2,274
8/21/06 (Commenced) to 03/31/07 (0.07) 12.79 28.65%(9) 94
INTERNATIONAL SYSTEMATIC
For the period ended 09/30/07 (1) $ -- $17.13 6.93% $ 30,662
For the year ended 03/31/07 (0.27) 16.02 19.04% 4,623
7/06/05 (Commenced) to 03/31/06 (0.17) 13.70 38.92%(9) 4,662
INTERNATIONAL ALL CAP GROWTH
For the period ended 09/30/07 (1) $ -- $17.70 22.83% $ 5,476
For the year ended 03/31/07 (0.59) 14.41 15.75% 23,827
For the year ended 03/31/06 (0.01) 13.00 43.28% 20,562
For the year ended 03/31/05 (0.04) 9.08 11.34% 33,900
For the year ended 03/31/04 -- 8.19 69.21% 28,700
For the year ended 03/31/03 -- 4.84 (28.19%) 19,700
FIXED INCOME FUND
U.S. HIGH YIELD BOND
For the period ended 09/30/07 (1) $(0.39) $ 9.99 1.12% $ 55,456
For the year ended 03/31/07 (0.76) 10.27 10.76% 63,925
For the year ended 03/31/06 (0.76) 10.00 7.40% 81,187
For the year ended 03/31/05 (0.84) 10.04 5.40% 131,677
For the year ended 03/31/04 (0.80) 10.34 16.67% 102,110
For the year ended 03/31/03 (0.83) 9.65 6.61% 120,182
<Caption>
RATIOS TO AVERAGE NET ASSETS (4)
-------------------------------------------------------------------------
NET EXPENSES EXPENSES NET OF FUND'S
INVESTMENT EXPENSE NET OF REIMBURSEMENT/ PORTFOLIO
INCOME TOTAL (REIMBURSEMENTS)/ REIMBURSEMENT/ RECOUPMENT TURNOVER
(LOSS) EXPENSES RECOUPMENT (5) RECOUPMENT OFFSET (6) RATE
- --------------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY FUNDS
GLOBAL SELECT
For the period ended 09/30/07 (1) 0.95% 1.16% -- 1.16% 1.00% 37%
For the year ended 03/31/07 0.35% 1.16% -- 1.16% 1.00% 105%
For the year ended 03/31/06 0.16% 1.13% (0.00%) 1.13% 0.88%(10) 139%
For the year ended 03/31/05 0.41% 1.15% (0.01%) 1.14% 0.95% 164%
For the year ended 03/31/04 (0.05%) 1.28% (0.10%) 1.18% 1.01%(8) 226%
For the year ended 03/31/03 (0.16%) 1.42% (0.27%) 1.15% 1.13%(7) 230%(11)
INTERNATIONAL GROWTH
For the period ended
09/30/07 (1) 1.10% 1.38% -- 1.38% 0.88% 62%
For the year ended 03/31/07 0.30% 1.41% -- 1.41% 1.14% 119%
For the year ended 03/31/06 0.73% 1.37% (0.00%) 1.37% 0.99%(10) 167%
For the year ended 03/31/05 0.42% 1.39% (0.00%) 1.39% 1.08% 203%
For the year ended 03/31/04 1.35% 1.49% (0.04%) 1.45% 1.19%(8) 186%
For the year ended 03/31/03 0.76% 1.46% (0.21%) 1.25% 1.23%(7) 203%
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/07 (1) 0.36% 1.40% -- 1.40% 1.16% 44%
For the year ended 03/31/07 0.09% 1.43% -- 1.43% 1.18% 127%
For the year ended 03/31/06 (0.02%) 1.38% (0.00%) 1.38% 1.07%(10) 168%
For the year ended 03/31/05 1.05% 1.42% (0.00%) 1.42% 1.11% 110%
For the year ended 03/31/04 0.74% 1.47% (0.00%) 1.47% 1.28%(8) 124%
For the year ended 03/31/03 0.36% 1.54% (0.10%) 1.44% 1.42%(7) 129%
EMERGING MARKETS
For the period ended 09/30/07 (1) 0.66% 1.41% -- 1.41% 1.30% 82%
8/21/06 (Commenced) to 03/31/07 0.23% 1.63% -- 1.63% 1.52% 22%
INTERNATIONAL SYSTEMATIC
For the period ended 09/30/07 (1) 2.13% 1.01% -- 1.01% 0.87% 105%
For the year ended 03/31/07 0.70% 0.93%(14) -- 0.93% 0.70% 210%
7/06/05 (Commenced) to 03/31/06 0.78% 2.94% (1.69%) 1.25% 1.11%(12) 103%
INTERNATIONAL ALL CAP GROWTH
For the period ended 09/30/07 (1) 0.95% 1.15% -- 1.15% 1.01% 55%
For the year ended 03/31/07 0.49% 1.18% -- 1.18% 1.04% 118%
For the year ended 03/31/06 0.08% 1.89% (0.47%) 1.42% 1.39%(10) 196%
For the year ended 03/31/05 (0.42%) 2.07% (0.59%) 1.48% 1.48% 166%
For the year ended 03/31/04 (0.87%) 2.25% (0.77%) 1.48% 1.48% 153%
For the year ended 03/31/03 (1.37%) 2.47% (0.98%) 1.49% 1.49%(15) 190%
FIXED INCOME FUND
U.S. HIGH YIELD BOND
For the period ended 09/30/07 (1) 6.90% 0.86% -- 0.86% 0.63% 36%
For the year ended 03/31/07 7.21% 0.64% -- 0.64% 0.52%(16) 92%
For the year ended 03/31/06 6.70% 0.82% (0.18%) 0.64% 0.56%(10) 112%
For the year ended 03/31/05 7.82% 0.82% (0.19%) 0.63% 0.60% 123%
For the year ended 03/31/04 8.43% 0.87% (0.23%) 0.64% 0.61%(8) 134%
For the year ended 03/31/03 8.78% 1.01% (0.24%) 0.77% 0.77%(7) 137%
</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) THE EXPENSE REIMBURSEMENT AGREEMENT WAS TERMINATED ON JANUARY 23, 2006.
(6) NET EXPENSES INCLUDE CERTAIN ITEMS NOT SUBJECT TO EXPENSE REIMBURSEMENT.
(7) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSE LIMITATION
AGREEMENT WHEREBY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES), OF THE U.S. MICRO CAP, U.S.
SYSTEMATIC LARGE CAP GROWTH, GLOBAL SELECT, INTERNATIONAL GROWTH, AND U.S.
HIGH YIELD BOND DO NOT EXCEED 1.56%, 1.00%, 1.20%, 1.40%, AND 0.75% FOR THE
PERIOD 04/01/02 TO 06/30/02, 1.56%, 0.90%, 1.05%, 1.15%, AND 0.75% PERIOD
07/01/02 TO 01/21/03, 1.40%, 1.00%, 1.10%, 1.15%, AND 0.80% FOR THE PERIOD
01/22/03 TO 03/31/03, RESPECTIVELY. U.S. EMERGING GROWTH, U.S. SMALL CAP
VALUE, U.S. EQUITY GROWTH, CONVERTIBLE AND INTERNATIONAL GROWTH
OPPORTUNITIES HAD RATES THROUGHOUT THE YEAR OF 1.25%, 1.30%, 1.00%, 1.00%
AND 1.40% RESPECTIVELY.
(8) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSES LIMITATION
AGREEMENT WHERE BY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES), OF THE U.S. MICRO CAP, U.S. EMERGING
GROWTH, U.S. SYSTEMATIC LARGE CAP GROWTH, U.S. EQUITY GROWTH, U.S.
CONVERTIBLE, GLOBAL SELECT, INTERNATIONAL GROWTH, INTERNATIONAL GROWTH
OPPORTUNITIES, AND U.S. HIGH YIELD BOND DO NOT EXCEED 1.40%, 1.25%, 1.00%,
1.00%, 1.00%, 1.10%, 1.15%, AND 0.60% FOR THE PERIOD 04/01/03 TO 07/28/03,
1.56%, 1.48%, 1.12%, 1.23%, 1.02%, 1.16%, 1.41%, 1.56%, AND 0.63% FOR THE
PERIOD 07/29/03 TO 03/31/04, RESPECTIVELY. U.S. SMALL CAP VALUE DOES NOT
EXCEED 1.30% FOR THE PERIOD 04/01/03 TO 07/28/03, 1.45% FOR THE PERIOD
07/29/03 TO 02/23/04, 1.30% AND 1.65% FOR THE PERIOD 02/24/04 TO 03/31/04.
(9) INCEPTION TO DATE RETURN.
(10) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSE LIMITATION
AGREEMENT WHEREBY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES), OF THE U.S. EMERGING GROWTH, GLOBAL
SELECT, INTERNATIONAL GROWTH, INTERNATIONAL GROWTH OPPORTUNITIES, AND
INTERNATIONAL ALL CAP GROWTH DO NOT EXCEED 1.20%, 1.15%, 1.39%, 1.42%, AND
1.15% FOR THE PERIOD 01/24/06 TO 03/31/06 RESPECTIVELY. U.S. MICRO CAP,
U.S. SMALL CAP VALUE, U.S. SYSTEMATIC LARGE CAP GROWTH, U.S. CONVERTIBLE
AND U.S. HIGH YIELD BOND HAD RATES THROUGHOUT THE YEAR OF 1.56%, 1.30%,
1.12%, 1.02% AND 0.63% RESPECTIVELY.
(11) DUE TO THE REALIGNMENT OF THE FUND'S PORTFOLIO IN CONNECTION WITH THE
COMBINATION WITH GLOBAL TECHNOLOGY FUND AND GLOBAL HEALTHCARE FUND, THE
COST OF PURCHASES OF $27,251,277 AND PROCEEDS FROM SALES OF $35,006,695
HAVE BEEN EXCLUDED FROM THE PORTFOLIO TURNOVER CALCULATION.
(12) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSES LIMITATION
AGREEMENT WHERE BY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES), OF THE INTERNATIONAL SYSTEMATIC FUND
DO NOT EXCEED 1.75% FOR THE PERIOD 07/06/05 TO 07/31/05 AND 1.20% FOR THE
PERIOD 08/01/05 TO 09/30/05, RESPECTIVELY.
(13) LESS THAN ONE PENNY PER SHARE.
(14) FOR THE PERIOD FROM 11/28/06 TO 12/21/06 THE UNITARY FEES FOR INTERNATIONAL
SYSTEMATIC FUND CLASS I WERE REDUCED FROM 0.48% TO 0.23%. THE UNITARY FEES
WERE RESUMED TO 0.48% THROUGH MARCH 31, 2007.
(15) FOR THE YEAR ENDED MARCH 31, 2003 RATIOS INCLUDE 12B-1 FEES FROM CLASS R
WHICH WERE EXCHANGED TO CLASS I SHARES ON SEPTEMBER 30, 2002. HAD THOSE
FEES NOT BEEN INCLUDED, THE EXPENSE AND NET INVESTMENT INCOME LOSS RATIOS
WOULD HAVE BEEN 1.48% AND (1.38%) RESPECTIVELY.
(16) FOR THE YEAR ENDED MARCH 31, 2007 RATIOS DO NOT INCLUDE ONE TIME EXPENSE
CREDIT. HAD THIS CREDIT BEEN INCLUDED, THE EXPENSE RATIOS WOULD HAVE BEEN
DECREASED BY 0.07%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
57
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS
For a Class II share outstanding during the period indicated
<Table>
<Caption>
DISTRIBUTIONS FROM:
---------------------------
NET REALIZED
NET ASSET NET AND TOTAL FROM NET
VALUE, INVESTMENT UNREALIZED INVESTMENT INVESTMENT NET REALIZED
BEGINNING INCOME (LOSS) (2) GAINS (LOSS) OPERATIONS INCOME CAPITAL GAINS
- -----------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. MICRO CAP
For the period ended 09/30/07 (1) $15.44 $ (0.07) $ 1..81 $ 1.74 $ -- $ --
For the year ended 03/31/07 17.50 (0.08) (0..19) (0.27) -- (1.79)
For the year ended 03/31/06 12.85 (0.09) 5..09 5.00 -- (0.35)
09/30/04 (commenced) to 03/31/05 12.49 (0.03) 1..07 1.04 -- (0.68)
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/07 (1) $19.67 $ 0.00(7) $ 2..86 $ 2.86 $ -- $ --
For the year ended 03/31/07 17.75 0.05 1..87 1.92 (0.00)(7) --
09/30/05 (Commenced) to 03/31/06 16.35 0.02 1..51 1.53 (0.13) --
U.S. CONVERTIBLE
For the period ended 09/30/07 (1) $24.36 $ 0.21 $ 2..36 $ 2.57 $(0.19) $ --
For the year ended 03/31/07 24.58 0.47 2..04 2.51 (0.50) (2.23)
09/30/05 (Commenced) to 03/31/06 23.97 0.30 1..63 1.93 (0.28) (1.04)
GLOBAL FUNDS
GLOBAL SELECT
For the period ended 09/30/07 (1) $18.61 $ 0.09 $ 2..69 $ 2.78 $ -- $ --
For the year ended 03/31/07 18.97 0.08 1..84 1.92 (0.01) (2.27)
For the year ended 03/31/06 16.09 0.04 3..98 4.02 (0.04) (1.10)
For the year ended 03/31/05 15.58 0.07 1..36 1.43 -- (0.92)
6/30/03 (Commenced) to 03/31/04 12.12 (0.01) 3..47 3.46 -- --
INTERNATIONAL GROWTH
For the period ended 09/30/07 (1) $22.36 $ 0.25 $ 4..11 $ 4.36 $ -- $ --
For the year ended 03/31/07 22.71 0.14 2..86 3.00 (0.15) (3.20)
1/23/06 (Commenced) to 03/31/06 21.64 1.85 (0..78) 1.07 -- --
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/07 (1) $57.63 $ 0.17 $11..05 $11.22 $ -- $ --
For the year ended 03/31/07 50.01 0.02 9..22 9.24 -- (1.62)
For the year ended 03/31/06 35.02 0.13 15..06 15.19 (0.20) --
For the year ended 03/31/05 29.47 0.38 5..32 5.70 (0.15) --
6/05/03 (Commenced) to 03/31/04 20.85 0.14 8..48 8.62 -- --
EMERGING MARKETS
For the period ended 09/30/07 (1) $12.78 $ 0.04 $ 4..06 $ 4.10 $ -- $ --
03/27/07 (Commenced) to 03/31/07 12.61 0.00(7) 0..17 0.17 -- --
INTERNATIONAL SYSTEMATIC
For the period ended 09/30/07 (1) $16.00 $ 0.08 $ 1..05 $ 1.13 $ -- $ --
12/22/06 (Commenced) to 03/31/07 15.48 0.07 0..45 0.52 -- --
</Table>
58
<Page>
<Table>
<Caption>
NET ASSET
TOTAL VALUE, TOTAL
DISTRIBUTIONS ENDING RETURN (3)
- ---------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. MICRO CAP
For the period ended 09/30/07 (1) $ -- $17.18 11.27%
For the year ended 03/31/07 (1.79) 15.44 (1.11%)
For the year ended 03/31/06 (0.35) 17.50 39.37%
09/30/04 (commenced) to 03/31/05 (0.68) 12.85 8.17%(9)
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/07 (1) $ -- $22.53 14.54%
For the year ended 03/31/07 (0.00) 19.67 10.83%
09/30/05 (Commenced) to 03/31/06 (0.13) 17.75 9.43%(9)
U.S.CONVERTIBLE
For the period ended 09/30/07 (1) $(0.19) $26.74 10.58%
For the year ended 03/31/07 (2.73) 24.36 10.92%
09/30/05 (Commenced) to 03/31/06 (1.32) 24.58 8.47%(9)
GLOBAL FUNDS
GLOBAL SELECT
For the period ended 09/30/07 (1) $ -- $21.39 14.94%
For the year ended 03/31/07 (2.28) 18.61 10.67%
For the year ended 03/31/06 (1.14) 18.97 25.90%
For the year ended 03/31/05 (0.92) 16.09 9.27%
6/30/03 (Commenced) to 03/31/04 -- 15.58 28.55%(9)
INTERNATIONAL GROWTH
For the period ended 09/30/07 (1) $ -- $26.72 19.50%
For the year ended 03/31/07 (3.35) 22.36 14.12%
1/23/06 (Commenced) to 03/31/06 -- 22.71 4.94%(9)
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/07 (1) $ -- $68.85 19.47%
For the year ended 03/31/07 (1.62) 57.63 18.90%
For the year ended 03/31/06 (0.20) 50.01 43.55%
For the year ended 03/31/05 (0.15) 35.02 19.40%
6/05/03 (Commenced) to 03/31/04 -- 29.47 41.34%(9)
EMERGING MARKETS
For the period ended 09/30/07 (1) $ -- $16.88 32.08%
03/27/07 (Commenced) to 03/31/07 -- 12.78 1.35%(9)
INTERNATIONAL SYSTEMATIC
For the period ended 09/30/07 (1) $ -- $17.13 7.06%
12/22/06 (Commenced) to 03/31/07 -- 16.00 3.36%(9)
<Caption>
RATIOS TO AVERAGE NET ASSETS (4)
-----------------------------------------------------------------------
EXPENSES EXPENSES NET OF FUND'S
NET ASSETS, NET EXPENSE NET OF REIMBURSEMENT/ PORTFOLIO
ENDING INVESTMENT TOTAL (REIMBURSEMENTS)/ REIMBURSEMENT/ RECOUPMENT TURNOVER
(IN 000'S) INCOME (LOSS) EXPENSES RECOUPMENT (5) RECOUPMENT (5) OFFSET (6) RATE
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. MICRO CAP
For the period ended 09/30/07 (1) $ 2,940 (0.83%) 1.30% -- 1.30% 1.05% 87%
For the year ended 03/31/07 2,692 (0.49%) 1.32% -- 1.32% 0.91% 165%
For the year ended 03/31/06 5,875 (0.56%) 1.40% (0.09%) 1.31% 0.85%(8) 180%
09/30/04 (commenced) to 03/31/05 15,200 (0.41%) 1.37% (0.06%) 1.31% 0.97% 266%
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/07 (1) $ 14,050 (0.01%) 0.97% -- 0.97% 0.90% 55%
For the year ended 03/31/07 10,040 0.28% 0.98% -- 0.98% 0.91% 100%
09/30/05 (Commenced) to 03/31/06 3,743 0.27% 1.37% (0.37%) 1.00% 0.94%(8) 147%
U.S.CONVERTIBLE
For the period ended 09/30/07 (1) $ 9,686 1.64% 0.91% -- 0.91% 0.76% 54%
For the year ended 03/31/07 7,880 2.05% 0.92% -- 0.92% 0.75% 92%
09/30/05 (Commenced) to 03/31/06 3,634 2.26% 1.01% (0.09%) 0.92% 0.77%(8) 92%
GLOBAL FUNDS
GLOBAL SELECT
For the period ended 09/30/07 (1) $100,437 0.89% 1.11% -- 1.11% 0.95% 37%
For the year ended 03/31/07 90,871 0.44% 1.11% -- 1.11% 0.95% 105%
For the year ended 03/31/06 100,610 0.21% 1.08% -- 1.08% 0.83%(8) 139%
For the year ended 03/31/05 69,548 0.44% 1.10% (0.01%) 1.09% 0.90% 164%
6/30/03 (Commenced) to 03/31/04 35,817 (0.08%) 1.24% (0.12%) 1.12% 0.94% 226%
INTERNATIONAL GROWTH
For the period ended 09/30/07 (1) $ 10,042 1.61% 0.98% -- 0.98% 0.70% 62%
For the year ended 03/31/07 52,420 0.64% 1.02% -- 1.02% 0.75% 119%
1/23/06 (Commenced) to 03/31/06 56,501 1.21% 0.99% -- 0.99% 0.73%(8) 167%
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/07 (1) $ 51,148 0.51% 1.26% -- 1.26% 1.03% 44%
For the year ended 03/31/07 73,640 0.05% 1.28% -- 1.28% 1.03% 127%
For the year ended 03/31/06 32,565 0.36% 1.22% -- 1.22% 0.91%(8) 168%
For the year ended 03/31/05 35,233 1.19% 1.27% -- 1.27% 0.97% 110%
6/05/03 (Commenced) to 03/31/04 60,394 0.66% 1.29% -- 1.29% 1.11% 124%
EMERGING MARKETS
For the period ended 09/30/07 (1) $ 32,247 0.44% 1.29% -- 1.29% 1.20% 82%
03/27/07 (Commenced) to 03/31/07 39,081 1.28% 1.18% -- 1.18% 1.18% 22%
INTERNATIONAL SYSTEMATIC
For the period ended 09/30/07 (1) $ 33,779 1.82% 0.86% -- 0.86% 0.72% 105%
12/22/06 (Commenced) to 03/31/07 12,722 1.33% 0.85% -- 0.85% 0.55% 210%
</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) THE EXPENSE REIMBURSEMENT AGREEMENT WAS TERMINATED ON JANUARY 23, 2006.
(6) NET EXPENSES INCLUDE CERTAIN ITEMS NOT SUBJECT TO EXPENSE REIMBURSEMENT.
(7) LESS THAN ONE PENNY PER SHARE.
(8) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSE LIMITATION
AGREEMENT WHEREBY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES), OF THE U.S. SYSTEMATIC LARGE CAP
GROWTH CLASS II, GLOBAL SELECT CLASS II, INTERNATIONAL GROWTH CLASS II AND
INTERNATIONAL GROWTH OPPORTUNITIES CLASS II DO NOT EXCEED 0.97%, 1.10%,
0.99% AND 1.27% FOR THE PERIOD 01/24/06 TO 03/31/06 RESPECTIVELY. U.S.
MICRO CAP CLASS II HAD RATE OF 1.31% THROUGHOUT THE YEAR. U.S. CONVERTIBLE
FUND CLASS II HAD RATE OF 0.92% SINCE INCEPTION 09.30.05.
(9) INCEPTION TO DATE RETURN.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
59
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS
For a Class III share outstanding during the period indicated
<Table>
<Caption>
DISTRIBUTIONS FROM:
-------------------------
NET ASSET NET NET REALIZED TOTAL FROM NET NET
VALUE, INVESTMENT AND UNREALIZED INVESTMENT INVESTMENT REALIZED
BEGINNING INCOME (LOSS)(2) GAINS (LOSS) OPERATIONS INCOME CAPITAL GAINS
- ------------------------------------------------------------------------------------------------------------------------
GLOBAL FUNDS
INTERNATIONAL GROWTH OPPORTUNITIES
For the period ended 09/30/07 (1) $57.50 $ 0.33 10.88 11.21 $ -- $ --
For the year ended 03/31/07 49.87 0.24 9.01 9.25 -- (1.62)
09/30/05 (Commenced) to 03/31/06 39.26 (0.10) 11.03 10.93 (0.32) --
INTERNATIONAL SYSTEMATIC
For the period ended 09/30/07 (1) $16.01 $ 0.12 1.02 1.14 $ -- $ --
12/21/06 (Commenced) to 03/31/07 15.36 0.09 0.56 0.65 -- --
</Table>
For a Class IV share outstanding during the period indicated
<Table>
<Caption>
DISTRIBUTIONS FROM:
-------------------------
NET ASSET NET NET REALIZED TOTAL FROM NET NET
VALUE, INVESTMENT AND UNREALIZED INVESTMENT INVESTMENT REALIZED
BEGINNING INCOME (LOSS)(2) GAINS (LOSS) OPERATIONS INCOME CAPITAL GAINS
- ------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUND
U.S. CONVERTIBLE
For the period ended 09/30/07 (1) $24.37 $ 0.11 2.48 2.59 $(0.21) $ --
12/30/06 (Commenced) to 03/31/07 23.47 0.12 0.91 1.03 (0.13) --
</Table>
60
<Page>
<Table>
<Caption>
NET ASSET NET ASSETS,
TOTAL VALUE, TOTAL ENDING
DISTRIBUTIONS ENDING RETURN (3) (IN 000'S)
- -------------------------------------------------------------------------
GLOBAL FUNDS
INTERNATIONAL GROWTH
OPPORTUNITIES
For the period
ended
09/30/07 (1) $ -- $68.71 19.50% $ 3,234
For the year
ended 03/31/07 (1.62) 57.50 19.00% 4,694
09/30/05
(Commenced)
to 03/31/06 (0.32) 49.87 28.05%(8) 6,771
INTERNATIONAL
SYSTEMATIC
For the period
ended
09/30/07 (1) $ -- $17.15 7.12% $ 58,447
12/21/06
(Commenced)
to 03/31/07 -- 16.01 4.23%(8) 54,604
<Caption>
RATIOS TO AVERAGE NET ASSETS (4)
----------------------------------------------------------------------------
EXPENSES NET OF FUND'S
NET EXPENSE EXPENSES NET OF REIMBURSEMENT/ PORTFOLIO
INVESTMENT TOTAL (REIMBURSEMENTS)/ REIMBURSEMENT/ RECOUPMENT TURNOVER
INCOME (LOSS) EXPENSES RECOUPMENT (5) RECOUPMENT OFFSET (6) RATE
- -------------------------------------------------------------------------------------------------------------
GLOBAL FUNDS
INTERNATIONAL GROWTH
OPPORTUNITIES
For the period
ended
09/30/07 (1) 0.96% 1.21% -- 1.21% 0.98% 44%
For the year
ended 03/31/07 0.46% 1.23% -- 1.23% 0.97% 127%
09/30/05
(Commenced)
to 03/31/06 0.46% 1.18% -- 1.18% 0.87%(7) 168%
INTERNATIONAL
SYSTEMATIC
For the period
ended
09/30/07 (1) 2.36% 0.77% -- 0.77% 0.63% 105%
12/21/06
(Commenced)
to 03/31/07 1.95% 0.76% -- 0.76% 0.46% 210%
</Table>
<Table>
<Caption>
NET ASSET NET ASSETS,
TOTAL VALUE, TOTAL ENDING
DISTRIBUTIONS ENDING RETURN (3) (IN 000'S)
- -------------------------------------------------------------------------
U.S. EQUITY FUND
U.S. CONVERTIBLE
For the period
ended
09/30/07 (1) $(0.21) $26.75 10.66% $106,398
12/30/06
(Commenced)
to 03/31/07 (0.13) 24.37 4.39%(8) 97,007
</Table>
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS (4)
----------------------------------------------------------------------------
EXPENSES NET OF FUND'S
NET EXPENSE EXPENSES NET OF REIMBURSEMENT/ PORTFOLIO
INVESTMENT TOTAL (REIMBURSEMENTS)/ REIMBURSEMENT/ RECOUPMENT TURNOVER
INCOME (LOSS) EXPENSES RECOUPMENT (5) RECOUPMENT OFFSET (6) RATE
- -------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUND
U.S. CONVERTIBLE
For the period
ended
09/30/07 (1) 1.72% 0.76% -- 0.76% 0.62% 54%
12/30/06
(Commenced)
to 03/31/07 1.97% 0.77% -- 0.77% 0.60% 92%
</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) THE EXPENSE REIMBURSEMENT AGREEMENT WAS TERMINATED ON JANUARY 23, 2006.
(6) NET EXPENSES INCLUDE CERTAIN ITEMS NOT SUBJECT TO EXPENSE REIMBURSEMENT.
(7) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSES LIMITATION
AGREEMENT WHERE BY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES), INTERNATIONAL GROWTH OPPORTUNITIES
FUND CLASS III DO NOT EXCEED 1.22% FOR THE PERIOD 01/24/06 TO 03/31/06.
(8) INCEPTION TO DATE RETURN.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
61
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
<Table>
<Caption>
U.S. SYSTEMATIC U.S. SMALL TO
U.S. EMERGING U.S. SMALL CAP LARGE CAP MID CAP
SEPTEMBER 30, 2007 (UNAUDITED) U.S. MICRO CAP GROWTH VALUE GROWTH GROWTH FUND (1)
- -------------------------------------------------------------------------------------------------------------------------------
Assets
Investments, at value* $85,344,540 $17,038,227 $27,666,623 $ 22,155,815 $5,771,203
Foreign currencies, at value** -- -- -- -- --
Cash -- -- -- -- --
Receivables:
Investment securities sold 30,487 3,813 -- 12 42,554
Capital shares sold 113,175 45,807 6,190 16,270 --
Dividends 10,594 1,889 41,176 10,044 1,468
Foreign taxes receivable -- -- -- -- --
Interest -- -- -- -- --
Expense offset 49,408 11,529 105,516 3,965 --
Other assets 421 51 342 81 --
----------- ----------- ----------- ------------ -----------
Total assets 85,548,625 17,101,316 27,819,847 22,186,187 5,815,225
----------- ----------- ----------- ------------ -----------
Liabilities
Payables:
Bank overdraft $ -- $ -- $ -- $ -- $ --
Investments purchased 775,275 121,294 -- 219,200 83,556
Capital shares redeemed 134,562 26,443 22,400 7,954 --
Collateral on securities loaned -- 4,429,950 -- -- --
Distributions fee -- -- -- -- --
To investment advisor and administrator 62,753 6,931 17,105 7,265 2,090
Accrued Expenses and other liabilites 40,295 5,417 21,426 11,388 2,108
----------- ----------- ----------- ------------ -----------
Total Liabilities 1,012,885 4,590,035 60,931 245,807 87,754
----------- ----------- ----------- ------------ -----------
NET ASSETS 84,535,740 12,511,281 27,758,916 21,940,380 5,727,471
=========== =========== =========== ============ ===========
* Investments, at cost 70,479,519 14,515,203 26,448,953 18,498,536 5,284,364
=========== =========== =========== ============ ===========
** Foreign currencies, at cost -- -- -- -- --
=========== =========== =========== ============ ===========
Net Assets Consist of:
Paid-in capital $59,373,305 $15,277,034 $ (58,455) $ 25,322,477 $5,326,714
Undistributed net investment income (loss) (482,066) (25,926) 518,314 1,926 (4,057)
Accumulated net realized gain (loss) on
investments and foreign currencies 10,779,480 (5,262,851) 26,081,387 (7,041,302) (82,025)
Net unrealized depreciation of investments
and of other assets and liabilities
denominated in foreign currencies 14,865,021 2,523,024 1,217,670 3,657,279 486,839
----------- ----------- ----------- ------------ -----------
Net Assets applicable to all shares
outstanding $84,535,740 $12,511,281 $27,758,916 $ 21,940,380 $5,727,471
=========== =========== =========== ============ ===========
Net Assets of Class I shares $81,596,152 $ 8,622,452 $27,758,916 $ 994,431 $5,727,471
Net Assets of Class II shares 2,939,588 -- -- 14,050,192 --
Net Assets of Class III shares -- -- -- -- --
Net Assets of Class IV shares -- -- -- -- --
Net Assets of Class R shares -- 3,888,829 -- 6,895,757 --
=========== =========== =========== ============ ===========
Class I Shares outstanding 4,789,131 568,364 1,505,973 43,938 532,674
Class II Shares outstanding 171,080 -- -- 623,545 --
Class III Shares outstanding -- -- -- -- --
Class IV Shares outstanding -- -- -- -- --
Class R Shares outstanding -- 261,546 -- 310,552 --
=========== =========== =========== ============ ===========
Net Asset Value -- Class I Share $ 17.04 $ 15.17 $ 18.43 $ 22.63 $ 10.75
Net Asset Value -- Class II Share $ 17.18 $ -- $ -- $ 22.53 $ --
Net Asset Value -- Class III Share $ -- $ -- $ -- $ -- $ --
Net Asset Value -- Class IV Share $ -- $ -- $ -- $ -- $ --
Net Asset Value -- Class R Share $ -- $ 14.87 $ -- $ 22.20 $ --
=========== =========== =========== ============ ===========
</Table>
62
<Page>
<Table>
<Caption>
INTERNATIONAL
U.S. GLOBAL NTERNATIONAL GROWTH
SEPTEMBER 30, 2007 (UNAUDITED) CONVERTIBLE SELECT GROWTH OPPORTUNITIES
- ------------------------------------------------------------------------------------------------------
Assets
Investments, at value* $156,264,103 $173,800,900 $ 21,102,797 $223,680,073
Foreign currencies, at value** -- 9,472 3,845 2,078,353
Cash -- 9,602 3,043 --
Receivables:
Investment securities sold 2,613,750 1,912,168 564,160 19,761,965
Capital shares sold 370,894 134,109 100,597 91,856
Dividends -- 233,469 27,566 179,207
Foreign taxes receivable -- 84,699 31,461 19,517
Interest 596,979 -- -- --
Expense offset -- 53,752 52,796 72,879
Other assets 685 813 334 1,230
------------ ------------ ------------ ------------
Total assets 159,846,411 176,238,984 21,886,599 245,885,080
------------ ------------ ------------ ------------
Liabilities
Payables:
Bank overdraft $ -- $ -- $ -- $ 258,495
Investments purchased 3,300,005 722,799 597,501 22,062,542
Capital shares redeemed 120,894 134,190 -- 128,415
Collateral on securities loaned -- 12,611,900 -- 35,653,305
Distributions fee -- -- -- --
To investment advisor and administrator 63,968 77,545 7,590 107,485
Accrued Expenses and other liabilites 38,622 66,582 17,141 113,519
------------ ------------ ------------ ------------
Total Liabilities 3,523,489 13,613,016 622,232 58,323,761
------------ ------------ ------------ ------------
NET ASSETS 156,322,922 162,625,968 21,264,367 187,561,319
============ ============ ============ ============
* Investments, at cost 136,312,760 141,115,683 16,677,478 165,059,424
============ ============ ============ ============
** Foreign currencies, at cost -- 9,354 3,833 2,078,069
============ ============ ============ ============
Net Assets Consist of:
Paid-in capital $139,315,292 $100,823,703 $(4,595,690) $ 99,876,678
Undistributed net investment income
(loss) 83,877 1,362,001 844,098 665,665
Accumulated net realized gain (loss)
on investments and foreign currencies (3,027,590) 27,750,721 20,587,974 28,417,238
Net unrealized depreciation of
investments and of other assets and
liabilities denominated in foreign
currencies 19,951,343 32,689,543 4,427,985 58,601,738
------------ ------------ ------------ ------------
Net Assets applicable to all shares
outstanding $156,322,922 $162,625,968 $ 21,264,367 $187,561,319
============ ============ ============ ============
Net Assets of Class I shares $ 40,238,764 $ 62,188,796 $ 8,348,319 $133,179,265
Net Assets of Class II shares 9,686,285 100,437,172 10,041,983 51,147,716
Net Assets of Class III shares -- -- -- 3,234,338
Net Assets of Class IV shares 106,397,873 -- -- --
Net Assets of Class R shares -- -- 2,874,065 --
============ ============ ============ ============
Class I Shares outstanding 1,505,190 2,910,326 306,538 1,944,873
Class II Shares outstanding 362,266 4,696,616 375,773 742,871
Class III Shares outstanding -- -- -- 47,071
Class IV Shares outstanding 3,976,990 -- -- --
Class R Shares outstanding -- -- 108,397 --
============ ============ ============ ============
Net Asset Value -- Class I Share $ 26.73 $ 21.37 $ 27.23 $ 68.48
Net Asset Value -- Class II Share $ 26.74 $ 21.39 $ 26.72 $ 68.85
Net Asset Value -- Class III Share $ -- $ -- $ -- $ 68.71
Net Asset Value -- Class IV Share $ 26.75 $ -- $ -- $ --
Net Asset Value -- Class R Share $ -- $ -- $ 26.51 $ --
============ ============ ============ ============
<Caption>
INTERNATIONAL
EMERGING INTERNATIONAL ALL CAP U.S. HIGH YIELD
SEPTEMBER 30, 2007 (UNAUDITED) MARKETS SYSTEMATIC GROWTH BOND
- ---------------------------------------------------------------------------------------------------------
Assets
Investments, at value* $35,880,591 $107,075,829 $ 8,406,018 $54,912,997
Foreign currencies, at value** 245,019 64,619 26,579 --
Cash 5,233 8,266 -- --
Receivables:
Investment securities sold 176,823 9,914,313 20,637,280 --
Capital shares sold 4,124 16,953,776 25 56,846
Dividends 52,821 228,235 33,146 --
Foreign taxes receivable -- 34,390 20,878 --
Interest -- -- -- 1,238,283
Expense offset -- 240 -- 37,333
Other assets 1,218 55,069 114 438
----------- ------------ ----------- -----------
Total assets 36,365,829 134,334,737 29,124,740 56,245,897
----------- ------------ ----------- -----------
Liabilities
Payables:
Bank overdraft $ -- $ -- $ 1,332,149 $ --
Investments purchased 240,307 10,145,097 20,637,980 750,000
Capital shares redeemed 3,899 64,291 -- 7,755
Collateral on securities loaned 1,567,650 1,177,005 1,653,600 --
Distributions fee -- -- -- --
To investment advisor and administrator 21,929 36,732 17,824 16,112
Accrued Expenses and other liabilites 11,325 23,240 7,367 16,488
----------- ------------ ----------- -----------
Total Liabilities 1,845,110 11,446,365 23,648,920 790,355
----------- ------------ ----------- -----------
NET ASSETS 34,520,719 122,888,372 5,475,820 55,455,542
=========== ============ =========== ===========
* Investments, at cost 29,237,441 100,617,744 6,853,836 54,085,031
=========== ============ =========== ===========
** Foreign currencies, at cost 242,013 64,619 19,811 --
=========== ============ =========== ===========
Net Assets Consist of:
Paid-in capital $23,419,100 $111,088,816 $ (526,675) $ 57,952,326
Undistributed net investment income
(loss) 83,853 1,200,226 81,783 357,818
Accumulated net realized gain (loss)
on investments and foreign currencies 4,374,914 4,178,775 4,359,961 (3,682,568)
Net unrealized depreciation of
investments and of other assets and
liabilities denominated in foreign
currencies 6,642,852 6,420,555 1,560,751 827,966
----------- ------------ ----------- -----------
Net Assets applicable to all shares
outstanding $34,520,719 $122,888,372 $ 5,475,820 $55,455,542
=========== ============ =========== ===========
Net Assets of Class I shares $ 2,273,616 $ 30,661,796 $ 5,475,820 $55,455,542
Net Assets of Class II shares 32,247,103 33,779,476 -- --
Net Assets of Class III shares -- 58,447,100 -- --
Net Assets of Class IV shares -- -- -- --
Net Assets of Class R shares -- -- -- --
=========== ============ =========== ===========
Class I Shares outstanding 134,681 1,789,896 309,286 5,549,669
Class II Shares outstanding 1,910,659 1,971,469 -- --
Class III Shares outstanding -- 3,407,405 -- --
Class IV Shares outstanding -- -- -- --
Class R Shares outstanding -- -- -- --
=========== ============ =========== ===========
Net Asset Value -- Class I Share $ 16.88 $ 17.13 $ 17.70 $ 9.99
Net Asset Value -- Class II Share $ 16.88 $ 17.13 $ -- $ --
Net Asset Value -- Class III Share $ -- $ 17.15 $ -- $ --
Net Asset Value -- Class IV Share $ -- $ -- $ -- $ --
Net Asset Value -- Class R Share $ -- $ -- $ -- $ --
=========== ============ =========== ===========
</Table>
(1) COMMENCED OPERATIONS ON 7/31/07
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
63
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
STATEMENTS OF OPERATIONS
<Table>
<Caption>
U.S. SYSTEMATIC U.S. SMALL TO
PERIOD ENDED U.S. EMERGING U.S. SMALL CAP LARGE CAP MID CAP
SEPTEMBER 30, 2007 (UNAUDITED) U.S. MICRO CAP GROWTH VALUE GROWTH GROWTH FUND (1)
- -------------------------------------------------------------------------------------------------------------------------------
Investment Income
Dividends, net of foreign taxes* $ 100,061 $ 15,992 $ 751,874 $ 85,550 $ 3,376
Interest -- -- 4 -- --
---------- ---------- ------------ ---------- --------
Total Income 100,061 15,992 751,878 85,550 3,376
---------- ---------- ------------ ---------- --------
Expenses
Advisory fees 443,727 43,604 184,634 42,313 4,302
Administration fees 236,076 23,837 127,400 51,556 3,442
Shareholder servicing fees -- 4,358 76 7,936 --
Professional fees 5,708 782 2,768 1,125 58
Trustees' fees and expenses 6,427 797 4,605 1,259 71
Interest and credit facility fees 101 -- 22,367 427 --
Miscellaneous 2,490 1,019 2,203 1,140 --
---------- ---------- ------------ ---------- --------
Total Expenses 694,529 74,397 344,053 105,756 7,873
Expense offset (112,402) (32,479) (31,539) (6,041) (440)
---------- ---------- ------------ ---------- --------
Net Expenses 582,127 41,918 312,514 99,715 7,433
---------- ---------- ------------ ---------- --------
Net Investment Income (Loss) (482,066) (25,926) 439,364 (14,165) (4,057)
---------- ---------- ------------ ---------- --------
Net Realized and Unrealized Gain (Loss)
on Investments
Realized gain from:
Securities 6,827,797 648,462 10,905,059 882,994 (82,025)
Foreign currency transactions -- -- -- -- --
---------- ---------- ------------ ---------- --------
Net realized gain (loss) 6,827,797 648,462 10,905,059 882,994 (82,025)
---------- ---------- ------------ ---------- --------
Change in unrealized appreciation
(depreciation) of:
Investments 2,787,924 1,060,491 (12,332,474) 1,673,564 486,839
Other assets and liabilities denominated in
foreign currencies -- -- -- -- --
---------- ---------- ------------ ---------- --------
Net unrealized appreciation (depreciation) 2,787,924 1,060,491 (12,332,474) 1,673,564 486,839
---------- ---------- ------------ ---------- --------
Net Gain (Loss) on Investments 9,615,721 1,708,953 (1,427,415) 2,556,558 404,814
---------- ---------- ------------ ---------- --------
Assets Resulting From Operations $9,133,655 $1,683,027 $ (988,051) $2,542,393 $400,757
========== ========== ============ ========== ========
* Foreign taxes withheld $ -- $ -- $ -- $ -- $ --
---------- ---------- ------------ ---------- --------
</Table>
64
<Page>
<Table>
<Caption>
INTERNATIONAL
PERIOD ENDED U.S. GLOBAL INTERNATIONAL GROWTH
SEPTEMBER 30, 2007 (UNAUDITED) CONVERTIBLE SELECT GROWTH OPPORTUNITIES
- ------------------------------------------------------------------------------------------------------
Investment Income
Dividends, net of foreign taxes* $ 589,501 $ 1,555,595 $ 607,741 $ 2,093,360
Interest 1,181,325 -- 18 1,655
----------- ----------- ----------- -----------
Total Income 1,770,826 1,555,595 607,759 2,095,015
----------- ----------- ----------- -----------
Expenses
Advisory fees 410,296 528,968 137,117 912,966
Administration fees 197,660 358,899 162,165 766,536
Shareholder servicing fees -- -- 3,204 --
Professional fees 10,848 10,720 2,986 14,638
Trustees' fees and expenses 10,486 12,053 3,210 18,482
Interest and credit facility fees -- 8,292 153 2,411
Miscellaneous 3,538 12,667 2,285 5,653
----------- ----------- ----------- -----------
Total Expenses 632,828 931,599 311,120 1,720,686
----------- ----------- ----------- -----------
Expense offset (111,376) (132,197) (99,651) (291,336)
----------- ----------- ----------- -----------
Net Expenses 521,452 799,402 211,469 1,429,350
----------- ----------- ----------- -----------
Net Investment Income (Loss) 1,249,374 756,193 396,290 665,665
----------- ----------- ----------- -----------
Net Realized and Unrealized Gain (Loss)
on Investments
Realized gain from:
Securities 3,329,756 11,214,588 19,256,320 38,104,517
Foreign currency transactions -- (1,430) 2,284,242 5,567,594
----------- ----------- ----------- -----------
Net realized gain (loss) 3,329,756 11,213,158 21,540,562 43,672,111
----------- ----------- ----------- -----------
Change in unrealized appreciation
(depreciation) of:
Investments 10,637,712 9,293,903 (7,393,165) (5,674,655)
Other assets and liabilities denominated
in foreign currencies -- 2,212,828 (105,158) 2,474,718
----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation) 10,637,712 11,506,731 (7,498,323) (3,199,937)
----------- ----------- ----------- -----------
Net Gain (Loss) on Investments 13,967,468 22,719,889 14,042,239 40,472,174
----------- ----------- ----------- -----------
Assets Resulting From Operations $15,216,842 $23,476,082 $14,438,529 $41,137,839
=========== =========== =========== ===========
* Foreign taxes withheld $ -- $ 141,434 $ 78,473 $ 259,030
----------- ----------- ----------- -----------
<Caption>
PERIOD ENDED EMERGING INTERNATIONAL INTERNATIONAL ALL U.S. HIGH
SEPTEMBER 30, 2007 (UNAUDITED) MARKETS SYSTEMATIC CAP GROWTH YIELD BOND
- ----------------------------------------------------------------------------------------------------------
Investment Income
Dividends, net of foreign taxes* $ 346,197 $1,265,890 $ 257,603 $ --
Interest -- -- 1,387 3,075,466
----------- ---------- ----------- -----------
Total Income 346,197 1,265,890 258,990 3,075,466
----------- ---------- ----------- -----------
Expenses
Advisory fees 186,890 217,450 110,648 160,546
Administration fees 66,978 119,279 35,147 74,572
Shareholder servicing fees -- -- -- --
Professional fees 3,060 6,157 1,566 5,118
Trustees' fees and expenses 2,853 6,074 1,695 6,326
Interest and credit facility fees 6,208 7,106 1,330 --
Miscellaneous 5,823 2,433 1,514 2,619
----------- ---------- ----------- -----------
Total Expenses 271,812 358,499 151,900 249,181
Expense offset (18,384) (60,831) (18,078) (64,588)
----------- ---------- ----------- -----------
Net Expenses 253,428 297,668 133,822 184,593
----------- ---------- ----------- -----------
Net Investment Income (Loss) 92,769 968,222 125,168 2,890,873
----------- ---------- ----------- -----------
Net Realized and Unrealized Gain (Loss)
on Investments
Realized gain from:
Securities 4,343,372 2,791,257 7,789,973 64,017
Foreign currency transactions 17,173 (9,475) 1,226,905 --
----------- ---------- ----------- -----------
Net realized gain (loss) 4,360,545 2,781,782 9,016,878 64,017
----------- ---------- ----------- -----------
Change in unrealized appreciation
(depreciation) of:
Investments 5,355,103 (711,676) (3,532,024) (3,244,237)
Other assets and liabilities denominated
in foreign currencies 528,897 2,836,382 (170,963) --
----------- ---------- ----------- -----------
Net unrealized appreciation (depreciation) 5,884,000 2,124,706 (3,702,987) (3,244,237)
----------- ---------- ----------- -----------
Net Gain (Loss) on Investments 10,244,545 4,906,488 5,313,891 (3,180,220)
----------- ---------- ----------- -----------
Assets Resulting From Operations $10,337,314 $5,874,710 $ 5,439,059 $ (289,347)
=========== ========== =========== ===========
* Foreign taxes withheld $ 37,224 $ 159,283 $ 28,514 $ --
----------- ---------- ----------- -----------
</Table>
(1) COMMENCED OPERATIONS ON 7/31/07
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
65
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
U.S. MICRO CAP U.S. EMERGING GROWTH
--------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2007 2007 MARCH 31, 2007 MARCH 31,
AND MARCH 31, 2007 (UNAUDITED) 2007 (UNAUDITED) 2007
- -----------------------------------------------------------------------------------------------------------
Increase (Decrease) In Net Assets from
Investment Operations:
Net investment income (loss) $ (482,066) $ (615,012) $ (25,926) $ (62,920)
Net realized gain (loss) 6,827,797 5,021,292 648,462 1,305,006
Net unrealized appreciation (depreciation) 2,787,924 (5,804,396) 1,060,491 (1,129,950)
------------ ------------ ----------- -----------
Net increase (decrease) in net assets from
investment operations 9,133,655 (1,398,116) 1,683,027 112,136
------------ ------------ ----------- -----------
Distributions to Shareholders:
From net investment income -- -- -- --
From net realized gains -- (9,264,776) -- (739,964)
------------ ------------ ----------- -----------
Total distributions -- (9,264,776) -- (739,964)
------------ ------------ ----------- -----------
From Capital Share Transactions:
Proceeds from shares sold
Class I 9,752,309 17,798,669 914,251 2,347,555
Class II 109,788 490,444 -- --
Class IV -- -- -- --
Class R -- -- 655,287 1,241,746
Distributions reinvested
Class I -- 8,668,832 -- 513,359
Class II -- 399,499 -- --
Class IV -- -- -- --
Class R -- -- -- 226,606
Cost of shares redeemed
Class I (21,392,122) (10,288,572) (876,507) (1,775,938)
Class II (165,142) (3,241,659) -- --
Class IV -- -- -- --
Class R -- -- (450,648) (1,234,060)
------------ ------------ ----------- -----------
Net increase (decrease) in net assets from
share transactions (11,695,167) 13,827,213 242,383 1,319,268
------------ ------------ ----------- -----------
Net Increase (Decrease) in Net Assets (2,561,512) 3,164,321 1,925,410 691,440
Net Assets
Beginning 87,097,252 83,932,931 10,585,871 9,894,431
------------ ------------ ----------- -----------
Ending $ 84,535,740 $ 87,097,252 $12,511,281 $10,585,871
============ ============ =========== ===========
Undistributed net investment income (loss), ending $ (482,066) $ -- $ (25,926) $ --
============ ============ =========== ===========
Class I -- Capital Share Activity
Shares sold 600,725 1,099,483 63,355 179,774
Distributions reinvested -- 588,116 -- 41,601
Shares redeemed (1,318,575) (659,422) (61,130) (138,889)
============ ============ =========== ===========
Net Class I Share Activity (717,850) 1,028,177 2,225 82,486
============ ============ =========== ===========
Class II -- Capital Share Activity
Shares sold 6,398 31,699 -- --
Distributions reinvested -- 26,938 -- --
Shares redeemed (9,694) (219,977) -- --
============ ============ =========== ===========
Net Class II Share Activity (3,296) (161,340) -- --
============ ============ =========== ===========
Class IV -- Capital Share Activity
Shares sold -- -- -- --
Distributions reinvested -- -- -- --
Shares redeemed -- -- -- --
============ ============ =========== ===========
Net Class IV Share Activity -- -- -- --
============ ============ =========== ===========
Class R -- Capital Share Activity
Shares sold -- -- 46,187 95,674
Distributions reinvested -- -- -- 18,696
Shares redeemed -- -- (31,996) (98,725)
============ ============ =========== ===========
Net Class R Share Activity -- -- 14,191 15,645
============ ============ =========== ===========
</Table>
66
<Page>
<Table>
<Caption>
U.S. SYSTEMATIC
U.S SMALL CAP VALUE LARGE CAP GROWTH
--------------------------- -------------------------
SEPTEMBER 30, SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2007 2007 MARCH 31, 2007 MARCH 31,
AND MARCH 31, 2007 (UNAUDITED) 2007 (UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------
Increase (Decrease) In Net Assets from
Investment Operations:
Net investment income (loss) $ 439,364 $ 487,788 $ (14,165) $ 16,091
Net realized gain (loss) 10,905,059 23,316,339 882,994 1,136,149
Net unrealized appreciation (depreciation) (12,332,474) (11,002,965) 1,673,564 565,057
------------ ------------ ----------- -----------
Net increase (decrease) in net assets from
investment operations (988,051) 12,801,162 2,542,393 1,717,297
------------ ------------ ----------- -----------
Distributions to Shareholders:
From net investment income -- (616,802) -- (1,377)
From net realized gains -- (17,506,477) -- --
------------ ------------ ----------- -----------
Total distributions -- (18,123,279) -- (1,377)
------------ ------------ ----------- -----------
From Capital Share Transactions:
Proceeds from shares sold
Class I 2,168,731 25,803,997 79,663 747,760
Class II -- 745 2,465,309 5,251,286
Class IV -- -- -- --
Class R 2,378 39,334 276,630 577,773
Distributions reinvested
Class I -- 13,918,857 -- --
Class II -- 3,727,379 -- 1,377
Class IV -- -- -- --
Class R -- 88,551 -- --
Cost of shares redeemed
Class I (40,499,946) (88,919,520) (160,100) (556,909)
Class II (9,619,539) (35,983,357) (2,873) (4,013)
Class IV -- -- -- --
Class R (703,135) (180,229) (268,198) (1,190,968)
------------ ------------ ----------- -----------
Net increase (decrease) in net assets from
share transactions (48,651,511) (81,504,243) 2,390,431 4,826,306
------------ ------------ ----------- -----------
Net Increase (Decrease) in Net Assets (49,639,562) (86,826,360) 4,932,824 6,542,226
Net Assets
Beginning 77,398,478 164,224,838 17,007,556 10,465,330
------------ ------------ ----------- -----------
Ending $ 27,758,916 $ 77,398,478 $21,940,380 $17,007,556
============ ============ =========== ===========
Undistributed net investment income (loss),
ending $ 518,314 $ 78,949 $ 1,926 $ 16,091
============ ============ =========== ===========
Class I -- Capital Share Activity
Shares sold 109,129 1,322,247 3,796 38,919
Distributions reinvested -- 739,971 -- --
Shares redeemed (2,092,509) (4,622,648) (7,650) (28,488)
============ ============ =========== ===========
Net Class I Share Activity (1,983,380) (2,560,430) (3,854) 10,431
============ ============ =========== ===========
Class II -- Capital Share Activity
Shares sold -- 39 113,300 299,668
Distributions reinvested -- 198,370 -- 73
Shares redeemed (486,557) (1,898,898) (140) (222)
============ ============ =========== ===========
Net Class II Share Activity (486,557) (1,700,489) 113,160 299,519
============ ============ =========== ===========
Class IV -- Capital Share Activity
Shares sold -- -- -- --
Distributions reinvested -- -- -- --
Shares redeemed -- -- -- --
============ ============ =========== ===========
Net Class IV Share Activity -- -- -- --
============ ============ =========== ===========
Class R -- Capital Share Activity
Shares sold 123 1,996 13,479 31,541
Distributions reinvested -- 4,706 -- --
Shares redeemed (35,876) (9,047) (12,976) (65,681)
============ ============ =========== ===========
Net Class R Share Activity (35,753) (2,345) 503 (34,140)
============ ============ =========== ===========
<Caption>
U.S. SMALL TO
MID CAP GROWTH (1) U.S. CONVERTIBLE
------------------ ---------------------------
SEPTEMBER 30, SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2007 2007 2007 MARCH 31,
AND MARCH 31, 2007 (UNAUDITED) (UNAUDITED) 2007
- -------------------------------------------------------------------------------------------------
Increase (Decrease) In Net Assets from
Investment Operations:
Net investment income (loss) $ (4,057) $ 1,249,374 $ 1,202,627
Net realized gain (loss) (82,025) 3,329,756 2,692,425
Net unrealized appreciation (depreciation) 486,839 10,637,712 4,354,669
---------- ------------ ------------
Net increase (decrease) in net assets from
investment operations 400,757 15,216,842 8,249,721
---------- ------------ ------------
Distributions to Shareholders:
From net investment income -- (1,191,350) (1,305,908)
From net realized gains -- -- (3,345,184)
---------- ------------ ------------
Total distributions -- (1,191,350) (4,651,092)
---------- ------------ ------------
From Capital Share Transactions:
Proceeds from shares sold
Class I 5,326,714 391,814 7,520,973
Class II -- 965,357 4,002,514
Class IV -- 24,459 93,437,091
Class R -- -- --
Distributions reinvested
Class I -- 274,120 3,631,531
Class II -- 66,363 426,080
Class IV -- 23,312 --
Class R -- -- --
Cost of shares redeemed
Class I -- (3,230,453) (3,772,860)
Class II -- -- (195,251)
Class IV -- (127,029) --
Class R -- -- --
---------- ------------ ------------
Net increase (decrease) in net assets from
share transactions 5,326,714 (1,612,057) 105,050,078
---------- ------------ ------------
Net Increase (Decrease) in Net Assets 5,727,471 12,413,435 108,648,707
Net Assets
Beginning -- 143,909,487 35,260,780
---------- ------------ ------------
Ending $5,727,471 $156,322,922 $143,909,487
========== ============ ============
Undistributed net investment income (loss),
ending $ (4,057) $ 83,877 $ 25,853
========== ============ ============
Class I -- Capital Share Activity
Shares sold 532,674 14,696 318,723
Distributions reinvested -- 10,440 155,568
Shares redeemed -- (122,423) (159,075)
========== ============ ============
Net Class I Share Activity 532,674 (97,287) 315,216
========== ============ ============
Class II -- Capital Share Activity
Shares sold -- 36,196 165,539
Distributions reinvested -- 2,522 18,203
Shares redeemed -- -- (8,058)
========== ============ ============
Net Class II Share Activity -- 38,718 175,684
========== ============ ============
Class IV -- Capital Share Activity
Shares sold -- 932 3,980,754
Distributions reinvested -- 77 --
Shares redeemed -- (4,773) --
========== ============ ============
Net Class IV Share Activity -- (3,764) 3,980,754
========== ============ ============
Class R -- Capital Share Activity
Shares sold -- -- --
Distributions reinvested -- -- --
Shares redeemed -- -- --
========== ============ ============
Net Class R Share Activity -- -- --
========== ============ ============
</Table>
(1) COMMENCED OPERATIONS ON 7/31/07
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
67
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
GLOBAL SELECT INTERNATIONAL GROWTH
-------------------------- ---------------------------
SEPTEMBER 30, SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2007 2007 MARCH 31, 2007 MARCH 31,
AND MARCH 31, 2007 (UNAUDITED) 2007 (UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------- --------------
Increase In Net Assets from Investment Operations:
Net investment income $ 756,193 $ 644,504 $ 396,290 $ 461,096
Net realized gain 11,213,158 23,421,528 21,540,562 19,578,811
Net unrealized appreciation (depreciation) 11,506,731 (8,352,881) (7,498,323) (7,320,021)
------------ ------------ ------------ ------------
Net unrealized appreciation (depreciation) in net
assets from investment operations 23,476,082 15,713,151 14,438,529 12,719,886
------------ ------------ ------------ ------------
Distributions to Shareholders:
From net investment income -- (53,126) -- (455,849)
From net realized gains -- (18,653,269) -- (13,553,285)
------------ ------------ ------------ ------------
Total distributions -- (18,706,395) -- (14,009,134)
------------ ------------ ------------ ------------
From Capital Share Transactions:
Proceeds from shares sold
Class I 1,837,015 4,229,593 1,231,762 3,016,780
Class II 2,410,773 1,644,792 9,041,996 50,000
Class III -- -- -- --
Class IV -- -- -- --
Class R -- -- 390,565 995,312
Distributions reinvested
Class I -- 7,842,519 -- 6,370,440
Class II -- 9,653,425 -- 7,369,591
Class III -- -- -- --
Class IV -- -- -- --
Class R -- -- -- 269,106
Cost of shares redeemed
Class I (28,483,447) (9,686,380) (10,315,814) (39,097,481)
Class II (6,035,345) (19,104,263) (62,922,703) (11,428,000)
Class III -- -- -- --
Class IV -- -- -- --
Class R -- -- (313,458) (709,385)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets from share
transactions (30,271,004) (5,420,314) (62,887,652) (33,163,637)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets (6,794,922) (8,413,558) (48,449,123) (34,452,885)
Net Assets
Beginning 169,420,890 177,834,448 69,713,490 104,166,375
------------ ------------ ------------ ------------
Ending $162,625,968 $169,420,890 $ 21,264,367 $ 69,713,490
============ ============ ============ ============
Undistributed net investment income, ending $ 1,362,001 $ 605,808 $ 844,098 $ 3,363,093
============ ============ ============ ============
Class I -- Capital Share Activity
Shares sold 91,913 229,759 49,693 134,231
Distributions reinvested -- 441,086 -- 302,921
Shares redeemed (1,405,057) (519,507) (414,423) (1,787,977)
============ ============ ============ ============
Net Class I Share Activity (1,313,144) 151,338 (364,730) (1,350,825)
============ ============ ============ ============
Class II -- Capital Share Activity
Shares sold 114,030 82,682 370,877 2,199
Distributions reinvested -- 542,632 -- 350,266
Shares redeemed (300,683) (1,045,918) (2,339,134) (496,447)
============ ============ ============ ============
Net Class II Share Activity (186,653) (420,604) (1,968,257) (143,982)
============ ============ ============ ============
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 IV Share Activity -- -- -- --
============ ============ ============ ============
Class R -- Capital Share Activity
Shares sold -- -- 16,145 45,495
Distributions reinvested -- -- -- 13,108
Shares redeemed -- -- (13,061) (33,088)
============ ============ ============ ============
Net Class R Share Activity -- -- 3,084 25,515
============ ============ ============ ============
<Caption>
INTERNATIONAL
GROWTH OPPORTUNITIES
---------------------------
SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2007 2007 MARCH 31,
AND MARCH 31, 2007 (UNAUDITED) 2007
- ---------------------------------------------------------------------------------
Increase In Net Assets from Investment Operations:
Net investment income $ 665,665 $ 214,508
Net realized gain 43,672,111 22,318,005
Net unrealized appreciation (depreciation) (3,199,937) 17,888,482
------------ ------------
Net unrealized appreciation (depreciation) in net
assets from investment operations 41,137,839 40,420,995
------------ ------------
Distributions to Shareholders:
From net investment income -- --
From net realized gains -- (7,183,710)
------------ ------------
Total distributions -- (7,183,710)
------------ ------------
From Capital Share Transactions:
Proceeds from shares sold
Class I 36,239,994 26,262,922
Class II 1,013,899 31,161,698
Class III 45,968 13,150
Class IV 26,893 37,314,972
Class R -- --
Distributions reinvested
Class I -- 3,129,833
Class II -- 1,392,423
Class III -- 188,795
Class IV -- 2,008,361
Class R -- --
Cost of shares redeemed
Class I (27,938,838) (47,558,129)
Class II (37,101,271) (342,687)
Class III (2,212,956) (3,000,000)
Class IV (75,746,255) (13,052,589)
Class R -- --
------------ ------------
Net increase (decrease) in net assets from share
transactions (105,672,566) 37,518,749
------------ ------------
Net Increase (Decrease) in Net Assets (64,534,727) 70,756,034
Net Assets
Beginning 252,096,046 181,340,012
------------ ------------
Ending $187,561,319 $252,096,046
============ ============
Undistributed net investment income, ending $ 665,665 $ 4,161,906
============ ============
Class I -- Capital Share Activity
Shares sold 565,252 511,290
Distributions reinvested -- 61,891
Shares redeemed (433,493) (921,085)
============ ============
Net Class I Share Activity 131,759 (347,904)
============ ============
Class II -- Capital Share Activity
Shares sold 16,113 605,599
Distributions reinvested -- 27,421
Shares redeemed (551,032) (6,439)
============ ============
Net Class II Share Activity (534,919) 626,581
============ ============
Class III -- Capital Share Activity
Shares sold 669 270
Distributions reinvested -- 3,727
Shares redeemed (35,236) (58,121)
============ ============
Net Class III Share Activity (34,567) (54,124)
============ ============
Class IV -- Capital Share Activity
Shares sold 402 741,231
Distributions reinvested -- 39,620
Shares redeemed (1,212,404) (255,292)
============ ============
Net IV Share Activity (1,212,002) 525,559
============ ============
Class R -- Capital Share Activity
Shares sold -- --
Distributions reinvested -- --
Shares redeemed -- --
============ ============
Net Class R Share Activity -- --
============ ============
</Table>
68
<Page>
<Table>
<Caption>
EMERGING MARKETS INTERNATIONAL SYSTEMATIC
---------------------------- -----------------------------
SEPTEMBER 30, 2007 SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2007 2007 MARCH 31, 2007 MARCH 31,
AND MARCH 31, 2007 (UNAUDITED) 2007 (UNAUDITED) 2007
- ----------------------------------------------------------------------------------------------------------
Increase In Net Assets
from Investment Operations:
Net investment income $ 92,769 $ 8,013 $ 968,222 $ 438,885
Net realized gain 4,360,545 4,406 2,781,782 2,117,989
Net unrealized appreciation
(depreciation) 5,884,000 758,852 2,124,706 3,504,485
------------- ------------ ------------- ------------
Net unrealized appreciation
(depreciation) in net assets from
investment operations 10,337,314 771,271 5,874,710 6,061,359
------------- ------------ ------------- ------------
Distributions to Shareholders:
From net investment income -- (6,966) -- (69,846)
From net realized gains -- -- -- (815,593)
------------- ------------ ------------- ------------
Total distributions -- (6,966) -- (885,439)
------------- ------------ ------------- ------------
From Capital Share Transactions:
Proceeds from shares sold
Class I 2,080,422 1,012,755 28,302,236 50,370,893
Class II 84,581 38,573,618 21,492,901 28,284,448
Class III -- -- 18,640 52,389,299
Class IV -- -- -- --
Class R -- -- -- --
Distributions reinvested
Class I -- 6,966 -- 885,438
Class II -- -- -- --
Class III -- -- -- --
Class IV -- -- -- --
Class R -- -- -- --
Cost of shares redeemed
Class I (53,977) (1,182,489) (3,034,583) (53,280,511)
Class II (17,102,776) -- (1,653,082) (16,538,521)
Class III -- -- (61,550) --
Class IV -- -- -- --
Class R -- -- -- --
------------- ------------ ------------- ------------
Net increase (decrease) in net
assets from share transactions (14,991,750) 38,410,850 45,064,562 62,111,046
------------- ------------ ------------- ------------
Net Increase (Decrease) in Net Assets (4,654,436) 39,175,155 50,939,272 67,286,966
Net Assets
Beginning 39,175,155 -- 71,949,100 4,662,134
------------- ------------ ------------- ------------
Ending $ 34,520,719 $ 39,175,155 $ 122,888,372 $ 71,949,100
============= ============ ============= ============
Undistributed net investment income,
ending $ 83,853 $ (8,916) $ 1,200,226 $ 232,004
============= ============ ============= ============
Class I -- Capital Share Activity
Shares sold 130,737 101,715 1,687,771 3,359,152
Distributions reinvested -- -- -- 59,385
Shares redeemed (3,413) (94,358) (186,555) (3,470,050)
============= ============ ============= ============
Net Class I Share Activity 127,324 7,357 1,501,216 (51,513)
============= ============ ============= ============
Class II -- Capital Share Activity
Shares sold 5,942 3,057,987 1,275,977 1,826,780
Distributions reinvested -- -- -- --
Shares redeemed (1,153,270) -- (99,398) (1,031,890)
============= ============ ============= ============
Net Class II Share Activity (1,147,328) 3,057,987 1,176,579 794,890
============= ============ ============= ============
Class III -- Capital Share Activity
Shares sold -- -- 1,128 3,409,885
Distributions reinvested -- -- -- --
Shares redeemed -- -- (3,608) --
============= ============ ============= ============
Net Class III Share Activity -- -- (2,480) 3,409,885
============= ============ ============= ============
Class IV -- Capital Share Activity
Shares sold -- -- -- --
Distributions reinvested -- -- -- --
Shares redeemed -- -- -- --
============= ============ ============= ============
Net IV Share Activity -- -- -- --
============= ============ ============= ============
Class R -- Capital Share Activity
Shares sold -- -- -- --
Distributions reinvested -- -- -- --
Shares redeemed -- -- -- --
============= ============ ============= ============
Net Class R Share Activity -- -- -- --
============= ============ ============= ============
<Caption>
INTERNATIONAL ALL CAP GROWTH U.S. HIGH YIELD BOND
---------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2007 2007 MARCH 31, 2007 MARCH 31,
AND MARCH 31, 2007 (UNAUDITED) 2007 (UNAUDITED) 2007
- ---------------------------------------------------------------------------------------------------------
Increase In Net Assets from
Investment Operations:
Net investment income $ 125,168 $ 106,129 $ 2,890,873 $ 8,216,721
Net realized gain 9,016,878 3,010,452 64,017 646,077
Net unrealized appreciation
(depreciation) (3,702,987) 157,864 (3,244,237) 2,536,959
------------ ------------ ------------ -------------
Net unrealized appreciation
(depreciation) in net assets from
investment operations 5,439,059 3,274,445 (289,347) 11,399,757
------------ ------------ ------------ -------------
Distributions to Shareholders:
From net investment income -- (120,976) (2,912,914) (8,509,740)
From net realized gains -- (814,495) -- --
------------ ------------ ------------ -------------
Total distributions -- (935,471) (2,912,914) (8,509,740)
------------ ------------ ------------ -------------
From Capital Share Transactions:
Proceeds from shares sold
Class I 152,696 687,166 5,579,455 17,430,335
Class II -- -- 57,244 9,007
Class III -- -- -- --
Class IV -- -- -- --
Class R -- -- -- --
Distributions reinvested
Class I -- 935,471 2,005,965 4,747,362
Class II -- -- 5,404 14,060
Class III -- -- -- --
Class IV -- -- -- --
Class R -- -- -- --
Cost of shares redeemed
Class I (23,942,961) (696,616) (14,019,846) (41,154,418)
Class II -- -- (32,698,711) (10,043,336)
Class III -- -- -- --
Class IV -- -- -- --
Class R -- -- -- --
------------ ------------ ------------ -------------
Net increase (decrease) in net
assets from share transactions (23,790,265) 926,021 (39,070,489) (28,996,990)
------------ ------------ ------------ -------------
Net Increase (Decrease) in Net Assets (18,351,206) 3,264,995 (42,272,750) (26,106,973)
Net Assets
Beginning 23,827,026 20,562,031 97,728,292 123,835,265
------------ ------------ ------------ -------------
Ending $ 5,475,820 $ 23,827,026 $ 55,455,542 $ 97,728,292
============= ============ ============= =============
Undistributed net investment income,
ending $ 81,783 $ 230,581 $ 357,818 $ 379,859
============= ============ ============= =============
Class I -- Capital Share Activity
Shares sold 9,326 50,330 537,881 1,746,153
Distributions reinvested -- 69,811 164,539 474,222
Shares redeemed (1,353,035) (49,417) (1,376,371) (4,113,220)
============= ============ ============= =============
Net Class I Share Activity (1,343,709) 70,724 (673,951) (1,892,845)
============= ============ ============= =============
Class II -- Capital Share Activity
Shares sold -- -- 5,706 899
Distributions reinvested -- -- 386 1,407
Shares redeemed -- -- (3,305,490) (976,681)
============= ============ ============= =============
Net Class II Share Activity -- -- (3,299,398) (974,375)
============= ============ ============= =============
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 IV Share Activity -- -- -- --
============= ============ ============= =============
Class R -- Capital Share Activity
Shares sold -- -- -- --
Distributions reinvested -- -- -- --
Shares redeemed -- -- -- --
============= ============ ============= =============
Net Class R Share Activity -- -- -- --
============= ============ ============= =============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
69
<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
thirteen 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"),
eight Funds have issued Class II shares ("Class II"), two Funds have issued
Class III shares ("Class III"), one Fund has issued Class IV shares ("Class IV")
and three Funds have issued Retirement shares ("Class R"). No shares have a
sales charge. Class R has a distribution fee. The Funds offering Class I, Class
II, Class III and Class IV shares are covered in this report.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies consistently followed by the Funds in preparing
these financial statements are described below. The policies conform with
accounting principles generally accepted in the United States.
SECURITY VALUATIONS
Equity securities that are traded on a stock exchange or on the NASDAQ National
Market System or other over-the-counter ("OTC") markets 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. ADRs will be
valued by an approved pricing service at the "evaluated" price as of the close
of business on the NYSE on the day the securities are being valued. GDRs will be
valued by an approved pricing service at the last sale price as of the close of
business on the London International or Luxembourg markets (i.e., normally at
1:00 p.m. Eastern Time). Securities listed or traded on certain non-U.S.
exchanges will be generally valued at the last sale/closing price on the primary
exchange obtained by an approved pricing vendor. If the security does not trade
on a particular day, the security will be 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
mean between the bid and ask price provided by an approved bond pricing service.
In the event a TRACE price is used, the price will be the last traded price on
that day greater than or equal to 1 mm par amount. Convertible securities are
normally priced at the mean between the bid and ask prices. In the event that a
pricing service does not price a particular security or the price provided is
not believed to be reliable, the Investment Adviser will endeavor to use the
average of one or two broker-dealer quotations. If broker-dealer quotations are
not available, the Investment Adviser will generally "stale" the price. If such
a security has a demand feature exercisable within one to seven days, the
security will be valued at par. 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.
U.S.Treasury Bills will be priced at the bid received from an approved pricing
source.
Repurchase Agreements will be priced at cost plus accrued interest. Options that
trade on exchanges or the OTC market will be valued at the last sale provided
the last sale falls between the closing bid and ask prices. If the last sale is
larger than the ask price, the option will be valued at the bid price. If no
sales are reported, an option will be valued at the mean between the bid and the
ask price. If the bid price is zero, the option will be valued at the last sale
unless this price is greater than the ask price. In such cases, the option will
be valued at the ask price. Private options will be valued by obtaining broker
quotations. Futures contracts will be valued at the last sale or settlement
price as of the close of such exchanges or markets. Other securities purchased
by the Funds may include equity-linked securities, derivatives and private
placements (e.g., Rule 144A and Reg S securities). These securities will be
generally valued by using market quotations or a matrix method provided by an
approved pricing service. If a pricing service is unable to provide a price or
the price provided is not believed to be reliable, then broker-dealer quotations
will be used.
Shares available to U.S. investors such as the Funds in foreign markets may be
priced at a premium to the local shares in that market. The foreign shares are
generally priced using the local price as the base and applying a premium, which
is received from an independent pricing service or the broker.
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
70
<Page>
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 of the respective currency at the spot rate at 11:00 a.m.
Eastern Time against the U.S. dollar, as provided by an approved pricing
service. Security transactions, income and expenses are converted at the
prevailing exchange rate on the day of the event. The effect of changes in
exchange rates on securities denominated in a non-U.S. currency is included with
the net realized and unrealized gain or loss of the associated security. Other
Non-U.S. currency gains or losses are reported separately.
Certain Funds may use forward non-U.S. currency contracts to reduce their
exposure to currency fluctuations of their non-U.S. securities. These contracts
are commitments to purchase or sell a non-U.S. currency at a specified rate on a
future date. When the contract is fulfilled or closed, gains or losses are
realized. Until then, the gain or loss is included in unrealized appreciation or
depreciation of investments. The contract commitment is fully collateralized by
cash or securities of the Fund. Non-U.S. denominated assets and forward currency
contracts may involve more risks than U.S. transactions, including currency
risk, political and economic risk, regulatory and market risk. Evaluating and
monitoring such risk exposure is a part of the Funds' management strategy. There
were no such forward non-U.S. currency contracts at September 30, 2007.
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, 2007.
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. There were no such options contracts at September 30, 2007.
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
71
<Page>
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, lose the
opportunity to sell securities at a desirable price. In addition, in the event
that a borrower of securities would file for bankruptcy or become insolvent,
disposition of the securities may be delayed pending court action. The market
value of securities on loan and the related collateral at the period ended
September 30, 2007 were:
- ---------------------------------------------------------------
FUND MARKET VALUE COLLATERAL
- ---------------------------------------------------------------
U.S. Emerging Growth $ 4,264,193 $ 4,429,950
Global Select 12,164,427 12,611,900
International Growth Opportunities 31,480,679 35,653,305
Emerging Markets 1,393,384 1,567,650
International Systematic 1,110,338 1,177,005
International All Cap Growth 1,566,622 1,653,600
- ---------------------------------------------------------------
CREDIT FACILITY
The Trust has a $15 million credit facility available to fund temporary or
emergency borrowing expiring in March 2008. Each Fund pays its pro-rata share of
an annual commitment fee plus interest on its specific borrowings. For the
period ended September 30, 2007, 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.
The Funds have arrangements with their brokers, custodian and third party
service providers whereby commissions paid by a Fund, interest earned on cash
maintained with its custodian and income from securities lending arrangements
are used to reduce Fund expenses and offset fees. During the period, the credits
used to reduce the Funds' expenses were:
- ---------------------------------------------------------------------
CREDIT DIRECT SECURITY
INTEREST BROKERAGE LENDING
FUND OFFSET OFFSET OFFSET
- ---------------------------------------------------------------------
U.S. Micro Cap 22,729 4,339 84,704
U.S. Emerging Growth 8,952 2,076 21,750
U.S. Small Cap Value 16,041 9,255 6,381
U.S. Systematic Large Cap Growth 5,777 264 --
U.S. Small to Mid Cap Growth 440 -- --
U.S. Convertible 107,016 -- 4,328
Global Select 63,172 8,498 61,133
International Growth 21,130 8,586 70,033
International Growth Opportunities 115,767 36,820 169,567
Emerging Markets 9,386 134 9,167
International Systematic 38,033 11,695 16,667
International All Cap Growth 7,275 2,808 8,167
U.S. High Yield Bond 64,588 -- --
- ---------------------------------------------------------------------
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
NOTE C -- FEDERAL INCOME TAXES
The Funds intend to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially all
of their taxable income to shareholders. Accordingly, no provision for federal
income taxes is required. A Fund investing in foreign securities records any
foreign taxes on income and gains on such investments in accordance with the
applicable tax rules. The Funds' tax accounting treatment of loss deferrals,
accretion, passive foreign investment companies and expiration of capital loss
carryforwards are different from the financial statement recognition of income
and gains.
Capital loss carryforwards may be used to offset current or future capital gains
until expiration.
The ROCSOP amounts as of the end of the prior period have been reclassified for
the International Growth, International Growth Opportunities and International
All Cap Growth Funds by $2,915,285, $4,164,906 and $273,966, respectively,
increasing Accumulated Net Realized Gain (Loss) and decreasing Undistributed Net
Investment Income. The International Growth Opportunities Fund also had a
reclassification increasing Accumulated Net Realized Gain (Loss) and decreasing
Paid-in Capital for $102,299.
72
<Page>
DISTRIBUTIONS TO SHAREHOLDERS
The Funds record distributions to shareholders on the ex-dividend date.
Distributions are determined in accordance with income tax regulations that may
differ from generally accepted accounting principles. Accordingly, the Funds'
capital accounts are periodically reclassified to reflect income and gains
available for distribution under income tax regulations. The Funds make income
and capital gain distributions at least annually. Funds with income objectives
make distributions either quarterly or monthly in accordance with the
prospectuses.
NOTE D -- TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Nicholas-Applegate Capital Management LLC ("NACM") serves as Adviser (the
"Adviser") to the Trust. The Adviser receives a monthly fee at an annual rate
based on the average daily net assets of the Funds. The investment Advisory Fee
rates for each of the Funds are listed in the table below.
ADMINISTRATIVE & SHAREHOLDER SERVICES FEE
On January 24, 2006, the Funds entered into an Administration Agreement whereby
the Funds pay for the administrative services they require under what is
essentially an all-in fee structure. Class I, II, III & IV shareholders of the
Funds pay an administrative fee to the Investment Adviser computed as a
percentage of the Funds' assets attributable in the aggregate to Class I, II,
III & IV shares, the Investment Adviser, in turn, provides or procures
administrative and shareholder services for Class I, II, III & IV shareholders
and also bears the costs of most third-party administrative services required by
the Funds, including audit, custodial, portfolio accounting, legal, transfer
agency and printing costs. The administrative fees paid to the Investment
Adviser may exceed the related costs. Generally, this may not be the case for
relatively small funds.
Effective September 28, 2006, the administrative fees were decreased to the
rates shown below, to better reflect other expenses not covered under the
administrative fee. These other expenses which are borne by the Funds, such as
brokerage fees, taxes, commissions and other transaction expenses, costs of
borrowing money, including interest expenses, extraordinary expenses and fees,
expenses of the disinterested Trustees of the Trust and their counsel may vary
and affect the total level of expenses paid by Class I, II, III & IV
shareholders.
The investment advisory and administrative services fees are charged at the
following annual rates:
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------
ADMINISTRATION FEE*
FUND ADVISORY FEE CLASS I CLASS II CLASS III CLASS IV
- ----------------------------------------------------------------------------------------------
U.S. Micro Cap 1.00% 0.54% 0.29% -- --
U.S. Emerging Growth 0.75% 0.41% -- -- --
U.S. Small Cap Value 0.75% 0.52% -- -- --
U.S. Systematic Large Cap Growth 0.45% 0.64% 0.49% -- --
U.S. Small to Mid Cap Growth (1) 0.50% 0.40% -- -- --
U.S. Convertible 0.55% 0.44% 0.34% -- 0.19%
Global Select 0.65% 0.47% 0.42% -- --
International Growth 0.50% 0.86% 0.46% -- --
International Growth Opportunities 0.70% 0.69% 0.54% 0.49% --
Emerging Markets 0.90% 0.42% 0.32% -- --
International Systematic 0.50% 0.48% 0.33% 0.23% --
International All Cap Growth 0.85% 0.27% -- -- --
U.S. High Yield Bond 0.40% 0.20% -- -- --
- ----------------------------------------------------------------------------------------------
</Table>
(1) COMMENCED 7/31/07
TRUSTEE COMPENSATION
Certain officers of the Trust are also officers of the Investment Adviser and
Distributor. The Trustees who are not affiliated with the Investment Adviser
receive annual compensation of approximately $35,000 each from the Trust, except
for the chairman of the Trust who will receive annual compensation of
approximately $42,000 from the Trust.
73
<Page>
NOTE E -- INVESTMENT TRANSACTIONS
The following table presents purchases and sales of securities, excluding
short-term investments, during the period ended September 30, 2007 to indicate
the volume of transactions in each Fund. The tax cost of securities held at
September 30, 2007, and the related gross and net unrealized appreciation and
depreciation, provide aggregate information on a tax basis against which future
gains and losses on these investments are measured for distribution purposes.
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
PURCHASES SALES TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
FUND (IN 000's) (IN 000's) (IN 000's) (IN 000's) (IN 000's) (IN 000's)
- ------------------------------------------------------------------------------------------------------------------------
U.S. Micro Cap $ 77,306 $ 90,087 $ 70,480 $ 15,987 $(1,122) $14,865
U.S. Emerging Growth 7,432 7,151 14,515 2,860 (337) 2,523
U.S. Small Cap Value 8,395 56,643 26,449 3,747 (2,529) 1,218
U.S. Systematic Large Cap Growth 12,631 10,493 18,499 4,001 (344) 3,657
U.S. Small to Mid Cap Growth 6,346 1,092 5,284 571 (84) 487
U.S. Convertible 78,352 80,420 136,313 21,203 (1,252) 19,951
Global Select 59,549 88,928 141,116 35,887 (3,197) 32,690
International Growth 31,261 93,106 16,677 4,699 (271) 4,428
International Growth Opportunities 109,853 218,250 165,059 61,577 (2,975) 58,602
Emerging Markets 32,951 47,777 29,237 6,792 (149) 6,643
International Systematic 120,985 91,858 100,618 9,738 (3,317) 6,421
International All Cap Growth 12,626 36,752 6,854 1,583 (22) 1,561
U.S. High Yield Bond 27,159 60,579 54,085 1,342 (514) 828
- ------------------------------------------------------------------------------------------------------------------------
</Table>
Gains and losses resulting from the subscriptions-in-kind and
redemptions-in-kind are included in the realized gain/loss from securities and
non-U.S. currency transactions. During the period, ended September 30, 2007, the
U.S. Micro Cap, U.S. Small to Mid Cap Growth, and Emerging Markets Funds had
subscriptions-in-kind valued at $4,689,392, $5,325,073 and $1,600,660,
respectively. The International Growth, International Growth Opportunities, and
International All Cap Growth Funds had redemptions-in-kind valued at
$62,922,703, $63,691,105 and $23,642,996, respectively.
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. For the period ended September 30, 2007 the Funds
were not party to any such agreements.
NOTE G -- SHAREHOLDER ACTIONS
The Trust held a special meeting of the shareholders of the U.S. Systematic Mid
Cap Growth Fund on July 25, 2007 to approve an Agreement and Plan of
Reorganization with respect to the reorganization of the Nicholas-Applegate U.S.
Systematic Mid Cap Growth Fund with and into the Allianz NACM Mid-Cap Growth
Fund, a series of Allianz Funds as described in the proxy statement mailed to
shareholders of record as of May 31, 2007 on July 3, 2007.
In the matter approving the reorganizaton and termination of the Fund there were
the following votes either present or represented by proxy
- -------------------------------
For 1,566,542.947
Against 0
Abstained 0
- -------------------------------
The Trust held a special meeting of the shareholders of all the Series of the
Trust on August 13, 2007 to approve to elect three Trustees to serve until their
successors are duly elected and qualified and to consider any other business
that may properly come before the meeting or any adjournment thereof, as
described in the proxy statement mailed to shareholders of record as of May 31,
2007 on July 12, 2007.
In the matter approving the election of Trustees there were the following votes
either present or represented by proxy:
- -----------------------------------------------------------
NOMINEE FOR AGAINST ABSTAIN
- -----------------------------------------------------------
Bradford K. Gallagher 20,902,044.76 0 9,850.00
Dr. Steven Grenadier 20,903,452.76 0 8,442.00
Dr. Arthur B. Laffer 20,851,683.27 0 60,211.49
- -----------------------------------------------------------
74
<Page>
NOTE H -- NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has recently issued
Interpretation No.48, Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No.109 ("FIN 48"), which applies to all
registered investment companies and clarifies the accounting for uncertain tax
positions. FIN 48 requires the evaluation of tax positions taken, or expected to
be taken, in the course of preparing the Funds' tax returns to determine whether
the tax positions are "more-likely-than-not" of being sustained by the
applicable tax authority. To the extent that a tax benefit of a position is not
deemed to meet the more-likely-than-not threshold, the Funds would report an
income tax expense in the statement of operations. Adoption of FIN 48 is
required for the last NAV calculation in the first financial statement reporting
period for fiscal years beginning after December 15, 2006. Accordingly,
management is in the process of evaluating tax positions taken by the Funds for
the period ending March 31, 2008 to determine if the adoption of FIN 48 will
have a material impact to the Funds' financial statements.
In addition, in September 2006, Statement of Financial Accounting Standards No.
157, Fair Value Measurements ("SFAS 157"), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact, if any
the adoption of SFAS 157 will have on the Funds' financial statements.
75
<Page>
SHAREHOLDER EXPENSE EXAMPLE -- (Unaudited)
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs,
including redemption fees, and (2) ongoing costs, including management fees and
other Fund expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Funds and to compare these costs
with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (April 1, 2007 to September 30, 2007).
ACTUAL EXPENSES
The first line of the table below for each fund provides information about
actual account values and actual expenses. You may use the information in this
line, together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number in the first line for a fund under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below for each fund provides information about
hypothetical account values and hypothetical expenses based on a fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have been
higher.
<Table>
<Caption>
EXPENSES PAID
BEGINNING ACCOUNT ENDING ACCOUNT DURING THE PERIOD
VALUE VALUE APRIL 1, 2007 TO ANNUALIZED
APRIL 1, 2007 SEPTEMBER 30, 2007 SEPTEMBER 30, 2007 EXPENSE RATIO
- -------------------------------------------------------------------------------------------------------------------------
U.S. MICRO CAP -- CLASS I
Actual $1,000.00 $1,111.50 $8.18 1.55%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,017.25 $7.82 1.55%
- -------------------------------------------------------------------------------------------------------------------------
U.S. MICRO CAP -- CLASS II
Actual $1,000.00 $1,112.70 $6.87 1.30%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.50 $6.56 1.30%
- -------------------------------------------------------------------------------------------------------------------------
U.S. EMERGING GROWTH -- CLASS I
Actual $1,000.00 $1,158.90 $6.42 1.19%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.05 $6.01 1.19%
- -------------------------------------------------------------------------------------------------------------------------
U.S. SMALL CAP VALUE -- CLASS I
Actual $1,000.00 $ 955.40 $6.80 1.39%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.05 $7.01 1.39%
- -------------------------------------------------------------------------------------------------------------------------
U.S. SYSTEMATIC LARGE CAP GROWTH -- CLASS I
Actual $1,000.00 $1,144.70 $6.01 1.12%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.40 $5.65 1.12%
- -------------------------------------------------------------------------------------------------------------------------
U.S. SYSTEMATIC LARGE CAP GROWTH -- CLASS II
Actual $1,000.00 $1,145.40 $5.20 0.97%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.15 $4.90 0.97%
- -------------------------------------------------------------------------------------------------------------------------
U.S. SMALL TO MID CAP GROWTH -- CLASS I
Actual $1,000.00 $1,075.00 $1.47 0.88%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,006.64 $1.42 0.88%
- -------------------------------------------------------------------------------------------------------------------------
U.S. CONVERTIBLE -- CLASS I
Actual $1,000.00 $1,105.30 $5.32 1.01%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.95 $5.10 1.01%
- -------------------------------------------------------------------------------------------------------------------------
U.S. CONVERTIBLE -- CLASS II
Actual $1,000.00 $1,105.80 $4.79 0.91%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.45 $4.60 0.91%
- -------------------------------------------------------------------------------------------------------------------------
</Table>
76
<Page>
<Table>
<Caption>
EXPENSES PAID
BEGINNING ACCOUNT ENDING ACCOUNT DURING THE PERIOD
VALUE VALUE APRIL 1, 2007 TO ANNUALIZED
APRIL 1, 2007 SEPTEMBER 30, 2007 SEPTEMBER 30, 2007 EXPENSE RATIO
- -------------------------------------------------------------------------------------------------------------------------
U.S. CONVERTIBLE -- CLASS IV
Actual $1,000.00 $1,106.60 $4.00 0.76%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,021.20 $3.84 0.76%
- -------------------------------------------------------------------------------------------------------------------------
GLOBAL SELECT -- CLASS I
Actual $1,000.00 $1,148.90 $6.23 1.16%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.20 $5.86 1.16%
- -------------------------------------------------------------------------------------------------------------------------
GLOBAL SELECT -- CLASS II
Actual $1,000.00 $1,149.40 $5.96 1.11%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.45 $5.60 1.11%
- -------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH -- CLASS I
Actual $1,000.00 $1,218.30 $7.65 1.38%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.10 $6.96 1.38%
- -------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH -- CLASS II
Actual $1,000.00 $1,195.00 $5.38 0.98%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.10 $4.95 0.98%
- -------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH OPPORTUNITIES -- CLASS I
Actual $1,000.00 $1,193.90 $7.68 1.40%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.00 $7.06 1.40%
- -------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH OPPORTUNITIES -- CLASS II
Actual $1,000.00 $1,194.70 $6.91 1.26%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.70 $6.36 1.26%
- -------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH OPPORTUNITIES -- CLASS III
Actual $1,000.00 $1,195.00 $6.64 1.21%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.95 $6.11 1.21%
- -------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS FUND -- CLASS I
Actual $1,000.00 $1,319.80 $8.18 1.41%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,017.95 $7.11 1.41%
- -------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS FUND -- CLASS II
Actual $1,000.00 $1,320.80 $7.48 1.29%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.55 $6.51 1.29%
- -------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL SYSTEMATIC -- CLASS I
Actual $1,000.00 $1,069.30 $5.23 1.01%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.95 $5.11 1.01%
- -------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL SYSTEMATIC -- CLASS II
Actual $1,000.00 $1,070.60 $4.45 0.86%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.70 $4.34 0.86%
- -------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL SYSTEMATIC -- CLASS III
Actual $1,000.00 $1,071.20 $3.99 0.77%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,021.15 $3.89 0.77%
- -------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL ALL CAP GROWTH -- CLASS I
Actual $1,000.00 $1,228.30 $6.41 1.15%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.25 $5.81 1.15%
- -------------------------------------------------------------------------------------------------------------------------
U.S. HIGH YIELD BOND -- CLASS I
Actual $1,000.00 $1,011.20 $4.32 0.86%
- -------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.70 $4.34 0.86%
- -------------------------------------------------------------------------------------------------------------------------
</Table>
77
<Page>
SUPPLEMENTARY INFORMATION -- (Unaudited)
QUARTERLY FILING
The Funds provide a complete list of portfolio holdings four times in each
fiscal year, at the end of each calendar quarter. For the second and fourth
quarters, the portfolio holdings appear in the Funds' semiannual and annual
reports to shareholders. For the first and third quarters, the Funds file their
portfolio holdings with the Securities and Exchange Commission on Form N-Q.
Shareholders can look up the Funds' Form N-Q on the SEC's website at
www.sec.gov. Forms N-Q may also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. To find out more about this public service,
call the SEC at 1-202-942-8090.
78
<Page>
CORPORATE GOVERNANCE
<Table>
<Caption>
NAME, ADDRESS (1)
AGE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
POSITION(S) HELD WITH FUND OTHER DIRECTORSHIP HELD BY TRUSTEE
LENGTH OF TIME SERVED (2) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE
- --------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES:
DARLENE T. DEREMER PRINCIPAL OCCUPATIONS: Managing Director, Putnam Lovell
(51) NBF Private Equity (Since 2004); Managing Director,
Chairperson of the Board & Trustee NewRiver E-Business Advisory Services Division
Since August 2007 (2000-2003); Prior to, President and Founder, DeRemer
Associates, a strategic and marketing consulting firm
for the financial services industry (1987-2003); Vice
President and Director, Asset Management Division, State
Street Bank and Trust Company, now referred to as State
Street Global Advisers, (1982-1987); Vice President, T.
Rowe Price & Associates (1979-1982); Member, Boston Club
(since 1998); Member, Financial Women's Association
Advisory Board (since 1995); Founder, Mutual Fund Cafe
Website.
OTHER DIRECTORSHIPS HELD: Founding Member and Director,
National Defined Contribution Council (since 1997);
Trustee, Boston Alzheimer's Association (since 1998);
Director, King's Wood Montessori School (since 1995);
Editorial Board, National Association of Variable
Annuities (since 1997); Director, Nicholas-Applegate
Strategic Opportunities, Ltd. (1994-1997); Trustee,
Nicholas-Applegate Mutual Funds (1994-1999); Director,
Jurika & Voyles Fund Group (since 1994-2000); Director,
Nicholas-Applegate Southeast Asia Fund, Ltd. (since
2004).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
JOHN J. MURPHY PRINCIPAL OCCUPATIONS: Founder and senior principal,
(63) Murphy Capital Management
Trustee
Since September 2005 OTHER DIRECTORSHIPS HELD: Director, Smith Barney
Multiple Discipline Trust; Director, Barclays
International Funds Group Ltd. and affiliated companies.
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
BRADFORD K. GALLAGHER PRINCIPAL OCCUPATIONS: Founder, Spyglass Investments LC
(63) (a private investment vehicle in 2001); Founder,
Trustee President and CEO of Cypress Tree Investment Management
Since August 2007 Company and Annuity Company. Managing Director, Fidelity
Investments.
OTHER DIRECTORSHIPS HELD: Director The Common Fund
(since 2005); Director, Anchor Point Inc. (since 1995);
Chairman and Trustee, Atlantic Maritime Heritage
Foundation (since 2007); Director, Shielding Technology
Inc. (since 2006); Director, United Way Eastern
Massachusetts Chapter (1988-1990); Director, Quinet Fund
(1993-2005); Director, Emersion Hospital (1995-2005)
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
STEVEN GRENADIER PRINCIPAL OCCUPATIONS: William F. Sharpe Professor of
(42) Financial Economics, Stanford University Graduate School
Trustee of Business; Research Associate, National Bureau of
Since August 2007 Economic Research (since 2002); Chairman of the Finance
Department, Stanford University Graduate School of
Business (2004-2006).
OTHER DIRECTORSHIPS HELD: NA
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
GEORGE F. KEANE PRINCIPAL OCCUPATIONS: President Emeritus and founding
(77) Chief Executive Officer, The Common Fund (1971-1993);
Emeritus Trustee and Endowment Advisors (1987-1999) (organizations that
Since August 2007 provide investment management programs for colleges and
universities)
OTHER DIRECTORSHIPS HELD: Director, Bramwell Funds
(since 1994); Director, Longview Oil & Gas (since 2000);
Director, Security Capital U.S. Real Estate (since
1997); Director, The Universal Bond Fund (since 1997);
Director, Universal Stainless & Alloy Products Inc.
(since 1994); Director, United Water Services and
affiliated companies (1996-2000); Director, and former
Chairman of the Board, Trigen Energy Corporation
(1994-2000); Trustee, Nicholas-Applegate Mutual Funds
(1994-1999).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
WALTER E. AUCH PRINCIPAL OCCUPATIONS: Retired; prior thereto, Chairman
(86) and CEO of Chicago Board of Options Exchange
Emeritus Trustee (1979-1986); Senior Executive Vice President Paine
Since August 2007 Webber, Inc.
OTHER DIRECTORSHIPS HELD: Trustee, LLBS Funds (since
1994) and Brinson Supplementary Trust (since 1997);
Director, Thompson Asset Management Corp (1987-1999);
Director, Smith Barney Trak Fund (since 1992) and Smith
Barney Advisors (since 1992); Director, PIMCO Advisors
L.P. (since 1994); Director, Banyon Realty Trust
(1988-2002), Banyon Mortgage Investment Fund (1989-2002)
and Banyon Land Fund II (since 1988); Director, Express
America Holdings Corp (1992-1999); Director, Legend
Properties, Inc. (1987-1999); Director, Senele Group
(since 1988); Director, Fort Dearborn Income Securities,
Inc. (1987-1995); Trustee, Nicholas-Applegate Mutual
Funds (1994-1999); Director, Geotek Industries, Inc.
(1987-1998).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
- --------------------------------------------------------------------------------------------
</Table>
79
<Page>
<Table>
<Caption>
NAME, ADDRESS (1)
AGE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
POSITION(S) HELD WITH FUND OTHER DIRECTORSHIP HELD BY TRUSTEE
LENGTH OF TIME SERVED (2) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE
- --------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
HORACIO A. VALEIRAS PRINCIPAL OCCUPATIONS: Managing Director (since 2004)
(48) and Chief Investment Officer. Nicholas-Applegate Capital
President & Trustee Management, Nicholas-Applegate Securities (since 2002);
Since August 2004 Managing Director of Morgan Stanley Investment
Management, London (1997-2002); Head of International
Equity and Asset Allocation, Miller Anderson & Sherred;
Director and Chief of Investment Strategies, Credit
Suisse First Boston.
OTHER DIRECTORSHIPS HELD: Trustee, The Bishops School
(since 2002); Trustee, San Diego Rowing Club (since
2002).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
ARTHUR B. LAFFER PRINCIPAL OCCUPATIONS: Chairman, Laffer Associates
(65) (economic consulting) (since 1979); Chairman, Laffer
Trustee Advisors Inc. (registered broker-dealer) (since 1981);
Since August 2007 Chairman, Laffer Investments (asset management) (since
2000); Member, Congressional Policy Advisory Board
(since 1998); Distinguished University Professor and
Director, Pepperdine University (1985-1988); Professor
of Business Economics, University of Southern California
(1976-1984); Associate Professor of Business Economics,
University of Chicago (1967-1976).
OTHER DIRECTORSHIPS HELD: Director of MPS Group, Inc.
(NYSE:MPS) (since 2003); Director, Petco Animal
Supplies, Inc. (NASDAQ:PETC) (since 2002); Director,
Oxigene Inc. (NASDAQ:OXGN), biopharmaceutical company
(since 1998); Director of Provide Commerce (NASDAQ:PRVD)
(since 1998); Director, Veolia Environmental Corporation
(successor to U.S. Filter Corporation) (water
purification) (since 1991). Director, Nicholas-Applegate
Fund, Inc. (1987-2007)
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
OFFICERS:
CHARLES H. FIELD, JR. PRINCIPAL OCCUPATIONS: General Counsel,
(51) Nicholas-Applegate Capital Management,
Secretary and Chief Compliance Nicholas-Applegate Securities LLC, Nicholas-Applegate
Officer Holdings LLC (since February2004), Deputy General
Since May 2002 Counsel, Nicholas-Applegate Capital Management, LLC
(1996-2004).
OTHER DIRECTORSHIPS HELD: NA
NUMBER OF PORTFOLIOS OVERSEEN BY OFFICER: 13
DEBORAH A. WUSSOW PRINCIPAL OCCUPATIONS: Vice President and Director,
(47) Nicholas-Applegate Capital Management, LLC (since 2005),
Treasurer and Assistant Secretary and previously Manager, Legal and Compliance,
Since August 2006 Nicholas-Applegate Capital Management, LLC (since 1995)
OTHER DIRECTORSHIPS HELD: NA
NUMBER OF PORTFOLIOS OVERSEEN BY OFFICER: 13
- --------------------------------------------------------------------------------------------
</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.
80
<Page>
(This page intentionally left blank)
<Page>
(This page intentionally left blank)
<Page>
TRUSTEES OF NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
Darlene T. DeRemer, CHAIRPERSON
Horacio A. Valeiras
John J. Murphy
Bradford K. Gallagher
Steven Grenadier
Arthur B. Laffer
George F. Keane, EMERITUS
Walter E. Auch, EMERITUS
OFFICERS
Horacio A. Valeiras, PRESIDENT
Charles H. Field, Jr., SECRETARY
Deborah A. Wussow, TREASURER
INVESTMENT ADVISER
Nicholas-Applegate Capital Management
DISTRIBUTOR
Nicholas-Applegate Securities
CUSTODIAN
Brown Brothers Harriman & Co., Private Bankers
TRANSFER AGENT
UMB Fund Services Group, Inc.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
<Page>
NICHOLAS|APPLEGATE
INSTITUTIONAL FUNDS
NICHOLAS-APPLEGATE SECURITIES, DISTRIBUTOR
[A company of Allianz LOGO]
Global Investors
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
800.551..8043
<Page>
NICHOLAS|APPLEGATE(R)
INSTITUTIONAL FUNDS
SEPTEMBER 30, 2007 SEMI-ANNUAL REPORT (UNAUDITED)
CLASS R SHARES
U.S. EMERGING GROWTH
U.S. SYSTEMATIC LARGE CAP GROWTH
INTERNATIONAL GROWTH
[A COMPANY OF ALLIANZ LOGO]
GLOBAL INVESTORS
<Page>
LETTER TO SHAREHOLDERS
Dear Fellow Shareholder,
The six months ended September 30, 2007 was an unusually volatile time in the
world's financial markets. Over the summer, deterioration in the value of
securities tied to U.S. residential mortgages sparked a global liquidity crisis
that caused investors to shun riskier assets. Monetary action taken by central
banks worldwide helped restore investor confidence, and major U.S. and non-U.S.
equity indexes finished the period with strong gains.
In this semi-annual report, we review the performance of the financial markets
and our mutual funds from April 1 through September 30. In addition, we share
our perspective on the dynamics shaping the investment landscape and our outlook
for the months ahead.
During the period, the broad U.S. equity market, as measured by the S&P 500
Index, gained 8.44%. The Index reached an all-time record on July 19, lifted by
healthy economic and earnings growth and buoyant merger activity. The rally
ended abruptly, however, when mounting losses on U.S. mortgage-backed securities
made investors reluctant to buy even high-quality corporate debt, causing
liquidity to dry up in the fixed-income markets. Financial institutions holding
mortgage-backed securities, including a few highly leveraged hedge funds, were
inundated with broker margin calls and redemption requests. To raise cash and
reduce leverage, they sold their most liquid assets, including stocks. By
mid-August, the S&P 500 Index had fallen nearly 10% from its July peak,
approaching the technical definition of a market correction. The Federal Reserve
intervened, and stock prices reversed course once again, climbing higher in
August and September.
International equities in both developed and emerging countries followed a
similar, volatile path. Gains throughout much of the period erased steep summer
losses that resulted from concerns about foreign ownership of U.S.
mortgage-backed securities, as well as tighter credit market conditions
globally. Central banks, including the European Central Bank and Bank of Japan,
helped calm investors' nerves by pumping extra liquidity into the financial
system.
For the full period, the MSCI EAFE Index, a barometer of developed non-U.S.
equities, gained 9.05%. The vast majority of the increase was due to currency
movements, as the euro, pound and yen rose 6.8%, 4.0% and 2.6%, respectively,
versus the U.S. dollar. Weakness in the dollar was caused by the problems in the
U.S. housing and mortgage markets and an interest rate cut from the Federal
Reserve in September. Amid rising oil prices, an economic upturn in the euro
region and six consecutive quarters of above-trend growth in the United Kingdom,
European policymakers were focused on controlling inflation. The European
Central Bank raised interest rates in June, and the Bank of England tightened
monetary policy in May and July. Japanese central bankers held rates steady at
0.50%, as economic growth showed signs of losing momentum.
Stock markets in emerging countries delivered the best performance, with the
MSCI Emerging Markets Index gaining 31.76% on positive country and company
fundamentals. Economic growth in developing nations remained robust, led by
China where GDP expanded at a 10.9% annual rate in the April-to-June quarter.
Corporate earnings for companies in the index were expected to grow more than
16% in 2007, and balance sheets were strong. In fact, emerging market businesses
are estimated to carry about half as much debt as their U.S. and European
counterparts.
In the volatile market conditions, Nicholas-Applegate Institutional Funds
delivered strong results. All nine of the funds using traditional investment
processes outpaced their benchmarks. Of the four funds using systematic
approaches, three outperformed or performed broadly in line with their
benchmarks and one trailed. The environment was challenging for systematic
strategies in general due to the inherent difficulty of modeling a rare event
such as the recent liquidity crisis, which was the worst of its kind in nearly a
decade. In addition, rapid deleveraging by some quantitative hedge funds in
early August caused short-term market dislocations which negatively affected
performance in Nicholas-Applegate's systematic strategies.
Looking ahead, we believe that the housing slowdown in the United States will
continue, but that the U.S. economy will still grow at a moderate pace.
Overseas, economic activity should remain at its higher-than-normal rate,
supported by growth in emerging countries and positive trends in Europe,
reflected in record-low unemployment in the euro zone. We expect growth in U.S.
corporate profits of around 5-7%, with higher growth of 10-12% internationally.
Against this backdrop, we anticipate more modest price appreciation for stocks
compared to the robust gains of the past six months.
In this environment, companies that can deliver strong earnings growth should
continue to capture investor attention. Growth stocks outperformed value stocks
in developed markets during the first nine months of 2007, suggesting that many
years of value leadership may be drawing to a close. We also think this kind of
environment is ideal for security selection, particularly for investing in
companies where positive change is leading to increased earnings estimates. As
we seek to deliver excess return to shareholders, we continue to search out
those companies for all of our funds.
On behalf of everyone at Nicholas-Applegate, thank you for your participation in
the Nicholas-Applegate Institutional Funds. We appreciate the trust you have
placed in us.
Best Regards,
/s/ Horacio A. Valeiras
- --------------------------------------
Horacio A. Valeiras, CFA
President and Chief Investment Officer
September 30, 2007
<Page>
TABLE OF CONTENTS
THE FUNDS' REVIEW AND OUTLOOK, PERFORMANCE AND SCHEDULE OF INVESTMENTS
U.S. Emerging Growth 1
U.S. Systematic Large Cap Growth 5
International Growth 9
THE FUNDS':
Financial Highlights 14
Statements of Assets and Liabilities 16
Statements of Operations 17
Statements of Changes in Net Assets 18
Notes to Financial Statements 20
Shareholder Expense Example 25
Supplementary Information 26
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION TO SHAREHOLDERS AND TO OTHERS ONLY
WHEN PRECEDED OR ACCOMPANIED BY A CURRENTLY EFFECTIVE PROSPECTUS FOR
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS CLASS I, II, III & IV SHARES.
DISTRIBUTOR: NICHOLAS-APPLEGATE SECURITIES.
<Page>
U.S. EMERGING GROWTH FUND
MANAGEMENT TEAM: JOHN C. MCCRAW, Portfolio Manager; ROBERT S. MARREN, Portfolio
Manager; BLAKE H. BURDINE, Analyst; K. MATHEW AXLINE, CFA, Analyst; STEPHEN W.
LYFORD, Analyst
CHIEF INVESTMENT OFFICER: HORACIO A.VALEIRAS,CFA
GOAL: The U.S. Emerging Growth Fund seeks to maximize long-term capital
appreciation through investments primarily in U.S. companies with market
capitalizations similar to the Russell 2000 Growth Index at time of purchase.
MARKET OVERVIEW: U.S. small-cap growth stocks delivered healthy increases during
the six months ended September 30, 2007. Solid gains throughout much of the
period eclipsed a summer decline caused by deterioration in the mortgage market
and the worst liquidity crunch in nearly ten years. Factors contributing to the
period's overall positive results included:
- Improvement in the economy, with GDP growing at a 3.8% annual rate in
the second quarter compared to the meager 0.6% growth rate posted in
the prior quarter
- Soaring merger and buyout activity, fueled by corporate cash surpluses
and robust inflows into private equity funds
- Accommodative monetary policy from the Federal Reserve, including the
first cut in the target funds rate since June 2003
Small-cap growth stocks outperformed small-cap value stocks in every month of
the period -- their longest winning streak in more than seven years. Within the
small-cap growth market, financials was the only sector to decline amid problems
with subprime mortgages and tighter credit market conditions. The materials
sector turned in the highest return, boosted by double-digit gains in chemicals
and metals and mining stocks.
PERFORMANCE: The Fund's Class R shares rose 15.81% during the six months ended
September 30, 2007, outperforming the 6.70% gain in the Russell 2000 Growth
Index.
PORTFOLIO SPECIFICS: The Fund's outperformance was due to stock selection, which
was positive in most sectors and strongest in industrials. The Fund's
best-performing investments included DryShips and Excel Maritime Carriers, two
shipping companies that specialize in transporting dry bulk commodities, such as
coal and grain. Both benefited from better-than-expected demand for dry bulk
commodities that pushed up the daily charter rates on their vessels. JA Solar
Holdings, a manufacturer of solar cells, was another top performer in the
industrials sector. The company was recognized for its floating-price supply
contracts, which should provide a cost advantage relative to competitors that
have locked in what are expected to be high prices for the wafers used to create
the cells.
Stock selection was also especially strong in the information technology sector,
helped by a significant gain from Vasco Data Security International. The company
provides technologies that increase the security of web-based transactions, such
as online banking, and is experiencing brisk demand from financial institutions
in Asia. Areas of relative weakness in the Fund included stock selection in the
consumer discretionary sector, where several of our retail holdings
underperformed.
MARKET OUTLOOK: Continued softness in the housing market and record-high
commodity prices may dampen investor sentiment over the coming months. However,
additional monetary easing from the Fed may drive further gains in small-cap
growth stocks. History shows that the beginning of a monetary easing cycle, as
we saw in September, typically benefits equity investors.
In the changing market environment, we believe our focus on stocks exhibiting
positive and sustainable change will continue to lead us to exciting investment
opportunities for the Fund.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN U.S. EMERGING GROWTH
FUND CLASS R SHARES WITH THE RUSSELL 2000 GROWTH INDEX.
[CHART]
<Table>
<Caption>
U.S. EMERGING GROWTH FUND CLASS I SHARES RUSSELL 2000 GROWTH INDEX
10/1/1993 $250,000 $250,000
10/31/1993 $250,400 $257,225
11/30/1993 $237,400 $246,820
12/31/1993 $249,920 $256,560
1/31/1994 $257,143 $263,389
2/28/1994 $255,286 $262,230
3/31/1994 $234,855 $246,122
4/30/1994 $235,474 $246,498
5/31/1994 $229,076 $240,974
6/30/1994 $217,519 $230,677
7/31/1994 $222,679 $233,965
8/31/1994 $237,744 $251,133
9/30/1994 $240,633 $252,185
10/31/1994 $243,935 $254,871
11/30/1994 $231,553 $244,559
12/31/1994 $241,147 $250,321
1/31/1995 $231,007 $245,222
2/28/1995 $243,351 $256,553
3/31/1995 $255,254 $264,047
4/30/1995 $259,442 $268,018
5/31/1995 $261,426 $271,529
6/30/1995 $284,571 $290,241
7/31/1995 $312,124 $312,862
8/31/1995 $313,006 $316,723
9/30/1995 $319,619 $323,244
10/31/1995 $307,055 $307,344
11/30/1995 $320,721 $320,910
12/31/1995 $327,708 $328,021
1/31/1996 $323,033 $325,305
2/29/1996 $342,668 $340,139
3/31/1996 $352,952 $346,864
4/30/1996 $389,650 $373,492
5/31/1996 $411,388 $392,645
6/30/1996 $386,378 $367,131
7/31/1996 $341,966 $322,312
8/31/1996 $372,353 $346,172
9/30/1996 $397,130 $364,000
10/31/1996 $379,833 $348,297
11/30/1996 $383,574 $357,983
12/31/1996 $389,595 $364,964
1/31/1997 $394,413 $374,081
2/28/1997 $351,961 $351,490
3/31/1997 $332,993 $326,685
4/30/1997 $327,874 $322,906
5/31/1997 $379,961 $371,438
6/30/1997 $407,660 $384,034
7/31/1997 $436,865 $403,712
8/31/1997 $445,295 $415,827
9/30/1997 $487,145 $449,010
10/31/1997 $452,521 $422,043
11/30/1997 $435,017 $411,981
12/31/1997 $436,748 $412,212
1/31/1998 $426,704 $406,713
2/28/1998 $464,803 $442,622
3/31/1998 $490,779 $461,190
4/30/1998 $490,779 $464,017
5/31/1998 $452,334 $430,306
6/30/1998 $468,959 $434,704
7/31/1998 $429,195 $398,406
8/31/1998 $325,073 $306,438
9/30/1998 $358,956 $337,508
10/31/1998 $363,545 $355,112
11/30/1998 $401,944 $382,658
12/31/1998 $455,854 $417,285
1/31/1999 $500,962 $436,054
2/28/1999 $447,786 $396,164
3/31/1999 $495,828 $410,275
4/30/1999 $525,167 $446,507
5/31/1999 $504,263 $447,212
6/30/1999 $566,975 $470,771
7/31/1999 $569,542 $456,215
8/31/1999 $564,775 $439,153
9/30/1999 $581,645 $447,624
10/31/1999 $637,022 $459,088
11/30/1999 $720,228 $507,631
12/31/1999 $882,812 $597,101
1/31/2000 $860,761 $591,542
2/29/2000 $1,159,018 $729,171
3/31/2000 $1,010,263 $652,520
4/30/2000 $867,488 $586,635
5/31/2000 $762,089 $535,270
6/30/2000 $918,319 $604,416
7/31/2000 $822,264 $552,617
8/31/2000 $942,613 $610,747
9/30/2000 $886,924 $580,405
10/31/2000 $793,111 $533,294
11/30/2000 $611,428 $436,464
12/31/2000 $665,221 $463,171
1/31/2001 $676,406 $500,660
2/28/2001 $563,494 $432,029
3/31/2001 $509,701 $392,749
4/30/2001 $570,951 $440,833
5/31/2001 $573,081 $451,043
6/30/2001 $583,733 $463,343
7/31/2001 $545,918 $423,815
8/31/2001 $509,701 $397,327
9/30/2001 $423,420 $333,198
10/31/2001 $459,104 $365,252
11/30/2001 $495,321 $395,751
12/31/2001 $518,223 $420,406
1/31/2002 $503,310 $405,439
2/28/2002 $471,886 $379,207
3/31/2002 $510,766 $412,161
4/30/2002 $502,777 $403,258
5/31/2002 $476,147 $379,667
6/30/2002 $442,593 $347,472
7/31/2002 $379,746 $294,065
8/31/2002 $378,681 $293,918
9/30/2002 $358,442 $272,697
10/31/2002 $364,833 $286,496
11/30/2002 $382,409 $314,887
12/31/2002 $356,844 $293,160
1/31/2003 $346,725 $285,186
2/28/2003 $336,072 $277,572
3/31/2003 $336,605 $281,763
4/30/2003 $368,029 $308,418
5/31/2003 $400,517 $343,177
6/30/2003 $410,637 $349,800
7/31/2003 $442,060 $376,245
8/31/2003 $469,223 $396,449
9/30/2003 $446,854 $386,419
10/31/2003 $488,397 $419,806
11/30/2003 $500,647 $433,491
12/31/2003 $491,593 $435,442
1/31/2004 $520,886 $458,303
2/29/2004 $511,831 $457,615
3/31/2004 $511,299 $459,766
4/30/2004 $480,408 $436,686
5/31/2004 $485,734 $445,376
6/30/2004 $507,038 $460,162
7/31/2004 $462,832 $418,886
8/30/2004 $444,191 $409,880
9/30/2004 $476,147 $432,546
10/31/2004 $488,908 $443,057
11/30/2004 $528,314 $480,495
12/31/2004 $546,435 $497,745
1/31/2005 $525,124 $475,297
2/28/2005 $538,462 $481,808
3/31/2005 $520,370 $463,740
4/30/2005 $487,327 $434,246
5/31/2005 $520,903 $464,861
6/30/2005 $544,344 $479,876
7/31/2005 $584,299 $513,419
8/31/2005 $588,564 $506,180
9/30/2005 $594,450 $510,179
10/31/2005 $578,994 $491,302
11/30/2005 $606,091 $519,110
12/31/2005 $618,334 $518,331
1/31/2006 $688,701 $568,350
2/28/2006 $698,274 $565,338
3/31/2006 $740,938 $592,813
4/30/2006 $749,459 $591,094
5/31/2006 $705,765 $549,481
6/30/2006 $701,531 $549,811
7/31/2006 $658,317 $521,276
8/31/2006 $665,229 $536,549
9/30/2006 $666,293 $540,198
10/31/2006 $699,341 $575,256
11/30/2006 $712,139 $589,005
12/31/2006 $719,047 $587,591
1/31/2007 $733,931 $598,521
2/28/2007 $740,243 $596,605
3/31/2007 $750,533 $602,094
4/30/2007 $788,960 $617,869
5/31/2007 $830,222 $646,044
6/30/2007 $849,733 $642,297
7/31/2007 $809,030 $608,962
8/31/2007 $828,528 $624,247
9/30/2007 $869,789 $642,412
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR 5 YEARS 10 YEARS
- ---------------------------------------------------------------
U.S. Emerging Growth Fund Class R 30.22% 19.13% 5.71%
- ---------------------------------------------------------------
Russell 2000 Growth Index 18.94% 18.70% 3.65%
- ---------------------------------------------------------------
THE GRAPH ABOVE SHOWS THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND COMPARED WITH THE RUSSELL 2000 GROWTH INDEX FOR THE PERIODS INDICATED.THE
FUND'S CLASS R SHARES WERE FIRST AVAILABLE ON MAY 21, 1999. PERFORMANCE PRIOR TO
THE INTRODUCTION OF CLASS R SHARES REFLECTS THE HISTORICAL PERFORMANCE OF THE
FUND'S CLASS I SHARES. THIS PERFORMANCE HAS BEEN RESTATED TO REFLECT SHAREHOLDER
SERVICES FEES OF 0.25% APPLICABLE TO CLASS R SHARES, BUT NOT CLASS I SHARES OF
THE FUND. THE FUND'S CLASS I SHARES CALCULATE THEIR PERFORMANCE BASED UPON THE
HISTORICAL PERFORMANCE OF A CORRESPONDING SERIES OF NICHOLAS-APPLEGATE MUTUAL
FUNDS (RENAMED ING MUTUAL FUNDS), ADJUSTED TO REFLECT ALL FEES AND EXPENSES
APPLICABLE TO THE FUND'S CLASS I SHARES. AVERAGE ANNUAL TOTAL RETURN FIGURES
INCLUDE CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN
DISTRIBUTIONS. THE TOTAL RETURNS SHOWN ABOVE DO NOT SHOW THE EFFECTS OF INCOME
TAXES ON AN INDIVIDUAL'S INVESTMENT. IN MOST CASES, TAXES MAY REDUCE YOUR ACTUAL
INVESTMENT RETURNS ON INCOME OR GAINS PAID BY THE FUND OR ANY GAINS YOU MAY
REALIZE IF YOU SELL YOUR SHARES. PAST PERFORMANCE CANNOT GUARANTEE FUTURE
RESULTS.
THE RUSSELL 2000 GROWTH INDEX IS AN UNMANAGED INDEX COMPRISED OF THOSE RUSSELL
2000 COMPANIES WITH HIGHER PRICE-TO-BOOK RATIOS AND HIGHER FORECASTED GROWTH
VALUES. THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX GENERALLY REPRESENTATIVE OF
THE 2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX, WHICH REPRESENTS
APPROXIMATELY 10% OF THE TOTAL MARKET CAPITALIZATION OF THE RUSSELL 3000 INDEX.
THE UNMANAGED INDEX DIFFERS FROM THE FUND IN COMPOSITION, DOES NOT PAY
MANAGEMENT FEES OR EXPENSES AND INCLUDES REINVESTED DIVIDENDS.ONE CANNOT INVEST
DIRECTLY IN AN INDEX.
SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE WITH MARKET CONDITIONS.YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
YOUR SHARES.
1
<Page>
U.S. EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------
COMMON STOCK - 99.5%
ADVERTISING SERVICES - 0.6%
inVentiv Health, Inc.* 1,800 $ 78,876
-----------
AEROSPACE/DEFENSE-EQUIPMENT - 5.4%
AAR Corp.* 2,200 66,748
BE Aerospace, Inc.* 2,000 83,060
Ducommun, Inc.*,## 2,100 67,830
Kaman Corp 2,300 79,488
Moog, Inc.Cl.A*,## 1,600 70,304
Orbital Sciences Corp.* 3,800 84,512
TransDigm Group, Inc.* 2,600 118,846
Triumph Group, Inc. 1,300 106,223
-----------
677,011
-----------
AGRICULTURAL CHEMICALS - 1.6%
CF Industries Holdings, Inc. 1,500 113,865
UAP Holding Corp 2,600 81,536
-----------
195,401
-----------
AIRLINES - 0.4%
Republic Airways Holdings, Inc.* 2,400 50,808
-----------
ALTERNATIVE WASTE TECH - 0.6%
Darling International, Inc.* 7,400 73,186
-----------
APPAREL MANUFACTURERS - 1.3%
G-III Apparel Group, Ltd.*,## 3,300 64,977
Phillips-Van Heusen 800 41,984
Volcom, Inc.*,## 1,200 51,024
-----------
157,985
-----------
APPLICATIONS SOFTWARE - 0.5%
Actuate Corp.* 9,800 63,210
-----------
AUDIO/VIDEO PRODUCTS - 0.6%
Universal Electronics, Inc.*,## 2,300 74,750
-----------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL - 2.1%
ArvinMeritor, Inc. 3,600 60,552
Spartan Motors, Inc.## 4,700 79,101
Tenneco, Inc.*,## 1,800 55,818
Titan International, Inc.## 2,300 73,416
-----------
268,887
-----------
BROADCAST SERVICES/PROGRAMMING - 0.6%
DG FastChannel, Inc.*,## 3,400 80,172
-----------
BUILDING & CONSTRUCTION-MISCELLANEOUS - 0.7%
Layne Christensen Co.* 1,500 83,220
-----------
BUILDING PRODUCTS-DOORS & WINDOWS - 0.6%
Apogee Enterprises, Inc. 2,900 75,226
-----------
BUILDING PRODUCTS-LIGHT FIXTURES - 0.6%
LSI Industries, Inc. 3,600 73,872
-----------
BUILDING-HEAVY CONSTRUCTION - 0.8%
Perini Corp.* 1,700 95,081
-----------
BUILDING-MAINTENANCE & SERVICE - 0.5%
Healthcare Services Group## 3,300 66,891
-----------
CASINO HOTELS - 0.2%
MTR Gaming Group, Inc.*,## 2,400 22,872
-----------
CASINO SERVICES - 0.8%
Bally Technologies, Inc.* 2,800 99,204
-----------
CHEMICALS-PLASTICS - 1.1%
Metabolix, Inc.*,## 2,900 70,354
PolyOne Corp.* 9,400 70,218
-----------
140,572
-----------
CHEMICALS-SPECIALTY - 0.6%
Terra Industries, Inc.* 2,500 78,150
-----------
COMPUTER SERVICES - 0.8%
BluePhoenix Solutions, Ltd.* 5,400 99,414
-----------
COMPUTERS-INTEGRATED SYSTEMS - 0.5%
Radiant Systems, Inc.* 4,300 68,069
-----------
COMPUTERS-PERIPHERAL EQUIPMENT - 1.6%
Sigma Designs, Inc.*,## 1,700 82,008
Synaptics, Inc.*,## 2,500 119,400
-----------
201,408
-----------
CONSULTING SERVICES - 1.2%
FTI Consulting, Inc.* 1,800 90,558
Watson Wyatt Worldwide, Inc.Cl. A 1,300 58,422
-----------
148,980
-----------
CONSUMER PRODUCTS-MISCELLANEOUS - 1.1%
Fossil, Inc.* 1,700 63,512
Tupperware Brands Corp.## 2,200 69,278
-----------
132,790
-----------
COSMETICS & TOILETRIES - 0.7%
Elizabeth Arden, Inc.* 3,200 86,272
-----------
DATA PROCESSING/MANAGEMENT - 0.6%
FalconStor Software, Inc.*,## 6,000 72,300
-----------
DIAGNOSTIC KITS - 0.7%
Inverness Medical Innovations, Inc.* 1,600 88,512
-----------
DIVERSIFIED MANUFACTURING OPERATIONS - 2.9%
Ameron International Corp 700 74,039
Barnes Group, Inc.## 2,800 89,376
Koppers Holdings, Inc.## 2,700 104,247
LSB Industries, Inc.*,## 3,800 89,870
-----------
357,532
-----------
E-COMMERCE/PRODUCTS - 0.9%
Shutterfly, Inc.*,## 3,700 118,067
-----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 3.8%
Advanced Analogic Technologies, Inc.* 6,100 64,904
Emcore Corp.*,## 10,600 101,760
Omnivision Technologies, Inc.*,## 3,400 77,282
Semtech Corp.* 4,000 81,920
SiRF Technology Holdings, Inc.*,## 3,500 74,725
Skyworks Solutions, Inc.* 8,800 79,552
-----------
480,143
-----------
ELECTRONIC DESIGN AUTOMATION - 0.7%
Magma Design Automation, Inc.*,## 5,800 81,606
-----------
ELECTRONIC MEASURE INSTRUMENTS - 1.2%
FARO Technologies, Inc.*,## 1,600 70,640
Itron, Inc.* 900 83,763
-----------
154,403
-----------
E-MARKETING/INFORMATION - 0.4%
Valueclick, Inc.* 2,300 51,658
-----------
ENERGY-ALTERNATE SOURCES - 0.8%
JA Solar Holdings Co., Ltd.- ADR*,## 2,100 94,395
-----------
ENGINEERING/R & D SERVICES - 2.7%
Aecom Technology Corp.*,## 2,400 83,832
EMCOR Group, Inc.* 2,000 62,720
Michael Baker Corp.*,## 2,100 102,921
URS Corp.* 1,500 84,675
-----------
334,148
-----------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
2
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES - 2.9%
American Software, Inc.Cl.A 6,900 $ 63,480
Concur Technologies, Inc.* 3,100 97,712
JDA Software Group, Inc.* 3,200 66,112
Lawson Software, Inc.*,## 7,100 71,071
Ultimate Software Group, Inc.*,## 1,700 59,330
-----------
357,705
-----------
ENTERTAINMENT SOFTWARE - 0.6%
Take-Two Interactive Software, Inc.*,## 4,400 75,152
-----------
FINANCE-OTHER SERVICES - 1.0%
FCStone Group, Inc.* 1,650 53,245
GFI Group, Inc.* 800 68,896
-----------
122,141
-----------
FIREARMS & AMMUNITION - 0.6%
Smith & Wesson Holding Corp.*,## 3,800 72,542
-----------
FOOD-MISCELLANEOUS/DIVERSIFIED - 0.3%
M&F Worldwide Corp.* 800 40,152
-----------
FOOD-WHOLESALE/DISTRIBUTION - 0.4%
Spartan Stores, Inc. 2,300 51,819
-----------
FOOTWEAR & RELATED APPAREL - 0.5%
Iconix Brand Group, Inc.*,## 2,600 61,854
-----------
HOME FURNISHINGS - 0.9%
Tempur-Pedic International, Inc.## 3,100 110,825
-----------
HOTELS & MOTELS - 0.6%
Morgans Hotel Group Co.* 3,200 69,600
-----------
HOUSEWARES - 0.6%
Libbey, Inc.## 4,200 73,584
-----------
INDUSTRIAL AUDIO & VIDEO PRODUCTS - 0.7%
China Security & Surveillance
Technology, Inc.*,## 3,500 85,050
-----------
INDUSTRIAL AUTOMATION/ROBOTICS - 0.7%
Hurco Cos, Inc.*,## 1,600 86,496
-----------
INSTRUMENTS-SCIENTIFIC - 0.5%
FEI Co.*,## 2,000 62,860
-----------
INTERNET APPLICATIONS SOFTWARE - 1.1%
Cybersource Corp.*,## 5,200 60,788
DealerTrack Holdings, Inc.* 1,800 75,384
-----------
136,172
-----------
INTERNET INFRASTRUCTURE SOFTWARE - 0.6%
Chordiant Software, Inc.* 5,200 72,072
-----------
INTERNET SECURITY - 0.6%
Vasco Data Security International* 2,000 70,620
-----------
INVESTMENT COMPANIES - 0.3%
NexCen Brands, Inc.*,## 5,500 36,960
-----------
MACHINERY TOOLS & RELATED PRODUCTS - 0.8%
Hardinge, Inc. 2,800 97,524
-----------
MACHINERY-CONSTRUCTION & MINING - 0.6%
Bucyrus International, Inc.Cl.A 1,100 80,223
-----------
MACHINERY-GENERAL INDUSTRY - 3.7%
Altra Holdings, Inc.*,## 4,400 73,348
Chart Industries, Inc.* 4,400 141,504
DXP Enterprises, Inc.*,## 1,400 49,714
Kadant, Inc.*,## 2,400 67,200
Middleby Corp.* 800 51,632
Robbins & Myers, Inc. 1,300 74,477
-----------
457,875
-----------
MEDICAL IMAGING SYSTEMS - 0.6%
Given Imaging, Ltd.*,## 2,600 71,552
-----------
MEDICAL INFORMATION SYSTEMS - 0.8%
Phase Forward, Inc.* 5,200 104,052
-----------
MEDICAL INSTRUMENTS - 1.2%
Arthrocare Corp.* 1,300 72,657
NuVasive, Inc.* 2,300 82,639
-----------
155,296
-----------
MEDICAL LABS & TESTING SERVICES - 0.8%
Icon PLC - ADR*,## 2,000 102,060
-----------
MEDICAL LASER SYSTEMS - 0.9%
Cynosure, Inc.Cl.A* 2,900 107,010
-----------
MEDICAL-BIOMEDICAL/GENETICS - 1.4%
Alexion Pharmaceuticals, Inc.* 1,500 97,725
Regeneron Pharmaceuticals, Inc.* 4,100 72,980
-----------
170,705
-----------
MEDICAL-DRUGS - 0.4%
Indevus Pharmaceuticals, Inc.* 7,200 49,752
-----------
MEDICAL-OUTPATIENT/HOME MEDICAL CARE - 0.7%
Air Methods Corp.*,## 1,900 87,780
-----------
METAL PROCESSORS & FABRICATION - 2.7%
CIRCOR International, Inc. 2,000 90,820
Haynes International, Inc.* 900 76,833
LB Foster Co.Cl.A*,## 1,900 82,574
RBC Bearings, Inc.* 2,300 88,205
-----------
338,432
-----------
NETWORKING PRODUCTS - 0.4%
Switch & Data Facilities Co., Inc.*,## 3,100 50,499
-----------
NON-FERROUS METALS - 0.3%
USEC, Inc.*,## 3,200 32,800
-----------
OIL COMPANIES-EXPLORATION & PRODUCTION - 0.6%
Carrizo Oil & Gas, Inc.*,## 1,600 71,776
-----------
OIL FIELD MACHINERY & EQUIPMENT - 2.6%
Complete Production Services, Inc.* 3,100 63,488
Flotek Industries, Inc.*,## 2,300 101,545
NATCO Group, Inc.* 1,500 77,625
T-3 Energy Services, Inc.* 2,000 85,280
-----------
327,938
-----------
OIL-FIELD SERVICES - 0.9%
Cal Dive International, Inc.*,## 4,800 72,000
Oceaneering International, Inc.* 600 45,480
-----------
117,480
-----------
PAPER & RELATED PRODUCTS - 0.9%
Neenah Paper, Inc. 1,500 49,635
Rock-Tenn Co.Cl. A 2,400 69,360
-----------
118,995
-----------
PHYSICAL THERAPY/REHABILITATION CENTERS - 0.4%
Psychiatric Solutions, Inc.* 1,400 54,992
-----------
POLLUTION CONTROL - 0.3%
Fuel Tech, Inc.*,## 1,700 37,553
-----------
PRINTING-COMMERCIAL - 0.4%
Consolidated Graphics, Inc.* 900 56,511
-----------
PRIVATE CORRECTIONS - 1.6%
Cornell Cos., Inc.*,## 3,300 77,715
The Geo Group, Inc.* 4,000 118,440
-----------
196,155
-----------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------
PROPERTY/CASUALTY INSURANCE - 1.6%
Amtrust Financial Services, Inc.## 5,500 $ 83,435
Navigators Group, Inc.* 1,300 70,525
Tower Group, Inc. 2,000 52,360
-----------
206,320
-----------
RESEARCH & DEVELOPMENT - 1.3%
Kendle International, Inc.*,## 1,900 78,907
Parexel International Corp.* 2,000 82,540
-----------
161,447
-----------
RESORTS/THEME PARKS - 0.6%
Vail Resorts, Inc.*,## 1,200 74,748
-----------
RETAIL-APPAREL/SHOE - 1.4%
Bebe Stores, Inc.## 4,000 58,520
Dress Barn, Inc.* 3,400 57,834
JOS A Bank Clothiers, Inc.*,## 1,700 56,814
-----------
173,168
-----------
RETAIL-AUTOMOBILE - 0.6%
Rush Enterprises, Inc.Cl.A* 3,200 81,120
-----------
RETAIL-JEWELRY - 0.7%
Movado Group, Inc. 2,700 86,184
-----------
RETAIL-MISCELLANEOUS/DIVERSIFIED - 0.7%
Pricesmart, Inc.## 3,700 87,320
-----------
RETAIL-SPORTING GOODS - 0.5%
Zumiez, Inc.*,## 1,300 57,681
-----------
RUBBER-TIRES - 0.6%
Cooper Tire & Rubber Co 3,100 75,640
-----------
SATELLITE TELECOMMUNICATIONS - 0.6%
GeoEye, Inc.* 3,100 79,825
-----------
SCHOOLS - 1.3%
Capella Education Co.*,## 2,000 111,820
Corinthian Colleges, Inc.* 3,400 54,094
-----------
165,914
-----------
SEISMIC DATA COLLECTION - 0.5%
ION Geophysical Corp.*,## 4,400 60,852
-----------
SEMICONDUCTOR COMPONENTS-
INTEGRATED CIRCUITS - 1.7%
Anadigics, Inc.*,## 5,600 101,248
O2Micro International, Ltd.- ADR* 5,200 80,444
Pericom Semiconductor Corp.* 3,200 37,504
-----------
219,196
-----------
STEEL PIPE & TUBE - 0.6%
Valmont Industries, Inc.## 900 76,365
-----------
TELECOMMUNICATIONS EQUIPMENT - 1.6%
Arris Group, Inc.* 3,600 44,460
CommScope, Inc.* 1,600 80,384
Plantronics, Inc. 2,800 79,940
-----------
204,784
-----------
TELECOMMUNICATIONS SERVICES - 1.4%
NTELOS Holdings Corp 3,500 103,110
PAETEC Holding Corp.* 5,300 66,091
-----------
169,201
-----------
THERAPEUTICS - 2.9%
Alnylam Pharmaceuticals, Inc.*,## 2,000 65,540
Cypress Bioscience, Inc.* 5,000 68,450
Isis Pharmaceuticals, Inc.*,## 5,100 76,347
MGI Pharma, Inc.* 2,400 66,672
Onyx Pharmaceuticals, Inc.* 2,000 87,040
-----------
364,049
-----------
TRANSACTIONAL SOFTWARE - 1.1%
Synchronoss Technologies, Inc.* ## 2,000 84,120
VeriFone Holdings, Inc.*,## 1,200 53,196
-----------
137,316
-----------
TRANSPORT-AIR FREIGHT - 0.5%
Atlas Air Worldwide Holdings, Inc.* 1,100 56,793
-----------
TRANSPORT-MARINE - 1.5%
DryShips, Inc. 900 81,765
Excel Maritime Carriers, Ltd 1,800 100,440
-----------
182,205
-----------
WEB PORTALS/ISP - 0.5%
Trizetto Group* 3,800 66,538
-----------
WIRE & CABLE PRODUCTS - 1.0%
Belden, Inc. 1,600 75,056
General Cable Corp.*,## 800 53,696
-----------
128,752
-----------
WIRELESS EQUIPMENT - 0.2%
Novatel Wireless, Inc.* 1,300 29,445
- --------------------------------------------------------------------------
Total Common Stock (Cost: $9,919,474) 12,442,498
- --------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 36.7%
MONEY MARKET FUNDS - 35.4%
Boston Global Investment Trust -
Enhanced Portfolio, 5.408%** $4,429,950 4,429,950
-----------
TIME DEPOSIT - 1.3%
Wells Fargo Bank 4.370%, 10/01/07 165,779 165,779
- --------------------------------------------------------------------------
Total Short Term Investments (Cost: $4,595,729) 4,595,729
- --------------------------------------------------------------------------
Total Investments - 136.2% (Cost: $14,515,203) 17,038,227
- --------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (36.2%) (4,526,946)
- --------------------------------------------------------------------------
Net Assets - 100.0% $12,511,281
- --------------------------------------------------------------------------
</Table>
* NON-INCOME PRODUCING SECURITIES.
** ALL OF THE SECURITY IS PURCHASED WITH CASH COLLATERAL PROCEEDS FROM
SECURITIES LOANS.
## ALL OR A PORTION OF THE FUND'S HOLDINGS IN THIS SECURITY WAS ON LOAN AS OF
9/30/07.
ADR - AMERICAN DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
<Table>
<Caption>
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Industrial 30..6%
Consumer, Non-cyclical 18..8
Technology 14..7
Consumer, Cyclical 13..0
Communications 9..6
Energy 5..4
Basic Materials 4..5
Financial 2..9
Short Term Investments 36..7
- --------------------------------------------------------------------------------
Total Investments 136..2
Liabilities in excess of other assets (36..2)
- --------------------------------------------------------------------------------
Net Assets 100..0%
- --------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
<Page>
U.S. SYSTEMATIC LARGE CAP GROWTH FUND
MANAGEMENT TEAM: JAMES LI, PH.D., CFA, Portfolio Manager; JANE EDMONDSON,
Portfolio Manager; Lu Yu, CFA, CIPM, Analyst
CHIEF INVESTMENT OFFICER: HORACIO A.VALEIRAS,CFA
GOAL: The U.S. Systematic Large Cap Growth Fund seeks to maximize long-term
capital appreciation by investing primarily in stocks from a universe of
large U.S. companies with market capitalizations similar to the upper 90% of
the Russell 1000 Growth Index at time of purchase.
MARKET OVERVIEW: U.S. large-cap growth stocks generated strong increases between
April 1 and September 30 in a volatile market environment. Healthy gains at the
beginning and end of the period overshadowed sharp losses during the summer.
In April and May, investors bid share prices up on robust merger and acquisition
activity, better-than-expected corporate earnings growth and signs the economy
was improving after having slowed to a near standstill during the first quarter
of the year. Gains in the core consumer price index, which excludes food and
energy prices, slipped to a twelve-month low, and the Federal Reserve held
interest rates steady as it had since June 2006.
Equities subsequently reversed course, as a rise in residential mortgage
defaults undermined the value of mortgage-backed securities. The drop in value
caused financial institutions holding the bonds to sell stocks to meet cash
needs and reduce leverage to dampen potential losses. Risk aversion skyrocketed,
prompting a liquidity crunch throughout the financial markets. The Federal
Reserve intervened, lowering both the discount rate and the key federal funds
rate. Stocks rallied in response to the central bank's actions, delivering gains
in both August and September.
Among major Russell indexes, large-cap growth stocks posted the best returns
during the period and outpaced large-cap value stocks by more than 6%.
PERFORMANCE: During the six months ended September 30, 2007, the Fund's Class R
shares gained 14.32%, outperforming the Russell 1000 Growth Index, which
advanced 11.36%.
PORTFOLIO SPECIFICS: Outperformance over the index was driven by stock
selection, which was especially strong in the industrials, energy and materials
sectors. Top-performing holdings included Precision Castparts, a manufacturer of
metal components that experienced robust demand across all of its business
segments; National Oilwell Varco, an oilfield equipment company which reported a
jump in new orders; and Freeport-McMoRan Copper & Gold, a mining company that
announced it was selling a non-core business and would use the proceeds to repay
debt. PC and multimedia device maker Apple was another standout performer. The
company launched its highly anticipated iPhone in June and sold its one
millionth unit seventy-four days later. On the negative side, an overweight in
consumer discretionary stocks hurt relative performance amid concerns about the
outlook for consumer spending.
As of September 30, holdings remained broadly diversified across sectors and
industries. The Fund was overweight consumer discretionary, information
technology, and health care, where our model has identified a number of
attractively valued stocks with strong earnings growth and cash flow. The Fund
was underweight financials due to deteriorating fundamentals in the mortgage and
credit markets.
MARKET OUTLOOK: Our process evaluates investment opportunities on a relative
basis and is required to remain fully invested. As such, the process neither
utilizes nor results in a forecast or outlook on the overall market, but expects
to perform equally well versus the Russell 1000 Growth Index in both up and down
markets.
We are confident that the Fund's proprietary stock-selection model, in
conjunction with its risk-controlled approach to portfolio construction, will
continue to add value above the index over time.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN U.S.SYSTEMATIC LARGE
CAP GROWTH FUND CLASS R SHARES WITH THE RUSSELL 1000 GROWTH INDEX.
[CHART]
<Table>
<Caption>
U.S. SYSTEMATIC LARGE CAP GROWTH FUND CLASS I SHARES RUSSELL 1000 GROWTH INDEX
12/27/1996 $250,000 $250,000
12/31/1996 $247,200 $246,185
1/31/1997 $272,400 $263,452
2/28/1997 $267,800 $261,669
3/31/1997 $260,000 $247,507
4/30/1997 $270,000 $263,941
5/31/1997 $300,200 $282,990
6/30/1997 $311,400 $294,315
7/31/1997 $350,200 $320,345
8/31/1997 $342,200 $301,595
9/30/1997 $359,600 $316,436
10/31/1997 $359,200 $304,741
11/30/1997 $354,897 $317,683
12/31/1997 $361,073 $321,241
1/31/1998 $366,478 $330,846
2/28/1998 $400,192 $355,733
3/31/1998 $424,641 $369,912
4/30/1998 $438,281 $375,032
5/31/1998 $427,214 $364,388
6/30/1998 $458,097 $386,707
7/31/1998 $448,284 $384,147
8/31/1998 $373,570 $326,494
9/30/1998 $420,007 $351,576
10/31/1998 $451,657 $379,832
11/30/1998 $494,721 $408,726
12/31/1998 $580,590 $445,580
1/31/1999 $645,965 $471,745
2/28/1999 $632,475 $450,195
3/31/1999 $697,590 $473,907
4/30/1999 $730,134 $474,514
5/31/1999 $735,294 $459,932
6/30/1999 $770,229 $492,146
7/31/1999 $760,111 $476,505
8/31/1999 $755,701 $484,291
9/30/1999 $769,969 $474,116
10/31/1999 $825,745 $509,922
11/30/1999 $920,954 $537,432
12/31/1999 $1,138,610 $593,330
1/31/2000 $1,089,839 $565,509
2/29/2000 $1,248,865 $593,157
3/31/2000 $1,292,448 $635,615
4/30/2000 $1,193,089 $605,372
5/31/2000 $1,117,078 $574,886
6/30/2000 $1,235,116 $618,456
7/31/2000 $1,180,637 $592,673
8/31/2000 $1,334,734 $646,334
9/30/2000 $1,219,032 $585,197
10/31/2000 $1,094,249 $557,505
11/30/2000 $883,799 $475,324
12/31/2000 $865,615 $460,284
1/31/2001 $843,954 $492,085
2/28/2001 $698,749 $408,544
3/31/2001 $604,620 $364,086
4/30/2001 $683,507 $410,132
5/31/2001 $652,754 $404,095
6/30/2001 $620,130 $394,736
7/31/2001 $584,564 $384,872
8/31/2001 $518,513 $353,389
9/30/2001 $434,278 $318,121
10/31/2001 $455,938 $334,822
11/30/2001 $511,560 $366,999
12/31/2001 $508,886 $366,302
1/31/2002 $489,365 $359,818
2/28/2002 $457,810 $344,886
3/31/2002 $483,482 $356,819
4/30/2002 $455,404 $327,702
5/31/2002 $442,033 $319,772
6/30/2002 $393,631 $290,193
7/31/2002 $362,611 $274,232
8/31/2002 $364,483 $275,055
9/30/2002 $340,951 $246,532
10/31/2002 $359,403 $269,139
11/30/2002 $373,041 $283,753
12/31/2002 $336,940 $264,146
1/31/2003 $329,987 $257,727
2/28/2003 $329,185 $256,541
3/31/2003 $340,416 $261,313
4/30/2003 $361,809 $280,650
5/31/2003 $372,506 $294,655
6/30/2003 $376,517 $298,721
7/31/2003 $387,213 $306,159
8/31/2003 $396,573 $313,782
9/30/2003 $385,876 $310,425
10/31/2003 $404,060 $327,871
11/30/2003 $408,606 $331,281
12/31/2003 $408,072 $342,743
1/31/2004 $418,768 $349,735
2/29/2004 $415,827 $351,973
3/31/2004 $402,991 $345,427
4/30/2004 $393,631 $341,420
5/31/2004 $403,793 $347,770
6/30/2004 $412,618 $352,152
7/31/2004 $390,957 $332,255
8/30/2004 $385,609 $330,627
9/30/2004 $390,688 $333,768
10/31/2004 $403,229 $338,975
11/30/2004 $427,221 $350,636
12/31/2004 $438,371 $364,381
1/31/2005 $423,379 $352,247
2/28/2005 $432,101 $355,981
3/31/2005 $426,916 $349,502
4/30/2005 $408,644 $342,861
5/31/2005 $429,607 $359,421
6/30/2005 $429,865 $358,092
7/31/2005 $448,392 $375,602
8/31/2005 $440,500 $370,757
9/30/2005 $445,390 $372,462
10/31/2005 $434,210 $368,850
11/30/2005 $454,662 $384,747
12/31/2005 $454,389 $383,554
1/31/2006 $471,838 $390,305
2/28/2006 $473,489 $389,680
3/31/2006 $486,557 $395,448
4/30/2006 $486,849 $394,894
5/31/2006 $470,783 $381,507
6/30/2006 $469,135 $380,019
7/31/2006 $472,138 $372,799
8/31/2006 $487,860 $384,430
9/30/2006 $502,496 $395,002
10/31/2006 $521,792 $408,867
11/30/2006 $525,914 $416,962
12/31/2006 $529,490 $418,380
1/31/2007 $547,969 $429,132
2/28/2007 $537,229 $421,064
3/31/2007 $545,502 $423,338
4/30/2007 $565,359 $443,277
5/31/2007 $586,334 $459,235
6/30/2007 $577,480 $452,393
7/31/2007 $571,705 $445,381
8/31/2007 $589,657 $452,462
9/30/2007 $624,446 $471,420
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------
U.S. Systematic Large Cap Growth Fund Class R 23.95% 12.81% 5.49%
- ---------------------------------------------------------------------------
Russell 1000 Growth Index 19.35% 13.84% 4.06%
- ---------------------------------------------------------------------------
THE GRAPH ABOVE SHOWS THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND COMPARED WITH THE RUSSELL 1000 GROWTH INDEX FOR THE PERIODS INDICATED. THE
FUND'S CLASS R SHARES WERE FIRST AVAILABLE ON MAY 21, 1999. PERFORMANCE PRIOR TO
THE INTRODUCTION OF CLASS R SHARES REFLECTS THE HISTORICAL PERFORMANCE OF THE
FUND'S CLASS I SHARES. THIS PERFORMANCE HAS BEEN RESTATED TO REFLECT SHAREHOLDER
SERVICES FEES OF 0.25% APPLICABLE TO CLASS R SHARES, BUT NOT CLASS I SHARES OF
THE FUND. THE FUND'S CLASS I SHARES CALCULATE THEIR PERFORMANCE BASED UPON THE
HISTORICAL PERFORMANCE OF A CORRESPONDING SERIES OF NICHOLAS-APPLEGATE MUTUAL
FUNDS (RENAMED ING MUTUAL FUNDS). AVERAGE ANNUAL TOTAL RETURN FIGURES INCLUDE
CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS, AND CAPITAL GAIN
5
<Page>
DISTRIBUTIONS. ABSENT EXPENSE LIMITATIONS, TOTAL RETURNS WOULD HAVE BEEN
SLIGHTLY LOWER. THE TOTAL RETURNS SHOWN ABOVE DO NOT SHOW THE EFFECTS OF INCOME
TAXES ON AN INDIVIDUAL'S INVESTMENT. IN MOST CASES, TAXES MAY REDUCE YOUR ACTUAL
INVESTMENT RETURNS ON INCOME OR GAINS PAID BY THE FUND OR ANY GAINS YOU MAY
REALIZE IF YOU SELL YOUR SHARES. PAST PERFORMANCE CANNOT GUARANTEE FUTURE
RESULTS.
THE RUSSELL 1000 GROWTH INDEX MEASURES THE PERFORMANCE OF THOSE RUSSELL 1000
COMPANIES WITH LOWER PRICE-TO-BOOK RATIOS AND LOWER FORECASTED GROWTH VALUES.
THE UNMANAGED INDEX DIFFERS FROM THE FUND IN COMPOSITION, DOES NOT PAY
MANAGEMENT FEES OR EXPENSES AND INCLUDES REINVESTED DIVIDENDS.ONE CANNOT INVEST
DIRECTLY IN AN INDEX.
SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE WITH MARKET CONDITIONS.YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
YOUR SHARES.
6
<Page>
U.S. SYSTEMATIC LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------
COMMON STOCK - 99.7%
AEROSPACE/DEFENSE - 3.8%
Lockheed Martin Corp 5,000 $ 542,450
Raytheon Co 4,700 299,954
-----------
842,404
-----------
AGRICULTURAL CHEMICALS - 1.2%
Monsanto Co 3,100 265,794
-----------
APPLIANCES - 0.7%
Whirlpool Corp 1,800 160,380
-----------
APPLICATIONS SOFTWARE - 4.3%
Microsoft Corp 32,100 945,666
-----------
ATHLETIC FOOTWEAR - 1.3%
Nike, Inc. Cl. B 4,800 281,568
-----------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL - 1.0%
Johnson Controls, Inc. 1,900 224,409
-----------
BROADCAST SERVICES/PROGRAMMING - 2.0%
Liberty Media Corp.- Capital* 3,500 436,905
-----------
CABLE TV - 1.3%
EchoStar Communications Corp.* 5,900 276,179
-----------
CHEMICALS-DIVERSIFIED - 1.1%
Celanese Corp. Cl. A 6,000 233,880
-----------
COMPUTERS - 6.8%
Apple, Inc.* 2,300 353,142
Hewlett-Packard Co 11,300 562,627
International Business Machines Corp 4,800 565,440
-----------
1,481,209
-----------
COMPUTERS-MEMORY DEVICES - 2.8%
EMC Corp.* 11,600 241,280
Network Appliance, Inc.* 14,200 382,122
-----------
623,402
-----------
COSMETICS & TOILETRIES - 1.0%
Procter & Gamble Co 3,275 230,363
-----------
DATA PROCESSING/MANAGEMENT - 1.5%
NAVTEQ Corp.* 4,200 327,474
-----------
E-COMMERCE/PRODUCTS - 1.4%
Amazon.Com, Inc.* 3,400 316,710
-----------
ELECTRIC-GENERATION - 1.5%
The AES Corp.* 16,100 322,644
-----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS - 6.9%
Broadcom Corp. Cl. A* 6,300 229,572
Intel Corp 28,500 737,010
MEMC Electronic Materials, Inc.* 4,500 264,870
Nvidia Corp.* 7,650 277,236
-----------
1,508,688
-----------
ELECTRONIC MEASURE INSTRUMENTS - 0.5%
Garmin, Ltd 1,000 119,400
-----------
ENGINEERING/R & D SERVICES - 1.7%
Fluor Corp 2,600 374,348
-----------
ENGINES-INTERNAL COMBUST - 2.3%
Cummins, Inc. 3,900 498,771
-----------
ENTERPRISE SOFTWARE/SERVICES - 2.6%
BMC Software, Inc.* 7,300 227,979
Oracle Corp.* 15,600 337,740
-----------
565,719
-----------
FINANCE-INVESTMENT BANKERS/BROKERS - 0.6%
The Goldman Sachs Group, Inc. 600 130,044
-----------
FOOTWEAR & RELATED APPAREL - 1.3%
CROCS, Inc.* 4,300 289,175
-----------
HEALTH CARE COST CONTAINMENT - 0.7%
McKesson Corp 2,600 152,854
-----------
INTERNET SECURITY - 0.9%
Symantec Corp.* 10,400 201,552
-----------
MACHINERY-FARM - 1.5%
AGCO Corp.* 6,600 335,082
-----------
MEDICAL INSTRUMENTS - 1.7%
Intuitive Surgical, Inc.* 1,600 368,000
-----------
MEDICAL PRODUCTS - 3.3%
Johnson & Johnson 11,100 729,270
-----------
MEDICAL-DRUGS - 6.8%
Abbott Laboratories 12,100 648,802
Forest Laboratories, Inc.* 10,000 372,900
Merck & Co., Inc. 4,900 253,281
Schering-Plough Corp 6,800 215,084
-----------
1,490,067
-----------
MEDICAL-HMO - 5.2%
Aetna, Inc. 9,100 493,857
UnitedHealth Group, Inc.* 8,400 406,812
WellCare Health Plans, Inc.* 2,200 231,946
-----------
1,132,615
-----------
METAL PROCESSORS & FABRICATION - 2.6%
Precision Castparts Corp 3,800 562,324
-----------
METAL-DIVERSIFIED - 2.5%
Freeport-McMoRan Copper & Gold, Inc. 5,300 555,917
-----------
MULTIMEDIA - 1.5%
The Walt Disney Co.* 9,400 323,266
-----------
NETWORKING PRODUCTS - 5.7%
Cisco Systems, Inc.* 31,900 1,056,209
Juniper Networks, Inc.* 5,100 186,711
-----------
1,242,920
-----------
OIL FIELD MACHINERY & EQUIPMENT - 3.9%
Cameron International Corp.* 2,600 239,954
National Oilwell Varco, Inc.* 4,200 606,900
-----------
846,854
-----------
OIL REFINING & MARKETING - 2.2%
Frontier Oil Corp 5,700 237,348
Valero Energy Corp 3,800 255,284
-----------
492,632
-----------
OIL-FIELD SERVICES - 1.6%
Schlumberger, Ltd 3,400 357,000
-----------
PHARMACY SERVICES - 1.8%
Medco Health Solutions, Inc.* 4,400 397,716
-----------
PUBLISHING-NEWSPAPERS - 1.4%
Gannett Co., Inc. 6,800 297,160
-----------
RETAIL-COMPUTER EQUIPMENT - 1.3%
GameStop Corp.Cl. A* 5,100 287,385
-----------
RETAIL-DISCOUNT - 2.0%
Dollar Tree Stores, Inc.* 6,300 255,402
Wal-Mart Stores, Inc. 4,200 183,330
-----------
438,732
-----------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------
RETAIL-RESTAURANTS - 2.3%
Darden Restaurants, Inc. 5,900 $ 246,974
McDonald's Corp 4,800 261,456
-----------
508,430
-----------
SUPER-REGIONAL BANKS-US - 1.0%
Fifth Third Bancorp 6,300 213,444
-----------
TELEPHONE-INTEGRATED - 2.2%
Verizon Communications, Inc. 10,700 473,796
- ------------------------------------------------------------------------
Total Common Stock (Cost: $18,204,869) 21,862,148
- ------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 1.3%
TIME DEPOSIT - 1.3%
Wells Fargo Bank
4.370%, 10/01/07 (Cost: $293,667) $293,667 293,667
- ------------------------------------------------------------------------
Total Investments - 101.0% (Cost: $18,498,536) 22,155,815
- ------------------------------------------------------------------------
Liabilities in Excess of Other Assets - (1.0%) (215,435)
- ------------------------------------------------------------------------
Net Assets - 100.0% $21,940,380
- ------------------------------------------------------------------------
</Table>
* NON-INCOME PRODUCING SECURITIES.
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
<Table>
<Caption>
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Technology 23..7%
Consumer, Non-cyclical 20..5
Communications 16..2
Industrial 13..7
Consumer, Cyclical 10..0
Energy 7..7
Basic Materials 4..8
Financial 1..6
Utilities 1..5
Short Term Investments 1..3
- --------------------------------------------------------------------------------
Total Investments 101..0
Liabilities in excess of other assets (1..0)
- --------------------------------------------------------------------------------
Net Assets 100..0%
- --------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
<Page>
INTERNATIONAL GROWTH FUND
MANAGEMENT TEAM: HORACIO A. VALEIRAS, CFA, Portfolio Manager and Chief
Investment Officer; PEDRO V. MARCAL, Portfolio Manager
GOAL: The International Growth Fund seeks to maximize long-term capital
appreciation through investments primarily in companies located outside the
United States with market capitalizations predominantly in the top 75% of
publicly traded companies as measured by stock market capitalizations within
each country.
MARKET OVERVIEW: Equity markets in developed countries outside the United States
registered healthy gains from April 1 through September 30, 2007. The U.S.
dollar weakened against a basket of currencies, more than doubling returns for
U.S.-based investors. Broadly speaking, growth stocks outperformed value stocks
by approximately 5%.
From a regional perspective, European equities outpaced Pacific Rim shares due
to weakness in Japan. Japanese stocks were hard hit by the U.S. mortgage and
credit problems, as well as signs the economy was slowing, including the first
drop in capital spending in four years. However, outside of Japan, Pacific Rim
markets posted strong increases. Australia was a standout performer, as this
top-five global producer of coal, nickel and other materials benefited from
robust demand for commodities.
European markets were led by substantial gains in Germany, the region's largest
economy and the world's largest exporting country. After nearly a decade of
being a drag on euro zone growth, Germany has experienced an economic
reawakening, as rising exports have fueled business spending and hiring.
Strength in the German economy helped drive the euro to a record high versus the
U.S. dollar, as did the Federal Reserve's decision to cut the fed funds rate in
September. Monetary easing in the United States raised hopes that the European
Central Bank might follow suit, despite having raised its key interest rate in
June to keep inflationary pressures at bay.
PERFORMANCE: The Fund's Class R shares gained 21.72% during the six months ended
September 30, 2007, outperforming the 9.05% increase in the MSCI EAFE Index.
PORTFOLIO SPECIFICS: The Fund's outperformance of the index was largely due to
stock selection, which was positive in most countries and nearly every sector of
investment. Stock selection was especially strong in France, Japan, Canada and
the industrials sector. Overall, the portfolio's sector and currency exposures,
which are a byproduct of our bottom-up investment decisions, were also a source
of value added. For example, an underweight in financials was a plus, since
financials was the market's worst-performing sector amid the U.S.-induced global
liquidity crunch. Pockets of relative weakness in the Fund included stock
selection in Germany and an underweight in the energy sector.
At the individual stock level, some of our best-performing holdings were
France-based Alstom, a transport and energy infrastructure firm; Japan Steel
Works, a manufacturer of industrial machinery; and Canada-based Aur Resources, a
mining company.
MARKET OUTLOOK: International stocks are facing several challenges, including
global liquidity issues, record-high oil prices and large currency swings. That
said, a number of positive factors may pave the way for additional price gains,
including:
- Expectations for healthy corporate profit growth throughout developed
non-U.S. countries
- Pro-growth developments in Europe, such as the election of French
President Nicolas Sarkozy who campaigned on economic reforms
- Attractive valuations in Europe relative to history and relative to
the U.S. and emerging markets
In the shifting market terrain, we remain focused on identifying fundamentally
strong companies with exceptional growth prospects for the Fund.
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN INTERNATIONAL GROWTH
FUND CLASS R SHARES WITH THE MSCI EAFE INDEX.
[CHART]
<Table>
<Caption>
INTERNATIONAL GROWTH FUND CLASS I SHARES MSCI EAFE INDEX
12/27/1996 $250,000 $250,000
12/31/1996 $252,475 $252,250
1/31/1997 $274,682 $243,422
2/28/1997 $277,282 $247,403
3/31/1997 $282,684 $248,299
4/30/1997 $286,685 $249,617
5/31/1997 $313,293 $265,860
6/30/1997 $331,298 $280,522
7/31/1997 $352,505 $285,060
8/31/1997 $334,099 $263,770
9/30/1997 $358,707 $278,546
10/31/1997 $328,898 $257,136
11/30/1997 $325,228 $254,515
12/31/1997 $329,820 $256,735
1/31/1998 $341,928 $268,476
2/28/1998 $365,307 $285,703
3/31/1998 $387,017 $294,500
4/30/1998 $398,289 $296,831
5/31/1998 $408,101 $295,391
6/30/1998 $412,902 $297,627
7/31/1998 $431,271 $300,644
8/31/1998 $369,482 $263,398
9/30/1998 $351,948 $255,322
10/31/1998 $358,419 $281,937
11/30/1998 $379,975 $296,381
12/31/1998 $400,853 $308,074
1/31/1999 $416,302 $307,164
2/28/1999 $399,183 $299,843
3/31/1999 $411,918 $312,359
4/30/1999 $426,950 $325,016
5/31/1999 $410,457 $308,278
6/30/1999 $442,817 $320,297
7/31/1999 $457,431 $329,817
8/31/1999 $464,530 $331,022
9/30/1999 $471,628 $334,354
10/31/1999 $502,527 $346,877
11/30/1999 $567,666 $358,929
12/31/1999 $677,711 $391,144
1/31/2000 $629,452 $366,291
2/29/2000 $705,914 $376,151
3/31/2000 $666,012 $390,732
4/30/2000 $611,068 $370,171
5/31/2000 $578,686 $361,130
6/30/2000 $609,814 $375,253
7/31/2000 $582,865 $359,521
8/31/2000 $606,263 $362,641
9/30/2000 $566,987 $344,984
10/31/2000 $531,055 $336,835
11/30/2000 $505,070 $324,203
12/31/2000 $521,270 $335,726
1/31/2001 $505,514 $335,553
2/28/2001 $463,129 $310,398
3/31/2001 $426,292 $289,706
4/30/2001 $455,806 $309,838
5/31/2001 $441,160 $298,903
6/30/2001 $423,407 $286,679
7/31/2001 $413,199 $281,463
8/31/2001 $396,112 $274,342
9/30/2001 $364,378 $246,551
10/31/2001 $363,935 $252,863
11/30/2001 $371,258 $262,194
12/31/2001 $375,474 $263,741
1/31/2002 $358,831 $249,736
2/28/2002 $361,272 $251,484
3/31/2002 $381,022 $265,089
4/30/2002 $379,246 $266,839
5/31/2002 $378,803 $270,228
6/30/2002 $365,932 $259,473
7/31/2002 $331,314 $233,863
8/31/2002 $328,207 $233,325
9/30/2002 $296,474 $208,266
10/31/2002 $306,903 $219,450
11/30/2002 $315,336 $229,413
12/31/2002 $303,353 $221,705
1/31/2003 $292,701 $212,459
2/28/2003 $288,485 $207,594
3/31/2003 $284,712 $203,671
4/30/2003 $309,788 $223,875
5/31/2003 $329,316 $237,643
6/30/2003 $335,086 $243,513
7/31/2003 $339,302 $249,455
8/31/2003 $352,839 $255,516
9/30/2003 $352,617 $263,437
10/31/2003 $377,915 $279,876
11/30/2003 $380,884 $286,145
12/31/2003 $405,580 $308,522
1/31/2004 $415,146 $312,903
2/29/2004 $420,263 $320,193
3/31/2004 $424,268 $322,114
4/30/2004 $408,694 $315,092
5/31/2004 $408,472 $316,447
6/30/2004 $414,034 $323,504
7/31/2004 $392,231 $313,055
8/30/2004 $393,343 $314,495
9/30/2004 $404,467 $322,766
10/31/2004 $418,947 $333,805
11/30/2004 $449,153 $356,704
12/31/2004 $466,401 $372,363
1/31/2005 $462,763 $365,549
2/28/2005 $485,716 $381,413
3/31/2005 $465,024 $371,992
4/30/2005 $454,561 $363,660
5/31/2005 $460,243 $364,205
6/30/2005 $468,666 $369,195
7/31/2005 $489,568 $380,529
8/31/2005 $494,121 $390,271
9/30/2005 $526,832 $407,716
10/31/2005 $507,286 $395,851
11/30/2005 $531,332 $405,629
12/31/2005 $575,432 $424,531
1/31/2006 $619,511 $450,640
2/28/2006 $600,615 $449,739
3/31/2006 $621,697 $464,760
4/30/2006 $647,746 $487,301
5/31/2006 $613,221 $468,978
6/30/2006 $606,905 $469,166
7/31/2006 $606,602 $473,857
8/31/2006 $624,375 $487,031
9/30/2006 $624,125 $487,859
10/31/2006 $645,470 $506,885
11/30/2006 $668,836 $522,193
12/31/2006 $696,393 $538,642
1/31/2007 $686,922 $542,305
2/28/2007 $687,540 $546,752
3/31/2007 $707,135 $560,967
4/30/2007 $745,108 $586,379
5/31/2007 $777,073 $597,462
6/30/2007 $793,547 $597,760
7/31/2007 $815,687 $589,033
8/31/2007 $797,334 $579,962
9/30/2007 $861,918 $611,106
</Table>
Annualized Total Returns As of 9/30/07
1 YEAR 5 YEARS 10 YEARS
- ----------------------------------------------------------------
International Growth Fund Class R 37.64% 23.39% 8.84%
- ----------------------------------------------------------------
MSCI EAFE Index 25.38% 24.05% 8.35%
- ----------------------------------------------------------------
THE GRAPH ABOVE SHOWS THE VALUE OF A HYPOTHETICAL $250,000 INVESTMENT IN THE
FUND'S CLASS R SHARES COMPARED WITH THE MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALASIA, FAR EAST INDEX ("MSCI EAFE") OVER THE PERIODS INDICATED.
THE FUND'S CLASS R SHARES WERE FIRST AVAILABLE ON MAY 21, 1999. PERFORMANCE
PRIOR TO THE INTRODUCTION OF CLASS R SHARES REFLECTS THE HISTORICAL PERFORMANCE
OF THE FUND'S CLASS I SHARES.
THIS PERFORMANCE HAS BEEN RESTATED TO REFLECT SHAREHOLDER SERVICES FEES OF 0.25%
APPLICABLE TO CLASS R SHARES, BUT NOT CLASS I SHARES OF THE FUND. THE FUND'S
CLASS I SHARES CALCULATE THEIR PERFORMANCE
9
<Page>
BASED UPON THE HISTORICAL PERFORMANCE OF A CORRESPONDING SERIES OF
NICHOLAS-APPLEGATE MUTUAL FUNDS (RENAMED ING MUTUAL FUNDS), ADJUSTED TO REFLECT
ALL FEES AND EXPENSES APPLICABLE TO THE FUND'S CLASS I SHARES. AVERAGE ANNUAL
TOTAL RETURN FIGURES INCLUDE CHANGES IN PRINCIPAL VALUE, REINVESTED DIVIDENDS,
AND CAPITAL GAIN DISTRIBUTIONS.
THE TOTAL RETURNS SHOWN ABOVE DO NOT SHOW THE EFFECTS OF INCOME TAXES ON AN
INDIVIDUAL'S INVESTMENT. IN MOST CASES, TAXES MAY REDUCE YOUR ACTUAL INVESTMENT
RETURNS ON INCOME OR GAINS PAID BY THE FUND OR ANY GAINS YOU MAY REALIZE IF YOU
SELL YOUR SHARES. PAST PERFORMANCE CANNOT GUARANTEE FUTURE RESULTS.
THE MSCI EAFE INDEX IS AN UNMANAGED INDEX OF OVER 900 COMPANIES, AND IS A
GENERALLY ACCEPTED BENCHMARK FOR MAJOR OVERSEAS MARKETS. INDEX WEIGHTINGS
REPRESENT THE RELATIVE CAPITALIZATIONS OF THE MAJOR OVERSEAS MARKETS INCLUDED IN
THE INDEX ON A U.S. DOLLAR ADJUSTED BASIS. THE UNMANAGED INDEX DIFFERS FROM THE
FUND IN COMPOSITION, DOES NOT PAY MANAGEMENT FEES OR EXPENSES AND INCLUDES
REINVESTED DIVIDENDS.
ONE CANNOT INVEST DIRECTLY IN AN INDEX.
SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE WITH MARKET CONDITIONS, CURRENCY VOLATILITY AND THE SOCIAL,
ECONOMIC AND POLITICAL CLIMATES OF COUNTRIES WHERE THE FUND INVESTS. YOU MAY
HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
10
<Page>
INTERNATIONAL GROWTH FUND
SCHEDULE OF INVESTMENTS (Unaudited)
As of September 30, 2007
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 89.0%
AUSTRALIA - 6.1%
AMP, Ltd. 20,175 $ 188,180
CSL, Ltd. 4,845 460,058
Incitec Pivot, Ltd. 5,513 417,326
Rio Tinto, Ltd. 2,619 250,820
-----------
1,316,384
-----------
BELGIUM - 1.1%
InBev NV 2,667 241,075
-----------
BRAZIL - 1.4%
Cia Vale do Rio Doce - ADR 6,800 230,724
Unibanco - Uniao de Bancos Brasileiros SA - GDR 500 65,775
-----------
296,499
-----------
CANADA - 3.9%
Inmet Mining Corp. 1,800 180,688
Rogers Communications, Inc. Cl. B 9,800 446,557
Teck Cominco, Ltd. Cl. B 4,600 218,589
-----------
845,834
-----------
DENMARK - 2.2%
FLSmidth & Co. AS Cl. B 3,400 360,670
Novo Nordisk AS Cl. B* 900 108,350
-----------
469,020
-----------
EGYPT - 0.5%
Orascom Construction Industries - GDR 698 118,137
-----------
FINLAND - 3.3%
Nokia OYJ 5,812 220,359
Outotec OYJ 4,280 301,297
Wartsila OYJ Cl. B* 2,692 183,956
-----------
705,612
-----------
FRANCE - 7.6%
Alstom 2,665 540,345
Cie Generale de Geophysique-Veritas* 819 266,900
Neopost SA 1,235 173,739
Total SA 2,280 184,887
Veolia Environnement 5,636 484,040
-----------
1,649,911
-----------
GERMANY - 9.1%
E.ON AG 1,259 232,155
IVG Immobilien AG 3,712 137,994
Rhoen Klinikum AG 3,543 113,118
RWE AG 1,817 227,913
SAP AG 3,820 223,009
Siemens AG* 2,336 320,321
Solarworld AG 4,233 243,026
Stada Arzneimittel AG 3,602 234,256
United Internet AG 10,500 235,785
-----------
1,967,577
-----------
GREECE - 1.9%
National Bank of Greece SA 3,214 204,314
Piraeus Bank SA 5,800 206,707
-----------
411,021
-----------
HONG KONG - 2.2%
Kerry Properties, Ltd. 20,000 154,210
Pacific Basin Shipping, Ltd. 94,200 195,708
Sun Hung Kai Properties, Ltd. 7,000 118,039
-----------
467,957
-----------
ITALY - 2.4%
Saipem SpA 4,874 207,392
UniCredito Italiano SpA 35,527 303,148
-----------
510,540
-----------
JAPAN - 17.6%
Chugai Pharmaceutical Co., Ltd. 14,900 245,753
East Japan Railway Co. 33 259,949
Fanuc, Ltd.* 1,000 101,813
Honda Motor Co., Ltd. 4,300 144,312
Japan Tobacco, Inc. 63 345,633
KDDI Corp. 33 244,455
Komatsu, Ltd. 5,600 187,941
Mitsubishi Corp. 7,900 250,020
Mitsubishi Electric Corp. 13,300 166,517
Mitsubishi Estate Co., Ltd. 3,300 94,396
Mitsui Engineering & Shipbuilding Co., Ltd. 19,000 107,542
Nintendo Co., Ltd. 100 51,993
Nitori Co., Ltd. 1,550 73,177
Nomura Holdings, Inc. 8,800 147,362
Secom Co., Ltd. 2,000 96,161
Sumitomo Heavy Industries, Ltd. 12,000 154,310
The Japan Steel Works, Ltd. 23,000 381,350
Tokuyama Corp. 8,000 121,236
Tokyu Land Corp. 11,000 110,273
Toyo Tanso Co., Ltd. 3,600 362,770
Toyota Motor Corp.* 2,700 159,162
-----------
3,806,125
-----------
MEXICO - 0.3%
America Movil SAB de CV - ADR 1,200 76,800
-----------
NETHERLANDS - 3.5%
Koninklijke BAM Groep NV 7,208 191,589
Koninklijke Philips Electronics NV* 4,500 202,230
Royal KPN NV 9,062 156,841
SBM Offshore NV 5,028 197,141
-----------
747,801
-----------
NORWAY - 1.1%
Renewable Energy Corp. AS* 5,400 247,480
-----------
PERU - 0.2%
Credicorp, Ltd. 800 54,160
-----------
REPUBLIC OF CHINA - 1.2%
China Coal Energy Co. 52,400 155,811
China Communications Construction Co., Ltd. 43,000 102,288
-----------
258,099
-----------
SINGAPORE - 2.4%
City Developments, Ltd. 21,600 235,724
DBS Group Holdings, Ltd. 19,100 277,921
-----------
513,645
-----------
SOUTH KOREA - 0.5%
Samsung Heavy Industries Co., Ltd.* 1,980 105,258
-----------
SPAIN - 1.2%
Iberdrola SA* 1,715 100,486
Telefonica SA 6,009 167,752
-----------
268,238
-----------
SWEDEN - 0.9%
Assa Abloy AB Cl. B 4,600 95,107
Telefonaktiebolaget LM Ericsson - ADR 2,300 91,540
-----------
186,647
-----------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
SWITZERLAND - 6.0%
ABB, Ltd. 12,607 $ 330,877
Julius Baer Holding AG 2,475 184,428
Nestle SA 506 226,535
Roche Holding AG* 1,396 252,265
Swatch Group AG 3,314 211,487
Syngenta AG* 480 103,133
-----------
1,308,725
-----------
UNITED KINGDOM - 12.4%
BP PLC 17,509 202,439
British American Tobacco PLC 7,107 253,680
BT Group PLC 32,183 201,294
Burberry Group PLC 13,528 181,078
Imperial Tobacco Group PLC 3,932 179,523
International Power PLC 44,027 404,764
Reckitt Benckiser PLC 3,566 208,656
Royal Dutch Shell PLC Cl. A 5,003 205,590
Southern Cross Healthcare, Ltd. 12,097 125,694
Standard Chartered PLC 6,448 210,189
Unilever PLC 7,395 232,773
Vodafone Group PLC 75,012 269,737
-----------
2,675,417
- --------------------------------------------------------------------------------
Total Common Stock (Cost: $14,849,694) 19,247,962
- --------------------------------------------------------------------------------
PREFERRED STOCK - 3.2%
BRAZIL - 0.8%
Usinas Siderurgicas de Minas Gerais SA 2,500 173,913
- --------------------------------------------------------------------------------
GERMANY - 2.4%
Fresenius SE 3,715 288,309
Henkel KGaA 4,611 236,661
-----------
524,970
- --------------------------------------------------------------------------------
Total Preferred Stock (Cost: $671,832) 698,883
- --------------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 5.4%
TIME DEPOSITS - 5.4%
Citibank Nassau 4.370%, 10/01/07 (Cost: $1,155,952) $1,155,952 1,155,952
- --------------------------------------------------------------------------------
Total Investments - 97.6% (Cost: $16,677,478) 21,102,797
- --------------------------------------------------------------------------------
Other Assets in Excess of Liabilities - 2.4% 521,570
- --------------------------------------------------------------------------------
Net Assets - 100.0% $21,624,367
- --------------------------------------------------------------------------------
</Table>
* NON-INCOME PRODUCING SECURITIES.
ADR - AMERICAN DEPOSITORY RECEIPT
GDR - GLOBAL DEPOSITORY RECEIPT
SCHEDULE OF INVESTMENTS BY SECTOR
as of September 30, 2007 (Unaudited)
<Table>
<Caption>
PERCENT OF
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
Industrial 22.1%
Consumer, Non-cyclical 17.8
Financial 12.4
Communications 9.8
Energy 8.8
Basic Materials 7.8
Utilities 6.7
Consumer, Cyclical 5.0
Technology 1.8
Short Term Investments 5.4
- --------------------------------------------------------------------------------
Total Investments 97.6
Other assets in excess of liabilities 2.4
- --------------------------------------------------------------------------------
Net Assets 100.0%
- --------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<Page>
(This page intentionally left blank)
13
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS
For a Class R share outstanding during the period indicated
<Table>
<Caption>
DISTRIBUTIONS FROM:
-------------------------
NET ASSET NET NET REALIZED TOTAL FROM NET NET
VALUE, INVESTMENT AND UNREALIZED INVESTMENT INVESTMENT REALIZED
BEGINNING INCOME (LOSS) (2) GAINS (LOSS) OPERATIONS INCOME CAPITAL GAINS
- -------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. EMERGING GROWTH
For the period ended 09/30/07 (1) $12.84 $(0.04) $ 2..07 $ 2.03 $ -- $ --
For the year ended 03/31/07 13.69 (0.10) 0..18(10) 0.08 -- (0.93)
For the year ended 03/31/06 9.65 (0.14) 4..18 4.04 -- --
For the year ended 03/31/05 9.52 (0.10) 0..23 0.13 -- --
For the year ended 03/31/04 6.27 (0.11) 3..36 3.25 -- --
For the year ended 03/31/03 9.54 (0.09) (3..18) (3.27) -- --
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/07 (1) $19.42 $(0.02) $ 2..80 $ 2.78 $ -- $ --
For the year ended 03/31/07 17.59 (0.02) 1..85 1.83 -- --
For the year ended 03/31/06 15.46 (0.02) 2..15 2.13 -- --
For the year ended 03/31/05 14.90 0.02 0..54 0.56 -- --
For the year ended 03/31/04 12.61 (0.06) 2..35 2.29 -- --
For the year ended 03/31/03 17.96 (0.08) (5..27) (5.35) -- --
GLOBAL EQUITY FUND
INTERNATIONAL GROWTH
For the period ended 09/30/07 (1) $21.78 $0.11 $ 4..62 $ 4.73 $ -- $ --
For the year ended 03/31/07 22.26 (0.01) 2..79 2.78 (0.06) (3.20)
For the year ended 03/31/06 20.19 0.12 5..94 6.06 -- (3.99)
For the year ended 03/31/05 18.93 0.15 1..53 1.68 -- (0.42)
For the year ended 03/31/04 12.72 0.12 6..10 6.22 (0.01) --
For the year ended 03/31/03 17.07 0.10 (4..45) (4.35) -- --
</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) THE EXPENSE REIMBURSEMENT AGREEMENT WAS TERMINATED ON JANUARY 23, 2006.
(6) THIS CALCULATION INCLUDES EXPENSES NOT PART OF THE EXPENSE REIMBURSEMENT
CALCULATION.
(7) THE BOARD OF TRUSTEES APPROVED AN AMENDMENT TO THE EXPENSE LIMITATION
AGREEMENT WHEREBY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSE) OF U.S. SYSTEMATIC LARGE CAP GROWTH,
AND INTERNATIONAL GROWTH EXCLUDING TAXES, INTEREST, BROKERAGE AND
EXTRAORDINARY EXPENSES, DO NOT EXCEED 1.25% AND 1.65% FOR THE PERIOD 4/1/02
TO 6/30/02, 1.15% AND 1.40% FOR THE PERIOD 7/1/02 TO 1/21/03 AND 1.25% AND
1.40% FOR THE PERIOD 1/22/03 TO 3/31/03, RESPECTIVELY. EMERGING GROWTH HAD
RATES THROUGHOUT THE YEAR OF 1.50%.
(8) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSE LIMITATION
AGREEMENT WHEREBY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES), OF THE U.S. EMERGING GROWTH AND
INTERNATIONAL GROWTH, DO NOT EXCEED 1.45% AND 1.64%, FOR THE PERIOD
01/24/06 TO 03/31/06 RESPECTIVELY. U.S. SMALL CAP VALUE AND U.S. SYSTEMATIC
LARGE CAP GROWTH HAD RATES THROUGHOUT THE YEAR OF 1.55% AND 1.37%
RESPECTIVELY.
(9) THE BOARD OF TRUSTEES APPROVED THE AMENDMENTS TO THE EXPENSE LIMITATION
AGREEMENT WHEREBY OVERALL OPERATING EXPENSES (EXCLUDING TAXES, INTEREST,
BROKERAGE AND EXTRAORDINARY EXPENSES) OF THE U.S. EMERGING GROWTH, U.S.
SYSTEMATIC LARGE CAP GROWTH AND INTERNATIONAL GROWTH DO NOT EXCEED 1.25%,
1.00% AND 1.15%, FOR THE PERIOD 4/1/03 TO 7/28/03, 1.48%, 1.12% AND 1.41%
FOR THE PERIOD 7/29/03 TO 3/31/04, RESPECTIVELY.
(10) THE FUND RECEIVED $12,373 FROM A SECURITY LITIGATION SETTLEMENT DURING THE
YEAR WHICH IS REFLECTED IN REALIZED GAINS. THIS EVENT HAD A $0.05 PER SHARE
IMPACT TO THE FUND.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<Page>
<Table>
<Caption>
NET ASSET NET ASSETS,
TOTAL VALUE, TOTAL ENDING
DISTRIBUTIONS ENDING RETURN (3) (IN 000'S)
- ---------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. EMERGING GROWTH
For the period ended 09/30/07 (1) $ -- $14.87 15.81% $ 3,889
For the year ended 03/31/07 (0.93) 12.84 1.02% 3,177
For the year ended 03/31/06 -- 13.69 41.98% 3,173
For the year ended 03/31/05 -- 9.65 1.37% 3,681
For the year ended 03/31/04 -- 9.52 51.83% 3,948
For the year ended 03/31/03 -- 6.27 (34.28%) 2,879
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/07 (1) $ -- $22.20 14.32% $ 6,896
For the year ended 03/31/07 -- 19.42 10.40% 6,022
For the year ended 03/31/06 -- 17.59 13.78% 6,055
For the year ended 03/31/05 -- 15.46 3.76% 9,318
For the year ended 03/31/04 -- 14.90 18.16% 10,229
For the year ended 03/31/03 -- 12.61 (29.79%) 9,052
GLOBAL EQUITY FUND
INTERNATIONAL GROWTH
For the period ended 09/30/07 (1) $ -- $26.51 21.72% $ 2,874
For the year ended 03/31/07 (3.26) 21.78 13.36% 2,294
For the year ended 03/31/06 (3.99) 22.26 33.34% 1,776
For the year ended 03/31/05 (0.42) 20.19 8.94% 1,749
For the year ended 03/31/04 (0.01) 18.93 48.86% 9,236
For the year ended 03/31/03 -- 12.72 (25.48%) 7,845
<Caption>
RATIOS TO AVERAGE NET ASSETS (4)
---------------------------------------------------------------------------
EXPENSES EXPENSES NET OF FUND'S
NET EXPENSE NET OF REIMBURSEMENT/ PORTFOLIO
INVESTMENT TOTAL (REIMBURSEMENTS)/ REIMBURSEMENT/ RECOUPMENT TURNOVER
INCOME (LOSS) EXPENSES RECOUPMENT (5) RECOUPMENT OFFSET (6) RATE
- ----------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUNDS
U.S. EMERGING GROWTH
For the period ended 09/30/07 (1) (0.61%) 1.44% -- 1.44% 0.88% 63%
For the year ended 03/31/07 (0.78%) 1.46% -- 1.46% 0.97% 148%
For the year ended 03/31/06 (1.27%) 2.09% (0.36%) 1.73% 1.42%(8) 128%
For the year ended 03/31/05 (1.06%) 1.89% (0.20%) 1.69% 1.26% 142%
For the year ended 03/31/04 (1.28%) 1.73% -- 1.73% 1.51%(9) 166%
For the year ended 03/31/03 (1.20%) 1.74% (0.20%) 1.54% 1.50%(7) 118%
U.S. SYSTEMATIC LARGE CAP GROWTH
For the period ended 09/30/07 (1) (0.40%) 1.37% -- 1.37% 1.25% 55%
For the year ended 03/31/07 (0.13%) 1.38% -- 1.38% 1.30% 100%
For the year ended 03/31/06 (0.11%) 1.86% (0.48%) 1.38% 1.29%(8) 147%
For the year ended 03/31/05 0.14% 1.94% (0.57%) 1.37% 1.29% 197%
For the year ended 03/31/04 (0.41%) 1.58% (0.20%) 1.38% 1.18%(9) 172%
For the year ended 03/31/03 (0.59%) 1.51% (0.30%) 1.21% 1.20%(7) 193%
GLOBAL EQUITY FUND
INTERNATIONAL GROWTH
For the period ended 09/30/07 (1) 0.91% 1.63% -- 1.63% 1.07% 62%
For the year ended 03/31/07 (0.05%) 1.67% -- 1.67% 1.41% 119%
For the year ended 03/31/06 0.57% 1.62% -- 1.62% 1.24%(8) 167%
For the year ended 03/31/05 0.80% 1.66% (0.02%) 1.64% 1.32% 203%
For the year ended 03/31/04 0.71% 1.74% (0.04%) 1.70% 1.44%(9) 186%
For the year ended 03/31/03 0.65% 1.72% (0.21%) 1.51% 1.48%(7) 203%
</Table>
15
<Page>
STATEMENTS OF ASSETS AND LIABILITIES
<Table>
<Caption>
U.S. SYSTEMATIC
U.S. EMERGING LARGE CAP INTERNATIONAL
SEPTEMBER 30, 2007 (UNAUDITED) GROWTH GROWTH GROWTH
- ----------------------------------------------------------------------------------------------
Assets
Investments, at value* $17,038,227 $22,155,815 $21,102,797
Foreign currencies, at value** -- -- 3,845
Cash -- -- 3,043
Receivables:
Investment securities sold 3,813 12 564,160
Capital shares sold 45,807 16,270 100,597
Dividends 1,889 10,044 27,566
Foreign taxes receivable -- -- 31,461
Interest -- -- --
Expense offset 11,529 3,965 52,796
Other assets 51 81 334
----------- ----------- -----------
Total assets 17,101,316 22,186,187 21,886,599
----------- ----------- -----------
Liabilities
Payables:
Bank overdraft $ -- $ -- $ --
Investments purchased 121,294 219,200 597,501
Capital shares redeemed 26,443 7,954 --
Collateral on securities loaned 4,429,950 -- --
Distributions fee -- -- --
To investment advisor and administrator 6,931 7,265 7,590
Accrued Expenses and other liabilites 5,417 11,388 17,141
----------- ----------- -----------
Total Liabilities 4,590,035 245,807 622,232
----------- ----------- -----------
NET ASSETS 12,511,281 21,940,380 21,264,367
=========== =========== ===========
* Investments, at cost 14,515,203 18,498,536 16,677,478
=========== =========== ===========
** Foreign currencies, at cost -- -- 3,833
=========== =========== ===========
Net Assets Consist of:
Paid-in capital $15,277,034 $25,322,477 $(4,595,690)
Undistributed net investment income (loss) (25,926) 1,926 844,098
Accumulated net realized gain (loss) on
investments and foreign currencies (5,262,851) (7,041,302) 20,587,974
Net unrealized depreciation of investments
and of other assets and liabilities
denominated in foreign currencies 2,523,024 3,657,279 4,427,985
----------- ----------- -----------
Net Assets applicable to all shares outstanding $12,511,281 $21,940,380 $21,264,367
=========== =========== ===========
Net Assets of Class I shares $ 8,622,452 $ 994,431 $ 8,348,319
Net Assets of Class II shares -- 14,050,192 10,041,983
Net Assets of Class III shares -- -- --
Net Assets of Class IV shares -- -- --
Net Assets of Class R shares 3,888,829 6,895,757 2,874,065
=========== =========== ===========
Class I Shares outstanding 568,364 43,938 306,538
Class II Shares outstanding -- 623,545 375,773
Class III Shares outstanding -- -- --
Class IV Shares outstanding -- -- --
Class R Shares outstanding 261,546 310,552 108,397
=========== =========== ===========
Net Asset Value - Class I Share $ 15.17 $ 22.63 $ 27.23
Net Asset Value - Class II Share $ -- $ 22.53 $ 26.72
Net Asset Value - Class III Share $ -- $ -- $ --
Net Asset Value - Class IV Share $ -- $ -- $ --
Net Asset Value - Class R Share $ 14.87 $ 22.20 $ 26.51
=========== =========== ===========
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
<Page>
STATEMENTS OF OPERATIONS
<Table>
<Caption>
U.S. SYSTEMATIC
PERIOD ENDED U.S. EMERGING LARGE CAP INTERNATIONAL
SEPTEMBER 30, 2007 (UNAUDITED) GROWTH GROWTH GROWTH
- ----------------------------------------------------------------------------------------------------------------
Investment Income
Dividends, net of foreign taxes* $ 15,992 $ 85,550 $ 607,741
Interest -- -- 18
---------- ---------- -----------
Total Income 15,992 85,550 607,759
---------- ---------- -----------
Expenses
Advisory fees 43,604 42,313 137,117
Administration fees 23,837 51,556 162,165
Shareholder servicing fees 4,358 7,936 3,204
Professional fees 782 1,125 2,986
Trustees' fees and expenses 797 1,259 3,210
Interest and credit facility fees -- 427 153
Miscellaneous 1,019 1,140 2,285
---------- ---------- -----------
Total Expenses 74,397 105,756 311,120
Expense offset (32,479) (6,041) (99,651)
---------- ---------- -----------
Net Expenses 41,918 99,715 211,469
---------- ---------- -----------
Net Investment Income (Loss) (25,926) (14,165) 396,290
---------- ---------- -----------
Net Realized and Unrealized Gain (Loss) on Investments
Realized gain from:
Securities 648,462 882,994 19,256,320
Foreign currency transactions -- -- 2,284,242
---------- ---------- -----------
Net realized gain (loss) 648,462 882,994 21,540,562
---------- ---------- -----------
Change in unrealized appreciation (depreciation) of:
---------- ---------- -----------
Investments 1,060,491 1,673,564 (7,393,165)
Other assets and liabilities denominated in foreign currencies -- -- (105,158)
---------- ---------- -----------
Net unrealized appreciation (depreciation) 1,060,491 1,673,564 (7,498,323)
---------- ---------- -----------
Net Gain (Loss) on Investments 1,708,953 2,556,558 14,042,239
---------- ---------- -----------
Assets Resulting From Operations $1,683,027 $2,542,393 $14,438,529
========== ========== ===========
* Foreign taxes withheld $ -- $ -- $ 78,473
---------- ---------- -----------
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
<Page>
NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
U.S. SYSTEMATIC
U.S. EMERGING GROWTH LARGE CAP GROWTH
-------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2007 2007 MARCH 31, 2007 MARCH 31,
AND MARCH 31, 2007 (UNAUDITED) 2007 (UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) In Net Assets from Investment Operations:
Net investment income (loss) $ (25,926) $ (62,920) $ (14,165) $ 16,091
Net realized gain (loss) 648,462 1,305,006 882,994 1,136,149
Net unrealized appreciation (depreciation) 1,060,491 (1,129,950) 1,673,564 565,057
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from investment operations 1,683,027 112,136 2,542,393 1,717,297
----------- ----------- ----------- -----------
Distributions to Shareholders:
From net investment income -- -- -- (1,377)
From net realized gains -- (739,964) -- --
----------- ----------- ----------- -----------
Total distributions -- (739,964) -- (1,377)
----------- ----------- ----------- -----------
From Capital Share Transactions:
Proceeds from shares sold
Class I 914,251 2,347,555 79,663 747,760
Class II -- -- 2,465,309 5,251,286
Class IV -- -- -- --
Class R 655,287 1,241,746 276,630 577,773
Distributions reinvested
Class I -- 513,359 -- --
Class II -- -- -- 1,377
Class IV -- -- -- --
Class R -- 226,606 -- --
Cost of shares redeemed
Class I (876,507) (1,775,938) (160,100) (556,909)
Class II -- -- (2,873) (4,013)
Class IV -- -- -- --
Class R (450,648) (1,234,060) (268,198) (1,190,968)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from share transactions 242,383 1,319,268 2,390,431 4,826,306
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets 1,925,410 691,440 4,932,824 6,542,226
Net Assets
Beginning 10,585,871 9,894,431 17,007,556 10,465,330
----------- ----------- ----------- -----------
Ending $12,511,281 $10,585,871 $21,940,380 $17,007,556
=========== =========== =========== ===========
Undistributed net investment income (loss), ending $ (25,926) $ -- $ 1,926 $ 16,091
=========== =========== =========== ===========
Class I -- Capital Share Activity
Shares sold 63,355 179,774 3,796 38,919
Distributions reinvested -- 41,601 -- --
Shares redeemed (61,130) (138,889) (7,650) (28,488)
=========== =========== =========== ===========
Net Class I Share Activity 2,225 82,486 (3,854) 10,431
=========== =========== =========== ===========
Class II -- Capital Share Activity
Shares sold -- -- 113,300 299,668
Distributions reinvested -- -- -- 73
Shares redeemed -- -- (140) (222)
=========== =========== =========== ===========
Net Class II Share Activity -- -- 113,160 299,519
=========== =========== =========== ===========
Class IV -- Capital Share Activity
Shares sold -- -- -- --
Distributions reinvested -- -- -- --
Shares redeemed -- -- -- --
=========== =========== =========== ===========
Net Class IV Share Activity -- -- -- --
=========== =========== =========== ===========
Class R -- Capital Share Activity
Shares sold 46,187 95,674 13,479 31,541
Distributions reinvested -- 18,696 -- --
Shares redeemed (31,996) (98,725) (12,976) (65,681)
=========== =========== =========== ===========
Net Class R Share Activity 14,191 15,645 503 (34,140)
=========== =========== =========== ===========
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
<Page>
<Table>
<Caption>
INTERNATIONAL GROWTH
---------------------------
SEPTEMBER 30,
PERIODS ENDED SEPTEMBER 30, 2007 2007 MARCH 31,
AND MARCH 31, 2007 (UNAUDITED) 2007
- ----------------------------------------------------------------------------------------------------------------
Increase In Net Assets from Investment Operations:
Net investment income $ 396,290 $ 461,096
Net realized gain 21,540,562 19,578,811
Net unrealized appreciation (depreciation) (7,498,323) (7,320,021)
------------ ------------
Net unrealized appreciation (depreciation) in net assets from investment operations 14,438,529 12,719,886
------------ ------------
Distributions to Shareholders:
From net investment income -- (455,849)
From net realized gains -- (13,553,285)
------------ ------------
Total distributions -- (14,009,134)
------------ ------------
From Capital Share Transactions:
Proceeds from shares sold
Class I 1,231,762 3,016,780
Class II 9,041,996 50,000
Class III -- --
Class IV -- --
Class R 390,565 995,312
Distributions reinvested
Class I -- 6,370,440
Class II -- 7,369,591
Class III -- --
Class IV -- --
Class R -- 269,106
Cost of shares redeemed
Class I (10,315,814) (39,097,481)
Class II (62,922,703) (11,428,000)
Class III -- --
Class IV -- --
Class R (313,458) (709,385)
------------ ------------
Net increase (decrease) in net assets from share transactions (62,887,652) (33,163,637)
------------ ------------
Net Increase (Decrease) in Net Assets (48,449,123) (34,452,885)
Net Assets
Beginning 69,713,490 104,166,375
------------ ------------
Ending $ 21,264,367 $ 69,713,490
============ ============
Undistributed net investment income, ending $ 844,098 $ 3,363,093
============ ============
Class I -- Capital Share Activity
Shares sold 49,693 134,231
Distributions reinvested -- 302,921
Shares redeemed (414,423) (1,787,977)
============ ============
Net Class I Share Activity (364,730) (1,350,825)
============ ============
Class II -- Capital Share Activity
Shares sold 370,877 2,199
Distributions reinvested -- 350,266
Shares redeemed (2,339,134) (496,447)
============ ============
Net Class II Share Activity (1,968,257) (143,982)
============ ============
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 IV Share Activity -- --
============ ============
Class R -- Capital Share Activity
Shares sold 16,145 45,495
Distributions reinvested -- 13,108
Shares redeemed (13,061) (33,088)
============ ============
Net Class R Share Activity 3,084 25,515
============ ============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<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
thirteen 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"),
eight Funds have issued Class II shares ("Class II"), two Funds have issued
Class III shares ("Class III"), one Fund has issued Class IV shares ("Class IV")
and three Funds have issued Retirement shares ("Class R"). No shares have a
sales charge. Class R has a distribution fee. The Funds offering Class R shares
are covered in this report.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies consistently followed by the Funds in preparing
these financial statements are described below. The policies conform with
accounting principles generally accepted in the United States.
SECURITY VALUATIONS
Equity securities that are traded on a stock exchange or on the NASDAQ National
Market System or other over-the-counter ("OTC") markets 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. ADRs will be
valued by an approved pricing service at the "evaluated" price as of the close
of business on the NYSE on the day the securities are being valued. GDRs will be
valued by an approved pricing service at the last sale price as of the close of
business on the London International or Luxembourg markets (i.e., normally at
1:00 p.m. Eastern Time). Securities listed or traded on certain non-U.S.
exchanges will be generally valued at the last sale/closing price on the primary
exchange obtained by an approved pricing vendor. If the security does not trade
on a particular day, the security will be 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
mean between the bid and ask price provided by an approved bond pricing service.
In the event a TRACE price is used, the price will be the last traded price on
that day greater than or equal to 1 mm par amount. Convertible securities are
normally priced at the mean between the bid and ask prices. In the event that a
pricing service does not price a particular security or the price provided is
not believed to be reliable, the Investment Adviser will endeavor to use the
average of one or two broker-dealer quotations. If broker-dealer quotations are
not available, the Investment Adviser will generally "stale" the price. If such
a security has a demand feature exercisable within one to seven days, the
security will be valued at par. 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. U.S.
Treasury Bills will be priced at the bid received from an approved pricing
source.
Repurchase Agreements will be priced at cost plus accrued interest. Options that
trade on exchanges or the OTC market will be valued at the last sale provided
the last sale falls between the closing bid and ask prices. If the last sale is
larger than the ask price, the option will be valued at the bid price. If no
sales are reported, an option will be valued at the mean between the bid and the
ask price. If the bid price is zero, the option will be valued at the last sale
unless this price is greater than the ask price. In such cases, the option will
be valued at the ask price. Private options will be valued by obtaining broker
quotations. Futures contracts will be valued at the last sale or settlement
price as of the close of such exchanges or markets. Other securities purchased
by the Funds may include equity-linked securities, derivatives and private
placements (e.g., Rule 144A and Reg S securities). These securities will be
generally valued by using market quotations or a matrix method provided by an
approved pricing service. If a pricing service is unable to provide a price or
the price provided is not believed to be reliable, then broker-dealer quotations
will be used.
Shares available to U.S. investors such as the Funds in foreign markets may be
priced at a premium to the local shares in that market. The foreign shares are
generally priced using the local price as the base and applying a premium, which
is received from an independent pricing service or the broker.
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
20
<Page>
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 of the respective currency at the spot rate at 11:00 a.m.
Eastern Time against the U.S. dollar, as provided by an approved pricing
service. Security transactions, income and expenses are converted at the
prevailing exchange rate on the day of the event. The effect of changes in
exchange rates on securities denominated in a non-U.S. currency is included with
the net realized and unrealized gain or loss of the associated security. Other
Non-U.S. currency gains or losses are reported separately.
Certain Funds may use forward non-U.S. currency contracts to reduce their
exposure to currency fluctuations of their non-U.S. securities. These contracts
are commitments to purchase or sell a non-U.S. currency at a specified rate on a
future date. When the contract is fulfilled or closed, gains or losses are
realized. Until then, the gain or loss is included in unrealized appreciation or
depreciation of investments. The contract commitment is fully collateralized by
cash or securities of the Fund. Non-U.S. denominated assets and forward currency
contracts may involve more risks than U.S. transactions, including currency
risk, political and economic risk, regulatory and market risk. Evaluating and
monitoring such risk exposure is a part of the Funds' management strategy. There
were no such forward non-U.S. currency contracts at September 30, 2007.
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, 2007.
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. There were no such options contracts at September 30, 2007.
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
21
<Page>
and the Fund may, therefore, lose the opportunity to sell securities at a
desirable price. In addition, in the event that a borrower of securities would
file for bankruptcy or become insolvent, disposition of the securities may be
delayed pending court action. The market value of securities on loan and the
related collateral at the period ended September 30, 2007 were:
- ------------------------------------------------
FUND MARKET VALUE COLLATERAL
- ------------------------------------------------
U.S. Emerging Growth $4,264,193 $4,429,950
- ------------------------------------------------
CREDIT FACILITY
The Trust has a $15 million credit facility available to fund temporary or
emergency borrowing expiring in March 2008. Each Fund pays its pro-rata share of
an annual commitment fee plus interest on its specific borrowings. For the
period ended September 30, 2007, 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.
The Funds have arrangements with their brokers, custodian and third party
service providers whereby commissions paid by a Fund, interest earned on cash
maintained with its custodian and income from securities lending arrangements
are used to reduce Fund expenses and offset fees. During the period, the credits
used to reduce the Funds' expenses were:
- ------------------------------------------------------------------
CREDIT DIRECT SECURITY
INTEREST BROKERAGE LENDING
FUND OFFSET OFFSET OFFSET
- ------------------------------------------------------------------
U.S. Emerging Growth 8,952 2,076 21,750
U.S. Systematic Large Cap Growth 5,777 264 --
International Growth 21,130 8,586 70,033
- ------------------------------------------------------------------
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
NOTE C -- FEDERAL INCOME TAXES
The Funds intend to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially all
of their taxable income to shareholders. Accordingly, no provision for federal
income taxes is required. A Fund investing in foreign securities records any
foreign taxes on income and gains on such investments in accordance with the
applicable tax rules. The Funds' tax accounting treatment of loss deferrals,
accretion, passive foreign investment companies and expiration of capital loss
carryforwards are different from the financial statement recognition of income
and gains.
Capital loss carryforwards may be used to offset current or future capital gains
until expiration.
The ROCSOP amounts as of the end of the prior period have been reclassified for
the International Growth Fund by $2,915,285, increasing Accumulated Net Realized
Gain (Loss) and decreasing Undistributed Net Investment Income.
DISTRIBUTIONS TO SHAREHOLDERS
The Funds record distributions to shareholders on the ex-dividend date.
Distributions are determined in accordance with income tax regulations that may
differ from generally accepted accounting principles. Accordingly, the Funds'
capital accounts are periodically reclassified to reflect income and gains
available for distribution under income tax regulations. The Funds make income
and capital gain distributions at least annually. Funds with income objectives
make distributions either quarterly or monthly in accordance with the
prospectuses.
NOTE D -- TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Nicholas-Applegate Capital Management LLC ("NACM") serves as Adviser (the
"Adviser") to the Trust. The Adviser receives a monthly fee at an annual rate
based on the average daily net assets of the Funds. The investment Advisory Fee
rates for each of the Funds are listed in the table below.
ADMINISTRATIVE & SHAREHOLDER SERVICES FEE
On January 24, 2006, the Funds entered into an Administration Agreement whereby
the Funds pay for the administrative services they require under what is
essentially an all-in fee structure. Class R shareholders of the Funds pay an
administrative fee to the Investment Adviser computed as a percentage of the
Funds' assets attributable in the aggregate to Class R shares, the Investment
Adviser, in turn, provides or procures administrative and shareholder services
for Class R shareholders and also bears the costs of most third-party
administrative services required by the Funds, including audit, custodial,
portfolio accounting, legal, transfer agency and printing costs. The
administrative fees paid to the Investment Adviser may exceed the related costs.
Generally, this may not be the case for relatively small funds.
Effective September 28, 2006, the administrative fees were decreased to the
rates shown below, to better reflect other expenses not covered under the
administrative fee. These other expenses which are borne by the Funds, such as
brokerage fees, taxes, commissions and other transaction
22
<Page>
expenses, costs of borrowing money, including interest expenses, extraordinary
expenses and fees, expenses of the disinterested Trustees of the Trust and their
counsel may vary and affect the total level of expenses paid by Class R
shareholders.
The investment advisory and administrative services fees are charged at the
following annual rates:
- ---------------------------------------------------------------------
ADMINISTRATION FEE*
FUND ADVISORY FEE CLASS R
- ---------------------------------------------------------------------
U.S. Emerging Growth 0.75% 0.41%
U.S. Systematic Large Cap Growth 0.45% 0.64%
International Growth 0.50% 0.86%
- ---------------------------------------------------------------------
The Shareholder servicing fees for Class R shareholders are charged at the
following rates:
FUND
U.S. Emerging Growth 0.25%
U.S. Systematic Large Cap Growth 0.25%
International Growth 0.25%
TRUSTEE COMPENSATION
Certain officers of the Trust are also officers of the Investment Adviser and
Distributor. The Trustees who are not affiliated with the Investment Adviser
receive annual compensation of approximately $35,000 each from the Trust, except
for the chairman of the Trust who will receive annual compensation of
approximately $42,000 from the Trust.
NOTE E -- INVESTMENT TRANSACTIONS
The following table presents purchases and sales of securities, excluding
short-term investments, during the period ended September 30, 2007 to indicate
the volume of transactions in each Fund. The tax cost of securities held at
September 30, 2007, and the related gross and net unrealized appreciation and
depreciation, provide aggregate information on a tax basis against which future
gains and losses on these investments are measured for distribution purposes.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
PURCHASES SALES TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
FUND (IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S)
- ----------------------------------------------------------------------------------------------------------------
U.S. Emerging Growth $ 7,432 $ 7,151 $14,515 $2,860 $(337) $2,523
U.S. Systematic Large Cap Growth 12,631 10,493 18,499 4,001 (344) 3,657
International Growth 31,261 93,106 16,677 4,699 (271) 4,428
- ----------------------------------------------------------------------------------------------------------------
</Table>
Gains and losses resulting from the subscriptions-in-kind and
redemptions-in-kind are included in the realized gain/loss from securities and
non-U.S. currency transactions. During the period ended September 30, 2007, the
International Growth Fund had redemptions-in-kind valued at $62,922,703.
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. For the period ended September 30, 2007 the Funds
were not party to any such agreements.
NOTE G -- SHAREHOLDER ACTIONS
The Trust held a special meeting of the shareholders of the U.S. Systematic Mid
Cap Growth Fund on July 25, 2007 to approve an Agreement and Plan of
Reorganization with respect to the reorganization of the Nicholas-Applegate U.S.
Systematic Mid Cap Growth Fund with and into the Allianz NACM Mid-Cap Growth
Fund, a series of Allianz Funds as described in the proxy statement mailed to
shareholders of record as of May 31, 2007 on July 3, 2007.
In the matter approving the reorganizaton and termination of the Fund there were
the following votes either present or represented by proxy
- --------------------------------------------------------------------------------
For 1,566,542.947
Against 0
Abstained 0
- --------------------------------------------------------------------------------
23
<Page>
The Trust held a special meeting of the shareholders of all the Series of the
Trust on August 13, 2007 to approve to elect three Trustees to serve until their
successors are duly elected and qualified and to consider any other business
that may properly come before the meeting or any adjournment thereof, as
described in the proxy statement mailed to shareholders of record as of May 31,
2007 on July 12, 2007.
In the matter approving the election of Trustees there were the following votes
either present or represented by proxy:
- --------------------------------------------------------
NOMINEE FOR AGAINST ABSTAIN
- --------------------------------------------------------
Bradford K. Gallagher 20,902,044.76 0 9,850.00
Dr. Steven Grenadier 20,903,452.76 0 8,442.00
Dr. Arthur B. Laffer 20,851,683.27 0 60,211.49
- --------------------------------------------------------
NOTE H -- NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has recently issued
Interpretation No.48, Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No.109 ("FIN 48"), which applies to all
registered investment companies and clarifies the accounting for uncertain tax
positions. FIN 48 requires the evaluation of tax positions taken, or expected to
be taken, in the course of preparing the Funds' tax returns to determine whether
the tax positions are "more-likely-than-not" of being sustained by the
applicable tax authority. To the extent that a tax benefit of a position is not
deemed to meet the more-likely-than-not threshold, the Funds would report an
income tax expense in the statement of operations. Adoption of FIN 48 is
required for the last NAV calculation in the first financial statement reporting
period for fiscal years beginning after December 15, 2006. Accordingly,
management is in the process of evaluating tax positions taken by the Funds for
the period ending March 31, 2008 to determine if the adoption of FIN 48 will
have a material impact to the Funds' financial statements.
In addition, in September 2006, Statement of Financial Accounting Standards No.
157, Fair Value Measurements ("SFAS 157"), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact, if any
the adoption of SFAS 157 will have on the Funds' financial statements.
24
<Page>
SHAREHOLDER EXPENSE EXAMPLE -- (Unaudited)
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs,
including redemption fees, and (2) ongoing costs, including management fees and
other Fund expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of investing in the Funds and to compare these costs
with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (April 1, 2007 to September 30, 2007).
ACTUAL EXPENSES
The first line of the table below for each fund provides information about
actual account values and actual expenses. You may use the information in this
line, together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number in the first line for a fund under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below for each fund provides information about
hypothetical account values and hypothetical expenses based on a fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have been
higher.
<Table>
<Caption>
EXPENSES PAID
BEGINNING ACCOUNT ENDING ACCOUNT DURING THE PERIOD
VALUE VALUE APRIL 1, 2007 TO ANNUALIZED
APRIL 1, 2007 SEPTEMBER 30, 2007 SEPTEMBER 30, 2007 EXPENSE RATIO
- ---------------------------------------------------------------------------------------------------------------------
U.S. EMERGING GROWTH -- CLASS R
Actual $1,000.00 $1,158..90 $6.42 1.19%
- ---------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019..05 $6.01 1.19%
- ---------------------------------------------------------------------------------------------------------------------
U.S. SYSTEMATIC LARGE CAP GROWTH -- CLASS R
Actual $1,000.00 $1,144..70 $6.01 1.12%
- ---------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019..40 $5.65 1.12%
- ---------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH -- CLASS R
Actual $1,000.00 $1,218..30 $7.65 1.38%
- ---------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018..10 $6.96 1.38%
- ---------------------------------------------------------------------------------------------------------------------
</Table>
25
<Page>
SUPPLEMENTARY INFORMATION -- (Unaudited)
QUARTERLY FILING
The Funds provide a complete list of portfolio holdings four times in each
fiscal year, at the end of each calendar quarter. For the second and fourth
quarters, the portfolio holdings appear in the Funds' semiannual and annual
reports to shareholders. For the first and third quarters, the Funds file their
portfolio holdings with the Securities and Exchange Commission on Form N-Q.
Shareholders can look up the Funds' Form N-Q on the SEC's website at
www.sec.gov. Forms N-Q may also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. To find out more about this public service,
call the SEC at 1-202-942-8090.
26
<Page>
CORPORATE GOVERNANCE
<Table>
<Caption>
NAME, ADDRESS (1)
AGE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
POSITION(S) HELD WITH FUND OTHER DIRECTORSHIP HELD BY TRUSTEE
LENGTH OF TIME SERVED (2) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE
- ---------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES:
DARLENE T. DeREMER PRINCIPAL OCCUPATIONS: Managing Director, Putnam Lovell
(51) NBF Private Equity (Since 2004); Managing Director,
Chairperson of the Board & Trustee NewRiver E-Business Advisory Services Division
Since August 2007 (2000-2003); Prior to, President and Founder, DeRemer
Associates, a strategic and marketing consulting firm
for the financial services industry (1987-2003); Vice
President and Director, Asset Management Division, State
Street Bank and Trust Company, now referred to as State
Street Global Advisers, (1982-1987); Vice President, T.
Rowe Price & Associates (1979-1982); Member, Boston Club
(since 1998); Member, Financial Women's Association
Advisory Board (since 1995); Founder, Mutual Fund Cafe
Website.
OTHER DIRECTORSHIPS HELD: Founding Member and Director,
National Defined Contribution Council (since 1997);
Trustee, Boston Alzheimer's Association (since 1998);
Director, King's Wood Montessori School (since 1995);
Editorial Board, National Association of Variable
Annuities (since 1997); Director, Nicholas-Applegate
Strategic Opportunities, Ltd. (1994-1997); Trustee,
Nicholas-Applegate Mutual Funds (1994-1999); Director,
Jurika & Voyles Fund Group (since 1994-2000); Director,
Nicholas-Applegate Southeast Asia Fund, Ltd. (since
2004).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
JOHN J. MURPHY PRINCIPAL OCCUPATIONS: Founder and senior principal,
(63) Murphy Capital Management
Trustee
Since September 2005 OTHER DIRECTORSHIPS HELD: Director, Smith Barney
Multiple Discipline Trust; Director, Barclays
International Funds Group Ltd. and affiliated companies.
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
BRADFORD K. GALLAGHER PRINCIPAL OCCUPATIONS: Founder, Spyglass Investments LC
(63) (a private investment vehicle in 2001); Founder,
Trustee President and CEO of Cypress Tree Investment Management
Since August 2007 Company and Annuity Company. Managing Director, Fidelity
Investments.
OTHER DIRECTORSHIPS HELD: Director, The Common Fund
(since 2005); Director, Anchor Point Inc. (since 1995);
Chairman and Trustee, Atlantic Maritime Heritage
Foundation (since 2007); Director, Shielding Technology
Inc. (since 2006); Director, United Way Eastern
Massachusetts Chapter (1988-1990); Director, Quinet Fund
(1993-2005); Director, Emersion Hospital (1995-2005)
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
STEVEN GRENADIER PRINCIPAL OCCUPATIONS: William F. Sharpe Professor of
(42) Financial Economics, Stanford University Graduate School
Trustee of Business; Research Associate, National Bureau of
Since August 2007 Economic Research (since 2002); Chairman of the Finance
Department, Stanford University Graduate School of
Business (2004-2006).
OTHER DIRECTORSHIPS HELD: NA
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
GEORGE F. KEANE PRINCIPAL OCCUPATIONS: President Emeritus and founding
(77) Chief Executive Officer, The Common Fund (1971-1993);
Emeritus Trustee and Endowment Advisors (1987-1999) (organizations that
Since August 2007 provide investment management programs for colleges and
universities)
OTHER DIRECTORSHIPS HELD: Director, Bramwell Funds
(since 1994); Director, Longview Oil & Gas (since 2000);
Director, Security Capital U.S. Real Estate (since
1997); Director, The Universal Bond Fund (since 1997);
Director, Universal Stainless & Alloy Products Inc.
(since 1994); Director, United Water Services and
affiliated companies (1996-2000); Director, and former
Chairman of the Board, Trigen Energy Corporation
(1994-2000); Trustee, Nicholas-Applegate Mutual Funds
(1994-1999).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
WALTER E. AUCH PRINCIPAL OCCUPATIONS: Retired; prior thereto, Chairman
(86) and CEO of Chicago Board of Options Exchange
Emeritus Trustee (1979-1986); Senior Executive Vice President
Since August 2007 PaineWebber, Inc.
OTHER DIRECTORSHIPS HELD: Trustee, LLBS Funds (since
1994) and Brinson Supplementary Trust (since 1997);
Director, Thompson Asset Management Corp (1987-1999);
Director, Smith Barney Trak Fund (since 1992) and Smith
Barney Advisors (since 1992); Director, PIMCO Advisors
L.P. (since 1994); Director, Banyon Realty Trust
(1988-2002), Banyon Mortgage Investment Fund (1989-2002)
and Banyon Land Fund II (since 1988); Director, Express
America Holdings Corp (1992-1999); Director, Legend
Properties, Inc. (1987-1999); Director, Senele Group
(since 1988); Director, Fort Dearborn Income Securities,
Inc. (1987-1995);Trustee, Nicholas-Applegate Mutual
Funds (1994-1999); Director, Geotek Industries, Inc.
(1987-1998).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
</Table>
27
<Page>
<Table>
<Caption>
NAME, ADDRESS (1)
AGE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
POSITION(S) HELD WITH FUND OTHER DIRECTORSHIP HELD BY TRUSTEE
LENGTH OF TIME SERVED (2) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE
- ----------------------------------------------------------------------------------------------
INTERESTED TRUSTEES: PRINCIPAL OCCUPATIONS: Managing Director (since 2004)
HORACIO A.VALEIRAS and Chief Investment Officer. Nicholas-Applegate Capital
(48) Management, Nicholas-Applegate Securities (since
President & Trustee 2002); Managing Director of Morgan Stanley Investment
Since August 2004 Management, London (1997-2002); Head of International
Equity and Asset Allocation, Miller Anderson & Sherred;
Director and Chief of Investment Strategies, Credit
Suisse First Boston.
OTHER DIRECTORSHIPS HELD: Trustee, The Bishops School
(since 2002); Trustee, San Diego Rowing Club (since
2002).
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
ARTHUR B.LAFFER PRINCIPAL OCCUPATIONS: Chairman, Laffer Associates
(65) (economic consulting) (since 1979); Chairman, Laffer
Trustee Advisors Inc.(registered broker-dealer) (since
Since August 2007 1981); Chairman, Laffer Investments (asset management)
(since 2000); Member, Congressional Policy Advisory Board
(since 1998); Distinguished University Professor and
Director, Pepperdine University (1985-1988); Professor of
Business Economics, University of Southern California
(1976-1984); Associate Professor of Business Economics,
University of Chicago (1967-1976).
OTHER DIRECTORSHIPS HELD: Director of MPS Group,
Inc.(NYSE:MPS)(since 2003); Director, Petco Animal
Supplies, Inc. (NASDAQ:PETC)(since 2002); Director,
Oxigene Inc. (NASDAQ:OXGN), biopharmaceutical company
(since 1998); Director of Provide Commerce (NASDAQ:PRVD)
(since 1998); Director, Veolia Environmental Corporation
(successor to U.S. Filter Corporation) (water
purification) (since 1991). Director, Nicholas-Applegate
Fund, Inc.(1987-2007)
NUMBER OF PORTFOLIOS OVERSEEN BY TRUSTEE: 13
- ---------------------------------------------------------------------------------------------
OFFICERS: PRINCIPAL OCCUPATIONS: General Counsel,
CHARLES H. FIELD, JR. Nicholas-Applegate Capital Management,
(51) Nicholas-Applegate Securities LLC, Nicholas-Applegate
Secretary and Chief Compliance Holdings LLC (since February 2004), Deputy General
Officer Since May 2002 Counsel, Nicholas-Applegate Capital Management, LLC
(1996-2004).
OTHER DIRECTORSHIPS HELD: NA
NUMBER OF PORTFOLIOS OVERSEEN BY OFFICER: 13
DEBORAH A.WUSSOW PRINCIPAL OCCUPATIONS: Vice President and Director,
(47) Nicholas-Applegate Capital Management, LLC (since 2005),
Treasurer and Assistant Secretary and previously Manager, Legal and Compliance,
Since August 2006 Nicholas-Applegate Capital Management, LLC (since 1995)
OTHER DIRECTORSHIPS HELD: NA
NUMBER OF PORTFOLIOS OVERSEEN BY OFFICER: 13
- ---------------------------------------------------------------------------------------------
</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.
28
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TRUSTEES OF NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
Darlene T. DeRemer, CHAIRPERSON
Horacio A. Valeiras
John J. Murphy
Bradford K. Gallagher
Steven Grenadier
Arthur B. Laffer
George F. Keane, EMERITUS
Walter E. Auch, EMERITUS
OFFICERS
Horacio A. Valeiras, PRESIDENT
Charles H. Field, Jr., SECRETARY
Deborah A. Wussow, TREASURER
INVESTMENT ADVISER
Nicholas-Applegate Capital Management
DISTRIBUTOR
Nicholas-Applegate Securities
CUSTODIAN
Brown Brothers Harriman & Co., Private Bankers
TRANSFER AGENT
UMB Fund Services Group, Inc.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
<Page>
[NICHOLAS|APPLEGATE INSTITUTIONAL FUNDS LOGO]
NICHOLAS APPLEGATE SECURITIES, DISTRIBUTOR
[A COMPANY OF ALLIANZ LOGO]
GLOBAL INVESTORS
600 WEST BROADWAY
SAN DIEGO, CALIFORNIA 92101
800.551..8043
ITEM 2. CODE OF ETHICS.
Not required for this semi-annual report on Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required for this semi-annual report on Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required for this semi-annual report on Form N-CSR.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
This schedule is included as part of the report to shareholders filed under Item
1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (as
required by Item 22(b)(15) of Schedule 14A), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and financial officers have concluded
that the registrant's disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act")) are effective, as of a date within 90 days of the filing date
of this semi-annual report on Form N-CSR, based on their evaluation of
these controls and procedures required by Rule 30a-3(b) under the 1940 Act
and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred
during the registrant's last fiscal half-year that have materially
affected, or are reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not required for this semi-annual report on Form N-CSR.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule
30a-2(a) under the 1940 Act is filed as Exhibit 12(a) to this semi-annual
report on Form N-CSR.
(a)(3) Not applicable.
(b) The certifications required by Rule 30a-2(b) under the 1940 Act, Rule
13a-14(b) or Rule 15d-14(b) under the Exchange Act and Section 1350 of
Chapter 63 of Title 18 of the United States Code are attached to this
semi-annual report on Form N-CSR as Exhibit 12(b).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant)
Nicholas-Applegate Institutional Funds
By (Signature and Title)
/s/ Horacio A. Valeiras
- -----------------------
Horacio A. Valeiras
Title: President (Principal Executive Officer) and Trustee
Date: December 5, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)
/s/ Deborah A. Wussow
- ---------------------
Deborah A. Wussow
Title: Treasurer (Principal Financial Officer and Principal Accounting Officer)
Date: December 5, 2007
* Print name and title of each signing officer under his or her signature.